OREANDA-NEWS. On 01 September 2008 Far East Telecom (RTS: ESPK, MICEX: DLSV, ADR: FEEOY, Deutsche Bourse and Berlin Stock Exchanges: D7A), the biggest telecom of Far East Region, announced not-audited results for the 1st quarter 2008 in accordance with International Financial Reporting Standards (IFRS).

"In the first quarter we increased revenue stability at the account of the internet access services and data transmitting, and showed good EBITDA profitability, strengthened liquidity, - said Chief Executive Officer of Far East Telecom, Anton Kolpakov, - This year we are aimed at increase of the Company’s share at the communication services market of the Far Eastern region by developing of our technical opportunities, strengthening profitability and liquidity".

Consolidated financial reports include property, liabilities and results of operations of the Group of companies of the OJSC “Far East Telecom”, the main sphere of operation of which is rendering of local telephone, cellular communication and other telecommunication services.

Telegraph communication services, data transmitting and telematic services

The highest rate of income growth is observed in the sphere of services of broad band internet access. The main driver of income is growth of subscribers base. As compared to the 1st quarter 2007 it increased by 103,916 subscribers (including at the account of Open Joint Stock Company “Sakhatelecom” - - 14,612 subscribers). Moreover the growth of income was influenced by the expansion if Internat-channels in Primorskiy, Khabarovskiy and Sakhalinskiy branch offices during 2007 and 1st quarter 2008.

Interactive digital television (IP TV) as compared to the 1st quarter 2007 indicated growth of income equal to 395% (the 1st 2007 – 7.5 mln. rub, 1st quarter of 2008 – 29,7 mln. rub). The growth is caused by expansion of geography of the service at the account of Khabarovskiy krai and Kamchatskiy krai, Republic Sakha (Yakutia).

Significant income growth (155%) proves virtual private networks service (IP VPN) at the account of increase of subscribers base (the 1st quarter 2007 - 18 mln. rub., the 1st quarter 2008 – 27, 8 mln. rub.).

Local telephone communication services

Growth of income from local telephone communication services is caused by increase of tariffs from July 01, 2007. Also growth of income was influenced by increase in subscriber base by 10,562 subscribers (the 1st quarter 2007 – 1, 623,575, the 1st quarter 2008 – 1,634,137).

In-zone communication services

Income from in-zone communication services in the 1st quarter 2008 were at the level of the 1st quarter of year 2007.

Cellular communication services

Income from cellular communication services in the 1st quarter 2008 reduced by 3% as compared to the analogous period of the previous year.

Decrease of income is connected with high saturation of the cellular communication market, strengthening of competition and consequently reduction of ARPU.

Joining and traffic transmission services

Reduction of income from joining and traffic transmission services in the 1st quarter 2008 as compared to the 1st quarter 2007 is caused by:

Cancellation of fee for servicing of joining points from March 01, 2008;

Cancellation of compensation surcharge from January 01, 2008;

Loss of share of income from traffic transmission services in the 1st quarter 2008 connected with de-monopolization of zone fixed communication services market and assess to the market of alternative communication operators.

Wages, salaries, other benefits and payroll taxes

During 1st quarter of year 2008 expenses falling under paragraph “Salary, other payments and social deductions” reduced by 6.7% as compared to analogous period of the year 2007. This in its turn is connected with implementation of personnel quantity optimization program of Open Joint Stock Company “Sakhatelecom”.

Materials, repair and maintenance, utilities

Growth of expenses falling under paragraph “Materials, repair and maintenance, utility services” by 19.5% is caused by the growth of expenses for subscriber maintenance for provision of interactive digital television services (IP TV), as well as growth of prices for services and materials as compared to analogous period of the previous year.

Interconnection charges – domestic operators

Expenses connected to the services of communication operators increased by 42.8% and equaled to 457 mln. rub., this was caused by the following:

Institution of payment for service of termination to codes of ABC of operators of mobile communication network;

Growth of traffic from the subscribers of the Group of companies of Open Joint Stock Company “Far Eastern Telecommunications Company” to the subscribers of mobile communication network due to increase of subscribers base of mobile communication network;  

Rent of satellite segment and additional communication channels for implementation of Federal Purpose Program “Education”;

Change in tariffs for rent of in-zone channels from Open Joint Stock Company “Rostelecom” in the interests of the zone, which became effective since March 2008.

Depreciation and amortization

Paragraph "Wear and depreciation" shows 30% growth which is connected with putting into operation of capital assets objects in the 4th quarter of the year 2007 due to completion of projects aimed at development, first of all, broadband Internet as well as expansion of fiber-optic communication lines and other infrastructure objects.

OWN AND LOANED CAPITAL

Net assets of Group of companies of Open Joint Stock Company “Far Eastern Telecommunications Company” as of March 31, 2008 increased by 7.0% and reached 9,027 mln.rub. (as of December 31, 2007 – 8,436 mln.rub, the share of loaned capital reduced as compared to beginning of the report period by 1,1% , i.e. from 56,6% to 55,5%.

LIQUIDITY

During the report period the Company improved its liquidity showings. As of March 31, 2008 excess of the current liabilities over current assets was 175 mln. rub. (as of December 31, 2007 – 1,020 mln. rub.).