VimpelCom Ltd (VIP), a wireless operator controlled by Russian billionaire Mikhail Fridman, reported a fourth-quarter loss after writing down its Ukraine assets by $2.1 billion because of the country’s political turmoil.
The net loss was $2.66 billion, compared with a profit of $195 million a year earlier, the company said today. Sales fell 7 percent to $5.55 billion, missing the $5.7 billion projected by analysts on average, according to data compiled by Bloomberg.
Amsterdam-based VimpelCom, which operates in more than a dozen markets, recorded the writedown at its Ukraine carrier, Kyivstar, as the country deals with a military standoff with Russia. VimpelCom is also losing market share in Russia, its biggest market, to rivals including OAO MegaFon, said Ivan Kim, an analyst at VTB Capital in Moscow. VimpelCom’s results were “weak,” Kim said in a note to clients.
Shares of the company lost as much as 4 percent and fell 1.8 percent to $9.62 at 11:30 a.m. in New York trading. They have declined 26 percent this year.
The operator, part-owned by Norway’s Telenor ASA (TEL), is also struggling to cut its $27.5 billion debt which resulted from an acquisition of telecommunications assets in Italy, Algeria and Asia from Egyptian billionaire Naguib Sawiris about three years ago. The company canceled its final dividend for 2013 and set future payouts at a fraction of the earlier level.
The writedown at Kyivstar, Ukraine’s largest operator, “is technical and won’t affect cash flows,” Chief Executive Officer Jo Lunder said. “We did it to reflect higher political risks and reduction in Ukraine’s credit rating this year.”
The company has seen no disruption to its Ukraine business amid street protests this quarter, and traffic remains stable in the country, Lunder said in a phone interview. VimpelCom also posted a $768 million non-cash impairment charge in Canada after declining to bid for new wireless spectrum in the country.
Fourth-quarter sales in Russia, accounting for two-fifths of revenue, fell 4 percent in ruble terms to the equivalent of $2.17 billion. Mobile-data revenue growth slowed to 25 percent from 30 percent in the previous three months.
For the telecommunications industry in Italy, where VimpelCom runs the Wind unit, Lunder predicted business combinations. VimpelCom is also looking for opportunities for market consolidation in Pakistan, he said. In Algeria, the company expects to resolve an ownership dispute with the local government over its Djezzy unit by year-end, Lunder said.
Earnings before interest, taxes, depreciation and amortization fell 3 percent to $2.37 billion. The Ebitda margin rose to 42.7 percent of revenue from 41.1 percent a year earlier. Ebitda margin in Russia shrank about 1 percentage point to 40.3 percent.
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