Mobile TeleSystems OJSC (MBT), the largest mobile phone operator in Russia and the Commonwealth of Independent States, on Friday reported a 4.1% decline in profit for the third quarter. Results were hurt by a 19.4% drop in revenues, higher debt levels and lower non-cash foreign exchange gain on U.S. dollar-denominated debt. Looking ahead, the company said it continues to see sustained macroeconomic volatility in its markets of operations that may impact the financial and operational performance throughout the Group.
Third-Quarter Results
Moscow, Russian Federation-based Mobile TeleSystems or MTS, which provides GSM services in the regions of Russia, as well as Armenia, Belarus, Turkmenistan, Ukraine, and Uzbekistan, reported net income attributable to the group of $494.4 million or $0.26 per share for the third quarter, lower than $515.6 million or $0.27 per share in the prior-year quarter.
On average, analysts polled by Thomson Reuters expected earnings of $1.25 per share for the third quarter. Analysts' estimates typically exclude special items.
In August, the company had reported net income of $563.04 million or $0.30 per share for the second quarter.
Consolidated revenues for the third quarter declined to $2.27 billion from $2.81 billion in the same quarter last year, yet topped analysts' consensus estimate of $2.18 billion. Revenues for the quarter increased 12.1% from $2.02 billion generated in the preceding second quarter.
Service revenue and connection fees for the third quarter dropped to $2.16 billion from $2.80 billion in the year-ago quarter. Sales of handsets and accessories soared to $102.87 million from $15.44 million in the same quarter last year. MTS' net operating income for the third quarter dropped 31.7% to $638.49 million from $935.45 million in the prior-year quarter.
The company added approximately 1.86 million new customers during the latest quarter that were all added organically. This includes the addition of around 1.28 million subscribers in Russia. Total subscribers at the end of quarter were 101.38 million, up from 91.73 million at the end of the year-ago quarter. Sales and marketing expenses for the quarter decreased to $186.14 million from $221.64 million in the prior-year quarter, while general and administrative expenses declined to $374.43 million from $407.21 million a year ago. However, cost of handsets and accessories soared to $110.15 million from $44.69 million in the same quarter last year.
The company ended the third quarter with cash and cash equivalents of $3.82 billion, compared to $627.24 million at end of the year-ago quarter.
As of September 30, 2009, MTS' total debt was at $7.19 billion, much higher $4.08 billion as of December 31, 2008. The company said the increase in total debt was due to additional capital raised for the acquisition of Comstar-UTS and general corporate needs.
In mid-October, the company said it acquired a 50.91% stake in Comstar-United TeleSystems, a supplier of telecommunication solutions in Russia and the CIS, from AFK Sistema for 39.15 billion rubles, or $1.32 billion.
MTS said that in the third quarter, no ADRs were acquired as part of the company's share repurchase program.
Year-To-Date Results
For the nine months of fiscal year 2009, MTS reported net income attributable to the group of $999.72 million or $0.53 per share, sharply lower than $1.78 billion or $0.92 per share in the prior-year period.
Consolidated revenues for the year-to-date period dropped to $6.10 billion from $7.83 billion in the same period last year.
Outlook
Looking ahead, MTS said it continues to see sustained macroeconomic volatility in its markets of operations that may impact the financial and operational performance throughout the Group. For fiscal year 2009, MTS forecasts group revenue to reach $8.25 billion.
The company raised its capital expenditure guidance for the year to $1.8 billion from the previous $1.5 billion, citing the appreciation of the Russian ruble and additional spending in Central Asian markets to accommodate increasing traffic.
Further, the company said it expects single-digit year-over-year ruble revenue growth in Russia and a single-digit year-over-year revenue reduction in hryvnia revenue in Ukraine.
Peer Performance
Among others in the industry, another Russian telecommunications service provider Vimpel-Communications (VIP) is yet to announce financial results for the third quarter. Analysts expect the company to report earnings of $0.47 per share for the quarter.
Stock Quotes
In Friday's regular trading session, MBT is currently trading at $50.35, up $0.64 or 1.29% on a volume of 0.14 million shares. In the past 52-week period, the stock has been trading in a range of $18.36 -$55.71.
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