OREANDA-NEWS. December 14, 2009. “Far East Telecom” (RTS: ESPK, MICEX: DLSV, ADR USA OTC: FEEOY, Frankfurt and Berlin Stock Exchange: D7A) announces unaudited financial results for 6 months ended 30th September 2009 according to International Financial Reporting Standards (IFRS).

Consolidated interim accounting statements include property, liabilities and results of the Far East Telecom Group activity specializing in local telecommunication services, mobile telecommunication services and other telecommunication services.

Group Financial Highlights

 

9 months, ended 30th  September 2009, Mln Roubles

9 months, ended 30th  September 2008,  Mln Roubles

Change, %

Revenues

12,736

11,956

6.5%

 

Revenues from communication services

12,421

11,649

6.6%

 

Operating expenses (net) before amortization

7,981

7,658

4.2%

 

OIBDA

4,755

4,298

10.6%

 

OIBDA margin,%

37.34%

35.95%

-

 

EBITDA

4,762

4,320

10.2%

 

EBITDA margin, %

37.394%

36.13%

-

 

Profit for the accounting period

1,937

1,556

24.5%

 

Net profit margin, %

15.21%

13.01%

-

 

Far East Telecom’s Subsidiary Companies

Company’s name

Type of business

Stake in share capital and other interests, %

As at 30th  September 2009

As at 31st December 2008

OJSC Sakhatelecom 

Communication services

51.00

51.00

CJSC AKOS

Communication services

94.45

94.35

Interdaltelecom Ltd.

Communication services

100.00

100.00

Wireless Information Technologies Ltd.

Communication services

100.00

100.00

Set Stolitsa

(property of OJSC Sakhtelecom)

Technical service for telecommunication net

100.00

100.00

OJSC Shakhtersksvyaz

Communication services

100.00

100.00

REVENUES BREAKDOWN

 

For 9 months, ended 30th September 2009, Million Roubles

For 9 months, ended 30th September 2008, Million Roubles

Change, %

Local telephone communication services

4,804

4,429

8.5%

 

Telegraph communication, data transmission and telematic services (Internet)

3,509

2,729

28.6%

 

Intrazone telephone communication services

1,844

1,984

(7.1%)

 

Traffic interconnection services

1,080

1,298

(16.8%)

 

Mobile radiotelephone communication (cellular) services

800

831

(3.7%)

 

Mobile radio communication, wire communication services, broadcasting, television services

120

119

0.8%

 

Other communication services

264

259

1.9%

 

Total income from communication services

12,421

11,649

6.6%

 

Revenues growth highlighted by:

data transmission and telematic services (Internet) income growth;

local communication income growth.

Telegraph Telecommunication Services, Data Telecommunication and Telematic Services (Internet)

Digital interactive IP TV showed the highest income growth rate of 71% (171.2 mln Roubles for 9 months, ended 30th September 2009 against 100.1 mln Roubles for 9 months, ended 30th September 2008). Income increase is due to subscribers’ base enlargement to 35,655 subscribers (72,866 subscribers for 9 months, ended 30th September 2009 against 37,211 subscribers for 9 months, ended 30th September 2008). The subscribers’ base growth is connected with active service development and revenue service launching in OJSC Far East Telecom’s Amurskiy Branch in June 2008, Magadansky and Sakhalinsky Branches in September 2009.

Internet broadband access income growth rate was 39% (2,748.9 mln Roubles for 9 months, ended 30th September 2009 against 1 976.4 mln Roubles for 9 months, ended 30th September 2008).

Income increase is mostly driven by subscribers base enlargement. It increased to 137,700 subscribers comparing to the similar period of 2008 (including 19,342 OJSC Sakhtelecom subscribers) and reached 373,196 customers. Thereby “Average income from subscriber per month” for 9 months, ended 30th September 2009, was 832 Roubles (against 914 Roubles for 9 months, ended 30th September 2008).

Virtual Personal Network (IP VPN) showed significant income growth of 36.7 mln Roubles or 40% yoy (128.1 mln Roubles for 9 months, ended 30th September 2009, against 91.4 mln Roubles for 9 months, ended 30th September 2008) due to subscribers base enlargement (1,750 subscribers for 9 months, ended 30th September 2009 against 1,480 subscribers for 9 months, ended 30th September 2008).

Local Telephone Communication Services

Revenue increase from local telecommunication service is caused by growth of OJSC Far East Telecom tariffs from 20th September 2008 and the 1st March 2009 by 11.2% and 8.7% respectively, and OJSC Sakhtelecom tariffs growth from the 1st March 2009 by 6.3%. Local telecommunication service subscribers base reduced by 0.4% (or 6,529 subscribers) as of 30th September 2008 comparing to the subscribers base as of 30th September 2008 and reached 1,621,497 customers.

Intrazone Communication Services

Revenue from intrazone communication services for 9 months 2009 reduced by 7.1% as compared to similar period in 2008. The income reduction is caused by F2F traffic income decrease by 109.5 mln Roubles (14%) due to traffic volume decrease by 14% because of mobile cannibalization.

Mobile Radiotelephone Communication (Cellular) Services

Revenue from cellular communication services for 9 months, ended 30th September 2009, reduced by 0.7% or 31 mln Roubles as against 9 months, ended 30th September 2008. This is due to decreasing revenue of OJSC Far East Telecom Kamchatskiy and Magadanskiy Branches and Wireless Information Technologies Ltd. consequent on stiffening competition and newly introduced tariff plans with reduced subscriber fee. Meanwhile, CJSC AKOS revenue for 9 months, ended 30th September 2009, increased by 0.7% or 4 mln Roubles comparing to similar period in 2008.

Traffic interconnection services

Revenue from interconnection services decreased in 9 months, ended 30th September 2009, comparing to the similar period of 2008 by 16.8% (218 mln Roubles) due to:

cancellation of payment for interconnection points maintenance starting on March 1st 2008;

differentiated tariffs for zone call termination service introduced from May 1st 2008 within one settlement (0.80 – 1.25 Roubles per minute instead of 1.52 Roubles per minute);

partial income loss from traffic service (zone call termination) due to demonopolization of zone fixed communication market and appearance of alternative communication providers on that market. These trends first appeared in Primorsky, Khabarovsky, Amursky and Kamchatsky branches of the Far East Telecom;

decreased income share on traffic interconnection access nodes (local call initiation) due to dial-up Internet access service share reduction and ADSL Internet access share growth.

At the same time Far East Telecom Group income from zone call termination is partially compensated by income growth from other traffic services like local call termination.

OPERATING EXPENSES BREAKDOWN

 

For 9 months, ended 30th September 2009, Million Roubles

For 9 months, ended 30th September 2008, Million Roubles

Change, %

Personnel costs

(3,655)

(3,481)

5.0%

 

Depreciation and amortization

(1,741)

(1,600)

8.8%

 

Interconnection charges

(1,597)

(1,481)

7.8%

 

Materials, repairs and maintenance, utilities

(1,196)

(1,108)

7.9%

 

Taxes, other than income tax

(235)

(212)

10.8%

 

Bad debt expense reserves

(60)

(108)

(44.4%)

 

Other operating income

265

230

15.2%

 

Other operating expenses

(1,503)

(1,498)

0.3%

 

Total operational expenses

(9,722)

(9,258)

5.0%

 

Personnel Costs

Expenses of line "Personnel costs" increased by 5% comparing to the similar period of 2008 due to indexation of OJSC Far East Telecom personnel wages in July 2008.

Materials, Repairs and Maintenance, Utilities

Growth in the line "Materials, repairs and maintenance, utilities" by 7.9% is caused by increase of utility costs (22.1% or 60 mln Roubles), repairs and maintenance costs (22.1% or 60 mln Roubles). Expenses on materials including subscribers’ equipment for broadband access services and IP TV decreased by 4.8% or 27 mln Roubles comparing 9 months, ended 30th September 2008.

Expenses on repairs and maintenance are kept at the level of the same period of previous year (growth 0.4% or 1 mln Roubles).  

Interconnection Charges

Interconnection charges rose by 7.8% or 116 mln Roubles up to 1,597 mln Roubles mostly due to change of tariffs for lease of intrazone channels from the OJSC Rostelecom in favor of the zone starting from June 2009 as well as increasing expenses related to Internet service consumption in the report period.

Depreciation and Amortization

Expenses in “Depreciation and amortization” section increased by 8.8% due to investment plan implementation and fixed assets commissioning.

EQUITY AND LIABILITIES

Far East Telecom Group net assets as of 30th September 2009 increased by 13.9% or 1,462 mln Roubles comparing to figure of 31st December 2008 (10,500 mln Roubles), and reached 11,962 mln Roubles. Equity’s share in the balance sheet increased by 4.1 percentage points from 50.3% to 54.4% comparing to the beginning of the report period.

 

For 9 months, ended 30th September 2009, Million Roubles

For 9 months, ended 30th September 2008, Million Roubles

Change, %

Debt

5,389

5,687

(5.2)%

 

Net debt

5,068

5,133

(1.3)%

 

LIQUIDITY

Far East Telecom Group net assets as of 30th September 2009 exceeded current assets 2,238 mln Roubles (against 2,247 mln Roubles as of 31st December 2008).

 

30 September 2009

31 December 2008

Absolute liquidity ratio

0.10

0.13

 

Quick assets ratio

0.36

0.38

 

Current liquidity ratio

0.61

0.58

 

Working capital coverage ratio

(1.92)

(2.31)