Rostelecom reports its audited consolidated full year 2009 results under ifrs

Print version 31.05.2010

Moscow – May 31 , 2010 : Rostelecom (RTS, MICEX: RTKM, RTKMP; OTCQX: ROSYY) today announced its audited consolidated financial results for the full year ended December 31, 2009 in accordance with International Financial Reporting Standards (IFRS).

Highlights

• Consolidated revenue for the full year 2009 amounted to RUB 65.5 billion;

• OIBDA ¹ amounted to RUB 12.5 billion, representing an OIBDA margin of 19.1%;

• N et profit amounted to RUB 3.5 billion;

• Revenue from new state-of-the-art services increased by 1.5 times year-on-year to
  RUB 10.1 billion and accounted for 15.4% of Rostelecom’s consolidated revenue .

Rostelecom and its subsidiaries , (‘the Company’), delivered the following financial and operating results for the full year 2009:

RUB million	2009	2008	% change, y-o-y
Revenue	65,510	66,629	-1.7%
Operating expenses, incl.	61,246	59,809	2.4%
OIBDA	12,491	14,274	-12.5%
OIBDA margin, %	19.1%	21.4%	n/a
Operating income	4,264	6,820	-37,5%
Operating margin, %	6.5%	10.2%	n/a
Net profit	3,456	12,182	-71.6%
Net margin, %	5.3%	18.3%	n/a
Total comprehensive income	3,894	5,628	-30.8%

R evenue and Positioning in Major Markets

The Company ’s consolidated revenue for the full year 2009 amounted to RUB 65,510.0 million representing a decrease of 1.7% year-on-year, which is largely attributable to a reduction in revenues from a number of traditional segments (first of all, from domestic and international long-distance services). However, through the continued diversification of its business, the Company has increased its overall revenues from new state-of-the-art services, primarily incorporating Internet access for both operators and corporates, VPN, Data Centre and intelligent network services now representing a greater cumulative share of 15.4% in R ostelecom’s consolidated revenue.

Data transmission services as a standalone (Internet access services for operators (‘wholesale Internet’), and corporate clients, as well as VPN, Data Center and VoIP services) rose substantially by 65.8% to RUB 9,014.0 million. By the end of 2009, the Company’s share in the wholesale Internet services market reached 36%, while its share in the VPN services market surged to 46%.

The Company’s positions in the traditional voice telecom segments during 2009 can be characterised as follows:

Domestic long-distance (DLD) revenues fell by 11.5% to RUB 26,212.0 million.

Revenues from international long-distance (ILD) services to Russian end-customers and operators amounted to RUB 11,334.0 million, a fall of 6.2% year-on-year.

Total revenues from international operators for incoming ILD telephone traffic transit and termination dropped by 3.3% year-on-year to RUB 6,236.0 million.

The decrease in DLD and ILD revenue is primarily attributable to the overall reduction in volume of the fixed-line long-distance market as a result of the weakened global macro-economic environment, growing competition as well as the continued migration of long-distance, end-customer traffic from fixed-line to mobile networks.

Nevertheless, at the end of 2009 , the Company’s share in the market of fixed-line DLD/ILD services to Russian residential & corporate end-customers remained relatively stable and amounted to more than 50%, compared to 2008. In the residential fixed-line DLD/ILD service market as a standalone, the Company continues to have a dominant position maintaining an 81% market share at the end of 2009.

Revenues from leased-line services fell by 9.8% year-on-year to RUB 6,958.0 million. This fall is mainly attributable to the fact that Russian operators (mobile and inter-regional) have a reduced demand for channels from the Company, as they near completion in the construction of their own networks.

Operating Expenses

Total operating expenses for 2009 amounted to RUB 61,246.0 million, an increase of 2.4% year-on-year. This was primarily due to higher payments made to international operators (mostly as a result of the devaluation of the Russian Rouble).

OIBDA, Operating Profit

In 2009, OIBDA fell by 12.5% year-on-year to RUB 12,491.0 million representing an OIBDA margin of 19.1%.

Depreciation charges for 2009 amounted to RUB 7,580.0 million, rising 5.7% year-on-year, in part due to the rapid growth of investment into the development of Rostelecom’s IP/MPLS network, as well as IT infrastructure for the provision of new state-of-the-art services.

The Company’s full year 2009 operating profit fell by 37.5% year-on-year to RUB 4,264.0 million, with an operating margin of 6.5%.

Other Income /Loss, Profit before Income Tax

Other income for the full year 2009 amounted to RUB 409.0 million compared to
RUB 9,324.0 million in 2008, (see Appendix I). This difference is largely attributable to the significant additional income realised following the sale of investments in 2008.

In February 2008, OJSC Rostelecom sold its stake in Golden Telecom, Inc. and the profit from this transaction before tax amounted to RUB 8,666.0 million.

The Company’s profit before income tax for 2009 thus amounted to RUB 4,677.0 million, compared to RUB 16,073.0 million in 2008 (RUB 7,407.0 million - if the profit before tax from the abovementioned transaction is deducted).

Net profit

In 2009 the Company’s consolidated net profit fell by 71.6% to RUB 3,456.0 million. Net margin stood at 5.3%.

Appendices:

1. Condensed consolidated statements of comprehensive income for the full year ended
   December 31, 2009 and December 31, 2008 in RUB million;

2. Condensed consolidated statements of financial position as of December 31, 2009 and
   December 31, 2008 in RUB million.

Appendix I

Condensed consolidated statements of comprehensive income for the full year ended
December 31, 2009 and December 31, 2008 in RUB million

RUB million		2009	2008	% change, y-o-y
Revenue from telephone traffic transmission:		44,527.0	48,874.0	-8.9%
	DLD	26,212.0	29,611.0	-11.5%
	Outgoing ILD	11,334.0	12,082.0	-6.2%
	Incoming ILD (termination and transit)	6,236.0	6,450.0	-3.3%
	Local	745.0	731.0	1.9%
Revenue from leased line services		6,958.0	7,710.0	-9.8%
Data transmission services (incl. Internet access, VPN, Data Centers, VoIP)		9,014.0	5,437.0	65.8%
Other revenue		5,011.0	4,608.0	8.7%
Total revenue		65,510.0	66,629.0	-1.7%
	Payments to Russian operators	(24,596.0)	(25,743.0)	-4.5%
	Payments to international operators	(9,625.0)	(8,706.0)	10.6%
	Wages, salaries, etc.	(10,197.0)	(9,473.0)	7.6%
	Taxes other than on income	(649.0)	(618.0)	5.0%
	Bad debt recovery	28.0	32.0	-12.5%
	Other operating expenses	(7,980.0)	(7,847.0)	1.7%
Total operating expenses before depreciation and on disposal of PP&E and impairment of PP&E, goodwill and other intangible assets		(53,019.0)	(52,355.0)	1.3%
OIBDA		12,491.0	14,274.0	-12.5%
OIBDA margin, %		19.1%	21.4%	n.a.
	Depreciation	(7,580.0)	(7,174.0)	5.7%
	Loss on sale and disposal of property, plant and equipment	(647.0)	(65.0)	by a factor of 10.0
	Impairment of PP&E, goodwill and other intangible assets	-	(215.0)	n.a.
Total operating expenses		(61,246.0)	(59,809.0)	2.4%
Operating profit		4,264.0	6,820.0	-37.5%
Operating margin, %		6.5%	10.2%	n.a.
Gain / (loss) from associates		4.0	(71.0)	n.a.
	Other income (net), incl.	409.0	9,324.0	-95.6%
	Interest expense	(234.0)	(268.0)	-12.7%
	Interest income	1,568.0	1,646.0	-4.7%
	(Loss) / gain on sale of investments	(81.0)	8,670.0	n.a.
	Foreign exchange loss, net	(893.0)	(788.0)	13.3%
	Other non-operating income, net	49.0	64.0	-23.4%
Income before tax		4,677.0	16,073.0	-70.9%
	Current tax charge	(1,270.0)	(4,331.0)	-70.7%
	Deferred tax benefit	49.0	440.0	-88.9%
Income tax expense		(1,221.0)	(3,891.0)	-68.6%
Net income, attributable to:		3,456.0	12,182.0	-71.6%
	Equity holders of the parent	3,673.0	12,178.0	-69.8%
	Non-controlling interests	(217.0)	4.0	n.a.
Net margin, %		5.3%	18.3%	n.a.
Other comprehensive income, net of tax, incl.		438.0	(6,554.0)	n.a.
	Valuation gain / (loss) on available-for-sale investments	506.0	(412.0)	n.a.
	Valuation gain on available-for-sale investments transferred to profit on sale	-	(8,666.0)	n.a.
	Acquisition of subsidiaries	-	268.0	n.a.
	Income tax relating to the components of other comprehensive income	(68.0)	2,256.0	n.a.
Total comprehensive income		3,894.0	5,628.0	-30.8%

Appendix II

Condensed consolidated statements of financial position as of December 31, 2009 and December 31, 2008 in RUB million

RUB million		Dec. 31, 2009	Dec. 31, 2008	% change, y-o-y
ASSETS
Non-current Assets, incl.		45,298	43,982	3.0%
	Property, plant and equipment	40,249	39,586	1.7%
Current Assets, incl.		31,447	32,721	-3.9%
	Accounts receivable, net	8,751	10,133	-13.6%
	Short-term investments	14,947	8,762	70.6%
	Cash and cash equivalents	6,996	11,992	-41.7%
Total Assets		76,745	76,703	0.1%
EQUITY AND LIABILITIES
Shareholders’ equity, incl.		61,197	59,425	3.0%
Non-controlling interests		-177	40	n.a.
Current liabilities, incl.		13,290	14,867	-10.6%
	Current portion of long-term borrowings	1,980	2,522	-21.5%
	Short-term borrowings	140	13	by a factor of 10.8
Non-current liabilities, incl.		2,258	2,411	-6.3%
	Long-term borrowings - net of current portion		117	n.a.
	Deferred tax liabilities	1,609	1,590	1.2%
Total Liabilities		15,548	17,278	-10.0%
Total Equity and Liabilities		76,745	76,703
				0.1%
Net debt 1		-19,823	-18,102	9.5%

¹ Net debt is calculated as the sum of long-term loans and short-term borrowings minus cash and cash equivalents and short-term investments .

Rostelecom ( www.rt.ru/en ) is Russia’s national telecommunications operator.

The Company owns and operates a nationwide network (about 150,000 km in length), enabling Rostelecom to handle the majority of long-distance and international voice traffic transmission as well as TV and radio broadcasting channels in Russia. The Company is a major provider of telecommunications services to state organizations and governmental agencies. Additionally, Rostelecom is the domestic market leader in the wholesale Internet services segment.

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