MegaFon Sales Rise Faster Than Rivals on Data Growth

OAO MegaFon (MFON), Russia’s second-largest wireless operator, posted faster quarterly sales growth than competitors as data revenue surged. The shares jumped to the highest in three months.

First-quarter revenue rose 11 percent from a year earlier to 74.9 billion rubles ($2.2 billion), the Moscow-based company said today in a statement. It reiterated full-year targets.

The carrier, controlled by Alisher Usmanov, Russia’s richest man, and part-owned by Sweden’s TeliaSonera AB (TLSN), has been boosting revenue faster than local competitors after acquiring mobile-data operator Scartel last year. VimpelCom Ltd. (VIP)’s Russia sales dropped 6 percent in the first quarter, while OAO Mobile TeleSystems (MBT)’ total revenue rose 5.1 percent.

“The results of the first quarter assure us that we have chosen the right growth strategy, and that our significant investments in the development of mobile Internet services are paying off,” MegaFon Chief Executive Officer Ivan Tavrin said in the statement.

The stock rose as much as 4.8 percent and was up 4.5 percent at $30.14 as of 10:41 a.m. in London.

Operating income before depreciation and amortization climbed 0.4 percent to 32.5 billion rubles, in line with the average estimate of analysts surveyed by Bloomberg.

Revenue Target

“MegaFon showed strong first-quarter results which met our expectations,” said Anna Lepetukhina, an analyst at Sberbank CIB in Moscow. “The company’s financials confirm its ability to continue paying high dividends in the future.”

The company reiterated its full-year growth target even as the Russian economy slowed. It seeks to boost revenue 6 percent to 8 percent with Oibda of at least 44 percent of sales. VimpelCom cut full-year guidance after first-quarter results, while MTS kept its targets unchanged.

MegaFon’s data revenue climbed 45 percent to 16.2 billion rubles in the quarter, while billionaire Vladimir Evtushenkov’s MTS reported 42 percent growth in data revenue.

MegaFon’s net income fell 43 percent in the period on currency moves and higher depreciation because of the Scartel acquisition.

The company proposed a dividend equivalent to 64.51 rubles a share. It links dividend payments to Oibda and free cash flow rather than net income. Free cash flow fell 41 percent as capital expenditure increased from a year earlier, including spending related to the Sochi Winter Olympics.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Robert Valpuesta, David Risser

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