Mobile TeleSystems Announces Financial Results for the Third Quarter Ended September 30, 2016
Comunicato Precedente
Comunicato Successivo
Key Corporate and Industry Highlights
Commentary
Andrei Dubovskov, President and CEO of MTS commented, "For the period we saw a slight revenue decline of 1.3% year-over-year to RUB 112.2 bln. Macroeconomic factors and competitive issues continue to impact our performance in many ways, in particular voice and messaging usage in roaming, but in general, our revenue trends have shown relative stability in comparison to our peers throughout our markets of operations.
Vasyl Latsanych, Vice President, Strategy and Marketing, highlighted, "Total revenue in Russia did decline slightly by 0.8% to RUB 103.1 bln, as the weaker economy impacts travel and roaming usage. Nevertheless, we saw stronger data usage due to both the growth of customer usage and the migration to data plans as smartphone penetration reached nearly 52%, and a 2.8% growth in subscribers. In our fixed-line business, revenue increased slightly by 0.1% to RUB 15.1 bln. We see continuous growth from our B2C broadband and pay-TV markets, as market shares in Moscow in both home internet and pay-tv improved.
"In Ukraine, revenue for the period increased by 11.2% to nearly UAH 2.9 bln. Key drivers include a 2.7% increase in subscribers and data consumption, which is rising as we have rolled out 3G to all major population centers throughout Ukraine. Among our foreign subsidiaries, revenue in Armenia and Turkmenistan fell during the period. Both markets remain exposed to macroeconomic trends, which continue to weaken voice and data usage."
Mr. Dubovskov continued, "Adjusted OIBDA declined 5.1% year-over-year to RUB 45.7 bln. We already warned of weaker Adjusted OIBDA performance when we lowered our guidance for the year, and 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."
Commented Alexey Kornya, Vice President, Finance, Investments and M&A, "We saw relative strength in our Russian operations as Russia OIBDA declined 3.0% year-over-year. As indicated by our Group adjusted OIBDA performance, Russia showed a relative improvement in OIBDA quarter-on-quarter as well (8.8% vs 8.0% growth) when compared to 2015. Like in previous quarters, roaming usage and its impact on overall revenues, as well as our retail expansion and efforts to manage the increased competition within the marketplace, continued to pressure profitability.
Mr. Kornya continued, "In Ukraine, adjusted OIBDA improved year-over-year to nearly UAH 1.1 bln. We continue to see improvement in Ukraine efficiency as we realize the scale benefits of our 3G investments in the market through rising subscriber levels and growing revenues from voice and data products. In our other markets, OIBDA trends in Armenia and Turkmenistan reflect revenue dynamics, as we see customer usage impacted by the weakened economy through a reduction in international dialing and roaming."
"Group net profit for the period decreased slightly year-over-year to RUB 12.6 bln. This included a RUB 2.7 bln loss on the disposal of UMS LLC. Other factors impacting our net profit include OIBDA dynamics, a decrease in non-cash FOREX loss from ruble appreciation and a stronger ruble in relation to group currencies and key non-ruble expenses."
"Free cash flow to date amounted to RUB 48.9 bln, an increase of 67.2% year-over-year through the first nine months. Lower CAPEX spending of RUB 58 bln year-to-date is a key factor, and we expect more moderate CAPEX spending to continue and be in line with our guidance of RUB 85 bln. By the end of the period, total debt stood at RUB 267.9 bln – net of leases and debt issuance costs – which is trending lower due to our on-going debt repayments as well as financial policies. Our net debt/LTM Adjusted OIBDA remained stable at a manageable 1.1x, a comfortable level for the Company and very low in relation to our peers."
Mr. Dubovskov concluded, "While our quarterly performance was below past performance, we feel strongly that MTS is well-positioned for the future. In our key markets, we've seen the effects of macroeconomic weakness, especially in segments like roaming and small business, impact our results disproportionately to our competitors. Despite these challenges, we have been successful in sustaining our market share.
"Overall, we saw subscriber growth in our key markets of Russia and Ukraine. We've completed our core network build, and we now offer LTE in every region of Russia and 3G services throughout Ukraine. In Moscow, our market share in Internet and pay-tv is increasing. Our expansion into complementary businesses remains promising as we have issued more than 3.2 million of MTS Money cards. Our balance sheet remains the strongest in the business. We've sustained current net debt/adjusted OIBDA levels for many quarters and generate sufficient cash flow to make a healthy return to shareholders."
2016 Outlook
In accordance with IFRS 5 disclosure requirements, from Q3 2016 the Group shall present financial results in a manner that enables users of the financial statements to evaluate the effects of discontinued operations. Results of discontinued operations shall be excluded from the results of continuing operations and presented separately as a single amount in the statement of comprehensive income.
Group Revenue: For 2016, MTS reiterates its Group revenue outlook at 2-3% growth, after disposal of UMS LLC and expected full deconsolidation of UMS's financial results in Q3 2016 and other factors:
Group OIBDA: MTS reiterates its outlook on adjusted Group OIBDA growth rate at -4% due primarily to the sale of UMS LLC as well as other factors:
Group CAPEX: MTS aims to reduce FY2016 CAPEX to RUB 85 bln
Additional Information
MTS continues to see sustained macroeconomic volatility in its markets of operations that may impact the financial and operational performance throughout the Group.
Conference Call
The conference call will start today at:
18:00 hrs (Moscow time)
15:00 hrs (London time)
10:00 hrs (US Eastern time)
To take part in the conference call, please dial one of the following telephone numbers and quote the confirmation code, 8926555
From Russia: + 7 495 213 1767
From the UK: + 44(0)20 3043 2002
From the US: + 1 719 325 2229
The conference call will also be available at: http://www.mtsgsm.com/news/reports/ via audio webcast.
A replay of the conference call will be available for seven days on the following telephone numbers:
From the US: +1 719 457 0820 PIN 8926555
From the UK: +44(0)20 7660 0134 PIN 8926555
This press release provides a summary of some of the key financial and operating indicators for the period ended September 30, 2016. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.
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Learn more about MTS. Visit the official blog of the Investor Relations Department at www.mtsgsm.com/blog/ and follow us on Twitter: JoshatMTS
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Mobile TeleSystems PJSC ("MTS") (NYSE: MBT; MOEX: MTSS) is the leading telecommunications group in Russia and the CIS. We provide wireless Internet access and fixed voice, broadband and pay-TV to over 100 million customers who value high quality of service at a competitive price. Our wireless and fixed-line networks deliver best-in-class speeds and coverage throughout Russia, Ukraine, Armenia, Turkmenistan and Belarus. To keep pace with evolving customer demand, we continue to grow through innovative products, investments in our market-leading retail platform, mobile payment services, e-commerce and IT solutions. For more information, please visit: www.mtsgsm.com.
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Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," and the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Company's most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks.
Attachments to the Third Quarter 2016
Earnings Press Release
Attachment A
Non-IFRS financial measures. This presentation includes financial information prepared in accordance with International Financial Reporting Standards, or IFRS, as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Due to the rounding and translation practices, Russian ruble and functional currency margins, as well as other non-IFRS financial measures, may differ.
Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA margin. OIBDA represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of our net revenues. OIBDA may not be similar to OIBDA measures of other companies, is not a measurement under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of profit or loss. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of mobile operators and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under IFRS, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. We use a term Adjusted for OIBDA and operating income when there were significant excluded one off effects. OIBDA can be reconciled to our consolidated statements of profit or loss as follows:
OIBDA margin can be reconciled to our operating margin as follows:
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Attachment B
Net debt represents total debt less cash and cash equivalents and short-term investments and long-term deposits. Our net debt calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare our periodic and future liquidity within the wireless telecommunications industry. The non-IFRS financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS.
Net debt can be reconciled to our consolidated statements of financial position as follows:
Free cash-flow can be reconciled to our consolidated statements of cash flow as follows:
LTM Adjusted OIBDA can be reconciled to our consolidated statements of operations as follows:
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Attachment C
Definitions
Subscriber. We define a "subscriber" as an organization or individual, whose SIM-card:
Over the course of any three-month period, inclusive within the reporting period, and was not blocked at the end of the period.
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MOBILE TELESYSTEMS
[1] Net of financial leasing and unamortized debt issuance cost adjustment, as of September 30, 2016
[2] Revenue, net of intercompany between mobile, fixed and integrated services
[3] Excluding costs of RUB 3.4 bln related to the acquisition of a 4G license in Russia in 2015 and RUB 2.6 bln in 2016
[4] Excluding purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015
[5] Excluding RUB 875 mln spent on CAPEX in Uzbekistan in 2016, which was stated under cash flows from discontinued operations
[6] Excluding costs of RUB 2.6 bln in 2016 and purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015
