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COMSTAR - UTS

September 4, 2008

COMSTAR — United TeleSystems OJSC second quarter and first six months of 2008 financial results

MOSCOW---- “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE:CMST), the leading integrated telecommunications operator in Russia and the CIS, today announced its unaudited consolidated US GAAP financial results for the second quarter and six months ended June 30, 2008.

 

SECOND QUARTER HIGHLIGHTS

· Consolidated revenues of US$ 417.3 million - up 18%^1 year on year when excluding Federal Budget compensation payments received in Q2 2007

· Adjusted OIBDA2 of US$ 163.5 million with margin of 39.2%

· Net income up 74% year on year to US$ 29.9 million

· Net cash flow from operations up 12% year on year to US$ 125.8 million

· 51% of MGTS residential subscribers on unlimited tariff plan at the end of the quarter

· 80% year on year increase to 783 thousand residential broadband subscribers in Moscow with substantially increased market share of 36.0%^3 – premium segment ARPU of US$ 18.54 and mass market ARPU of US$ 4.9

· Moscow alternative segment corporate subscriber ARPU up 40% year on year to US$ 449.8

· Year on year addition of 46 thousand residential broadband subscribers in the regions and regional ARPU of US$ 20.2

 

HALF YEAR HIGHLIGHTS

· Consolidated revenues of US$ 834.2 million - up 22%^1 year on year when excluding Federal Budget compensation payments received in Q2 2007

· Adjusted OIBDA2 of US$ 333.8 million with margin of 40.0%

· Net income up 38% year on year to US$ 84.0 million

· Net cash flow from operations up 36% year on year to US$ 274.2 million

· Total assets up 32% year on year to US$ 4.98 billion

· Regulatory reduction in price of MGTS unlimited tariff plan for residential voice services from US$ 16.1 (RUR 3805) to US$ 14.66 (RUR 3455) from February 1, 2008

· Regulatory cancellation of monthly US$ 25.46 (RUR 600) MGTS operator interconnect service charge from March 1, 2008

· 25% increase in weighted average regulated per minute charge for operators interconnected to MGTS network to US$ 0.0136 (RUR 0.30) from July 1, 2008

 

Sergey Pridantsev, President and Chief Executive Officer, commented: “The first half of the year has seen significant further progress in a number of our key strategic focus areas – Broadband, the Regions, and Group Structure. We have already now moved into the second phase of our Broadband development strategy in Moscow after the significant market share gains that we have reported in recent quarters. Our objective is to drive up ARPU levels in the premium customer segment, whilst focusing on growing the subscriber base in the mass market segment.

“Our regional footprint and market position has been enhanced by the recent acquisitions of Interlink Group in the Central region in June and Ural Telephone Company in the Ural region in July. At the same time, the development of our regional Broadband business will be accelerated through the management of STREAM-TV’s regional assets from September. STREAM-TV’s network already passes more than 3.5 million homes and the combination with our existing operations will make us the largest broadband operator in the Russian regions. Finally, the consolidation of the whole of the Comstar-Direct broadband business during the second quarter has also further simplified our corporate structure.”

Irina Matveeva, Chief Financial Officer, added: “We have continued to demonstrate healthy levels of growth and profitability despite the impact of the various regulatory changes introduced during the first half of the year. The alternative segment business has performed well in Moscow and the regions, and we have been working closely with the Regulator to bring the MGTS interconnect tariffs in line with the changes in legislation by cancelling the monthly service charge. As a result, the per-minute interconnect tariffs have been supplemented after the end of the quarter with a fixed payment by operators for the use of MGTS lines. We therefore maintain our previously stated full year organic revenue and OIBDA margin guidance for 2008”.

 

 

 

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