A delicate balance between US and Russian IR
While his colleagues from other countries wring their hands over whether or not to blog or tweet or comment on rumors in the media, Joshua Tulgan, an American uncannily well adapted to his adopted Russian home, puts his head down and charges in.
Mobile TeleSystems (MTS), one of two Russian companies left listed on the NYSE, not only has an information-hungry global shareholder base to satisfy, but is also taking a lead in spreading the word about Russia’s thriving consumer landscape.
Mobile TeleSystems' Joshua Tulgan
To do so, however, it has to balance an aggressive Russian media with its distant US shareholders, as well as Russian accounting standards with US GAAP. Along the way it has won accolades including the top honors in the IR Magazine Russia & CIS Awards.
Tulgan joined MTS as director of investor relations in 2006, shortly after a management overhaul, during a turning point for the wireless telecoms company.
As a first mover in a nearly saturated market, its market share and growth rate were dwindling. At the same time, Russia was entering boom times as oil prices and disposable incomes rose.
‘Our markets were changing and our message was becoming a lot more complicated than just adding subscribers,’ Tulgan recalls. ‘It was the start of exciting times.’
MTS and Tulgan made a good match: both were new to structured, in-house IR, and both were up for an adventure. A graduate of the prestigious Phillips Academy Andover in New England and then a tiny liberal arts college in Maine, where he studied Russian, Tulgan worked at Burson-Marsteller in the 1990s before getting an MBA from Georgetown University.
In MTS he saw an opportunity for the company to take an aggressive leadership position, both in communications and in business.
The opportunity could also have been seen as sheer necessity: MTS had around 48 percent minority ownership, which is enormous for a Russian firm, and an ADR program with one of the world’s highest ratios of DRs to ordinary shares. Its NYSE listing was essentially its primary one and MTS was perhaps Russia’s most liquid stock.
‘We had a leadership mantle to take on. We just had more investors relative to the size of the company than anybody else,’ Tulgan says.
A different landscape
So an American takes on IR for the most liquid stock in Russia’s economy smack in the middle of investors’ love affair with the BRICs (Brazil, Russia, India and China). But this was Russia, and Tulgan had to quickly learn the difference between media in developed markets and media in markets still developing.
‘The Russian media are important because they don’t have the same controls and don’t have to disclose sources as readily,’ Tulgan explains.
‘A lot of Russian newspapers are very aggressive about getting information and then speculating on it, be it M&A, competitive factors between operators or regulatory decisions. The key was balancing their needs – and you have to play offensively with the Russian press – with our disclosure obligations to our investor base, the SEC and the NYSE.’
Tulgan well knows that his US counterparts by policy don’t comment on rumors. ‘With the Russian press, you can’t really stick to that. You risk losing the opportunity to control the story if you don’t comment,’ he says.
On one occasion, with reporters speculating on MTS making an African acquisition, Tulgan said he couldn’t comment on M&A.
But when pressed for an opinion he remarked that any acquirer would likely seek a cluster of African markets, not just one – which resulted in the startling headline that MTS was buying into 10 African markets.
In turn, Tulgan regularly has to make sure MTS’ audiences outside Russia understand the context for that kind of news wildfire. Rumors can also extend to operational results, especially given that MTS has to report under Russian accounting standards as well as US GAAP.
As the Russian accounts come out earlier, observers try to infer MTS’ US dollar financial performance. ‘So we’re always in the process of trying to manage two languages and accounting systems,’ Tulgan sums up.
For MTS, the global debt crisis beginning in 2008 was an opportunity to market itself to investors. It had low debt and was generating good running cash, and the business grew during the crisis as it entered the fixed-line market, which now accounts for about 10 percent to 12 percent of its total revenue. It also got into retail so it could control its own distribution.
Once again, Tulgan and senior management set out to change investors’ understanding of MTS. Their Moscow-based team also includes a deputy IR director, a manager responsible for international activities and social media, and another manager who handles analysis and rating agency relationships.
This lean team is bolstered by active C-suite involvement as well as a strong reliance on its depositary bank, JPMorgan, which deals with special projects like dividend taxes while providing regular reports on shareholder composition. MTS relies on databases from Thomson Reuters to keep track of buy-siders.
The team's efforts are multiplied by a busy marketing schedule with the banks covering MTS, which are evenly divided between Russia and London, with one in Israel. Though it’s concentrated in the US, Tulgan sees MTS’ shareholder base as global.
Of the roughly 48 percent minority ownership, around 55 percent is in the US, 25 percent in the UK, 10 percent in continental Europe, and 10 percent in the rest of the world.
In June 2010 Tulgan took on the added role of acting director of corporate finance, which he says has been formative.
‘You see all aspects of placing debt, how it’s traded and the expectations of investors,’ he says. ‘We’ve been working on articulating a new financial strategy and it’s been valuable to me to have been exposed to where the money comes from and how we create value for stakeholders.’
A thriving blog and Twitter chatter, either one a risky flier for a typical public company, began as practical necessities for MTS. ‘Social media gave us a communication channel that didn’t need to be filed with the SEC or submitted through the normal disclosure process, which saves us a lot of money,’ explains the firm’s IR director Josh Tulgan.
Of course, he stipulates that nothing material to an investment decision is ever disclosed via social media. ‘Rather, it’s a way for us to get in the debate because we’re one of the most reliable sources of information,’ he says.
First came a blog with executive interviews, presentations and even reports of customer numbers. ‘Even when we talk to analysts before our results, it gives us the safety and comfort to send them to a blog post so they can make their own inferences,’ Tulgan explains.
Twitter came more recently, and although the downside is that the audiences MTS wants to cater to the most – investors and analysts – are often barred by their own firms from accessing it, it can spur discussion with other groups. For example, earlier this year after Cisco released data-use forecasts that conflicted with MTS’ predictions, Tulgan entered into a high-profile Twitter chat about a broad range of topics.
IR professionals in other countries may cringe at Tulgan’s hell-for-leather approach, but they’d have to acknowledge he works in a different world. ‘There is a perception deficit about Russia,’ he explains. ‘It’s a vacuum, so we want to help frame the debate and drive interest. That’s why we can be a bit more aggressive.’