Amsterdam-headquartered VimpelCom, which has operations in Russia, Italy and a number of emerging markets, saw sales and net profit plummet during Q2. The company pinned much of the blame on a difficult economic climate, particularly in Russia and the Ukraine, and rising network costs.

Total operating revenue fell 11 per cent for the three months ended June, to a shade over $5 billion, while net income attributable to shareholders slumped 83 per cent, to $100 million.

Part of the net income fall, said VimpelCom, was related to non-cash charges related to the refinancing of Wind, its Italian operation

VimpelCom still generates a fairly healthy EBITDA margin – 41 per cent in Q2 – but that is being squeezed (Q2 2013: 42.4 per cent).

Underlying cash profits for the group shrank 14 per cent over the period, to just over $2 billion, as rising costs in Russia related to 3G and LTE deployments – and 3G rollouts in in Algeria, Pakistan and Bangladesh – all took their toll.

Jo Lunder (pictured), chief executive, repeated his view that 2014 would be a “challenging year” for the group as he reflected on the Q2 numbers.

“The results for the second quarter were impacted by a weaker operational performance in some markets, but also by the macro-economic situation in Russia and Ukraine,” he said.

On the plus side, Lunder asserted that operations in Italy “continue to outperform competitors in a weak market” – despite a sharp fall in revenue there – and that Kazakhstan and Bangladesh were seeing signs of growth.

In Russia, VimpelCom notched up mobile data revenue growth of 17 per cent, to RUB9 ($248 million), but it was still not enough to prevent overall revenues falling 7 per cent, to RUB68.7 billion.

Mobile service revenue in Russia was down 5 per cent, to RUB54.9 billion. VimpelCom attributes part of the fall to blocking unrequested services from content providers. And while mobile customers declined 1.1 per cent, year-on-year, to 56.3 million, they increased 1.3 million quarter-on-quarter.

The number of mobile broadband customers in Russia is growing fast on the back of network investment – up 20 cent, year-on-year, to 3.3 million – but it’s from a small base. They still represent a tiny fraction of overall mobile subscribers.

The performance in Ukraine has been affected by customers reining in spending amid political uncertainty. Total revenues decreased 5 per cent, to UAH3 billion ($256 million), while mobile service revenue dropped 4 per cent, to UAH2.7 billion.

Operational performance in the Ukraine was hurt badly by rising electricity costs and a doubling of spectrum fees during Q2. EBITDA decreased 12 per cent, to UAH1.3 billion.

Competitive and regulatory pressures in Italy saw mobile service revenue drop 11 per cent, to €737 million (although mobile broadband revenue was up 18 per cent, to €137 million).

Organic sales at the Africa & Asia business unit was down 4 per cent, to $879 million, largely because of a slowdown in Algeria and Pakistan. Bangladesh is showing some signs of growth but contributes only a small amount to the group top line (Q2: $140 million).

Refinancing of Wind in Italy, and the expected sale of Djezzy (VimpelCom’s Algerian unit) is expected to boost total net income for the year by €500 million.

Even so, VimpelCom saw no reason to revise its full-year targets: revenue decline in the low- to mid-single digit range compared with 2013, and EBITDA dropping within the same range.

Full-year capex (excluding licences) is expected to account for a 21 per cent chunk of 2014 revenue.