VimpelCom Group’s Algeria subsidiary Djezzy has reported decreased service revenue of 15% in the firm’s second quarter 2016 financial, with the drop being attributed to the combined impact of 3G coverage shortfalls and the SMP (Significant Market Player) designation, sub-optimal changes in billing increments, low sales due to change in commission structure and the shift in Ramadan by almost two weeks.
Overall, Djezzy’s underlying EBITDA organically decreased 18%, due to the decrease in revenue, leading to an underlying EBITDA margin of 51% according to the Group financial statement.
The report notes that although Djezzy’s operations delivered strong margins during the second quarter, the telco continued to experience significant pressure on results, adding that “the decrease in revenue was not only due to the shift in Ramadan calendar (June 2016 included 24 days of Ramadan, while June 2015 included 12 days of Ramadan) but was also caused by continued customer churn and average revenue per user (ARPU) erosion.”
Djezzy, which expects this pressure to continue for the remainder of the year, as it will take time to stabilize its commercial proposition and its customer base, also saw its subscriber base decrease by 4% year-on-year to 16.3 million while ARPU declined by 12% due to the combined impact of historic 3G coverage shortfalls, sub-optimal changes in Q2 2016 to billing increments and the commission structure for indirect distribution, both of which were partially corrected in Q2 2016, together with forced migrations from legacy tariffs from late 2015 onwards. In addition, Q2 2016 ARPU was impacted by the shift in Ramadan which caused a 2.3% ARPU decrease for the quarter.
As a result, Djezzy’s Q2 2016 service revenue was DZD 27.2 billion (US $247.52 million), down 15%, while data revenue continued to strongly grow by 53%, due to the higher usage and substantial increase in data customers as a result of the 3G network roll-out.
In Q2 2016, Djezzy’s EBITDA decreased 18% to DZD 14.0 billion (US $127.4 million) due to the decrease in revenue. EBITDA margin remained strong at 51% due to commercial and network costs optimization as well as a decline in personnel costs, driven by headcount reduction.
Commenting on the results, Jean-Yves Charlier, CEO, VimpelCom Group, said: “We are pleased to report that VimpelCom’s financial performance is in line with expectations for the first half of the year in spite of weaker service revenue trends in the second quarter. Service revenue declined slightly by 0.7% while underlying EBITDA grew by 3% in the quarter on an organic basis. We saw particularly solid performances in Pakistan and Ukraine and mobile data revenue growth was also strong, up 26%, reflecting our strategic focus to transform our business from traditional voice and messaging to data and digital services. Profit for the period grew 29% and reached US $138 million. Reported results however continue to be negatively impacted by adverse foreign exchange movements, although this effect is moderating… VimpelCom remains on track to achieve its financial targets for the year, although at the lower range for service revenue and underlying EBITDA margin, while the capex to revenue ratio is trending towards 17%.”
Apart from Algeria, VimpelCom Group has operations in 13 other countries including Russia, Italy, Pakistan, Uzbekistan, Kazakhstan, Ukraine, Bangladesh, Kyrgyzstan, Tajikistan, Armenia, Georgia, Laos, and Zimbabwe. The company’s brands include “Beeline”, “WIND”, “Djezzy” (Algeria), “Mobilink”, “Kyivstar”, “banglalink” and “Telecel.”