Deutsche Bank Makes Rating Changes On Russian Telcos Amid 'Sharp GDP Drop'

Deutsche Bank commented on Russian telecom companies on Thursday.

Analyst Igor Semenov began 2015 with a cut to his estimates and target prices for "Russian telcos on a recent decline in macro forecasts that envisage an extended economic decline with a sharp GDP drop in 2015.”

In spite of Semenov cutting estimates for telcos, Mobile TeleSystems OJSC (ADR) MBT was upgraded from Hold to Buy but its price target was cut from $12.70 to $9.00.

Semenov noted that Mobile TeleSystems has “demonstrated strong execution on the operating front” and the analyst expected the trend to continue even in a weak economic environment. Further, the “valuation levels are attractive, especially in comparison with its key competitors.”

Mobile TeleSystems OJSC (ADR) recently traded at $7.64, down 3.41 percent.

VimpelCom Ltd (ADR) VIP was not viewed as favorably and Semenov felt the shares had “limited upside potential.” The stock was downgraded from Buy to Hold and its price target was cut from $6.70 to $4.10.

VimpelCom Ltd (ADR) recently traded at $3.61, up 5.10 percent.

Risks to both companies included FX, issues with Ukraine and investigations by the U.S. Securities and Exchange Commission and the U.S. Department of Justice in relation to activities in Uzbekistan.