MTS reports 2.1% drop in Q2 EBITDA

19 Aug 2015

Russian-based telecoms group Mobile TeleSystems (MTS) has reported a 3.9% year-on-year rise in consolidated revenues in the second quarter of 2015 to RUB102.691 billion (USD1.561 billion), driven by active subscriber growth in Russia and data service adoption across its Russian and CIS markets. However, EBITDA dropped by 2.1% y-o-y to RUB42.722 billion in the three months ended 30 June, largely due to the cessation of operations in Crimea (former Ukraine), ongoing turbulence in eastern Ukraine, devaluation of the Ukrainian currency, and costs related to MTS’ relaunch of mobile services in Uzbekistan. Consolidated net profit fell by 21.7 y-o-y to RUB17.074 billion in 2Q15, affected by currency fluctuations. MTS maintained a 2% annual revenue growth forecast (including 3%-plus growth in Russia).

MTS’ Russian mobile and fixed revenues climbed 4.4% y-o-y to RUB94.336 billion in Q2 2015, driving Russian EBITDA up 2.2% to RUB41.245 billion, with mobile turnover accounting for RUB72.749 billion (up 2.8% y-o-y) as Russian mobile data revenue jumped by 23.4% to RUB18.910 billion. MTS reported its Russian mobile subscriber base as 75.4 million at the end of June, up from 70.6 million twelve months earlier, although TeleGeography notes that the mid-2015 total contains machine-to-machine (M2M) connections estimated at over 3.4 million (up from around 2.75 million at mid-2014). Russian mobile ARPU shrank by 3.5% over the same period to RUB323.6 per month. Revenues at MTS Ukraine fell by 5.9% to UAH2.419 billion (USD109 million) in 2Q15 following the discontinuation of Crimean operations.

In reference to recent reports of a US-led call to seize certain assets in Europe as part of investigations related to MTS, Vimpelcom and TeliaSonera’s historical operations in Uzbekistan, MTS gave the following statement: ‘MTS affirms that the alleged activities related to its business in Uzbekistan have been referenced in a civil forfeiture complaint, filed by US Department of Justice (DOJ) in the US District Court, Southern District of New York (Manhattan), directed at certain assets of an unnamed Uzbek government official. The Complaint alleges among other things that MTS and certain other parties made corrupt payments to the unnamed Uzbek official to assist their entrance and operations in the Uzbekistan telecommunications market. The Complaint is solely directed towards assets held by the unnamed Uzbek official, and none of MTS’s assets are affected by the Complaint. As MTS disclosed in March 2014, both the US Securities and Exchange Commission (SEC) and DOJ are currently conducting an investigation related to MTS’s former operations in Uzbekistan. As previously disclosed, the Company has received requests for documents and information from both the SEC and DOJ and continues to cooperate with these investigations in good faith.’

Russia, Ukraine,Mobile TeleSystems (MTS), Vodafone Ukraine,

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