Ukrtelecom improves EBITDA 56% yoy in 3Q15

Ukraine’s leading fixed line telephony and Internet provider Ukrtelecom (UTLM UK) reported 9M15 net revenue at UAH 4,766 mln (+1% yoy) as its 5% yoy growth in Internet revenue (to UAH 1,092 mln) outpaced a 4% yoy decline in local fixed line telephony (to UAH 2,034 mln). Its 9M15 EBITDA amounted to UAH 1,187 mln (+1% yoy) and bottom line was positive at UAH 493 mln (vs. net loss of UAH 27 mln in 9M14).

This result implies that in 3Q15, Ukrtelecom’s revenue fell 1% yoy (to UAH 1,553 mln), EBITDA jumped 56% yoy (to UAH 509 mln) and net income amounted to UAH 352 mln (vs. USD 74 mln in losses a year before).

Alexander Paraschiy: It’s not clear what exactly caused the surge in the company’s 3Q15 EBITDA as its core cost item, employee wages and social expenses, increased to 46.8% of revenue in the quarter from 45.8% a year before. With little clarity in the reasons for its cost shifts, we believe it’s hard to predict the company’s full-year bottom line. Uktelecom’s top line will for sure improve significantly in 4Q15 as it has raised its monthly flat fee for telephone use by over 17% since October 1. Such a rate adjustment, even if it will lead to some decrease in customer base, will enable the company to boost its revenue by about 5% yoy in 4Q15, we estimate.