Rostelecom announces its IFRS financial and operating results for the third quarter and nine months of 2020

Print version

Q3 2020 Revenue growth of 13%; 17% increase in OIBDA[1]; FCF[2] up 26%
FY 2020 guidance upgraded to ≥9% Revenue & OIBDA growth

Moscow, Russia – November 11, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the third quarter and nine months of 2020 prepared in accordance with IFRS[3].

In accordance with the accounting policy of the Group, the acquisition of Tele2 Russia has been recognized as a business combination under common control. According to this method the merger of businesses arising from a transfer of entity stakes under common control of the Group’s shareholders, is presented as if the merger took place in the earliest period of the statements, or, if later, effective from the date that common control was put into effect; for this purpose comparatives are revised. Rostelecoms consolidated financial statements for 2019 have therefore been revised to incorporate Tele2 Russias performance as if the acquisition had been completed on 1 January 2019.

Third quarter 2020 financial highlights

  • Revenue grew by 13% to RUB 135 billion compared to the third quarter of 2019;
    • mobile services revenue grew 14% year-on-year;
    • digital services revenue grew 62% year-on-year;
  • OIBDA up by 17% to RUB 53.7 billion;
  • OIBDA margin grew by 1.5 p.p. to 39.8%;
  • Net profit increased by 31% to RUB 12 billion;
  • CAPEX[4] excluding state programmes stood at RUB 24.3 billion (18% of revenue) compared to RUB 18.8 billion (15.7% of revenue) in the third quarter of 2019;
  • FCF increased by 26% to RUB 19.5 billion;
  • Net debt[5] increased by 23% since the beginning of the year to RUB 410 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.

Key figures for 3Q 2020

RUB million

3Q 2020

3Q 2019

change, y-o-y

Revenue

134,988

119,621

13%

OIBDA

53,677

45,736

17%

OIBDA margin %

39.8%

38.2%

-

Operating Income

23,087

18,724

23%

Operating margin %

17.1%

15.7%

-

Net Income

11,988

9,140

31%

% of revenue

8.9%

7.6%

-

Capital Expenditure

24,325

18,755

30%

% of revenue

18.0%

15.7%

-

Net debt

410,027

322,744

27%

Net debt/ OIBDA

2.2

1.9

-

FCF

19,512

15,455

4,057

Nine months of 2020 financial highlights

  • Revenue increased by 12% to RUB 383.9 billion compared to the nine months of 2019;
  • OIBDA increased by 15% year-on-year to RUB 149.6 billion;
  • OIBDA margin grew by 1 p.p. to 39%;
  • Net profit increased by 21% to RUB 27.4 billion;
  • CAPEX stood at RUB 71 billion (18.5% of revenue) compared to RUB 62.8 billion (18.3% of revenue) in the nine months of 2019;
  • FCF stood at RUB 4.7 billion compared to RUB 14.6 billion in the nine months of 2019;
  • Net debt increased by 23% since the beginning of the year to RUB 410 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.

Key figures for 9M 2020

RUB million

9M 2020

9M 2019

change, y-o-y

Revenue

383,880

342,858

12%

OIBDA

149,559

130,078

15%

OIBDA margin %

39.0%

37.9%

-

Operating Income

60,591

51,490

18%

Operating margin %

15.8%

15.0%

-

Net Income

27,431

22,670

21%

% of revenue

7.1%

6.6%

-

Capital Expenditure

70,976

62,794

13%

% of revenue

18.5%

18.3%

-

Net debt

410,027

322,744

27%

Net debt/ OIBDA

2.2

1.9

-

FCF

4,734

14,556

(9,822)

Mikhail Oseevskiy, President of Rostelecom:

“We delivered robust financial and operational growth in the third quarter of 2020. Growth across the Group remained on track with revenue up by 13%, OIBDA up 17% and FCF also up by 26%. Our key strategic business segments mobile and digital services continue to be successful as we remain focused on delivering Rostelecoms digital transformation strategy, which sets out our ambition to be the largest integrated digital company in Russia. Our ambitious digital economy projects, spanning a large variety of promising sectors, reinforce this solid growth trajectory. We continue to expand the industries we serve by entering new high-potential markets, building strong management teams to drive our robust marketing strategy to deliver growth into new and adjacent market segments. Through targeted M&A deals and partnerships, we are creating high-performing teams with diverse competencies to build on our competitive advantage. The acquisition of utilities software developers Forkam and Fastech; the expansion of our product ecosystem with Elvis Plus, the leading security system integrator; the strengthening of our position in video content terrestrial delivery, all have significant potential to expand and diversify products and solutions that sit within the growing ecosystem of Rostelecom business clusters.

We continue to develop smart digital solutions for business, government, and private users, and we will soon announce a refreshed strategy which will slightly recalibrate our focus. Built on strong recent achievements, the Rostelecom brand today represents a solid portfolio of fast-growing and high-potential businesses, that are currently undervalued by the market. Our key effort builds on delivering commercial and operational success, within these new business clusters, in order to unlock their potential and ultimately, the true value of our company. In addition to this strong focus on new growth projects and strengthening our position on the digital frontier, we plan to maintain an attractive dividend yield, which, coupled with steady business growth, shapes a unique long-term investment opportunity.”

Vladimir Kirienko, First Vice-President of Rostelecom:

The recent achievements in key markets and across our business segments continue to translate into strong and steady growth while strengthening the long-term digital leadership of Rostelecom. Our constantly evolving digital offering continues to yield impressive results. The demand for cyber security solutions has increased more than two and a half times, while data centers and cloud/IaaS both have both doubled. E-government, video-webcast, smart household products and cloud telephony are performing increasingly well too. The introduction of new timely options and offerings within our digital product family has been well received by customers. Our strategic nation-wide convergent approach is paying off with increased clients loyalty and growing sales. An example of this was the launch in cooperation with Tele2 of a new offer Everywhere online that provides our clients with special subscription deals for the Wink entertainment platform which is becoming increasingly popular. In October, we broke Winks own concurrent viewers record with 3 million users watching the live stream of Khabib Nurmagomedovs fight with Justin Gaethje, final match in Khabibs storied career..

For our corporate clients, we launched Technologies PRO, a new tariff offering for remote working with an expanded product line and added services such as personal manager, antivirus, cloud storage on Yandex. Disk and other, in addition to the core broadband service. I would also like to mention the launch of an innovative solution for monitoring solid domestic waste, which using video surveillance cameras and AI enables customers to assess the condition of waste collection sites, schedule and compliance with standards. The environmental protection services market is growing worldwide, and as the leading digital provider in the country, we realise the role we have to play, but also the significant opportunity in developing smart innovative products and solutions to help businesses, the government and households reduce their environmental impact.

Sergey Anokhin, Senior Vice-President and Chief Financial Officer:
Our strong third quarter financial results reflect our plan for 2020 and we continue to deliver on our business targets. Despite the increased restrictions caused by the second wave of the pandemic, coupled with uncertainty surrounding macroeconomic dynamics, the considerable achievements made during the first three quarters, allows us to increase the forecast for key 2020 indicators. The management team therefore expects an increase in consolidated revenue of at least 9%, an increase in OIBDA of at least 9%; and APEX to stay within the range of 100-110 billion rubles excluding state programmes.

Key operating highlights

Fixed-line business

Number of subscribers (million):

3Q 2020

3Q 2019

change, y-o-y

2Q 2020

change, y-o-y

Internet access

13.4

13.1

3%

13.4

0,4%

B2C: Broadband

12.3

12.0

3%

12.3

0,3%

B2B: Broadband + VPN

1.1

1.0

6%

1.1

2%

Pay TV

10.7

10.3

4%

10.7

1%

Incl. IPTV

5.9

5.5

8%

5.8

2%

Hosted PBX

0.147

0.090

62%

0.139

5%

Local telephony services

14.5

16.0

(9%)

14.9

(3%)

ARPU[6] (RUB):

3Q 2020

3Q 2019

change, y-o-y

2Q 2020

change, y-o-y

Internet access

B2C: Broadband

390

396

(1%)

395

(1%)

B2B: Broadband + VPN

3,231

3,475

(7%)

3,344

(3%)

Pay TV (B2C)

245

248

(1%)

248

(1%)

Incl. IPTV

298

311

(4%)

309

(4%)

Hosted PBX

1,119

1,200

(7%)

1,148

(3%)

Blended ARPU[7]

537

536

0.1%

545

(1%)

Mobile business

3Q 2020

3Q 2019

change, y-o-y

2Q 2020

change, y-o-y

Data Traffic, incl. MVNO,Pb

1,351

875

55%

1,216

11%

Churn, %

(7.3%)

(8.8%)

(1.5 p.p.)

(9.0%)

(1.7 p.p.)

Growth of active mobile data users, %

25.5%

47.4%

(21.9 p.p.)

28.1%

(2.6 p.p.)

  1. The total number of Internet subscribers among households grew by 3% to 12.3 million in the third quarter of 2020 compared to the corresponding period of last year; ARPU was RUB 390.
  2. The total number of B2B Internet and VPN subscribers increased by 6% year-on-year to 1.1 million; ARPU was RUB 3,231.
  3. The number of pay-TV subscribers grew by 4% to 10.7 million households compared to the corresponding period of last year with average ARPU of RUB 245 across B2C;
    • The number of IPTV subscribers increased by 8% to 5.9 million, and ARPU across B2C was RUB 298;
  4. The number of active mobile Internet users grew by 25.5% year-on-year while mobile data traffic growth reached 55%; at the same time, cellular customer base churn decreased to 7.3%.
  5. The number of local telephony subscribers decreased by 9% to 14.5 million.

Press-release on 3q 2020 financial results



[1] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA

[2] Here and below 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.

[3] International financial reporting standards.

[4] Here and below, capital expenditure (CAPEX) comprises cash spent on fixed assets and intangible assets.

[5] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).

[6] Average revenue per user

[7] Blended ARPU includes revenue from broadband, IPTV and digital cable TV