OREANDA-NEWS. June 03, 2010. “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 82 Russian cities, announced its unaudited consolidated US GAAP financial results for the three months ended March 31, 2010.

FIRST QUARTER HIGHLIGHTS

•    Consolidated revenues up 7% year on year in ruble terms to USD 407.0 million 

•    OIBDA  up 24% year on year in ruble terms to USD 178.8 million, including USD 19.0 million reversal of previously accrued expenses for cancelled 2008 phantom option programme

•    Increased OBIDA margin of 43.9% (39.2% when excluding reversal of previously accrued phantom option expenses)

•    Net income attributable to Comstar-UTS shareholders more than tripled year on year in ruble terms to USD 60.3 million

•    Cash and cash equivalents and short term investments up four times year on year in ruble terms to USD 545.4 million

•    Cash flow from operations up 28% year on year in ruble terms to USD 148.1 million

•    Cash capital expenditure  of USD 16.5 million represents 4.1% of consolidated revenues

•    Free cash flow  up 2.7 times year on year in ruble terms to USD 131.5 million

•    Total broadband subscriber base up 16% year on year and 5% quarter on quarter  to 1.4 million

•    DLD/ILD traffic passed through Comstar’s proprietary network up more than 4 times year on year to 161 million minutes, with DLD/ILD consolidated revenues of USD 18.5 million

•    Agreements for telecom services signed with the owners of 37 commercial real estate projects comprising  approximately 2 million square metres in Moscow

KEY STRATEGIC DEVELOPMENTS

•    MGTS’s regulated local connection tariffs and regulated line rental tariffs for corporate and residential subscribers were increased by 10.3% in rubles from February 1, 2010

•    MGTS’ Extraordinary General Meeting of Shareholders on March 26, 2010 approved a dividend payment to holders of MGTS preferred shares, which  became non-voting upon dividend payment

•    Interest rate on RUR 26.0 billion credit facility reduced from 13.35% to 10.5% with effect from March 1, 2010 and grace period extended until September 27, 2010

•    RUR 5.8 billion three year credit facility provided by Sberbank for draw down before end of 2010, with 10.5% annual interest rate and grace period until end of 2011

•    Acquisition of TenzorTelecom, one of the largest internet service providers in the Central Federal District, in February 2010

•    Establishment of project centre for the development of innovative technologies and services

•    Signing of agreements to sell 25%+1  share stake in OJSC Svyazinvest to OJSC Rostelecom for RUR 26 billion through a series of transactions and subject to obtaining the necessary corporate approvals by the parties involved

Sergey Pridantsev, President and Chief Executive Officer, commented: “We have delivered another quarter of healthy operating and financial results in line with our expectations:  consolidated revenues were up 7% year on year in ruble terms, underlying OIBDA margin was 39.2%, free cash flow increased 2.7 times year on year while net debt was down 22% since the end of 2009. We have made significant progress with the restructuring of our ownership in Svyazinvest by signing a sale and purchase agreement with Rostelecom. We have also moved forward consistently with the integration of our operations into MTS, by commencing the rebranding of our alternative segment business and launching the first convergent subscriber offerings.

“In accordance with our strategy to develop and introduce innovative technologies and provide customers with enhanced service offerings, we have established a Project Centre to develop the seamless communications space for our customers by implementing IMS technology in the MGTS network.”