MTS Earnings Beat Estimates on Wireless-Data Demand

OAO Mobile TeleSystems, Russia’s largest wireless carrier, reported second-quarter earnings topping analysts’ estimates as subscribers spent more on data and increased its full-year profitability forecast.

Operating income before depreciation and amortization rose 10 percent to 44.4 billion rubles ($1.3 billion), Moscow-based MTS said today. Analysts projected 42.4 billion rubles, the average of estimates compiled by Bloomberg. Sales climbed 5 percent to 97.5 billion rubles.

MTS, controlled by billionaire Vladimir Evtushenkov, is trying to stay ahead of OAO MegaFon and VimpelCom Ltd. as Russia’s mobile-data usage grows. MTS is pushing tariff plans with unlimited voice and selling cheaper smartphones to get more users to surf the Web and watch video on their handsets.

“The quarterly numbers came in strong, and upgraded full-year guidance is a good signal for investors,” Alexander Vengranovich, an analyst at Otkritie Capital, said by phone. “For the second quarter in a row, MTS is showing the fastest data revenue growth among Russian operators.”

Second-quarter Oibda margin expanded to 45.5 percent of sales from 43.6 percent a year earlier, and MTS boosted its full-year margin forecast to “more than 43 percent” from an earlier projection for about 42 percent.

MTS rose as much as 2.2 percent and added 2 percent to

293.50 rubles at 5:21 p.m. in Moscow. It had gained 17 percent this year through yesterday.

Russia Revenue

Data revenue in Russia rose 40 percent to 11 billion rubles. Billionaire Alisher Usmanov’s MegaFon has the largest data revenue among Russian operators, with the carrier boosting it 29 percent last quarter to 11.6 billion rubles. This month, MegaFon agreed to acquire mobile-data operator Scartel to gain a faster network.

MTS is “working hard on increasing our data revenue,” Chief Executive Officer Andrei Dubovskov told reporters in Moscow. It aims to cover 600 Russian cities with a faster network by the end of 2014 and the plan won’t be affected by MegaFon’s Scartel purchase, Dubovskov said.

Net income was 29 billion rubles, after a loss of 23.1 billion rubles in the year-earlier period, when the company had expenses for shutting down its Uzbekistan operations after a dispute with the local government. In the latest quarter, MTS had a gain after a settlement of a disagreement with a rival over assets in Kyrgyzstan prompted the company to reverse earlier write-offs.

Sales a year earlier were 92.8 billion rubles, excluding Uzbekistan.

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