Russian Into Mobile

Mobile operators MegaFon and Mobile TeleSystems OJSC (MTS) (NYSE: MBT) have shown there's plenty of growth left in the Russian mobile market with their latest subscriber figures.

MTS reported its fourth quarter and full year 2007 results this week, and many of the resulting headlines focused on the 9.6 percent fall in its share price Wednesday –- down $7.51 to $70.52 –- after the carrier, which has mobile operations in Russia and five other markets in the former Soviet region, reported fourth quarter net income of $460 million. (See MTS Reports Q4.)

While that was a 317 percent improvement from a year earlier, it was short of the $544 million analysts had been expecting.

For the full year, MTS reported revenues of $8.25 billion, up 29 percent compared with 2006, and net income of nearly $2.1 billion, nearly double its 2006 profit.

But behind the financials lie continued significant subscriber growth numbers. MTS's total customer base grew by 9.1 million, or 12.5 percent, in 2007 to reach nearly 82 million, 57.4 million of which were in Russia.

And that rate of growth is increasing. MTS has also just released its subscriber numbers for the end of March 2008, which show it added a further 3 million customers in the first three months of this year to reach a total 84.94 million customers. As the chart below shows, that represents a 14.5 percent increase compared with a year earlier.

Table 1: MTS Subscriber Numbers March 2007/2006
Subscribers in millions End of March 2008 End of March 2007 Year-on-year growth
Total 84.94 74.16 +14.50%
Russia 59.9 51.5 +16.30%
Ukraine 19.61 20.75 -5.50%
Uzbekistan 3.56 1.7 +109.20%
Turkmenistan 0.47 0.2 +132.90%
Armenia 1.42 NA NA
MTS Belarus* 3.94 3.37 +16.90%
* MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated
Source: MTS

At the end of March it had 59.9 million subscribers in Russia, up 16.3 percent from a year earlier.

MTS is also looking to top up its organic growth with some acquisitions and is rumored to be lining up a bid for Russian GSM operator JSC Smarts . (See Russian Tug of War and Russia's MTS On M&A Trail.)

Megafon, meanwhile, has also just announced its 2007 numbers. Its subscriber base, which is in Russia only, grew by 20 percent in 2007 to end the year at 35.6 million. And according to data on its Website, the operator had grown that subscriber base by a further 1.4 million to reach 37 million.

Its full year revenues for 2007 grew by 53 percent to reach $5.7 billion, while its net income grew 70 percent to hit $1.4 billion.

These growth levels are helping to maintain Russia's status as one of the fastest growing emerging mobile markets in the world, though it has slipped in the latest rankings. In our Top 10 Emerging Mobile Markets , which reported on 2006 subscriber growth numbers, Russia ranked fourth, but in the latest Top 10 ranking, due to be published next week, Russia comes in sixth.

Keep an eye out for the report to find out which markets have pushed Russia down the rankings.

— Ray Le Maistre, International News Editor, Light Reading

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