OREANDA-NEWS. On 17 March 2008 was announced, that VolgaTelecom presented preliminary results of its operations in 2007.

In 2007 the key financial and operating indicators were the following:

- Ordinary activities proceeds – RUR 25 162,7 million (+16,0%).

- Telecommunications services revenues – RUR 23 887,3 million (+17,3%);

- Sales profit – RUR 6 101,6 million (+28,9%);

- Earnings before taxation – RUR 4 273,2 million (+20,9%);

- Net profit margin (net profit/proceeds) -11,9% (11,3% – in 2006);

- OIBDA – RUR 9 591,8 million (+26,3%);

- OIBDA margin (OIBDA in proceeds) – 38,1%;

- EBITDA – RUR 8 579,6 million (+20,5%);

- EBITDA margin – 34,1%;

- CAPEX – RUR 7 454,2 million (+27%).

- As per the data of non-audited reporting the estimated net profit amounts to RUR 2 991,4 million (+21,9%). By the Company’s management estimates significant deviations are not anticipated, but some adjustments are possible.

At the year end the revenues from high-tech telecommunications services amounted to RUR 3 123,9 million (12,4% in the Company’s total proceeds). The largest share of the revenues was generated by the services of Internet access via leased lines - RUR 1 953,4 million (+80,1% vs. 2006). At January 1, 2008 the number of Internet broad band users accounted for 372 500, which is threefold more than at the beginning of 2007. Substantial growth of Internet broad band subscriber’s base was ensured by new marketing initiatives designed in the Company, implementation of modern methods of sales system and servicing, introduction on the market of uniform brand and new tariff plans.

In 2007 VolgaTelecom’s expenditures amounted to RUR 19 061,2 million (+12,4% vs. 2006).

The growth of expenditures was due to:

- increase in depreciation charges (+ RUR 628,3 million) due to realization of investment programs (2005 – RUR 5 244,3 million, 2006 – RUR 5 882,4 million, 2007 – RUR 7 454,2 million);

 - increase in interconnect costs (+ RUR 1 245,4 million) because of the arrangement of additional bandwidths to provide Internet services  due to the subscriber’s demand growth and the change of mutual settlements with other operators for traffic transit.

The Company improves its business efficiency in all directions, including headcount optimization. As a result of reforming the structure of regional subsidiaries and revision of working positions in 2007 VolgaTelecom’s headcount was reduced by 4 185 and at January 1, 2008 it accounted for 35 168 employees.

In 2007 VolgaTelecom continued to realize the investment programs intended to the upgrade of communications network and the development of new, high-tech services. For the reporting period the Company’s investment portfolio amounted to RUR 7 454,2 million (+27%).

The sources of investments financing:

- proprietary resources – RUR 3 490,3 million;

- raised funds – RUR 3 963,9 million.

In 2007 the Company also leased NGN equipment under leasing contracts of the total value of RUR 540,9 million accounted in the lessor’s balance.

In 2007 VolgaTelecom commissioned new PBXs of the total capacity of 369 200 numbers, of which 251 300 numbers were commissioned in urban telephone network and 117 900 in rural telephone network. In 2007 urban telephone network of Nizhny Novgorod was converted to seven digit numbering. Special attention was paid to further construction of digital transportation network and as a result the digitalization level has grown to 73,8%.

In 2007 the installed capacity of VolgaTelecom’s telephone network has grown by 59 800 numbers and accounted for 5 169 400 numbers. The equipped capacity – 4 844 200 numbers.  The number of phone sets per 100 residents has grown to 25,5 (in 2006 –24,9).

In the reporting year VolgaTelecom participated in realization of national project “Education”; within this project 8 334 educational institutions of the Volga Federal district were connected to the Internet. Within the other priority national project 17 071 universal service payphones were installed in the settlements of the Volga Federal district.

Sergey Omelchenko, VolgaTelecom’s General Director, noted that “during 2007 we successfully solved the challenges coming from tougher competition in telecommunications market of the Volga region. The change of competitive environment required from us the new approach to doing business and all our actions were intended to create a solid foundation for sustainable and profitable growth and development”.

Major industry and corporate events in 2007:

- Introduction of tariffs for local and intra-region telephony services since February 1, 2007;

- Participation in realization of national project “Education”;

- Participation in the program of providing universal communications services in the territory of the Volga Federal district;

- Completion of consolidation of VolgaTelecom’s cellular assets on the basis of ZAO NSS;

- Growth of Internet broad band users to 372 500;

- Realization of the project of the network upgrade on the basis of NGN equipment;

- Construction of multi-service network;

- Reorganization of the Company’s commercial bloc.