OREANDA-NEWS. On 06 August 2009 was announced, that following the results of operation in the first six months of 2009 the earnings of VolgaTelecom OJSC amounted to 13,374.9 million rubles (growth of 3.3% against the first six months of 2008) according to the Russian Accounting Standards (RASs). The income from the communication services has grown by 3.7% up to 12,741.7 million rubles. The EBITDA has grown by 21.8% up to 6,198 million rubles, the EBITDA margin has grown by 7 points up to 46.3%. VolgaTelecom OJSC’s earnings have amounted to 2,227.1 million rubles which is higher than the similar index for the first six months of 2008 by 26.3%.

Principal financial and operational indices for the first six months of 2009:  

Index

First six months

of 2009

First six months

 of 2008

Change

Revenue from sales, million rubles

13,374.9

12,947.4

3.3 %

Income from communication services, million rubles

12,741.7

12,292.5

3.7%

Expenses on usual activities, million rubles

10,481.0

10,235.3

2.4%

Profit from sales, million rubles

2,893.9

2,712.0

6.7%

Profit from sales taking into consideration compensation of losses caused by rendering all-purpose communication services, million rubles1

3,420.1

3,071.4

11.3%

Profit prior to taxation, million rubles

2,712.2

2,349.3

15.4%

OIBDA, million rubles2

5,326.8

4,850.9

9.8%

OIBDA margin, %3

39.8%

37.5%

2.4 points

EBITDA, million rubles4

6,198.0

5,089.3

21.8%

EBITDA margin, %5

46.3%

39.3%

7 points

Earnings, million rubles

2,227.1

1,763.1

26.3%

Rate of return on net profit, %

16.7%

13.6%

3.1 points

 1The accounting policy of reflection of expenses from rendering all-purpose communication services in the expenses on usual activities and compensation of losses caused by rendering all-purpose services in other income influences the expenses and profit dynamics.

2 OIBDA indicator is calculated as the sum of sales profit and amortization of property, plant and equipment.

3 OIBDA margin indicator was calculated as OIBDA/revenues.

4 EBITDA indicator is calculated as pretax earnings plus interest due plus amortization of property, plant and equipment plus leasing payments, the sum is adjusted by the amount of interest receivable.

5 EBITDA margin indicator was calculated as EBITDA/revenues.

The positive dynamics of the profit growth has been provided for by advanced growth of income on usual activities (3.7%) against expenses (2.4%).

The positive dynamics of the revenue has been determined by rendering services of dedicated access to the Internet and rendering services of local communication.

The principal engine of the income growth of the broadband access to the Internet (BBA) is increase in the number of subscribers. In 2009 VolgaTelecom OJSC has carried out an aggressive policy on subscribers’ attraction. In particular, unlimited pricing plans have been introduced in the market, the existing pricing plans have been permanently reconsidered concerning increase of the speed and the limit. As a result of the measures undertaken, VolgaTelecom OJSC has been able to ensure growth of linkups (in the individuals’ sector as well as in the legal persons' sector) in the conditions of growing competition. The subscriber base of the BBA services in the first six months of 2009 grew by 1.7 times up to 914 thousand ports in the first six months of 2009 compared to the similar period of the previous year.

The principal growth of income from the local-communication services has been provided for by rate indexation since 1 March 2009. This fact as well as the marketing offers of decrease of the installation value have served as a factor of preservation of the positive dynamics of the income growth of local telephony services in the conditions of a mature market of traditional telephony services.
Structure of income (revenue), million rubles  

 

First six months of 2009

First six months of 2008

Change, %

Intra-zone telephone communication services

2,266.1

2,406.5

- 5.8%

Local telephone communication services

5,692.0

5,492.6

3.6%

Services of mobile radio, line radio,

radio broadcast, TV broadcast

370.2

 

337.9

9.6%

Services of mobile telephone communication

168.7

 

190.9

- 11.6%

Telegraphy communication services, data transfer services, and telematic communication services

2,927.1

 

2,361.5

23.9%

including data transfer services and Internet access services

2,860.9

 

2,289.3

25.0%

Linkup and traffic transmission services

1,317.1

1,502.5

-12.3%

Other services by principal activities

0.46

0.55

-16.2%

Assistance and agent services

254.8

276.2

-7.8%

Income from rendering services by non-principal activities

378.4

 

378.6

-0.1%

Mobile replacement as well as decrease of communication services caused by the influence of the global economic crisis have influenced decrease of income on intra-zone communication in relation to the previous year. In particular, the number of outcoming intra-zone F2F and F2M calls has decreased in the individuals’ sector as well as in the legal persons' sector compared to the similar period of 2008.

The expenses of VolgaTelecom increased by 2.4% in the first six months of 2009 compared to the similar period of 2008 which was lower than the rate of the revenue growth by 0.9% and was part of the Company’s anticrisis strategy aimed at growth of free cash flow.

Structure of expenses, million rubles 

 

First six months of 2009

 

First six months of 2008

 

Change, %

Depreciation of fixed assets

2,432.9

2,138.9

13.7%

Labour costs

3,146.4

3,178.9

- 1.0%

Deductions for social insurance

760.3

764.3

- 0.5%

Material expenses

890.3

917.9

- 3.0%

Expenses on services of mobile operators

1,092.2

1,232.4

- 11.4%

Other expenses - total

including:

2,158.9

 

2,002.9

7.8%

Leasing payments

294.8

123.6

138.6%

As a result of the measures taken on the optimisation of the number, the personnel expenses, material expenses, expenses for services of outside organisations on maintenance and repair, advertising, consultation, and other services have been decreased. This assisted in growth of the rate of return of telephone communication services and Internet and data-transfer networks services.

The decrease of VolgaTelecom OJSC’s income and expenses on operators’ services is explained by the decrease of the volume of the traffic in the Company’s networks, which is provided for by the subscribers’ wish to decrease expenses for communication services in the crisis conditions.

The principal growth of expenses in relation to the first six months of 2008 happened in the depreciation deductions line (13.7%) due to development of the communication infrastructure and putting fixed assets into operation at the end of 2008. Growth of other expenses happened mostly as a result of growth of energy-resources rates as well as leasing payments appearing in the structure of the Company’s prime cost in 2008 upon implementation of the project of rendering all-purpose communication services.

Indices of operation efficiency

The average number of the payroll decreased by 9.5% to 30,308 persons in the first six months of 2009 (compared to the first six months of 2008). The number of lines per employee has increased by 10.8% up to 168 lines. The revenue per employee has increased by 14.2% up to 441.3 thousand rubles. The revenue per line following the results of the first six months of 2009 has amounted to 2,619 rubles (growth by 3%).

Investment 

In the reporting period the investment of VolgaTelecom OJSC amounted to 488.8 million rubles. The largest share in the investment structure are contributions to development of modern high-tech communication services (BBA, cable TV, IPTV etc.) – 63% (47% in the first six months of 2008). The amount of investment to development of transfer lines and communication infrastructure has been 108.7 million rubles, the investment to development of local communication amounted to 21.2 million rubles or 4% in the total investment structure. In the crisis conditions VolgaTelecom OJSC decided to invest funds to highly profitable projects only as well as to the projects aimed at preservation of its share in the market on the market priority segments. 

In the first six months of 2009 VolgaTelecom constructed and put into operation 97.9 thousand ports of xDSL and 8.2 thousand ports of Ethernet.