UPDATE 2-Russia’s MTS eyes 10 pct revenue growth in 2011

* 2010 sales totalled $11.3 bln, ahead of company forecast

* 2011 profit margin seen at 42-43 pct vs 43.1 pct in 2010

* Capex seen at 22-24 pct of sales vs 23 pct in 2010

(Adds share price, comment on Belarus)

MOSCOW, April 5 (Reuters) – MTS (MBT.N: Quote, Profile, Research), Russia’s biggest
mobile phone operator, expects intensifying competition to keep
profit margins steady in 2011 when it sees revenue growing by 10

The company’s New York-listed shares fell 2.9 percent by
1449 GMT on Tuesday after it reported lower-than-forecast
earnings and margins for the final quarter of 2010.

MTS sacrificed margins last year to protect market share as
rival MegaFon, part-owned by Nordic telecoms group TeliaSonera
(TLSN.ST: Quote, Profile, Research), overtook Vimpelcom (VIP.N: Quote, Profile, Research) as the second-biggest
Russian mobile phone operator.

“As we enter the second quarter, we anticipate that margins
will remain pressured. However, we do forecast significant
improvement in the second half of the year,” said MTS Chief
Executive Andrei Dubovskov in a statement.

Chief Financial Officer Alexey Kornya said the margin
erosion resulted from “certain commercial decisions to protect
leadership and stabilise the market” as well as higher than
anticipated handset sales — a low margin business.

“Network enhancement will drive more profitable data usage
through our networks. In addition, our ability to launch
convergent products … will further drive usage and support our
churn-reduction efforts,” Dubovskov added.

The OIBDA margin fell to 43.1 percent in 2010 from 45.5
percent in 2009, and came in at 38.7 percent in the final
quarter of last year — below the 40.6 percent forecast in a
Reuters poll. [ID:nLDE72U0VB]

Fourth-quarter net profit was $156.3 million, hit by a
$137.8 million write-off related to the suspension of operations
in Turkmenistan and missing analysts’ forecast of $206 million.

OIBDA declined 3.5 percent to $1.16 billion despite a 10
percent rise in sales to $3 billion.

Full-year sales grew 14.5 percent — ahead of the company’s
10 percent forecast — to reach $11.3 billion.

Vice President Oleg Raspopov told reporters MTS was in talks
with Belarus over buying the government’s controlling stake in a
local joint venture.

“We are interested in the acquisition at a reasonable price,
we are holding negotiations,” Raspopov said.

Belarus had proposed to MTS that the company buys the 51
percent stake for $1 billion, President Alexander Lukashenko
said last month. [ID:nLDE72H1S7]
(Reporting by Anastasia Teterevleva and Maria Kiselyova;
Editing by David Cowell)

UPDATE 2-Russia’s MTS eyes 10 pct revenue growth in 2011