OREANDA-NEWS. October 29, 2010. Rostelecom (hereinafter, “the Company”) (RTS, MICEX: RTKM, RTKMP; OTCQX: ROSYY), announces its unaudited consolidated IFRS financial results for the first six months ended June 30, 2010.

Consolidated revenues amounted to RUR 30.0 bln in the first six months of 2010.

OIBDA[1] reached RUR 5.8 bln; OIBDA margin stood at 19.4% and net profit amounted to RUR 1.9 bln.

The Company’s revenues for 1H10 amounted to RUR 30.0 bln compared with RUR 32.8 bln for the same period in 2009, mainly due to an expected decrease in revenue in a number of traditional segments. Alongside this, while remaining committed to the business diversification process, the Company raised revenues from high-tech and high-margin services to RUR 10.7 bln during the reporting period.  As a result, their weighting in the overall revenue breakdown increased to 35.7%.

Thus, compared to the same period last year, revenue from datacom and telematic service went up 24% and reached RUR 5.5. bln, first and foremost, due to ISP and the rollout of virtual private networks (VPNs).

Furthermore, revenue generated from intelligent network services (INS) increased to RUR 583 mln, which is 12% higher than during the same period in 2009.

An anticipated decrease in revenues in traditional segments, from DLD/ILD traffic and line lease was attributable to a decline in volumes of the respective traffic flows due to the ongoing migration of fixed-line subscribers to cellular networks, and also the completion of own networks by mobile operators.

Operating expenses, OIBDA, operating profit

The Company’s operating expenses for the first six months of 2010 amounted to RUR 27.8 bln, down nearly 10% y-o-y, mainly due to savings of direct expenses.  Payroll expenses for the first six months of 2010 decreased by 10% to RUR 4.9 bln as a result of the optimization of business processes and organizational structure.  OIBDA went up by 1% compared to the year-earlier period and totaled RUR 5.8 bln, while OIBDA margin reached 19.4%.

Depreciation and amortization amounted to RUR 3.8 bln, which is essentially unchanged compared to the figure recorded last year.

The company’s operating profit for the first six months of 2010 increased by 10% compared with the same period last year and amounted to RUR 2.2 bln.

Operating profit margin rose to 7.3%.

Other revenues and expenses

The Company’s other profits exceeded other expenses by RUR 329.0 mln, while this metric stood at RUR 50.0 mln in the same period last year.

Net profit

The consolidated net profit of the Rostelecom Group of companies amounted to RUR 1.9 bln in the first half of 2010, which is 31% higher than the same metric last year.  In addition, net profit margin came in at 6.3%.

Highlights during the reporting period

Rostelecom announced the results of a public auction at which Sberbank was selected to extend non-revolving credit lines for a total amount of RUR 30.0 bln for periods ranging from 24 to 36 months and with an interest rate ranging from 7.28% to 8.20%.

Rostelecom’s annual general shareholders meeting approved the merger of Rostelecom with seven regional telecommunications operators (RTOs) and Dagsvyazinform and also approved the applicable share swap ratios. The Company’s shareholders also approved the distribution of the net profit for 2009 under Russian Accounting Standards (RAS) as follows:

-         RUR 3,571,195,000 to raise the Company’s equity, or 70% of net profit;

-         RUR 1,530,388,000 to be paid out as dividends on the Company’s shares or 30% of net profit (on type A preferred shares, i.e. RUR 2.1005 per one share, with aggregate payout equal to 10% of net profit; RUR 1.4002 per one share on common shares, with aggregate payout equal to 20% of net profit).

The number of authorized common shares increased to 5,900,000,000 from 905,330,221 pursuant to an additional share issue related to the merger in 1Q11.

An extraordinary general meeting of shareholders is scheduled to be convened on November 10, 2010 to discuss the payout of interim dividends for 9M 2010 equal to 0.0000000411722654% of RAS net profit per one preferred share, and 0.0000000274519684% of net profit RAS net profit per one common share.

Rostelecom and RTOs have completed the procedure to buy back shares from shareholders that voted against or failed to vote on the merger issue.  A total of 10% of the value of the Company’s net assets was allocated to buy back these shares.

Rostelecom and the Comstar-UTS Group of companies completed a series of transactions involving the sale by Comstar Group to Rostelecom of a 25%+1 share in the charter capital of Svyazinvest. Within the framework of these transactions, Rostelecom transferred RUR 26 bln to the Comstar Group.

Appendices:

Condensed consolidated statement of comprehensive income for the first six months of 2010 and the first six months of 2009, RUR, mln, except earnings per share;

Condensed consolidated statement of financial position as of June 30, 2010 and December 31, 2009, RUR, mln;

Condensed consolidated cash flow statement for the first six months of 2010 and the first six months of 2009, RUR, mln.