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Dalsvyaz

August 27, 2004

FETEC OJSC announces results of activity in 2003 according to International Financial Reporting Standards

Net profit of FETEC OJSC increased by 2.6 times.

Vladivostok, August 27, 2004 – Open Stock Joint Company “Far East Telecommunications Company” (Russian Trade System: ESPK; Moscow Interbank Currency Exchange: DLSV; OTC, USA: FEEOY), the leader of telecommunication market of the Far East Federal District of the Russian Federation announces financial results of activity for 2003 in conformity with International Accounting Standards (IAS).

  • The main financial indices and results of activity for 2003 are as follows:
  • Net profit in 2003 increased by 2.6 times and amounted to 195.922 thousand rubles. 
  • Basic and diluted earnings per share amounted to 1.81 rubles, which in 3.2 times more than 2002 result.(1) 
  • Revenue from operating activity in 2003 increased by 21% as compared to previous year and amounted to 6.887 bln rubles showing constant efforts of FETEC executives in increasing profitability of the company operating activity 
  • Increase in long distance and international traffic amounted to 22.7% as a result of both tariffs reduction and intensive work carried out by the company in order to stimulate demand for these types of telephone calls. 
  • EBITDA increased by 2 times as compared to previous year and amounted to 2 bln rubles. 
  • The company’s development strategy was approved till 2010.

«Figures of 2003 are the result of our constant purposeful activity during the whole year. Events aimed at development and modernization of communication devices facilitated increase in volume and quality improvement of services rendered by the company. According to plan local, satellite and cellular communication were developed most intensively in 2003. The company managed to increase traffic growth and net profit as well as to achieve considerable growth in market capitalization. Today we face the challenge of the company active development and strengthening its position as a leader of Far Eastern telecommunication market. The main priority for us in 2004 is still development of local communication services, for which allocation of 73% of total capital investment is planned. Moreover, in order to strengthen the leading position of FETEC on communication service market we plan to promote new services such as Internet, IP-telephony and data transmission. Cellular communication is one more priority for the company. I am sure that with preserving the growth rates we will be able to multiply the company profit by more than three by the year 2010», - noted Igor Zabolotny, Director General of FETEC OJSC in his statement.

The main financial results of 2003 in ruble and dollar equivalent are given in consolidated table in the end of the press release.

In 2003 consolidated revenue from the company operating activity amounted to 6.8 bln rubles and increased figures of 2002 (5.6 bln) by 21%. Revenue from customer services amounted to 3.9 bln rubles, which is 1.27 times more than in 2002. Share of revenue from population in total revenue was 58.2%. Revenue share received from corporate sector amounted to 41.8% respectively.

The main factors that had positive influence on consolidated revenue were development of local telecommunication, increase in long distance and international traffic, implementation and extension of new services range as well as changes in communication service tariffs. Thus, in 2003 surplus in number of telephones amounted to 55.5 thousand units or 95% of the previous year index. Increase in long distance and international traffic amounted to 22.7% as a result of wide advertising campaign held in order to encourage demand for these telephone services. Income from traffic increase grew by 119% as compared to previous year and amounted to 2.9 bln rubles. Income from new telecommunication services increased by 41% and amounted to 307 mln rubles. Due to changes in communication service tariffs the company received additional 446.5 mln rubles.

The main factors affecting results of activity in 2003 were increasing expenses on bad debts and changes in mutual settlements with Rostelecom OJSC. Doubtful debts make more than 50% of the company receivables from state budget for communication services rendered by the company to certain category of consumers in conformity with effective legislation. Budget indebtedness amounted to 297.4 mln rubles and increased by 38% as compared to 2002 figures. To solve the problem the company is constantly working on levying outstanding payments.

During the year efforts were put to reduce the company staff number. Average staff number was reduced by 5.5% (1105 persons). In 2004 reduction of the company staff number will be continued.

After commissioning of new installations amortization charges increased by 32%. Thus, digital ATX commissioned in 2003 contributed greatly to improvement of communication services rendered by the company. One of important occasions of the year was installation of additional GSM standard cellular communication equipment in Kamchatka and Magadan Regions, which allowed 32% increase in number of the company subscribers.

In 2003 there were no changes in the company assets. Share capital of the company is 1.267 bln rubles as of December 31st. According to International Accounting Standards share profit amounted to 1.81 rubles, that is 3.2 more than 2002 result(1). The company paid out dividends in the amount of 0.40 rubles on common shares and 0.73 rubles on preferences. Increase in dividends as compared to previous year was 29% on common shares and 26% on preferences.

Net income of FETEC OJSC in 2003 amounted to 195.9 mln rubles, which is 2.6 times more than 2002 result (73.7 mln rubles). Increase in net income is a result of surplus in net assets of associated companies, reduction in losses from foreign currency exchange and reduction of income tax expences.

On the 31st of August from 11 till 12:30 AM Moscow time FETEC will be holding an Internet conference on FINAM company site – www.finam.ru, where the company’s executives will answer all your questions concerning financial results of FETEC OJSC activity in 2003.

For detailed information please contact Investor Relations Department – ir@dsv.ru or Public Relations Department – pr@dsv.ru.

About Far East Telecommunications Company: Open Joint Stock Company "Far East Telecommunications Company" (Dalsvyaz) incorporated on the 12th of May 1994 is the largest fixed-line operator in the Far East Federal District of the Russian Federation with the 142 million USD in revenue of the first half of 2003. The FETEC OJSC is one of the largest federal telecommunication companies by market capitalization (85 million USD as of December 31, 2002; capitalization of the company group by the end of the first half of 2004 was 125 million USD) and the first largest by growth of sales revenue at the first quarter 2003. Dalsvyaz’s licensed area covers the territory of 2,000 thou sq km with the population over 5.6 million people. The equipped capacity of the FETEC networks is 1,205 million lines. At the end of 2003 the Company had 87% share in the local communications market, provided 81% of inter-urban and international communications services and 72% of the Internet services. The detailed information about the Company can be viewed on the corporate site www.dsv.ru. The information about Company’s ADR can be viewed at www.adr.com.

Statements relating to future contained in the press release shall be “statements containing forecasts concerning future events” as they are interpreted by the USA securities legislation. The press release contains information about future events and financial results the company expects in future. These statements are potential risk objects of the company and uncertainty to some extent. The following factors may influence results expected by the company: worsening of economy; amendments in effective legislation; increasing dependability on OJSC Rostelecom on determination of proportion of payment for long distance and international traffic; changes in currency rate changes in interest rates; changes in prices on raw materials and services used by issuer; changes in the country political situation; war conflicts and emergencies; impossibility to prolong license for operation. More detailed description of the company potential risks is given in quarter and annual reports of FETEC OJSC. Most of the above factors are beyond the company control or any forecast possibilities. Taking into consideration the above the company does not recommend you to rely unreasonably on any statements of the press release containing forecast concerning future events. The company is not obliged to reveal any amendments to the press release in order to reflect events or circumstances that occurred after the date of the press release or in order to point at unexpected circumstances excluding cases where such disclosure may be required in conformity with the USA laws concerning securities.

FETEC OJSC

Main consolidated financial results

 

December 31, 2003

 

December 31, 2002

 

 

 

 thousand rubles

thousand US dollars(2)

thousand rubles

thousand US dollars(3)

 

 Earnings

6 887 446

233 833  

 5 665 594

 178 251

 

 Total Operating Expenses

6 614 473

224 566

 5 312 009

 167 126

 

 Operating Income

272 973

9 268

 353 585

 11 124

 

 Net Income

195 922

6 652

 73 732

 2 319

 

Basic and Diluted Earnings per Share

1,81

0,06 

 0,58

 0,01

 

 

 

(1). Profit allocated for dividends is limited by the profit recognized according to Provision for Accounting and Reporting in Russian Federation. Page 27, Notes to consolidated financial reporting.

(2). Conversion to US dollars is made at the rate of 29.4545 as of December 31, 2003.

(3). Conversion to US dollars is made at the rate of 31.7844 as of December 31, 2003.

 

 

 

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