WRAPUP 1-Russian mobile firms highlight dividend prospects

Wed Nov 14, 2012 1:06pm EST

* MTS, Vimpelcom post Q3 earnings above forecasts

* MTS to hike dividend 25 percent

* Vimpelcom expects to be able to resume payments soon

* IPO-hopeful MegaFon continues to outperform in Russia

By Maria Kiselyova

MOSCOW, Nov 14 (Reuters) - Russian telecoms group MTS and Vimpelcom both beat expectations for third-quarter earnings, highlighting the prospects of strong future dividends.

MTS plans to raise its dividend 25 percent, it said on Wednesday after reporting a 74 percent jump in net profit to $630 million, and Vimpelcom said it hoped to resume payouts after the expected withdrawal of a Russian legal case.

MegaFon, the second-biggest Russian mobile operator and which plans an IPO this year, pipped the two listed competitors in terms of quarterly revenue growth and was on a par with MTS in terms of core profitability.

Analysts say MegaFon could lure investors away from MTS and Vimpelcom, putting pressure on their stock price, thanks to its outperformance in Russia and its lack of foreign exposure.

MegaFon has yet to adopt a dividend policy, while MTS plans to raise its payouts to more than 18.3 roubles from the 14.7 roubles it paid for 2011, chief executive Andrei Dubovskov said.

Vimpelcom aims to pay at least $0.80 in annual dividends through 2013. Its dividends are on hold due to an injunction connected with a lawsuit filed by Russia's anti-monopoly regulator FAS earlier this year.

CEO Jo Lunder said he expected the board to discuss resuming a dividend after the legal case - contesting the recent dominance of Norwegian group Telenor as a shareholder - is dropped.

The head of the FAS said on Wednesday it could drop its lawsuit after Nov. 21 when a commission was due to review its proposal regarding the settlement of the case - a move made possible by the recent increase of its Vimpelcom stake by Russian tycoon Mikhail Fridman's Altimo.

"The Russian shareholder is bigger than the other one and in the context of all of this the FAS claim might go away ... At least if you look at the history and the argument behind ... the whole process, we can be hopeful," Lunder told Reuters.

Vimpelcom said third-quarter net profit nearly tripled to $538 million, beating forecasts. Both MTS and Vimpelcom said their performance was boosted by foreign exchange gains.

WINNING IN RUSSIA

In Russia, the biggest market for the three telecoms groups, MegaFon outperformed MTS and Vimpelcom in terms of sales growth with a pace of 12 percent in rouble terms against 8 percent and 7 percent at MTS and Vimpelcom, respectively.

It was on par with MTS in terms of Russian core profit margin which came in at 45.1 percent against 45.4 percent at MTS, while Vimpelcom lagged with 43.2 percent.

With Russian mobile phone market penetration topping 160 percent, there are few new subscribers to recruit, and mobile firms are trying to enhance their offering to clients including through better control of distribution channels.

MegaFon was expected to receive regulatory approval for its bid for a stake in Euroset - Russia's top cellphone retailer - on Wednesday. The other half of Euroset is owned by Vimpelcom.

"We expect that our colleagues will behave reasonably. If they rock the boat, it would destabilise the market. I think our competitors will have enough common sense to behave wisely and this will guarantee that the market remains profitable," MTS CEO Dubovskov said.

Vimpelcom's Lunder said he was happy with its Russian unit's results, adding the group remained focused on the market while conducting a strategic review of other emerging markets assets.

Vimpelcom this year sold non-profitable operations in Vietnam, and sources said it could also divest its businesses in Cambodia and Laos as well as Burundi, Central African Republic and Zimbabwe.