The Company was able to maintain its OIBDA Margin, reduce its leverage and increase net profit despite the continued impact of the pandemic.
Key results for Q2 20201:
Service revenue in Q2 was RUB 73.4 billion, down 6.9% y-o-y, as a result of efforts to reduce communications spend undertaken by both retail and business customers amidst the pandemic. A large number of retail stores were closed, which significantly reduced both the number of new subscribers and service revenue. Additionally, to support its subscribers in self-isolation, MegaFon offered free access to a range of its most popular services over an extended period, which also had an impact on its revenues. Service revenue was also affected by a drop in roaming revenue due to border closures.
Despite the pandemic’s negative impact on service consumption in the B2B segment and the number of non-working days in April and May, fixed-line revenue demonstrated a slight growth of 1.0% to RUB 6.8 billion, driven by demand for residential broadband, information security services and cloud solutions.
Store closures in some regions, travel restrictions in most large cities and the general decline in consumer confidence in Q2 had a negative impact on revenue from sales of equipment and accessories, driving it down by 24.7% to RUB 5.2 billion.The number of visitors to MegaFon stores fell by 40% y-o-y.
Despite the pandemic’s major negative impact on the Company’s financial performance, MegaFon was able to maintain its OIBDA Margin flat y-o-y at 45.4%, primarily by reducing low-margin sales of equipment, cutting selling and marketing expenses and reducing general expenses. In the new challenging environment, smart performance management has become even more important.
Net profit grew by 35.2% y-o-y, driven by operational efficiency gains and in particular lower finance charges due to continued deleveraging.
The best mobile network in RussiaOperational CAPEX was RUB 13.1 billion in Q2, down 20.1% y-o-y. As a result of the pandemic, several non-critical projects not related to network operations were postponed.
At the same time, the increased network load has required renewed focus on network development to maintain a high quality of service for subscribers. In Q2 2020, the number of base stations grew by 2.3% to 189,000 including more than 4,000 new base stations added in LTE and LTE Advanced standards alone. These efforts have ensured the continued delivery of our high-quality voice and mobile services. According to Ookla’s Speedtest Intelligence analysis for 1H 2020, MegaFon provides the fastest mobile internet in Russia.
MegaFon’s subscriber base in Russia remained fairly stable in Q2 at 75.4 million.The data user base in Russia has continued to grow — up by 4.2% to 34.9 million, making up 46.3% of the total subscriber base. The number of 4G devices registered in MegaFon’s network was 35 million, up 14.5% y-o-y.
1Based on the IFRS interim condensed unaudited consolidated financial statements for 1H 2020 reviewed by JSC KPMG. Due to manual rounding, financial and operating results may differ from those presented here. All changes are shown for the same periods in the current and previous year on a quarterly or annual basis, unless otherwise indicated.
2Operational 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.