* Revises net debt to EBITDA target to 2.4 from 2.3
* First-quarter EBITDA down 11 pct
* Net profit tumbles 90 pct to $39 mln
* Shares recover a little after early fall
(Adds share price, CEO comment on Canada, analysts)
By Maria Kiselyova
MOSCOW, May 14 Russia's No.3 mobile group
Vimpelcom said it expected sales and core profit to fall
this year, as it struggles to defend its market share in Russia
while resisting cut-price competition in Italy and a weak
economy in Ukraine.
Vimpelcom, which assumed more than $20 billion of debt as it
expanded into foreign markets in 2010, has been struggling with
weak economies and regulatory pressure abroad, while losing
customers at home to rivals MTS and Megafon.
Russia is still the biggest market for Vimpelcom, which had
218 million mobile subscribers at the end of March spread across
a dozen countries in the CIS, Europe, Asia and Africa.
"Italy is still very competitive. We are also going through
a transition in Russia, so we think this year is a transition
year for us," CEO Jo Lunder told Reuters after the company
announced revised targets for 2014.
He said political turmoil in Ukraine had no direct impact on
Vimpelcom's performance in the first quarter. The company in
March took an impairment charge of $2.1 billion on assets in the
country, where it is the top operator with its Kyivstar brand.
Vimpelcom now expects "low to mid single digit" declines
this year in revenue and core profit, or EBITDA, compared with
earlier guidance for flat revenue and EBITDA. It revised its net
debt to EBITDA ratio target to around 2.4 from 2.3.
"I think Vimpelcom continues to lose market share in Russia
and it's early to say that it recovered its position in Ukraine,
so it's too early to talk about the company reversing the
trend," said Anna Lepetukhina, an analyst at Sberbank Investment
Analysts at Credit Suisse and Otkritie said the new guidance
was more reasonable given weak first-quarter results and
reiterated their ratings of Underperform and Hold respectively,
while JP Morgan downgraded it to Underweight.
Vimpelcom cut dividends in January to free up cash for debt
repayments and said the new policy would remain in place until
it has a net debt to EBITDA ratio of 2 times.
Vimpelcom's Nasdaq-listed shares dived by almost 7 percent
in early trade on Wednesday but later recovered some of the
losses and traded down 4.6 percent by 1500 GMT.
For the first quarter, Vimpelcom reported a 10 percent
year-on-year fall in revenues to $5 billion and an 11 percent
decline in earnings before interest, taxation, depreciation and
amortisation to $2.1 billion. EBITDA was only moderately below
Net profit fell 90 percent to $39 million due to a higher
effective tax rate and a $92 million foreign exchange loss.
Analysts tend to concentrate more on the core figures, which
strip out volatile items.
Vimpelcom said its Russian business unit continued to see
pressure as it fought for customer loyalty by adjusting tariffs
and reducing non-requested services, with mobile revenues down 3
percent in rouble terms.
Vimpelcom also said mobile revenues at its Italian unit Wind
fell 11 percent in euros in the first quarter as a result of
heavy price competition, and its businesses in Africa and Asia
had been squeezed by tough regulations.
Lunder said the recent refinancing within Wind strengthened
its financial position and it could "easily stand on its own
feet in competition" but said he remained in favour of in-market
Vimpelcom has been rumoured to be seeking a merger of Wind
with Hong Kong-based Hutchison Whampoa's 3 Italia unit
and the refinancing of Wind's most expensive debt last month
fuelled speculation about a possible deal.
Lunder said it would be difficult for the industry to roll
out several parallel high-speed networks and that
network-sharing arrangements and consolidation "make a lot of
sense" for a market like Italy where data traffic is growing.
Lunder declined to comment on a possible deal with 3 Italia.
Vimpelcom's biggest shareholders are Russian billionaire
Mikhail Fridman's Alfa Group and Norwegian telecoms group
Telenor, while 10.8 percent is traded on Nasdaq.
(Editing by Tom Pfeiffer and Keiron Henderson)