MegaFon Sees 11% Drop in Q2 Profits on Currency Losses

­Russia's smallest of the big three dominant operators, MegaFon has reported a 10.8% drop in second quarter profits, which it put down mainly to currency changes. The company reported a quarterly profit of RUB 9 billion (US$284.8 million), while revenues rose by 3.4 percent to RUB 43.9 billion (US$1.4 billion).

Sergey Soldatenkov, Chief Executive Officer of MegaFon, said: "We had a very good overall performance in the six months ended June 30, 2009, showing growth in financial indicators versus the corresponding period in the previous "pre-crisis" year. The first quarter of 2009 was not easy, our subscribers reduced their monthly usage and spending, and new subscriber additions slowed, but we were able to offset this by pursuing a conservative approach to costs and by efficient business management. As a result, by the end of the current period we managed to reverse the negative trends which were evident at the beginning of this year and were able, through effective marketing initiatives in the second quarter of 2009, to realize improved MOU and ARPU".

He also added "In spite of the fact that the situation in the financial markets in Russia and throughout the world still remains difficult, the Company is one of the most financially stable in Russia and possesses all necessary resources to fulfill its plans to become the leader in revenue among mobile operators in the Russian market".

The decrease in net income in the second quarter of 2009 was primarily related to the foreign exchange loss due to the appreciation of the ruble on the Company's monetary investments denominated in foreign currencies.

The principal reason for the decrease in EBITDA margin in the second quarter of 2009 was the write-down of the carrying value of certain customer equipment. In addition EBITDA was negatively impacted by the cost of special marketing initiatives implemented by the Company in the second quarter of 2009 and increases in other operating costs.

The Company's MOU per subscriber is traditionally the highest among the Russian mobile operators. While both MOU and ARPU declined year-on-year as a result of reduction in demand, mainly resulting from the economic crisis in Russia, the Company started to see renewed growth in both MOU and ARPU in the second quarter of 2009 as a result of a number of factors including seasonality and the Company's tariff policy, as well as a decrease in the adverse effects of the world financial instability and stabilization of demand for mobile communications.

Also in the second quarter of 2009, MegaFon voice traffic increased by 9% against the first quarter of 2009 and data traffic increased by 8%. Subscriber churn decreased as a result of a number of initiatives taken by the Company, including improving network quality and subscriber service and the effect of loyalty programmes such as the MegaFon Bonus Programme.  

Posted to the site on 8th September 2009