OREANDA-NEWS. On May 08, 2008 Southern Telecommunications Company (“UTK”) [(RTS: KUBN, KUBNP; МICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the principal fixed-line telecommunications provider for Russia’s Southern Federal District announced its operating and financial results for the first quarter of 2008 compiled under Russian Accounting Standards (RAS), reported the press-centre of UTK.

Main corporate events in the first quarter of 2008:

Introduction of three tariff plans throughout the whole licensed territory of the Company from February 1, 2008;

launching of IP-TV in the Astrakhan Region and in the Northern Osetia - Alania Republic;

affirmation by Expert RA Rating Agency of its “A” national rating of corporate governance assigned earlier to Southern Telecommunications Company;

conclusion of the cooperation agreement with Sky Link on provision of hi-speed Internet access services;

approval of the new version of the Provisions of Dividend Policy of "Southern Telecommunications Company" PJSC;

signing of non-revolving credit line agreement with Commercial Joint –Stock Bank “Bank Societe Generale Vostok” (Closed Joint –Stock Company ) worth 1 billion rubles;

inclusion of series 04 and series 05 bonds of Southern Telecommunications Company in MICEX Quotation List A1.

Q1 2008 revenue is up 7,9% over Q1 2007 to RUR 5,1 billion;

Q1 2008 EBITDA increased 0,4% over Q1 2007 to RUR 1,967.7 million representing an EBITDA margin of 38,4% (down 2,8 percentage points);

Revenue from data transmission and Internet services increased by 63,0% to RUR 936,7 million. Share of revenues from these services in total telecommunications revenue increased by 6,4 percentage points over Q1 2007 to 19,1%.

UTK’s Q1 2008 revenue made RUR 5,103.6 million, representing a 7,9%- increase over Q1 2007. Operating expenses grew by 21,1% to RUR 3,968.8 million. Thus, Q1 2008 operating profit was down 22,0% to RUR 1,134.8 million and Q1 2008 net profit decreased by 21,1% to RUR 463,4 million. EBITDA for the reporting period amounted to RUR 1,957.7 million or 0,4% higher than in Q1 2007.

Revenues from local telephone services increased by 4,8% to RUR 2,343.2 million due to introduction of three tariff plans throughout the whole licensed territory of "UTK" PJSC from February 1, 2008, and accounted for 47,7% of the Company’s telecom revenues.

Revenues from intra-zonal telephone services rose 1,4% to RUR 914,5 million accounting for 18,6% of the Company’s telecom revenues.

Q1 2008 revenues from telegraph, data transfer and telematic services increased by 56,3% to RUR 976,7 million accounting for 19,9% of the Company’s telecom revenues. Revenues from data transfer and Internet access services rose by 63,0% while the number of Internet broadband access subscribers surged 118,8% to 202,8 thousand users.

Revenues from interconnection and traffic transit services decreased 12,2% to 592,4 million roubles accounting for 12,1% of the Company’s telecom revenues.

Q1 2008 expenses for wages and salaries increased 21,9% over a year-ago to RUR 1,237.6 million due to lump-sum bonus payment based on Q1 2008 results, and accounted for 31,2% of the Company’s operating expenses.

Depreciation charges grew 25,1% to RUR 866.8 million accounting for 21,8% of the Company’s operating expenses.

Q1 2008 material expenses rose 13,5% over Q1 2007 to RUR 431,7 million due to electricity rate growth and write-off of inventories their value not exceeding 20,000 rubles per unit, and accounted for 10.8% of the Company’s operating expenses.

Amount of payments to national telecom operators rose 17,9% to RUR 435,2 million due to increasing payments to Rostelecom and growing expenses for call termination services, and accounted for 11,0% of the Company’s operating expenses.

The Company continued to optimize the headcount aiming to raise its business efficiency. As a result, in Q1 2008 the Company managed to slash the average number of employees by 8,7% over a year-ago to 26,953 people and to bring the number of lines per employee to 151,6 representing a 9,6%-increase.

Q1 2008 capex amounted to RUR 190,8 million, decreasing 22,4% over Q1 2007. Digitalization rate of the Company’s local network climbed 3,55% y-o-y to 69,06%.