MOSCOW, May 19, 2015 /PRNewswire/ --
Mobile TeleSystems OJSC ("MTS" - NYSE: MBT), the leading
telecommunications provider in Russia and the CIS, today announces its
unaudited IFRS financial results for the three months ended
March 31, 2015.
Key Financial Highlights of Q1 2015
- Consolidated group revenue increased 2.7% y-o-y to RUB 100.2 bln
- Total revenue in Russia rose
3.6% y-o-y to RUB 90.4 bln
- Mobile service revenue in Russia improved 3.9% y-o-y to RUB 70.5 billion
- Data traffic revenue in Russia
grew 26.0% y-o-y to RUB 18.1 bln
- Handset sales increased 1.2% y-o-y to RUB 6.3 bln
- Group Adjusted OBDA down 2.0% to RUB
41.3 bln
- OIBDA in Russia rose 0.9%
y-o-y to RUB 38.2 bln
Key Corporate and Industry Highlights
- Won a tender for a nationwide license for the provision of 3G
telecommunications services in the 1950-1965 MHz/2140-2155 MHz in
Ukraine. The cost of the license
amounted to UAH 2.7 bln.
- Launched LTE network in the 1800 MHz range in Moscow and LTE network in the 800 MHz range
throughout the Moscow region
- Launched LTE network in the 1800 MHz range in Saint Petersburg and the Leningrad Region
- Launched LTE network in the 1800 MHz range in the Krasnodar
region in southern Russia
- Annual dividend recommendation by the MTS Board of RUB 19.56 per ordinary MTS share (RUB 39.12 per ADR), or a total of RUB 40.419 bln based on the full-year 2014
financial results, upon acceptance by the AGM and completion of
this payment, MTS will have paid out up to RUB 53.2 bln rubles based on fiscal year 2014
financial results
- Signed a USD 200 mln equivalent
term loan facility agreement with China Development Bank
Corporation ("CDB") in renminbi and US dollars.
Commentary
Mr. Andrei Dubovskov, MTS
President and CEO, commented, "For the period, MTS again
demonstrated strong operational trends in our core markets. Revenue
for the Group grew 2.7% year-over-year to 100.2 billion rubles.
Growth was primarily driven by increases in voice usage and data
adoption.
Despite the volatile and generally negative macroeconomic
environment, we maintained strong profitability with a Group
Adjusted OIBDA margin coming in at 41.2%. In Russia, we continue to benefit from growing
smartphone penetration and increased data usage in all customer
segments while overall demand for our services remains resilient.
Our sensible commercial strategies, the speed and quality of our
networks, our commitment to customer service and the biggest chain
of proprietary retail stores have allowed us to continue to
outperform the market."
Mr. Vasyl Latsanych, MTS Vice
President for Marketing, said, "Revenue at our business in
Russia grew 3.6% year-over-year to
90.4 billion rubles. The most significant growth was seen in our
mobile business, which increased 3.9% year-over-year to 70.5
billion rubles. This was mainly attributable to the higher uptake
of data plans as smartphone penetration reached 43.5% among our
active subscribers, contributing to a 26.0% increase in data
traffic revenue year-over-year. In Ukraine, our revenues grew 9.0% year-over-year
to 2.6 billion hryvnas. In spite of the operational challenges in
the East and the exit from Crimea, MTS-Ukraine's operations show
remarkable resilience. In addition, revenues were boosted during
the quarter by an increase in termination rates as well as by the
hryvnia devaluation against the US dollar, as interconnect rates
are fixed in hard currency."
Mr. Alexey Kornya, MTS Vice
President for Finance and Investments, said, "MTS Russia OIBDA
increased 0.9% year-over-year to 38.2 billion rubles. OIBDA was
positively impacted by a growing share of high-margin data
revenues. At the same time, weaker roaming revenues and increased
roaming expenses depressed the margin, which came in at 42.2%.
Sequentially, OIBDA fell by 7.7% in line with revenue. In
Ukraine, we delivered stable
Adjusted OIBDA of 1.2 billion hryvna with an OIBDA margin of 47.0%.
On a quarterly basis, we saw a strong increase in OIBDA due to
growth in interconnect revenues.
Group net income for the period, declined 14.3% to 10.9 billion
rubles and was impacted by the decline in OIBDA; a FOREX loss of
3.5 billion rubles in Q1 2015 based on the value of MTS's foreign
currency-denominated debt due to ruble depreciation and volatility
throughout the period; and a reserve related to the cash balances
held in distressed banks in Ukraine in the amount of 1.7 billion rubles.
Free cash flow for the first three months fell by 56.1% to
15.0 billion rubles. Free cash flow was largely impacted by higher
than normal CAPEX for the period. This included both the settlement
of invoices billed at the end of 2014 and our planned network build
for 2015."
Mr. Alexey Kornya added, "At MTS
we have long considered dividends to be a key commitment to our
shareholders. This is both a reflection of the strong market, in
which we operate, and prudent management of our business. We are
pleased that the results of 2014 will allow us to pay out the
largest dividend in our history; for the Fiscal Year 2014, MTS will
have paid out 53.2 billion rubles. Most importantly, this sum is
derived from our free cash flow, which does not require us to
resort to outside funding to finance this payment. Unlike some, our
view is that a dividend story is best preserved by paying one. And
in that respect in April, the Board recommended to the AGM to be
held on June 25, 2015, to approve
annual dividends of 19.56 rubles per ordinary MTS share, or a total
of 40.4 billion rubles, based on the full-year 2014 financial
results."
Mr. Andrei Dubovskov concluded,
"As you've seen from the results of all players in the sector, even
in conditions of greater macroeconomic uncertainty, the Russian
telecoms sector continues to present growth opportunities - but
only operators with the right business model will be able to
realize them. Our enhanced leadership of the sector positions us to
benefit ahead of our competitors, for example from the continued
increase in data usage and strong unit sales in lower-value
handsets."
Change to International Financial Reporting
Standards
In 2010, the Russian State Duma enacted a law requiring Russian
public companies to prepare consolidated financial statements under
International Financial Reporting Standards (IFRS). To conform to
this requirement, the Group will prepare its consolidated financial
statements for the year ended December 31,
2015, with comparative information for the year ended
December 31, 2014, under IFRS.
This change also reflects our commitment to transparency and
facilitates more accurate like-for-like comparison with the Group's
European peers, most of whom report under IFRS.
The accounts in IFRS will continue to be presented in Russian
rubles as MTS' core assets and activities are based primarily in
Russia.
The Group is reporting its quarterly results under IFRS starting
from Q1 2015. Comparative information for the previous quarters of
2014 presented has been restated to comply with IFRS.
The following table and notes summarize the impact of the
conversion from US GAAP to IFRS on selected IFRS and non-IFRS
measures of the Group for the year ended December 31, 2014.
As of December, 31 2014
RUB mln US GAAP IFRS Difference
Revenue 410,758 410,780 22
Adjusted OIBDA 175,463 179,127 3,664
Net Income 52,393 51,496 (897)
CAPEX 92,599 91,929 (670)
Net Debt 185,525 183,006 (2,519)
Adjusted OIBDA
Upon transition to IFRS, the Group will start reporting its
share of profits or losses of Mobile TeleSystems LLC ("MTS
Belarus"), a 49% owned associate, within operating income and,
consequently, OIBDA, since the entity is viewed as part of the
Group's core telecommunications operations. The Group will continue
to report its share of profits or losses of MTS-Bank below
operating income and OIBDA.
Net income
Difference in net income reported under IFRS as compared to net
income previously reported under US GAAP is due to a number of
differences, including:
- accounting for the put option issued by the Group over the
non-controlling interest in K-Telecom, an 80%-owned subsidiary in
Armenia, as financial liability
(US GAAP: mezzanine equity) recognizing the change in its fair
value in profit or loss (US GAAP: equity);
- non-consolidation of Tsifrovoe Teleradioveschanie LLC ("TSTV"),
an operator of MTS's satellite project owned by Sistema Mass Media,
a subsidiary of Sistema JSFC;
- an adjustment to the share of net income of MTS Belarus due to
the differences in hyperinflationary economies accounting;
- an increase in depreciation and amortization expenses due to
reversal of impairment on the consolidated statement of financial
position related to the assets of our subsidiary in Turkmenistan ("MTS Turkmenistan") which were
previously impaired; and
- a different approach to capitalization of borrowing costs under
IFRS.
CAPEX
Different capitalization policies for borrowing costs under the
IFRS led to a reduction in total CAPEX.
Net debt
Upon transition to IFRS, the Group presents deferrals of debt
issuance costs in the statement of financial position as a
reduction of the debt balance (US GAAP: presented as assets). The
Group's debt under IFRS also does not include the debt of TSTV
which is not consolidated under IFRS comparing to US GAAP.
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.
This press release provides a summary of some of the key
financial and operating indicators for the period ended
March 31, 2015. For full disclosure
materials, please
visit http://www.mtsgsm.com/resources/reports/.
* * *
Mobile TeleSystems OJSC ("MTS") is the leading
telecommunications group in Russia
and the CIS, offering mobile and fixed voice, broadband, pay TV as
well as content and entertainment services in one of the world's
fastest growing regions. Including its subsidiaries, the Group
services over 100 million mobile subscribers. The Group has been
awarded GSM licenses in Russia,
Ukraine, Turkmenistan, Armenia and Belarus, a region that boasts a total
population of more than 200 million. Since June 2000, MTS' Level 3 ADRs have been listed on
the New York Stock Exchange (ticker symbol MBT). Additional
information about the MTS Group can be found at
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.
For further information, please contact in Moscow:
Joshua B. Tulgan
Director, Corporate Finance & Investor Relations
Mobile TeleSystems OJSC
Tel: +7-495-223-2025
E-mail: ir@mts.ru
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