MTS Raises Dividend, May Bid for Tele2 Unit in Russia
OAO Mobile TeleSystems (MBT), Russia’s largest mobile operator, plans to raise future dividend payouts by one-quarter and said it would consider the acquisition of the local unit of Sweden’s Tele2 AB (TEL2B) to boost growth.
MTS will increase the dividend payment by 25 percent to at least 18.3 rubles per share in the three years through 2014, Chief Executive Officer Andrei Dubovskov told reporters today. The shares rose 1.7 percent to 230 rubles in Moscow, the most in more than a month.
MTS, controlled by billionaire Vladimir Evtushenkov, sees any further market consolidation in Russia as “value- accreditive” and would be potentially interested in acquiring the local unit of Tele2, Chief Financial Officer Alexey Kornya said today in an interview.
Tele2 had 22.3 million subscribers in Russia versus MTS’s 70.7 million users at the end of September, according to AC&M Consulting. The Swedish company may seek to merge its Russian assets with local operators such as state-run OAO Rostelecom after failing to receive a fourth-generation license during July auctions, Kommersant reported in August.
MTS generates about 90 percent of its sales in Russia while attempting to overcome difficulties in ex-Soviet republics Uzbekistan and Turkmenistan. The company lost 9 million users in Uzbekistan after a court withdrew its licence in July. In Turkmenistan, MTS has only recently resumed operations after a hiatus of almost two years.
The company reported third-quarter net income of $630 million, beating an average estimate of $507 million from eight analysts surveyed by Bloomberg. Sales declined 4 percent to $3.1 billion, partly due to the closing of the Uzbekistan unit, MTS said in a statement.
MTS is hoping to return to the Uzbek market, though “not at any price”, Vice President Oleg Raspopov told reporters today. The local court withdrew its licence there in July citing violations by local managers. Another Uzbek court last week demanded a $600 million fine from MTS, overturning a decision to confiscate the company’s assets there.
MTS wrote off $1.08 billion in impairment and tax claims on its Uzbek assets in August after the forced shutdown. Its former users in Uzbekistan switched to rivals TeliaSonera AB (TLSN), based in Stockholm, and Russian competitor VimpelCom Ltd. (VIP)
In Turkmenistan, the local government withdrew the MTS licence in December 2010 and returned it in July of this year only after the company agreed to pay 30 percent of its country income to the state. MTS now has about 850,000 subscribers in Turkmenistan, a third of the 2.4 million it had in 2010.
MTS has a 45.4 percent margin on operating income before depreciation and amortization in its Russian unit, the highest among local rivals, according to VTB Capital. Third-quarter Oibda margins at the Russian units of VimpelCom and OAO MegaFon were 43.2 percent and 44.7 percent respectively.
The company raised its sales growth forecast for 2012 to 7 percent, compared with a range of 5 percent to 7 percent, Dubovskov said. It also increased its target for operating income before depreciation and amortization to more than 42 percent from 41 percent to 42 percent.
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