News
Telco troubled by forex issues, competitive climate in Russia; confident of securing European Commission OK for Italy deal.
VimpelCom on Thursday said service revenue and earnings for the full year would come in at the low end of its guidance, after its second-quarter numbers showed some weaknesses.
The telco said its results for the first half of 2016 were in line with expectations, despite weaker service revenue trends in Q2.
The company posted group revenue of US$2.16 billion in Q2, down by 16% year-on-year and a slide of just 0.1% organically. Service revenues, including fixed and mobile operations, fell by 17% – or 0.7% organically – to $2.09 billion.
Reported EBITDA dropped by 29% to €795 million, and reported underlying EBITDA fell by 14% to $911 million but increased by 3% organically.
"We saw particularly solid performances in Pakistan and Ukraine and mobile data revenue growth was also strong, up 26%, reflecting our strategic focus to transform our business from traditional voice and messaging to data and digital services," said VimpelCom CEO Jean-Yves Charlier, in the operator’s Q2 report.
He added that the telco’s profit for the period grew by 29% to $138 million.
"Reported results however continue to be negatively impacted by adverse foreign exchange movements, although this effect is moderating," Charlier said.
VimpelCom said revenue growth and profitability at its Russian operations were impacted by the macro-economic slowdown and the weakness of the rouble. "In addition, competition has increased during 2016 and the company expects the environment to remain challenging for the remainder of the year," it said.
Revenues in Russia came in at $1.01 billion in Q2, down 22% on the year-ago quarter, while underlying EBITDA was down 20% to $417 million. On an organic basis, earnings were flat but revenue and service revenue still slipped by 2%.
The telco’s top line was hit by a 10% organic reduction in fixed-line service revenue, brought about mainly by corporate customers changing their contracts to the rouble from the U.S. dollar, but also coming as a result of lower B2C revenue. Mobile service revenues also fell by 0.4% though, as mobile data revenue growth just failed to offset lower voice and roaming revenues.
As Charlier mentioned in his comments, Pakistan and Uzbekistan proved to be VimpelCom’s strongest markets, growing revenues by 14% and 11% respectively on an organic basis in Q2.
The telco now classes its Italian operation, Wind, as an asset held for sale, pending the completion of its joint venture with CK Hutchison.
"VimpelCom remains confident of securing regulatory approval from the European Commission, which is expected by 8 September 2016," the operator said. "As of today, no Statement of Objections has been received from the EC."
The telco confirmed its full-year guidance, albeit with the caveat that the numbers will come in at the low end of expectations.
"VimpelCom remains on track to achieve its financial targets for the year, although at the lower range for service revenue and underlying EBITDA margin, while the capex to revenue ratio is trending towards 17%," Charlier said.
