OREANDA-NEWS. On November 07, 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 nine months of 2008 compiled under Russian Accounting Standards (RAS), reported the press-centre of UTK.

Main corporate events in the third quarter of 2008:

the Company determined the new structures of the Committees of its Board of Directors;

UTK renewed composition and term of office of its Management Board;

Southern Telecommunications Company took out a patent for an industrial pattern of the telephone "Card Number One";

UTK put out of operation the last step-by-step telephone exchange ATE-5 located in its licensed territory;

Southern Telecommunications Company acted as a technical sponsor of VII International Investment Forum "Sochi - 2008";

the Company paid out 2007 dividend on preference shares;

the Company made the first principal payment in the amount of USD 25 million to repay Credit Suisse International syndicated credit;

the Ninth Arbitration Court declared the tax claims served by Inter-Regional Tax Inspectorate № 7 against "Southern Telecommunications Company" PJSC on the results of a tax audit of the Company’s books for 2004-2006 to be groundless;

the Moscow Arbitration Court declared groundless the back-tax claims issued against Southern Telecommunications Company in relation to the Company’s activities in 2002-2003.

9m 2008 revenue is up 6.0% over 9m 2007 to RUR 15.5 billion;

9m 2008 EBITDA decreased 3.6% over a year ago to RUR 5,621.2 million representing an EBITDA margin of 36.3% (down 3.7 percentage points);

Revenue from data transmission and Internet services increased by 62.0% to RUR 3,045.0 million. Share of revenues from these services in total telecommunications revenue increased by 7 percentage points over 9m 2007 to 20.5%.

* EBITDA  includes Earnings Before Interest Payable, Taxes, Leasing Payments, Depreciation and Amortization minus Interest Receivable

UTK’s 9m 2008 revenue made RUR 15,465.0 million, representing a 6.0%- increase over 9m 2007. Operating expenses grew by 13.9% to RUR 11,602.0 million. Thus, 9m 2008 operating profit was down 12.2% to RUR 3,863.0 million and net profit decreased by 31.4% to RUR 1,186 million. EBITDA for the reporting period amounted to RUR 5,621.2 million or 3.6% lower than in 9m 2007.

Revenues from local telephone services increased by 3.0% to RUR 6,989.6 million due to introduction of three tariff plans across the whole licensed territory of "UTK" PJSC from February 1, 2008, as well as due to bringing the unlimited tariffs to their maximum permitted level from August 20, 2008, and accounted for 47.0% of the Company’s telecom revenues.

Revenues from intra-zonal telephone services have not changed making 2,768.3 million roubles and accounting for 18.6% of the Company’s telecom revenues.

9m 2008 revenues from telegraph, data transfer and telematic services increased by 56.1% to RUR 3,163.3 million accounting for 21.3% of the Company’s telecom revenues. Revenues from data transfer and Internet access services rose by 62.0% while the number of Internet broadband access subscribers surged 121.3% to 292.1 thousand users.

Revenues from interconnection and traffic transit services decreased 21.2% to 1,672.8 million roubles accounting for 11.3% of the Company’s telecom revenues.

9m 2008 expenses for wages and salaries increased 13.3% over a year-ago to RUR 3,403.6 million and accounted for 29.3% of the Company’s operating expenses.

Depreciation charges grew 23.6% to RUR 2,638.1 million accounting for 22.7% of the Company’s operating expenses.

9m 2008 material expenses rose 8.4% over 9m 2007 to RUR 1,287.4 million due to electricity rate growth and write-off of inventories their value not exceeding 20,000 rubles per unit, and accounted for 11.1% of the Company’s operating expenses.

Amount of payments to national telecom operators rose 7.1% to RUR 1,284.6 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 11.1% of the Company’s operating expenses.

In 9m 2008 the Company managed to slash the average number of employees by 9.2% over a year-ago to 26,414 people and to bring the number of lines per employee to 154.3 representing a 9.9%-increase.

9m 2008 capex amounted to RUR 2,848.8 million, increasing 33.5% over 9m 2007. Digitalization rate of the Company’s local network climbed 3.24% y-o-y to 69.81%.