Krasnodar, February 26, 2007: Southern Telecommunications Company (“UTK”) (RTS: KUBN, KUBNP; OTC USA: STJSY)], the principal fixed-line telecommunications provider for Russia’s Southern Federal District, today announced its preliminary financial results for the year 2006 in accordance with Russian Accounting Standards (RAS).
According to the preliminary data, "UTK" PJSC’s 2006 revenue is estimated at RUR 17,664.4 mln, representing a 2.58% decrease over the last year. The strict cost control policy allowed the Company to cut operating expenses by 8.48%, thereby raising the estimated net profit by 159.4% to RUR 791.7 mln. EBITDA for the reporting period is projected at RUR 5,961.0 mln, or 10.3% higher than in 2005.
Key financial highlights, RUR mln:
|
Description |
2005 Fact |
2006E |
y-o-y change, % |
|
Revenue |
18,133.1 |
17,664.4 |
-2.58 |
|
Profit before tax (PBT) |
701.9 |
1,269.4 |
80.86 |
|
Profit before tax margin, % |
3.87 |
7.19 |
3.32 |
|
EBITDA* |
5,403.2 |
5,961.0 |
10.3 |
|
EBITDA margin, % |
29.8 |
33.7 |
3.9 |
|
Net profit |
305.2 |
791.7 |
159.4 |
|
* EBITDA includes Earnings Before Interest, Taxes, Depreciation and Amortization |
A fast-back development of new technologies and marketing solutions enabled UTK to increase 2006 revenues from value-added services* by 24.8% to RUR 1,850.8 mln, in the result of which their share in the Company’s tariff earnings structure is estimated to have grown by 2.8% to 11.1%. In addition, earnings generated by xDSL Internet access services grew two-fold.
Revenues from local telecommunication services increased 7.92% over 2005 to RUR 8,406.2 million due to the increase in local tariffs from September 1, 2005.
In 2006 the Company continued to optimize the headcount aiming to raise UTK’s business efficiency. As a result the Company managed to slash the average number of employees by 8.6% to 34,426 people and bring a number of lines per employee to 117.7, a 11% increase.
Operating revenue and expenses, RUR mln:
|
Description |
2005 Fact |
2006E |
y-o-y change, % |
|
Revenue |
18,133.1 |
17,664.4 |
-2.58 |
|
Revenue from telecom services, including |
17,873.0 |
16,655.4 |
-6.81 |
|
Intra-zone communications |
2,598.1 |
3,043.6 |
17.14 |
|
Local telephony |
7,789.2 |
8,406.2 |
7.92 |
|
Interconnection and traffic transit services |
1,192.2 |
2,746.7 |
130.4 |
|
Value-added services** |
1,482.8 |
1,850.8 |
24.8 |
|
Including Internet earnings |
949.3 |
1,499.3 |
57.9 |
|
Of which via xDSL |
330.2 |
711.9 |
115.6 |
|
Other sales revenues (non-core activities) |
260.1 |
288.3 |
10.86 |
|
Operating expenses |
13,952.4 |
12,768.9 |
-8.48 |
|
Salaries and wages, social deductions |
5,448.0 |
5,284.8 |
-3.0 |
|
Depreciation and amortization |
2,285.0 |
2,608.0 |
14.13 |
|
Material expenses |
1,405.7 |
1,467.8 |
4.41 |
|
Payments to telecom operators |
2,563.1 |
995.5 |
-61.2 |
|
Including to OJSC “Rostelecom” |
2,045.7 |
66.4 |
-96.75 |
|
**the figures are non-comparable due to changes in accounting principles for revenues from value-added services (in 2006 ISDN and IP were excluded from the list of revenues from value-added services according to “Svyazinvest” OJSC |
According to the preliminary data, "UTK" PJSC 2006 capex amounted to RUR 2,080.7 mln, a 35.3% decrease vs. 2005. Capex were funded only from in-house funds. In 2006 48,940 lines were entered into service at "UTK" PJSC. Digitalization rate of the Company’s local network climbed 3.2% y-o-y and stood at 65.3% as of the beginning of 2007. The subscriber base of xDSL Internet access added 37,400 users (from 31,800 to 69,300 customers), the number of installed xDSL ports by end-2006 totaled 107,400.
Key operational highlights:
|
Description |
Measure unit |
2005 Fact |
2006E |
y-o-y change, % |
|
Capital expenditures |
RUR mln |
3,213.5 |
2,080.7 |
-35.3 |
|
In-house funds |
% |
49.5 |
100 |
x |
|
Urban/Rural Telephone Exchanges net additions, including: |
units, ths |
86.8 |
48.94 |
-43.6 |
|
Total number of main telephone sets at Urban/Rural Telephone Exchanges |
units, ths |
4,015.003 |
4,063.947 |
1.2 |
|
Commissioning of installed line capacity |
lines, ths |
254.035 |
214.474 |
-15.6 |
|
Including lines for replacement |
lines, ths |
85.905 |
121.11 |
41.0 |
|
Total installed capacity of Urban/Rural Telephone Exchanges |
lines, ths |
4,254.081 |
4,335.696 |
1.9 |
|
Digitalization of local network (Rural/Urban Telephone Exchanges) |
% |
62.3 |
65.5 |
3.2 |
|
Average number of employees |
employees |
37,662 |
34,426 |
-8.6% |
|
Number of lines per employee |
lines |
106 |
117.7 |
11.0% |
Commenting on "UTK" PJSC 2006 preliminary results, the Company’s Deputy Director General – Director for Economics and Finance Alexander Dobryakov pointed out: “Implementing the Company’s 2006 business plan designed to fully employ the Company’s in-house funds, "UTK" PJSC displays positive dynamics of financial and operating metrics in comparison with the previous year. Net income was up 159.4%. Revenues from value-added services advanced by 24.8%, which allowed "UTK" PJSC to retain the leading positions on the VAS market of the South federal district.”
* Value-added services rendered by "UTK" PJSC include: VPN services on the basis of MPLS and other technologies; services of data transmission; Internet access services (hardwired IP-connection, dial-up access, xDSL-based broadband access, Ethernet to the home, wireless access on the basis of Wi-Fi technology); digital TV services (IPTV); video telephony and video conferencing; intelligent services (on the basis of SCP-SSP); content services (including on the basis of Call-centers); Hosting and Co-location services.
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