Question: What's the difference between Mobile TeleSystems (NYSE:MBT) and a telemarketer?

Answer: Though they both call you at ungodly hours of the morning, with no regard for your beauty sleep (OK, my beauty sleep) -- when it's Mobile TeleSystems (MTS) calling with earnings news, you're happy to take the call. And that'll be the case tomorrow morning, when the Moscow-based telecom reports its Q1 2006 results.

What analysts say:

  • General consensus. Fifteen analysts follow MTS, with 11 rating it a buy and four a hold.
  • Revenues. Quarterly sales are expected to increase 20%, to $1.26 billion.
  • Earnings. Profits are predicted to shoot up 342%, to $0.53 per share.

What management says:
In a recent update, MTS reported continued slowing in its rate of signing up new subscribers. For May, it claimed 48.5% growth in total subscriber numbers since the same month last year. Just as one would expect, growth was slowest in the wealthiest and first-saturated markets of Moscow and St. Petersburg (22%), faster in the Russian regions (53%), and fastest of all in the "near abroad" countries of Belarus (63%), Ukraine (66%), and Uzbekistan (96%).

What management does:
Mobile TeleSystems shares have lost 16% of their value over the last 52 weeks. Not at all the results you'd expect for a firm growing its business by half again every year. Then again, MTS's profits are headed in the opposite direction from its subscriber numbers. Over the last 18 months, rolling gross, operating, and net margins are all down, down, and down.

Margins %

9/04

12/04

3/05

6/05

9/05

12/05

Gross

82.2

81.9

81.6

81

80.6

80.3

Op.

39.7

36.5

36.1

33.9

32.4

32.6

Net

27

25.4

25.3

23.5

22.2

22.5
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Remember, however, to take all of the above numbers with mammoth grains of salt. With 47.2 million subscribers claimed in Russia alone, MTS seems to be saying that one out of every three men, women, children, and infants currently living in Russia is carrying an MTS phone.

The bigger those subscriber counts grow, and the longer they keep growing at their slowing -- but still barn-burning -- pace, the more you need to wonder just how many of those subscribers are separate individuals. Remember that one individual with multiple cell phones, or even multiple SIM cards being switched in and out, can be counted as multiple subscribers. One clue to the "quality" of MTS's subscriber counts will be found in the amount that revenue growth lags subscriber growth -- another is in those steadily shrinking margins.

Competitors

Suppliers

Creditors

Golden Telecom (NASDAQ:GLDN)

Rostelecom (NYSE:ROS)

ABN AMRO (NYSE:ABN)

VimpelCom (NYSE:VIP)

Deutsche Telekom (NYSE:DT)

ING Group (NYSE:ING)


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