Page 18 - bne_Tech_0809_2018

Telecom
August/September 2018 www.intellinews.com I Page 18
Russia's MegaFon reports strong set of results as telecoms price war breaks out
MegaFon reported a strong set of results on August 16, supported by the unfolding effect of a price war that broke out in the summer and dur- ing the World Cup.
The company deconsolidated its accounts from Mail.ru Group following the completion of the transaction to create a JV on June 9. It reported the stand-alone results. Revenues increased by 5.1% y/y to RUB81.94bn, driven by both the wire- less (+4.6%) and wireline (+21.8%) segments, Sberbank CIB said in a note.
Equipment sales continued to decline (-7.3%) as a result of the shrinking proprietary retail store net- work. EBITDA (based on the new IFRS standards) was a positive surprise, up 5.5% to R32.3mn. Net income increased by 11.5% to R6.1bn. Capex for the second quarter of 2018 was R16.2bn, or 19.7% of revenues. Net debt was R214.7bn as of June 30, Sberbank reported. Guidance was reiterated for flat revenues and R75-80bn in capex in 2018.
Megafon’s results were also affected by a price war that broke out this summer between the leading players in the market. In mid-June, MegaFon reduced prices by 33-67% in 17 regions, which provoked a response from rival Tele2 in early August. Then this week MTS entered the fray by offering unlimited mobile data, which has already garnered a response by VEON that operates under the Beeline brand.
“We would not go so far as to call what is happen- ing a 'price war,' given the limited risks to blended ARPU at this stage. But it is certainly a continua- tion of the highly competitive pricing environment.
MegaFon and Tele2 still have the opportunity to reshuffle mobile prices, including in another 50+ regions of Russia. MTS, with its new unlimited mobile data plan, is aiming to increase ARPU and is de facto simplifying the structure of its tariffs,” Sberbank CIB said in a note.
Data overtook voice as the main source of revenue earnings several years ago and given that there is no network neutrality regulation in Russia, opera- tors can be flexible with costs, thus limiting the negative effect on earnings.
But competition between the leading companies in what is probably Russia’s most modern and so- phisticated sector remains tough – and especially between the incumbent MegaFon and the new kid on the block Tele2.
In mid-June, MegaFon initiated a promo called
"a blow to prices" in 17 regions where Tele2 has traditionally had a strong position, reducing prices by 33-67%.
“For example, in Kurgan Region, MegaFon's en- try-level bundle is now priced at RUB140/month ($2 or a 53% reduction in tariffs) and includes 300 voice minutes, 20 GB of mobile data, free traffic for VK Music and MegaFon TV. In early August, Tele2 responded by reshuffling tariffs in these 17 regions plus 13 others. In Kurgan Region, Tele2 offers 20 GB and 600 voice minutes for RUB140/ month, including free traffic for social networks and messengers,” Sberbank comments.
“New 'Tariffische' plan by MTS with unlimited mo- bile data started August 14. In Moscow, on top of