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lower-margin devices. Net income was up 46.5% y/y at R17.2bn thanks to the improved profitability of MTS Bank and a positive R3.0bn impact from FX and derivative operations (excluding this, net income would have only been up 21.0% y/y). Russian revenues grew 10.7% y/y to R127.0bn, while Russian EBITDA was up 11.0% y/y to R56.4bn. Mobile service revenues rose 5.3% y/y, up from 2.3% growth in 1Q21 thanks to a modest tariff hike and 1.8% subscriber base growth (versus flat y/y in 1Q21). Sales of handsets and accessories in Russia jumped 28.2% y/y to R16.8bn, with a nearly flat store count (the total revenues of mobile retail stores in Russia were up 49% y/y to R153.0bn). Net debt/EBITDA (excluding lease obligations) came in at 1.6 (up from 1.3 a year ago). FCF excluding MTS Bank and cash proceeds from the sale of the Ukrainian business stood at R16.8bn in 2Q21, down 48.8% y/y, mainly due to higher cash capex, which was up 28.3% y/y to R25.8bn, or 20% of revenues. The company upgraded its 2021 guidance to at least high-single-digit growth in revenues and at least 5% growth in EBITDA (up from 4% revenue growth and at least 4% OIBDA growth; we had 6% growth for both), while its cash capex guidance was reaffirmed at approximately R100-110bn (we had R108bn).
Rostelecom released its 2Q21 results on August 5. Revenues were up 9% y/y to RUB138.6bn. Mobile service revenues grew 11.7% y/y to RUB46.1bn (after 13% growth in 1Q21). The dynamics of mobile subscribers were not disclosed. Digital services were up 19% y/y to RUB17.9bn, which marks a q/q acceleration due to the late signing of contracts relating to some "Digital Regions" and cybersecurity projects in 1Q21. Broadband revenues rose 7% y/y to RUB23.8bn (after 9% in 1Q21). EBITDA was up 15% to R55.9bn, with the margin improving 1.8 pp to 40.4%. This translated into net income of R11.2bn (for an 8.1% net margin, flat q/q and up 2.2 pp y/y). FCF came in positive at R1.1bn (up from negative RUB9.6bn in 2Q20), due to lower repayments of accounts payable versus 2Q20. Net debt stood at R493.8bn, for a net debt/EBITDA ratio of 2.4 (down from 2.7 a year ago). Capex (net of state programs) was R24.4bn, or 17.6% of revenues, down from 19.5% of revenues a year ago. The company confirmed its guidance for an increase in revenues of at least 5% this year (BBG consensus has +5%), but hiked its EBITDA guidance from "at least 5%" to "8-10% growth" (BBG consensus has +12%) with the possibility of reviewing it again with the 3Q21 results. Capex is still projected to be within a range of RUB110-115bn (excluding state programs).
Kismet, a SPAC created by Ivan Tavrin, the founder and CEO of Kismet Capital Group and former head of MegaFon, has sent VEON a bid to acquire its tower assets in Russia, according to several sources quoted by Vedomosti. The financial conditions of the proposal were not disclosed. As a reminder, Vedomosti first reported in June that VEON had resumed negotiations to sell its towers in Russia. The media outlet reported back then
168 RUSSIA Country Report September 2021 www.intellinews.com