OREANDA-NEWS. November 11, 2009. OJSC VolgaTelecom (RTS: NNSI/NNSIP, MICEX: VTEL/VTELP, ADR: VLGAY) presents its financial and operating results for 9 months of 2009 as per the Russian Accounting Standards (RAS).

·         The Company’s revenues amounted to RUB 20,069 million, having increased by 3.1% vs. similar period of 2008;  

·         Telecommunications services sales also increased by 3.1% to RUB 19,068.9 million;

·         Net profit increased by 23.5% and amounted to RUB 3,176.6 million;

·         EBITDA increased by 17.1% to RUB 9,031.6 million;

·         EBITDA margin accounted for 45%.

VolgaTelecom’s key performance indicators for 9 months of 2009

Indicator

9months of 2009

9 months of 2008

Change

Sales revenues, RUB million

20,069.0

19,459.3

+3.1%

Telecommunications services sales, RUB million

19,068.9

18,497.5

+3.1%

Ordinary operations expenses, RUB million

15,635.9

15,412.2

+1.5%

Sales profit, RUB million

4,433.1

4,047.1

+9.5%

Sales profit with due account for losses caused by universal service provision, RUB million1

5,224.9

4,673.2

+11.8%

Income before tax, RUB million

3,925.8

3,485.7

+12.6%

OIBDA, RUB million2

8,080.6

7,277.3

+11.0%

OIBDA margin, %3

40.3

37.4

+2.9 percentage points

EBITDA, RUB million4

9,031.6

7,711.1

+17.1%

EBITDA margin, %5

45.0

39.6

+5.4 percentage points

Net profit, RUB million

3 176,6

2 572,8

+23.5%

Net profit margin, %

15.8

13.2

+2.6 percentage points

1 The dynamics of expenses and sales profit is substantially affected by the accounting policy of reflecting the expenses from universal service provision in ordinary operations expenses and compensation of losses caused by universal service provision in nonoperating revenues.  

2 OIBDA is calculated as the sum of sales profit and depreciation and amortization of property, plant and equipment.

3 OIBDA margin is calculated as OIBDA/sales revenues.

4 EBITDA is calculated as the sum of income before tax, interest due, depreciation and amortization of property, plant and equipment, lease payments expenses adjusted for the amount of interest receivable.  

5  EBITDA margin is calculated as EBITDA/ sales revenues.

Revenues and expenses for 9 months of 2009

Revenue structure (sales revenues), RUB million

 

9 months of 2009

9 months of 2008

Change, %

Intrazonal telephony services

3,396.,2

3,605.4

-5.8

Local telephony services

8,528.8

8,210.2

+3.9

Mobile radio, wire broadcasting, radio broadcasting and TV services 

554.7

 

515.6

+7.6

Mobile radio telephony (cellular) services

254.8

287.7

-11.4

Telegraphy services, data transmission network and telematic services

4,385.4

 

3,677.8

+19.2

Including data transmission services and Internet access services

4,284.7

 

3,569.0

+20.1

Interconnect and traffic transit services

1,948.3

2,200.1

-11.4

Other services (core operations)

0.78

0.77

+0.9

Fees on assistance and agency services

378.5

409.2

-7.5

Revenue from other sales (non-core operations)

621.6

 

552.6

+12.5

Positive dynamics of sales revenues was due to:

Increase in revenues from Internet leased line access services.

The key driver of growth of revenues from new services is the growth of revenues from Internet broadband access services, and in the first place the market of home users. In 2009 VolgaTelecom is practicing active marketing actions of increasing its subscribers’’ base. In particular, fully unlimited tariff plans were introduced to the market in a number of regions. As a result of arrangements realized by VolgaTelecom in the environment of increasing competition and aggressive dumping policy of the competitors the Company manages to ensure the growth of connections (both in “residential” segment and in “entities” segment). In Q 3-2009 the subscribers’ base of Internet broadband access services users has increased by 43.2% to 928 000 ports vs. similar period of the prior year.

Increase in local telephony services revenues.

Local telephony services revenues have increased by 3.9% vs. similar period of the prior year and amounted to RUB 8,528.8 million.

The major gain in local telephony services revenues was due to tariffs indexation effective since March 01, 2009. This fact, as well as the Company’s marketing actions of reducing the cost of network access serve as the factor of keeping positive dynamics of growth of local telephony services revenues in the environment of saturated market of traditional telephony and growing cost of consumed power resources. 

Decrease in revenues from intrazonal telephony services vs. the prior year is related to mobile substitution and also to the reduction of consumption of services caused by the effect global economic crisis. In particular, the number of outgoing intrazonal F2F and F2M calls both in “residential” segment and in “entities” segment has decreased vs. similar period of the prior year (by 5.4% on average).

Expenditure pattern, RUB million

 

9 months of 2009

9 months of 2008

Change, %

Depreciation and amortization of property, plant and equipment

3,647.5

3,230.3

+12.9

Labor costs

4,616.2

4,671.9

-1.2

Deductions to social insurance

1,092.3

1,092.5

0.0

Material costs

1,366.7

1,408.6

-3.0

Communications operators’ services costs

1,623.9

1,797.3

-9.6

Lease

637.2

459.5

+38.7

Including lease payments

428.4

266.8

+60.6

Other expenses – total

2,652.1

2,752.1

-3.6

For 9 months of 2009 VolgaTelecom’s expenses have grown vs. similar period of 2008 by 1.5% which is by 1.6% lower than the growth ratio of revenues. Optimization of operating expenses is a part of the Company’s Program intended at competitive recovery of services and the growth of free cash flow.

The growth of expenses in item “Amortization expenses” by 12.9% vs. 9 months of 2009 is related to the realization of investment program and commissioning of a large number of property, plant and equipment at the end of 2008. For 9 months of 2009 the commissioned fixed-capital assets amounted to RUB 1,090 million.

The realized arrangements resulted in the reduction of personnel costs, material costs, repair and maintenance costs for the services of outside entities, security costs, consulting, information and other services of outside entities. 

Reduction of communications operators’ services costs was due to the decrease in the volumes of traffic transited between the networks, which is caused by the desire of the subscribers to save amidst the crisis, as well as by the expansion of the Company’s proprietary intra-regional data transmission network and the reduction of costs for the transit of backbone Internet traffic.   

Operating efficiency indicators

 

9 months of 2009

9 months of 2008

Change,%

Staff on the payroll, men

30,100

33,018

-8.8

Number of lines per an employee, lines

169

154

+9.7

Revenue per an employee, RUB thousand

666.7

589.3

+13.1

Revenue per a line, RUB

3,938

3,818

+3.1

Investments

For the reporting period VolgaTelecom’s investments amounted to RUB 714.5 million. The composition of investments is as follows:

Composition of investments, RUB million

9 months of 2009

9 months of 2008

Traditional telephony

45.8

797.3

New services

423.1

1,362.8

Lines, data transmission network

146.7

332.0

IT investments

38.4

269.0

Other investments

60.5

431.6

Total

714.5

3,192.6

The largest share in the investments composition is the investment in the development of hi-tech, advanced telecommunications services (Internet broadband access, construction of NGN network) – 59.2% (for 9 months of 2008 – 42.7%).

The investments into the development of transmission lines and communications infrastructure amounted to RUB 146.7 million, the investments into the development of traditional telephony accounted for RUB 45.8 million or 6.4% in the total composition of investments.