OREANDA-NEWS. On 08 April 2008 OJSC FETEC announced audited business transaction results for 2007 according to Russian Accounting Standards (RAS).

According to General Director of OJSC FETEC Anton Kolpakov, as compared to previous year, in 2007 company improved its economic profitability indices due to increase in business stability (income share of Internet access service, data transmission and mobile electric communications in company revenue mix reached 21%), operating expenses supervision (expenses on personnel first of all) and production capacity growth. “Our company has strong operating profit margin. That is why in spite of contingent liability reserve formation we achieved growth in EBITDA and EBITDA margin, - noted Anton Kolpakov. – Unconditional drivers for company earnings are aggressive broadband access service development, increasing non-regulated service share and service package”.

Performance indices

Income per employee increased from 31.6% to 899.1 thousand rubles (against 683.2 thousand rubles in 2006);

Number of lines per employee increased from 25.2% to 119.2 lines (95.2 in 2006);

Prime cost per ruble of earnings reduced by 1.1% down to 74.1 kopecks (74.9 in 2006);

Number of employees on payroll reduced by 1482 people down to 12 381 employees (13 863 employees in 2006).

Internet access service, data transmission and mobile electric communications in company revenue mix increased by 21.0% (16.9 in 2006);

Subscriber base for Internet dial-up access users reduced by 13.4% down to 200 772 users (231 846 users in 2006);

Subscriber base for DSL Internet access doubled to include 159 948 subscribers (78 667 subscribers in 2006);

Cellular communication subscriber base increased by 4 thousand subscribers to include 104 284 subscribers (100 022 in 2006) (Kamchatskaya oblast – 48 722 (52 957 in 2006), Magadanskaya oblast – 55 562 (47 065 in 2006));

Company fixed line subscriber base increased by 0.6% and amounted to 1 364 950 subscribers (1 356 158 in 2006).

Expenses on personnel in 2007, as compared to 2006, decreased by 243.2 mln rubles or 6.8% as a result of company staff redundancy program.

Depreciation allowances increased by 169.1 mln rubles or 14.9% due to fixed assets commissioning. Specific weight of this cost element in prime cost pattern increased from 14.8% up to 15.7% (high depreciation allowance level is typical for technology intensive industries).

35.3% growth in expenses on communication operator services as compared to 2006 is related to increasing expenses on trunk internet traffic purchase from outside operators due to broadband subscriber base enlargement and a widened range of service offered, as well as due to the fact that no settlements with cellular communication operators were not completed in the first six months of 2006.

Considerable growth in outsourced services as compared to 2006 is explained by increasing expenses on consulting, agency services, repairs and transportation.

Miscellaneous revenues and expenses

Losses from miscellaneous nonoperating activities amounted to 1455.8 mln rubles in 2007, which is 12.4% worse than 2006 result (loss of 1 295.7 mln rubles). Main items are as follows:

Interest return received in the amount of 75.6 mln rubles, which is 13.9 mln rubles less than 2006 level (89.5 mln rubles).

Interest paid amounted to 509.3 mln rubles, which is 38% more than interest paid for 2006 (369.1 mln rubles). Increase in the expenses is reasoned by execution of contract for nonrevolving credit line accommodation in the amount of 1955.0 mln rubles, bonded loan series D1 refunding (1000 mln rubles) by bonded loan series D2 and D3 issue (3500 mln rubles).

In 2007 net income from replenishing reserve for doubtful debts amounted to 59.9 mln rubles, which is 145.2 mln rubles more than net loss from provisions for doubtful debts in 2006 (85.3 mln rubles).

Earnings from reimbursed losses on universal communication service rendering amounted to 94.5 mln rubles (in 2006 company had no earnings from reimbursement).

The results of other activities were affected by formation of contingent liabilities reserve in the amount of 317.3 mln rubles (including 296 mln rubles for CJSC Primtelephone claim). In 2006 the reserve amounted to 467.9 mln rubles (including 466.1 mln rubles under tax authority claims for 2001- 2002)

(8) Information, consulting, audit, transportation, security, maintenance and repairs and staff retraining services;

(9) Leasing payments, property rent, nongovernmental pension insurance, voluntary medical insurance in favor of employees.