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Dalsvyaz

November 2, 2004

Far East Telecommunications Company reports results for third quarter 2004

Net Income increased 260% and exceeded 1 billion rubles.

  • Operation Revenues increased 31%; 
  • Net Income increased 260% compare to the third quarter 2003, and 14% compared 1st half 2004. 
  • Mobile Revenue increased 72%; 
  • Internet Revenue increased 57%; 
  • International traffic increased 11,4%;
  • Long-distance traffic increased 13,4%; 
  • EBITDA(1) increased to 2,1 billion rubles or 260% compared the first 9 month 2003.

Open Joint Stock Company “Far East Telecommunications Company” (RTS: ESPK, MICEX: DLSV, OTC: FEEOY), the leader of telecommunication market of the Russian Far East Federal District, today announces un audited results under Russian Accounting Standards for third quarter, ended 30 September 2004.

FETEC OJSC posted its eight consecutive quarter of year-over-year revenue growth, as the joint company.

Operating revenues increased to 6.3 billion. Rubles or 31% compared to the third quarter 2003 (4,8 billion rubles). The additional increase in total revenue was driven by development of local service, growth of international and long distance traffic, increasing of mobile and new services revenues.

Revenue from telecommunications services to one line increased to 5 300 rubles, 23% compared to the third quarter 2003.

Net Income exceeded 1 billion rubles. Compared to the third quarter 2003 FETEC’s Net Income increased 260% to 1,062 billion rubles. Selling of shares of «Primtelefon» OJSC drove this result. Compared to the 1st half of 2004 Net Income increased 14%.

FETEC reported total operating expenses of 5,4 billion rubles in the third quarter 2004. In the third quarter 2003, reported total operating expenses were 4 billion rubles. This increase of 35% was primary driven by changing account structure with “Rostelecom” OJSC and increasing of depreciation. Account payable to Rostelecom increased to 746 million rubles, 55%, when traffic increased 13,4%. Depreciation increased double to 464 million rubles.

FETEC Vice President of Corporate Development Alexander Zheludkov said: «Today on the capital market Dalsvyaz should not be treated as the smallest regional operator, but as the company with the highest potential for growth. We are sure, that our greatest efforts to increase the quality of corporate governance, our active work oriented to the substitution of the old telephony switchboards for the digital ones, and also launching of the space telecommunications project and giving up its expensive overland kinds in the regions with low density of population will positively influence Dalsvyaz operational profitability and consequently the growth of its market capitalization in the nearest future.»

Account payable was raised to 4.5 billion rubles at the end of the third quarter 2004, from 1.8 billion rubles at the end of the third quarter 2003. Sort-term account payable increased to 1.9 billion rubles from 1.5 billion rubles in the third quarter 2003. Long–term account payable increased to 2.6 billion rubles from 0.3 billion rubles in the third quarter 2003. Issue of bond debt and making contracts for buying telecommunications equipment drove increase of long-term account payable for 2.3 billion rubles.

BUSINESS SEGMENT HIGHLIGHTS

Revenues from telecommunications services increased to 6.2 billion rubles, 31.6% compared to the third quarter 2003 (4,7 billion. rubles). In these same periods, respectively, the revenue share from local service is 35.7% (35.6%) in total revenue from telecommunications services, the revenue share of long-distance and international services is 36.5% (44.7%), the revenue share from mobile services is 4% (2.8%), and the share revenue from new services is 5.6% (4.8%). Other services share is 18.2% (12.1%).

Local (domestic) service

Local services revenue (sum of revenues from town and rural services) increased to 2.2 billion rubles, 31% compared to the third quarter 2003.

In comparison with the 3rd quarter of 2003 the amount of corporate clients of local communications increased by 5% up to 187,7 thousand organizations, the amount of physical entities among the subscribers of local communications increased by 9% up to 1 017 038 people. 

Long distance and international services

The result of the active marketing of telecommunications services was the increase of long-distance and international traffic. The volume of inter-urban traffic is 435 603 minutes; the volume of long-distance traffic is 27 566 minutes.

Inter-urban communications revenue in the 3rd quarter increased by 13,4% in comparison with the same period in 2003 and reached 2 billion rubles.

Long distance communications services in the 3rd quarter increased by 11,4% in comparison with the same period in 2003 and reached 394 million rubles.

Mobile service

Mobile revenues increased 72% to 234 million rubles in the third quarter 2004, compared to the third quarter 2003.

FETEC amount subscribers increased to 27,8 thousand people, increased by 2.8 times since the end of the third quarter 2003.

FETEC mobile market share is 100% of Magadan’s and 50% Kamchatka’s mobile markets. One of the main strategic goals of FETEC OJSC is to expand mobile market share in the Russian Far East.

New Services

Revenues from new services increased to 351,5 million rubles or increased 53%, compared to the third quarter 2003.

The Internet is the most popular service among all FETEC’s new services. The Internet revenues increased to 340 million rubles or 57% compared to the third quarter 2003.

A lot of attention FETEC paid to the marketing and development of new service “DSL – high speed Internet”. The highest demand to the DSL is in Primorsky Region of the Russian Far East. In the third quarter amount of FETEC’s subscribers increased three times to 4 thousand people.

THE MAIN CORPORATE EVENTS

To increase the quality of corporate management The Board of Directors ratified the conditions and formed 4 committees, including the Corporate Governance Committee, Human Resources, Motivation and Compensation Committee, Audit Committee, and Strategic Management Committee. The Board of Directors also made a decision to liquidate FETEC’s Jewish Autonomous Regional branch and to reorganize it into communications Hub of JAR. It will allow the company to decrease operational expenses at the expense of reduction of the administrative staff and reduction of fee (salary) fund. As of the 3rd quarter Far East Telecommunications Company’s market capitalization increased to $122 million, 12% compared with the 3rd quarter of 2003.

 ___________________________________________________________

(1) – EBITDA was accounted as: EBIT + amortization + payment %.

 # # #

To receive more information

- Shareholders, investors, and analysts, please, contact Investor Relations Department tel.: +8(4232) 208-500, ext. 1306 or email to: ir@dsv.ru;

- Mass media, please, contact Public Relations Department tel.: +8(4232) 220-860 or email to: pr@dsv.ru.

About the Company:

Open Joint Stock Company “Far East Telecommunications Company” (Dalsvyaz) incorporated on the 12th May 1994 is the largest regional operator in the Far East Federal District of the Russian Federation. Company’s covered area is 2,000 thousand square km with population over 5.6 million people. The equipped capacity of the FETEC is 1,205 million lines. At the end of 2003 the Company had 87% share of local (domestic) telecommunications market, 81% of the long distance and international telecommunications market, 72% of the Internet market, 100% mobile market at Magadan Region and 50% mobile market of Kamchatka Region. The detailed information about the Company is available at the company’s corporate web site www.dsv.ru. The information about Company’s ADR is available at www.adr.com.

The forward-looking information, which is included in this news-release, are the statements, made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. The news-release contains information about the future events and financial results, estimated by the Company in the future. These statements involve a number of risks and uncertainties. Among the factors that could cause future results include: deterioration of economy; changes of the laws, which are currently in force; increase in dependence on “Rostelecom”,OJSC, concerning the questions of proportion establishment, according to which the payment for international and long-distance traffic is divided: changes in rate of currency exchange; changes in percentage rates; changes in prices for raw materials and services, used by the issuer; changes in political situation in the country; military conflicts and cases of emergency; impossibility to continue the license for carrying out activity. The more detailed description of risks and uncertainties of the company you can find in the quarterly and annual reports of “FETEC”, OJSC. The majority of the mentioned factors are beyond the control or the possibility of prognostication on the Company’s behalf. Taking onto consideration all the above-mentioned information, the Company does not recommend to rely upon any forward-looking statements, included into this presentation. The Company does not commit itself to disclosing any changes to this presentation with the aim to show the events or circumstances, which took place after the date of this presentation, or with the aim o show the unforeseen events, with the exception of the cases when this disclosure is required in accordance to the Private Securities Litigation Reform Act of 1995.

 

 

 

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