Mobile TeleSystems (MTS) announces financial results for the first quarter 2001

21 May 2001

Moscow, Russian Federation — 22 May 2001 — Mobile TeleSystems OJSC (NYSE: MBT), Russia’s leading mobile operator, today announced its financial and operational results for the three-months ended 31st March 2001. Financial highlights.

 

$78.5 million EBITDA, $31 million net income

  3 months ended
March 31, 2001
3 months ended
March 31, 2000
Change 12 months ended
March 31, 2001
12 months ended
December 31, 2000
Change
Net revenue 166,303 102,041 63% 599,974 535,712 12%
EBITDA 78,553 52,132 51% 259,016 232,595 11%
EBITDA margin 47% 51%   43% 43%  
Net income 31,215 19,290 62% 101,973 90,048 13%

Net revenues for the first three months of 2001 rose to $166 million, an increase of 63% compared to the same period in 2000. This reflects the explosive demand for mobile services and indicates that the positive performance of the Russian economy over the last year is progressing into this year. Earnings before interest, tax, depreciation and amortization (EBITDA) for the first three months of 2001 were $78 million, an increase of 51% compared to the first quarter of 2000. EBITDA margin for the first quarter was 47% compared to 51% in the first quarter 2000. EBITDA margin on a rolling 12 month period ended 31st March 2001 and 31st December 2000 was a stable 43% for both periods. Net income for the first three months of 2001 was US$31 million, an increase of 62% for the same period of 2000. Operational highlights

  3 months ended
March 31, 2001
3 months ended
March 31, 2000
Change 12 months ended
March 31, 2001
12 months ended
December 31, 2000
Change
Subscribers total, including 1,421,000 411,000 246% 1,421,000 1,194,000 19%
Moscow license area 1,302,000 398,000 227% 1,302,000 1,106,000 18%
Regional license area 119,000 13,000 815% 119,000 88,000 35%
ARPU (US$) 40 82 (52%) 50 54 (7%)
MOU (minutes) 152 152 0 163 151 8%
Subscriber churn rate (%) 6.1 8,4 (27%) 23,13% 21,6 7%
Subscriber acquisition costs, US$ 62 93 (33%) 64 69 (7%)

For the twelve months period ended 31st March 2001, MTS’s active subscriber base increased by 246% to more than 1.4 million subscribers. On April 25th, 2001 the company announced that the number of its active subscribers exceeded 1.5 million people. MTS’s active subscriber base in Moscow and the Moscow Region totaled 1,302,000 subscribers as of 31st March 2001. Regions outside the Moscow license area also witnessed steady growth in their subscriber base and increased by 815% during the twelve months, reaching 119,000 as of 31st March 2001. Average monthly revenue per user (ARPU) in the first quarter decreased to $40 from $82 in the first quarter of 2000. The average monthly minutes of use per subscriber (MOU) in the first quarter of 2001 was 152 minutes. The MOU in the first quarter of 2000 was also 152 minutes. This figure is not only a reflection of deeper entry into the mass market, but also a typical first quarter seasonal effect. Churn rate for the first quarter 2001 was 6.1% compared to 8.4% for the same period ended March 31st 2000. Subscriber acquisition costs per gross new additional subscriber have decreased 33% to $64 from $93 in the first quarter of 2001 compared to the first quarter 2000 accordingly. This highlights MTS’ strategy of tight cost control. The number of base stations in MTS network as of 31st March 2001 totaled 1240, including 862 in the Moscow license area and 378 in the Regional license area. Capital expenditures for the first quarter 2001 have totaled $79 million, while capital expenditures for the same period 2000 were $36,5 million. In April 2001 MTS acquired a controlling interest in ReCom, which was previously an unconsolidated subsidiary. The company increased its stake to 53.9% from 49.9%. This will allow MTS to consolidate ReCom in its next quarterly financial statements. Per 31st of March 2001 ReCom had 26,000 subscribers. In 2000 ReCom showed revenues of $7.4m; EBITDA of $2.7 million, and EBITDA margin of 36%. Net income was $0.6 million. Cumulative network investments at year end 2000 had reached $17.2 million; annual capital expenditures in the year 2000 were $10.4m. ReCom’s average revenue per user per month (ARPU) in 2000 was $65. MTS is actively carrying out research and construction works for the development of networks in six regions within its license areas: Nizhny Novgorod, Ivanovo, Kirov, Chelyabinsk, Tumen, and Perm Regions. Commenting on the results, Mr Mikhail Smirnov, President and Chief Executive Officer of Mobile TeleSystems OJSC, said: “MTS had another excellent quarter with continued growth both in subscribers and the bottom line. We are satisfied with the the first quarter results, especially keeping in mind that the first quarter sales in the industry are traditionally lower than the following quarters. We are fully confident that the trend will also apply to us this year. Our EBITDA margin is at its usual over 40% level”. “MTS has continued to take advantage of a growing mobile telecommunications market. We continue to invest in a sophisticated, technically state-of-the-art network. Recent introduction of new tariffs for intranet calls, meeting the differing needs of an increasingly diversified market, gives us good expectations that the steady growth will continue” he said.

Amounts in thousands of US$
ASSETS Dec. 31 2000 Mar. 31 2001
Cash and cash equivalents 75 828 25 262
Short term investments 170 000 170 000
Trade receivables, net 15 817 18 060
Accounts receivable related parties 4 937 5 146
Inventory, net 23 551 20 084
Total other current assets 39 851 47 307
Total current assets 329 984 285 859
Property, plant and equipment, net 439 307 493 274
Intangible assets, net 57 586 61 581
Licenses, net 204 996 198 132
Goodwill, net 27 984 26 458
Subscriber acquisition costs, net 27 553 25 909
Debt issuance costs, net 450 383
Investments in and advances to affiliates 13 472 62 735
Total assets $ 1 101 332 $ 1 154 331
LIABILITIES AND SHAREHOLDERS’ EQUITY Dec. 31 2000 Mar. 31 2001
Accounts payable related parties 3 792 3 705
Trade accounts payable 99 397 97 660
Debt current portion 24 000 24 000
Other payables 17 398 27 969
Accrued liabilities 38 175 42 361
Total current liabilities 182 762 195 695
Debt 23 305 17 305
Other long term liabilities 94 181 100 739
Total long term liabilities 117 486 117 994
Total liabilities 300 248 313 689
Common stock 50 558 50 558
Treasury shares (10 206) (10 206)
Additional paid-in capital 502 511 510 854
Retained earnings 258 221 289 436
Total shareholders’ equity 801 084 840 642
Total liabilities and shareholders’ equity $ 1 101 332 $ 1 154 331

MTS consolidated condensed statements of operations, comparing three months ended 31 March 2001 against three months ended 31 March 2000 and twelve months ended 31 March 2001 against twelve months ended 31 December 2000

Amounts in thousands of US$
  3 months ended31 March 2001 3 months ended31 March 2000 12 months ended31 March 2001 12 months ended31 December 2001
Total service revenue 155 100 88 788 550 781 484 469
Connection fees 4 147 3 593 15 439 14 885
Handset and accessories sales 7 056 9 660 33 754 36 358
Total net revenue 166 303 102 041 599 974 535 712
Direct costs:        
Interconnect and line rental 14 415 8 306 48 024 41 915
Roaming expenses 13 497 7 608 47 067 41 178
C.O.S. Handsets/accessories 4 895 9 397 27 709 32 211
C.O.S. SIM cards 2 404 893 8 517 7 006
C.O.S. and services 35 211 26 204 131 317 122 310
Sales and Marketing expenses 20 770 9 532 87 667 76 429
Operating expenses 30 029 13 677 124 191 107 839
Provision doubtful accounts 555 800 2 158 2 403
Depreciation and amortization 27 304 18 844 96 144 87 684
Total direct costs 113 869 69 057 441 477 396 665
Net operating income 52 434 32 984 158 497 139 047
Non-operating income/(expense)        
Currency exchange 624 1 158 532 1 066
Interest income (3 917) - (11 543) (7 626)
Interest expense 950 3 056 9 229 11 335
Other non-operating expenses/ (income) 561 (687) 746 (502)
Net non-operating expenses/ (income) (1 782) 3 527 (1 036) 4 273
Net income before profit tax and        
minority interest 54 216 29 457 159 533 134 774
Provision for income tax 23 001 10 942 63 213 51 154
      -  
Minority interest - (775) (5 653) (6 428)
Net income 31 215 19 290 101 973 90 048
EBITDA 78 553 52 132 259 016 232 595
EBITDA Margin 47 51 43 43
Weighted average number of shares outstanding 1,993,326,138 1,634,527,440 1,806,968,096 1,806,968,096
Earnings per share (basic and diluted) $0.016 $0.012 $0.056 $0.050
 

Contact investor relations:

+ 7 495 223 20 25 ir@mts.ru

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