MegaFon Predicts Stalling Sales, Lower Margin on Russia Woes

OAO MegaFon, Russia’s second-largest wireless carrier, forecast stalling sales and weakening profitability this year as the country’s economy slides toward recession.

Revenue will be little changed after rising 5.9 percent in 2014, the Moscow-based carrier said Wednesday. Operating income before depreciation and amortization is set to be “at or above” 40 percent of sales, compared with 44 percent last year.

MegaFon, controlled by billionaire Alisher Usmanov and part-owned by Sweden’s TeliaSonera AB, is trying to persuade customers to spend more on wireless-data plans to keep sales rising. That’s a challenge as a decline in oil prices and tensions over Ukraine are hurting economic growth and eroding consumer income.

“The guidance looks unimpressive,” said Konstantin Belov, an analyst at UralSib Capital in Moscow. “It’s also worrisome that MegaFon’s mobile-data revenue growth slowed.”

Revenue from wireless data increased 16 percent in the fourth quarter, compared with 41 percent in the first nine months of the year.

MegaFon fell 4.3 percent to $16 at 8:12 a.m. in London. The stock had lost 35 percent in the past year through yesterday.

“2015 will likely be a challenging year for MegaFon,” Chief Executive Officer Ivan Tavrin said in a statement. “We will continue our efforts to rationalize expenses and improve operating efficiencies. We will continue to invest to enhance the quality of our network.”

Competitor VimpelCom Ltd. said last month sales and profitability may fall this year as the company continues to face a “difficult” environment in Russia and Ukraine. Another rival, billionaire Vladimir Evtushenkov’s OAO Mobile TeleSystems, is scheduled to report next week.

MegaFon’s fourth-quarter sales rose 3.1 percent to 82 billion rubles ($1.3 billion), matching analyst estimates. Net income slid 72 percent, hurt by the ruble’s decline.

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