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Ukrtelecom reports first strong quarter in 2011

Ukrtelecom reports first strong quarter in 2011

26 October 2011

Ukraine’s incumbent telecom operator Ukrtelecom (UX: UTLM UK, BUY) improved its third-quarter sales by 3.4% y-o-y to UAH 1,729 mln, which brought its 9M11 revenue to UAH 5,060 mln (-0.3% y-o-y). The company’s EBITDA in the quarter improved by 36% y-o-y to UAH 346 mln, shorting the y-o-y drop in 9M11 to only -3.5% (vs. -19.8% y-o-y in 1H11). Net income for the quarter was UAH 5.3 mln. The company reported both improved y-o-y revenue and a positive bottom line for the first time in 2011. Yegor Samusenko: The improved result, in our view, is related to three things. First, this was the first quarter when the company was fully in private hands (privatization completed in May 2011), and the new shareholder, EPIC, did its best to “prove” its efficiency. Probably, the result was achieved by a slight artificial decrease in 2Q financials which were unexpectedly weak. Secondly, the company’s sales were affected by the first stage of fixed-line tariff increases by the regulator since May 2011. Thirdly, the company’s bottom line was affected by a cut in workforce costs (down 10% or UAH 79 mln y-o-y in 3Q). We expect further optimization of workforce costs (which so far account for 44% of operating costs) and the second stage of fixed-line tariff growth effective in 4Q11, to continue driving the company’s financials in 4Q11 and 1H12.

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