OREANDA-NEWS. On 17 March 2008 Southern Telecommunications Company (“UTK”), the principal fixed-line telecommunications provider for Russia’s Southern Federal District announced its preliminary 2007 operating and financial results compiled under Russian Accounting Standards (RAS).

Main corporate events in 2007:

Moody’s Investors Service Rating Agency upgraded to “B1” the corporate family rating of Southern Telecommunications Company, the outlook of the rating is stable;

Standard & Poor’s Governance Services raised its Russia national scale corporate governance score (CGS) on Southern Telecommunications Company to “CGS-4.9” from “CGS-4.8”;

The city of Sochi was chosen the capital of 2014 Winter Olympic Games;

Series 05 bond issue of the Company  was successfully placed at the lowest among regional telecoms interest rate of 7.55%;

According to the results of the 2007 transparency and disclosure survey of the Russian companies published by Standard & Poor’s rating agency, "Southern Telecommunications Company" PJSC  is the most transparent company among the mega-regional telecoms;

Standard & Poor’s Rating Services raised its long-term corporate credit rating on Southern Telecommunications Company to B from B- with “Positive” outlook.   

within the framework of the national program "Education" the Company  connected 2,934 schools to the Internet;

within the framework of the national program of a universal telecom services’ provision the Company  installed 7,555 payphones.

Under interim data UTK’s 2007 revenue is estimated at RUR 19,772.4 million, representing a 12.5%- increase over 2006. Operating expenses are expected to grow by 11.6% to RUR 14,274.9 million. Thus, the estimated operating profit is up 14.9% to RUR 5,497.5 million. The proposed net profit is up 60.8% to RUR 1,904.9 million. The net profit amount may be adjusted slightly, but it is not likely to change significantly . EBITDA for the reporting period is projected at RUR 7,389.9 million or 17.2% higher than in 2006.

Revenues from local telecommunication services are estimated to increase by 7.2% to RUR 9,008.6 million due to the increase in local tariffs in February 2007.

Revenues from intra-zonal telecommunication services are projected to rise 23.8% to RUR 3,768.9 million in the period due to introduction of “Calling Party Pays” principle.

Active development and roll out of new technologies enabled UTK to increase 2007 revenues from data transfer and Internet access services by 65.2% to RUR 2,669.7 million. Number of Internet broadband access subscribers surged 129.3% to 168.5 thousand users.

Under interim data, expenses for wages and salaries are projected to increase 1.2% over 2006 to RUR 4,297.7 million. Depreciation charges are expected to grow 10.7% to RUR 2,887.5 million. 2007 material expenses are estimated at RUR 1,666.9 million representing a 13.6%-increase over 2006. Amount of payments to national telecom operators are expected to rise 74.6% to RUR 1,738.3 million due Internet traffic growth and introduction of “Calling Party Pays” principle.

In 2007 the Company continued to optimize the headcount aiming to raise UTK’s business efficiency. As a result the Company managed to slash the average number of employees by 16.2% to 28,852 people and bring a number of lines per employee to 141.6 representing a 20.3%-increase.

According to the preliminary data, UTK’s 2007 capex amounted to RUR 4,068.0 million, a 98.1% increase over. 2006. Capex were funded only from in-house funds. Digitalization rate of the Company’s local network climbed 3.57% y-o-y and stood at 68.83% as of the beginning of 2008.

Commenting on UTK 2007 preliminary results, the Company’s Deputy Director General – Director for Economics and Finance Alexander Dobryakov pointed out: “2007 was a favorable and successful year for the Company. "UTK" PJSC managed to offset the loss of revenues due to introduction of 2006 regulatory changes and reported positive sales against 2005. It was mainly attributable to revenue growth derived from Internet access and intra-zonal telecom services. Stringent cost-containment efforts allowed us to achieve a substantial increase in net profit. In 2007 the Company developed and approved its Development Program till 2012. This Program determines medium-term strategic trends of the Company’s development. I believe that it is one more step to increase the Company’s investment appeal”.