Metromedia International Group Reports SecondQuarter 1998 Results; Combined Joint Ventures Generate 97% SubscriberGrowth and 57% Revenue Growth In First Six Months of 1998
August 13, 1998 09:54 AM
EAST RUTHERFORD, N.J.--(BUSINESS WIRE)--Aug. 13, 1998--Metromedia International Group , through its Communications Group, is the owner of various interests in joint ventures that are currently in operation or planning to commence operations in Eastern Europe, the republics of the former Soviet Union, China, and other selected emerging markets.
Combined financial results of these joint ventures for the quarters and six-month periods ended June 30, 1998 and 1997 are summarized below. The Company's consolidated condensed statement of operations and balance sheet are set forth in attachments to this release.
Combined Financial Results of Joint Ventures
(Eastern Europe, the republics of the former Soviet Union, China, and
other selected emerging markets)
$ in Thousands
Quarters Ended June 30,
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1998 1997 Change
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Number of Joint Ventures 49 43 14%
Subscribers(a) 420,993 213,896 97%
Revenues $ 30,495 $ 21,281 43%
EBITDA(b) $ 2,926 $ 3,605 -19%
Depreciation and amortization $ 7,840 $ 3,195 145%
Operating income (loss) before taxes $ (4,914) $ 410 n/m
Capital expenditures(c) $ 8,304 $ 7,430 12%
Equity in income (losses) $ (4,045) $ (587) 589%
Six Months Ended June 30,
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1998 1997 Change
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Number of Joint Ventures 49 43 14%
Subscribers(a) 420,993 213,896 97%
Revenues $ 63,151 $ 40,215 57%
EBITDA(b) $ 3,879 $ 10,837 -64%
Depreciation and amortization $ 16,208 $ 6,164 163%
Operating income (loss) before taxes $ (12,329) $ 4,673 n/m
Capital expenditures(c) $ 32,054 $ 12,427 158%
Equity in income (losses) $ (11,558) $ (2,185) 429%
(a)Includes China's Ningbo City GSM Subscribers
(b)Operating income (loss) plus depreciation and amortization
(c)Metromedia International Telecommunications, Inc. capital
expenditures only
Metromedia International Group's (MMG) joint ventures continue to
experience rapid subscriber growth. Total combined revenues reported
by consolidated and unconsolidated joint ventures in which MMG had an
investment for the six month period ended June 30, 1998 were $63.2
million, up 57% versus the same period in 1997. Expenses associated
with the start-up of various joint venture operations contributed to a
64% decrease in EBITDA versus the same period in 1997. MMG announced a
loss from continuing operations attributable to common stockholders
for the second quarter of 1998 of $0.38 per share.
John W. Kluge, MMG's Chairman, said: "As in the past, this
quarter's results reflect the significant progress of our ventures as
they continue to capitalize on a truly extraordinary international
opportunity-250 million people lacking adequate communications
capabilities. Quarter after quarter, our strong subscriber and revenue
growth evidences that Metromedia International Group's strategy is
working." Stuart Subotnick, MMG's President and Chief Executive
Officer, said: "As we continue to invest across the broad spectrum of
our international opportunity, we are increasingly able to leverage
Metromedia's excellent reputation to establish more powerful ventures
that serve considerably broader and more lucrative segments of the
regional populations. In this quarter, for example, we made the
investments to add an outstanding venture designed to provide a full
range of telecommunications services, including local, domestic and
international long distance telephone service, data services, and
Internet access, for the country of Azerbaijan."
Metromedia International Group recent highlights include:
- Completed acquisition of Mobile Telecom ZAO, the largest paging
operator in Russia
- Launched Internet services in Romania
- Entered local telephone market in Azerbaijan
- Divested Western European trunked mobile radio operations
- Announced new President and CEO for Metromedia China Corporation
Review of Combined Results of Consolidated and Unconsolidated
Joint Venture Operations
Eastern Europe and the Republics of the Former Soviet Union
Total revenues for the Communications Group's cable television,
paging, radio broadcasting, cellular telecommunications, international
toll calling and trunked mobile radio businesses were $61.7 million
and $40.2 million in the first six months of 1998 and 1997,
respectively. The percentage increase in revenues was 53%. Combined
operating income (loss) for all of the Communication Group's
businesses were ($11.7) million and $4.7 million in the first six
months of 1998 and 1997, respectively.
Cable television revenues were $15.6 million and $10.5 million in
the first half of 1998 and 1997, respectively, an increase of 49%.
Total subscribers increased from 147,671 at June 30, 1997 to 269,017
at June 30, 1998. Combined operating losses for cable television were
$3.4 million and $1.0 million in the first six months of 1998 and
1997, respectively. Included in operating losses in the first half of
1998 and 1997 were depreciation and amortization charges of $6.2
million and $4.1 million, respectively. The increase in these charges
is attributable to the amortization of goodwill in connection with
acquisitions in Moldova and Romania.
Subscriber growth and revenue increases from cable television
were the result of the expansion of the Communications Group's
strategy to increase the customer base by wiring buildings in advance
and targeting for a lower priced, broader based program package,
coupled with acquisitions of systems in Moldova and Romania. The
increase in operating loss in the first six months of 1998 as compared
to the first six months of 1997 was primarily attributable to
operating losses at Joint Ventures that recently became operational in
St. Petersburg and Romania, as well as additional marketing and
programming costs incurred at operations in Moscow and Latvia,
respectively. In addition, the Communications Group's operations in
Georgia and Latvia have experienced increased competition which has
adversely affected operating results in the first half of 1998. The
Communications Group is intentionally slowing the growth in its
Belarus Joint Venture as a result of new regulations instituted by
various governmental ministries which may adversely affect the
operations of the Joint Venture.
Paging revenues were $9.0 million in the first six months of 1998
and $6.2 million in the first six months of 1997. This represents an
increase of 45%. Total subscribers increased from 53,416 at June 30,
1997 to 73,399 at June 30, 1998. Combined operating losses for paging
were $5.0 million and $2.1 in the first half of 1998 and the first
half of 1997, respectively. Included in operating losses in the first
six months of 1998 and 1997 were depreciation and amortization charges
of $1.5 million and $764,000, respectively.
During the first six months of 1998, revenue growth was primarily
attributable to revenue increases of approximately $1.4 million,
$589,000, $450,000, and $402,000 at paging operations in Kazakstan,
Nizhny Novgorod, Russia, Vienna, Austria, and St. Petersburg, Russia,
respectively. The operating loss in the first half of 1998 was
primarily comprised of operating losses of $2.9 million, $1.4 million,
and $749,000 at paging operations in Austria, Romania, and Estonia,
respectively. These losses were partially due to increased marketing,
advertising, technical and distribution expenses incurred to introduce
Calling Party Pays service. Calling Party Pays service is designed to
reach a younger demographic group providing a significantly larger
potential subscriber base. The joint venture receives a fee from the
local telephone operator for each call made to a pager.
Radio broadcasting revenues were $9.7 million in the first six
months of 1998 and $6.6 million in the first six months of 1997, an
increase of 45%. Combined operating income from radio broadcasting was
at break-even and $1.4 million in the first half of 1998 and the first
half of 1997, respectively. Included in operating income in the first
half of 1998 and 1997 were depreciation and amortization charges of
$681,000 and $147,000, respectively.
The revenue growth was due to increases in the number of
advertising spots sold and increases in the price of the advertising
spots. The ability to sell additional spots at a higher rate is
dependent on an increase in audience ratings. The Company has
increased its audience share through the use of market research to
determine programming formats and marketing strategies, including
employing U.S. trained sales managers.
For the six months ended June 30, 1998, operating income includes
a loss of $2.1 million attributable to increased programming and other
expenses associated with the News Talk format at the Communications
Group's radio station in Berlin, which was acquired during the third
quarter of 1997. Although the operating results for the first half of
1998 were adversely affected by the operating loss of the
Communications Group's radio station in Berlin, the operating results
of its other radio stations generally improved. The News Talk format
has higher start-up costs than traditional music radio stations, but,
the Communications Group expects to achieve its targeted rate of
return through its future operation of the radio station.
Telephony revenues were $27.5 million in the first half of 1998
and $16.9 million in the first half of 1997. This represents an
increase of 63%. Total subscribers increased from 12,809 at June 30,
1997 to 52,335 at June 30, 1998. International toll calling revenues
were $13.6 million in the first half of 1998 compared to $15.0 million
in the first half of 1997. Trunked mobile radio revenues were $5.0
million and $1.8 million in the first six months of 1998 and the first
six months of 1997, respectively. Cellular telecommunications revenues
were $8.9 million in the first half of 1998 versus $108,000 in the
first half of 1997.
Combined operating income (loss) for telephony was ($3.3) million
and $6.4 million in the first half of 1998 and in the first half of
1997, respectively. Included in operating income (loss) in the first
six months of 1998 and of 1997 were depreciation and amortization
charges of $6.6 million and $1.1 million, respectively. Operating
income from international toll calling operations was $3.1 million and
$9.7 million in the first half of 1998 and in the first half of 1997,
respectively. Trunked mobile radio's operating losses were $1.8
million in both the first six months of 1998 and 1997, and the
operating losses for cellular telecommunications were $4.6 million and
$1.4 million in the first half of 1998 and 1997, respectively.
International toll calling revenue is generated at the joint
venture in Tblisi, Georgia, which handles all international calls
inbound to and outbound from the Republic of Georgia. Although minutes
of use increased during the first half of 1998 as compared to the
first half of 1997, revenue and operating income in the first half of
1998 decreased due to the change in the incoming and outgoing mix in
telephone traffic and the contractual reductions in termination
accounting rates in its international settlement agreements for
traffic with its overseas carriers. In addition, payments made to
local carriers for call terminations increased during 1998. Operating
income in the first six months of 1997 included the impact of
favorable settlements, of approximately $2.0 million, with
international carriers for costs related to 1996 call revenues.
Increased trunked mobile radio revenue was primarily due to an
increase of approximately $1.4 million realized at the Portugal
operations. The operating loss for cellular telecommunications
reflects the operating results of the joint venture's operations in
Latvia and Georgia, which commenced operations in April 1997 and
September 1997, respectively. The Communications Group expects these
start-up operations to incur losses for the near term.
China
Equity in losses of the Communications Group's Joint Ventures in
China amounted to $1.5 million in 1998. The loss is attributable
principally to the Communications Group's Ningbo JV, which commenced
operations in May 1997.
As a number of the Company's Communications Group's joint
ventures are in the early stages of development, the Company expects
this group to generate significant operating and net losses as it
continues to build out its facilities and market its services.
Management believes that its goals will be achieved through a
combination of the Company's successful implementation and execution
of its growth strategy and the Company's joint ventures achieving
positive operating results and cash flows through revenue and
subscriber growth and control of operating expenses.
This partial discussion of the financial condition and operations
of the Company should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's Form
10-Q for the quarter ended June 30,1998, as filed with the U.S.
Securities and Exchange Commission.
Metromedia International Group, Inc. is a global communications
and media company. Through its wholly owned subsidiary, Metromedia
International Telecommunications, Inc., the Company owns and operates
communications and media businesses in Eastern Europe, the Republics
of the former Soviet Union and other emerging markets. These
businesses include wireless and wired cable television stations; FM
radio stations; radio paging operations; and a variety of telephone
operations including GSM cellular, international toll calling, fixed
wireless local loop and trunk mobile radio. Through its approximately
58% ownership of Metromedia China Corp., MITI operates ventures
supporting Public Switched Telephone Networks and GSM systems in
China.
This news release contains certain forward-looking statements
that involve risks and uncertainties. Factors that could cause or
contribute to such risks and uncertainties include, but are not
limited to, general economic and business conditions, competition,
changes in technology and methods of marketing, and various other
factors beyond the Company's control. This also includes such factors
as described from time to time in the U.S. Securities and Exchange
Commission reports filed by Metromedia International Group, including
the Company's Form 10-Q for the quarter ended June 30, 1998.
c 1998 Business Wire.
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