MBT Confirms Outlook, Ups CapEx

Russia’s incumbent telecom carrier Mobile TeleSystems (MBT - Analyst Report) released its 2009 outlook yesterday. The company has lifted its capital expenditure (CapEx) guidance to $1.8 billion from $1.5 billion as per the previous guidance.
 
This increase is primarily due to the expected growth in capital spending in Central Asian markets and appreciation of the ruble against the US dollar. While the revised CapEx for 2009 is lower than $2.2 billion spent in 2008, as a percentage of sales it still remains at 22%. In contrast, the company’s archrival VimpelCom (VIP - Analyst Report) is expected to spend 12%-15% of sales in 2009.
 
Mobile TeleSystems plans to invest approximately $450 million in 2009 in 3G network infrastructure and expansion of its proprietary distribution network. Moreover, the company has earmarked $350 million for the maintenance of its existing network. To fund its investments in 3G network, the company has secured a loan of €413 million (US$578 million) from three international lenders. 
 
Assuming stability in currency exchange rates and economic conditions across the operating regions, the company revealed its revenue target for 2009 which is forecasted to reach $8.5 billion. This represents a decline from $10.2 billion registered in 2008.
 
Revenues in Russia are projected to grow by at least 10% year over year in local currency. However, the company expects continued downward pressure on revenue from its Ukrainian (the second-largest market) operation given the ongoing macroeconomic volatility. Revenues from this market are forecasted to decline by at least 10% in 2009.  
 
The company expects OIBDA margin to surpass 45%, reflecting a decline from 50.2% in 2008. Although Mobile TeleSystems remains the market leader in Russia, the company is increasingly exposed to intense pricing pressure across most of its operating markets. This has led to declining operating margins as evidenced by the last quarter’s results.