OREANDA-NEWS. July 08, 2010. Sibirtelecom (RTS: ENCO/ENCOP, ENCOG/ENCOPG; ICEX: STKM/STKMP; ADR: SBTLY, Frankfurt and Berlin stock exchanges ISIN: US8257351036, WKN: 260452) a telecommunications operator in the Siberian Federal District, presents its unaudited consolidated interim financial statement for the period of three months ended March 31, 2010 (hereinafter the first quarter of 2010), drafted in accordance with international financial reporting standards (IFRS).

The unaudited consolidated interim financial statement includes the assets, liabilities and results of the financial activities of Sibirtelecom and its subsidiaries (hereinafter, the Company).  The main activity of subsidiaries is mobile and radio (cellular) services and other telecommunications services. 

Headline financial indicators, IFRS (RUR mln):

 

3M 2010  

3M 2009  

Change, %

Revenue

9,683

9,477

2.2

OIBDA[1]

3,977

3,506

13.4

OIBDA margin

41.1%

37.0%

 

EBITDA[2]

4,018

2,550

57.6

EBITDA margin

41.5 %

26.9 %

 

Net Debt[3]

16,317

18,078

(9.7)

Operating expenses[4]

(8,025)

(8,316)

(3.5)

Operating profit

2,046

1,486

37.7

Operating margin

21.1%

15.7%

 

Pre-tax profit

1,462

(304)

 

Profit during the reporting period

1 351

(375)

 

Profit margin during the reporting period

14.0%

(4.0)%

 

Revenue  

The Companys consolidated revenue for the first quarter of 2010 amounted to RUR 9,585 mln, which represents an increase of RUR 206 mln, or 2.2% compared to the same period in 2009.

In the breakdown of the Companys revenue mix, the main components include the provision of local voice services (RUR 3,132 mln), as well as mobile and radio (cellular) telephony (RUR 2,421 mln) or 32.3% and 25.0%, respectively.  Other major revenue items include datacom and telematic services (Internet) (RUR 1,620 mln) and the provision of intrazonal telephony (RUR 1,115 mln) or 16.7% and 11.5%, respectively.  Revenue derived from interconnect and traffic transmission accounted for 8.8% (RUR 854 mln) of consolidated revenue.

The Companys main revenue growth drivers in the reporting period were the expansion of broadband Internet access, i.e. an increase in the number of Internet users.

Compared to the same period in 2009, during the first quarter of 2010:

the biggest gain in revenue came from the provision of datacom and telematic services (Internet) RUR 273 mln or 20.3%.  The main factor behind this growth was the expansion of the broadband subscriber base and, respectively, a rise in revenue from dedicated Internet access. As of March 31, 2010 the number of broadband Internet users amounted to 642,300 (+39.0% year-on-year);

growth in revenue from the provision of local voice services amounted to RUR 238 mln, or 8.2%, which was attributable to the aggregate effect of indexation of regulated tariffs as of March 1, 2009 and also as of February 1, 2010.  

the decline in revenue from the provision of intrazonal telephony amounted to RUR 124 mln, or 10.0%, which was attributable to a decrease in traffic from fixed-line subscribers to fixed-line networks, and to the networks of cellular operators, and also lower intrazonal tariffs for calls in a number of areas with long tariff zones;

the decrease in revenue from line leasing amounted to RUR 101.0 mln, or 55.6%, which was attributable to a decrease in the number of leased facilities;

the decrease in interconnect and traffic transmission services amounted to RUR 91 mln, or 9.6%, which was attributable to a downturn in the volume of traffic transmitted and the introduction of discount tariffs as of January 2010 on traffic transmission depending on the volumes of services provided.

Revenue breakdown (RUR, mln)

Revenue item

For the first quarter of

Change

2010

2009

RUR, mln

%

Local voice

3,132

2,894

238

8.2

Mobile and radio (cellular) telephony

2,421

2,434

(13)

(0.5)

Telegraph, datacom and telematic services (Internet)

1,674

1,409

265

18.8

incl. Datacom and telematic services (Internet)

1,620

1,347

273

20.3

Intrazonal telephony

1,115

1,239

(124)

(10.0)

Interconnect and traffic transmission

854

945

(91)

(9.6)

Outsourcing and agency

112

132

(20)

(15.2)

Mobile and radio, wire broadcasting, radio broadcasting, television

58

115

(57)

(49.6)

Other (main types of activity)

2

3

(1)

(33.3)

Other

315

306

9

2.9

incl. Line leasing

81

182

(101)

(55.5)

Total

9,683

9,477

206

2.2

 

 

 

 

 

 

Cost side

The Companys consolidated expenses decreased by RUR 291 mln in the first quarter of 2010, or by 3.5% compared to the same period in 2009 and amounted to RUR 8,025 mln. In the expense breakdown the largest proportions fell to payrolls (30.6%), depreciation and amortization (24.1%), and other operating expenses (20.4%).

Compared to the same period in 2009, in the first quarter of 2010:

expenses for materials, repair and maintenance, and utilities increased by RUR 155 mln, or 20.4%, which was attributable to tariff indexation for electricity and heat, and also a rise in expenses for the connection of mobile and broadband subscribers, and implementation of a universal telecommunications services program;

payroll expenses decreased by RUR 220, or by 8.2%, which was attributable to headcount reduction efforts;

the decline in other operating expense amounted to RUR 92 mln, or 5.3%, which was mainly attributable to a decrease in advertising costs, lower deductions to the dubious debt reserve, and also a decrease in software product expenses;

the amount of accrued depreciation and amortization declined by RUR 89 mln or by 4.4%, which was attributable to an increase in the proportion of fully amortized fixed assets and containment of the Companys 2009 investment program;

the decrease in interconnect expenses amounted to RUR 45 mln or 4.0% as a result of a decrease in the origination and termination of traffic. 

Expenses breakdown (RUR, mln)

Expense item

For the first quarter of

Change

2010

2009

RUR, mln

%

Payrolls

(2,455)

(2,675)

220

(8.2)

Depreciation and amortization

(1,931)

(2,020)

89

(4.4)

Interconnect

(1,088)

(1,133)

45

(4.0)

Materials, repair and maintenance, utilities services

(914)

(759)

(155)

20.4

Other operating expenses

(1,637)

(1,729)

92

(5.3)

Total

(8,025)

(8,316)

291

(3.5)

 Capital expenditure

The Companys capital expenditure amounted to RUR 885 mln in the first quarter of 2010, which is RUR 114 mln lower, or 11.4% less than in the same period of 2009.  The amount of investment allocated for the development of mobile and radio (cellular telephony) amounted to 51.8% of the total volume of the Companys capital expenditure. .

Financial results

Compared to the same period in 2009, in the first quarter of 2010:

The rise in OIBDA amounted to RUR 471 mln, or 13.4%.  OIBDA margin reached 41.1%.

Operating profit increased by RUR 560 mln, or 37.7% and amounted to RUR 2,046 mln, which was attributable to an increase in revenue (2.2%) and a concomitant decrease in expenses (3.5%). The composition of operating profit reflected other operating revenue equal to RUR 388 mln, including compensation of losses from the provision of universal telecommunications services amounting to RUR 285 mln. Operating margin stood at 21.1%.

Pre-tax profit increased by RUR 1,766 mln and amounted to RUR 1,462 mln, which was attributable to the dynamics of operating profit, a decrease in interest expenses, and also positive profit trends in foreign exchange currency differences (profit equal to RUR 41 mln was generated in the first quarter of 2010, whereas a negative balance on foreign exchange currency difference amounting to RUR 956 mln was recorded in the first quarter of 2009).

Profit during the reporting period increased by RUR 1,726 mln and amounted to RUR 1,351 mln, which was attributable to an increase in pre-tax profit.  Profit margin during the reporting period reached 14.0%.

The full version of Sibirtelecoms first quarter 2010 unaudited consolidated interim financial statement drafted to IFRS can be viewed on the operators corporate website at www.sibirtelecom.ru in the section Investment and Financial Reports (in Russian). 

[1] OIBDA is calculated using the following formula: Operating profit + Depreciation and amortization.

[2] EBITDA is calculated using the following formula: Profit during the reporting period + Income tax + Depreciation and amortization + Financial expenses Interest revenue on pension plan assets Interest revenue on financial assets.

[3] Debt debt is calculated using the following formula: Long-term borrowing liabilities + Current borrow obligations Cash and cash equivalents Ready-for-sale promissory notes and bonds.

[4] Operating expenses are calculated using the following formula: Payroll expenses + Depreciation and amortization + Interconnect expenses + Materials, repair and maintenance, utilities + Other operating expenses.