The FINANCIAL -- Metromedia International Group, Inc. (PINK SHEETS: MTRMP - Preferred Stock), the owner of interests in communications businesses in the country of Georgia, lasdt week that revenues at Magticom increased by $15.1 million (20%) to $92.0 million for the six months ended June 30, 2007 as compared to $76.9 million for the six months ended June 30, 2006, due principally to the growth from subscriber revenue activity.
Magticom is one of the leading mobile telephony operators in Tbilisi, Georgia. It provides services throughout the country of Georgia. At present, the Company has a 50.1% economic interest in Magticom.
Magticom markets mobile voice, data and video communication services to consumers and commercial users nationwide in the country of Georgia. Magticom currently provides these services via a wireless mobile telephony network operating under the GSM standard in the 900 MHz and 1800 MHz radio frequency spectrum ranges and, beginning in mid-2006, in the 2.1 GHz radio frequency spectrum for 3rd generation GSM communication services.
Magticom competes with Geocell; a second GSM mobile operator that launched service contemporaneously with Magticom approximately 10 years ago; and Magticom has maintained a market share lead over Geocell. In March 2007 a third GSM mobile telephone service provider launched services in Georgia. This provider, an affiliate of the largest Russian mobile operator, Vimpelcom, is marketing services under the "Beeline" brand which has enjoyed considerable success in Russia.
According to Magticom, subscriber revenue is generated from both voice telephone usage and value-added data services offered by Magticom. Voice telephony usage continues to represent the primary subscriber revenue source; however, value-added data service revenues are rapidly becoming a significant contributor to total subscriber revenue. Subscriber revenue growth is due to both expanded usage and growth in subscription; partially offset by Magticom's continued discounting of retail usage pricing during 2007 through various promotional programs aimed at garnering new subscribers, limiting competitive losses and, to a lesser extent, stimulating usage. Competition for subscribers, both new subscribers and subscribers of other operators, has remained aggressive in 2007.
According to company data, Magticom's total and average subscribers have increased 27% and 28%, respectively, as compared to June 30, 2006 levels.
“Magticom anticipates further increases in its subscriber base as it continues to penetrate the market; however, the rate of new subscriber acquisition can be expected to decline as overall penetration of mobile telephony services in Georgia increases. Although reliable industry statistics are not available for the Georgian telecommunications market, Magticom estimates the June 2007 level of mobile penetration in the country as being approximately 50% of total population”, company says.
“With the evolution of the mobile communications market, customers are utilizing their mobile phones for capabilities beyond voice communication. Value-added data services such as short messaging, e-mail, internet access and various other content-based data services have become increasingly popular and convenient; stimulated, in part, by the latest generation of mobile handsets and network capabilities. Revenues from value-added data services increased by $4.9 million (53%) to $14.1 million for the first six months of 2007 as compared to $9.2 million for the same period in 2006 principally due to increases in short messaging volumes. Magticom anticipates further revenue growth from value-added data services as subscribers' familiarity with data and message based services broadens and mobile handset capabilities continue to evolve. Magticom is well-positioned to seize upon this growth opportunity in consequence of the investments it has recently made in new network technology and support systems”.
Despite the significant increase in its subscriber base and the increasing popularity of value-added data services, average revenue per subscriber ("ARPU") decreased 7.0% for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006. This corresponds to a 17.6% decrease in the average minutes of use per subscriber ("AMPU") for the same period.
“Roaming revenues reflect charges to Magticom subscribers originating calls using their Magticom-equipped mobile telephone in a territory not directly serviced by Magticom and charges to subscribers of a foreign operator originating calls utilizing the Magticom network while in Georgia. Period-over-period increases in roaming revenues reflect modest increases in Georgian travel abroad and tourist or commercial traffic into Georgia. Magticom and most other operators' worldwide bill roaming subscribers at a significant premium over the rates charged for conventional domestic usage. This practice is now being aggressively challenged in several regulatory jurisdictions, especially in the European Union; and Magticom expects that premiums associated with roaming will erode, perhaps sharply, over future periods”.
Cost of services at Magticom increased by $3.9 million (21%) to $21.9 million in the six months ended June 30, 2007 as compared to $18.0 million in the six months ended June 30, 2006, due principally to an increase in interconnection expenses reflecting expanded call volumes. Interconnection costs increased by $2.9 million (23%) to $15.6 million in the six months ended June 30, 2007 as compared to $12.7 million in the six months ended June 30, 2006.
Company said, selling, general and administrative expenses increased $3.3 million (39%) to $11.9 million for the six months ended June 30, 2007 as compared to $8.6 million for the six months ended June 30, 2006. The increase is principally attributable to a $3.2 million increase in personnel costs and a $0.4 million increase in marketing expenses; partially offset by minor decreases in other selling, general and administrative expenses.
“The increase in personnel costs reflects an overall 18% increase in the average number of personnel employed by Magticom for the first six months of 2007 as compared to the same period in 2006 and certain wage increases provided to employees in first quarter 2007. Effective January 1, 2007, Magticom provided all existing employees with a 10% wage increase, which was notably higher than wage increases of prior years”, Metromedia reported.