In Q3 2019 MegaFon unveiled a number of new products for its clients. These included providing its clients with a single point of access for wireless services, home internet and MegaFon TV via its convergeant product called “Obyedinyai! (Unite!)”, as well as implementing a flexible system for increasing cashbacks on its “Vklyuchaisya!” (“Connect!”) tariffs.
The transformation of MegaFon’s retail network through the introduction of “new generation” stores, focused on the provision of top quality client service and a unique customer experience, is proceeding well and showing promising initial results. The daily average number of clients visiting the upgraded stores in Q3 2019 is up 20%, and the daily average revenue for such stores in Q3 2019 is up between 30% and 40%, in each case as compared with the corresponding figures prior to the stores’ transformation.
Total revenue from sales of equipment and accessories is up 36.5% y-o-y. The suppliers which are the most popular with Russian consumers are Huawei/Honor, Samsung, Xiaomi, and Apple. Demand for new Apple models at the end of the quarter was three times higher than the year before, and the order backlog for the new models before their launch date in September 2019 was up 20% y o y compared to the order backlog in September 2018 for the prior year’s new models.
MegaFon continues working on reducing its leverage and using part of its profits to pay down the debt. (As a reminder, the Company’s leverage increased as a result of a series of buy-backs of its shares and GDRs during 2018 and the first half of 2019.) As a result, the Company’s net debt had decreased to RUB 350.3 billion by the end of the reporting period. This enabled MegaFon to reduce the Net debt/LTM OIBDA ratio from 2.88x at the end of Q2 2019 to 2.80x at the end of Q3 2019.
MegaFon continues the roll-out of LTE and LTE Advanced networks. At the same time CAPEX in the quarter was lower than the year before because of the completion of major projects for the upgrade of the billing platform and financial software on which the Company had been working in 2018.
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The Company was able to increase its net profit and reduce leverage despite the continued impact of the pandemic.