Mobile TeleSystems Announces Financial Results for the Second Quarter Ended June 30, 2016
Comunicato Precedente
Comunicato Successivo
Key Financial Highlights ofQ2 2016
Key Corporate and Industry Highlights
Commentary
Mr. Andrei Dubovskov, President and CEO of MTS, commented, "For the period, we are pleased to report strong topline growth of 5.3% as total Group revenue increased to RUB 108.1 bln. Factors that have allowed us to build on our successful 3D strategy and set the pace for the market include: strong retail sales; stable service revenue despite on-going weaker usage in certain mobile market segments; growth in B2C home Internet and pay-tv markets; and growth in Ukraine through the steady adoption of 3G data services.
--------------------------------------------------
[1] Net of financial leasing and unamortized debt issuance cost adjustment, as of June 30, 2016
Macroeconomic factors and competitive issues continue to impact our performance in many ways, in particular voice and messaging usage in roaming, but in sum, our group revenue performance currently out-paces the market."
Mr. Dubovskov continued, "OIBDA performance was slightly weaker in Q2 than anticipated as we witnessed a 4.3% decline in OIBDA for an OIBDA margin of nearly 38%. Our guidance for the year was predicated on changes in the retail environment, but we continue to see strong competitor activity in this space. Retail competition impacts both the gross margin and OIBDA directly, but it also has a sustained impact on effective pricing. These factors, combined with the continued macroeconomic volatility throughout our markets, dampened our performance for the period."
Mr. Vasyl Latsanych, Vice President, Strategy and Marketing, commented, "Total revenue in Russia increased by 3.3% to RUB 97.4 bln. Our mobile business revenue grew slightly during the period as we see a continuation of trends that had previously defined our growth: stronger data usage due to both the growth of customer usage and migration to data plans, as smartphone penetration reached over 51%; 3.2% growth in subscribers as we focus more on sales through our proprietary retail channels; and higher handset sales as we continue to implement our retail strategy of upgrading existing feature phone users, as well as attracting new active voice and data users."
Mr. Latsanych continued, "In our fixed-line business, revenue decreased by 2.8% to RUB 15.3 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 rose. However, overall B2B and B2G spending has fallen due to macroeconomic factors, which reduces overall voice calling. In Ukraine, revenue for the period increased by 13.5% to UAH 2.7 bln. Key drivers include an increase of 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 declined 18.6% year-over-year, while in Turkmenistan, we saw a 7.5% decline. Both markets remain exposed to macroeconomic trends, which continue to weaken voice and data usage."
Alexey Kornya, Vice President, Finance, Investments and M&A, added, "We witnessed a decline in year-over-year group OIBDA of 4.3% to RUB 40.9 bln. While the decline we have seen in the contribution from our foreign subsidiaries has stabilized, Russia witnessed OIBDA decline due to factors we have long identified as having a negative impact on our OIBDA, including higher retail expenses and also roaming costs in light of higher currency volatility. Overall, for the first half of 2016, we are only down 2.2% on OIBDA, which is close to our previous guidance of minus 2%."
Mr. Kornya continued, "Group net profit for the period decreased year-over-year to RUB 9.1 bln. Primary this decline was attributable to a number of factors, including OIBDA trends; the accelerated realization of RUB 3.1 bln in interest expense due to our repurchase of USD 267 mln of our 2020 Eurobond notes; and a smaller non-cash FOREX gain compared to Q2 2015 of RUB 1.0 bln for the period, due to relative ruble weakness vis-à-vis our non-ruble denominated debt."
"Free cash flow to date amounted to 24.0 billion rubles, an increase of 22% year-over-year for the period. CAPEX equaled nearly RUB 40.0 bln, lower than in H1 2015, but in line with our guidance of RUB 85 bln for the year. Spending is lower in each of our markets as we focus on incremental investments in our more developed data markets and have completed our launch of our core 3G network in Ukraine.
"Recently, we paid out dividends of RUB 28.0 bln or RUB 14.01 per share. The Board of Directors also recommended that an Extraordinary General Meeting of Shareholders approve a semi-annual dividend payment of close to RUB 24.0 bln or RUB 11.99 per share, which would satisfy our commitment to deliver RUB 25 - 26 per share in dividends over the course of calendar year 2016.
"By the end of the period, total debt stood at RUB 274.5 bln[2], 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. Virtually our entire non-ruble debt position is currently covered by a combination of hedges, short-term deposits and stable long-term investments, all of which are denominated in US dollar or Euro. Adding to this, we repurchased USD 267 mln of our 2020 Eurobonds in Q2 to take advantage of a strong market and our favorable liquidity position to provide hedges against currency volatility and balance sheet flexibility. We remain focused on sustaining a strong balance sheet and identifying further ways to optimize our debt portfolio."
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 amends its Group revenue outlook to 2-3% growth, due to disposal of UMS LLC and expected full deconsolidation of UMS's financial results in Q3 2016 and other factors:
Group OIBDA: MTS is compelled to revise its outlook on adjusted Group OIBDA growth to -4% due primarily to the sale of UMS LLC as well as other factors:
Group CAPEX: MTS affirms its Group CAPEX guidance of 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:
--------------------------------------------------
[2] Net of financial leasing and unamortized debt issuance cost adjustment, as of June 30, 2016
18:00 hrs (Moscow time)
16:00 hrs (London time)
11:00 hrs (US Eastern time)
To take part in the conference call, please dial one of the following telephone numbers and quote the confirmation code, 9935476
From Russia + 7 495 545 0588
From the UK: + 44(0)20 3427 1906
From the US: + 1 646 254 3361
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: +1 347 366 9565 PIN 9935476
From the UK: +44(0)20 3427 0598 PIN 9935476
This press release provides a summary of some of the key financial and operating indicators for the period endedJune 30, 2016. For full disclosure materials, please visithttp://www.mtsgsm.com/resources/reports/.
Financial Summary
Russia Highlights
Ukraine Highlights
--------------------------------------------------
[3] Revenue, net of intercompany between mobile, fixed and integrated services
Armenia Highlights
Turkmenistan Highlights
Uzbekistan Highlights
Belarus Highlights
CAPEX Highlights
* * *
For further information, please contact in Moscow:
Joshua B. Tulgan
Director, Corporate Finance & Investor Relations
Mobile TeleSystems PJSC
Tel: +7 495 223 2025
E-mail: [email protected]
Learn more about MTS. Visit the official blog of the Investor Relations Department at http://www.mtsgsm.com/blog/ and follow us on Twitter: JoshatMTS
* * *
Mobile TeleSystems PJSC ("MTS" - NYSE:MBT; MOEX:MTSS) is the leading telecommunications group in
Russia, Central and
Eastern Europe. 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: http://www.mtsgsm.com.
* * *
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 Second 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 operations as follows:
--------------------------------------------------
[4] 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
[5] Excluding purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015
OIBDA margin can be reconciled to our operating margin as follows:
***
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:
--------------------------------------------------
[6] 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 and purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015
***
Attachment C
Definitions
Subscriber. We define a "subscriber" as an organization or individual, whose SIM-card:
shows traffic-generating activity or
accrues a balance for services rendered or
is replenished or topped off
Over the course of any three-month period, inclusive within the reporting period, and was not blocked at the end of the period.
***
