The company increased its service revenue, OIBDA and net profit in spite of plummeting roaming and retail revenues.
Key results for Q1 20201:
In Q1 2020 our service revenue increased by 0.9% y-o-y to RUB 73.4 billion. The growth was driven by positive dynamics in B2B wireline revenue, as well as in wireless revenue which kept growing on the back of mobile data revenue growth. Services provided through our tariff line “Vklyuchaisya!” (“Connect!”) and our marketing campaigns aimed at promoting data consumption, as well as our combining the company’s products with partner services, have all driven data revenue up by 9.9% y o y. A decrease in roaming revenue caused by the gradual closure of borders in March 2020 put some pressure on wireless revenue.
Q1 2020 total revenue was negatively impacted by the situation in retail. Local authorities in a number of regions decided to completely close telecom retail stores in response to the pandemic. As a result of the restrictions, Q1 2020 revenue from sales of equipment and accessories decreased by 16.3% y-o-y, as the average number of visitors to MegaFon retail stores decreased by 23% in March.
Effective cost management
Despite the reduction in revenue the company increased OIBDA by 2.2% y-o-y in Q1 2020. At the same time Net profit increased by 136.5% y-o-y. This was as a result of decreases in costs, particularly sales and marketing costs, as well as operational efficiencies.
The best mobile network in Russia
In Q1 2020 Operational CAPEX amounted to RUB 11.5 billion, which is 44.4% more than in the same quarter last year. The growth rate in base station construction was 14% compared to Q1 2019, and for LTE installations was 35%. The company continues to develop and improve its telecommunication networks. In Q1 2020 the company placed into service approximately 3,500 new LTE and LTE Advanced base stations. The surge in network load in March, as a large number of our subscribers switched to working from home during the lockdown, required that the company increase its spending on infrastructure to maintain its high quality of service. For example, in response to the peak network demands the company upgraded its Unified billing cluster to increase the reliability of our services for our subscribers.
In Q1 2020 MegaFon’s subscriber base in Russia remained fairly stable at 75.1 million people. On the back of the growing demand for digital services the number of data users in Russia increased by 3.0% in the quarter to 34.8 million, making up 46.3% of our overall subscriber base. At the same time the number of 4G enabled devices registered in MegaFon’s network has gone up by 20% y-o-y to over 35 million devices.
1 Based on the IFRSE inderim condensed unaudited financial statements reviwed by JSC “KPMG”. Due to rounding actually numbers and calculations for financials and KPIs may differ from those set forth in this release. Year over year (“y-o-y”) stands for the same periods in the current and previous year on either a quarterly or yearly basis, unless otherwise indicated.
2 Operational CAPEX is CAPEX excluding expenditures on additions of right-of-use assets under leases.
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The Company was able to increase its net profit and reduce leverage despite the continued impact of the pandemic.