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Tourism Market Watch - November 2019

5 Dec, 2019

In November 2019, total international visitor (tourists and same-day combined) growth accelerated to 11.9% y/y after growing  8.8% y/y in October. Out of total 0.54mn visitors, Georgia hosted 0.33mn tourists (up 10.3% y/y) and 0.2mn same-day visitors (up 14.8% y/y) in November. Strengthened tourist arrivals (+10.3% y/y) in November was supported by significantly increased visitors from Israel, Kazakhstan and EU countries (+38.5% y/y) .

Meanwhile, arrivals from neighbors (Azerbaijan, Armenia and Turkey) also continued solid growth, reflected in elevated same-day arrivals (+14.8% y/y). Importantly, significantly reduced arrivals from largest source markets - Russia and Iran, were fully offset by strong arrival growth from other countries. 

Please see the full note here, which brings together tourist arrival data for reporting month, most recent statistical information available in the sector and 2019 forecast.

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Initiating coverage of Silknet, which placed debut US$ 200mn Eurobond in 2019

3 Dec, 2019

10 things you need to know about Georgia’s telecom sector and Silknet
1. Georgia was one of the first post-Soviet countries to liberalize the telecom market. The country’s telecom industry has seen a number of mergers and acquisitions in recent years, enabling original operators to maintain the dominant market positions. In Georgia’s three-carrier mobile industry, Magticom and Silknet are the only full-service telecom operators, while Veon is focused on the mobile industry.

2. We find both the mobile and fixed market in Georgia to be attractive especially when compared to European markets. We believe that Georgia’s telecom market will benefit from rising urbanization, changing lifestyle and increased mobile data usage. 

3. Mobile segment expected to grow from mobile migration and increased data usage as Georgians use low levels of mobile internet compared to EU and CIS countries

4. Fixed broadband segment expected to benefit from increasing penetration in rural parts and shrinking household size in Georgia. After record breaking growth levels, we expect fixed broadband market to shift to steady growth path as penetration is still low in Georgia vs. EU. 

5. Pay-TV sector was the fastest growing segment, with penetration reaching 56.5% of the Georgia’s households. Despite the trend, Pay TV penetration still low in Georgia, particularly in rural parts. We estimate, urbanization trend and growing number of households to support the sector going forward. However, we acknowledge that the prevalent content piracy in Georgia hinders the sector’s growth outlook.

6. Fixed voice segment expected to continue decline, reflecting global trend of fixed-to-mobile substitution. Not surprising that more and more people, especially young Georgian families, do not have a fixed phone line at home. 

7. We initiate coverage of JSC Silknet, the largest fixed voice and second largest fixed broadband, Pay TV and mobile operator in Georgia. Silknet has transformed into a fully four-play-enabled telecom operator with the acquisition of Geocell in March 2018, then second largest mobile operator in Georgia. We believe that this acquisition enhances company’s market position and product profile, and better equips Silknet to compete with its rival.

8. Silknet placed its debut US$ 200mn Eurobond on 2 April 2019, with 5-year tenor and 11% coupon rate.  Major portion of the Eurobond proceeds was used to refinance the obligations incurred for Geocell acquisition and the remainder improved company’s liquidity profile.

9. Geocell acquisition almost doubled Silknet’s revenue as mobile sector became the largest and most profitable business line for the company. Silknet expected to benefit from the surge in mobile data traffic as well as growing fixed segment penetration in Georgia.

10. We believe that Silknet’s financial metrics will remain at comfortable levels compared to the Eurobond covenants in the medium term. Silknet’s credit profile is backed by robust profitability, moderate leverage and strong growth prospects, while key risks facing the company are related to competition in the sector and FX exposure. 

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Regional Fixed Income Market Watch | October 2019

25 Nov, 2019


  • US real GDP growth came in at 1.9% annualized rate (advance estimate) in 3Q19 after 2.0% growth in 2Q19. Annual inflation in the US was 1.8% in October 2019, up from 1.7% in the previous month. Unemployment rate was 3.6% in October 2019, up from 3.5% in the previous month. Target range for the federal funds rate was lowered to 1.5%-1.75% in October 2019.
  • EU19 real GDP growth was 1.2% y/y in 3Q19 unchanged from 2Q19. Based on the Eurostat flash estimate, annual inflation in EU19 was 0.7% in October 2019, down from 0.8% in the previous month. Unemployment rate in EU19 was 7.5% in September 2019, unchanged from the previous month. In October 2019, ECB kept the interest rate unchanged on the main refinancing operations, the marginal lending facility and the deposit facility at 0.00%, 0.25% and -0.50%, respectively.
  • Chinese economy increased by 6.0% y/y in 3Q19 after growing 6.2% y/y in 2Q19.
  • In September 2019, economic growth was 7.5% y/y in Armenia, 5.2% y/y in Georgia, 4.1% y/y in Kazakhstan and 2.9% y/y in Russia, based on preliminary data. In 9M19, growth was 3.8% y/y in Ukraine, 2.5% y/y in Azerbaijan and 1.0% y/y in Belarus.
  • In October 2019, annual inflation was above the target level in Belarus (5.3%), Ukraine (6.5%), Georgia (6.9%) and Turkey (8.6%); inflation was below the target in Armenia (0.9%) and in Russia (3.8%), while it was within the target range in Kazakhstan (5.5%). Annual inflation was 2.7% in Azerbaijan in October 2019.
  • In October 2019, monetary policy rate increased by 100 basis points to 8.5% in Georgia, while it reduced by 25 basis points to 7.75% in Azerbaijan, by 50 basis points to 6.5% in Russia, by 100 basis points to 15.5% in Ukraine, by 250 basis points to 14.0% in Turkey and has remained unchanged in other countries.

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.

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GDP Recalculation - Georgian Economy Expands by 8.6%

18 Nov, 2019

  • Geostat changed accounting methodology to a new Standard of National Accounting (SNA 2008), rebased GDP to year 2015 from year 2010 and recalculated GDP data from 2010 to 2018.
  •  Economy expands by 6.9% to GEL 33.9bn (US$ 14.9bn) in the base year and by 8.6% to GEL 44.6bn (US$ 17.6bn) in 2018 compared to old series.
  • Nominal GDP and per capita GDP are higher in new series vs. old series in every single year from 2010 to 2018.
  • Real GDP growth rate still strong at 4.8% in 2018; averaged 4.7% during 2011-18. Downward revision to the real growth rate recorded only in 2014: 4.4% in new series vs. 4.6% in old series.
  • Georgia’s GDP per person increased to US$ 4,722 from US$ 4,346 in 2018.
  • Expansion in nominal GDP improves debt indicators, creating a fresh borrowing space. 

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