Economical Analysis and Valuation of Megafon DCF as the Base Model
Coursework: Financial Research and Value of OJSC Megafon, Russia using DCF as the bottom model
Made by: Victor Amoasii
Word count: 3697
1 . Megafon overview and analysis of agency costs
2 . Risk Profile Evaluation
3. Measured Average Expense of Capital
some. Megafon valuation
5. Capital investments risk analysis
6. Capital composition and dividend policy
Megafon overview and analysis of agency costs
Megafon is among the leading three Russian mobile operators. The majority aktionar is Alisher Usmanov, who have controls 50 percent plus 95 shares through aseries of holding businesses including Garsdale, which also owns levels in Scartel (Yota) and Euroset. TeliaSonera owns a blocking share of just over 25%. Megafon was on the London and Moscow share exchanges in December 2012, with a free of charge float of just under 15%.
Agency advocates treat the firm like a nexus of contracts between owners, employees, creditors, while others. Agency theory advocates (a) efficiency as a means to improve firm performance, and (b) the use of governance components to manage organization costs because the primary method of improving performance (Eisenhardt 1989; Fama and Jensen 1983).
In general, company costs and corporate governance risks are considered to get very high in Russia. The primary potential corporate governance risks associated with Megafon are made by the fact that it is vast majority controlled by simply one shareholder, Alisher Usmanov, through a quantity of holding companies, in which other sorts of assets (both related and unrelated for the telecom industry) are also organised. This elevates the potential risk of related-party deals that may, theoretically, be more good for the controlling shareholder than to community shareholders in Megafon.
Mitigating this kind of risk to a large degree is:
(1) the existence of TeliaSonera as a minority aktionar with a obstructing stake of 25. 2%; (2) the board structure, in which Mister Usmanov is definitely represented simply by only 3 out of seven administrators, is counterbalanced by two TeliaSonera appointees and two may be thought to be genuinely 3rd party;
(3) the requirement for a supermajority plank vote in the matter of major decisions; and (4) the stipulation that administrators representing interested parties are not eligible to vote in the case of related-party transactions.
Overall, the corporate governance risks for Megafon are similar in many ways to the Russia's telecoms industry. Debatably, the presence of a blocking group shareholder as TeliaSonera might help to reduce potential risks to minorities. It is additionally to be mentioned that top management provides significant contact with the talk about price in the form of share options (in the case of the CEO, Mr Tavrin) and phantom share choices (other elderly management).
Risk Account Analysis
The main risks encountered by Megafon may be summarized as follows: Competition. Megafon directly competes pertaining to 2G and 3G subscribers across the country with MTS and Vimpelcom. In certain regions Megafon faces added competition by Rostelecom and Tele2. Megafon's competitors (apart from Tele2) posses considerably larger fixed line assets and are likely to realize higher synergies among their sections, which may cause greater difficulties for Megafon on the competitive landscape. In addition , Rostelecom can be planning to grow its services into fresh Russian parts, including Moscow (currently functions only in the Urals, Volga and Siberia federal districts). Finally Megafon competes for 4G members with its spouse Yota and MTS, and might soon face additional competition from Rostelecom and VIP in that space. Revenue concentration. Roughly 89% of Megafon's business is definitely attributable to wifi services (7% in wireline and 5% in retail distribution). Inside the wireless industry, Megafon continues to rely greatly on words revenues (almost 60% of total), which...
Beginning of your Whistleblower Bernie Ebbers, Jeff Sullivan, and also other members of top administration ..