New strategic priorities and revenue growth in the B2B segment. Due to the glut of the cellular communications market with non-contract balance SIM cards and a slowdown in the growth rate of the telecommunications market, in 2018 the Company revised its strategic priorities, which are aimed at moving from distribution based on volumes to attracting and building a quality subscriber base. The revised strategy will allow the Company to minimize the risks associated with bad debts and to attract quality customers in the long term. According to the results of 2018, the Company showed growing indicators in the B2B segment, in which revenue increased by 21.5% y/y due to the introduction of individual business solutions for corporate clients.
Prospects for synergy between Kcell and Kazakhtelecom. The acquisition of Kcell by the main operator of the Republic of Kazakhstan will serve the development of the telecommunications industry in the country due to the expansion of the range of services and the positive economic effect from the reduction of capital and operating investments. We believe that the Company will be able to stabilize the financial and operating performance in the medium term through the integration of the business processes of the two companies and significant savings in the costs of maintaining and developing the current technological base. Given the successful practical experience of Kazakhtelecom in the development and introduction of new technologies, the Company will be able to implement a number of strategic projects with the main operator, as well as share the resources and networks of the main operator.
Positive trends in the telecommunications services market. Due to the increase in the number of smartphone users and the positive trend in demand for mobile communications, smartphones will contribute to the growth of data traffic. According to the GSMA, with the transition to the 4G standard, there is an active movement towards broadband mobile communications in the CIS countries. The region also plans to introduce 5G networks by 2025. According to data as of 2018, the Company has made significant progress in the deployment of the 4G/LTE network in the Republic of Kazakhstan and currently the network covers 61.9% of the country's population. We assume that the planned introduction of the 5G standard in the future will make it possible to efficiently use the general resources of Kazakhtelecom necessary for the deployment of the 5G network.
Target price KZT2 225/share, recommendation to Buy. Given the significant reduction in risks associated with the Company's dependence on the infrastructure of other operators, as well as the prospects for the introduction of new products, we expect a growth potential of 15.3% and recommend to Buy Kcell shares with 12M TP KZT2 225/share.
