OREANDA-NEWS. On April 08, 2009 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 Federal District, announced its audited financial results for the year 2008 compiled in accordance with Russian Accounting Standards (RAS), reported the press-centre of UTK.

Commenting on year 2008 performance results, UTK’s General Director Alexander Andreev noted: "2008 performance results confirmed a grow trend in broadband access subscriber base: at the end of the year the number of high-speed Internet subscribers made 354 thousand users, share of revenues from these services in total telecom revenue increased to 21.3%. Last year the following business efficiency indicators showed an increase: number of lines per employee was up 9.5 % to 155.1 lines per one employee and revenue per one line was up 6.1 % to 5,130.7 roubles".

"At the same time, Southern Telecommunications Company faced the same problems as other telecommunications companies, - Alexander Andreev stated. – Net profit reduction was mainly attributable to high level of the Company’s liabilities nominated in foreign currency, increase in interest rates on borrowings, devaluation of ruble in relation to US dollar and Euro.

Analysis of 2008 results carried out in comparable conditions (without taking into account the effect of factors resulted from foreign exchange differences and changes in effective legislation) shows that net profit keeps at the level of 2007 and EBITDA margin demonstrates a 1.4 %-growth to 38.6 %.

In 2009 the Company will continue implementation of the anti-crisis program launched by its management in 2008, thus allowing UTK to generate additional cash flow that will be directed to lower its debt burden".

UTK’s 2008 revenue made RUR 20,883.8 million, representing a 5.6%- increase over 2007. Operating expenses grew by 10.4% to RUR 15,753.6 million. 

Revenues from local telephone services grew by 3.1% to RUR 9,330.4 million due to bringing the unlimited tariffs to their maximum permitted level as well as due to increase in number of subscribers having the opportunity to choose one of the three tariff plans (85% of the subscriber base), and accounted for 46.6% of the Company’s telecom revenues.

Due to structural changes in traffic, revenues from intra-zonal telephone services decreased slightly to 3,720.6 million roubles and accounting for 18.6% of the Company’s telecom revenues.

Active enhancement of Internet broadband access subscriber base by 2.1 times to 354.0 thousand users enabled UTK to increase 2008 revenues from data transfer and Internet access services by 59.1% to RUR 4,259.9 million. Based on 2008 results, share of revenues from these services in total telecom revenue increased by 7.2 percentage points over 2007 to 21.3%.

Revenues from interconnection and traffic transit services decreased 23.7% to 2,210.5 million roubles accounting for 11.0% of the Company’s telecom revenues. The reduction was attributable to cancellation from January 1, 2008  of a compensation bonus to the price for initiation of zonal calls.

2008 expenses for wages and salaries showed a 6.6%-increase over 2007 to RUR 4,581.7 million accounting for 29.1% of the Company’s operating expenses.

Depreciation charges grew 23.7% to RUR 3,573.0 million accounting for 22.7% of the Company’s operating expenses.

2008 material expenses amounted to RUR 1,734.3 million representing a 4.0%-increase over 2007 and accounting for 11.0% of the Company’s operating expenses.

Payments to national telecom operators in the amount of RUR 1,735.2 million changed slightly compared to 2007 and accounted for 11.0% of the Company’s operating expenses.

Expenses breakdown:
The Company failed to keep positive dynamics of its operating efficiency indicators owing to the effect of global financial and economic crisis and extra expenses of 1,359.4 million roubles caused by foreign exchange differences.

In 2008 the Company continued to optimize the headcount. As a result the Company managed to slash the average number of employees by 9.0% to 26,250 people and bring a number of lines per employee to 155.1 representing a 9.5%-increase. During the year average wage was up 16.4% to 14,470 roubles.

2008 capex amounted to RUR 4,807.2 million, a 17.8%- increase over. 2007. Capex were funded only from in-house funds. Digitalization rate of the Company’s local network climbed 3.32% y-o-y and stood at 72.21% as of the beginning of 2009.

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