MTS announces continuing profitable growth for the Second quarter 2001 Moscow, Russian Federation — 16 August 2001 — Mobile TelesyStems OJSC (NYSE: MBT), Russia’s leading mobile operator, today announced its financial and operational results for the 2nd quater 2001 and the six months ending 30th June 2001.
Financial highlights
| US$ ’000 |
Second Quarter
2001 (US$, 000) |
Second Quarter
2000 (US$, 000) |
Change, % |
Six months ended
June 30, 2001 (US$, 000) |
Six months ended
June 30, 2000 (US$, 000) |
Change, % |
|
|
|
|
|
|
|
|
| Net revenue |
205,890 |
120,027 |
72% |
372,193 |
222,068 |
68% |
| EBITDA 1 |
81,541 |
58,437 |
40% |
160,094 |
110,569 |
45% |
| EBITDA margin 1 |
40% |
49% |
N/a |
43% |
50% |
N/a |
| Net income 1 |
35,038 |
28,028 |
25% |
66,253 |
47,318 |
40% |
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
2001 (US$) |
Second Quarter
2000 (US$) |
Change, % |
Six months ended
June 30, 2001 (US$) |
Six months ended
June 30, 2000 (US$) |
Change, % |
|
|
|
|
|
|
|
|
| Subscribers total, including |
|
|
|
1,856,000 |
640,000 |
190% |
| Moscow license area |
|
|
|
1,654,000 |
612,000 |
170% |
| Regional license area |
|
|
|
202,000 |
28,000 |
621% |
| ARPU (US$) |
39 |
67 |
(42%) |
38 |
68 |
(44%) |
| MOU (minutes) |
166 |
173 |
(4%) |
155 |
154 |
(1%) |
| Subscriber churn rate (%) |
4.9% |
6.4% |
N/a |
10.5% |
13.5% |
N/a |
| Subscriber acquisition costs, US$ |
62 |
71 |
(12%) |
62 |
79 |
(22%) |
|
|
|
|
|
|
|
|
|
|
During the first half of year 2001, MTS’ overall active subscriber base has increased by 190% to 1,856,000 as of 30th June 2001 (compared to 640,000 active subscribers on 30th June 2000). 436,000 net subscribers joined the MTS network during the second quarter of this year. MTS’ regional subscriber base, beyond the Moscow license area, reached 202,000 active subscribers as of 30th June 2001, seven times more than on June 2000. On 3rd August 2001, MTS’ announced that it had surpassed its two millionth customer mark. MTS took six years to gain one million subscribers, while the second million joined the network in a mere eight and half months. MTS expects subscriber growth to continue as the company expands its network across regional Russia, also bearing in mind the start up of operations in major cities like St. Petersburg and Nizhny Novgorod this year. MTS’ regional expansion strategy is to consolidate a wireless pan-Russian network so as to become Russia’s nationwide mobile operator. MTS has allocated $110 million for regional expansion this year. During the first six months of 2001, 250 new base stations were added to the MTS network, bringing the cumulative number to 1,373 base stations, of which 949 base stations were located within the Moscow license area and 434 in the regions. Three new switches were installed in Moscow in the first half of year 2001, which brought the total number of switches in the Moscow license area up to eight. As of today, switching capacity in Moscow is 2.5 million subscribers. Average revenue per subscriber (ARPU) per month for the second quarter 2001 was $39 compared to $40 in the first quarter of 2001, and showed $38 for the first half of the year 2001. Average monthly minutes of use per subscriber (MOU) was 166 minutes in the second quarter 2001, an expected seasonal growth from MOU of 152 minutes in the first quarter 2001.
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It should be noted that MTS changed its accounting policy in regards to subscriber acquisition costs, which is reflected in financial reports as of the beginning of MTS’ current fiscal year. The effect of this change in accounting policy on MTS’ income (before income tax) for the six months ended June 30 2001 is $28 million. Net revenues for the second quarter of 2001 rose to $206 million, an increase of 72% compared to the same period in 2000. Earnings before interest, tax, depreciation and amortization (EBITDA) for the second quarter of 2001 were $81 million, an increase of 40% compared to the second quarter of 2000. Such a steady and sustained EBITDA growth reflects the viability of MTS’ overall business strategy, combined with a continued explosive demand for mobile services in Russia. EBITDA margin, an indicator of business efficiency, for the second quarter of 2001 was 39% compared to 49% in the second quarter 2000, mainly caused by the one-time write-off of capitalized dealer commission. Net income for the second quarter of 2001 was US$ 35 million, still an increase of 25% for the same period of 2000. Half year results were also strong, with revenue of $372 million up 68% compared to the same period last year, evidencing a sustainable level in MTS’ revenue growth. EBITDA for the first six months of the year 2001 reached US$ 160 million, an increase of 45% over the first six months of 2000. EBITDA margin comprised 43% for the first six months of the year 2001. MTS’ total investment in the network development was US$ 163 million in the first six months of 2001. Commenting on the results, Mr. Mikhail Smirnov, President and Chief Executive Officer of Mobile TeleSystems OJSC, said: “MTS’ results clearly demonstrate that with better than expected growth of subscriber numbers over the past six months and constantly improving business efficiency, MTS continues to report strong increases in profitability. We are witnessing an unprecedented demand for mobile services, and we are proud to be at the forefront of this technological revolution in Russia. By establishing a mobile market in Russia, MTS delivers progress not only to Moscow and St Petersburg, but also to Russia’s most remote areas.” Operational highlights. |
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For further information contact:
MTS
Eva Prokofyeva
Press Secretary
tel: +7095 104 4938
e-mail: eva@mts.ru
Investor Relations department
tel: +7 (095) 766-01-03
Fax: +7 (095) 766-01-00
e-mail: ir@mts.ru |
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to conform them to actual results. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, including our most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures; rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, risks associated with operating in Russia, volatility of stock price, financial risk management, and future growth subject to risks.
Mobile TeleSystems OJSC (NYSE: MBT) is Russia’s leading GSM 900/1800 mobile cellular operator. MTS has GSM 900/1800 licenses to provide mobile cellular telephony services in 46 regions of the Russian Federation, covering 56% of the country’s population. It operates in 24 regions covering more than 50 million people. Information about MTS’s activities and services can be found on MTSs website at https://www.mtsgsm.com.
Notes to editors Subscriber acquisition costs are the direct costs MTS pays for each new subscriber. Part of these costs are commissions paid to independent dealers. Until 16 July 2001, MTS had capitalized these commissions only to the extent they exceeded any related revenues deferred from the acquisition of the subscriber. As a result of the change in accounting policy used, MTS will expense the remaining balance of capitalized dealer commissions as of December 31 2000, of approximately $ 28 million as a cumulative effect of an accounting policy change at the beginning of the fiscal year, and from that point forward will expense dealer commissions as they incur. |
MTS condensed consolidated balance sheets at December 31, 2000 and June 30, 2001
Amounts in thousands of US$
| ASSETS |
Dec. 31 2000 |
June 30 2001 |
|
|
|
|
| Cash and cash equivalents |
75,828 |
22,642 |
| Short term investments |
170,000 |
171,122 |
| Trade receivables, net |
15,817 |
21,623 |
| Accounts receivable related parties |
4,937 |
3,289 |
| Inventory, net |
23,551 |
16,540 |
| Total other current assets |
39,851 |
73,329 |
| Total current assets |
329,984 |
308,545 |
| Property, plant and equipment, net |
439,307 |
562,992 |
| Intangible assets, net |
57,586 |
70,309 |
| Licenses, net |
204,996 |
265,971 |
| Goodwill, net |
27,984 |
24,932 |
| Subscriber acquisition costs, net |
27,553 |
— |
| Debt issuance costs, net |
450 |
315 |
| Investments in and advances to affiliates |
13,472 |
1,455 |
| Total assets |
$ 1,101,332 |
$ 1,234,519 |
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
Dec. 31, 2000 |
June 30, 2001 |
|
|
|
|
| Accounts payable related parties |
3,792 |
3,404 |
|
|
| Trade accounts payable |
99,397 |
116,992 |
|
|
| Debt current portion |
24,000 |
3,150 |
|
|
| Other payables |
17,398 |
17,445 |
|
|
| Accrued liabilities |
38,175 |
46,546 |
|
|
| Total current liabilities |
182,762 |
187,537 |
|
|
| Debt |
23,305 |
38,155 |
|
|
| Other long term liabilities |
94,181 |
130,751 |
|
|
| Total long term liabilities |
117,486 |
168,906 |
|
|
| Total liabilities |
300,248 |
356,443 |
|
|
| MINORITY INTEREST |
— |
468 |
|
|
| SHAREHOLDERS’ EQUITY: |
| Common stock |
50,558 |
50,558 |
| Treasury shares |
(10,206) |
(10,206) |
| Additional paid-in capital |
502,511 |
512,782 |
| Retained earnings |
258,221 |
324,474 |
| Total shareholders’ equity |
801,084 |
877,608 |
|
|
| Total liabilities and shareholders’ equity |
$ 1,101,332 |
$ 1,234,519 |
|
|
|
|
|
|
MTS consolidated condensed statements of operations for the three and six months ended June 30, 2000 and 2001
Amounts in thousands of US$, except share and per share data
|
Second quarter
2001 |
Second quarter
2000 |
Six months ended
30 June, 2001 |
Six months ended
30 June, 2000 |
|
|
|
|
|
|
| Total service revenue |
190,869 |
104,945 |
345,969 |
193,733 |
|
|
| Connection fees |
4,968 |
3,314 |
9,115 |
6,907 |
|
|
| Handset and accessories sales |
10,053 |
11,768 |
17,109 |
21,428 |
|
|
| Total net revenue |
205,890 |
120,027 |
372,193 |
222,068 |
|
|
| Direct costs: |
| Interconnect and line rental |
17,449 |
8,602 |
31,864 |
16,908 |
| Roaming expenses |
13,616 |
9,415 |
27,113 |
17,023 |
| Cost of equipment |
9,794 |
12,163 |
17,163 |
22,453 |
| C.O.S. and services |
40,859 |
30,180 |
76,070 |
56,384 |
| Sales and Marketing expenses |
57,804 |
9,350 |
78,574 |
18,882 |
| Operating expenses |
24,410 |
24,272 |
54,439 |
37,949 |
| Provision doubtful accounts |
126 |
1,152 |
681 |
1,952 |
| Depreciation and amortization |
31,261 |
19,969 |
58,565 |
38,813 |
| Total direct costs |
154,460 |
84,923 |
268,329 |
153,980 |
| Net operating income |
51,430 |
35,104 |
103,864 |
68,088 |
|
|
| Non-operating income/(expense) |
| Currency exchange |
(29) |
(435) |
595 |
723 |
| Interest income |
(3,643) |
— |
(7,560) |
|
| Interest expense |
1,440 |
2,714 |
2,390 |
5,770 |
| Other non-operating (income) /expenses. |
1,576 |
(1,008) |
2,137 |
(1,695) |
| Net non-operating expenses |
(656) |
1,271 |
(2,438) |
4,798 |
|
|
| Net income before profit tax and |
| minority interest |
52,086 |
33,833 |
106,302 |
63,290 |
| Provision for income tax |
17,445 |
7,726 |
40,446 |
18,668 |
| Minority interest |
(397) |
(1,921) |
(397) |
(2,696) |
| Net income |
35,038 |
28,028 |
66,253 |
47,318 |
|
|
| EBITDA |
81,541 |
58,437 |
160,094 |
110,569 |
|
|
| EBITDA margin |
40% |
49% |
43% |
50% |
|
|
| Weighted average number of shares outstanding |
1,993,326,138 |
1,634,527,440 |
1,993,326,138 |
1,634,527,440 |
|
|
| Earnings per share (basic and diluted), US$ |
0.0176 |
0.0171 |
0.0332 |
0.0289 | |
