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Lawsuit Resolution Good News for Mobile TeleSystems

We're lowering our risk rating on this narrow-moat firm now that its parent company has settled its outstanding lawsuit.

The settlement is consistent with our earlier belief that the lawsuit was a legal tactic for the state-owned oil company Rosneft to force Sistema to pay damages alleged by Rosneft after purchasing Bashneft in 2016. Sistema’s shares in MTS were frozen in the summer of 2017 as part of the enforcement action. We think the settlement materially lowers the risk that the Russian government will become a major shareholder of MTS through the lawsuit. We also observe that, in its press release, Sistema thanked Sberbank, a state-owned bank in Russia, and the Russian Direct Investment Fund, Russia’s sovereign wealth fund, for facilitating the settlement. Sberbank is a major debtholder of MTS.

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About the Author

Alex Zhao

Equity Analyst

Alex Zhao, CFA, is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the telecommunications industry.

Before assuming his current role in 2016, Zhao led Morningstar’s U.S. mutual fund database performance team. He has worked for Morningstar since 2010, progressing from performance analyst to investment analyst for Morningstar’s Investment Management group, a unit of Morningstar, Inc.

Zhao holds a bachelor’s degree in economics and mathematics from Kenyon College, and he is pursuing a master’s degree in business administration from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation.

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