Russia's MTS Profits Down on Currency Losses - Delays Network Upgrades

Russia's Mobile TeleSystems (MTS) has reported a 21% drop in 3rd quarter net profits to US$515.6 million, which the company put down to currency losses on its US dollar debt. Consolidated revenues were up 27% y-o-y to US$2.8 billion due to subscriber additions, rising voice traffic and VAS adoption throughout the Group

The company also maintained its revenue guidance of 25% revenue growth based on current exchange rates of national currency. The company has also reduced its CAPEX outlook from $2.5 billion to $2 billion due to delays in launching HSPA-enabled networks in Moscow and ongoing currency concerns.

The average ruble-to-dollar rate for the period rose 2.6% from 23.6 to 24.3, a trend which the company said will negatively impact its financial results. MTS acknowledges that the current macroeconomic environment and global difficulties within the financial sector make it difficult to attract additional financing

Mr. Mikhail Shamolin, President and Chief Executive Officer, commented, "We are pleased to deliver our sixth consecutive quarter of profitable growth despite weakening currency factors in our core markets late in the period. We are maintaining our strong OIBDA margin through revenue growth and our on-going efficiency improvements. Our performance validates our 3+2 strategy of pursuing profitable growth as we witness rising voice and data traffic in all of our markets."

Mr. Shamolin added, "Our decline in earnings is directly attributable to the US GAAP translation of our US dollar-denominated debt. As is evident by our recent issuance of RUR 30 billion, we are working to more closely match our revenues with debt so as to stabilize future earnings performance. Though we see signs of a weakening macroeconomic environment both globally and in our markets of operation, we are confident that the nature of our product and the efficiency of the organization is well-positioned to meet whatever challenges may lay ahead."

Posted to the site on 13th November 2008