VimpelCom Earnings Drop on Currency, Regulatory Changes
VimpelCom Ltd. (VIP), the wireless carrier controlled by Russian billionaire Mikhail Fridman, reported a 2 percent drop in second-quarter earnings, citing exchange-rate and Italian regulatory changes.
Earnings before interest, taxes, depreciation and amortization fell to $2.43 billion from $2.48 billion a year earlier, VimpelCom said today. Analysts projected $2.45 billion, the average of nine estimates compiled by Bloomberg. The company also named Andrew Davies chief financial officer.
VimpelCom, which operates in 15 countries, said revenue was little changed at $5.7 billion. Sales rose in Russia, the Amsterdam-based company’s biggest market, and other former Soviet countries. Revenue fell in Italy amid changes in the regulation of so-called termination rates.
The company, part-owned by Norway’s Telenor ASA (TEL), is struggling to reduce spending and boost profitability to help cut $27.4 billion of debt stemming from the acquisition of telecommunications assets, including in Italy and Algeria, from Egyptian billionaire Naguib Sawiris in 2011.
Net income increased 17 percent to $573 million, helped by lower taxes and financial expenses. The Ebitda margin narrowed to 42.4 percent of sales from 43.2 percent.
Mobile subscribers rose 5 percent from a year earlier to 215 million users. Investors are monitoring VimpelCom’s efforts to stabilize its market share in Russia, where it has been lagging behind rivals in network development, said Ivan Kim, an analyst at VTB Capital, before the report. Fridman’s holding company may seek to remove VimpelCom’s Russian head, Anton Kudryashov, newspaper Vedomosti reported today.
“Russian unit showed substantial improvement in the last 18 months,” VimpelCom Chief Executive Officer Jo Lunder said today in an interview. “I have no intention to remove Anton Kudryashov. He is part of my management team and reports to me, not to the shareholders.”
VimpelCom fell 1 percent to $9.88 yesterday in New York, valuing the company at $17.4 billion. The stock has declined 5.8 percent this year.
VimpelCom said today it will transfer its listing to the Nasdaq Stock Market from the New York Stock Exchange. The move will reduce costs and get VimpelCom included in more stock indexes, Lunder said.
Davies is joining from Verizon Wireless, where he has been finance chief since 2010.
Lunder also said VimpelCom’s units in countries including Canada and Pakistan may get involved in market consolidation. In Canada, where the company co-owns Wind Mobile, it may take about three months to study options and agree with the Canadian government on the configuration of a deal, he said.
In June, VimpelCom’s Egyptian unit withdrew a request for regulatory approval to buy Wind Mobile entirely. Wind Mobile has also drawn interest from Verizon Communications Inc. (VZ), which said in June that Wind Mobile is “one of many” options it’s considering.
“We are in discussion with different parties,” Lunder said, declining to elaborate on company names. “We see growing interest in the asset.”
In Pakistan, consolidation “will happen,” with all the carriers, including VimpelCom, talking to each other, Lunder said. In Algeria, VimpelCom is continuing talks to settle an ownership dispute over its local unit with the government, he said.
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