• According to ACRA, the total volume of the Russian telecommunications market is expected to amount to 1.79 trillion rubles as of the end of 2020 (+2% compared to 2019). In the medium-term, the Agency expects the market to grow in step with inflation (around 4% annually).
• The telecommunications sector is among those that have suffered the least from the pandemic. The coronavirus had a negative impact on the mobile segment, but simultaneously contributed to higher revenues from broadband internet access. In addition, the pandemic did not lead to a significant decline in capital expenditures of the sector’s major players or a deterioration in their credit quality.
• Profitability of telecommunications companies will remain high in forthcoming years. In the medium-term, the profitability of the sector will largely depend on whether telecommunications companies are able to shift operational and capital expenditures to end users.
• Substantial capital expenditures on deploying 5G networks may lead to negative free cash flow (FCF). The final approval of frequencies will have a determining impact on the volume of capital expenditures for deploying fifth generation networks. ACRA predicts that total investments in 5G networks in Russia from 2021 to 2027 may amount to 1.0–1.1 trillion rubles. Significant growth in capital expenditures may in turn lead to negative FCF and lower dividend payouts.
• The leverage of the sector will grow under pressure from capital expenditures. According to ACRA’s estimates, the ratio of adjusted total debt to FFO prior to fixed payments and taxes may grow from 2.7x in 2020 to 2.8–2.29x in 2023–2024.

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