Segment Belarus

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Key financials (in EUR million)

2014

2013

Change
in %

*

The methodology for counting mobile broadband customers has been changed to only include data-only tariffs with effect from the first quarter of 2013.

Revenues

355.0

331.7

7.0

EBITDA comparable

172.4

155.9

10.6

EBITDA comparable margin

48.6%

47.0%

EBITDA incl. effects from restructuring and impairment tests

172.4

155.9

10.6

Operating income

82.2

71.6

14.9

Capital expenditure

48.5

34.0

42.6

 

 

 

 

Mobile communication

 

 

 

ARPU (in EUR)

5.1

4.8

6.4

Mobile communication subscribers (in ̒000)

4,949.9

4,947.4

0.0

Share of contract customers

80.6%

80.6%

Market share

42.4%

42.5%

Mobile broadband subscribers (in ̒000)*

284.1

246.5

15.2

Penetration

123.3%

123.0%

 

 

 

 

Employees (full-time equivalents as of 31 Dec)

1,881

1,749

7.5

Belarus was classified as a hyperinflationary country in December 2011, and it was resolved that accounting for hyperinflationary economies would be applied for the whole year 2011. Hyperinflation is determined, among other things, by the three-year cumulative inflation rate. As this amounted to around 108.7% for 2011, around 21.8% for 2012 and around 16.6% for 2013, hyperinflationary accounting continued to be applied in 2014. To what extent hyperinflation accounting will be applied in 2015 as a result of volatile market development after 1 January 2015 will be decided on the basis of the inflation development in the financial year 2015.

The macroeconomic environment in Belarus remained relatively stable in the year under review despite the political crisis in Ukraine. Following a weak first half of the year, the Belarusian Rouble lost 9.0% of its value over the year as a whole (2013: –13.3%). The currency devaluation shortly thereafter in January 2015 did not affect the consolidation in 2014. At 16.2% the 2014 rate of inflation remained at the level of the prior year.

In light of these developments, velcom’s management team continued to concentrate on a tariff and equipment portfolio focussed on smartphones and tablets in 2014 with the aim of monetising the rising demand for data. Tariffs were also adjusted in the year under review to counteract currency and hyperinflationary effects. Furthermore, the company focused on optimising operating expenses and disconnecting them from currency effects.

velcom’s customer base remained largely stable at 4.95 million in the year under review. The 15.2% increase in mobile broadband customers to around 284,100 reflects the continuous rise in demand for data as mentioned above. velcom’s market share also remained broadly stable in the year under review.

After changes due to financial reporting in hyperinflationary economies and including negative currency effects in the amount of EUR 35.3 mn, revenues increased by 7.0% year-on-year to EUR 355.0 mn in 2014. Local currency revenues rose by 19.8%. Inflation-related price adjustments in 2013 and 2014, upselling effects and increased data usage were the main reasons for the growth in monthly fee and traffic revenues. Equipment revenues also climbed as a result of the increased demand for smartphones as well as tablets. velcom also generated higher interconnection revenues, primarily as a result of increased international fees. As a result of the aforementioned developments, average monthly revenue per mobile user (ARPU) improved to EUR 5.1 (2013: EUR 4.8).

Operating expenses increased by 4.4% to EUR 188.6 mn in the year under review. In local currency, the increase was primarily due to higher maintenance, repair and rental expenses, as well as higher bad debt. In addition, inflation-related salary adjustments and growth-related employee recruitment led to increased employee costs. Material expenses also rose as a result of the high level of demand for smartphones and tablets; however the equipment margin remained positive. The reduction in interconnection expenses due to lower transit fees and the downturn in international usage were not sufficient to offset the aforementioned effects.

Thanks to the positive revenue development, EBITDA comparable increased by 10.6% to EUR 172.4 mn in the year under review, despite negative foreign exchange rate effects amounting to EUR 17.1 mn. The EBITDA comparable margin climbed to 48.6% in the year under review (2013: 47.0%), the highest margin in the Group yet again.

Despite increased depreciation and amortisation as a result of the faster depreciation of equipment, the increase in EBITDA comparable translated into an increase in operating income of 14.9% to EUR 82.2 mn.

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