OREANDA-NEWS. April 26, 2010. Southern Telecommunications Company (UTK) [(RTS: KUBN, KUBNP; МICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the largest fixed-line telecommunications operator in the territory of the Southern and North-Caucasian federal districts, hereby announces its audited financial results for 2009 in accordance with Russian Accounting Standards (RAS).

Commenting on UTK’s 2009 results, the operator’s general director Alexander Shipulin noted: “In 2009 we managed not only to stabilize its loan portfolio and considerably reduce its debt load, but also to complete a number of large-scale projects, by preparing a platform for the implementation of the company’s ambitious goals in 2010.  We managed to optimize many business processes, and expand its package of services for corporate clients and on the whole improve the quality of services provided”.

UTK’s revenue in 2009 amounted to RUR 21,856.9 mln, which is 4.7% more compared with 2008.  Expenses increased by 3.4% to RUR 16,313.1 mln.

Revenue from local voice telephony increased by 1.8% to RUR 9,501.4 (45.2% in the company’s revenue breakdown) due to the indexation of tariffs in March 2009 and a rise in the number of subscribers which have the ability to select three tariff plans (87% of the overall subscriber base).

As a result of structural changes in traffic and mobile substitution revenues from intrazonal telephony services decreased and amounted to RUR 3,435.7 mln (16.4% in the breakdown of tariff revenues).

Revenue from datacom and Internet access increased by 31.0% to RUR 5,580.4 mln as a result of 1.5-fold growth in the operator’s broadband Internet subscriber base (up to 546,000 users).  The proportion of these revenues in the company’s tariff revenue mix increased by 5.3% to 26.6%.

In addition, revenue from interconnect and traffic transit decreased by 12.1% to RUR 1,942.4 mln (9.3% in the tariff revenue mix) due to a redistribution of traffic on the fixed-line zonal telephony network of operators which do business in the license territory of URK, and also a reduction in traffic related to local and zonal origination of calls.

Revenue breakdown 

Indicator, RUR, mln

 

2009

2008

Change, %

Revenue from core activities

21,856.9

20,883.8

4.7

incl. telecom services

20,998.7

20,037.9

4.8

Intrazonal telephony

3,435.7

3,720.6

-7.7

Local voice telephony

9,501.4

9,330.4

1.8

Mobile radio, wire broadcasting, television

361.2

339.2

6.5

Telegraphic, datacom and telematic services

5,757.1

4,420.2

30.1

incl.  datacom and Internet access

5,580.4

4,259.9

31.0

Interconnect and traffic transit

1,942.4

2,210.5

-12.1

Other core activities

1.1

17.0

-93.5

Outsourcing and agency services

478.8

520.4

-8.0

Non-core activities

 

379.3

325.5

16.5

Payrolls amounted to RUR 4,505.2 mln in 2009 (accounting for 27.6% of the expense breakdown), which is 1.8% less than in 2009 due to headcount reduction.

Depreciation of fixed assets increased by 12.1% to RUR 4,003.6 mln (24.5% of the expense breakdown).

Material expenses decreased by 3.0% to the level of RUR 1,682.3 mln (10.3% of the expense breakdown).

Interconnect expenses (including Rostelecom) increased by 7.2% and amounted to RUR 1,860.2 mln (11.4% of the expense breakdown).

Expense breakdown 

Indicator, RUR, mln

 

2009

2008

Change, %

Operating expenses

16,313.1

15,778.2

3.4

Payrolls

4,505.2

4,586.3

-1.8

Social insurance contributions

1,090.3

1,106.7

-1.5

Depreciation of fixed assets

4,003.6

3,573.0

12.1

Material expenses

1,682.3

1,734.3

-3.0

Interconnect (including Rostelecom)

1,860.2

1,735.2

7.2

Other

3,171.5

3,042.7

4.2

The net profit indicator rose 3.3 times to RUR 1,845.7 mln as a result of higher efficiency of operating activities and an increase in positive exchange rate differences.

As a result of operations aimed at headcount reduction, the company managed to lower the total number of its in-house staff by 4.8% to 24,966 and raise the number of lines per employee by 3.0% to 159.8.  In addition, the average payroll increased by 2.9% to RUR 14,896 mln in 2009. 

The amount of capital investments in 2009 amounted to RUR 1,727.0 mln, which is 63.7% less than the 2008 level.  The digitalization rate of the company’s local voice network increased by 1.76% and stood at 74.04% as of the beginning of 2010.

Headline efficiency indicators and other metrics  

Indicator

Unit of measurement

2009

2008

Change, %

EBITDA [1]

RUR, mln

8,550.8

6,648.1

28.6

EBITDA margin

%

39.1

31.8

7.3%

Net profit

RUR, mln

1,845.7

557.0

231.3

Average number of in-house employees (not incl. outsourcing)

employees

24,996

26,250

-4.8

Average payroll

RUR

14,896.0

14,481.7

2.9

Number of main lines

 

‘000 units

3,914.7

4,026.6

2.8

Number of lines per employee

 

Lines/employee

159.8

155.1

3.0

Revenue per line

RUR/line

5,472.5

5,130.7

6.7

Digitalization of local voice network

%

74.04

72.28

1.76%

Investments

RUR, mln

1,727.0

4,752.0

-63.7

In 2009 the company’s interest debt shrank by 19.4% to RUR 18,524.7 mln, while net debt decreased by 16.4% to RUR 18,004.5 mln, and the Net Debt/EBITDA ratio declined to 2.11x. 

Indicator

As of Dec.  31. 2009

As of Dec.  31. 2008

Change, %

Interest debt [2], RUR, mln

18,524.7

22,981.4

-19.4

Net debt [3], RUR, mln

18,004.5

21,533.1

-16.4

Net Debt / EBITDA

2.11

3.24

-

“Today we look ahead to the future with confidence, and the company’s plans are extremely ambitious.  In 2010 UTK will continue to decrease its debt load, strengthen cost cutting, and raise the efficiency of its investment activity.  These actions will eventually strengthen the company’s positions on the telecommunications service market of southern Russia”, the general director of UTK Alexander Shipulin pointed out.

[1] EBITDA is calculated as earnings before taxation, interest payable, depreciation of fixed assets, lease payments, additional expenses for credits and loans adjusted for the amount of interest receivable.
 [2] Interest debt is equal to long-term credit and loan obligations and short-term credit and loan obligations.

 [3] Net debt is calculated as interest debt minus monetary funds.