Kazakhstan’s KCell Earnings Fall

Kazakhstan's Kcell Q2 Net Income Drops 87 Pct On Tax Provision

Oct 21 Kazakhstan’s biggest mobile operator KCell, controlled by Sweden-based Telia , said on Friday its third-quarter net income fell 71 percent to 4.378 billion tenge (about $13 million). Kcell JSC provides cellular services to citizens of Kazakhstan. The Company offers a wide range of cellular services as well as Internet services.

“In the third quarter of 2016 we delivered a second successive quarterly increase in service revenue and reported net growth in our subscriber base, although the economic and market environment remained challenging and we saw further year-on-year declines in revenue and profit,” Chief Executive Arti Ots said in a statement. ($1 = 331.4000 tenge)

Kcell JSC Results for January – September 2016

Almaty, 21 October 2016 – Kcell Joint Stock Company (“Kcell” or the “Company”) (LSE, KASE: KCEL), the leading provider of mobile telecommunications services in Kazakhstan by market share in terms of revenue and subscribers, announces its interim results for January – September 2016.

Third quarter

·    Net sales decreased by 13.6 percent to KZT 36,931 million (42,756). Service revenue down 11.6percent to KZT 35,032 million (39,612).

·    EBITDA, excluding non-recurring items, declined by 25.2 percent to KZT 14,238 million (19,028). EBITDA margin decreased to 38.6 percent (44.5); mainly due to an increase in internet feed cost.

·    Operating income, excluding non-recurring items, down 37.3 percent to KZT 8,056 million (12,849).

·    Net financial items changed to KZT -2,321 million (6,638).

·    Net income decreased by 71.0 percent to KZT 4,378 million (15,112).

·    Free cash flow decreased to KZT 7,968 million (12,169).

·    During the quarter, the Company’s customer base rose by 157,000 to 9,905 thousand (9,748).

Nine-month period

·    Net sales down 15.5 percent to KZT 108,814 million (128,820). Service revenue down 14.1 percent to KZT 102,558 million (119,447).

·    EBITDA, excluding non-recurring items, decreased by 32.8 percent to KZT 43,503 million (64,725). EBITDA margin of 40.0 percent (50.2).

·    Operating income, excluding non-recurring items, down 45.2 percent to KZT 25,384 million (46,304).

·    Net financial items KZT -4,905 million (4,951).

·    Net income declined by 60.6 percent to KZT 15,633 million (39,666).

·    Free cash flow decreased to KZT -992 million (26,579).

Financial highlights

KZT in millions, except key ratios,
per share data and changes

Jul-Sep

2016

Jul-Sep

2015

Chg

(%)

Jan-Sep

2016

Jan-Sep

2015

Chg

(%)

Revenue

36,931

42,756

-13.6

108,814

128,820

15.5

   of which service revenue

35,032

39,612

-11.6

102,558

119,447

-14.1

EBITDA excl. non-recurring items

14,238

19,028

25.2

43,503

64,725

32.8

Margin (%)

38.6

44.5

40.0

50.2

Operating income

7,916

12,849

38.4

24,775

45,977

46.1

Operating income excl. non-recurring items

8,056

12,849

37.3

25,384

46,304

45.2

Net income attributable to owners of the parent company

4,378

15,112

71.0

15,633

39,666

60.6

Earnings per share (KZT)

21.9

75.6

71.0

78.2

198.3

60.6

CAPEX-to-sales (%)

27.1

11.5

38.8

8.4

Free cash flow

7,968

12,169

-992

26,579

In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the third quarter of 2015 unless otherwise stated.

Comments by Arti Ots, CEO

“In the third quarter of 2016 we delivered a second successive quarterly increase in service revenue and reported net growth in our subscriber base, although the economic and market environment remained challenging and we saw further year-on-year declines in revenue and profit.

We remain focused on driving growth through smart innovation in products and services. In August we unveiled a key strategic development, with the announcement of our network sharing agreement with Beeline Kazakhstan, part of VimpelCom, for the joint deployment of 4G/LTE network in Kazakhstan.

This strategic partnership, the first such agreement in the region, will enable Kcell to swiftly deploy 4G/LTE services in all major areas in Kazakhstan by combining the networks of the two operators. As a result, Kcell has now rolled out 4G/LTE services in 11 cities in Kazakhstan. Kcell will continue to deliver market-leading quality across all areas of our business.

At the same time, Kazakhstan has started to see some encouraging signs of macro recovery, with an increase in oil prices. There have also been some signals that consumer price inflation is easing and currency levels are stabilising. However, some downward pricing pressure in LTE/4G services has started to emerge, with the recent launch by other providers of all-you-can-eat data packages.

We aim to maintain our market leadership by further expanding our offering of products and services and improving the quality and reach of our network in order to meet the evolving needs of our customers.”

 

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