Stronger revenue in 2Q20 versus consensus (by ₽2.9 bln) largely explains OIBDA growth (by ₽3.4 bln). Mobile operators tariffs hikes on the back of limited market competition helped to offset lost roaming revenue (-₽1.9 bln effect on OIBDA). Margin benefited from optimization of the MTS retail network (+₽1.7 bln), adjusted provision for fine imposed by the antimonopoly watchdog over text messages tariffs (+₽0.8 bln).
MTS peers have already published 2Q20 earnings.
MTS revenue, yoy: +0.8% vs -8.3% for MegaFon and -9.7% for VEON. MTS revenue decreased by 1.6% qoq (the revenue of telecom services even increased by 0.3% qoq) vs -1.4% qoq for MegaFon and -2.9% qoq for VEON.
MTS OIBDA, yoy: +0.3% vs -8.3% for MegaFon and -3.5% for VEON. MTS OIBDA decreased by 0.5% qoq vs -1.1% qoq for MegaFon and -8.7% qoq for VEON.
Thus, MTS and MegaFon posted strong EBITDA margin even despite the second quarter challenges. However, while MegaFon recorded stable OIBDA margin against 1Q20 at 45.4%, MTS improved its OIBDA margin by 0.8 pt to 43.8%. Against this background, VEON weak results appear to reflect specifics of an indi-vidual company, rather than the broader mobile market. VEON's profitability rate in Russia fell by 2.5 pt qoq, to 39.3%.
The Company has confirmed its 2020 forecast released in May which, in our view, is a sign of business stability amid the economic crisis. MTS expects the revenue to remain flat or grow 3%. The company expects OIBDA to decline by 2% or remain flat. Capex are forecasted at ₽90 bln.
Sistema, the controlling shareholder, needs MTS dividends: (1) ₽23 bln and ₽10 bln of debt are due in 2020 and 2021 respectively; (2) 2019 corporate centre overheads amounted to about ₽13 bln. In 2019, MTS paid ₽29.3 dividend per share (8.5% dividend yield), a total of ₽58 bln (excluding special dividends), half of which were paid to Sistema. According to the dividend policy, MTS dividends for the year may not drop below ₽28 per share. MTS dividends for the first half of 2020 have already been accrued at ₽8.9 per share.