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Svyazinvest

May 16, 2003

Rostelecom reports first quarter 2003 RAS unaudited net profit increase to rur 1,248 million

Revenue for the first quarter 2003 amounted to RUR 6,362.8 million, an increase of 27.6% versus first quarter 2002*.  Based on the adjusted first quarter 2002 numbers, revenue growth was 2.6%;

·        Domestic long-distance traffic**was up 21% year-on-year;

·        Outgoing international traffic grew by 2.6%, while incoming international traffic surged 25.1% compared to the first quarter 2002;

·        Operating profit for the first quarter 2003 increased 7% to RUR 2,217.5 million, while compared to adjusted operating profit for the first quarter 2002 it increased 11.5%;

·        Net profit increased by 3.1% to RUR 1,248 million.

 

Rostelecom (NYSE: ROS; RTS: RTKM), Russia’s national long-distance telecommunications operator, today announcedunaudited results for the first quarter 2003 in accordance with Russian accounting legislation - RAS. 

Domestic long-distance (DLD) traffic for the first quarter totaled 1,984.6 million minutes, a year-on-year increase of 21%.  DLD revenues increased year-on-year by 13.5% to RUR 2,330.5 million. 

Outgoing international long-distance (ILD) traffic in the first quarter grew to 307.2 million minutes, a 2.6% increase over the first quarter 2002.  ILD revenues from Russian operators and subscribers declined by 6.9% to RUR 1,864.7 million.  

Incoming international traffic surged 25.1% year-on-year to 264.5 million minutes.  Revenues from international operators (only for telephone traffic termination) totaled RUR 939.8 million, representing a 7.7% decline compared to the first quarter 2002.  The revenue decline is due by Rostelecom’s efforts to decrease settlement rates with international operators throughout 2002.   

Total revenues for the first quarter 2003 were RUR 6,362.8 million, up 27.6% year-on-year.  As already reported, the Company has moved to a new method of accounting for operations with international operators in its RAS financial statements, which takes into account the total amounts of both revenues from and payments to international operators.  Based on the adjusted 2002 first quarter number, revenue growth was 2.6%.  

First quarter 2003 operating costs amounted to RUR 4,145.2 million, a 42.2% increase versus first quarter 2002.  Operating costs, compared to the adjusted first quarter 2002 number, decreased by 1.5%. 

The main reason for the decrease in operating costs was the 28.4% decline in depreciation to RUR 931.3 as a number of Rostelecom’s leased assets were fully depreciated in the second half of 2002.

At the same time, staff costs increased by 14.9% to RUR 639.9 million due to increases in payrolls to keep up with inflation and one-off redundancy payments.  There was a RUR 40 million increase in insurance costs associated with the fact that Rostelecom insured its production equipment in 2003.  Expenses related to public utilities services increased by 29% to RUR 133 million as the natural monopolies’ prices continued to grow.  A 31% growth in payments to Russian operators (to RUR 378 million) is explained by the late recognition of such payments in the first half 2002 – some of the payments related to the first and second quarters were recognized only in the third quarter 2002.

EBITDA was RUR 3,148.8 million, representing a 6.6% decline year-on-year.  However, if compared to EBITDA of the first quarter 2002 adjusted for the new accounting method, the decline was 4.3%.  This decline reflects growth in some of the operating costs as described above.

Operating profit grew by 7% to RUR 2,217.5 million, while compared to adjusted operating profit for the first quarter 2002 it increased 11.5%.

The results from other operating activities amounted to RUR -443.1 million.  The negative result is primarily due to the more conservative method of dealing with bad debt provisions.  First quarter 2003 bad debt expense was RUR -326,5 million, while there was no bad debt expense in the first quarter of 2002.  Additionally, taxes other than on income totaled RUR (77.4) million. 

Results from other non-sales activities amounted to RUR 19.4 million.

First quarter 2003 net profit increased by 3.1% year-on-year to RUR 1,248 million.  

Balance Sheet, RUR ‘000

 

31.12.2002

31.03.2003

% change y-o-y

ASSETS

 

 

 

Non-current assets, incl.

22,909,612

22,717,972

-0.8%

Intangible assets

21

20

-4.8%

Fixed assets

17,143,830

16,273,305

-5.1%

Construction in progress

2,863,205

3,363,674

17.5%

Long-term financial investments

2,517,331

2,543,210

1.0%

Other non-current assets

385,225

537,763

39.6%

Current assets, incl.

18,039,517

19,210,416

6.5%

Inventory

690,868

981,326

42.0%

VAT on obtained property

1,988,908

1,951,477

-1.9%

Accounts receivable, incl.

9,808,766

10,397,708

6.0%

Accounts receivable from international operators

3,911,015

4,458,205

14.0%

Bad debt provision

-1,956,012

-2,282,496

16.7%

Short-term financial investments

4,259,058

3,254,834

-23.6%

Cash and cash equivalents

1,291,917

2,625,071

103.2%

BALANCE

40,949,129

41,928,388

2.4%

 

 

 

 

SHAREHOLDERS EQUITY AND LIABILITIES

 

 

 

Shareholders equity

19,296,556

20,521,457

6.3%

Liabilities, incl.

21,652,573

21,406,931

-1.1%

Long-term liabilities, incl.

7,291,882

6,908,000

-5.3%

Loans due more than in 12 months

847,687

865,978

2.2%

Short-term liabilities, incl.

14,360,691

14,498,931

1.0%

Accounts payable to international operators

3,667,780

3,720,848

1.4%

Loans due less than in 12 months

4,389,150

4,771,418

8.7%

BALANCE

40,949,129

41,928,388

2.4%

 


 

Profit and Loss Statement, RUR ‘000

 

Q1 2002

Q2 2003

% change y-o-y

Revenue

4,986,056

6,362,770

27.6%

Revenue adjusted for the new method of accounting for operations with international operators

6,199,030

6,362,770

2.6%

Operating expenses

2,914,483

4,145,247

42.2%

Operating expenses adjusted for the new accounting method

4,210,349

4,145,247

-1.5%

Depreciation

1,301,437

931,280

-28.4%

EBITDA

3,373,010

3,148,803

-6.6%

EBITDA adjusted for the new accounting method

3,290,118

3,148,803

-4.3%

Operating profit

2,071,573

2,217,523

7.0%

Operating profit adjusted for the new accounting method

1,988,681

2,217,523

 

 

 

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