Key results for Q2 2019
In Q2 2019 MegaFon demonstrated steady growth in its key performance indicators1 while maintaining its loyal subscriber base. The operating results show that MegaFon is pursuing the right strategy towards its digital transformation goal:
- Revenue increased by 4.5% y-o-y2 to RUB 85.6 billion
- OIBDA including the impact of IFRS 16 increased by 20.6% y-o-y to RUB 38.9 billion, at the same time MegaFon demonstrated steady growth in organic OIBDA of 4.7% y-o-y to RUB 33.8 billion.
- OIBDA Margin including the impact of IFRS 16 was 45.4% and organic OIBDA Margin was 39.4%.
- Net profit including the impact of IFRS 16 was RUB 2.9 billion and organic Net profit was RUB 3.8 billion.
- CAPEX increased by 1.2% y-o-y to RUB 16.4 billion.
- Free Cash Flow to Shareholders3 decreased by 22.7% y-o-y to RUB 6.1 billion. The decrease is mainly due to the increase in finance costs resulting from the additional debt financing taken out to finance the buy-back of shares and GDRs of the Company from non-affiliated shareholders.
- Net debt decreased since last quarter to RUB 360.6 billion.
- The number of mobile subscribers as of 30 June 2019 increased by 0.1% y-o-y to 77.6 million4.
- The number of data service users as of 30 June 2019 increased by 6.9% y-o-y to 34.4 million4.
In June 2019, the Company completed the buy-back of the remaining shares held by non-affiliated shareholders. Shares of MegaFon are no longer trading on the London or the Moscow stock exchanges. The buy-back was partly carried out using debt financing which increased the Company’s total debt over the period of the buy-back process. The Company used part of its profit to service the debt.
The concentration of greater control over the Company by its main shareholder in the second quarter enabled MegaFon to significantly increase its operational efficiency, and to continue to invest in its network, accelerate implementation of new projects and launch new digital products and services as part of its strategy of digital transformation:
- It embarked upon a revolutionary transformation of the telecom-retail business, launching a new type of store called “The store of the Future” with an initial investment of RUB 1.5 billion.
- It signed an agreement with Alibaba, Mail.Ru and the Russian Direct Investment Fund for the creation of the AliExpress Russia e-commerce joint venture.
- It created an international consortium for the construction of a unique transcontinental underwater high-speed fiber optic line, which will connect Helsinki to Tokyo.
- It continued to invest in the widening of its network and the development of its infrastructure. As of 30 June 2019 MegaFon maintains its leading position in regard to the number of base stations in Russia — it has more than 240,000 base stations covering all communication standards, including 100,000 base stations supporting LTE and LTE Advanced5. For the third year in a row MegaFon’s mobile internet has been named by Ookla the fastest in Russia.
1 See Schedule 1 for definitions of the terms used and Schedule 2 for the reconciliation of non-IFRS measures. Due to rounding actual numbers and calculations for financials and KPIs may differ from those set forth in this release.
2 Year over year (“y-o-y”) stands for the same periods in the current and previous year on either a quarterly or yearly basis.
3 This is shown without taking into account the effect of the IFRS 16 implementation.
4 Includes subscribers of the Company in Russia and the subscribers of its subsidiaries: “TT mobile” CJSC in the Republic of Tajikistan, “AQUAFON-GSM” CJSC in the Republic of Abkhazia and “OSTELEKOM” CJSC in the Republic of South Ossetia.
5 Based on Roskomnadzor, as of 30 June 2019.
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