Sibirtelecom Releases 9M09 Financial Results (IFRS)

OREANDA-NEWS. December 28, 2009. Sibirtelecom (RTS: ENCO/ENCOP, ENCOG/ENCOPG; МICEX: STKM/STKMP; ADRs: ОТС– SBTLY, Frankfurt and Berlin stock exchanges– ISIN: US8257351036, WKN: 260452) – a telecommunications operator which provides services in the Siberian Federal District, hereby announces its unaudited, consolidated and interim financial statement for nine months ended September 30, 2009, drafted in accordance with international financial reporting standards (IFRS).

The unaudited, consolidated and interim financial statement include the assets, liabilities and results of the activities of Sibirtelecom and its subsidiaries (hereinafter, the Company).  The main activity of subsidiaries is to provide mobile radio telephone (cellular) services and other telecommunications services.

Headline financial indicators, IFRS (RUR mln)

TheCompany’s revenue

The Company’s consolidated revenue for nine months ended September 30, 2009 amounted to RUR 28,538 mln, which is an increase of RUR 621 mln, or 2.2% higher than in the same period in 2008. 

The Company’s main revenue driver during the reporting period was the expansion of broadband Internet services.  Growth came from a rise in the number of Internet users and Internet traffic, as well as local voice revenue.

Revenue breakdown (RUR, mln)

The Company’s consolidated revenue breakdown shows a considerable proportion represented by local telephony (RUR 8,759 mln) and cellular telephony services (RUR 7,340 mln) or 30.7%, respectively.

Other large items in the Company’s revenue breakdown include earnings from datacom networks and telematic services (Internet) (RUR 4,126 mln) and intrazonal telephony (RUR 3,700 mln), up 14.5% and 13%, respectively. In addition, revenue generated from interconnect and traffic transit increased by 9.5% (RUR 2,720 mln) of the Company’s consolidated revenue. 

Compared with the same period in 2008, in the nine months ended September 30, 2009:

the biggest growth in revenue came from the provision of Internet services, for a total of RUR 920 mln, or up 28.7%.  The main growth drivers were an increase in the number of broadband Internet users and, accordingly, higher earnings from the provision of Internet services. As of October 1, 2009 the number of broadband Internet subscribers stood at 543,500 (up 69.6% compared with the same period in 2008);

the rise in revenue from other sales stood at RUR 256 mln, or 34.2%, which is mainly connected with an increase in the number of leased out facilities;

the increase in revenue from provision of local services stood at RUR 229 mln or 2.7%, which was mainly attributable to the indexation of regulated tariffs effective March 1, 2009 and an increase in the subscriber base;

the decrease in revenue from interconnect and traffic transit, which amounted to RUR 335 mln, or 11.0%, was attributable to a decline in volumes of transited traffic, as well as the cancellation of tariff charges at interconnection points as of March 1, 2008;

the decline in revenue from provision of intrazonal telephony stood at RUR 309 mln, or 7.7%, which was due to a decline in traffic volumes and a decrease in the average line distance tariff for F2G calls;

the decrease in earnings from provision of cellular telephony amounted to RUR 80 mln, or 1.1%, which is due to a downturn in the consumption of subscriber services both in the household and corporate segment, and also the transition of subscribers to cheaper tariff plans from the list offered by the Company;

the decline in revenue from outsourcing and agency fees stood at RUR 72 mln, or 16%, which is mainly due to shrinkage in the volume of services provided to users on the part of Rostelecom, and also the number of contracted entered into directly at the level of Rostelecom. 

The Company’s expenses

The Company’s expenses for 9 months ended September 30, 2009 increased by RUR 1,141 mln, or by 4.9% compared with the same period in 2008 and amounted to RUR 24,266 mln. 

The largest expense items in the Company’s revenue breakdown fell to payrolls (30.9%), depreciation and amortization (25.2%) and other operating expenses (20.9%).

Breakdown of operating expenses

Compared with the same period in 2008, in the nine months ended September 30, 2009:

the amount of accrued depreciation and amortization increased by RUR 835 mln, or 15.8%, which was attributable to the Company’s investment policy which is aimed at network expansion and also as a result of the acquisition of software products for the Company’s corporate content center;

the increase in other operating expenses stood at RUR 380 mln or 8.1%, which was attributable to higher costs related to agency fees, transportation expenses as a result of the review of the Company’s business processes, and also the formation of a reserve against dubious debts owing to a rise in overdue accounts receivable;

the increase in expenses for services payable to telecom operators stood at RUR 251 mln, or 7.8%, which is due to an increase in traffic subject to payment in accordance with the interconnect procedure pursuant to legislative industry standards. 

Capital expenses

The Company’s capital expenses during the nine months ended September 30, 2009 stood at RUR 3,585, which is RUR 3,109 mln or 46.4% less than in the same period in 2008.  The level of investments allocated for the rollout of mobile (cellular) telephony amounted to 42.5% of the Company’s total amount of capital spending. 

Leverage

As of September 30, 2009 the Company’s net debt stood at RUR 20.8 bln (-9.3% since the beginning of 2009). 

Financial results

Compared with the same period in 2008, for the nine months ended September 30, 2009:

The increase in OIBDA stood at RUR 570 mln, or 5.3%. 

OIBDA margin reached 39.9%.

Profit from operating activity decreased by RUR 265 mln, or 4.8% and stood at RUR 5,274 mln, which was due to a rapid rise in operating expenses (4.9%) compared with operating revenue (3.1%). 

Operating profit reflects other operating revenue equal to RUR 1,002 mln, including the refund of losses from the provision of universal services amounting to RUR 656 mln.

Operating profit margin amounted to 18.5%.

Pre-tax profit decreased by RUR 1,187 mln, or 32.8% and amounted to RUR 2,434 mln, or 32.8% and totaled RUR 2,434, which was attributable to a decrease in operating profit, an increase in financial expenses from interest on the Company’s bank credits and loans, and a result of the influence of non-cash losses from foreign exchange losses (the negative balance on foreign exchange differences stood at RUR 311 mln).

Profit during the reporting period decreased by RUR 745 mln, or 29% and stood at RUR 1,820 mln, which was attributable to a decrease in pre-tax profit.  Profit margin during the reporting period stood at 6.4%. 

For reference: Main unconsolidated operating indicators