Mobile services

Russia's MTS Sees Earnings Fall in Q3

Russia's MTS has blamed economic setbacks and competition for a fall in revenues and earnings in the July-to-September quarter.

The biggest of Russia's three nationwide mobile operators, Mobile TeleSystems OJSC (MTS) (NYSE: MBT) still claimed to be faring well compared with rivals VimpelCom Ltd. (NYSE: VIP) and MegaFon , drawing attention to a continued increase in data usage and rising smartphone penetration.

The operator's group revenues fell by 1.3% in the quarter, to 112.2 billion Russian rubles ($1.7 billion), compared with the year-earlier period, while operating income before depreciation and amortization (OIBDA) dropped 5.1%, to RUB45.7 billion ($710 million).

"Certain factors continued to impact us, including competition, reduced usage of services sensitive to macroeconomic factors and a lower contribution from foreign subsidiaries due to ruble appreciation during the period," said Andrei Dubovskov, the president and CEO of MTS, in a company statement.

Despite the recent difficulties, MTS continues to guide for a 1% to 3% increase in group revenues in 2016, thanks to customer growth and data-services adoption in Russia, although it expects OIBDA to fall by 4%.

Besides operating in Russia, MTS also maintains networks across a number of markets in eastern European and central Asia that have recently been rocked by macroeconomic difficulties and political turbulence. Efforts to maintain market share, and the cost of building a 3G network in Ukraine, were held chiefly responsible for the gloomy OIBDA forecast.

In Russia, which still accounts for more than 90% of total sales, MTS picked up another 200,000 mobile customers in the quarter but saw overall revenues fall by 0.8%, to RUB103.1 billion ($1.6 billion), compared with the year-earlier period.

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Its performance was far better in neighboring Ukraine, the company's second-biggest market, where revenues rose by 11.2%, to nearly 2.9 billion Ukrainian hryvnia ($110 million), thanks to growth in customer numbers and the take-up of 3G services.

"In Armenia and Turkmenistan… we see customer usage impacted by the weakened economy through a reduction in international dialing and roaming," said Alexey Kornya, the vice president of finance, in commenting on performance elsewhere.

MTS continues to report a low level of net debt compared with international peers, with borrowings equaling just 1.1 times its annual OIBDA.

A number of Europe's biggest service providers have net-debt-to-EBITDA ratios of between two and three.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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