Russian telecommunications service provider Vimpel-Communications (VIP) on Wednesday reported a net loss for the fourth quarter compared to a profit in the year-ago period. The results for the latest quarter were negatively impacted by the sharp devaluation of local currencies in Russia and Ukraine in addition to impairment of goodwill and long-lived assets.
Fourth-Quarter Results
The company's net loss for the fourth quarter was US$815.73 million, or US$16.12 per share, compared to net profit of US$368.11 million, or US$7.25 per share, in the prior year period. Net loss per ADS equivalent for the quarter was US$0.81 compared to net income per ADS of US$0.36 in the previous-year quarter.
On average, four analysts polled by Thomson Reuters expected the company to report earnings of US$0.07 per share for the quarter. Analysts' estimates typically exclude special items.
The net loss for the latest quarter reflects loss of US$1.01 billion due to currency devaluation and impairment loss of US$442.75 million. The foreign exchange loss relates primarily to revaluation of the company's long-term foreign currency debt. The impairment loss includes a US$315 million loss related to VimpelCom's acquisition of Golden Telecom in February 2008, due to deteriorating macroeconomic factors.
Excluding foreign exchange currency losses and impairment losses, the company's adjusted net income for the quarter was US$387 million.
Net operating revenues for the quarter increased 27.1% to US$2.56 billion from US$2.01 billion in the year-ago period, but missed analysts' consensus revenue estimate for the quarter of US$2.65 billion.
Peer Performance
In March, Mobile TeleSystems OJSC (MBT), the largest mobile phone operator in Russia and the Commonwealth of Independent States or CIS, reported a 68.4% fall in profit for the fourth quarter, hurt mainly by currency exchange and transaction losses, despite revenue growth. The company's net income for the quarter was US$145.50 million, or US$0.08 per share, down from US$460.32 million, or US$0.23 per share, a year ago. Net operating revenue increased 4% to US$2.42 billion from US$2.33 billion in the prior-year quarter.
Other Metrics
VimpelCom's Mobile business segment generated revenues of US$2.15 billion, while fixed-line business recorded revenues of US$499 million in the most recent period.
Net operating revenues from Russia for the latest quarter were US$2.16 billion, up 26.7% from the year-ago period. Revenues from CIS markets, including Kazakhstan, Ukraine and Armenia, surged 33.5% from the prior-year quarter to US$419.6 million.
The company said that while it did not see a direct immediate impact of the economic crisis on its operations during the fourth quarter, financial results were affected by the sharp devaluation of local currencies in Russia and Ukraine.
Operating income before depreciation and amortization, or OIBDA, increased 22.4% to US$1.12 billion from US$918 million in the same period last year.
Consolidated OIBDA margin for the quarter was 44.0%, including the fixed-line business. This compares to 45.7% in the year-ago period. OIBDA margin was 43.9% for Russia and 42.7% for CIS.
VimpelCom noted that mobile subscribers increased 18% in the fourth quarter to reach 61.03 million from 51.74 million a year ago. Average revenue per user, or ARPU, declined 7.4% from the previous-year quarter to US$12.5 in Russia, and dropped 16.2% to US$10.8 in Kazakhstan.
Full Year Results
For fiscal year 2008, VimpelCom's net income dropped 64.2% to US$524.33 million from US$1.46 billion in the previous year, reflecting strong adverse currency impact and charges related to impairment loss. On a per share basis, net income declined to US$10.34 from US$28.78 in the prior year. Net income per ADS equivalent dropped to US$0.52 from US$1.44 a year ago.
Net operating revenues for the year surged 41.1% to US$10.12 billion from US$7.17 billion in the previous year.
VimpelCom said that in the first months of 2009, economic conditions in all its markets were deteriorating with a substantial drop in industrial production and growing unemployment. The company anticipates that these developments could have a negative impact on the telecom sector and therefore plans to focus efforts on cost reduction, operational excellence and effective cash management.
As of March 31, 2009, VimpelCom has repaid 100% of the debt, or US$549 million, which came due in the first quarter of 2009. As of year-end, the company's debt obligations due in 2009 constituted approximately US$1.91 billion.
Stock Quotes
In Wednesday's regular trading session on the NYSE, VIP is trading at US$10.61, down US$0.85 or 7.42% on a volume of 0.65 million shares. In the past 52 weeks, the stock has been trading in a range of US$4.81-US$36.49.
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