Sibirtelecom Releases 1H 2009 IFRS Financial Results

OREANDA-NEWS. September 23, 2009.Sibirtelecom (RTS: ENCO/ENCOP, ENCOG/ENCOPG; МICEX: STKM/STKMP; ADR: ОТС– SBTLY, Frankfurt and Berlin stock exchanges – ISIN: US8257351036, WKN: 260452) – a telecommunications operator which provides services in the Siberian Federal District , hereby announces the release of its unaudited consolidated interim financial reports for a 6-month period ended June 30, 2009, which were prepared in accordance with international financial reporting standards (IFRS).

The consolidated financial statements include the assets, liabilities and results of the activities carried out by Sibirtelecom and its subsidiaries (hereinafter, the Company).  The primary activity performed by the subsidiaries of the company is that of providing cellular telephony and other telecommunications services.

Headline IFRS financial indicators (Rub, mln)

Revenue

The company’s consolidated revenue for the six months ended June 30, 2009 stood at Rub 19,070 mln, which implies an increase of Rub 609 mln or 3% higher compared with the same period in 2008.

The main factors driving growth in the company’s revenue during the reporting period include growth in the fixed-line and cellular telephony subscriber base, as well as expansion of broadband Internet access services, which led to growth in the number of Internet users and Internet traffic.

Revenue breakdown (Rub, mln)

The company’s consolidated revenue breakdown shows a large portion from the provision of local telephony services (Rub 5,854 mln) and cellular telephony (Rub 4,893 mln) or 30.7% and 25.7%, respectively.

Major items in the revenue structure include earnings from the provision of datacom and telematic services (Internet) for a total of Rub 2,734 mln and intrazonal telephony (Rub 2,498 mln), or 14.3% and 13.1%, respectively.  Earnings generated from interconnect and traffic transmission amounted to 9.6% of the (Rub 1,840 mln) of the company’s total consolidated revenue.

Compared to the same period in 2008 for the six months ended on June 30, 2009:

the biggest increase in revenues came from the provision of datacom services and provision of Internet access services, i.e. Rub 612 mln or 28.8%.  The main factors impacting this growth were a rise in the number of broadband Internet subscribers and, respectively, higher revenue from the provision of Internet access services.  As of July 1, 2009 the number of broadband Internet subscribers stood at 501,500 users (+88.0% compared to the same period in 2008);

an increase in revenue from other sales equal to Rub 187 mln, or 40.8%, which is mainly due to an increase in the number of facilities accepted for leasing;

a rise in earnings from the provision of local voice telephony stood at Rub 145 mln, or 2.5%.  Revenue increased as a result of growth in the subscriber base (the number of main lines serviced by the parent company rose by 27,900 and stood at 4,358.8 mln as of the end of H1 2009) and the indexation of regulated tariffs as of March 1, 2009;

higher revenue from the provision of cellular telephony, amounting to Rub 77 mln or up 1.6% due to an increase in the subscriber base.  As of July 1, 2009 the subscriber base of the company’s cellular business exceeded 5.1 mln users (+14.2% compared to the same period in 2008);

a decrease in income from the provision of interconnect and traffic transmission equal to Rub 218 mln, or down 10.6% mainly due to the cancellation as of March 1, 2008 of tariff charged at interconnection points;

a decline in revenue from the provision of intrazonal telephony equal to Rub 164 mln, or 6.2% which was attributable to a decrease in traffic and a decrease in the average revenue charge;

lower revenue from outsourcing and agency fees equal to Rub 45 mln, or 14.5% less than in the year-earlier period mainly due to a decrease in the volume of services provided to users on the part of Rostelecom, and also the number of contracts stipulated directly with users at the level of Rostelecom.

Expenses

Consolidated expenses for the 6 months ended June 30, 2009 increased by Rub 1,212 mln, or 8.0% compared with the same period in 2008 and amounted to Rub 16,373 mln.

The largest portion of expenses fall to payrolls, other payments and social contributions (31.4%), depreciation and amortization (24.9%) and other operating expenses (20.7%).

Expense breakdown (Rub, mln)

Compared with the same period in 2008, during the six months ended June 30, 2009:

the amount of depreciation and amortization accrued increased by Rub 640 mln, or by 18.6%, which is due to the company’s active investment policy aimed at network rollout;

a rise in other operating expenses equal to Rub 413 mln, or 13.9%, which is due to a rise in agency fees, taxes, except for profit tax, expenses related to transportation and mailing services, and also the formation of a reserve against dubious debts;

an increase in expenses for the services of telecom operators equal to Rub 188 mln, or 8.8%, which was attributable to higher traffic subject to payment in accordance with the interconnect procedure pursuant to the industry’s statutory provisions and guidelines.

Capital expenses

The total amount of the company’s capital expenses for the six months ended June 30, 2009 stood at Rub 2,372 mln, which is Rub 902 mln y-o-y or 27.6% compared with the same period in 2008.  The level of investments aimed at developing mobile and radio (cellular) telephony reached 46% of the total amount of the company’s capital expenses.

Debt burden

The company’s debt burden remains at an acceptable level.  As of June 30, 2009 the company’s net debt amounted to 21.2 bln (-7.6% compared with the beginning of 2009).

Financial results

Compared with the same period in 2008, for the six months ended June 30, 2009:

OIBDA increased by Rub 185 mln, or 2.6%;

OIBDA margin came in at 38.8%;

Operating profit decreased by Rub 455 mln, or by 12% and stood at Rub 3,335 mln, which is due to a rapid increase in expenses (8.0%) compared with the increase in revenue (3.3%).  The composition of operating profit reflected a compensation of losses from the provisoin of universal services amounting to Rub 406 mln, and other operating income equal to Rub 232 mln;

Operating profit margin amounted to 17.5%;

Profit before taxation decreased by Rub 1,503 mln, or 54.1% and stood at Rub 1,276 mln, which was attributable to a decline in operating profit, a rise in  interest expenses on bank credits and loans of the company and as a result of non-monetary losses resulting from foreign exchange rate difference (negative balance due to foreign exchange rate differences stood at Rub 428 mln);

Profit during the reporting period decreased by Rub 1,154 mln, or by 57.6% and amounted to Rub 851 mln, which was attributable to a decrease in profit before taxation.  Profit margin during the reporting period stood at 4.5%.

For the record: headline consolidated operating indicators and statistical data