OREANDA-NEWS. May 7, 2010. Southern Telecommunications Company (“UTK”) (RTS: KUBN, KUBNP; MICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the principal fixed-line telecommunications provider for Russia’s Southern and North-Caucasian Federal Districts, today announced its unaudited financial results for the first quarter of 2010 compiled in accordance with Russian Accounting Standards (RAS).

UTK’s Q1 2010 revenue was up 6.1% to RUR 5,660.3 million. Operating expenses grew by 5.5% to RUR 4,159.5 million.  

Revenues from local telephone services rose by 6.3% to RUR 2,481.3 million due to tariff growth in March 2009 and accounted for 45.7% of the Company’s telecom revenues.

Due to structural changes in traffic and mobile substitution, revenues from intra-zonal telephone services decreased by 9.3% to RUR 785.1 million accounting for 14.5% of the Company’s telecom revenues.

Well-directed efforts in the competitive market of new telecom services enabled UTK to increase revenues from data transfer and Internet services by 20.0% to RUR 1,563.2 million, thus increasing the portion of revenues from these services in total telecom revenue to 28.8%. Broadband Internet subscriber base was enhanced by 45.1% in Q1 2010 to 588.3 thousand users.

Revenues from interconnection and traffic transit services decreased by 7.8% to RUR 463.7 million thus accounting for 8.5% of the Company’s telecom revenues. 

SEGMENTAL ANALYSIS OF REVENUES:

Description

Mln rub

 Q1 2010

Q12009

Change, %

Revenue

5,660.3

5,336.8

6.1

Including Telecom revenue

5,430.6

5,135.4

5.7

Intra-zone telephony

785.1

865.4

-9.3

Local telephony

2,481.3

2,333.5

6.3

Wireless communication with mobile objects, wired radio, TV and radio broadcasting

91.3

91.4

-0.1

Telegraph, data transfer and telematic services

1,608.9

1,341.0

20.0

Including data transmission and Internet access

1,563.2

1,302.3

20.0

Interconnection and traffic transit services

463.7

503.1

-7.8

Other telecom services

0.3

0.9

-66.7

Fees on assistance and agent services

112.5

118.6

-5.1

Other sales revenues (non-core activities)

117.2

82.9

41.4

Q1 2010 expenses for wages and salaries showed a 7.2%-increase over Q1 2009 to RUR 1,208.3 million, accounting for 29.0% of the Company’s operating expenses. It was attributable to indexation of wages from February 1, 2010. 

Depreciation charges grew slightly by 2.7% to RUR 1,034.3 million accounting for 24.9% of the Company’s operating expenses. 

Material expenses amounted to RUR 419.8 million representing a 21.6%-increase over Q1 2009 and accounting for 10.1% of the Company’s operating expenses. 

Payments to national telecom operators (including to Rostelecom) decreased by 2.8% to RUR 437.4 million and accounted for 10.5% of the Company’s operating expenses. 

Expenses breakdown: 

Description

Mln rub

Q1 2010

Q1 2009

Change, %

Operating expenses

4,159.5

3,944.4

5.5

Wages and salaries

1,208.3

1,127.2

7.2

Social insurance

312.3

294.8

5.9

Depreciation and amortization

1,034.3

1,007.4

2.7

Material expenses (total)

419.8

345.2

21.6

Payments to national telecom operators (including to Rostelecom)

 

437.4

450.1

-2.8

Other costs

747.4

719.7

3.8

EBITDA more than doubled amounting to RUR 2,618.6 mln and represented EBITDA margin of 46.3%, gaining 22.6 percentage points over Q1 2009.

Due to improvement of the Company’s operating efficiency indicators and foreign exchange differences net profit made RUR 939.1 million compared to net loss of RUR 320.8 million in Q1 2009.

The Company continued to optimize the headcount aiming to raise its business efficiency. As a result, in Q1 2010 the Company managed to slash the average number of employees by 4.7% over a year-ago to 24,160 people and to bring the number of lines per employee to 162.1 representing a 2%-increase.

Q1 2010 capex more than tripled over Q1 2009 to RUR 168.0 million. Digitalization rate of the Company’s local network climbed 1.76% y-o-y to 74.08%. 

Key operational highlights and business efficiency indicators:

Description

Measure unit

Q12010

Q12009

Change, %

EBITDA*

RUR mln

2,618.6

1,265.2

106.9

EBITDA margin

%

46.3

23.7

22.6 p.p.

Net profit (loss)

RUR mln

939.1

-320.8

-

Average number of employees on payroll

people

24,160

25,361

-4.7

Lines per employee

Lines/employee

162.1

158.9

2.0

Revenue per line

RUR/line

1,444.9

1,324.2

9.1

Local network digitization rate

%

74.08

72.32

1.76 p.p.

Investments

RUR mln

168.0

37.8

344.4

* EBITDA includes Earnings Before Interest Payable, Taxes, Leasing Payments, Depreciation and Amortization minus Interest Receivable.