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Mobile TeleSystems: What Led to Falling Income in Fiscal 3Q15?

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Price movement

Mobile TeleSystems (MBT) has a market cap of $6.8 billion. After the 3Q15 earnings report, MBT rose by 6.69% to close at $7.0 per share as of November 17, 2015. Its weekly, monthly, and YTD (year-to-date) price movements are 8.0%, -8.7%, and 7.8%, respectively.

Technically, the stock broke the support of the 20-day, 50-day, and 200-day moving averages a few times in 2015. Currently, MBT is trading 0.19% above its 20-day moving average, 1.8% below its 50-day moving average, and 17.4% below its 200-day moving average.

The VanEck Vectors Russia ETF (RSX) invests 4.5% of its holdings in Mobile TeleSystems. The ETF tracks an index of Russian companies. The YTD price movement of RSX is 14.4% as of November 16, 2015.

The competitors of Mobile TeleSystems (MBT) and their market caps are:

  • Orange (ORAN) at $47.6 billion
  • Ericsson (ERIC) at $31.0 billion
  • Turkcell Iletisim Hizmetleri (TKC) at $9.2 billion
  • VimpelCom (VIP) at $6.3 billion
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Performance of Mobile TeleSystems in 3Q15

The company reported 3Q15 net revenue of 115,034.0 million rubles, a rise of 7.4% when compared to the net revenue of 107,152.0 million rubles. Revenue from the Service and Sales of handsets and accessories rose by 3.2% and 58.8%, respectively, in 3Q15 as compared to the prior year period. The cost of services as a percentage of service revenue rose by 6.7%, while the cost of handsets and accessories as a percentage of revenue of handsets and accessories rose by 7.0% in 3Q15, as compared to the prior year period.

The company’s operating profit fell by 18.4% in 3Q15 as compared to the prior year period. Its net income and EPS (earnings per share) fell to 14,393.0 million rubles and 7,24.0 rubles, respectively, in 3Q15, as compared to net income and EPS of 15,407.0 million rubles and 7,75.0 rubles, respectively, in 3Q14. Comprehensive income attributable to equity shareholders rose to 25,601.0 million rubles in 3Q15, a rise of 8.6% as compared to the prior year period.

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Meanwhile, cash and cash equivalents fell by 43.0%, and trade receivables and short-term investments rose by 17.0% and 22.2%, respectively, in 3Q15 on a quarterly basis. The company’s current and long-term debt-to-equity ratios rose to 1.01 and 1.95, respectively, in 3Q15, as compared to the respective current and long-term debt-to-equity ratios of 0.91 and 1.94 in 2Q15.

Key activities in 3Q15

The company signed an agreement to acquire 100% of the shares of NVision Group, the developer and owner of its billing system, based in Russia. Its wholly-owned subsidiaries will purchase NVisopn Group from the subsidiaries of Sistema (SSA-LON), the parent company of Mobile TeleSystems, by the end of 2015. This would be for the total enterprise value up to 15 billion rubles, including debt.

Additionally, In H1 2015, Mobile TeleSystems installed over 9,160 base stations across Russia compared to 5,730 base stations installed in H1 2014.

Also, Mobile TeleSystems and Google signed an agreement to promote mobile internet technologies and Google’s search services in Russia.

About Mobile TeleSystems

Mobile TeleSystems is a telecommunications group located in Russia, as well as Central and Eastern Europe. It offers wireless Internet access and fixed voice, broadband, and pay-TV to its customers.

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