OREANDA-NEWS. July 07, 2010. Sibirtelecom OJSC (RTS: ENCO/ENCOP, ENCOG/ENCOPG; MICEX: STKM/STKMP; ADR: ОТС - SBTLY, Frankfurt and Berlin Stock Exchanges – ISIN: US8257351036, WKN: 260452) – operator of telecommunication services in Siberian Federal District – provides its unaudited consolidated interim financial statements for 3 months period ended March 31, 2010 (hereinafter referred to as “1Q 2010”), that were made in compliance with the International Financial Reporting Standards (IFRS).

The unaudited consolidated interim financial statements include assets, liabilities and results of activity of Sibirtelecom OJSC and its subsidiary companies (hereinafter referred to as “the Company”). The primary activity of subsidiaries is provision of mobile communication and other telecommunication services.

Key financial indices according to the IFRS (mln. rubles):

 

3 months of

2010

3 months of

2009

Change,

%

Revenue from sales

19,070

18,461

3.3

OIBDA

7,407

7,222

2.6

OIBDA margin

38.8%

39.1%

 

EBITDA

6,981

7,278

(4.1)

EBITDA margin

36.6%

39.4%

 

Net Debt

16,317

18,078

(9.7)

Operating expenses

(16,373)

(15,161)

8.0

Operating profit

3,335

3,790

12.0

Operating profit margin

17.5%

20.5%

 

Profit before tax

1,276

2,779

 

Profit for the reporting period

851

2,005

 

Margin of profit for the reporting period

4.5%

10.9%

 

The Company’s revenues from sales

The Company’s consolidated revenue from sales for 1Q 2010 made up 9,683 mln. rubles, having increased by 206 mln. rubles, or by 2.2% in comparison with the similar period of 2009.

In the structure of the Company’s consolidated revenue the main components are  income from provision of local telephony services (3,132 mln. rubles) and mobile radiotelephony (cellular) communication (2,421 mln. rubles), or 32.3% and 25.0% respectively. Important items in the structure of revenue are income from services of data transfer network and telematic services (Internet) (1,620 mln. rubles) and from provision of intrazone telephony communication services (1,115 mln. rubles), or 16.7% and 11.5% respectively. Income obtained from the services of interconnection and traffic transmission amounted to 8.8% (854 mln. rubles) from consolidated revenue.

The basic factor of the Company’s revenue growth in the reporting period was the development of broad-band access services: the growing number of users of Internet access.

As compared with the same period of 2009, in 1Q 2010:

the greatest increase in revenues was obtained from providing services of data transmission network and telematic services (Internet) – 273 mln. rubles, or 20.3%. The main factors are the growing number of users of broad-band access (BBA) services and therefore the growth of income from providing access to the Internet. As of March 31, 2010 the number of BBA subscribers was 642.3 thousand users (+39.0% to the same period of 2009);

increase in revenues from rendering local telephony services amounted to 238 mln. rubles, or 8.2%, which is attributed to the aggregate effect of adjustment of fixed tariffs from March 1, 2009 and February 1, 2010;

decrease in revenues from providing intrazone telephony services amounted to 124 mln. rubles, or 10.0%, which is connected with reduction of traffic from fixed subscribers both to networks of landline and cellular operators and decrease of tariffs on intrazone connections with “long-range” tariff zones for some territories from January 30, 2010;

decrease in revenues from leasing of assets made up 101,0 mln. rubles, or 55.5%, due to deduction of the number of objects let on lease;

decrease in revenues from services of connection and traffic transmission amounted to 91 mln. rubles, or 9.6%, which was caused by reduction of transmitted traffic and introduction of discounts on traffic transmission tariffs from January 01, 2010.

The structure of the Company’s revenues from sales (mln. rubles):

Revenue type

1Q

Change

2010

2009

mln. rubles

%

Services of local telephone communication

3,132

2,894

238

8.2

Services of mobile radiotelephone (cellular) communication

2,421

2,434

(13)

(0.5)

Services of telegraph communication, data transmission and telematic communication services (Internet)

1,674

1,409

265

18.8

including services of data transmission network and telematic services (Internet)

1,620

1,347

273

20.3

Services of intrazone telephone communication

1,115

1,239

(124)

(10.0)

Services of connection and traffic transmission

854

945

(91)

(9.6)

Assistance and agency services

112

132

(20)

(15.2)

Services of mobile radio communication, wire broadcasting, television

58

115

(57)

(49.6)

Other services (primary types of activity)

2

3

(1)

(33.3)

Revenues from other sales

315

306

9

2.9

including revenues from leasing of assets

81

182

(101)

(55.5)

Total

9,683

9,477

206

2.2

The Company’s expenses

The Company’s consolidated expenses for 1Q 2010 reduced by 291 mln. rubles, or 3.5%, against the same period of 2009 and amounted to 8,025 mln. rubles.

Personnel expenses (30.6%), depreciation and amortization (24.1%) and other operating expenses (20.4%) form the biggest share of the total amount of expenses.

As compared with the same period of 2009, in 1Q 2010:

expenses on materials, repair and maintenance, utilities increased by 155 mln. rubles, or 20.4%, due to adjustment of tariffs on electric and thermal energy and growth of cost of connection of mobile and BBA subscribers, implementation of the program of universal communication services;

reduction of personnel costs by 220 mln. rubles, or 8.2%, which is referred to current optimization of the headcount;

decrease of other operating expenses amounted to 92 mln. rubles, or 5.3%, which was mainly caused by reduction of advertising expenses, reduction of allocations to the provision for doubtful debts and reduction of software expenses;

amount of the charged depreciation and amortization decreased by 89 mln. rubles, or 4.4%, due to growth of the share of completely depreciated fixed assets and suppression of the Company’s investment program in 2009;

decrease of expenses on telecoms’ services amounted to 45 mln. rubles, or 4.0%, due to reduction of initiated and landed traffic.

The Company’s expenses structure (mln. rubles):

Type of expenses

1Q

Change

2010

2009

2010

2009

Personnel expenses

(2,455)

(2,675)

220

(8.2)

Depreciation and amortization

(1,931)

(2,020)

89

(4.4)

Telecoms’ services

(1,088)

(1,133)

45

(4.0)

Materials, repair and maintenance, utilities

(914)

(759)

(155)

20.4

Other operating expenses

(1,637)

(1,729)

92

(5.3)

Total

(8,025)

(8,316)

291

(3.5)

The Company’s capital expenditure

The Company’s capital costs for 1Q 2010 amounted to 885 mln. rubles, having reduced by 114 mln. rubles, or 11.4%, as compared with the same period of 2009. The investments in the development of mobile radiotelephone (cellular) communication services made up 51.8% of the total volume of the Company's capital costs.

The Company’s financial results

As compared with the same period of 2009, in 1Q 2010:

The growth of OIBDA amounted to 471 mln. rubles, or 13.4%. OIBDA margin – 41.1%.

The operating profit increased by 560 mln. rubles, or 37.7%, and made up 2,046 mln. rubles, due to growing revenues (2.2%) and simultaneously decreasing costs (3.5%).

The structure of operating profit includes other operating income amounting to 388 mln. rubles, including compensation for losses from provision of universal communication services making up 285 mln. rubles.

The operating profit margin is 21.1%.

Profit before tax increased by 1,766 mln. rubles and reached 1,462 mln. rubles due to performance of operating profit, reduction of interest expenses, and positive behavior of profit from exchange difference during foreign currency valuation (by the results of 1Q 2010 profit made up 41 mln. rubles, whereas in 1Q 2009 the balance of negative exchange difference amounted to 956 mln. rubles).

The profit for the reporting period increased by 1,726 mln. rubles and reached 1,351 mln. rubles, due to the growth of profit before tax. The margin of profit for the reporting period – 14.0%.