OREANDA-NEWS. August 3, 2010. Southern Telecommunications Company (UTK), [(RTS: KUBN, KUBNP; MICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the largest fixed-line telecommunciations operator in the territory of the Southern and North-Caucasian Federal Districts of Russia, hereby announces its unaudited financial results for the first six months of 2010 in accordance with Russian Accounting Standards (RTS).

For the first six months of 2010 UTK’s revenue increased by 6.3% and amounted to RUR 11,424.9 mln.  In addition, expenses went up by 4.9% to RUR 8,442.7 mln.

Revenue from local voice rose 5.0% to RUR 4,982.4 mln (45.5% in the revenue breakdown from telecom services), which is attribtuable to the indexation of local tariffs as of February 1, 2010 and an increase in the number of subscribers which have the technical capability of selecting tariff plans.

Revenue from intrazonal telephony decreased by 7.9% and amounted to RUR 1,588.3 mln (14.5% in the revenue breakdown from telecom services), which is attributable to a redistribution of traffic on cellular operators. 
Focused operations on the competitive value-added services market allowed the company to raise its revenue from datacom and ISP services by 21.4% to RUR 3,195.7 mln (29.2% in the revenue breakdown from telecom services).  In addition, the operator’s broadband Internet subscriber base increased by 40.7% to 636,500 users as of the end of the first six months of 2010. 

Revenue from interconnect and traffic transmission decreased by 7.2% to RUR 918.0 mln (8.4% in the breakdown of revenues from telecommunciations service).

Revenue breakdown

Indicator, RUR, mln

H110

H109

Change, %

Revenue from core types of activity

11,424.9

10,751.1

6.3

incl. telecom revenue

10,958.9

10,356.2

5.8

Intrazonal telephony

1,588.3

1,725.3

-7.9

Local telephony

4,982.4

4,746.0

5.0

Mobile and radio, wire broadcasting, radio broadcasting, television

180.2

180.4

-0.1

Telegraph, datacom and telematic services

 

3,289.4

2,713.8

21.2

incl. datacom and ISP

3,195.7

2,632.6

21.4

Interconnect and traffic transmission

918.0

988.9

-7.2

Other types of core activities

0.6

1.7

-64.7

Outsourcing and agency services

218.6

230.0

-5.0

Non-core activities

247.4

164.9

50.0

For the first six months of 2010 the company's payroll expenses rose by 8.8% and amounted to RUR 2,439.1 mln (28.9% in the company’s cost breakdown) in conjunction with the indexation of salaries made from February 1 through May 1, 2010.

The depreciation of plant, property and equipment increased by 3.7% to RUR 2,069.5 mln (24.5% of the total cost side).

Material expenses increased 5.1% to RUR 808.0 mln (9.6% of the total cost side).

Interconnect expenses (including Rostecom) decreased by 4.7% and amounted to RUR 885.6 mln (10.5% of the total cost side). 

Cost breakdown 

Indicator, RUR, mln

 

H110

 

H109

 

Change, %

Operating expenses

8,442.7

8,048.2

4.9

Payroll expenses

2,439.1

2,242.7

8.8

Social insurance deductions

626.4

573.0

9.3

Depreciation of PP&E

2,069.5

1,995.1

3.7

Material expenses (total)

808.0

768.7

5.1

Interconnect expenses (including Rostelecom)

885.6

929.6

-4.7

Other

1,614.1

1,539.1

4.9

In addition, EBITDA in the first six months of 2010 increased by 24.0% and amounted to RUR 4,808.8 mln, while EBITDA margin rose 6.0% to 42.1%.

As a result of lower interest expenses, higher efficiency of operating activity and an increase in positive foreign exchange rate differences, net profit amounted to RUR 1,541.6 mln, which is 3 times higher y-o-y.

As a result of an improvement in the management structure and headcount reduction the average number of main employees decreased by 5.3% to 23,883.  In addition, a 2.6% rise was recorded in the number of lines per employee, up to 163.5 lines per employee.

The total amount of capital investments in the first six months of 2010 amounted to RUR 1,305.6 mln, which is more than five times the level of this metric in the first six months of 2009.  Furthermore, the digitalization of UTK’s local voice network rose 1.76% and reached 74.2%.

Main efficiency indicators and other metrics 

Indicator

Unit of measurement

H110

 

H109

 

Change, %

EBITDA*

RUR, mln

4,808.8

3,876.9

24.0

EBITDA margin

%

42.1

36.1

6.0

Net profit/loss

RUR, mln

1,541.6

517.8

197.7

Average number of main employees (not incl. those who work concurrently)

#

23,883

25,214

-5.3

Number of lines per employee

lines/employee

163.5

159.4

2.6

Revenue per line

RUR/line

2,926.1

2,675.3

9.4

Digitalization rate of local voice network

%

74.2

72.44

1.76

Investments

RUR, mln

1,305.6

252.3

417.5

 [1] EBITDA is calculated as the sum of profit before taxation, interest expenses, depreciation of PP&E, and lease payments adjusted for interest revenue.