OREANDA-NEWS. November 10, 2010. OJSC VolgaTelecom (RTS: NNSI/NNSIP, MICEX: VTEL/VTELP, ADR: VLGAY) presents its financial and operating results for 9 months of 2010 in accordance with the Russian Accounting Standards (RAS).

·         The Company’s sales revenues accounted for RUB 21, 264.3 million, having increased by 6.0% vs. similar period of 2009;

·         Telecommunications services sales increased by 5.4% to RUB 20, 103.7 million; 

·         Net profit has grown by 38.6% and amounted to RUB 4, 403.1 million;

·         EBITDA increased by 9.0% to RUB 9, 854.1 million;

·         EBITDA margin increased by 1.3 percentage points and accounted for 46.3%.

VolgaTelecom’s key performance indicators for 9 months of 2010  

Indicator

9 months of 2010

9 months of 2009

Change

Sales revenues, RUB million

21, 264.3

20, 069.0

plus6.0%

Telecommunications services sales, RUB million

20, 103.7

19, 068.9

plus5.4%

Ordinary operations expenses, RUB million

15, 703.5

15, 635.9

plus0.4%

Sales profit, RUB million

5, 560.7

4, 433.1

plus25.4%

Income before tax, RUB million

5, 591.6

3, 925.8

plus42.4%

OIBDA, RUB million1

9, 261.9

8, 509.5

plus 8.8%

OIBDA margin, %2

43.6

42.4

plus 1.2 percentage points

EBITDA, RUB million3

9, 854.1

9, 041.5

plus 9.0 %

EBITDA margin, % 4

46.3

45.0

plus 1.3 percentage points

Net profit, RUB million

4, 403.1

3, 176.6

plus38.6%

Net profit margin, %5

20,7

15,8

plus4,9 percentage points

Number of subscribers of:

fixed-line telephony (service numbers including), thousand units

broadband access services, thousand users

4, 768

1, 102

4, 809

928

- 0.9%

18.8%

cable TV, over-the-air-cable and IP TV services, thousand users

277

274

plus1.4%

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

2 OIBDA margin is calculated as OIBDA/sales revenues.

3 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.  

4 EBITDA margin is calculated as EBITDA/ sales revenues.

5  Net profit margin is calculated as Net profit/sales revenues.

Revenues and expenses for 9 months of 2010

Sales revenues structure, RUB million  

 

9 months of 2010

9 months of 2009

Change

Local telephony services

9, 260.8

8, 528.8

plus8.6%

Intrazonal telephony services

3, 286.8

3, 396.2

-3.2%

Mobile radio, wire broadcasting, radio broadcasting and TV services

567.5

554.7

plus2.3%

Telegraphy services, data transmission network and telematic services

4, 874.0

4, 385.3

plus11.1%

Including data transmission services and Internet access services

4, 762.3

4, 284.7

plus11.1%

Interconnect and traffic transit services

1, 890.4

1, 948.3

-3.0%

Other services (core operations)

224.3

255.6

-12.2%

Fees on assistance and agency services

363.0

378.5

-4.1%

Revenues from other sales (non-core operations)

797.5

621.6

plus28.3%

Total

21, 264.3

20, 069.0

plus6.0%

 Positive dynamics of sales revenues was ensured by: 

·         Increase in tariffs for regulated local telephony services since February 01, 2010 (Russia’s FTS order No 274-c/1 of November 11, 2009). For 9 months of 2010 local telephony services sales revenues accounted for RUB 9, 261 million (8.6% growth);

·         Development of broadband access services. In recent years the development of retail broadband access services is the priority for VolgaTelecom. The Company managed to increase substantially the subscribers’ base of Internet services users and thus compensate for the decrease in sales revenues from intrazonal telephony and traffic transit services. At the end of September 2010 the number of broadband access services users accounted for 1, 102, 000 subscribers; 18.8% growth or 175, 000 users vs. similar period of the prior year. For 9 months of 2010 Internet access services sales revenues accounted for RUB 4, 162 million (8.0% growth); of which access over dedicated lines – RUB 4, 066 million or 97.7%.

Decrease in intrazonal telephony services sales revenues is related to the reduction of intrazonal traffic due to mobile substitution. Vs. similar period of the prior year F2F traffic has reduced by 6.2%, and F2M traffic – by 5%; the largest reduction of outgoing intrazonal traffic (F2M) was observed in “Household” segment.

Expenditure pattern, RUB million 

 

9 months of 2010

9 months of 2009

Change

Depreciation and amortization of property, plant and equipment

3, 322.5

3, 647.5

-8.9%

Labor costs

4, 844.7

4, 616.2

plus4.9%

Deductions to social insurance

1, 123.2

1, 092.3

plus2.8%

Material costs

1, 448.8

1, 366.7

plus6.0%

Communications operators’ services costs

1, 529.6

1, 623.9

-5.8%

Lease

650.4

637.2

plus2.1%

Other expenses – total

2, 784.3

2, 652.1

plus5.0%

Total

15, 703.5

15, 635.9

plus0.4%

For 9 months of 2010 VolgaTelecom’s expenses have grown vs. similar period of 2009 by 0.4% which is by 5.6 percentage points lower than the growth ratio of sales 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.

Material costs for 9 months of 2010 accounted for RUB 1, 448.8 million having increased by 6% vs. similar period of the prior year. The increase in material costs is related to the increase in tariffs for electric and heat power, fuel and also to the increase in costs for materials to implement the plans of telecommunications services promotion. 

The growth rate of labor costs accounted for 4.9% which is related to the increase in salaries of major jobs to the amount of inflation changes.

Depreciation and amortization of property, plant and equipment accounted for RUB 3, 322.5 million, having reduced by 8.9%, which was caused by the reduction of investments in 2009 due to the implementation of anti-crisis measures intended at the growth of free cash flow.

Reduction of communications operators’ services costs is related to the decrease in the volumes of traffic terminated on the networks of mobile (cellular) operators due to mobile substitution. 

Operating efficiency indicators 

 

9 months of 2010

9 months of 2009

Change

Staff on the payroll, men

28, 252

30, 100

-6.1%

Number of lines per an employee, lines

177

169

plus 4.8%

Sales revenues per an employee, RUB thousand

752.7

666.7

plus 12.9%

Sales revenues per a line, RUB

4, 243

3, 938

plus 7.8%

Prime cost of RUB 100 of sales revenues, RUB

73.85

77.91

- 5.2%

Investments

For the reporting period VolgaTelecom’s investments amounted to RUB 4, 253.8 million, which is 6 times more vs. similar period of the prior year. The composition of investments is as follows: 

Composition of investments, RUB million

9 months of 2010

9 months of 2009

Traditional telephony

222.2

45.8

Value-added services

2, 524.6

423.1

Lines, data transmission network

873.4

146.7

IT investments

279.9

38.4

Other investments

353.7

60.5

Total

4, 253.8

714.5

Major trend of investments – value-added services (59.3% or RUB 2, 524.6 million of the total amount were allocated for the arrangement of Internet broadband access on the basis of xDSL, FTTx, Ethernet, NGN construction, etc.). More than 380, 000 broadband access ports were put into operation for 9 months of 2010, of which 280, 500 Ethernet/FTTx-based ports.

Major trends of investments for 9 months of 2010:

·         Arrangement of Ethernet/FTTx access (the investments amounted to RUB 1, 596.1 million); 

·         Arrangement of xDSL access (the investments amounted to RUB 535.5 million; 99, 500 xDSL-based broadband ports were put into operation);

·         NGN construction (the investments amounted to RUB 312.3 million; 92, 700 packet switching numbers were put into operation); 

·         Traditional telephony (the investments amounted to RUB 222.2 million; 51, 700 channel switching numbers were put into operation);

·         Construction of intra-regional multi-services data transmission network (the investments amounted to RUB 128.5 million).

Debt load

The growth of the Company’s net debt is related to the attraction of credit resources to perform the liabilities of shares repurchase presented by the Company’s shareholders within the framework of current reorganization of VolgaTelecom in the form of affiliation to Rostelecom, and also to finance the purchase of group of companies of Teleset Networks PCL providing local telephony and Internet access services. 

 

9 months of 2010

9 months of 2009

Change

Equity/Total assets1

0.55

0.62

-0.07

Net Debt,2 RUB million

12, 727.8

8, 910.7

plus 42.8%

Net Debt/EBITDAttm3

1.0

0.79

plus0.21

Interest due/EBITDA4

0.07

0.13

-0.06

Turnover of accounts receivable, days

22.77

22.81

-0.2%

Quick ratio

1.00

0.71

plus0.29

 1. Equity/Total assets is calculated as the ratio of Equity to the Total assets at the reporting period end.

2 Net Debt is calculated as the sum of borrowed liabilities adjusted for the amount of cash and cash equivalents.

3 Net Debt/EBITDAttm is calculated as the ratio of Net Debt to EBITDA for 12 months.

4 Interest due/EBITDA is calculated as the ratio of interest due expenses of Income statement to EBITDA for the reporting period.