* Q3 net income up 20 pct to record 15 billion roubles
* Revenue rises 12.3 pct to 71.2 bln roubles
* Core profit margin jumps to 45.1 pct from 41.9 pct
* Strong results may help offset weaker market at IPO
By Maria Kiselyova
MOSCOW, Nov 8 Russia's No. 2 mobile phone
operator MegaFon reported a sharp rise in profits,
increased subscriber numbers and reduced costs ahead of a
roadshow for its planned $2 billion IPO.
The company, controlled by Russia's richest man Alisher
Usmanov, said on Thursday its net profit in the three months to
end-September was 15 billion roubles ($476 million), up 20
percent from the same period last year.
MegaFon hopes to go public in London and Moscow this year,
but several sources familiar with the matter said the company
may have to delay the sale until 2013 if it does not get a green
light from UK regulators soon.
The company already postponed its roadshow in order to
include the third-quarter results into its IPO prospectus. A new
date has not yet been set.
Alexander Vengranovich, an analyst at Moscow-based brokerage
Otkritie, said if MegaFon's IPO goes ahead this year it will
likely have to be priced at a discount to rival MTS.
"By the year end investors are cautious... especially if the
valuation is high," Vengranovich said. "I think (investors) will
want a discount to MTS - this may be a key stumbling block for
Vengranovich expected a price range between $16 and $18 per
share, with the low end of the range implying a 10 percent
discount to MTS, based on a 2012 EV/EBITDA multiple.
Bahrain-based investment firm Arcapita this week
withdrew a planned London listing of its PointPark Properties
(P3) unit, suggesting the gap in price expectations between
buyers and sellers remains wide.
Scandinavian telecoms group Teliasonera is a
minority shareholder in MegaFon and was expected to sell shares
in the IPO. MegaFon would also sell stock acquired in its buyout
of minority owner Mikhail Fridman last April.
The strong results should help MegaFon achieve the $12-$16
billion valuation it has been aiming for, despite a weakening in
the global stock markets, analysts said.
"I think the results will help them to remain in the
valuation range they previously sought," said Sergei Libin, an
analyst at Raiffeisenbank.
MegaFon, which has 27 percent of Russia's mobile market,
has recently outpaced listed competitors MTS and Vimpelcom
in terms of Russian sales growth after investing
aggressively in infrastructure in recent years to improve
quality and attract customers. It took the number two spot from
Vimpelcom in 2010.
MTS and Vimpelcom will report third-quarter earnings next
MegaFon reported a rise in core profit margin to 45.1
percent from 42.3 percent in the second quarter and compared to
41.9 percent a year ago.
Its third-quarter revenue grew by more than 12 percent to
around 71 billion roubles, driven by an increase in its
subscriber base and growing demand for mobile data.
An increase in sales, as well as a core profit gain on the
back of lower operating costs, helped to drive profits as
MegaFon benefitted from lower subscriber acquisition costs and a
reduction in capital expenditures.
Its core profit, or operating income before depreciation and
amortisation, rose 21.1 percent to 32.1 billion.