Ring, ring. Will somebody get the phone, please? It's long distance. Very long distance.
Tomorrow, at the uncivilized hour of 7 a.m. EST, Russia's No. 1 mobile phone provider will be reporting its Q3 2005 earnings results. At last report, things were looking mighty good for the company.
Earlier this month, Mobile TeleSystems (NYSE:MBT) reported its October results -- both against October 2004 and sequentially against September 2005. Year over year, Mobile TeleSystems (MTS to its customers) grew its subscriber base 89% by doubling its customer base in regional Russia, while still growing in Moscow and St. Petersburg in the mid-double digits. Outside Russia, its business in each of Ukraine, Uzbekistan, and Belarus (where MTS owns a minority stake in a local limited-liability company of the same name) nearly doubled in size.
Tomorrow, analysts will likely focus on similarly big numbers: the ones from Q3 2004 vs. Q3 2005. That's the right thing to do, as everyone knows you're supposed to compare apples to apples, and quarters from year "X" to quarters from year X-minus-1.
In that regard, we can already tell you that tomorrow's numbers will be satisfyingly large, because the October press release just happened to mention the subscriber numbers for end-of-September 2005 -- the ones we'll be comparing to the year-ago numbers tomorrow. They show that over the past year, MTS grew its total subscriber base from 26.6 million to 50.4 million. Again, the numbers for each of Ukraine, Uzbekistan, and Belarus roughly doubled. What's more impressive than even those big numbers, though, is watching the growth occur "in real time." Sequentially, MTS grew its subscriber base by 4.1% overall. That's right. In 30 days' time, MTS added more than two million net new subscribers to its lines.
The unknown variable, hidden unannounced among all those numbers above, is the one most likely responsible for fellow Fool Stephen Simpson's observation back in August that MTS' shares have been stuck in a trading range between $30 and $40. It's what "helped" MTS to miss analysts' projections for its per-share profit in three of the past four quarters. It is, in a word, investment.
MTS is locked in a death match with rival and No. 2 Russian cellular operator VimpelCom (NYSE:VIP) for dominance in the Russian and adjacent markets. As part of that competition, it seems that every quarter, MTS spends more on building out its infrastructure than analysts are expecting, causing it to "miss" earnings targets. Because we already know that MTS has its growth numbers in the bag, chances are that if the company misses tomorrow's target of $0.79 per share, it will be capital spending that's to blame.
Then again, if Wall Street wants to keep MTS's shares on a tight leash as punishment for investing in its future, that just gives us more time to snap them up at a bargain, now doesn't it?
For more Foolish musings on MTS, read:
Fool contributor Rich Smith owns neither of the companies mentioned above.
