Vimpelcom's profits soar 63 per cent in 4th quarter

Reuters , Tuesday 29 Mar 2011

The telecoms giant is looking to close its deal to gain control of Orascom Telecom

Russian telecoms group Vimpelcom beat earnings forecasts on Tuesday with a 63 percent jump in fourth-quarter net profit and said its efforts to restore domestic market share had begun to bear fruit.

The company also said it hopes to close its $6 billion plus deal for control of Orascom Telecom and Italy's Wind Telecom within a month after gaining approval despite opposition from Norwegian shareholder Telenor.

"As we look ahead, we are confident this combination will be increasingly attractive for all our stakeholders and will unlock additional value within the next 24 months," Chief Executive Alexander Izosimov said in a statement.

Vimpelcom also said it had begun to see the benefits of efforts to restore its Russian market share after losing ground to rival MegaFon last year in terms of subscribers.

"We continue to strengthen our competitive position and drive growth by prioritising network expansion, further developing our marketing capabilities and working on distribution optimisation and pricing efficiency," Izosimov said in a statement.

The company doubled capital expenditure in the fourth quarter, year-on-year, and in the whole of 2010 versus 2009, returning to "normal investment levels" with a capex to sales ratio of 19.2 per cent compared with 8.1 per cent in 2009.

"We expect the economic recovery in Russia to continue with support from rising oil and gas prices. Against this backdrop, we plan to pursue rapid network development," the firm said in a statement.

Russian revenue grew 10 percent year-on-year, and were flat on a quarterly basis due to seasonal weakness.

Consolidated net profit rose to $461.2 million against $283.4 million in the final quarter of 2009, Vimpelcom said in a statement, above the $483.6 million average analyst forecast in a Reuters poll.

The increase was helped by a 22 per cent rise in sales to $2.82 billion on the back of consolidation of Ukraine's Kyivstar and improvements in macroeconomic conditions.

Its operating income before depreciation and amortisation (OIBDA) increased 15 per cent to $1.25 billion for an OIBDA margin of 44.5 per cent versus 47.1 per cent a year ago.

Izosimov forecast the margin in mid-40s for the first half and also told a press conference it is seen returning to target level of more than 45 per cent in the second half of 2011.

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