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MTS Eyes 'Ticketmaster' Role in Russia After Latest M&A Moves

Iain Morris

MTS sees an opportunity to become the Ticketmaster of Russia through its just-announced takeover of two of the country's largest ticketing companies.

The Russian service provider, which operates the country's biggest mobile network, is paying 3.25 billion Russian rubles ($60 million) for market leader Ticketland.ru and acquiring a 78.2% stake in number-five player Ponominalu.

Ponominalu carries a total enterprise value of RUB495 million ($8.5 million), said MTS.

The acquisitions tie in with the operator's current diversification strategy: Mobile TeleSystems OJSC (MTS) (NYSE: MBT) is trying to expand outside the fast-maturing telco sector and into adjacent markets where it believes its digital capabilities could fuel sales growth.

Like California-based ticketing giant Ticketmaster, both of the companies MTS is acquiring function as ticket distributors for music concerts and other live events. Russia's ticket market is currently worth about RUB68 billion ($1.2 billion) in annual sales and growing, according to MTS. But it also remains "underdeveloped," says the operator, with 60% of ticketing sales done through offline channels.

MTS reckons it can accelerate growth by "digitizing" the ticketing companies and increasing the share of online business. "We have a very good marketing and technology platform based on our big data and knowledge of customers, and so there are synergies allowing the ticketing business to grow much faster than if it were standalone," says Vyacheslav Nikolaev, the chief marketing officer of MTS.

Following the takeovers, MTS says it will integrate an event ticketing service into its existing loyalty program and ecosystem of mobile applications. Subscribers will then be able to buy tickets using their smartphones and receive personalized offers.

Yet to report results up through the end of 2017, MTS had more than 78 million mobile customers in Russia at the end of September and generated revenues of around RUB303 billion ($5.2 billion) in the country during the first nine months of the year. Group profits over that period hit RUB45.2 billion ($780 million), up from RUB36.1 billion ($620 million) in the first nine months of 2016.

While the takeover moves will not at first have a "huge impact" on profits, they represent an important part of the digital transformation that is underway at MTS, Nikolaev told Light Reading.

Keen to establish itself as a software company in the Russian market, the operator has already developed a range of digital services, including TV, music and mobile money offerings. It also recently acquired a so-called "cyber sports" website called Gambit Esports as well as an online cash register branded LiteBox. (See Russia's MTS to 'Sacrifice' Connectivity in Software Rebirth.)

MTS has been actively recruiting data scientists and says its investments in big data -- financial details of which have not been disclosed -- are paying off handsomely.

"We can provide Ticketland.ru and Ponominalu with instruments to work faster," says Nikolaev. "This is unlike Western markets because it is underdeveloped and in general only about 40% of tickets are sold online. So there is huge room for growth."

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While operators in more developed markets have struggled to expand into software and online sectors, MTS believes conditions are more favorable in Russia, where the Silicon Valley tech giants have a much lower profile.

Nikolaev previously told Light Reading that he believed the Russian operator could look to generate about a tenth of its revenues from software as a realistic "mid-term" objective. (See MTS Marketing Boss Eyes $760M in Annual Software Sales.)

Asked this week if MTS was trying to become "the Ticketmaster of Russia," Nikolaev said there was a "definite opportunity" to replicate the success of the Californian player, whose parent company -- Live Nation Entertainment -- made $1.8 billion in ticketing revenues in 2016.

"These companies are positioned at numbers one and five and there is an opportunity to consolidate the market and produce one leader," says Nikolaev. "You have Ticketmaster in Europe which takes a big share of the market, and we see this move as an opportunity to have that in Russia."

For the time being, however, MTS plans to operate Ticketland.ru and Ponominalu as independent businesses under the direction of their existing management teams. MTS will oversee their strategic development.

The operator says it has now received all of the necessary corporate and regulatory approvals for the transactions.

Mikhail Minin, the founder and CEO of Ponominalu, will retain the 21.8% stake in the business that MTS is not acquiring, but the operator has the option of increasing its stake to 100% by 2020.

— Iain Morris, News Editor, Light Reading

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