Mobile phone operator MTS says Q2 net profit down 15 percent due to ruble depreciation

MTS’s Q2 net profit drops 15 pct on weaker ruble

MOSCOW — Russia’s largest mobile phone operator MTS on Tuesday posted a $563 million net profit for the second quarter, a 15 percent drop from a year earlier, due largely to the depreciation of the ruble.

Revenues fell 23 percent from a year earlier to $2 billion.

The quarter’s results were nevertheless a significant improvement compared to the first quarter, when MTS reported a $58 million loss. Revenues rose 12 percent on the quarter.

The ruble rose 7 percent against the dollar during the second quarter, helping MTS reverse some of its previous foreign exchange losses with a one-off gain of $198 million.

The figures were largely as expected by analysts, who lauded MTS for its cost-cutting efforts.

Moscow-based investment bank Uralsib said in a note to investors that MTS’s results confirmed the company’s strong fundamentals and “the sector’s defensive nature as demand for mobile services is still strong despite the crisis.”

Shares were up 2.3 percent on the MICEX stock exchange in Moscow late afternoon.

MTS said that despite the market squeeze it had added 2.8 million new subscribers during the second quarter and maintained its 34 percent share of the Russian market.

The company’s chief executive, Mikhail Shamolin, said that “strong subscriber additions, a seasonal increase in usage and on-going cost saving initiatives facilitated quarter-on-quarter revenue growth and higher operating margins.”

MTS’s Russian operations saw net profit rise 34 percent year-on-year to 17 billion rubles ($527 million).

Ukraine and Armenia — among the former Soviet countries that have been hit hardest by the recession — showed stunning losses. Ukraine’s profits dropped by 62 percent to 142 million hryvnas ($17.6 million) while losses in Armenia multiplied to 2.9 billion dram ($7.9 million) from 209 million drams ($600,000) a year earlier.

MTS said last week it agreed to buy control in major fixed-line telecommunications operator Comstar from Russian conglomerate Sistema. The deal was widely reported to be worth some $1.3 billion.