Report: Russian operators seen forced to cut capex over weak ruble

MOSCOW, Aug 27 (PRIME) -- Russian mobile operators will reduce capital expenditure to the minimum, and their subscribers will cut consumption of connection services due to economic instability and the weakening ruble, ComNews reported Thursday, referring to analysts.

The bulk of incomes of operators are generated in rubles, while the equipment becomes more expensive with the growth of the U.S. dollar. The tailspin of the ruble undermines real incomes of customers and forces them to save money, including on connection services.

UFS IC’s analyst Pyotr Dashkevich said that many companies have debts denominated in foreign currencies. “It’s most likely that ruble indicators will not be revised, but in U.S. dollars, capital expenditure could be reduced significantly that will result in a deeper fall in investment in natural terms,” he said.

Rye, Man & Gor Securities’ analyst Yegor Dakhtler said that the increase of the U.S. dollar could depress margins of connection operators since some of their spending is in foreign currency. The current results of companies have already implied currency risks, but there will not be a significant fall in rubles.

“Growth of mobile services costs, in particular spending on interconnect, may push margins down,” Dakhtler said.

“We expect a fall of OIBDA margins by 2–3%. A large part of CAPEX is denominated in foreign currency, from 50% to 80%, that is why capital expenditures will rise, if companies do not abandon investment programs soon. When it comes to dividends, operators will unlikely change their policy. I think that MegaFon and MTS will continue providing shareholders with the current yield of about 10%.”

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