OAO Mobile TeleSystems, Russia’s largest wireless operator that gets 10 percent of its revenue from Ukraine, cut its sales forecast for 2014 after operating income dropped as the Ukrainian currency weakened.
Sales growth this year will be more than 1 percent, down from an earlier estimate of 3 to 5 percent, MTS said today. The company’s second-quarter operating income before depreciation and amortization declined 2.6 percent from a year earlier to 43.2 billion rubles ($1.2 billion), below an average estimate of 43.6 billion rubles by 10 analysts in a Bloomberg survey.
MTS, controlled by Russian billionaire Vladimir Evtushenkov, has faced problems with its business in the former Soviet republics. In Ukraine, the hryvnia currency has lost a third of its value to the Russian ruble over a year, hurting profitability. In Uzbekistan, MTS formed a joint venture with the local government to resume operations after a two-year shutdown because of legal disputes.
Possible further declines in Ukraine’s currency and consumer spending, along with tensions in Crimea and network difficulties in southeast Ukraine, explained the reduction in sales outlook for the year, MTS said.
Revenue in Ukraine fell 23 percent in ruble terms in the second quarter. Russian sales advanced 4.5 percent to 90.4 billion rubles, with mobile-data revenue rising 40 percent. OAO MegaFon, Russia’s second-largest wireless carrier controlled by billionaire Alisher Usmanov, reported 39 percent growth in Russian mobile-data revenue in the period. MTS’s total sales for the quarter rose 1.4 percent.
The profit decline was also related to a one-time gain last year after a settlement of a dispute over the ownership of the Kyrgyzstani wireless operator Bitel, MTS said.