Russia’s MTS ups guidance after profit jump, eyes separating some assets

Russia’s biggest mobile operator, MTS, on Thursday reported a net profit jump in the second quarter, raised its full-year guidance and said it was hoping to separate two assets into legal entities in early 2022.

MTS is one of several Russian companies developing services beyond its core business. President and Chief Executive Vyacheslav Nikolaev said non-core segments – fintech, retail, media, cloud and digital – contributed more than half of revenue growth year-on-year.

“MTS Bank in particular has now achieved sufficient scale to become an engine of profitability for the group as a whole,” Nikolaev said in a statement.

Net profit increased 46.5% to 17.2 billion roubles ($232 million), prompting the company to raise its 2021 revenue guidance to high single-digit growth.

Its bank added around 100,000 customers in the quarter and posted net profit of 3.4 billion roubles for the first half of 2021, versus a 0.9 billion rouble loss in the same period last year, MTS said.

“We are already seeing individual business units growing and reaching sufficient scale for them to independently enter capital markets,” Nikolaev later said on a conference call.

He said management was proposing a restructuring process that would separate its digital infrastructure into a new business — MTS Web Services — and a cell towers unit, which, if approved by the board and shareholders, should be completed in early 2022.

Other business units such as the bank and MTS Media are already separate but still wholly-owned by MTS.

Second-quarter revenue was up 10.6% to 128.6 billion roubles, with adjusted operating income before depreciation and amortisation (OIBDA) 10.2% higher at 57.2 billion roubles.

MTS said it expects adjusted OIBDA to rise by at least 5% this year, up from a previous forecast of 4% growth.

The company confirmed its 2021 capex guidance of between 100 billion and 110 billion roubles. It said Russian legal requirements that telecom operators store certain data for up to six months meant it would need to spend around 50 billion roubles on data storage systems between 2018 and 2023. Reuters