Mobil’nye Telesistemy PAO (NYSE:MBT) “Mobile TeleSystems had an impressive third-quarter run as evidenced by its solid Q3 2018 earnings. Despite numerous regulatory hurdles during the season coupled with stiff competition, revenue surged 11.7% year over year to RUB128 billion.
The robust growth was driven by solid performance in the primary Russian market together with equally impressive Ukraine performance. In July 2018, MTS acquired an additional 28.63% stake in MTS Bank raising its ownership to a controlling 55.24%.
As a result, the company consolidated MTS bank’s revenue for the third quarter further fueling the Q3 growth. Without the consolidated results, the bank would have reported an 8.7% year over year growth- still a meaningful forward movement. The Group’s third-quarter adjusted to EBITDA was RUB59.3 billion representing a 21.6% year over year surge.
Behind the Outperformance
The company’s remarkable growth for the third quarter can also be attributed to strong handset sales alongside encouraging growth in underlying mobile segments. Despite the termination of internal roaming in September, the Group’s mobile operations continued to post meaningful growth.
Following the newly launched tariff plan-Terifisher with unlimited internet, MTS has reportedly seen positive growth in data usage and ARPU. Also during the third quarter, the company witnessed an increase in households using the GPON services. The number grew to an encouraging 1.9 million further boosting the Q3 performance.
The Group’s management attributes the impressive performance to incentives program aimed at inciting customers to update their smartphones. The strategy proved effective in attracting customers.
Speaking about the Q3 Report, Alexey Kornya, Group’s President and Chief Executive Office said that: “MTS delivered another set of solid results which were supported by continuing positive trends in most of its markets of operations. In Q3 MTS consolidated MTS Bank which also positively impacted our financial results. Group revenue increased 11.7% year-over-year to RUB 128.0 bln, while Adjusted OIBDA grew 21.6% year-over-year to RUB 59.3 bln including the impact of new IFRS standards. On a like-for-like basis and without the effect of MTS Bank, Group revenue increased by 8.7% and Group Adjusted OIBDA rose a meaningful 4.9%.”
Kornya added that the Group would continue to pursue its digital transformation strategy going forward. Based on the strong Q3 results, the management adjusted its full-year forecast. The Group’s new 2018 revenue projection is 4% to 6% growth. However, MTS maintained its Adjusted OIBDA at 2%.
MTS stock has always been appealing for value investing. The stock has a PE of 7.3 with a P/S ratio of 0.9 backed with a dividend yield of 1.6%. The stock currently ranks second at Zacks with a (Buy) recommendation implying it stands a chance to outperform.
As of December 27 business day, the stock closed at $7.0 down 1.62% from its opening price. The shares have a 52-week high of $12.80 and low of $6.64. MTS currently has a market capitalization of $13.99 billion.