OREANDA-NEWS. On 26 August 2008 was announced, that based on H108 performance, Volga Telecom’s RAS revenues amounted to Rub 12,947.4 mln or up a record 105.7% against January-June 2007. Volga Telecom’s telecom earnings came to Rub 12,292.5 mln (105.9%), while operating profit totaled Rub 2,712 mln (87.4%). Volga Telecom’s H108 revenues spiked on the heels of Internet access services (up 206.4%) and intrazonal F2M connections (traffic soared 108.8%).

Key financial and operating indicators for January-June 2008:

- Pre-tax profit totaled Rub 2,349.3 mln (101.0%);

- Net margin came in at 13.6%;

- OIBDA totaled Rub 4,850.9 mln (101.2 %);

- OIBDA margin weighed in at 37.47%;

- EBITDA equaled Rub 5,089.3 mln (115.8%);

- EBITDA margin – 39,31%;

- EBITDA margin was equal to 39.31%;

- Net profit totaled Rub 1,763.1 mln (105.9%).

Regulatory factors that influenced the company’s profit:

- the cancellation since January 1, 2008 of the compensatory surcharge in accordance with Order #627 dated October 19, 2005 (which depressed earnings derived from DLD/ILD traffic origination by Rub 204 mln);

- the cancellation of the tariff involving points of interconnect since March 1, 2008 in accordance with Order #666 dated October 12, 2007;

- the enactment since 3Q 2007 of the Russian government’s Order #477 dated July 25, 2007 that amended the Regulations for Local Voice, Intrazonal, DLD and ILD Services:

the cost of access to the local voice network in a telephone-enabled premise was slashed to a level equaling 30% of the monthly line rental fee;

The unit of charging a local telephone connection was changed (the partial unit of tariffication, the amount of which equals a half or more than a half of the unit of tariffication, is charged as complete, while a partial tariffication unit that is equal to less than half of a tariffication unit is charged as half of a tariffication unit).

Earnings derived from hi-tech telecom services in January-June 2008 came to Rub 2,289.3 mln (17.7% of the company’s aggregate revenue breakdown), with the biggest amount generated from hi-speed Internet (Rub 1,712.9 mln or 106.4%). Broadband Internet users amounted to 549,700 as of July 1, 2008 or 3 times higher than in the same period a year ago.

Volga Telecom’s H108 expenses totaled Rub 10,235.3 mln (111.9%).

Expenses rose sharply on growing investments in telecom facilities in recent years (Rub 5,244.3 mln in 2005, Rub 5,882.4 mln in 2006, Rub 7,454.2 mln in 2007 and Rub 1,640.4 mln in January-June 2008). H108 depreciation charges surged 26.7% y-o-y. Due to the implementation of the project of promoting universal telecom services, additional expenses involving lease payments appeared and totaled Rub 123.6 mln. Overall, expenses that relate to universal telecom services amounted to Rub 320.1 mln in January-June 2008. At the same time, in line with the Company’s accounting policy, expenses related to universal telecom services are recorded at cost; reimbursement of losses incurred when providing universal telecom services is reflected as other revenue. Taking into account this factor, operating expenses would have risen 109%.

The operator’s average headcount declined 10.3% to 33,494, lines per employee improved 13.6% to 152 lines, revenue per employee jumped 17.9% to Rub 387,000 and revenue per line rose 3.8% to Rub 2,543 in January-June 2008.

In H108, Volga Telecom continued to execute investment programs geared towards upgrading networks and rolling out value-added hi-tech services. Investments totaled Rub 1,640.4 mln (a 73% upsurge) in the reporting period.

In January-June 2008, Volga Telecom put into service new automatic switching facilities for 43,992 lines, including 17,352 lines in urban districts and 26,640 in rural areas. Special attention was devoted to the further construction of a digital transportation network. Main telephone lines jumped by 16,300 to 4,777,700 lines in H108.

The financial statement can be viewed on the company’s website http://www.vt.ru/5873