Belarus

Tomorrow is yours. velcom

velcom

In Belarus, strong operational developments continued to face macroeconomic challenges, although there were some improvements and the GDP increased slightly by 0.7 % in 2017 (IMF estimation; 2016: -2.6 %). In this context, the government is maintaining its focus on stabilising inflation, which came in at 4.6 % in 2017, and keeping in place the caps on certain price increases. In the year under review, velcom continued with its consolidation strategy in the fixed-line business with the acquisition of Garant (Gomel). The company has been consolidated as of 1 August 2017. Since September 2017, after opening its own data centre, velcom has also been able to offer cloud services and digital products (Infrastructure as a Service, Platform as a Service). Moreover, inflation-linked price increases in the amount of 9 % were implemented for the mobile business as of 12 April 2017. This followed a price increase in the fixed-line business as of 1 March 2017.

In comparison with the previous year, the mobile customer base in the Belarus segment declined by 1.6%, which was attributable primarily to the prepaid and also the postpaid segment. Revenue-generating units (RGUs) in the fixed-line business at the end of 2017 amounted to 463,400, including the 159,600 RGUs from acquired fixed-line provider Garant (Gomel).

Total revenues in the Belarusian segment increased by 15.2 % year-on-year (reported: +21.6 %), driven by continuing solid operational growth on the back of inflation-linked price increases and strong demand for data. Revenues from the sale of handsets also increased due to the changeover to a portfolio with more expensive handsets and higher sales volumes. The supportive FX development in the first half of 2017 was almost completely offset by a devaluation in the second half of the year. Overall, the Belarusian Rouble appreciated by 1.0 % compared with the same period last year (period average used respectively). On a local currency basis, total revenues rose by 14.1 % in comparison with the previous year (reported: +20.5 %).

Costs and expenses increased by 15.3 % in the year under review (reported: +23.5 %). On a local currency basis, the increase amounted to 14.2 % (reported: 22.3 %). The increase resulted mostly from increasing equipment costs and higher personnel costs due to inflation-linked salary increases as well as higher roaming costs.

In the Belarusian segment, the increasing revenues more than offset higher costs and expenses, which resulted in an increase in EBITDA by 15.2 % (reported: 19.6 %). Belarus recorded the highest EBITDA margin in the Group, at 46.4 % in the year under review (2016: 46.4 %). Excluding the positive FX effects amounting to EUR 1.8 mn, EBITDA in Belarus increased by 14.1 % year-on-year (reported: 18.5 %). Together with lower depreciation in comparison with the previous year as a result of the solar power plant project in 2016, the operating income improved by 34.1 % (reported: 40.2 %).