Call it an international, intercultural faux pas.
As most Americans remained deep in slumber after a weekend of Labor Day festivities, Russian telecom Mobile TeleSystems
Beginning with the headline news, we see that MTS:
- Grew quarterly revenues 21% year over year
- Projected 10%-15% sales growth for full-year 2006
- Saw net profits decline 3% year over year
- Generated $162 million in free cash flow year to date (up from $100 million by this time last year)
- Increased its net debt from $2 billion to $2.7 billion over the last 12 months
- Authorized the repurchase of as much as 10% of shares outstanding over the next 12 months
- Announced plans to lay off 14% of its workforce this year
Most of the increase in stock price probably stemmed from the news of the layoffs and buybacks, because the rest of the news, while not entirely bad, was neither completely good. For example, profits declined despite strong revenue growth, which is usually the opposite of what investors like to see happen. Investors must be hoping that once MTS begins buying back its stock, it will lift the price, even if net profits continue to disappoint.
Moreover, those profits could improve significantly if the company can just quit paying so many of those pesky -- what do you call them? -- ah yes, "employees." Shedding some payroll could help MTS reverse the 400-basis-point slide in operating margins we saw during the quarter, which prevented its extra customers from yielding extra profits.
Speaking of those extra customers, according to MTS, Russia has now reached "97% penetration" of its cell phone market. If you have the time, feel free to click through and read my full critique of "Russia's New Telecom Math." If not, I'll give you the short version here: 97% penetration is either an out-and-out lie (but if so, one that pretty much everyone working in Russia is in on), or an unreliable statistic that counts possessors of multiple cellphones and multiple SIM cards as if they were unique individual customers.
With every passing quarter, I look forward to the day when MTS, or perhaps rival VimpelCom
Dial up further Foolishness:
- Can Mobile TeleSystems Connect With Investors?
- Foolish Forecast: Mobile TeleSystems Rings In
- Nyet or Not Yet for Mobile TeleSystems
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