Recent news

30.07.2009
Far East Telecom’s RAS H109 net profit rises 24.3% y-o-y

Press release

Vladivostok– July 30, 2009. Far East Telecom (RTS: ESPK, ММВБ: DLSV, OTC USА: FEEOY, Frankfurt and Berlin stock exchanges: D7A) hereby announces its financial and economic indicators for the first six months of 2009 drafted to Russian Accounting Standards (RAS).

Headline financial and economic indicators for the first six months of 2009

Indicator

H109, Rub mln

H108, Rub mln

Change, %

Revenue from main types of activity

6,639.8

5,886.6

12.8%

inc. telecomservices

6,312.5

5,592.6

12.9%

Expenses for main types of activity

4,907.7

4,293.5

14.3%

EBIT

1,732.1

1,593.1

8.7%

Pre-tax profit

1,370.7

1,184.6

15.7%

OIBDA (1)

2,433.9

2,291.0

6.2%

OIBDA margin (2)

36.7%

38.9%

-

EBITDA (3)

2,324.5

2,093.0

11.1%

EBITDA margin (4)

35.0%

35.6%

-

Net profit

1,071.7

862.5

24.3%

NP margin

16.1%

14.7%

-

______________________
1. OIBDA is calculated as revenue minus amortization expenses.

2. OIBDA margin is calculated as OIBDA/revenue.
3. EBITDA is calculated as pre-tax profit plus amortization plus lease payments on off-balance-sheet leasing plus interest payable minus interest receivable.

4. EBITDA margin is calculated as EBITDA/revenue.

As a result of higher revenue from ISP, interactive television, and traditional telephony we managed to raise the pace of revenue growth compared with the first quarter of 2009”, noted the company’s general director Andrey Balatsenko.

“Management faced some important challenges this year, including strict control of operating expenses while optimizing business processes and raising the efficiency of investments. This will make it possible to strengthen profit margins, and, as a result, reduce debt”, he added.

Key efficiency indicators

Total number of staff as of June 30, 2009 reached 10,728 employees, which is 591 (of 5.2%) less than as of January 1, 2009 (11,319 employees);

Revenue per employee rose by 23.4% to Rub 621,200 during the first six months of 2009 (compared to Rub 503,500 as of the end of H1 2008);

The number of lines per employee increased by 8.6% to 138.4 lines (up from 127.2 as of end of H1 2008);

The cost of ruble revenue in the first six months of 2009 stood at 73,.91 kopecks, which is 1.3% more than in the year-earlier period (Rub 72.94 in H1 2008).

Revenue trends in telecom services as of the end of H1 2009

Type of service

H109, Rub mln

H108, Rub mln

Change, %

Intrazonal telephony

1,103.86

869.84

26.90%

Local voice

2,558.14

2,314.15

10.54%

Radio and wire communication, radio and television broadcasting

80.14

83.53

(4.06%)

Mobile (cellular) telephony

связи

131.53

164.20

(19.90%)

Telegraphic, datacom and telematic services

1,936.68

1,507.92

28.43%

incl. datacom and ISP (except for interactive television)

1,871.71

1435.48

30.39%

incl. interactive television

95.52

56.17

70.06%

Interconnect and traffic transmission

502.18

652.95

(23.09%)

TOTAL

6,312.53

5,592.59

12.87%

An increase in revenue is attributable to the following factors:

higher revenue from ISP;

higher revenue from interactive television;

higher revenue from local voice telephony.

Revenue from ISP and datacom

The fast pace of revenue growth was reached by increasing the subscriber base of broadband Internet users. Compared with the first six months of 2008, it rose by 116,198 subscribers (as of June 30, 2009 numbering 327,469 subscribers). Higher revenue also came from active promotion of limit-based and unlimited tariff plans, which, in turn, favored an increase in earnings from subscriber fees.

As for Interactive Television, growth in this service compared with the first six months of 2008 reached 70.1% or Rub 39.4 mln. This was due to an increase in the subscriber base by 28,022 subscribers (as of June 30, 2009 the subscriber base had reached 54,678). Higher revenue also helped the commercial launch of Interactive Television at the Amur branch in July 2008.

Revenuefromlocal voice telephony

The 10.5% increase in revenue from local voice telephony was attributable to tariff hikes made in September 2008 and in March 2009.

Revenue from intrazonal telephony

Higher revenue was due to the reflection in this line item of earning from services provided for mutual line leasing with Transtelecom beginning in July 2008 in the Primorsky and Khabarovsk branches. Without counting this factor, revenue would have declined 0.9% or Rub 7.6 mln. The decline was caused by a drop in volumes of intrazonal traffic, which resulted in a 7.7% decrease (Rub 58.7 mln) in revenue due to a contraction in revenue from F2F traffic (by 14.2% or Rub 50.9 mln). The decline in volumes of traffic was attributable to the entry into the market of alternative zonal telephony operators and the replacement of mobile telephony.

Revenue from cellular telephony

Revenue from cellular telephony decreased by 19.9% in the first six months of 2009 compared with the year-earlier period. The decrease was due to a decline in the subscriber base of 8,058 subscribers (as of June 30, 2009 the subscriber base stood at 93,512 subscribers) and the decrease in average revenue per subscriber from Rub 249 in H1 2008 to Rub 212 in H1 2009, which is due to fierce competition on the part of Big-3 operators in the Magadan and Kamchatka regions.

Revenue from interconnect and traffic transmission

The drop in revenue from interconnect and traffic transmission in the first six months of 2009 compared with the year-earlier period was caused by:

the cancellation of fees for servicing interconnect points as of March 1, 2008;

a decline in the share of revenue from traffic transmission, which is due to the deregulation of the zonal fixed-line telephony market and the entry into this market of alternative telecom operators. These trends were mainly visible in the Primorsk, Khabarovsk, and Amur regions;

a decline in revenue from traffic transmission on local and zonal levels, which is attributable to mobile replacement and the outflow of traffic to IP networks;

shrinkage in the share of service from traffic transmission to access nodes (local origination of calls) in connection with a decrease in the share of switched Internet access services and an increase in the share of DSL services.

Trends in subscriber base and shares in revenues of value-added services in H1 2009

The share of value-added services (Internet access, datacom, mobile telephony, interactive television and video on demand) reached 30.1%in the structure of the company’s revenue in the first six months of 2009 (up from 27.2% in the first six months of 2008);

The subscriber base of dial-up Internet access service fell by 44% to 96,017 subscribers (down from 171,081 in H1 2008) due to the fact that subscribers switched over to broadband Internet access);

The broadband Internet access subscriber base increased by 55% to 327,469 subscribers (up from 211,271 subscribers in H1 2008);

The cellular telephony subscriber base decreased by 8% to 93,512 subscribers (Kamchatka region – 34,777 (down from 43,693 in H1 2008), and 58,735 in the Magadan region (up from 57,8777 in 1H 2008);

The subscriber base for main lines stood at 1,379.270 in June 2009 (down from 1,381,092 as of June 30, 2008).

Expense trends in H1 2009

Expense item

H109, Rub mln.

H108, Rub mln

Change, %

Payrolls

1,515.98

1,330.31

13.96%

Social insurance contributions

325.65

329.55

(1.18%)

Depreciation of fixed assets

701.77

697.87

0.56%

Material expenses(5)

480.92

444.69

8.15%

Expenses payable to telecom operators (except Rostelecom)

821.82

590.51

39.17%

Expensespayable to Rostelecom

1,71.89

141.41

21.55%

Outsourcing (6)

376.54

334.67

12.51%

Deductions to universal service fund

66.50

58.99

Recent news

30.07.2009 Far East Telecom’s RAS H109 net profit rises 24.3% y-o-y

30.07.2009
Far East Telecom’s RAS H109 net profit rises 24.3% y-o-y