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UPDATE 2-Rostelecom ups spending to compete in mobile, broadband
April 27, 2012 / 9:26 AM / 5 years ago

UPDATE 2-Rostelecom ups spending to compete in mobile, broadband

* Capex to peak in 2012-2013 at over 20 pct of sales

* Focus on broadband networks upgrade, 3G rollout

* Sees 2012 sales growth broadly unchanged vs 2011

* Proposed dividend at 32.5 pct of 2011 net income (Releads, adds sales growth, capex guidance, details)

By Maria Kiselyova

MOSCOW, April 27 (Reuters) - Russian state-controlled telecoms operator Rostelecom’s efforts to challenge rivals in high-growth broadband internet and mobile networks will keep the group’s capital spending at more than 20 percent of sales over the next two years.

The former long-distance telephone monopoly is actively upgrading its broadband infrastructure and building 3G mobile networks to compete more effectively with Russia’s ‘big three’ mobile groups - MTS, MegaFon, and Vimpelcom .

“Now is not the time to reduce our investments, it is time to make them,” Chief Executive Alexander Provotorov told reporters, adding this will eventually allow the company to pay out more profit in dividends.

The company, created last year in a merger with seven regional fixed-to-mobile groups, is expanding in segments such as mobile, broadband and pay-TV to offset stagnating sales in core fixed-line calls business.

Rostelecom said Friday it would pay a 2011 dividend equal to 32.5 percent of last year’s net profit, compared to a 72 percent payout recommended by Russia’s top mobile firm MTS.

It also reported a 7 percent increase in full-year revenue to 296 billion roubles ($10.10 billion). The group’s capital expenditure accounted for 28 percent of sales or 82.8 billion roubles - higher than the average 20 percent rate projected for 2011-2015.

“You can use 2011 capex as a benchmark for 2012 because we will be in a very active phase of 3G roll-out and modernisation of our network, replacement of our copper infrastructure with fiber infrastructure,” Provotorov said on a conference call with analysts.

After these peak years, the capex is likely to stabilise at around 15 percent of revenue, the company said.

Provotorov said the group hoped to show a similar rate of sales growth in 2012 as last year and aimed to maintain core profit margins at around 40 percent within four to five years.

REASONABLE GROWTH

Rostelcom’s core income in the forth quarter rose 31 percent to 32.2 billion roubles on the back of a 41 percent margin.

Net income jumped almost seven-fold to 16.7 billion roubles due to lower operating costs and one-off items, while revenues were up 8 percent at 78.6 billion roubles.

“Rostelecom’s results confirm our positive view on the company’s fundamentals and indicate that it is managing to maintain reasonable sales growth,” Uralsib wrote in a note.

It aims to grow its share of Russia’s broadband market to 50 percent by 2015 from just under 40 percent now, and is targeting 30 percent of the pay-TV market and 22 percent of the wireless broadband market in subscriber terms, up from current levels of 25 percent and 9 percent respectively.

$1 = 29.3200 Russian roubles Additional reporting by Anastasia Teterevleva; Editing by John Bowker and Jane Merriman

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