How much could Kyivstar cost on the stock exchange?

Of course, one of the most interesting questions that may arise is how much Kyivstar could be worth on the stock exchange? What is its potential capitalization?

Adding to the intrigue is the fact that Ukrainian telecoms have not yet gone public. And the first swallow decided to do so in the middle of the war.

There are several markers that will help us understand what the value of all Kyivstar shares could be. First of all, these are the results of large transactions on the Ukrainian telecom market in recent years. And also — what is no less interesting — the valuation of similar telecoms in our region that are already on the stock exchange.

Looking ahead, I must say right away that there will be many nuances with the second point. For now, I will describe the first point. It is the simplest.

What about the deals?

In fact, there have only been two major telecom deals in our market recently. The first took place before the war — in 2019, when Bakcell (Baku) bought Vodafone Ukraine for $734 million. The Ukrainian company’s revenue was $460 million. In other words, Vodafone Ukraine was acquired for about 1.6 of its annual revenue.

The French holding company NJJ Capital bought lifecell last year for $500 million. At the same time, the company’s revenue for 2023 amounted to approximately $290 million. That is, this time the operator was sold for a little more than 1.7 annual revenue.

What’s on the exchanges

With European operators whose shares are already listed on exchanges, things are much more complicated.

The first thing to say is that the largest European operators have a rather sad picture in terms of their share value.

For example, Spanish telecom group Telefonica SA, which operates in Spain, Germany, the UK and South America, with annual revenue of €40.6 billion in 2023, has a market capitalization of just €21.9 billion. The same goes for French telecom giant Orange: annual revenue of €44 billion, capitalization of just $27 billion. British giant Vodafone is not far behind: revenue of €37 billion, capitalization of $17.8 billion.

But there are other European examples where stocks are worth much more. We’ll definitely take a look at those too.

Germans — separately

Another huge European telecom group is Deutsche Telekom. Here we see that with annual revenue of 114.7 billion Euros, the company’s capitalization is $152 billion. That is, the multiplier is 1.3. That’s better.

But how is Deutsche Telekom fundamentally different from the Spanish, French and British telecom giants?

In Europe — almost nothing. But in America — a completely different picture. The fact is that Deutsche Telekom has a controlling stake in T-Mobile US. And in the USA it is one of the market leaders. And its income has only been growing recently. Thus, Deutsche Telekom shares were pulled out by an American asset.

Strong local players

But if we talk about Kyivstar, which is not an international telecom group, but is a strong operator in its country of presence, then we can draw parallels with some strong European telecom brands that are relatively small but have an indirect presence.

Let’s start with Koninklijke KPN NV. This is the Dutch telecom leader. Revenue for 2023 is 5.44 billion Euros. Capitalization is 13.9 billion Euros. This gives us a good multiplier of 2.5.

Let’s see why KPN’s valuation is so different from European groups. The first thing that catches your eye is the lower level of competition in the country. This allows the company to maintain higher operating efficiency (EBITDA margin — 44%) .

This level of profitability is much higher than that of other large European companies such as Orange or Telefonica, which have EBITDA margins of around 30%, suggesting that operating in a calmer market is a key advantage for pricing. This guarantees higher profitability in the long term.

With good prices and good profitability, KPN has been able to invest in rebuilding its fixed telecom network and switching subscribers from copper to fiber. In addition, the company has built the best 5G coverage in the country. You can read more about KPN’s achievements here .

Another similar European example is Elisa Oyj, the leading telecom operator in Finland. Revenue for 2023 is $2.2 billion. Capitalization on the Nasdaq Helsinki stock exchange is 7.1 billion euros. This gives us the highest multiplier of 3.2.

Let’s figure out why this asset is so valued by investors.

The first is the most active player in the market: 39% of the country’s mobile segment, the largest 5G network.

The second is strong operating performance: EBIDTA margin — 34%, net profit margin — 21% (i.e., every fifth Euro earned goes into net profit).

The third is a strong IT component (it is not only the largest provider, but also one of the strongest IT companies in Finland).

Fourth: Elisa Oyj is a leader in the entertainment segment in Finland. It has its own video platform with its own content production.

Comparing with Kyivstar

Who is Kyivstar more similar to: the massive telecom giants of Europe or the dynamic local leaders?

Let’s look at the indicators.

First, it must be said that Ukraine is a fairly competitive market with very low prices. However, the relatively low cost of network maintenance and relatively simple geography (we don’t have many mountains) allow mobile operators to maintain high operational efficiency.

1. Kyivstar’s EBITDA margin for the first 9 months of 2024 is 56,4%. Europeans will be envious.
2. Kyivstar has its own IT company, which employs more than 400 employees.
3. Kyivstar acquired the largest electronic communications provider in the country, Helsi.
4. Kyivstar has the widest 4G coverage in the country and the largest number of subscribers.
5. The company has its own VOD platform.

Thus, you can see that Kyivstar actually has a lot in common with KPN and Elisa. And, I think, it could claim similar multipliers on the stock exchange in the future.

That is, we already have a certain price range within which Kyivstar can be included.

The lower threshold is most likely the multipliers of the two country deals — 1.6-1.7 (ratio of deal price to annual revenue). The upper threshold is the multipliers of European telecom assets similar to Kyivstar — 2.5-3.

Most likely, Kyivstar will fit into this corridor.

After all, if we fantasize and assume that Kyivstar’s IPO has already taken place, then, knowing the revenue for 2023 ($837 million), the company’s capitalization could be in the range of approximately $1.5 billion to $2.5 billion.

So, most likely, we have two unicorns in one.