OREANDA-NEWS. On 04 August 2008 Southern Telecommunications Company (“UTK”) [(RTS: KUBN, KUBNP; МICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the principal fixed-line telecommunications provider for Russia’s Southern Federal District announced its operating and financial results for the first half of 2008 compiled under Russian Accounting Standards (RAS).

Main corporate events in the second quarter of 2008:

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.

the Company placed in full its first issue of credit linked notes (CLNs) worth RUR 3.5 bln;

term of office of UTK’s CEO Alexander Andreev was extended till 15 June 2010;

the Company proved the tax claims on the results of a tax audit of UTK’s books for 2004-2006 to be groundless.

H1 2008 revenue is up 6.5% over H1 2007 to RUR 10.2 billion;

H1 2008 EBITDA increased 0.5% over H1 2007 to RUR 3,776.4 million representing an EBITDA margin of 36.9% (down 2.2 percentage points);

Revenue from data transmission and Internet services increased by 62.5% to RUR 1,955.1 million. Share of revenues from these services in total telecommunications revenue increased by 6.8 percentage points over H1 2007 to 19.9%.

UTK’s H1 2008 revenue made RUR 10,247.8 million, representing a 6.5%- increase over H1 2007. Operating expenses grew by 16.6% to RUR 7,890.3 million. Thus, H1 2008 operating profit was down 17.5% to RUR 2,357.4 million and H1 2008 net profit decreased by 21.7% to RUR 835,1 million. EBITDA for the reporting period amounted to RUR 3,776.4 million or 0.5% higher than in H1 2007.

Revenues from local telephone services increased by 3.6% to RUR 4,681.2 million due to introduction of three tariff plans throughout the whole licensed territory of "UTK" PJSC from February 1, 2008, and accounted for 47.5% of the Company’s telecom revenues.

Revenues from intra-zonal telephone services rose 0.8% to RUR 1,830.5 million accounting for 18.6% of the Company’s telecom revenues.

H1 2008 revenues from telegraph, data transfer and telematic services increased by 56.3% to RUR 2,032.1 million accounting for 20.6% of the Company’s telecom revenues. Revenues from data transfer and Internet access services rose by 62.5% while the number of Internet broadband access subscribers surged 119.3% to 234.9 thousand users.

Revenues from interconnection and traffic transit services decreased 19.0% to 1,130.3 million roubles accounting for 11.5% of the Company’s telecom revenues.

H1 2008 expenses for wages and salaries increased 16.3% over a year-ago to RUR 2,414.2 million due to lump-sum bonus payment based on Q1 2008 results, and accounted for 30.6% of the Company’s operating expenses.

Depreciation charges grew 23.6% to RUR 1,739.5 million accounting for 22.0% of the Company’s operating expenses.

H1 2008 material expenses rose 10.2% over H1 2007 to RUR 852.9 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 12.6% to RUR 851.3 million due to increasing payments to Rostelecom, growing expenses for call termination services and expenses for lease of satellite channels to ensure provision of universal telecom 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 H1 2008 the Company managed to slash the average number of employees by 9.3% over a year-ago to 26,602 people and to bring the number of lines per employee to 153.4 representing a 10.1%-increase.

H1 2008 capex amounted to RUR 1,525.8 million, increasing 43.5% over H1 2007. Digitalization rate of the Company’s local network climbed 3.36% y-o-y to 69.4%.