Russian telcos resist sanctions at Q1 2022 thanks to strong localization

A few months after the start of the Ukraine invasion, regional TMT companies started publishing their periodical reports, giving more insights on how current political circumstances have affected them. The most significant impact of the war is reflected on revenues, as Russia suffered an unprecedented depreciation of the ruble which reached a peak in early March at 140 roubles for 1 US dollar. Since then, the Russian currency has steadily recovered its strength and stood at an average of 65 RUB for 1 USD last May. Apart from that, the main Russian telcos have so far reported minor changes in terms of both subscriber counts and revenues in local currencies. VEON, which operates the Beeline brand across the CIS, reported a total income of over 72 billion RUB last quarter in Russia, which represents a 5.6% increase year on year, although it is 6.8% lower than Q4 2021 revenues. The group nonetheless stated its concerns in its latest report, as the ongoing conflict between Russia and Ukraine already impacted the group, along with "[their] service providers, partners, suppliers and other counterparties". In 2021, over 50% of VEON's income was generated in Russia, and an additional 14% in Ukraine. Meanwhile, MTS Group also reported steady results at end-March. The operator's total revenues increased by 8.5% year on year, and by 7.6% in Russia alone. The group's telecom consumer business makes up for about 50% of its income, with a growing importance of its video business since the rebranding of their Russian OTT platform, Kion, at H1 2021. In its latest press release, the group insisted on its "solid results", driven both by its historical business segments and growth on new services like banking. These two CIS-based telecom groups have so far reported steady figures for Q1 2022. But on the other hand, other significant local telcos are yet to publish their latest results. Rostelecom announced at mid-May that they decided not to publish their Q1 2022 financial statements. Megafon also hasn't published figures since its 2021 end-year report. As the situation in the region remains uncertain, Russian telco's operations and business plans are likely to evolve significantly over the next months, primarily in Russia and Ukraine. From a logistics perspective, local actors of the TMT industry lost a significant number of technical partners following international sanctions. Last April, Ericsson suspended its activities in Russia, shortly followed by Nokia. In May, Intelsat blocked some of Russian main TV channels from the platform of Orion Express, following the international ban on the Russian public TV and radio broadcaster VGTRK, affecting service distribution for more than 3 million households. Meanwhile, Russian media outlets have been largely banned abroad: the distribution of Russia Today and...

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