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Mobile TeleSystems Profit Drops After Uzbekistan Exit

OAO Mobile TeleSystems, Russia’s largest wireless operator, reported a 17 percent drop in first-quarter profit as a closing of Uzbekistan operations hurt revenue and the ruble declined.

Net income fell to 13 billion rubles ($402 million) from 15.6 billion rubles a year earlier, Moscow-based MTS said today in a statement. Sales rose 2 percent to 92.9 billion rubles. Adjusted operating income before depreciation and amortization advanced to 39.1 billion rubles from 38.1 billion rubles.

Data revenue in Russia rose by 37 percent as subscribers browsed the Web and sent e-mail, helping MTS offset slowing voice revenue in a market where mobile penetration exceeds 160 percent. MTS, controlled by billionaire Vladimir Evtushenkov, shut operations in Uzbekistan, where it had been the largest operator with 9.5 million users, in July over a legal dispute with the government.

The growth in mobile browsing and e-mailing helped MTS almost catch up with rival OAO MegaFon in data revenue, Chief Executive Officer Andrei Dubovskov told reporters in Moscow.

MTS advanced 0.2 percent to 255.54 rubles at 2:50 p.m. in Moscow, valuing the company at about $16 billion. The stock had gained 3.7 percent this year through yesterday.

Acquisitions Planned

MTS changed its dividend policy in April, boosting the payout and linking it to cash flows. The company plans to pay a minimum of 75 percent of free cash flow, or no less than 40 billion rubles, in dividends each calendar year through 2015. First-quarter free cash flow was 23.9 billion rubles, down from 24.4 billion rubles a year earlier.

The company said it had foreign-exchange losses of 1.5 billion rubles in the quarter. The ruble declined 5.8 percent against the dollar in the year through March 31 as Russia’s economy slowed. MTS had total debt 222.4 billion rubles as of March 31, with 16 percent of its loans in dollars.

To expand its broadband business, MTS is studying an acquisition of Moscow pay-TV and Internet provider Akado, Dubovskov said. MTS company asked Akado for documents to be able to perform due diligence and decide on a potential purchase, he said.

“MTS is constantly monitoring the market and weighing various acquisition opportunities,” Dubovskov said. “It’s too early to speak about Akado.”

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