Sibirtelecom Released Results of 9M Financial and Economic Activity

OREANDA-NEWS. November 06, 2009. Sibirtelecom OJSC (РТС: ENCO/ENCOP, ENCOG/ENCOPG; MICEX: STKM/STKMP; АDR: ОТС – SBTLY, Frankfurt and Berlin Stock Exchanges – ISIN: US8257351036, WKN: 260452) – operator of telecommunication services in Siberian Federal District, provides its financial statements for nine months of 2009 that were made in compliance with Russian Accounting Standards (RAS).

Revenues of the Company

Ø Revenues of Sibirtelecom OJSC (hereinafter – Company) without consideration of subsidiaries for nine months of 2009 reached 20,870.9 mln. rubles, having increased by 388.6 mln. rubles, or by 1.9 % as compared with the same period of the previous year.

Growth in the number of users of Internet access and Internet traffic is the main factor of increase in the Company revenues in the reporting period.

Structure of the Company’s revenues (mln. rubles):

Type of revenues	nine months  of 2009	nine months  of 2008	Change
			mln rubles	%
Local telephony services	8,696.3	8,464.0	232.3	2.7
including: universal communication services	0.5	0.4	0.1	25.0
Services of telegraph communication, data transmission, and telematic communication services	4,237.7	3,312.5	925.2	27.9
including: services of data transmission and services of Internet access	4,064.9	3,144.0	920.9	29.3
Services of intra-zone telephony	3,730.3	4,045.6	(315.3)	(7.8)
Services of connection and traffic transmission	1,917.6	2,347.2	(429.6)	(18.3)
Revenues from providing services of non-core business	815.6	647.9	167.7	25.9
including: revenues from asset leasing	589.4	409.0	180.4	44.1
Services of mobile radio-telephone communication	783.5	910.6	(127.1)	(14.0)
Services of  assistance and agency	362.4	437.3	(74.9)	(17.1)
Services of  mobile radio communication, wire broadcasting, radio broadcasting, television	326.9	317.0	9.9	3.1
Revenues from providing services of core business	0.6	0.2	0.4	200.0
Total	20,870.9	20,482.3	388.6	1.9

The greatest share in the structure of Company’s revenues 41.7 % (8,696.3 mln. rubles) belongs to revenues from providing local telephony services.

Revenues from services of data transmission and services of providing Internet access (4,064.9 mln. rubles) and services of intra-zone telephone communication services (3,730.3 mln. rubles), which is 19.5 % and 17.9 % respectively are significant items in the revenue structure. Revenues from the services of interconnection and traffic transmission amounted to 9.2 % (1,917.6 mln. rubles) of total revenues. Revenues from provision of mobile communication services amounted to 3.8 % (783.5 mln. rubles) of total revenues.

As compared with the same period of 2008 (without consideration of subsidiaries):

§         The biggest growth of revenues is recorded from providing services of data transmission and Internet access: 920.9 mln. rubles, or 29.3 %. It was mainly caused by the growth in the number of users of broad-band access and, consequently, the growth in revenues from providing Internet access. The number of broad-band access ports as of October 1, 2009 was 543.5 thousand users (+69.6% to the same period of 2008);

§         The growth in revenues from providing services of local telephone communication was 232.3 mln. rubles or 2.7 %, which was governed by indexation of regulated tariffs from March 1, 2009.

§         The growth in revenues from providing services of noncore business amounted to 167.7 mln. rubles or 25.9 %, which was caused by the increased number of leased objects;

§         Reduction in revenues from services of interconnection and traffic transmission that amounted to 429.6 mln. rubles or 18.3 % was caused by decreased volume of transmitted traffic and cancellation of POI tariffs from March 1, 2008;

§         Reduction in revenues from providing services of intra-zone telephone communication was 315.3 mln. rubles, or 7.8 %, which was connected with the decrease in the traffic volume;

§         Reduction in revenues from providing services of cellular communication amounted to 127.1 mln. rubles or 14.0 %, which was governed by the decreased consumption of services by subscribers in the mass and corporate segment;

§         Reduction in revenues from assistance and agency services provided under the contract with Rostelecom OJSC amounted to 74.9 mln. rubles or 17.1%. Reduction in revenues occurred due to a decrease in the volume of services provided from the part of Rostelecom OJSC to the customers, as well as due to the conclusion of direct contracts with customers at the level of Rostelecom OJSC.

The Company’s Expenses

Ø     Expenses of the Company (without consideration of subsidiaries) for nine months of 2009 increased by 1,121.2 mln. rubles, or by 6.9 % as compared with the same period of 2008 and made up 17,419.6 mln. rubles.

Structure of the Company’s expenses (mln. rubles):

Type of revenues	nine months of 2009	nine months of 2008	Change
			mln rubles	%
Labor costs	(5,010.9)	(5,029.5)	18.6	(0.4)
Depreciation of fixed assets	(3,527.5)	(2,985.3)	(542.2)	18.2
Services of telecom operators (except for Rostelecom OJSC)	(1,945.8)	(2,020.5)	74.7	(3.7)
Outside organization services	(1,827.9)	(1,506.9)	(321.0)	21.3
Deductions to social insurance	(1,229.2)	(1,142.0)	(87.2)	7.6
Material costs	(852.7)	(1,134.0)	281.3	(24.8)
Rental charge	(500.6)	(487.9)	(12.7)	2.6
Rostelecom OJSC services	(312.8)	(118.4)	(194.4)	164.2
Purchase value of goods	(125.8)	(106.6)	(19.2)	18.0
Taxes and duties included in the expenses of principal types of activity	(27.2)	(28.1)	0.9	(3.2)
Other expenses from core business	(2,059.2)	(1,739.2)	(320.0)	18.4
Total	(17,419.6)	(16,298.4)	(1,121.2)	6.9

In the total amount of the Company’s expenses the greatest share belongs to labor costs and deductions for social insurance, 35.8 %; depreciation of fixed assets, 20.3%; services of telecom operators, including Rostelecom OJSC, 13.0 %; other expenses, 11.8% and expenses from outside organization services, 10.5 %.

As compared with the same period of 2008 (without consideration of subsidiaries):

§         Labor costs reduced by 18.6 mln. rubles or by 0.4 %.

Under conditions comparable with 2008[1][1] the reduction in personnel expenses would amount to 4,441.2 mln. rubles, which is lower by 11.6 % than the level of the same period of last year according to the results of 9 months of 2009;

§         The amount of accrued depreciation of fixed assets grew by 542.2 mln. rubles, or by 18,2 %, with was connected with the Company’s investment policy aimed at network development;

§         Outsourcing expenses grew by 321.0 mln. rubles, or by 21.3 %, in view of adjustment of the Company’s business processes;

§         Other expenses grew by 320.0 mln. rubles, or by 18.4%, which resulted mainly from growth of agents fees and amortization of intangible assets referred to the software products for the Company’s content-center;

§         Expenses on the services of Rostelecom OJSC grew by 194.4 mln. rubles, or by 164.2 %, which resulted from growing traffic of the subscriber base of Sibirtelecom OJSC.

The Company’s leverage

Ø     The Company’s leverage remains at supportable level, and as of September 30, 2009 it makes 17.7 bln. rubles, net debt[2][2] 16.1 bln. rubles (-5.1% from the beginning of 2009).

The Company’s financial performance

Key financial indices according to Russian accounting standards (mln. rubles):

	nine months of 2009	nine months of 2008	Change, %
Revenues	20,870.9	20,482.3	1.9
Expenses	17,419.6	16,298.4	6.9
OIBDA[3][3]	6,990.7	7,173.6	(2.5)
OIBDA margin	33.5%	35.0%	-
EBITDA[4][4]	7,419.6	7,660.9	(3.1)
EBITDA margin	35.5%	37.4%	-
Sales profit	3,451.3	4,183.9	(17.5)
Sales profit margin	16.5%	20.4%	-
Profit before tax	2,141.6	3,458.2	(38.1)
Net profit	1,737.3	2,686.2	(35.3)
Net profit margin	8.3%	13.1%	-

Compared with the same period of 2008 (without subsidiaries) for nine months of 2009:

Ø         Sales profit reduced by 732.6 mln. rubles, or by 17.5 %, and made 3,451.3 mln. rubles, which was caused by outrunning growth of expenses (6.9 %) compared to revenues (1.9 %).

If reserves for future expenses on personnel reflected as in 2008[5][5], the expenses would grow by 3.4 %, and the sales profit would reduce by – 4 %.

Sales profit margin – 16.5 %.

Ø         OIBDA reduced by 182.9 mln. rubles, or by 2.5 %, in compliance with the sales profit performance. OIBDA margin – 33.5 %;

Ø         Profit before tax reduced by 1,316.6 mln. rubles, or by 38.1 %, and made 2,141.6 mln. rubles, which resulted from reduction of sales profit, growth of interest expenses, and lower dividend receipts;

Ø         Net profit reduced by 948.9 mln. rubles, or by 35.3 %, and made 1,737.3 mln. rubles, which was caused by reduction of profit before tax.

Net profit margin – 8.3 %.

Key operating indices of the Company’s activity:

	nine months of 2009	nine months of 2008	Change,            %
Key operating indices
The number of main stations, thousand	4,356.4	4,353.3	0.1
Intra-zone traffic (outgoing traffic), mln. minutes	1,672.2	1,812.2	(7.7)
Number of subscribers of mobile communication (without consideration of subsidiaries), thousand	669.5	595.5	12.4
Number of subscribers of mobile communication (with consideration of subsidiaries), thousand	5,382.0	4,655.6	15.6
Number of broad band ports, thousand	543.5	320.4	69.6
Average number of lines, thousand	5,036.4	4,904.8	2.7
Average number of employees[6][6]	25,756	30,045	(14.3)
Indices of effectiveness
Revenue per line, rubles	4,144.0	4,176.0	(0.8)
Revenue per employee, thousand rubles	810.3	681.7	18.9
Lines per employee	196	163	19.8

Accounting (financial) reporting of Sibirtelecom OJSC for 9 nine months of 2009 according to RAS is available at the Company’s corporate website www.sibirtelecom.ru in Financial reporting section.