MTS Full-Year Profits Down by 50%

Russia's Mobile TeleSystems (MTS) has reported a 17.5% drop in its full-year revenues for 2009 to US$9.8 billion, while profits halved to US$1 billion. For the fourth-quarter of 2009, revenues were up 3.8% compared to the previous quarter, although the company booked a net loss of US$26 million.

The quarterly loss was put down to a series of one-time and periodic charges, including the write off of US $368 million in investments, most of which is attributable to the re-valuation of the investment in Svyazinvest held on the Comstar-UTS level, the charges of US $86 million related to the write-off of obsolete equipment and expenses related to the acquisition of Comstar-UTS and higher non-cash tax provisions related to the anticipated upstreaming of dividends from foreign subsidiary companies as their markets mature.

The company would have reported a fourth-quarter adjusted income of US$301 million without those impairments.

Remarked Mikhail Shamolin, President and Chief Executive Officer, "The year 2009 has been a transformative year for MTS. As our markets were in transition due to macroeconomic developments, we began to take a number of steps to better change our organization to meet the challenges of our evolving markets and realize the goals of our 3i Strategy."

"Despite the challenges we faced in 2009, MTS has delivered a strong set of results that showed relative revenue growth to the market in each of our core markets and business streams. Total cash flows from operations were nearly $3.6 billion for 2009, underlying the health of the business despite the macroeconomic uncertainty in our regions of operations."

"Looking ahead, forecasted economic growth in Russia and the CIS could translate into definitive improvements in our markets of operation. We currently forecast mid to high single-digit revenue growth in local currency, driven by increased usage among our fixed and mobile subscribers, as well as the increased sale of handsets, in our key market in Russia. We expect Group OIBDA margin to be in the range of 43-45% depending on competitive factors and handset sales in our markets. And capital expenditures should fall within the range of 22-24% of revenues, most of which will be spent expanding our 3G and backbone networks in Russia and Central Asia."