OREANDA-NEWS. On 12 May 2008 Southern Telecommunications Company (“UTK”), the principal fixed-line telecommunications provider for Russia’s Southern Federal District announced its operating and financial results for the first quarter of 2008 compiled under Russian Accounting Standards (RAS).

Main corporate events in the first quarter of 2008:

Introduction of three tariff plans throughout the whole licensed territory of the Company from February 1, 2008;
launching of IP-TV in the Astrakhan Region and in the Northern Osetia - Alania Republic;
affirmation by Expert RA Rating Agency of its “A” national rating of corporate governance assigned earlier to Southern Telecommunications Company;
conclusion of the cooperation agreement with Sky Link on provision of hi-speed Internet access services;
approval of the new version of the Provisions of Dividend Policy of "Southern Telecommunications Company" PJSC;
signing of non-revolving credit line agreement with Commercial Joint –Stock Bank “Bank Societe Generale Vostok” (Closed Joint –Stock Company ) worth 1 billion rubles;
inclusion of series 04 and series 05 bonds of Southern Telecommunications Company in MICEX Quotation List A1.

Q1 2008 revenue is up 7.9% over Q1 2007 to RUR 5.1 billion;
Q1 2008 EBITDA increased 0.4% over Q1 2007 to RUR 1,967.7 million representing an EBITDA margin of 38.4% (down 2.8 percentage points);

Revenue from data transmission and Internet services increased by 63.0% to RUR 936.7 million. Share of revenues from these services in total telecommunications revenue increased by 6.4 percentage points over Q1 2007 to 19.1%.

UTK’s Q1 2008 revenue made RUR 5,103.6 million, representing a 7.9%- increase over Q1 2007. Operating expenses grew by 21.1% to RUR 3,968.8 million. Thus, Q1 2008 operating profit was down 22.0% to RUR 1,134.8 million and Q1 2008 net profit decreased by 21.1% to RUR 463.4 million. EBITDA for the reporting period amounted to RUR 1,957.7 million or 0.4% higher than in Q1 2007.

Revenues from local telephone services increased by 4.8% to RUR 2,343.2 million due to introduction of three tariff plans throughout the whole licensed territory of "UTK" PJSC from February 1, 2008, and accounted for 47.7% of the Company’s telecom revenues.

Revenues from intra-zonal telephone services rose 1.4% to RUR 914.5 million accounting for 18.6% of the Company’s telecom revenues.

Q1 2008 revenues from telegraph, data transfer and telematic services increased by 56.3% to RUR 976.7 million accounting for 19.9% of the Company’s telecom revenues. Revenues from data transfer and Internet access services rose by 63.0% while the number of Internet broadband access subscribers surged 118.8% to 202.8 thousand users.

Revenues from interconnection and traffic transit services decreased 12.2% to 592.4 million roubles accounting for 12.1% of the Company’s telecom revenues.

Q1 2008 expenses for wages and salaries increased 21.9% over a year-ago to RUR 1,237.6 million due to lump-sum bonus payment based on Q1 2008 results, and accounted for 31.2% of the Company’s operating expenses.

Depreciation charges grew 25.1% to RUR 866.8 million accounting for 21.8% of the Company’s operating expenses.

Q1 2008 material expenses rose 13.5% over Q1 2007 to RUR 431.7 million due to electricity rate growth and write-off of inventories their value not exceeding 20,000 rubles per unit, and accounted for 10.8% of the Company’s operating expenses.

Amount of payments to national telecom operators rose 17.9% to RUR 435.2 million due to increasing payments to Rostelecom and growing expenses for call termination services, and accounted for 11.0% of the Company’s operating expenses.

The Company continued to optimize the headcount aiming to raise its business efficiency. As a result, in Q1 2008 the Company managed to slash the average number of employees by 8.7% over a year-ago to 26,953 people and to bring the number of lines per employee to 151.6 representing a 9.6%-increase.

Q1 2008 capex amounted to RUR 190.8 million, decreasing 22.4% over Q1 2007. Digitalization rate of the Company’s local network climbed 3.55% y-o-y to 69.06%.