OREANDA-NEWS. May 26, 2010. Southern Telecommunications Company (UTK) [(RTS: KUBN, KUBNP; MICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the largest fixed-line telecommunications operator in the territory of the Southern and Northern Caucasian Federal Districts of Russia, hereby announces its unaudited financial results for the first quarter of 2010 in accordance with Russian Accounting Standards (RAS).

UTK’s Q110 revenue rose by 6.1% and stood at RUR 5,660.3 mln.  In addition, expenses increased by 5.5% to RUR 4,159.5 mln.

Revenue from local telephony services rose by 6.3% to RUR 2,481.3 mln (45.7% in the operator’s telecom revenues), which was attributable to an increase in local voice tariffs effective March 1, 2009.

Revenues from intrazonal telephony services decreased by 9.3% and amounted to RUR 785.1 mln (14.5% in the operator’s telecom revenues), which was attributable to a redistribution of traffic towards cellular operators.

Concerted efforts on the competitive value-added services market made it possible to raise revenues from datacom and Internet provision by 20.0% to RUR 1,563.2 mln (28.8% in the operator’s telecom revenues).  The broadband Internet subscriber base increased by 45.1% to 488,300 in the first quarter of 2010.

Revenue from interconnect and traffic transit decreased by 7.8% to RUR 463,700 (8.5% in the operator’s telecom services). 

Revenue breakdown 

Indicator, RUR mln

Q 1 2010

Q 1 2009

Change, %

Revenue  from main types of activity

5,660.3

5,336.8

6.1

including telecom services

5,430.6

5,135.4

5.7

Intrazonal telephony

785.1

865.4

-9.3

Local telephony

2,481.3

2.333.5

6.3

Mobile radio communication, wire broadcasting, television

91.3

91.4

-0.1

Telegraph, datacom and telematic services

1,608.9

1,341.0

20.0

incl. datacom and Internet access provision service

1,563.2

1,302.3

20.0

Interconnect and traffic transit

463.7

503.1

-7.8

Other main services

0.3

0.9

-66.7

Outsourcing and agency services

112.5

118.6

-5.1

Revenues from provision of non-core types of activity

117.2

82.9

41.4

Payroll expenses in the first quarter of 2010 stood at RUR 1,208.3 mln (29.0% in the operator’s expense breakdown), which implies a 7.2% increase compared with the same period last year due to the indexation of payrolls as of February 1, 2010.

The depreciation of core assets increased insignificantly by 2.7% to RUR 1,034.3 mln (24.9% in the operator’s expense structure). 

Material expenses increased by 21.6% to RUR 419.8 mln (10.1% in the operator’s expense structure).

Interconnect expenses (including those payable to Rostelecom) decreased by 2.8% and stood at RUR 437.4 mln (10.5% in the operators expense structure). 

Expense breakdown 

Indicator, RUR mln

Q1 2010

Q1 2009

Change, %

Operating expenses

4,159.5

3 944.4

5.5

Payrolls

1,208.3

1 127.2

7.2

Social insurance contributions

312.3

294.8

5.9

Depreciation of core assets

1,034.3

1 007.4

2.7

Materials (total)

419.8

345.2

21.6

Interconnect expenses (including Rostelecom)

 

437.4

450.1

-2.8

Other

747.4

719.7

3.8

EBITDA more than doubled and amounted to RUR 2,618.6 mln, while EBITDA margin increased by 22.6% to 46.3%.

Net profit amounted to RUR 939.1 mln against a loss of RUR 320.8 mln during the first quarter of 2009, as a result of higher operating efficiency and an increase in positive foreign currency exchange rate differences. 

The operator achieved a decrease in the average headcount, which dropped 4.7% to 24,160 owing to improvement in the management structure and staff reduction.  In addition, an increase was achieved in the number of lines per employee, up 2.0% to 162.1 lines/employee.

The amount of capital investments amounted to RUR 168.0 mln in the first quarter of 2010, which is more than three more than the same metric in the first quarter of 2009.  Furthermore, the digitalization rate of UTK’s local voice network went up by 1.76% and reached 74.08%.

Main efficiency and other indicators 

Indicator

Unit of measurement

Q1 2010

Q1 2009

Change, %

EBITDA*

RUR, mln

2,618.6

1,265.2

106.9

EBITDA margin

%

46.3

23.7

22.6%

Net profit/ loss

RUR, mln

939.1

-320.8

-

Average headcount (not including those who work concurrently)

# of employees

24,160

25,361

-4.7

Number of lines per employee

Lines/employee

162.1

158.9

2.0

Revenue per line

RUR/line

1,444.9

1,324.2

9.1

Digitalization rate of local voice network

%

74.08

72.32

1.76%

Investments

RUR, mln

168.0

37.8

344.4

 [1] EBITDA is calculated as the sum of pre-tax profit, interest expenses, depreciation of fixed assets, lease payment expenses adjusted for the amount of interest revenue.