Russia's Mobile TeleSystems 1Q Profit Falls 14.3%

By Olga Razumovskaya

MOSCOW--Mobile TeleSystems (MBT) said Tuesday its net profit fell 14.3% in the first quarter after Russia's leading telecommunications company was hit by forex and Ukraine-related losses.

MTS said it earned 10.9 billion rubles ($220.7 million) in the first three months of 2015. The company gained RUB6.7 billion from the resumption of operations in Uzbekistan, but the loss of deposits with insolvent Ukrainian banks trimmed the final profit figure by RUB1.7 billion.

MTS's revenue for the first quarter increased by 2.7% to RUB100.2 billion as the company's business in Ukraine stabilized and revenues from data services improved.

The company's adjusted operating income before depreciation and amortization, or Oibda, declined by 2% on year in the first quarter to RUB41.3 billion after it was hit by Russia's double-digit inflation rate.

MTS said it sees "significant macroeconomic instability" in its main markets, particularly Russia and Ukraine, which could negatively impact the company's performance in the future. But the company said it sticks to its previous full-year revenue forecast, which envisages a 2% increase. MTS also sees revenue at its Russian unit growing by more than 3%.

The company's Chief Executive Andrei Dubovskov said that under a so-called conservative forecast, MTS full-year 2015 Oibda margin is expected to grow by more than 40% and full-year capital expenditure is seen at RUB85 billion.

Despite economic headwinds, MTS bets on cheaper lending. The company's chief financial officer Alexei Kornya said he sees borrowing costs decreasing as the Bank of Russia is set to cut rates further.

The company's Oibda now also incorporates MTS performance in Belarus as in the first quarter the company started reporting earnings under International Financial Reporting Standards. Before switching to IFRS, MTS reported results in accordance with US Generally Accepted Accounting Principles, or GAAP.

Write to Olga Razumovskaya at [e-mail]

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