Ukrtelecom raises EBITDA 26% yoy in 2011

Ukrtelecom (UTLM UK), Ukraine’s incumbent telecom operator, reported EBITDA of UAH 1.66 bln in 2011 (+26% yoy, slightly above consensus). Revenue increased a mere 0.3% yoy to UAH 6.77 bln while net losses nearly halved yoy to UAH 137 mln. The company’s debt fell 6% yoy to UAH 2.84 bln.

Alexander Paraschiy: The main EBITDA driver for 2011 was an increase in net “other operating profits” (+UAH 296 mln yoy), which does not look sustainable to us. We note that Ukrtelecom made a significant progress in reducing its workforce and social costs (-7% or by UAH 221 mln yoy), which was another powerful EBITDA driver. Workforce costs still accounted for 43% of revenue, and Ukrtelecom still has a high potential for further significant reductions (up to an additional 50%) in the next couple of years. We are optimistic of a significant improvement in Ukrtelecom’s bottom line in 2012, and expect the company to break even this year.