Rostelecom announces its IFRS financial and operating results for the fourth quarter and full year of 2019

Print version

Digital segment[1] grew by 13% in 2019; OIBDA[2] up 6%; FCF[3] increased by 55%

Moscow, Russia – March 3, 2020 Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the fourth quarter and the full year of 2019 prepared in accordance with IFRS[4].

Fourth quarter 2019 key financial highlights

  • Revenue grew by 9% to RUB 94.9 billion compared to 4Q 2018;
  • OIBDA of RUB 25.1 billion compared to RUB 26.0 billion in 4Q 2018;
  • OIBDA margin of 26.4% compared to 29.8% in 4Q 2018;
  • Net profit of RUB 0.1 billion compared to RUB 2.4 billion in 4Q 2018;
  • CAPEX[5] excluding state programs increased by 51% to RUB 30.6 billion (32.3% of revenue) compared to 4Q 2018;
  • FCF increased by 4% to RUB 18.7 billion compared to 4Q 2018;
  • Net debt[6] increased by 14% since the beginning of the year to RUB 212.7 billion, resulting in a Net Debt/OIBDA ratio of 2.0x.

Key figures for 4Q 2019, RUB mln

RUB million

4Q 2019

4Q 2018

change, y-o-y

Revenue

94,867

87,257

9%

OIBDA

25,086

26,037

(4%)

OIBDA margin %

26.4%

29.8%

-

Operating Income

3,932

8,167

(52%)

Operating margin %

4.1%

9.4%

-

Net Income

112

2,351

(95%)

% of revenue

0.1%

2.7%

-

Capital Expenditure excl. state programs

30,607

20,322

51%

% of revenue

32.3%

23.3%

-

Net debt

212,748

186,712

14%

Net debt/ annualised OIBDA

2.0

1.9

-

FCF

18,744

18,063

681

Full year 2019 financial highlights

  • Revenue increased by 5% to RUB 337.4 billion compared to 2018;
  • OIBDA grew by 6% to RUB 106.5 billion;
  • OIBDA margin increased to 31.6%;
  • Net profit increased by 10% to RUB 16.5 billion;
  • CAPEX excluding state programs increased by 22% year-on-year to RUB 71.8 billion (21.3% of revenue);
  • FCF grew by 55% to RUB 22.8 billion compared to 2018.

Key figures for the full year of 2019, RUB mln

RUB million

2019

2018

change, y-o-y

Revenue

337,421

320,239

5%

OIBDA

106,526

100,900

6%

OIBDA margin %

31.6%

31.5%

-

Operating Income

33,852

35,800

(5%)

Operating margin %

10.0%

11.2%

-

Net Income

16,474

15,012

10%

% of revenue

4.9%

4.7%

-

Capital Expenditure excl. state programs

71,787

58,993

22%

% of revenue

21.3%

18.4%

-

Net debt

212,748

186,712

14%

Net debt/ annualised OIBDA

2.0

1.9

-

FCF

22,810

14,751

8,059


Mikhail Oseevskiy, President of Rostelecom:
“2019 was another successful year for Rostelecom with continued healthy operational and financial results. Our sustained competitive position in broadband and pay-TV markets allows us to concentrate our efforts on the further development of our digital solutions, including cloud and data centers, cyber-security, as well as smart products for households, business and State. The double-digit growth rate of our digital segment contributed to 2019 top line growth. As a result, revenue grew by 5%, OIBDA by 6% and net profit by 10%. Rostelecom’s operational performance has generated one-and-a-half times higher FCF, which provides a comfortable financial platform for dividend payments in accordance with our current policy.
The consolidation of 100% of Tele2, the most dynamic and successful mobile company in Russia, was undoubtedly last years key development for both Rostelecom and broader communications market. The deal is the largest telecom deal of recent years and will strengthen our leadership of the digital arena just as we enter a new era. The expanded ecosystem of new services and solutions will boost Rostelecoms financial results, solidify its competitive position, and improve revenues while retaining and expanding our customer base. Importantly, I am pleased to note that VTB and its partners will become our shareholders and will provide Rostelecom with supportive and long-term strategic motivation to help sustain and increase Rostelecoms capitalization. Our business strategy will soon be reviewed to set new ambitions and targets, focusing on the development of new products and technologies, including 5G networks.”

Vladimir Kirienko, First Vice-President of Rostelecom:
Rostelecoms solid performance over the last year was driven by encouraging digital transformation across all of our client groups and their growing interest in our developed digital offering. The B2B and B2G segments demonstrated the strongest results and sustainable double-digit growth of 13%. This success was mostly driven by Smart City projects, cloud services and data centers. These and other digital solutions have proved successful both among large state and business corporations and small and middle-sized enterprises.
We are seeing growing interest in our virtual IT infrastructure proposition from the business and State, and we are always seeking out new opportunities to strengthen our leadership position in this space alongside continuous technological improvement of cloud solutions and capabilities. The acquisition of DataLine made a major contribution to Rostelecoms strategic goal to increase its share of high margin cloud products as corporate and state clients are increasingly shifting to an IT-solutions service model. We have made significant progress in transitioning to digital, and Rostelecom is already ahead of the curve with its state-of-the-art products in cyber security, urban infrastructure management, medicine, education and other sectors. Innovation is at heart of our strategy and is a key sustainability driver for our business in the era of digital age.

Sergey Anokhin, Senior Vice-President and Chief Financial Officer:
Our solid 2019 results and our healthy cash position, underpins our ability to successfully invest in our digital segment. We therefore expect both our revenue and OIBDA in 2020 to grow by no less than 5% on a standalone basis (excluding the contribution of Tele2 Russia and DataLine). Capex is expected to be within the range of RUB 7075 billion, excluding the implementation of state programs.

Key operating highlights

Number of subscribers (million):

4Q 2019

4Q 2018

change, y-o-y

3Q 2019

change, y-o-y

Internet access

13.2

13.0

2%

13.1

1%

B2C: Broadband

12.2

12.0

1%

12.0

1%

B2B: Broadband + VPN

1.1

1.0

6%

1.0

2%

Pay TV

10.4

10.2

3%

10.3

1%

Incl. IPTV

5.6

5.3

6%

5.5

2%

MVNO subscribers

1.7

1.2

41%

1.5

15%

Local telephony services

15.7

17.4

(10%)

16.1

(3%)

ARPU[7] (RUB):

4Q 2019

4Q 2018

change, y-o-y

3Q 2019

change, y-o-y

Internet access

B2C: Broadband

402

392

2%

396

2%

B2B: Broadband + VPN

3,455

3,160

9%

3,475

(1%)

Pay TV

255

251

2%

248

3%

Incl. IPTV

320

328

(2%)

311

3%

Blended ARPU[8]

553

549

1%

536

3%

Total subscriber base

  1. The total number of Internet subscribers among households grew by 1% to 12.2 million in the fourth quarter of 2019 compared to the corresponding period of last year; ARPU was up 2% to RUB 402.
  2. The total number of Internet and VPN subscribers in B2B increased by 6% year-on-year to 1.1 million; ARPU grew by 9% to RUB 3,455.
  3. The number of pay-TV subscribers grew by 3% to 10.4 million users compared to the corresponding period of last year, with average ARPU of RUB 255 for households, up 2% year-on-year;
    • The number of IPTV subscribers increased by 6% to 5.6 million, and ARPU reached RUB 320 for households.
  4. The number of MVNO subscribers increased by 41% and reached 1.7 million users.
  5. The number of local telephony subscribers decreased by 10% to 15.7 million.

Press release on 4Q and FY2019 financial results



[1] Broadband + Pay TV + VAS and cloud services.
[2] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA. Note that the company changed the methodology for calculating OIBDA changed in 3q 2018 having excluded expenses related to non-government pension insurance. Historical OIBDA numbers for 2018 and relevant periods of 2017 were recalculated in line with the renewed methodology.
[3] Here and below, starting from 2019, Free Cash Flow (FCF) is calculated as net cash from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets, plus interest received, plus subsidy from government. Comparative statements of 2018 are given as they were disclosed in the corresponding period.
[4] International financial reporting standards.
[5] Here and below, capital expenditure (CAPEX) comprises cash spent on fixed assets and intangible assets.
[6] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).
[7] Average revenue per user.
[8] Blended ARPU includes revenue from one user subscribed to a number of services simultaneously, including broadband, IPTV and digital cable TV.