MTS customer base more than doubled during the first half of 2000.
Moscow, Russia, August 17, 2000 — Mobile TeleSystems OJSC (NYSE: MBT), Russia’s leading provider of GSM-900/1800 based mobile cellular communications services, today announced that it more than doubled the number of its subscribers during the first half of 2000, and reported its half-year results for the period ending June 30, 2000.
During the first six months of 2000 MTS added a net of 333,000 new customers, bringing its total customer base to 640,000 as of June 30, 2000, an increase of 108 % over the 307,000 subscribers at the end of 1999. Growth was particularly strong in the second quarter, with 230,000 net new subscribers joining MTS, including 94,000 in June alone. As of August 15, 2000 the total number of the Company’s subscribers was 776,000. In the Moscow license area the number of subscribers reached 734,000, an increase of 145% from December 31, 1999. As of August 15, 2000 MTS had 37,000 subscribers in its operational regions outside of the Moscow license area, an increase of 360% over the 8,000 subscribers at the end of 1999. The total regional subscriber base including MTS’ customers in Omsk (MTS’s most recent acquisition) has reached 42,000.
Commenting on the growth, Mikhail Smirnov, President of Mobile TeleSystems OJSC, said: “In a year of explosive market growth and increased competition, MTS grew its customer base by 145%, with the regions showing an even more impressive growth of 360%. Market growth was far ahead of projections, particularly in the second quarter of 2000, spurred by consumer interest in mobile cellular communications services. About 1 in 10 people in Moscow now own a mobile phone.”
Overall churn rate for the first six months of 2000 was 13.51%.
MTS’ total net revenues for the first six months of 2000 were $222 million. Total revenues for the second quarter of 2000 were $120 million, compared with $102 million for the first quarter, an increase of 18%. For the first half of 2000 the Company’s EBITDA totalled $111 million (unaudited). For the first six months of 2000 EBITDA margin was 49,8%, compared with 47,2% reported in 1999 (also unaudited). Net income in the second quarter was $28 million, compared with net income of $19 million for the first quarter of 2000. Total net income for the first six months of 2000 amounted to $47 million.
The average monthly airtime usage per subscriber (MOU) in the first six months of 2000 was 154 minutes. The number of call minutes in the second quarter of 2000 in MTS’ network increased by 14% compared to the first quarter. Among other factors this increase is attributable to an increase of mobile-to mobile traffic as well as to an increase of the volume of additional services the Company provided for its subscribers.
MTS’ monthly average service revenue per user (ARPU) for the first half year of 2000 was $68, showing a 20% decrease from the $84 reported in the first quarter of 2000. The attractive and competitive tariffs, introduced in April 2000 to increase mass market sales, have increased the portion of low-end users in the total customer base of MTS. This led to the dilution in ARPU, which is in line with the global experience of operators entering the mass market.
Along with the strong growth in the number of gross subscriber additions in the first half year of 2000 MTS significantly decreased average acquisition cost per gross subscriber addition. This decrease is attributable to growing sales through MTS’ own sales offices, including the two new sales offices opened this year. The average acquisition cost per subscriber in the first six months of 2000 was $80, of which one third is advertising expense. The balance is made up of dealer commissions.
Commenting on the announcement, Mikhail Smirnov said, “Today we are very pleased to announce our half year results to our shareholders and the investment community. Even implementing the mass market approach, we managed to achieve the best results in the industry, especially in terms of revenues, net profit, EBITDA and size of customer base.”
MTS capital investments in the first half of 2000 amounted to $92 million.
During the first six months of 2000 the coverage area and quality of MTS’ network substantially increased. MTS installed 160 additional base stations, both in regions already in operation and in new areas, including the regions of Yaroslavl and Omsk. MTS has also completed building networks in the Amursk region and the Republic of Udmurtiya, with operations to commence soon. The Company is also starting the construction of networks in the Ivanovo, Nizhni Novgorod and Vyatka regions. Thus, the Company’s plans include the expansion of its operations from the present 19 operational regions to 24 in the near future. In Moscow during the first half of 2000 MTS started testing communications equipment installed in the subway system. Today this equipment can provide users with mobile cellular communications services at 13 metro stations. MTS also expanded its roaming services, which now enable its subscribers to roam in 80 countries world-wide.
“Continued substantial investment in our networks has cemented our position as Russia’s largest GSM operator,” said Mikhail Smirnov. “Along with increasing the quality of our network coverage we constantly focus on new technologies and developments for implementation in our network. MTS has long been aware of the fact that the global society is entering the information era. In expanding and upgrading its services, MTS has been, and remains, focused on creating a network which will enable us to offer our subscribers the full range of opportunities “third generation” wireless communications promises to offer. MTS’ WAP-site, which we launched in May this year, has already become a major WAP portal in Russia. The upcoming launch of our GPRS system will be another step enabling us to offer our subscribers state-of-the-art services.”
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Financial data mentioned in this release are the responsibility of MTS’ management, they are unaudited but have been reviewed by MTS’ auditors ZAO Arthur Andersen.
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statement to conform them to actual results. We refer you to the documents the Company files from time to time with the U.S. Securities and Exchange Commission, specifically, the Company’s most recent Form and Form 20-F (when available). These documents contain and identify important factors, including those contained in the section captioned “Risk Factors,” that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures; rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, risks associated with operating in Russia, volatility of stock price, financial risk management, and future growth subject to risks.
Mobile TeleSystems OJSC (NYSE: MBT) is Russia’s leading GSM 900/1800 mobile cellular operator. MTS has GSM 900/1800 licenses to provide mobile cellular telephony services in 34 regions of the Russian Federation, covering 45% of the country’s population. It has commenced operations in 19 regions covering 39 million people.