Belarus

Tomorrow is yours. velcom

velcomIn Belarus, strong operational developments continued to face macroeconomic and regulatory headwinds. In this context, the government is pushing for a stabilisation of inflation, which slowed to 10.6% in 2016 (2015: 12.0%). The government increased the value added tax on mobile services from 20% to 25% in April 2016. The devaluation at the start of the year also overshadowed the positive operating results, although the currency recovered thanks to the improved development of the oil price and the Russian Rouble over the course of the year. In a year-on-year comparison, however, the Belarusian Rouble still declined by 19.7% (figure based on period averages in accordance with IFRS). Through the acquisition of Atlant and its subsidiary TeleSet, which has been consolidated as of 1 December 2016, velcom developed from a pure mobile provider into a convergent operator.

Thanks to its positioning as a premium provider with excellent network quality as well as a tariff and handset portfolio centred on smartphones and tablets, velcom again succeeded in benefiting from the rising demand for data. Furthermore, the company continued to focus its efforts on optimising operating expenses and disconnecting them from currency effects and energy prices; this included the commissioning of a solar power plant.

The total number of wireless subscribers at velcom declined slightly, by 0.2% year-on-year during the year under review, to 4.94 million. This was driven by a lower number of multiple SIM cards as a result of worsening economic environment and lower purchasing power. However, this development improved again in Q4 2016. The 26.8% rise in the number of mobile broadband customers to around 391,600 reflects the aforementioned strong demand for data services. Owing to the negative currency development, average monthly revenue per user (ARPU) declined from EUR 4.5 to EUR 4.1. velcom had 279,400 fixed-line revenue generating units (RGUs) at the end of the year.

Including negative currency effects in the amount of EUR 78.7 mn, total revenues declined by 3.9% year-on-year in 2016 (reported: -3.4%). In local currency, total revenues rose by 19.7%. Inflation-related price adjustments in December 2015 and April, May and September 2016, as well as the migration of existing customers from old tariffs to higher-ARPU bundled offers, were the main reasons for the increase in service revenues. Equipment revenues rose due to FX-driven higher handset prices as well as volume growth. Other operating income increased following the commissioning of the solar power plant, which reduced the company’s vulnerability to FX and energy prices volatility