Revenues of the Russian operator Megafon grew by 14.8 percent year-on-year to RUB 86.254 billion in the first quarter of this year, driven by its takeover of Mail.ru. OIBDA increased by 6.2 percent to RUB 32.120 billion, and the OIBDA margin totaled 37.2 percent, down by 3 percentage points. Revenues from the telecommunications sector dropped by 0.9 percent, to RUB 74.494 billion.
Capital expenditure of the group was RUB 9.497 billion, down by 33.6 percent, helping free cash flow grow by 55.8 percent, to RUB 8.367 billion. The net debt totaled RUB 221.015 billion at the end of March. The subscriber base increased by 1.2 percent, to 77.3 million.
On 25 May, at its Investor Day the company introduced its new business strategy for the period through 2020. In order to implement the new strategy effectively, at the end of 2016 Megafon revised the company’s structure by dividing it into operational and commercial divisions. This year the company is transitioning to a new cluster-based management model. Megafon will form its regional units not by geographical location, as previously, but based on clusters with comparable potential and local market similarities. The company will then apply different tactics to different clusters.
Along with the new business strategy, Megafon has updated its dividend policy. The new dividend policy specifies a minimum level of dividends at 70 percent of the group’s free cash flow to shareholders, excluding the results of Mail.Ru. The company will aim to ensure that dividend payments will not increase the group’s leverage level above a 2.0x ratio, also not taking into account the results of Mail.Ru. However, Megafon plans to retain the flexibility to increase the leverage level in certain instances, for example, when it would be reasonable to borrow for strategically important M&A transactions to increase shareholders’ value.
Megafon’s management board is recommending to the shareholders a final dividend for 2016 in the amount of RUB 20.0 billion. This is equivalent to RUB 32.25 per ordinary share (or GDR). The dividend payment is subject to approval by shareholders at the annual general meeting scheduled for 30 June. If approved by the shareholders, the total amount of dividends distributed for 2016 will be RUB 40.0 billion, equivalent to RUB 64.50 per ordinary share (or GDR).
