MTS blog


VASYL LATSNANYCH IN GLOBAL TELECOMS BUSINESS

Monday, April 27, 2015

MTS CMO Vasyl Latsanych was among three leading CMOs interviewed by Global Telecom Business. Vasyl commented on market trends, potentail for growth and challenges MTS is facing. Click here to read the interview.  

Tags:

media | media

SUBSCRIBER NUMBERS FOR Q4 2014

Thursday, April 23, 2015
Subscribers (mln)December 31,  2014 

September 30,  2014

Growth
Subs
Growth
%
Total consolidated subscribers, mln 98.84 99.83 (0.99) (1.0%)
Russia 74.56 73.25 1.31 1.8%
Ukraine* 20.22 22.73 (2.51) -11.1%
Armenia 2.15 2.15 (0.00) (0.2%)
Turkmenistan 1.72 1.69 0.03 1.6%
Uzbekistan 0.19 0 0.19 n/a
MTS Belarus** 5.31 5.31 0.00 0.0%

 


Subscriber data for Russian mobile operators is compiled by Advanced Communications and Media, a management consulting and research agency specializing in telecommunications and media. You can view their Q4 2014 subscriber report here.  In Q3 2014, MTS adjusted its subscriber methodology to reflects three-months of subscriber activity instead of previously used six-months methodology. Numbers for the previous periods have been retrospectively adjusted.

 

* Including CDMA subscribers
** MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated.

Tags:

INTERVIEW WITH ARVIDAS ALUTIS, CEO OF MTS RETAIL NETWORK

Wednesday, April 22, 2015

Arvidas Alutis was appointed the CEO of MTS’s retail network a year ago. Prior to his appointment, for three years, he oversaw MTS’s customer service department and began his career with MTS 15 years ago as a consultant in one of our retail stores.

 

Interfax spoke with Arvidas about the performance of MTS’s retail network, the company’s strategy in mobile retail, market trends and the outlook for 2015. See below the abridged and translated version of the interview.

 

What are the financial results for RTK (i.e. MTS’s retail division)? Is the retail business profitable?

 

Surprisingly we are. Usually any retail owned by a mobile operator is a money drain. Our profit resulted from two major factors. Firstly, we worked to improve efficiency throughout 2014 and will continue to do so in the future. For instance, we decreased our rental expenses by approximately 10% in 2014 over 2013.

 

The second factor is our impressive product line. Not only do we bring MTS new mobile subscribers, but we also develop segments, in which our competitors are not present, such as fixed-line broadband and financial products.

 

Our OIBDA remains positive and our net income almost doubled last year. We are the only retail business owned by a mobile operator staying above break-even. Everyone else is in the red.

 

What goals does the MTS retail business have?

 

I’ve set three major goals for our employees this year. First, we want to achieve significant growth in online sales. Sales through online channels allow us to decrease expenses, including rent and salaries. Besides, the Internet allows us to expand the products we offer indefinitely. For example, we will soon launch our own line of accessories, and customers will be able to customize these products online. For example, you will be able to simply upload any photo, edit and submit it and then receive a personalized phone case with an image of your dog or your family.

 

Our Internet sales have benefited a lot from our synergy with Ozon, in which MTS owns an 11% stake. Ozon has a great base of customers who already make purchases online and are accustomed to shopping online, while we offer products Ozon has not offered before. Recently we have launched a pilot project allowing customers to pick-up products ordered through Ozon in five MTS retail stores in Moscow and two stores in Saint Petersburg. We plan to open at least 50 Ozon delivery locations in all major Russian cities in 2015.

 

Our second largest goal is to become the most efficient retail business run by a mobile operator and offer the best quality of service. This is because clients who get used to high standards in customer service here and now are likely to return when they need to get a new phone or to purchase one as a gift. I see the future in improving quality of service, and I’m sure that this is the right path for every mobile operator. Clients no longer get in queues for products. Now we are the ones who get in queues for the clients.

 

The third goal is to develop our human resources. This is rarely emphasized in retail companies, where employee turnover may amount to 70-80% per year. Our goal is simple: we want to be the best employer in retail and reach the lowest possible level of employees turnover in this business. Our goal is to achieve employee turnover of less than 35%. Retail generally employs young adults, who are only testing the ice in adult life: we are the first employer for over 50% of our staff. We must make sure that they understand that they have an option to professionally develop within our company, to become a manager and to grow both vertically and horizontally within MTS Group.

 

Do you plan to diversify your product lines? Will we be able to buy a blender at a MTS store in the future?

 

I doubt you will be able to get a blender, but you will be able to buy a TV in our stores. That’s because MTS, unlike other players on the market, is developing other businesses besides mobile. We own a PSTN provider in Moscow, we are the second largest provider of fixed broadband in Russia, and we will soon launch our satellite TV service. Products which come as complimentary to these services, such as a TV with built-in IPTV or satellite TV options, are a logical purchase for the clients. And through our partnership with MTS Bank we are able to offer our clients a loan or an installment payment plan under our own brand.

 

Last year the number of mobile retail stores in Russia decreased from 28,500 to 28,000. But MTS retail chain increased its footprint by 3% up to 2,900 proprietary stores. Do you plan to increase or decrease the size of retail chain?

 

This year we are probably the only company to grow its retail presence rather than reduce it. MTS plans to increase both the number of its stores and number of employees per store. We plan to open 300-400 proprietary stores in 2015.

           

Where will you open new outlets: in Moscow or in regions? What is your priority: major cities or increasing availability of internet access in the regions?

 

There is no decisive answer here. We do realize that we need additional stores in specific locations. This depends on the dynamic of the operator’s client base in specific regions.  We know that Svyaznoy and Evroset reduced the number of their stores this year by closing unprofitable outlets. They are most likely focusing on large cities where there is money left. But we take into consideration not only sales of devices, but also developing the MTS client base. If clients used to top-up their accounts at a specific store that our competitors have closed and are not ready to go to another location, we will open a store there even if we don’t expect to make profit from selling devices there.

 

How have rent expenses changed? Do you expect the rent to grow?

 

We decreased rent expenses last year by almost 10% over 2013. Despite the fact that we expect to grow our number of stores by 10%, our rent expenses should remain the same as the last year. That’s possible even when you have many outlets.

 

You’ve mentioned that you plan to increase the number of employees per outlet. Will that result in increased expenses for the retail business?

 

Of course it will. But we understand that these expenses are necessary because, first of all, we don’t want clients and prospective customers queuing for services, and second, our employees should have sufficient time to serve every customer to not only help  them with purchase of a phone or a tablet, but also resolve any other problems they might have. That means spending money on training our employees, on professional development, on retaining our staff. Last year we increased our personnel cost per store by 10%, but this increase has already paid off. We saw an increase in sales per store which outweighed these expenses.

 

What percentage of MTS clients do you acquire through you retail chain?

 

Over 50% overall, and over 70% in some of the regions.  This is a lot, and you should also add up contribution from our franchising partners which generate up to additional 20% of SIM card sales in some regions.

 

You are experimenting with smartphone only format of the stores where you sell smartphones almost exclusively. When will MTS retail transition to this model?

           

Smartphones account for almost 60% of our sales, the latest monthly figure was 65%. We are once again ahead of the market here, by 3-4%. That’s only natural as the market follows the demand. Our goal as a retail business owned by a mobile operator is to shape this demand. That’s why we are ahead, and I believe that feature phones will become a thing of a past even without forcing it. However, a decrease in supply could also work.  We opened the first smartphone only outlet last year in Moscow, this year we plan to open around 40 such outlets in every city with population of over one million.

 

What product range will be available at these stores?

We will still offer mobile phones for senior citizens, with large buttons and a large screen. Also we will keep cheap phones you won’t mind giving to, say, a child. There will be only 1-3 models to choose from. Everything else will be smartphones.

 

What kind of smartphones? How many items?

 

There are three things customers pay attention to. First one is the price, especially now. Our goal is to either make a device affordable enough for instant purchase, or to provide customers with options for installment payment or taking a loan.

 

The second one is screen size. Tablet sales are in stagnation and will soon dwindle as modern large-screen smartphones are yesterday’s tablets. Why should you carry around two devices when you can have everything you need in one?

 

The third one is specifications: OS, support of LTE standard, camera resolution, memory size. I refer to the majority of the clients as there are also customers who will buy only Apple or other brands like Samsung, who would never choose anything else. But for most of the customers, these three things matter. 40 smartphone models meet set requirements of 80% of the customers. Those who want an exclusive device can order it either from our online store at home, or online at our outlet.

 

What are your Q1 2015 results? Did the forecasted decrease in sales following market saturation in December actually occur?

 

As of Q1 we slightly increased sales over the same period in 2014. Our revenue was stable, but sales of smartphones in units increased by roughly 4% despite the economic difficulties and lower customer demand. Sales of budget LTE smartphones increased 30x year-over-year and constituted one of the key drivers of growth. At the same time, we do see the demand shifting to a lower price segment. But we were prepared for that. In Q4, we aimed to smooth any increase in prices and didn’t let our prices skyrocket as would have been expected. On April 1 we lowered prices on 70 devices even further.

 

Did you lower the prices at the expense of markup? Or did your suppliers lower theirs?

 

We did it at the expense of the markup. We won’t end up in red ink though. Our negotiations with suppliers led to some interesting offers. We saw a significant decrease in sales of high-end devices priced over 30,000 rubles, because these devices were sold out before the New Year. But we never aimed to maintain strong presence in this segment.

 

Why is that?  IPhone users generate higher ARPU than average clients.

 

MTS has more Apple owners among its clients than its competitors.  But over 40% of them purchase their iPhones and iPads abroad. They order the devices from global online stores or they just purchase devices while they are on a business trip or travelling. There is no point in trying to win this segment.

 

What was share of your sales did LTE devices account for in Q1? What do you expect from the LTE segment going forward? Could these devices be getting too expensive for customers?

           

Last quarter LTE devices accounted for 25% of total devices sold. In Moscow we are ahead of the market in sales of LTE smartphones as we are focused on this region as the quality of our LTE network here is superb.

           

Customers do spend less now and the demand is probably bound to decrease. However, our prices for LTE devices are also declining. 4G chips still cost twice as much as 3G chips. Manufacturers promise that the prices will decrease by summer and that the prices depend on how many devices have been sold. It is the assembly line principle: the more units that are produced, the cheaper every single unit is. More than 1 million LTE devices are sold in Russia every quarter and penetration of LTE devices grows much faster than in many of the European markets.

 

Do you sell less LTE smartphones in the regions where the average income is lower?

 

It’s not a matter of income, it’s a matter of client experience. If the LTE network is there, if one’s friends start using LTE, a transition to LTE becomes enjoyable. Considering the fact that we are lowering our prices, money is not an obstacle. In some regions, LTE devices account for almost 20% of total sales. The difference from Moscow is not drastic by any means.

 

 

Tags: , , ,

Retail, devices

MTS CFO ALEXEY KORNYA ON BLOOMBERG

Wednesday, April 15, 2015

Alexey Kornya, MTS CFO, spoke with Bloomberg's Pimm Fox at "Taking Stock with Pimm Fox" about plans to develop 3G networks in Ukraine, impact of FX volatility on Company's capital expenditures and strategies of growing smartphone penetration in Russia. Cilck here to watch the video.

Tags: , , , , , , , , ,

SPEEDTEST RESULTS FOR DATA NETWORKS SPEEDS IN 2014

Saturday, March 21, 2015

We are pleased to share results of measurements taken during 2014 by mobile subscribers throughout Russia using the popular application ‘Speedtest’, which was developed by Ookla.

Based on over 7.7 million measurements conducted from January to December 2014, MTS can demonstrate leadership in data transfer speeds across Russia. The average downlink speed recorded on MTS’s 2G/3G/LTE networks across Russia during 2014 was 8% higher than the average of its competitors.  In Moscow, MTS’s networks deliver speeds, which exceed the average of its competitors by 13%.

In 2014, MTS installed over 15,000 3G and LTE sites throughout Russia. By the end of the year, MTS offers LTE services in 76 regions of Russia, while over 85% of its 3G network was enabled by Dual-Carrier HSPA+. MTS’s fiber networks grew to 160,000 km as MTS continues its focus on developing data markets throughout the region.

See below the the full report.

_Speedtest 2014_ (6).pdf (122.64 kb)

Tags: , ,

TRAFFIC USAGE ON SAMSUNG AND APPLE SMARTPHONES

Friday, February 27, 2015

We have published a report which looks into mobile traffic consumption patterns based on data from the 13 most popular Apple and Samsung smartphone models on the MTS network.

Key findings:

  • Social networks account for roughly half of all traffic generated by these users (i.e. 54% for Apple users, 47% for Samsung owners)
  • Video streaming or downloading accounts for up to a third of traffic among these users 
  • While overall traffic patterns on Samsung and Apple devices are broadly similar in terms of the types of applications used, we noticed some marked differences, namely that Samsung users are more active on messaging and video-services, while iOS users spend more time on social networks

Click here to download the full report.

Tags:

Mobile | Retail, devices

MTS LAUNCHES LTE-1800 IN SAINT PETERSBURG

Thursday, February 19, 2015

We have now launched LTE networks in the 1800 MHz range in Saint Petersburg and the Leningrad Region. The new LTE-1800 network complements our existing networks in the 2600 MHz and 800 MHz ranges to ensure greater coverage throughout the region.  The network also allows us to off-load traffic from our 3G networks to provide higher data transfer speeds for all MTS customers in the region.
 
Around 10% of the LTE base stations in the areas of peak demand in central St. Petersburg and the larger population centers of the Leningrad Region currently support 1800 MHz range networks. We plan to extend the LTE-1800 network’s coverage across the other regions of the North-Western Federal District over the course of 2015. 
 
In 2014, we established LTE network coverage throughout Saint Petersburg, including its suburbs as well as in over 100 population centers across the Leningrad Region, increasing the total number of base stations in the region by 40%.
 
Previously, MTS launched LTE-1800 networks in the Moscow Region and in Ufa. Overall, by the end of 2014, MTS operated LTE networks in 76 of Russia’s 85 regions.

Tags:

LIGHT READING TALKS TO VASYL LATSANYCH

Tuesday, February 10, 2015

Light Reading’s interview with Vasyl Latsanych, our Chief Marketing Officer is an interesting discussion focussing on the differentiation in our 3D strategy (data, differentiation, dividends) and the resilience of our business against what is a challenging macro-economic backdrop. Using our Q3 2014 figures the interview highlights our leadership in mobile, with the largest subscriber base and fastest subscriber growth year on year among the Big 3 and our continuing track record in growing smartphone sales and their penetration as a percentage of all mobile phones on our network towards the 40% level in 2014- which we are doing by developing our own branded high quality devices cost efficiently in partnership with manufacturers as well as continuing to expand our 4G and LTE networks.

Vasyl explains how the broadband opportunity in Moscow is at the core of MTS’s differentiated story. We have been replacing copper with state of the art GPON since 2011 and aim to convert 90% of MGTS’s 4.4 million lines in Moscow and the region by end 2015, over 80% of all Moscow households. As well as enabling high speed broadband, Vasyl says the GPON network will provide a platform to launch more sophisticated IPTV services, incorporating video-on-demand and catch up programming which will be more intuitive, simpler to use and better value than the services our competitors have at present. The interview picks up the importance of our differentiation in this area to our top line performance, driving overall Q3 2014 fixed line revenue growth of 2.6% year on year.

The article also puts our satellite TV strategy into context, with some 18.6 million Russians expected to use satellite TV by 2018, up from 13.1 million in 2013 and Analysys Mason citing our plans for nationwide pay-TV coverage in rural areas as a clear advantage.

The success of our unique approach to mobile financial services is also highlighted as a key differentiator and Vasyl sees a potential in further combining our mobile and banking activities and in fusing our satellite and 4G technologies as we continue to roll them out.

Light Reading concludes “If MTS can build a compelling advantage through service and technology convergence, while avoiding the margin pressure that service bundling entails, its investors will certainly have reason for cheer.”

You can view the full article here: http://www.lightreading.com/services/mobile-services/mtss-russian-resolution/d/d-id/713284?print=yes

Tags:

NETWORK DEVELOPMENT IN 2014

Tuesday, January 27, 2015

In 2014, we expanded our network by 20% through the installation of 15,000 3G and LTE base stations. By the end of the year, MTS launched LTE networks in 76 of Russia’s 85 regions. 

 

During the year, we continued to enhance our 2G and 3G networks and realized total population coverage of 98% by the end of the year. Over 80% of 3G base stations on our network now deliver speeds of 42 Mb/s, the fastest data transfer speed commercially available, through the deployment of Dual-Cell HSPA+. The remaining 3G base stations run on HSPA+ standard and deliver speeds up to 21 Mb/s.

 

In 2014, mobile data traffic on MTSs networks increased 1.7 times in Russia. The highest growth in the mobile traffic consumption was registered in the North-West and Moscow regions, where traffic grew 2.2 and 2 times respectively. In Moscow, the volume of the LTE traffic increased 13 times year-over-year due to network development and growing penetration of LTE-enabled smartphones, tablets and dongles. The traffic growth was also aided by Apples decision to enable LTE-TDD network for the new iPhone 6 and iPhone 6 Plus models, as well as older iPhone 5S and 5C models.

 

The total length of our fiber-optic lines reached 160,000 km in 2014. The increase was driven by the construction of long distance lines in the regions and the aggressive build-out of the Gigabit-capable Passive Optic Network (GPON) in Moscow, where the total length of the lines increased to 40,000 km. GPON is capable of delivering high-speed broadband and digital TV to 3.5 million Moscow households. During the year the number of the households passed doubled while the volume of internet traffic on our network increased by 45%.

Tags: , ,

INTERNATIONAL ROAMING DURING NEW YEAR HOLIDAYS

Friday, January 23, 2015

With the holiday period behind us, we decided to analyze how usage patterns of customers travelling abroad changed this season. One key trend we witnessed was an overall lower usage of voice and SMS in international roaming, which was driven mainly by a fall in the number of Russian tourists traveling abroad. Nevertheless, overall usage of mobile data increased due to the greater adoption of smartphones and more frequent utilization of tariffs that provide a fixed price per day, which allows subscribers to better control data roaming expenses.

 

We compared usage trends when roaming from 15th December 2014 to 15th January 2015 to the same period last year.  During this period, the number of international roamers declined by 25%, the volume of calls decreased by 26% and the volume of sent SMS fell by 28%.  At the same time, the number of smartphones used in the roaming abroad grew 1.5 times and the volume of the roaming data traffic increased by 23%.  Likely, this implies a greater usage of social media and OTT solutions at the expense of voice and messaging services, a trend we see both at home and abroad.

    

Those who travelled abroad actually broadened their Internet usage from essential browsing (e.g. maps, tourist guides and email) to more traffic-intensive use of social media and entertainment sites. The proportion of Internet traffic for social purposes during this time almost matched essential browsing traffic, reaching 30% and 35% respectively. This is another illustration of how social media use on smartphones is moving deeper into our customer segments regardless of their location.

Tags:

Recent Tweets

Follow me, Josh Tulgan, MTS Director for Corporate Finance and Investor Relations, on twitter

Twitter March 25, 15:08
#MTS CFO Alexey Kornya discusses ruble on CNBC $MBT http://t.co/vbFvR65iOv

Twitter March 17, 15:21
#MTS FY2014 results: Adj OpCF +1.8% despite RUB/UAH volatility; FCF decline due to prepayments on 2015 CAPEX. $MBT http://t.co/ujnpKTL61T

Twitter March 17, 15:18
#MTS FY2014 results: 2015 Outlook - Group Revenue >2%; Group OIBDA Margin >40%; CAPEX RUB 85 bln $MBT http://t.co/Q48KYJb9qn

Twitter March 17, 15:17
#MTS FY2014 results: UKR rev +1.1% despite cessation of biz in Crimea $MBT http://t.co/8A71tN0ifG

Twitter March 17, 15:16
#MTS FY2014 results: Russia revenue +5.6%; Russia OIBDA +4.5% $MBT http://t.co/xERAqRY5JG

Note: For Customization and Configuration, CheckOut Recent Tweets Documentation