March 16, 2017 / 8:51 AM / 4 months ago

Russia's MegaFon expects flat sales after sharp profit fall

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MOSCOW, March 16 (Reuters) - Russian mobile operator MegaFon forecast its revenues would be flat or grow slightly in 2017 after reporting a fall in fourth quarter earnings and sales on Thursday.

MegaFon, which is trying to reinvent itself as an internet player, said net profit dropped 42 percent to 3.1 billion roubles ($53 million) due to a 3.4 billion rouble impairment charge relating to revised forecasts for broadband operations.

It said this was "in response to the current challenging economic environment and competitive pressures". In a now mature Russian market, mobile operators are struggling to increase revenues and have been forced to cut prices to retain customers.

Earlier this year the company, Russia's number 2 mobile operator, completed the acquisition of a controlling stake in internet group Mail.ru in a bid to move away from a traditional telecoms business structure and tap new sources of growth.

MegaFon said its revenue fell 0.8 percent to 81.3 billion roubles in the fourth quarter, hurt by a shift among consumers to digital technologies and an increased uptake of more economical bundled tariffs, although this was partly offset by a 28.4 percent jump in lower margin revenue from handset sales.

The company said its Adjusted Operating Income Before Depreciation and Amortisation (OIBDA) fell 1.6 percent to 29.1 billion roubles in the fourth quarter.

MegaFon forecast 2017 OIBDA of 112–118 billion roubles and capital expenditure of 55-60 billion roubles, not including Mail.ru, while revenues are expected to be flat or rise slightly after growing by 0.9 percent in 2016.

Its Russian wireless subscriber base increased by 1.1 percent year on year to 75.6 million as of Dec. 31, but the company said it had shifted its focus to retaining existing customers and increasing their life-time value.

MegaFon's data service user base increased by 5.8 percent year on year, due to the ongoing promotion of its data services and an increased adoption of data-enabled devices. ($1 = 58.4687 roubles) (Reporting by Maria Kiselyova and Dasha Afanasieva; Editing by Alexander Smith)

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