Russian Telecoms Operator MTS Profit Plummets on Currency Depreciation

By Olga Razumovsksya 

MOSCOW--Russia's leading telecoms operator MTS said Tuesday its net profit tumbled in the fourth quarter as the company suffered from rapid depreciation in the ruble and in the Ukrainian hryvnia, and lost a deposit it had with an insolvent Ukrainian bank.

MTS, or Mobile TeleSystems, said its net profit fell 91.7% in the fourth quarter to 1.6. billion rubles ($25.88 million). MTS said it had booked a 5.1 billion rubles loss on a deposit with Ukraine's Delta Bank, which was declared insolvent by Ukraine's central bank on March 3.

MTS Chief Executive Andrei Dubovskov said the insolvency of the Ukrainian bank won't impact the company's investment abilities in Ukraine.

MTS's revenue in the fourth quarter went up 2.3% to 107.19 billion rubles, the company said. Its fourth-quarter adjusted operating income before depreciation and amortization, was down 5.3% to 42.60 billion rubles. This was affected by the company's relaunch of operations in Uzbekistan, higher taxes and an increase in employees' salaries in September, MTS said.

This year, MTS overall revenue is seen growing by 2%, and by 3% in Russia only, Mr. Dubovskov said. He also said he expects 2015 adjusted earnings to increase by more than 40%, while capital expenditures, including spending on faster third generation licenses in Ukraine, to stand at 85 billion rubles.

But high volatility of Russia's and Ukrainian's currency together with a "significant macroeconomic instability" may influence the company's financial and operational results and lead to a revision of MTS outlook on revenues and adjusted earnings, Mr. Dubovskov said.

Vasyl Latsanych, MTS marketing executive, said that the company considers the 2% revenue growth forecast as realistic thanks to the growth in data services consumption. The company had invested significantly in the fast Long Term Evolution, or LTE, network in Russia and expects the investment to pay off, Mr. Latsanych said.

Write to Olga Razumovskaya at [e-mail]

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