OJSC “VolgaTelecom” (RTS: NNSI, NNSIP) reported its operations for 2003 in accordance with International Accounting Standards (IAS). Financial statements were audited by independent audit company CJSC “Ernst & Young Vneshaudit”.
In 2003 OJSC “VolgaTelecom's” net profit under IAS amounted to US$58.39 million vs US$29.14 million in 2002. In 2003 the Company’s proceeds grew by 30% to US$54.29 million. Earnings before Interest, Taxation, Depreciation & Amortization (EBITDA) increased by 29% to US$173.79 million. The Company's EBITDA margin amounted to 32%.
ILD and DLD services revenues increased by 28.2%, local telephone services revenues grew by 26.0%, installation and networking fee – by 40.4%. An important event was switching over to a new system of settlement with OJSC “Rostelecom” in August 2003, which allowed the Company to derive revenues for passing incoming traffic via its networks depending on the volume of traffic actually passed during the current period, which resulted in revenues growing by US$12.41 million.
The leader of the revenues growth is cellular communication services – from US$45.41 million in 2002 to US$67.65 million in 2003 (up 49.0%). This accounted for both by increasing the Company's stake in companies providing cellular communication services (the acquisition of the remaining 50% of CJSC “NCC” shares and the acquisition of 50% +1 share of OJSC “Tatincom-T”), and the growth of revenues of affiliated cellular communication companies.
The share of income of general public services in the total earnings amounted to 53.9%. Revenues from this category of subscriber increased 38.6% year-on-year and amounted to US$294.36 million. Income from providing services to commercial organizations grew by 18.5%, which is related to the activity of the Company in the area of services promotion – developing and realizing a marketing strategy, individual performance with VIP customers, and an active advertising campaign. Revenues from budget organizations dropped slightly to US$37.52 million.
Operating expenses grew 27.0% to US$435.68 million, mainly due to the growth of personnel costs, amortization and the increase of expenses for accumulating a reserve for doubtful debts.
Personnel costs grew 30.0% to US$171.30 million, with the staff increased from 51,937 to 52,878 (affiliated companies taken into account) and salary increases. As the new objects were commissioned in 2003, the costs for amortization deductions increased by 17.1% to US$71.14 million.
In 2003 results the Company formed a reserve of US$25.33 million to cover doubtful debts, which is 3.2 times higher than the same indicator in 2002. The reserve for the budget backlog to compensate for the privileges granted by the Company to communication services users on the basis of federal legislation was 70.7% of the reserve - US$17.90 million. US$16.22 million were charged against expenses of 2003 for doubtful debts.
The lack of monetary gain from a change of purchasing capacity of the ruble and the growth of interest expenses from US$7.23 million in 2002 to US$13.00 million in 2003 were compensated by the more than threefold increase of income of participation in associated companies – to US$3.49 million and by the reduction of losses of exchange rate differences during foreign currency revaluation from US$7.55 million to US$1.95 million.