VimpelCom earnings hit by Italian regulation, forex

Multinational operator VimpelCom has blamed a fall in earnings for the three months ending June 2013 on a mixture of foreign exchange movements, regulation in Italy and one-off charges.

The operator – which is now headquartered in Amsterdam but whose biggest market remains Russia – saw earnings before interest, taxation, depreciation and amortization (EBITDA) fall by 2%, to $2.43 billion, compared with the same period last year.

Multinational operator VimpelCom has blamed a fall in earnings for the three months ending June 2013 on a mixture of foreign exchange movements, regulation in Italy and one-off charges.

The operator – which is now headquartered in Amsterdam but whose biggest market remains Russia – saw earnings before interest, taxation, depreciation and amortization (EBITDA) fall by 2%, to $2.43 billion, compared with the same period last year.

The operator’s net income, however, rose by 17%, to $1.22 billion, over the same period, thanks largely to lower taxes, while revenues shrank slightly from $5.75 billion to $5.72 billion.

VimpelCom also reported a 5% increase in its mobile customer base, to 215 million subscribers, between June 2012 and June 2013.

“These are solid results in the context of increasing competitive intensity and regulatory pressures in several of our markets,” said Jo Lunder, VimpelCom’s chief executive. “I remain confident that VimpelCom will deliver on its strategic objectives as a result of our continuing focus on operational excellence, cost control and customer excellence.”

VimpelCom remains burdened by a net debt of $22.6 billion – about 2.3 times the operator’s EBITDA over the past 12 months – having borrowed heavily to help fund its takeover of telecoms assets from Egypt’s Naguib Sawiris in 2011.

Still, the operator reported that its net-debt-to-EBITDA multiple had fallen from a figure of 2.4 this time last year.

VimpelCom reported reasonably strong revenue growth in Russia and the CIS countries but major declines in Italy – its second-biggest market – as well as in Africa and Asia, where foreign exchange movements were largely to blame for the setbacks.

The operator has lagged Russian rivals on the rollout of mobile data services but says it has been making investments in this area and “expects to be on par in quality with its competitors in its key strategic regions by the end of this year”.

Overall, the company invested $791 million in capital expenditure in the three-month period, about 17% of its revenues over the last 12 months, but it aims to invest about 20% of full-year revenues in capital expenditure as it continues to make network improvements in Russia.

VimpelCom said it was continuing to evaluate options for Wind Canada (Toronto) – which has struggled to compete against the big three players of Bell Canada (Montreal), Rogers (Toronto) and Telus (Burnaby) – and might look to dispose of the business entirely.

The operator also announced that it had appointed Andrew Davies as its new chief financial officer, replacing Henk van Dalen.

Davies will join VimpelCom from Verizon Wireless (New York City, NY, USA), where he holds the position of chief financial officer.