OREANDA-NEWS. On 30 June 2009 Sibirtelecom (RTS: ENCO/ENCOP, ENCOG/ENCOPG; MICEX: STKM/STKMP; ADR: ОТС– SBTLY, Frankfurt and Berlin Stock Exchanges, ISIN: US8257351036, WKN: 260452), a telecommunications operator in the Siberian Federal District, published its 2008 audited consolidated financial statement that was compiled in accordance with International Financial Reporting Standards (IFRS).

The operator’s 2008 financial records were audited by KPMG. The consolidated financial statement includes assets, liabilities and results achieved by Sibirtelecom and its subsidiaries (below named as the “company”). Core activities of the subsidiaries are to provide mobile telephony and other telecommunications services.

IFRS headline financials, Rub mln:

 

2008

2007

Chng, y-o-y%

Revenue

37,674

35,246

6.9

OIBDA

13,095

12,286

6.6

OIBDAmargin

34.8%

34.9%

 

EBITDA

11,870

12,403

(4.3)

EBITDAmargin

31.5%

35.2%

 

Operating expenses

33,080

30,170

9.6

Operatingprofit

5,738

6,158

(6.8)

Operatingprofitmargin

15.2%

17.5%

 

Pre-taxprofit

2,434

4,238

(42.6)

Profit for the reporting period

1,529

2,659

(42.5)

Profit margin for the reporting period

4.1%

7.5%

 

The company’s revenue

The company’s consolidated revenue jumped by Rub 2.42 bln or 6.9% against 2007 to Rub 37.67 bln.

The main components in the company’s consolidated revenue are local voice (Rub 11.43 bln) and mobile telephony earnings (Rub 9.95 bln) or 30.3% and 26.4% respectively. Substantial items in the revenue mix are intrazonal (Rub 5.38 bln) and datacom network and telematics (Rub 4.40 bln) revenues, accounting for 14.3% and 11.7% respectively. Earnings derived from interconnect and traffic transmission services equaled 10.9% (Rub 4.10 bln) of consolidated revenue.

The expanding mobile telephony customer base and the rollout of broadband Internet services are primary factors that pushed up the company’s earnings in the reporting period.

Compared to 2007, in 2008

the highest increment in earnings was derived from datacom network and telematics (Internet) services, up Rub 1.33 bln or 43.6%. The main factors are growth in the broadband Internet (BI) customer base and consequently a rise in earnings from providing (broadband and dialup) Internet access. In 2008 the company’s BI subscribers surged 2.2-fold to 415,000 at the end of the reporting period.

mobile telephony revenue grew by Rub 842 mln or 9.2% on the back of an expanding subscriber base. During the reporting period the company’s cellular subscriber base increased 14% to over 4.8 mln users;

revenue from property lease went up by Rub 271 mln or 91.2% as facilities provided for lease grew;

A rise in intrazonal earnings equaled Rub 161 mln or 3.1% following growth in F2M traffic.

Breakdown of the company’s revenue mix, Rub mln

Revenue item

2008

2007

Chng, y-o-y

Rub mln

%

Localvoiceservices

11,432

11,547

(115)

(1.0)

Mobile radio telecommunications (cellular) services

9,951

9,109

842

9.2

Intrazonalservices

5,383

5,222

161

3.1

Telegraph network, datacom network and telematics (Internet) services

4,654

3,282

1,372

41.8

including datacom network and telematics (Internet) services

4,401

3,064

1,337

43.6

Interconnect and traffic transmission services

4,106

4,255

(149)

(3.5)

Outsourcing and agency services

609

649

(40)

(6.2)

Property lease earnings

568

297

271

91.2

Mobile radio telecommunication, wire broadcasting, radio broadcasting and television services

426

406

20

4.9

Other services (core activities)

10

67

(57)

(85.1)

Revenue from other operations

535

412

123

29.9

Total

37,674

35,246

2,428

6.9

The company’s expenses

            The company’s 2008 consolidated expenses increased by Rub 2.91 bln or 9.6% to Rub 33.08 mln.

Payroll expenses, other payments and social insurance contributions (31.8%), other operating expenses (23%) and depreciation and amortization (22.2%) account for the largest portion in the amount of expenses.

Against 2007 the company saw in 2008:

            -a 21.6% increase or Rub 1.35 bln in other operating expenses following growth in expenses relating to transport services, outsourcing and management costs, the formation of reserves against the devaluation of fixed assets, construction in progress and intangibles;

            -accrued depreciation and amortization increased by Rub 1.22 bln or 20.1% thanks to the aggressive investment policy pursued by the company to roll out its network;

            -expenses relating to services rendered by telecom operators climbed by Rub 485 mln or 12.4% on the heels of a spike in traffic subject to payment in accordance with the procedure for interconnect relations under the telecom industry’s statutory legal framework;

            payroll expenses decreased by Rub 280 mln or 2.6% following a set of staff reduction measures.

Breakdown of the company’s cost mix, Rub mln

Cost item

2008

2007

Chng, y-o-y

Rub mln

%

Payroll expenses

(10,504)

(10,784)

280

(2.6)

Depreciation and amortization

(7,357)

(6,128)

(1,229)

20.1

Expenses under services provided by telecom operators

(4,400)

(3,915)

(485)

12.4

Supplies, repair and maintenance, public utilities

(3,217)

(3,093)

(124)

4.0

Otheroperatingexpenses

(7,602)

(6,250)

(1,352)

21.6

Total

(33,080)

(30,170)

(2,910)

9.6

The company’s capex

The company’s 2008 capex totaled Rub 12.5 bln or 5.6% less than in 2007. The bulk of capex was allocated for rolling out local voice services, datacom networks and telecom infrastructure facilities. Funds invested in developing mobile telecommunication (cellular) services in 2008 accounted for 20% of aggregate capex.

The company’s debt burden

The company’s debt burden is remained at an acceptable level. At the end of 2008 the operator’s aggregate debt reached Rub 24 bln (53% of which falls to long-term liabilities) or 11.3% higher than the 2007 indicator. The net debt[3]/EBITDA ratio is 1.9x.

The company’s financial performance

In comparison with 2007, in 2008

OIBDA rose by 6.6% or Rub 809 mln and OIBDA margin stood at 34.8%.

Operating profit fell by 6.8% or Rub 420 mln to Rub 5.73 bln due to faster growth of the cost side (9.6%) against the pace of growth in revenues (6.9%).

Operating profit reflects losses indemnified for universal telecom services (Rub 680 mln) and other operating profit (Rub 464 mln).

Operating margin reached 15.2%.

Pre-tax profit declined by Rub 1.80 bln or 42.6% to Rub 2.43 bln following both a slide in operating profit and the influence of non-cash losses caused by exchange rate differences.

Profit for the reporting period shrank 42.5% y-o-y to Rub 1.52 bln, profit (EBITDA) margin equaled 4.1%. The main factor behind soft net profit was non-cash losses from exchange rate differences (the negative balance of exchange rate differences totaled Rub 1.23 bln).

Sibirtelecom’s FY08 IFRS audited consolidated financial statement is posted on the corporate website (www.sibirtelecom.ru) in the section entitled Investors – Financial Statements.

The online conference “Consolidated Number of Sibirtelecom’s Financial and Economic Activities for 2008 (IFRS)” will be conducted on the web portal www.finam.ru from 11 am till 12.30 am Moscow time on June 17, 2009.