OREANDA-NEWS. On 05 August 2008 was announced, that OJSC VolgaTelecom’s H108 sales under Russian Accounting Standards (RAS) totaled RUR 12,947.4 million, a gain of 5.7% over the fist half of 2007.  OJSC VolgaTelecom delivered telecommunications services revenues of RUR  12,292.5 million, a 5.9% y-o-y increase, and generated operating profit of RUR 2,712.0 million (87.4 % of H107). OJSC VolgaTelecom’s H108 sales growth is attributable to surge in revenues from dedicated Internet access services (a 106.4% y-o-y rise) and services of intrazonal connection of fixed-line subscribers to mobile subscribers (traffic increased 8.8 %)

 Key financial and performance indicators for the six months ended June 30, 2008:

- earnings before taxes were RUR 2,349.3 million (up 1.0%);

- net margin totaled 13.6%;

- OIBDA was RUR 4,850.9 million (up 1.2 %);

- OIBDA margin accounted for 37.47%;

- EBITDA was RUR 5,089.3 million (up 15.8%);

- EBITDA margin amounted to 39.31%;

- net profit totaled RUR 1,763.1 million (up 5.9%).

Regulatory factors that affected profit:

- Cancellation of compensatory surcharge under RF Government regulation No 627 of 19.10.2005 since January 1,2008 (which resulted in RUR 204 mln drop in revenues from DLD and ILD traffic initiation);

- Connection points servicing tariff cancellation since March 01, 2008 according to RF Government regulation No 666 of 12.10.2007;

- Entry into effect in Q307 of RF Government regulation No477 of July 25,2007 introducing changes into Rules of providing local, intrazonal, DLD and ILD services:

reducing price of providing access to local telephone network in premises equipped with telephone connections, to the level of 30% of monthly subscriber fee;

change of local telephone connection tariffication unit  (a fractional tariffication unit which is at least a half of tariffication unit is considered to be a full unit, and a fractional tariffication unit which is less than a half of tariffication unit is considered to be a half of tariffication unit).

The Company’s H108 high-tech communications services revenues amounted to RUR 2,289.3 million (17.7% of the Company’s sales). Their largest proportion (RUR 1,712.9 million)   was derived from dedicated Internet access services provision (up 6.4% from a year ago). Broadband Internet subscribers at July 1,2008 totaled 549.7 thousand (a 3-fold y-o-y increase).

OJSC VolgaTelecom’s expenses for the six months ended June 30, 2008 were RUR 10,235.3 million (up 11.9%).

Rise in expenses was triggered by increase in investments in communications facilities development in recent years (RUR 5,244.3 million in year 2005, RUR 5,882.4 million in year 2006, RUR 7,454.2 million in year 2007 and RUR 1,640.4 million in H108). H108 depreciation charges grew RUR 450.7 million or 26.7% from a year ago. Universal services project implementation entailed additional lease payments expenses in the amount of RUR 123.6 million. Expenses for universal services provision in January-June period of 2008 totaled RUR 320.1 million.   Herewith pursuant to the Company’s accounting policy, the expenses related to universal services provision are recorded at cost; compensation for losses suffered at universal services provision  are recorded as other revenues.  Operating expenses growth rate could have been 9.0% if the Company had different accounting policy.

Average headcount decreased 10.3 % to 33,494. Lines per employee rose 13.6% to 152 lines in the reporting period. Revenue per employee grew to RUR 387 thousand (up 17.9%).                H108 revenue per line totaled RUR 2,543, a 3.8 % y-o-y increase.

In the first six months of 2008 OJSC VolgaTelecom continued implementation of investment programs aimed to upgrade communications network and develop leading-edge, high-tech services. H108 investments were RUR 1,640.4 million (73% of H107).

In January-June period of 2008 OJSC VolgaTelecom commissioned new automatic telephone exchanges with total capacity of 43,992 lines including 17,352 lines of city telephone network and 26,640 lines of rural telephone network. Special attention was paid to further construction of digital transport network. Main telephone lines increased 16.3 thousand to 4,777.7 thousand in the first six months of 2008.