WASHINGTON – MegaFon, the second-largest mobile carrier in Russia, is forecasting a decline in sales and revenue for 2015, according to a report from Bloomberg Business.
The report follows a 5.9% increase in revenue in 2014 with a profit margin forecasted at 40% for 2015, down from 44% in 2014.
MegaFon CEO Ivan Tavin told The Moscow Times, “2015 will likely be a challenging year for MegaFon. We will continue our efforts to rationalize expenses and improve operating efficiencies. … We will continue to invest to enhance the quality of our network … while at the same time focusing on maintaining efficiency in our capital expenditures.”
MegaFon is owned in part by Russian billionaire Alisher Usmanov, the third-richest man in the country, and Swedish telecom group TeliaSonera.
MegaFon is like other Russian companies that are beginning to feel the bite of Russia’s recession brought on by falling oil prices and Western sanctions imposed after Russia’s involvement in neighboring Ukraine. Bloomberg Business reports that MegaFon is trying to offset losses by increasing wireless data plan sales. This revenue has only increased 16% in the fourth quarter, down from 41% over the last three quarters.
Russian consumers may be cautious in buying more mobile data due to declining incomes and a recent crack down by the Kremlin on Internet usage aimed at stamping out dissent in what was previously one of Russia’s last forums of true free speech.
MegaFon’s stock has lost 35% of its value over the past year, Konstantin Belov, an analyst at UralSib Capital in Moscow, said.
“The guidance looks unimpressive. It’s also worrisome that MegaFon’s mobile data revenue growth slowed,” Belov noted.
Despite a 3.1% rise in Q4 sales to $1.3 billion, MegaFon’s net income was down 72%, due in large part to the slide in the value of the ruble. The Russian currency was trading at 62 rubles to the dollar on March 13, down from an average of 40 rubles to the dollar earlier this year, but still far better than the hyperinflation of the late 1990s, which rendered the Russian currency near worthless.
