New settlement system to go into effect on august 1, 2003
Print version
18.07.2003
Rostelecom (NYSE: ROS; RTS: RTKM, RTKMP), Russia’s national long-distance telecommunications operator, today welcomed the Anti-Monopoly Ministry of Russia’s decision to abolish the existing Integral Settlement Rate (ISR) for settlements between Rostelecom and regional operators and to approve the new settlement system for domestic long-distance (DLD) traffic transit commencing August 1, 2003.
The new settlement system is in line with established world practices and gives stimulus for the further development of the Russian telecommunications market. This move will significantly improve the transparency and ensure the precision of settlements between operators. Additionally, it will remove the economic rationale for operators to bypass Rostelecom’s network, thus increasing the Company’s share of traffic volumes and ensuring revenue growth.
The Anti-Monopoly Ministry’s resolution abolishes the use of the non-transparent Integral Settlement Rate for settlements between operators. ISR operates through offsetting termination charges between regional operators based on the balance of incoming and outgoing traffic between each two regions, with settlements made for the outgoing traffic only. As ISR is calculated only once a year on the basis of the previous year’s data, the system cannot account for changes in incoming and outgoing volumes of operators’ traffic during the year, which leads to distortions in settlements. Moreover, lack of actual payment for termination to regional operators opens up opportunities for alternative operators to bypass Rostelecom’s network, thus resulting in lower revenue capture.
The new settlement mechanism will move Rostelecom and the regional operators to a transparent direct payment system both for traffic transit through Rostelecom’s network and for traffic termination through regional operators’ networks. Settlements for one minute of domestic long-distance traffic transit through every 50 kilometers of Rostelecom’s network will be carried out using the Linear Settlement Rate determined by the Anti-Monopoly Ministry’s Resolution, while settlements for each minute of traffic termination through regional operators’ networks will be made using the Termination Settlement Rates previously set by the Ministry.
Importantly for Rostelecom’s revenue potential, by enabling the parties to settle for all actual terminated minutes of traffic, the new mechanism will halt the economically unjustified decline in traffic transit rates and provide the incentive for operators to route their traffic through Rostelecom’s network. In this way, the new settlement system will ensure equal terms for all operators interconnected to Rostelecom’s network on the trunk level, irrespective of ownership.
Certain statements in this press-release are “forward-looking statements” within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby.
These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements.
These risks include the risk of changes the Company’s operations and business prospects, the general financial and economic circumstances, relating to regulation of the Russian telecommunications industry and the Russian legislation; the competition and other risks.
For a more detailed discussion of these and other factors, see the Company’s Annual Report on Form 20-F for its most recently completed fiscal year and the Company’s other public filings with The U.S. Securities and Exchange Commission. Many of these factors are beyond the Company’s ability to control or predict. Given these and other uncertainties, the Company cautions not to place undue reliance on any of the forward-looking statements contained herein or otherwise.
The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required under applicable the U.S. federal securities laws.