Mobile TeleSystems (MTS) third quarter 2001 financial results

20 November 2001

MTS announces unprecedented regional subscriber growth, improved margins and commencement of activities in Belarus.

MTS announces unprecedented regional subscriber growth, improved margins and commencement of activities in Belarus.

 

Revenue increases 80% for the third quarter ended 30th september 2001 compared to the same period last year.

Financial Highlights for the 3rd quarter ended 30th September 2001

  • Revenue totalled US$262.6 million for the nine months ended September 2001, up 80% compared to the same period last year;
  • EBITDA up 128% to US$138.5 million compared to the same period last year;
  • Net income up 174% to US$78.4 million compared to the same period last year;
  • Average revenue per user (ARPU) stabilising in the 3rd quarter 2001 at $39.

Financial highlights

  Third Quarter
2001 (US$, 000)
Third Quarter
2000 (US$, 000)
Change, % Nine months ended
Sept 30, 2001 (US$, 000)
Nine months ended
Sept 30, 2000 (US$, 000)
Change, %
Net revenue 262,563 146,110 80% 634,756 368,178 72%
EBITDA 138,543 60,864 128% 298,637 171,433 74%
EBITDA margin 53% 42% N/a 47% 47% N/a
Net income* 78,369 28,560 174% 144,622 75,878 91%
Capital expenditures 132,520 64,372 106% 295,569 156,006 89%
EPS, US$ 0,039 0,015 169% 0,073 0,044 66%

* In August 2001, a new law regulation taxation of income became effective. Under that law, effective from January 1, 2002, the statutory income tax rate will be 24%. This reduction in the statutory income tax rate resulted in the recognition of a deferred tax benefit of approximately $23 million in the third quarter of 2001 (which gives a $23 million non-cash increase in net income).

Operating Highlights for the 3rd quarter ended 30th September 2001)

  • Customer base grows 163.9% to 2,346,000 at 30th September 2001 (889,000 at 30th September 2000);
  • MTS’ regional customer base increased eight-fold to 420,000 at the end of September 2001 compared to 52,000 at the end of September 2000. This includes growth through consolidation of acquisitions — 145,000 (ReCom as of 25 April 2001 and Telecom-900 as of 15 August 2001);
  • MTS won tender for GSM license for Belarus;
  • MTS continues its expansion into the regions, having launched Nizhni Novgorod, and Kirov networks recently.

MTS maintains its position as number one operator in Russia in terms of customer base and number of operational regions.

  Third Quarter
2001 (US$)
Third Quarter
2000 (US$)
Change, % Nine months ended
Sept 30, 2001 (US$)
Nine months ended
Sept 30, 2000 (US$)
Change, %
Subscribers total, including     2,346,000 889,000 163.9%
Moscow license area       1,926,000 837,000 130.1%
Regional license area       420,000 52,000 707.7%
ARPU (US$) 39 58 (32.7%) 37 61 (39.3%)
MOU (minutes) 167 175 (4.6%) 154 156 (1.3%)
Subscriber churn rate (%) 5.4% 5.1% N/a 15.5% 17.2% N/a
Subscriber acquisition costs, US$ 49 64 (23,4%) 56 73 (23.3%)

Moscow, Russian Federation, 20th November.
Mobile TeleSystems OJSC (NYSE: MBT), Russia’s leading mobile operator, today announced its financial and operating results for the nine months ended 30th September 2001, showing:

  • Strong growth in customers, usage and revenue;
  • Rapidly growing earnings before interest, tax, depreciation and amortisation (“EBITDA”) and net income;
  • Encouraging trends in average revenue per user (“ARPU”);and
  • Declining subscriber acquisition costs (“SACs”) per subscriber.

Commenting on the results, Mikhail Smirnov, MTS’ President and Chief Executive Officer said: "MTS is again performing increasingly strong. We are clearly the number one operator in the regions, and are still expanding. Over the past nine months the regional customer base increased eight-fold compared to the same period last year.

“MTS is showing rapid growth and improved margins. The underlying trends mean we are well on track to achieve the targets we set ourselves at the beginning of the year. We have also entered a market outside of the Russian Federation, having won a license to operate in Belarus”.

Financials
MTS has made strong progress since last year. MTS’ Q3 2001 revenue totalled US$263m, almost doubling from US$146 in Q3 2000.

EBITDA in the third quarter of 2001 was up 128% on Q3 2000 to US$138.5m compared to US$60.9m in the third quarter of 2000. EBITDA margin showed 53% in third quarter 2001 compared to 42% in the same period last year.

Net income grew almost threefold in the third quarter of 2001 to US$78.4m compared to Q3 2000.

Average Revenue per user (ARPU)
ARPU has stabilised at the level of $39 in third quarter 2001 compared to second quarter 2001.
MOU was 167 min in third quarter 2001 compared to 166 min in the second quarter 2001.

Customers
Consolidated MTS’ customer base totalled 2,346,000 at the end of September 2001, an almost threefold increase on the first nine months of 2000 from the 889,000 at 30th September 2000.

MTS’ Moscow license area customer base more than doubled over the first nine months of 2001 compared to the same period last year, having reached 1,926,000 from 837,000 at 30th September 2000.

MTS’ regional customer base has witnessed an unprecedented growth, increasing eight-fold to 420,000 at the end of September 2001 compared to 52,000 at the end of September 2000. . This includes growth through acquisitions of 145,000 as a result of consolidation ReCom subscribers (28,000 as of 25 April 2001) and Telecom-900 acquisition (117,000 subscribers as of 15 August 2001).

MTS remains the largest mobile operator in Russia and in the Moscow license area, maintaining in Moscow license area a market share of 57% in the third quarter of 2001.

MTS condensed consolidated balance sheets at December 31, 2000 and September 30, 2001

Amounts in thousands of U.S. dollars, except share amounts
  December 31, 2000 September 30, 2001
CURRENT ASSETS:
Cash and cash equivalents $75,828 $17,194
Short-term investments 170,000 120,000
Trade receivables, net 15,817 28,443
Accounts receivable, related parties 4,937 3,400
Inventory, net 23,551 19,875
Deferred tax asset 2,071 11,594
Other current assets 37,780 71,478
Total current assets 329,984 271,984
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $87,676 and $149,079, respectively 439,307 716,590
INTANGIBLE ASSETS, net of accumulated amortization of $33,648 and $46,179, respectively 57,586 73,602
LICENSES, net of accumulated amortization of $43,913 and $69,293, respectively 204,996 287,365
GOODWILL, net of accumulated amortization of $14,756 and $19,334, respectively 27,984 23,405
SUBSCRIBER ACQUISITION COSTS, net of accumulated amortization of $74,803 and $0 respectively 27,553
DEBT ISSUANCE COSTS, net of accumulated amortization of $900 and $1,103, respectively 450 248
INVESTMENTS IN AND ADVANCES TO AFFILIATES 13,472 1,485
Total assets $1,101,332 $1,374,679

MTS condenced consolidated balance sheets at December 31, 2000 and September 30, 2001

Amounts in thousands of U.S. dollars, except share amounts
  December 31, 2000 September 30, 2001
CURRENT LIABILITIES:
Accounts payable, related parties $3,792 $3,510
Trade accounts payable 39,864 75,604
Deferred connection fees 14,923 20,729
Subscriber prepayments and deposits 44,610 53,901
Debt, current portion 24,000 9,825
Accrued liabilities 38,175 50,838
Dividends payable 1,038 3,997
Other payables 16,360 56,079
Total current liabilities 182,762 274,483
LONG-TERM LIABILITIES:
Debt, net of current portion 23,305 31,500
Deferred connection fees, net of current portion 16,630 25,581
Deferred taxes 72,083 73,312
Total long-term liabilities 122,954 144,321
Total liabilities 300,248 411,840
MINORITY INTEREST 7,437
SHAREHOLDERS’ EQUITY:
Common stock 50,558 50,558
Treasury stock 10,206 10,206
Additional paid-in capital 502,511 515,166
Retained earnings 258,221 399,884
Total shareholders’ equity 801,084 955,402
Total liabilities and shareholders’ equity $1,101,332 $1,374,679

MTS condenced consolidated statements of operations for the three and nine months ended september 30, 2000 and 2001

Amounts in thousands of U.S. dollars, except share and per share data
  Three months ended
September 30
2000
Three months ended
September 30
2001
Nine months ended
September 30
2000
Nine months ended
September 30
2001
NET REVENUES
Service revenues, net $134,112 $246,055 $327,845 $592,024
Connection fees 4,050 5,911 10,957 15,026
Equipment sales 7,948 10,597 29,376 27,706
  146,110 262,563 368,178 634,756
COST OF SERVICES AND PRODUCTS
Interconnection and line rental 11,232 25,506 28,140 57,370
Roaming expenses 12,926 23,453 29,949 50,566
Cost of equipment 10,620 9,221 33,073 26,314
  34,778 58,180 91,162 134,250
OPERATING EXPENSES 32,049 30,984 69,998 85,423
SALES AND MARKETING EXPENSES 19,003 29,559 37,885 108,133
PROVISION FOR DOUBTFUL ACCOUNTS 353 1,884 2,305 2,565
DEPRECIATION AND AMORTIZATION 22,975 34,982 61,788 93,547
Net operating income 36,952 106,974 105,040 238,391
CURRENCY EXCHANGE AND TRANSLATION LOSSES (GAINS) (460) 586 263 1,181
OTHER EXPENSES (INCOME):
Interest (income)/ expenses (791) 690 4,979 (4,507)
Other expense (income) 1,435 1,101 (260) 3,238
Total other expenses (income), net 644 1,764 4,719 (1,269)
Income before provision for income taxes and minority interest 36,768 104,624 100,058 238,479
PROVISION FOR INCOME TAXES 10,120 24,529 28,788 64,975
MINORITY INTEREST (1,912) 1,726 (4,608) 1,329
NET INCOME $28,560 $78,369 $75,878 $144,622
Weighted average number of shares outstanding 1,961,889,991 1,993,326,138 1,741,080,873 1,993,326,138
Per common share - basic and diluted:
Net income 0.015 0.039 0.044 0.073

Contact investor relations:

+ 7 495 223 20 25 ir@mts.ru

MTS Investor Relations
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