Financial Performance

The development of digital products and services enabled MegaFon to largely offset the pandemic-driven decline in revenue in 2020. The Company demonstrated an increase in OIBDA margin and a significant growth of net profit thanks to measures taken to improve operational efficiency. MegaFon also demonstrated financial stability and reduced its debt burden.

Consolidated financial results, 2018–2020 1

Indicator 2018 2019 2020 2020/2019, %
Revenue, RUB billion 335.5 349.0 332.2 –4.8
Service revenue 307.0 310.8 303.0 –2.5
Mobile revenue 276.1 280.4 274.5 –2.1
Fixed-line revenue 30.9 30.4 28.5 –6.2
Sales of equipment and accessories 28.5 38.2 29.2 –23.6
OIBDA, RUB billion 124.0 151.6 147.8 –2.5
OIBDA margin, % 37.0 43.4 44.5 1.1 p.p.
Adjusted net profit, RUB billion 21.1 10.32 26.6 158.3
Adjusted net profit margin, % 6.3 3.0 8.0 5.0 p.p.
CAPEX, RUB billion 81.5 67.3 54.7 –18.7
CAPEX/revenue, % 24.3 19.3 16.5. –2.8 p.p.
Net debt, RUB billion 294.3 320.4 309.6 –3.4
Net debt/OIBDA, x 2.37x 2.11x 2.09x –0.02x
  1. Based on the IFRS consolidated financial statements for 12M 2020 audited by JSC KPMG. Due to manual rounding, financial and operational results may differ from those presented here. All changes are shown for the same periods in the current and previous year on a quarterly basis, unless otherwise indicated. Indicators for 2019 and 2020 include IFRS 16 impact.
  2. Excluding revaluation of investment in an associate (non-monetary item).

Revenue

In 2020, amid the COVID-19 pandemic, MegaFon’s revenue decreased by 4.8% to RUB 332.2 billion. Service revenue was down 2.5% to RUB 303.0 billion. The decline in the mobile segment, which accounts for the bulk of revenue, was the smallest, declining by 2.1%, while fixed-line revenue decreased by 6.2%. Revenue from sales of equipment and accessories showed the biggest decline, decreasing by 23.6%. Russian revenue is a major component of MegaFon’s total revenue and accounts for 98% of total revenue.

The negative impact on service revenue came mainly from falling international roaming revenue, an outflow of guest workers due to international travel restrictions, and changes in subscriber behaviour – lower activity and reduced spending on communications and value-added services by subscribers and businesses during the pandemic. Additionally, to support its customers in self-isolation, MegaFon offered free access to a range of its most popular services over an extended period, which also had an impact on the revenue.

The decline was partially offset by an increase in data revenue due to growing consumption of content services, including video, remote access services, big data analytics, and M2M services.

A positive impact came from the increased demand for certain digital services, including information security services and cloud solutions, which became especially relevant as many subscribers shifted to working from home. The launch of SIM card sales online and at convenience stores also had a positive effect, partially offsetting the decline in the number of new subscribers attracted through stores.

The drop in revenue from the sale of equipment and accessories was due to the closure of a significant number of retail stores and a sharp decline in foot traffic, which also significantly reduced the inflow of new subscribers and had a negative impact on service revenue. Although severe lockdown restrictions on retail outlets were lifted in the second half of the year, consumer spending recovered slowly and did not return to pre-pandemic levels.

OIBDA

In 2020, OIBDA did not decline as much as revenue: down 2.5% y-o-y to RUB 147.8 billion, while OIBDA margin increased by 1.1 p.p. to 44.5%. This was achieved through efficiency improvement measures – cost control, cutting advertising costs and certain general business expenses as a result of initiatives aimed at streamlining our processes, and reducing low-margin sales of equipment.

Net profit

In 2020, net profit grew by 158.3% y-o-y to RUB 26.6 billion. The surge was driven by overall operational efficiency gains and lower finance charges due to deleveraging and optimisation of our debt portfolio.

CAPEX

In 2020, CAPEX decreased by 18.7% to RUB 54.7 billion. The reduction was due to the fact that during the pandemic, MegaFon was developing networks in Russian regions where the need for communication services increased, while postponing to a later date projects not related to network quality, which was our main focus. The total number of base stations as at the end of 2020 was 193,300, with a 20.5% growth in the 4G/LTE segment (to 73,100 base stations).

26.6 RUB billion
Net profit in 2020
+ 158.3%
Capital expenditures in 2018–2020
54.7 RUB billion
–18.7%

Liquidity and financial stability

As at the end of 2020, MegaFon had sufficient liquidity and a comfortable leverage position. Throughout the reporting period, MegaFon worked to reduce debt by actively managing its debt portfolio and reducing financing costs, hedging interest and currency risks. As a result, net debt at the end of 2020 decreased by 3.4% to RUB 309.6 billion, compared with RUB 320.4 billion in 2019. The net debt to OIBDA ratio remained almost flat y-o-y due to the decline in OIBDA, and stood at 2.09x, down slightly, by 0.02x, along with the decrease in net debt.

MegaFon continues to maintain a predominantly rouble-denominated debt portfolio structure, and hedges a portion of its debt portfolio denominated in foreign currency. As at 31 December 2020, MegaFon’s total debt structure was organically diversified across instruments, with 32% of the debt portfolio having maturities of four years or more.

The Company has a significant number of available sources of debt financing. We monitor all developments in the financial markets and take steps to ensure timely response and mitigate any negative impacts.

Debt portfolio as at 31 December 2019 and 2020,
%
  1. Based on the IFRS consolidated financial statements for 12M 2020 audited by JSC KPMG. Due to manual rounding, financial and operational results may differ from those presented here. All changes are shown for the same periods in the current and previous year on a quarterly basis, unless otherwise indicated. Indicators for 2019 and 2020 include IFRS 16 impact.
  2. Excluding revaluation of investment in an associate (non-monetary item).
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