MTS blog


INTERVIEW ON RUSSIA TODAY

Thursday, August 13, 2009
Russia Today, the leading English-speaking TV channel based in Russia, has reported on our Q2 results and the intent to acquire a controlling stake in COMSTAR-UTS.

You can check out the video on their website, featuring an interview with our President and CEO, Mikhail Shamolin.

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MTS Q2 2009 RESULTS

Thursday, August 13, 2009
On August 11, we disclosed our financial results for the second quarter 2009. As always, we posted a lot of information about the results on our website – the press release, the presentation and the Excel spreadsheet with summary financial information for 2004-2009. In the presentation, we have included detailed slides about our future strategic priorities, logic behind the intent to acquire a controlling stake in COMSTAR-UTS (see the original press release), as well as more insight into our retail development and handset distribution in Russia.

On the conference call, we have commented that there was a general improvement in our operating environment in Q2, aided by seasonal and organic growth factors. The Group recorded 12% q-o-q revenue growth to over $2.0 billion US dollars, driven by 2.8 million new subscribers and a seasonal improvement in usage.

Group OIBDA increased by 15% q-o-q to $953.8 million. Margin on our service revenue was over 50% as growth was aided by the seasonal pick-up in revenue, tighter cost control on SG&A expenses and the appreciation of the Russian ruble during the period. As we have forecasted, our build-out of our monobrand retail has put additional cost pressures on our margins, with the cumulative negative effect on the Group margin of 3.4 percentage points for a total margin of 47.2%. We witnessed significant improvement in the profitability of our Ukrainian business unit as well.

Our revenues in Russia grew 9% q-o-q to 51 billion rubles due to strong subscriber additions and a positive impact from seasonal usage. We are seeing significant subscriber additions through our greater use of alternative sales channels, such as temporary stands, kiosks and so forth. At the same time, we are currently in the build-out stage of our monobrand network, which delivers higher-value customers as ARPUs are 20% higher on average.

Given the changes we see in our markets and the initiatives by which we are fostering growth in our markets, we also elaborated on our strategic direction, introducing our concept of 3i to our shareholders. 3i focuses on three principles that will govern future growth at MTS: integration, Internet and innovation. Be sure to check out our presentation for more information.

With the disclosure behind us, we will be posting more information here on our blog about our new monobrand stores and overall retail strategy, as well as updates about our proposed acquisition of Comstar-UTS, in the coming weeks. Будем на связи (Budem na svyazi!), or we'll be in touch soon!

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MTS Q1 2009 RESULTS

Monday, June 01, 2009

On May 22, 2009, we have disclosed financial results for the first quarter of 2009. A wealth of information about the results is available on our website – the press release, the presentation and the excel spreadsheet with summary financial information for 2004-2009. Of particular interest, we suggest reviewing the slides in the presentation on the decomposition of our revenue dynamics in Russia and OIBDA margin dynamics for the Group, as well as MTS Russia retail development.

In Q1, Group’s revenues fell 24% year-on-year to $1.8 billion US dollars.  The primary driver for this loss was the depreciation of our core currencies as the Russian ruble declined year-on-year by 40% and the Ukrainian hryvna by 52% versus the US dollar.  In each of our markets of operation, we continue to see an impact on consumption patterns due to sustained global macroeconomic volatility, but overall usage and subscriber additions remain strong and in line with seasonal expectations.

Our Russian business delivered year-over-year growth of 7.5% despite both the ruble volatility and increased competitiveness in the market.  In general, consumption of higher-value products, like roaming, long-distance and mobile-to-fixed calling was significantly lower in the beginning of the period, due to an overall drop in business activity, but these figures stabilized during the last month. We do see migration trends to lower-value tariffs as customers are more conscious of their spending.  Otherwise, we see usage trends in the future following seasonal patterns until the overall macroeconomic environment changes significantly.

Recently, we announced our dividend for FY2008.  In line with our policy, we will pay out 60% of our net income or a total of 39.4 billion rubles or roughly $1.2 billion.  This year, we will also not pay dividends to those shares repurchased through our mandatory buy-back offer in August 2008.  This equals roughly 1.9% of total shares outstanding.  This will in turn increase the dividend yield by about 15 basis points.  This translates to a greater shareholder benefit from our share buyback program.

Balancing growth and shareholder returns is a cornerstone of our financial and operating strategy.  This is a clear differentiator for MTS as an investment.  Our recent actions - relatively modest investments in proprietary distribution, tapping local credit markets and successfully refinancing our existing debt – are aimed to both ensure growth and sustain profitability, both of which allow us to make substantial returns to shareholders both now and in the future.

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