(Adds details, CEO comments)
MOSCOW Aug 6 Russia's third-biggest mobile
operator, Vimpelcom, said it had seen the lowest rate of
customer outflows in three years in its home market in the
second quarter, but other challenges lay ahead.
Vimpelcom has been struggling to turn around its Russian
operations since losing the number-two spot to Megafon
in 2010, having under-invested at home while pursuing a global
Its shares are down 37 percent since the beginning of 2014,
pressured by a weak performance in Russia - still its biggest
market - and a decision in January to slash dividends to free up
cash for debt repayments.
In the second quarter, its Russian mobile service revenue
fell 5 percent in rouble terms to around 55 billion roubles
($1.5 billion), while Megafon last week reported a 4 percent
rise to around 65 billion roubles.
Core profit in Russia fell 10 percent due to continued
investments in networks and distribution, the company said,
adding those investments started to bear fruit as the churn rate
reached its lowest in three years.
However, the number of Vimpelcom's mobile customers was
still down 1 percent from a year earlier.
"One quarter does not make it a trend," Chief Executive Jo
Lunder told Reuters on Wednesday. "We need to see a couple of
more quarters before we can call it sustainable but we are quite
optimistic in terms of the lower churn coming as a result of
improved network quality and more customer-friendly action."
Vimpelcom's revenues fell 11 percent to $5.07 billion. It
cited continued market weakness in Italy and economic slowdown
in Russia, crisis-hit Ukraine and Pakistan among the reasons.
"There was some operational improvement in Russia (on
churn), but we need to see improvement on revenue market share
before turning more positive," analysts at VTB Capital said.
Net profit fell 83 percent from a year ago to $100 million,
missing expectations due to a non-cash tax charge. Analysts had
forecast net profit of $270 million, revenues of $5.10 billion
and EBITDA of $2.12 billion.
Vimpelcom, in which Russia's Alfa Group and Norway's Telenor
are the biggest shareholders, confirmed annual targets.
It expects low to mid single digit percentage declines in sales
and EBITDA this year.
(1 US dollar = 36.2490 Russian roubles)
(Reporting by Maria Kiselyova; editing by Tom Pfeiffer)