EX-99.1 2 a10-11370_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

FOR IMMEDIATE RELEASE

June 2, 2010

 

COMSTAR — UNITED TELESYSTEMS OJSC

FINANCIAL RESULTS

FOR THE FIRST QUARTER OF 2010

 

Moscow, Russia – June 2, 2010 – “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 82 Russian cities, today announced its unaudited consolidated US GAAP financial results for the three months ended March 31, 2010.

 

FIRST QUARTER HIGHLIGHTS

 

·                  Consolidated revenues up 7% year on year in ruble terms to US$ 407.0 million(1)

·                  OIBDA(2) up 24% year on year in ruble terms to US$ 178.8 million, including US$ 19.0 million reversal of previously accrued expenses for cancelled 2008 phantom option programme

·                  Increased OBIDA margin of 43.9% (39.2% when excluding reversal of previously accrued phantom option expenses)

·                  Net income attributable to Comstar-UTS shareholders more than tripled year on year in ruble terms to US$ 60.3 million

·                  Cash and cash equivalents and short term investments up four times year on year in ruble terms to US$ 545.4 million

·                  Cash flow from operations up 28% year on year in ruble terms to US$ 148.1 million

·                  Cash capital expenditure(3) of US$ 16.5 million represents 4.1% of consolidated revenues

·                  Free cash flow(4) up 2.7 times year on year in ruble terms to US$ 131.5 million

·                  Total broadband subscriber base up 16% year on year and 5% quarter on quarter  to 1.4 million

·                  DLD/ILD traffic passed through Comstar’s proprietary network up more than 4 times year on year to 161 million minutes, with DLD/ILD consolidated revenues of US$ 18.5 million

·                  Agreements for telecom services signed with the owners of 37 commercial real estate projects comprising  approximately 2 million square metres in Moscow

 

(1)  The average exchange rate for the periods were:

29.89 Russian Rubles (RUR) per US$ 1 in the first quarter of 2010; RUR 33.93 per US$ 1 in the first quarter of 2009; RUR 29.47  per US$ 1 in the fourth quarter of 2009

(2)  Here and below, please refer to Attachment A to this statement for a full definition and reconciliation of OIBDA

(3)  Here and below, cash capital expenditure (“Cash CAPEX”) comprises purchases of property, plant and equipment, and intangible assets

(4)  Here and below, Free Cash Flow is calculated as operating cash flow net of cash capital expenditure

 

1


 

KEY STRATEGIC DEVELOPMENTS

 

·                  MGTS’s regulated local connection tariffs and regulated line rental tariffs for corporate and residential subscribers were increased by 10.3% in rubles from February 1, 2010

·                  MGTS’ Extraordinary General Meeting of Shareholders on March 26, 2010 approved a dividend payment to holders of MGTS preferred shares, which  became non-voting upon dividend payment

·                  Interest rate on RUR 26.0 billion credit facility reduced from 13.35% to 10.5% with effect from March 1, 2010 and grace period extended until September 27, 2010

·                  RUR 5.8 billion three year credit facility provided by Sberbank for draw down before end of 2010, with 10.5% annual interest rate and grace period until end of 2011

·                  Acquisition of TenzorTelecom, one of the largest internet service providers in the Central Federal District, in February 2010

·                  Establishment of project centre for the development of innovative technologies and services

·                  Signing of agreements to sell 25%+1(5) share stake in OJSC Svyazinvest to OJSC Rostelecom for RUR 26 billion through a series of transactions and subject to obtaining the necessary corporate approvals by the parties involved

 

Sergey Pridantsev, President and Chief Executive Officer, commented: “We have delivered another quarter of healthy operating and financial results in line with our expectations:  consolidated revenues were up 7% year on year in ruble terms, underlying OIBDA margin was 39.2%, free cash flow increased 2.7 times year on year while net debt was down 22% since the end of 2009. We have made significant progress with the restructuring of our ownership in Svyazinvest by signing a sale and purchase agreement with Rostelecom. We have also moved forward consistently with the integration of our operations into MTS, by commencing the rebranding of our alternative segment business and launching the first convergent subscriber offerings.

 

“In accordance with our strategy to develop and introduce innovative technologies and provide customers with enhanced service offerings, we have established a Project Centre to develop the seamless communications space for our customers by implementing IMS technology in the MGTS network.”

 

(5)  17.3% is owned by Comstar directly with another 7.7% owned by MGTS Finance S.A., which is controlled by Comstar.

 

2


 

FINANCIAL SUMMARY

 

 

 

RUR millions,
except where stated otherwise

 

US$ millions,
except where stated otherwise

 

 

 

Q1 2010

 

Q1 2009

 

Growth
(%)

 

Q4 2009

 

Growth
(%)

 

Q1 2010

 

Q1 2009

 

Growth
(%)

 

Q4 2009

 

Growth
(%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

12,167

 

11,343

 

7

%

12,133

 

0

%

407.0

 

334.4

 

22

%

411.7

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OIBDA

 

5,337

 

4,291

 

24

%

4,847

 

10

%

178.8

 

126.4

 

42

%

164.7

 

9

%

Margin (%)

 

43.9

%

37.8

%

 

 

40.0

%

 

 

43.9

%

37.8

%

 

 

40.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

3,881

 

2,798

 

39

%

3,175

 

22

%

130.1

 

82.2

 

58

%

108.1

 

20

%

Margin (%)

 

31.9

%

24.7

%

 

 

26.2

%

 

 

32.0

%

24.6

%

 

 

26.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income / (loss) attributable to Comstar-UTS’ shareholders

 

1,794

 

494

 

263

%

(8,821

)

—

 

60.3

 

12.6

 

378

%

(294.0

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operations

 

4,420

 

3,460

 

28

%

4,272

 

3

%

148.1

 

99.2

 

49

%

145.4

 

2

%

Cash CAPEX

 

495

 

2,024

 

(76

)%

800

 

(38

)%

16.5

 

59.7

 

(72

)%

27.1

 

(39

)%

% of revenues

 

4.1

%

17.8

%

 

 

6.6

%

 

 

4.1

%

17.8

%

 

 

6.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

3,925

 

1,436

 

173

%

3,472

 

13

%

131.5

 

39.5

 

233

%

118.3

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

112,367

 

116,017

 

(3

)%

109,382

 

3

%

3,826.7

 

3,410.9

 

12

%

3,616.6

 

6

%

 

OPERATING REVIEW

 

Group Overview

 

Comstar generated 7% year on year revenue growth in ruble terms in the first quarter, which reflected:

 

·                  Growing domestic and international long distance (DLD/ILD) and Calling Party Pays (CPP) traffic volumes, as well as the growth in the MGTS Broadband Internet business

·                  Ongoing up-selling of regional pay-TV subscribers to broadband Internet services

·                  Average increases in MGTS regulatory ruble prices for residential and corporate voice services of 8.0% from March 1, 2009 and 10.3% from February 1, 2010

·                  12% average increase in ruble prices in the alternative segment in Moscow and the regions from March 1, 2009

 

Group’s revenues were also stable quarter on quarter despite the fact that the first quarter is a seasonally weaker period of the year.

 

Revenues from fixed-to-mobile calls grew by 8% year on year to RUR 1,177 million in the first quarter, which represented 10% of Group revenues. CPP-traffic levels were up 4% year on year to 812 million minutes in the first quarter of 2010.

 

3


 

 

 

RUR millions

 

US$ millions

 

Operating Expenses(6)

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

Employee expenses

 

2,242

 

2,754

 

(19

)%

2,560

 

(12

)%

74.7

 

81.3

 

(8

)%

86.6

 

(14

)%

Network traffic expenses

 

1,696

 

1,542

 

10

%

1,707

 

(1

)%

56.8

 

45.4

 

25

%

57.9

 

(2

)%

Selling & marketing expenses

 

465

 

345

 

35

%

444

 

5

%

15.6

 

10.1

 

54

%

15.1

 

4

%

Repair & maintenance expenses

 

371

 

406

 

(9

)%

468

 

(21

)%

12.4

 

11.9

 

4

%

15.9

 

(22

)%

Taxes

 

387

 

328

 

18

%

371

 

4

%

12.9

 

9.7

 

34

%

12.6

 

3

%

Utility & energy expenses

 

450

 

400

 

13

%

367

 

22

%

15.0

 

11.8

 

27

%

12.5

 

21

%

Other, net

 

1,218

 

1,277

 

(5

)%

1,368

 

(11

)%

40.7

 

37.8

 

8

%

46.5

 

(12

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

6,830

 

7,052

 

(3

)%

7,286

 

(6

)%

228.2

 

208.0

 

10

%

247.0

 

(8

)%

% of revenues

 

56.1

%

62.2

%

 

 

60.0

%

 

 

56.1

%

62.2

%

 

 

60.0

%

 

 

 

Total operating expenses, when excluding depreciation and amortisation costs, were down 3% year on year in ruble terms in the first quarter, which reflected the net effect of:

 

·                  US$ 19.0 million reversal of previously accrued expenses for cancelled 2008 phantom option programme

·                  Growing DLD/ILD and CPP traffic volumes

·                  Increased sales and marketing activity in line with economic stabilisation and rising demand for services

·                  Re-negotiation of repair and maintenance contracts

 

Total operating expenses, when excluding depreciation and amortisation costs, were down 6% quarter on quarter in ruble terms in the first quarter, which reflected the net effect of:

 

·                  US$ 19.0 million reversal of previously accrued expenses for cancelled 2008 phantom option programme

·                  Declining social tax scale which results in seasonal increase in social taxes in the beginning of the year

·                  Higher regulated utility and energy tariffs and the seasonality

·                  Reduced repair and maintenance expenses due to the seasonality

 

Group OIBDA was therefore up 24% year on year in ruble terms, with an increased OIBDA margin of 43.9%. Group OIBDA was up 10% quarter on quarter in line with the writing-off of phantom option expenses and usual seasonal patterns.

 

Group depreciation and amortisation charges were down 2% year on year in ruble terms and down 13% quarter on quarter, which reflected the completion of the depreciation and write-off of MGTS analogue equipment, as well as due to certain write-offs through accelerated depreciation which were recorded in the fourth quarter of 2009.

 

Interest expense decreased by 9% quarter on quarter in ruble terms and by 28% year on year, which reflected the interest payments made under the terms of the restructured put option settlement in the first quarter of 2009, the repayment of certain other borrowings and the reduction in the interest rate payable on the Sberbank credit facility from 13.35% to 10.5% from March 1, 2010. Interest income was down 20% year on year and 3% quarter on quarter following the fall in interest rates as the financial markets have gradually stabilized.

 

The Group’s income tax charges increased by 53% year on year in the first quarter due to the increase of pre-tax income; growth rates of income tax and pre-tax income differ due to the significant share of non-deductible expenses reported in the first quarter of 2009. The Group’s income tax charges were reduced by 7% quarter on quarter, which reflected the RUR 220 million of deferred tax assets that were written off in

 

(6) Excluding depreciation and amortisation, net

 

4


 

the fourth quarter of 2009 in connection with the intercompany sale of certain legacy STREAM-TV entities.

 

Net income attributable to non-controlling shareholders was up approximately 7 times year on year in the first quarter, which was largely due to the foreign currency losses incurred by MGTS Finance S.A. on the US dollar denominated promissory notes related to the repayment of the put option in the first quarter of 2009. Total net income attributable to Comstar-UTS’ shareholders increased more than three times year on year and compared with a loss in the fourth quarter of 2009 and amounted to RUR 1,794. The quarter on quarter developments in net income were distorted by the fourth quarter 2009 impairment of the value of the shareholding in Svyazinvest, which was made in anticipation of the restructuring of the ownership stake.

 

5


 

Overview of Broadband Internet & Pay-TV Business in Moscow & the Regions

 

This overview addresses the Group’s actual and potential development in the Russian broadband internet and pay-TV markets. The operating and financial results for these businesses are included in each of the three following reporting segments.

 

 

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

MOSCOW

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

Voice subscribers (000s)

 

3,609

 

3,595

 

0

%

3,608

 

0

%

ARPU(7) (RUR)

 

332

 

299

 

11

%

320

 

4

%

ARPU (US$)

 

11.1

 

8.8

 

26

%

10.9

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

Voice + Broadband Internet subscribers(8) (000s)

 

860

 

795

 

8

%

847

 

2

%

ARPU (RUR)

 

302

 

323

 

(6

)%

350

 

(14

)%

ARPU (US$)

 

10.1

 

9.5

 

6

%

11.9

 

(15

)%

Premium subscribers(9) (000s)

 

583

 

635

 

(8

)%

601

 

(3

)%

ARPU (RUR)

 

341

 

342

 

0

%

398

 

(14

)%

ARPU (US$)

 

11.4

 

10.1

 

13

%

13.5

 

(15

)%

Mass-market subscribers (000s)

 

276

 

160

 

73

%

246

 

12

%

ARPU (RUR)

 

212

 

231

 

(8

)%

224

 

(5

)%

ARPU (US$)

 

7.1

 

6.8

 

4

%

7.6

 

(6

)%

 

 

 

 

 

 

 

 

 

 

 

 

Voice + Broadband Internet + Pay-TV subscribers(10) (000s)

 

125

 

137

 

(9

)%

128

 

(3

)%

ARPU (RUR)

 

550

 

496

 

11

%

630

 

(13

)%

ARPU (US$)

 

18.4

 

14.6

 

26

%

21.4

 

(14

)%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Broadband Internet subscribers (000s)

 

46

 

51

 

(11

)%

47

 

(3

)%

ARPU (RUR)

 

3,924

 

3,830

 

2

%

4,212

 

(7

)%

ARPU (US$)

 

131.3

 

112.8

 

16

%

143.0

 

(8

)%

 

 

 

 

 

 

 

 

 

 

 

 

REGIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Households passed(11) (000s)

 

4,147

 

3,579

 

16

%

3,894

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

Pay-TV subscribers (000s)

 

1,997

 

1,952

 

2

%

1,996

 

0

%

ARPU (RUR)

 

110

 

103

 

6

%

104

 

5

%

ARPU (US$)

 

3.7

 

3.0

 

21

%

3.5

 

4

%

Premium subscribers (000s)

 

1,642

 

1,574

 

4

%

1,634

 

1

%

ARPU (RUR)

 

131

 

125

 

5

%

125

 

5

%

ARPU (US$)

 

4.4

 

3.7

 

19

%

4.2

 

3

%

Social subscribers (000s)

 

355

 

378

 

0

%

362

 

(2

)%

ARPU (RUR)

 

13

 

12

 

0

%

12

 

6

%

ARPU (US$)

 

0.4

 

0.4

 

0

%

0.4

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

Pay-TV + Broadband Internet subscribers (000s)

 

426

 

300

 

42

%

378

 

13

%

 

(7) Here and below, excluding connection fees, including CPP where applicable

(8) Subscribers to Voice +  Broadband Internet service

(9) Subscribers to Broadband Internet, Pay-TV (IPTV and HDTV), VOD and other value added services

(10) Subscribers to Voice + Broadband Internet +  Pay-TV services

(11) Households passed by Comstar and STREAM-TV branches (from January 2009)

 

6


 

 

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

ARPU (RUR)

 

297

 

359

 

(17

)%

303

 

(2

)%

ARPU (US$)

 

9.9

 

10.5

 

(5

)%

10.3

 

(3

)%

 

 

 

 

 

 

 

 

 

 

 

 

Voice subscribers (000s)

 

259

 

261

 

(1

)%

259

 

0

%

ARPU (RUR)

 

283

 

307

 

(8

)%

275

 

3

%

ARPU (US$)

 

9.5

 

9.0

 

5

%

9.3

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Broadband Internet subscribers (000s)

 

28

 

23

 

20

%

26

 

9

%

ARPU (RUR)

 

2,352

 

2,946

 

(20

)%

2,624

 

(10

)%

ARPU (US$)

 

78.7

 

87.6

 

(10

)%

89.0

 

(12

)%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL NUMBER OF HOUSEHOLDS PASSED (000s)

 

7,756

 

7,173

 

8

%

7,502

 

3

%

TOTAL NUMBER OF BROADBAND INTERNET SUBSCRIBERS (000s)

 

1,359

 

1,169

 

16

%

1,298

 

5

%

TOTAL NUMBER OF PAY-TV SUBSCRIBERS (000s)

 

2,122

 

2,090

 

2

%

2,124

 

0

%

 

Broadband in Moscow

 

Residential broadband subscriber base in Moscow grew by 8% year-on-year to 860 thousand. The Group continued to grow its residential double play (voice + broadband internet) subscriber base in Moscow in the first quarter, with ARPU levels reflecting the usual quarter on quarter seasonality patterns. The MGTS mass market residential subscriber base grew by 30 thousand subscribers quarter on quarter and 116 thousand subscribers year on year to a total of 276 thousand subscribers by the end of the quarter. The number of premium residential subscribers was slightly down quarter on quarter and premium segment ARPU was stable year on year in ruble terms.

 

The number of triple-play subscribers in Moscow (voice, broadband internet & pay-TV) was largely stable down quarter on quarter and ARPU was up by 11% year on year.

 

Broadband in the Regions

 

Comstar also has “last mile” access to 4.1 million households in cities outside Moscow, of which 2.0 million are active pay-TV users. The regional broadband internet subscriber base grew by 126 thousand year on year and 48 thousand quarter on quarter to 426 thousand. Comstar also began the process of modernizing the existing regional networks and up-selling its existing regional pay-TV subscribers to broadband Internet services. The increase is also partly attributable to the consolidation of the subscriber base of TenzorTelecom, which was acquired in February 2010.

 

7


 

SEGMENTAL OPERATING REVIEW

 

1. Traditional Segment in Moscow

 

Comstar owns 69.93% of Moscow City Telephone Network (MGTS), which is Moscow’s incumbent fixed-line telecommunications operator and the infrastructure provider for the Group. MGTS is the owner of ‘last mile’ access in Moscow, which is not unbundled and provides 4.4 million residential and corporate telephony lines. MGTS provides regulated voice services, unregulated mass market broadband internet access and pay-TV services, as well as DLD/ILD services as an agent to Comstar.

 

Operating Highlights

 

 

 

Q1 2010

 

Q1 2009

 

Growth
(%)

 

Q4 2009

 

Growth
(%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Installed telephone lines (000s)

 

4,896

 

4,856

 

1

%

4,897

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

Number of subscribers / active lines (000s)

 

3,609

 

3,595

 

0

%

3,608

 

0

%

CPP traffic (millions of minutes)

 

487

 

464

 

5

%

524

 

(7

)%

ARPU (RUR)

 

349

 

309

 

13

%

335

 

4

%

ARPU (US$)

 

11.7

 

9.1

 

28

%

11.4

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Number of active lines (000s)

 

783

 

765

 

2

%

761

 

3

%

Number of subscribers (000s)

 

70

 

96

 

(27

)%

70

 

1

%

CPP traffic (millions of minutes)

 

211

 

194

 

9

%

235

 

(10

)%

ARPU (excl. revenue from points of interconnect) (RUR)

 

6,468

 

4,457

 

45

%

6,485

 

0

%

ARPU (excl. revenue from points of interconnect) (US$)

 

216.4

 

131.3

 

65

%

220.1

 

(2

)%

 

 

 

 

 

 

 

 

 

 

 

 

Number of points of interconnect (000s)

 

23

 

30

 

(22

)%

28

 

(18

)%

Average monthly revenue per point of interconnect (RUR)

 

6,036

 

5,271

 

15

%

5,982

 

1

%

Average monthly revenue per point of interconnect (US$)

 

201.9

 

155.7

 

30

%

203.0

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

Operators

 

 

 

 

 

 

 

 

 

 

 

Number of interconnected operators

 

207

 

247

 

(16

)%

207

 

0

%

Number of points of interconnect (000s)

 

225

 

222

 

1

%

225

 

0

%

Average monthly revenue per point of interconnect (RUR)

 

1,161

 

1,129

 

3

%

1,108

 

5

%

Average monthly revenue per point of interconnect (US$)

 

38.8

 

33.3

 

17

%

37.6

 

3

%

 

8


 

Financial Highlights

 

 

 

RUR millions

 

US$ millions

 

 

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

3,812

 

3,374

 

13

%

3,668

 

4

%

127.5

 

99.5

 

28

%

124.5

 

2

%

Corporate

 

1,881

 

1,817

 

3

%

1,925

 

(2

)%

62.9

 

53.6

 

17

%

65.3

 

(4

)%

Operators

 

2,024

 

1,960

 

3

%

1,947

 

4

%

67.7

 

57.7

 

17

%

66.1

 

2

%

Total

 

7,717

 

7,152

 

8

%

7,540

 

2

%

258.1

 

210.8

 

22

%

255.9

 

1

%

Intersegment sales

 

(769

)

(743

)

3

%

(742

)

4

%

(25.6

)

(21.9

)

17

%

(25.2

)

2

%

Net Revenues

 

6,948

 

6,408

 

8

%

6,798

 

2

%

232.5

 

188.9

 

23

%

230.7

 

1

%

Operating Expenses(12)

 

4,001

 

3,971

 

1

%

4,043

 

(1

)%

133.8

 

117.1

 

14

%

137.1

 

(2

)%

OIBDA, gross

 

3,716

 

3,180

 

17

%

3,497

 

6

%

124.4

 

93.8

 

33

%

118.8

 

5

%

Margin (%)

 

48.2

%

44.5

%

 

 

46.4

%

 

 

48.2

%

44.5

%

 

 

46.4

%

 

 

 

Net revenues were up 8% year on year in ruble terms and up 2% quarter on quarter. This reflected the average regulatory ruble price increases for residential and corporate voice services of 8% from March 1, 2009 and 10.3% from February 1, 2010, as well as a 17% increase in regulated interconnect tariffs from September 1, 2009 and year-on-year growth in CPP traffic volumes.

 

Operating expenses, excluding depreciation and amortisation charges, increased by 1% year on year in ruble terms,  primarily due to the net effect of US$ 4.6 million reversal of previously accrued expenses for cancelled 2008 phantom option programme, increase in network traffic costs in line with increasing traffic volumes, growing selling and marketing costs in line with the growing demand in the second half of the year, and rising regulated utility tariffs. Operating expenses, excluding depreciation and amortisation charges, decreased by 1% quarter on quarter in ruble terms, mainly due to the reversal of previously accrued expenses for cancelled 2008 phantom option programme and seasonal increase in personnel expenses in line with the declining social taxes scale.

 

Segment OIBDA therefore increased by 17% year on year and 6% quarter on quarter in ruble terms, with an increased OIBDA margin of 48.2% (46.4% when excluding reversal of previously accrued phantom option expenses).

 

(12) Excluding depreciation and amortisation charges

 

9


 

2. Alternative Segment in Moscow

 

Comstar owns a group of leading alternative fixed-line telecommunications operators, which provide broadband internet access, Domestic and International Long Distance telephony services, and multi-service solutions to residential and corporate subscribers in Moscow and the surrounding region. The segment includes the Comstar-Direct, Comstar-Moscow and Moscow Region operations.

 

Operating Highlights

 

 

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

Installed telephone lines (000s)

 

658

 

653

 

1

%

659

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

Number of subscribers(13) (000s)

 

583

 

666

 

(12

)%

607

 

(4

)%

ARPU (RUR)

 

527

 

367

 

44

%

549

 

(4

)%

ARPU (US$)

 

17.6

 

10.8

 

63

%

18.6

 

(5

)%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Number of subscribers (000s)

 

27

 

30

 

(8

)%

27

 

0

%

ARPU (RUR)

 

13,668

 

11,951

 

14

%

14,737

 

(7

)%

ARPU (US$)

 

457.3

 

351.6

 

30

%

500.1

 

(9

)%

 

 

 

 

 

 

 

 

 

 

 

 

Operators

 

 

 

 

 

 

 

 

 

 

 

Number of active lines (000s)

 

438

 

438

 

0

%

438

 

0

%

– of which, used by mobile operators (000s)

 

307

 

307

 

0

%

307

 

0

%

 

Financial Highlights

 

 

 

RUR millions

 

US$ millions

 

 

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

Q1
2010

 

Q1
2009

 

Growth
(%)

 

Q4
2009

 

Growth
(%)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

1,513

 

1,486

 

2

%

1,583

 

(4

)%

50.6

 

43.8

 

16

%

53.7

 

(6

)%

Operators

 

827

 

819

 

1

%

862

 

(4

)%

27.7

 

24.2

 

15

%

29.3

 

(5

)%

Residential

 

956

 

772

 

24

%

1,020

 

(6

)%

32.0

 

22.7

 

40

%

34.6

 

(8

)%

Total

 

3,296

 

3,077

 

7

%

3,465

 

(5

)%

110.3

 

90.7

 

22

%

117.5

 

(6

)%

Intersegment sales

 

(126

)

(98

)

29

%

(150

)

(16

)%

(4.2

)

(2.9

)

46

%

(5.1

)

(17

)%

Net Revenues

 

3,170

 

2,979

 

6

%

3,315

 

(4

)%

106.0

 

87.8

 

21

%

112.5

 

(6

)%

Operating Expenses(14)

 

2,367

 

2,495

 

(5

)%

2,738

 

(14

)%

79.0

 

73.5

 

8

%

92.9

 

(15

)%

OIBDA, gross

 

929

 

582

 

59

%

727

 

28

%

31.2

 

17.2

 

81

%

24.7

 

26

%

Margin (%)

 

28.2

%

18.9

%

 

 

21.0

%

 

 

28.3

%

19.0

%

 

 

21.0

%

 

 

 

Net revenues were up 6% year on year in the first quarter in ruble terms due to rising DLD/ILD volumes and down 4% quarter on quarter in line with the usual seasonal patterns.

 

Operating expenses, excluding depreciation and amortisation charges, were down 5% year on year and 14% quarter on quarter in ruble terms due to the net effect of reversal of US$ 13.3 million of previously accrued expenses for cancelled 2008 phantom option programme, the rise in network traffic expenses due to growing CPP and DLD/ILD traffic volumes and in selling and marketing expenses due to increased demand for the Group’s services.

 

(13) Subscribers to Broadband Internet, Pay-TV, Voice and other services

(14) Excluding depreciation and amortisation charges

 

10


 

Segment OIBDA was therefore up 59% year on year and 28% quarter on quarter in ruble terms, with an increased OIBDA margin of 28.2% (16.1% when excluding reversal of previously accrued phantom option expenses).

 

3. Alternative segment in the Regions & CIS

 

This segment comprises the Group’s operations in 82 Russian cities and in Ukraine and Armenia.

 

Operating Highlights

 

 

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

Residential

 

 

 

 

 

 

 

 

 

 

 

Number of subscribers (000s)

 

2,630

 

2,524

 

4

%

2,606

 

1

%

ARPU (RUR)

 

158

 

152

 

4

%

150

 

5

%

ARPU (US$)

 

5.3

 

4.5

 

19

%

5.1

 

4

%

Corporate

 

 

 

 

 

 

 

 

 

 

 

Number of subscribers (000s)

 

58

 

52

 

13

%

52

 

12

%

ARPU (RUR)

 

3,299

 

3,532

 

(7

)%

3,579

 

(8

)%

ARPU (US$)

 

110.4

 

104.5

 

6

%

121.4

 

(9

)%

Operators

 

 

 

 

 

 

 

 

 

 

 

Number of active lines (000s)

 

7

 

2

 

231

%

2

 

246

%

 

Financial Highlights

 

 

 

RUR millions

 

US$ millions

 

 

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

Q1 2010

 

Q1 2009

 

Growth (%)

 

Q4 2009

 

Growth (%)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

1,252

 

1,159

 

8

%

1,178

 

6

%

41.9

 

34.1

 

23

%

40.0

 

5

%

Corporate

 

563

 

539

 

5

%

569

 

(1

)%

18.8

 

15.9

 

18

%

19.3

 

(2

)%

Operators

 

371

 

286

 

30

%

411

 

(10

)%

12.4

 

8.4

 

47

%

13.9

 

(11

)%

Total

 

2,186

 

1,984

 

10

%

2,158

 

1

%

73.1

 

58.5

 

25

%

73.2

 

(0

)%

Intersegment sales

 

(137

)

(29

)

 

 

(138

)

(1

)%

(4.6

)

(0.8

)

 

 

(4.7

)

(2

)%

Net Revenues

 

2,049

 

1,955

 

5

%

2,020

 

1

%

68.6

 

57.7

 

19

%

68.5

 

0

%

Operating Expenses(15)

 

1,481

 

1,424

 

4

%

1,532

 

(3

)%

49.5

 

42.2

 

17

%

51.9

 

(5

)%

OIBDA, gross

 

705

 

560

 

26

%

626

 

13

%

23.6

 

16.3

 

45

%

21.3

 

11

%

Margin (%)

 

32.3

%

28.2

%

 

 

29.0

%

 

 

32.3

%

27.9

%

 

 

29.1

%

 

 

 

Net revenues were up 5% year on year and 1% quarter on quarter in ruble terms following the successful up-selling of residential pay-TV subscribers to double-play (broadband internet + pay-TV) services.

 

The quarter on quarter reduction in ruble operating expenses, excluding depreciation and amortisation charges, was primarily due to lower personnel costs resulting from the reversal of US$ 1.1 million of previously accrued expenses for cancelled 2008 phantom option programme. The 4% year on year rise was due to growing network traffic costs following increasing traffic volumes, net of the effect of the annual bonuses accrued for in 2008 and reversed in the first quarter of 2009.

 

Segment OIBDA was therefore up 26% year on year and 13% quarter-on-quarter in ruble terms, with an increased OIBDA margin was of 32.3% (30.8% when excluding reversal of previously accrued phantom option expenses).

 

(15) Excluding depreciation and amortisation charges

 

11


 

FINANCIAL REVIEW

 

Net cash generated by operating activities increased by 28% year on year to RUR 4.4 billion (US$ 148.1 million) in the first quarter due to the overall sales growth, the reduction in interest expenses and the optimization of the Group’s tax payment schedule.

 

Net cash used in investing activities totaled RUR 6.9 billion (US$ 230.0 million) and included RUR 9.2 billion (US$ 307.8 million) of purchases of short-term investments and RUR 495 million (US$ 16.5 million) of capital expenditure. The Group also received RUR 3.0 billion (US$ 100.3 million) from the redemption of short-term investments, including the RUR 2.2 billion of proceeds from the Sberbank promissory note purchased on September 27, 2009.

 

Free cash flow generation was therefore up 173% year on year and 13% quarter on quarter to RUR 3.9 billion (US$ 131.5 million), due to the increase in operating cash flow and decrease in capital expenditures.

 

Net cash used in financing activities amounted to RUR 419 million (US$ 14.0 million) in the quarter, and primarily comprised the repayment of Group debt and the acquisition of minority stakes in the Group’s regional subsidiaries in preparation for the legal reorganization.

 

The Group’s cash and cash equivalents and short term investments therefore increased approximately four times year on year and 26% quarter on quarter to RUR 16.0 billion (US$ 545.4 million) at the end of the period.

 

The Group’s total borrowings, including capital lease obligations, were reduced by 1% quarter on quarter to RUR 28.8 billion (US$ 981.3 million), and primarily comprised the RUR 26.0 billion Sberbank credit facility, the RUR 1.8 billion debt to MTS, and RUR 0.5 billion of vendor financing.

 

Comstar announced the agreement of revised repayment terms with Sberbank on March 10, 2010. The interest rate payable on the RUR 26.0 billion Sberbank credit facility has been reduced from 13.35% to 10.5% with effect from March 1, 2010, and the grace period has been extended until September 27, 2010. The March and June 2010 installments of RUR 4.3 billion each have been spread equally between the eight monthly repayments of RUR 3.25 billion planned between September 2010 and June 2012.  The interest rate payable on the facility will be 11.75% from September 28, 2010.

 

Sberbank has also granted Comstar a RUR 5.8 billion ruble three year credit facility, which can be utilized until the end of 2010, has a grace period until the end of 2011, and is subject to a 10.5% annual interest rate. The credit facility will be used to finance regional CAPEX and M&A projects.

 

Approximately 99% of the Group’s total debt was ruble denominated at the end of the first quarter of 2010, and the Group’s total debt was equivalent to 1.4 times annualized OIBDA, compared to 1.6 times at the end of 2009. The Group’s net debt(16) was reduced from RUR 16.4 billion at the end of 2009 to RUR 12.8 billion at the end of the quarter, and was equivalent to 0.6 times annualized OBIDA, compared to 0.9 times at the end of 2009.

 

(16) Calculated as total debt less cash and cash equivalents and short term investments

 

12


 

OTHER INFORMATION

 

Conference call

 

Comstar will host a conference call today at 7.00 AM (ET) / 12.00 PM (UK) / 1.00 PM (CET) / 3.00 PM (MOSCOW) . Participants may access the call by dialling the following numbers:

 

UK/ International:

 

+44 20 8515 2301

US:

 

+1 480 629 9773

 

A replay number will be available for 7 days after the conference call. To access the replay, please dial:

 

UK/ International:

 

+44 20 7154 2833

US:

 

+1 303 590 3030

 

The replay access number is 4311459#

 

The replay facility will also be made available at

 

http://www.comstar.ru/en/for_investors/finresults/2010/1q/ in due course.

 

***

 

For further information, please visit www.comstar-uts.com or contact:

 

Comstar-UTS

Shared Value Limited

Masha Eliseeva

Matthew Hooper

Tel: +7 985 997 08 52

Tel. +44 (0) 20 7321 5010

ir@comstar-uts.ru

comstar@sharedvalue.net

 

Comstar-UTS is the leading fixed-line telecommunications company in Moscow. Comstar provides voice, data, television and other value-added services to residential and corporate subscribers and operators, using its extensive backbone network and exclusive last mile access to 96% of Moscow households. The Company also offers communications services in 82 cities in the Russian regions, Armenia and Ukraine. Comstar had 3.6 million residential subscribers including 860 thousand residential broadband internet subscribers in Moscow, as well as 2.6 million regional and international residential subscribers, including 426 thousand residential broadband internet subscribers and 2.0 million residential pay-TV subscribers at the end of the first quarter of 2010. Comstar generated US$ 407.0 million of revenues and an 43.9% OIBDA margin for the three months ended March 31, 2010. Comstar’s Global Depositary Receipts are listed on the London Stock Exchange (ticker: CMST).

 

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Comstar-UTS. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might”, the negative of such terms or other similar expressions. Comstar-UTS wishes to caution that these statements are only predictions, and that actual events or results may differ materially. Comstar-UTS does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Comstar-UTS, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Comstar-UTS operates in, as well as many other risks specifically related to Comstar-UTS and its operations.

 

13


 

Attachment A

 

NON-GAAP FINANCIAL MEASURES

 

This results statement includes financial information prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP), as well as other non-GAAP financial information. The non-GAAP financial information should be considered as an addition to, but not as a substitute for, information prepared in accordance with US GAAP.

 

OIBDA is operating income before depreciation and amortisation, and the OIBDA margin is defined as OIBDA as a percentage of net revenues. These measures are included in this results statement in order to provide additional information regarding the Group’s ability to meet future debt service payments, capital expenditure and working capital requirements, and as a metric to evaluate profitability. OIBDA is not a measure of financial performance under US GAAP, and is not an alternative to operating income as a measure of operating performance, or to cash flows from operating activities as a measure of liquidity. While depreciation and amortisation are considered operating costs under US GAAP, these items primarily represent the non-cash current period allocation of costs arising from the acquisition or development of long-term assets in prior periods. OIBDA is commonly used as a criterion for evaluation of operating performance by credit and equity investors and analysts. The calculation of OIBDA may be different from the calculation used by other companies and comparability may therefore be limited. OIBDA can be reconciled to the Group’s consolidated statements as follows:

 

Reconciliation of OIBDA

 

 

 

Q1 2010

 

Q1 2009

 

Q4 2009

 

Q1 2010

 

Q1 2009

 

Q4 2009

 

 

 

RUR
‘mln

 

% of
revs

 

RUR
‘mln

 

% of
revs

 

RUR
‘mln

 

% of
revs

 

US$
‘mln

 

% of
revs

 

US$
‘mln

 

% of
revs

 

US$
‘mln

 

% of
revs

 

Operating profit

 

3,881

 

31.9

%

2,798

 

24.7

%

3,175

 

26.2

%

130.1

 

32.0

%

82.2

 

24.6

%

108.1

 

26.2

%

Add: depreciation and amortization

 

1,456

 

12.0

%

1,493

 

13.2

%

1,672

 

13.8

%

48.7

 

12.0

%

44.1

 

13.2

%

56.6

 

13.8

%

OIBDA

 

5,337

 

43.9

%

4,291

 

37.8

%

4,847

 

40.0

%

178.8

 

43.9

%

126.4

 

37.8

%

164.7

 

40.0

%

 

14


 

Attachment B

 

“COMSTAR — United TeleSystems” OJSC

UNAUDITED CONSOLIDATED INCOME STATEMENTS

 

 

 

Three months
ended March 31,

 

Three months
ended March 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

(RUR million, except for share and per share amounts)

 

(US$ thousand, except for share
and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

12,167

 

11,343

 

$

407,023

 

$

334,371

 

Operating expenses, excluding depreciation and amortisation, net

 

(6,830

)

(7,052

)

(228,214

)

(208,008

)

Depreciation and amortisation

 

(1,456

)

(1,493

)

(48,687

)

(44,132

)

 

 

 

 

 

 

 

 

 

 

Operating income

 

3,881

 

2,798

 

130,122

 

82,231

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

198

 

246

 

6,631

 

7,381

 

Interest expense

 

(823

)

(1,145

)

(27,523

)

(33,890

)

Change in fair value of purchased call option

 

—

 

(137

)

—

 

(4,810

)

Reversal of provision for long-term investments and loans

 

—

 

150

 

—

 

4,329

 

Foreign currency transactions gain/(loss), net

 

5

 

(799

)

153

 

(26,211

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

3,261

 

1,113

 

109,383

 

29,030

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(792

)

(518

)

(26,515

)

(15,091

)

 

 

 

 

 

 

 

 

 

 

Net income

 

2,469

 

595

 

82,868

 

13,939

 

 

 

 

 

 

 

 

 

 

 

Less: net income attributable to the noncontrolling interest

 

(675

)

(101

)

(22,611

)

(1,340

)

 

 

 

 

 

 

 

 

 

 

Net income attributable to Comstar-UTS

 

1,794

 

494

 

$

60,257

 

$

12,599

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic and diluted

 

404,456,856

 

358,224,856

 

404,456,856

 

358,224,856

 

Earnings per common share – basic and diluted

 

RUR

4.4

 

RUR

1.4

 

US$

0.15

 

US$

0.04

 

 

15


 

“COMSTAR — United TeleSystems” OJSC

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

 

2010

 

2009

 

2010

 

2009 (*)

 

 

 

(RUR million)

 

(US$ thousand)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

4,645

 

7,517

 

$

      158,183

 

$

        248,542

 

Short-term investments and loans

 

11,371

 

5,168

 

387,250

 

170,886

 

Trade receivables, net

 

4,990

 

4,438

 

169,921

 

146,736

 

Other receivables, prepaid expenses and other current assets

 

1,537

 

1,770

 

52,345

 

58,524

 

Inventories and spare parts

 

916

 

831

 

31,186

 

27,491

 

Deferred tax assets, current portion

 

1,155

 

1,029

 

39,329

 

34,035

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

24,614

 

20,753

 

838,214

 

686,214

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

51,644

 

52,514

 

1,758,766

 

1,736,332

 

Intangible assets, net

 

8,421

 

8,392

 

286,796

 

277,464

 

Investments in shares of Svyazinvest

 

26,000

 

26,000

 

885,444

 

859,669

 

Other long-term investments and loans

 

1,596

 

1,600

 

54,362

 

52,890

 

Other long-term assets

 

92

 

123

 

3,120

 

4,076

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

112,367

 

109,382

 

$

   3,826,702

 

$

     3,616,645

 

 

(*) The US$ amounts as of December 31, 2009 were derived from the audited consolidated financial statements of Comstar-UTS for the years ended December 31, 2009 and 2008 and should be read in conjunction with these statements.

 

16


 

“COMSTAR — United TeleSystems” OJSC

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (continued)

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

 

2010

 

2009

 

2010

 

2009 (*)

 

 

 

(RUR million)

 

(US$ thousand)

 

Liabilities and equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts payable, accrued expenses and other current liabilities

 

8,072

 

7,083

 

$

274,911

 

$

234,203

 

Deferred connection fees, current portion

 

774

 

814

 

26,349

 

26,921

 

Subscriber prepayments

 

1,284

 

1,237

 

43,729

 

40,916

 

Debt, current portion

 

10,173

 

7,036

 

346,431

 

232,644

 

Capital lease obligations, current portion

 

7

 

35

 

242

 

1,161

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

20,310

 

16,205

 

691,662

 

535,845

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred connection fees, net of current portion

 

2,746

 

2,816

 

93,530

 

93,097

 

Debt, net of current portion

 

18,635

 

21,987

 

634,610

 

726,997

 

Capital lease obligations, net of current portion

 

—

 

—

 

—

 

4

 

Post-retirement obligations

 

780

 

772

 

26,550

 

25,537

 

Property, plant and equipment contributions

 

2,729

 

2,733

 

92,937

 

90,349

 

Deferred tax liabilities, long-term portion

 

3,452

 

3,394

 

117,562

 

112,219

 

Payable to Sistema Hals

 

1,175

 

1,158

 

40,027

 

38,273

 

 

 

 

 

 

 

 

 

 

 

Total long-term liabilities

 

29,517

 

32,860

 

1,005,216

 

1,086,476

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

49,827

 

49,065

 

1,696,878

 

1,622,321

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Comstar-UTS shareholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock

 

418

 

418

 

23,900

 

23,900

 

Treasury stock

 

(13

)

(13

)

(857

)

(857

)

Additional paid-in capital

 

37,506

 

37,681

 

1,364,907

 

1,370,706

 

Retained earnings

 

11,232

 

9,438

 

399,315

 

338,986

 

Accumulated other comprehensive loss

 

(1,770

)

(1,794

)

(173,967

)

(220,713

)

 

 

 

 

 

 

 

 

 

 

Total Comstar-UTS shareholders’ equity

 

47,373

 

45,730

 

1,613,298

 

1,512,022

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

15,167

 

14,587

 

516,526

 

482,302

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

62,540

 

60,317

 

2,129,824

 

1,994,324

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

112,367

 

109,382

 

$

3,826,702

 

$

3,616,645

 

 

(*) The US$ amounts as of December 31, 2009 were derived from the audited consolidated financial statements of Comstar-UTS for the years ended December 31, 2009 and 2008 and should be read in conjunction with these statements.

 

17


 

“COMSTAR — United TeleSystems” OJSC

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Three months
ended March 31,

 

Three months
ended March 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

(RUR million)

 

(US$ thousand)

 

Operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

2,469

 

595

 

$

82,868

 

$

13,939

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

 

1,456

 

1,493

 

48,687

 

44,132

 

Stock-based compensation

 

(8

)

40

 

(260

)

1,069

 

Change in fair value of purchased call option

 

—

 

137

 

—

 

4,810

 

Reversal of provision for long-term investments and loans

 

—

 

(150

)

—

 

(4,329

)

Loss from disposal of fixed assets and other non-cash items, net

 

56

 

29

 

1,872

 

858

 

Compensation of losses from third parties

 

(58

)

(36

)

(1,956

)

(1,057

)

Amortisation of deferred finance charges

 

3

 

3

 

111

 

80

 

Deferred taxes

 

(43

)

39

 

(1,493

)

1,026

 

Foreign currency transactions loss on non-operating activities, net

 

(17

)

755

 

(553

)

22,245

 

Postretirement benefits

 

13

 

16

 

443

 

484

 

Provision for doubtful debts

 

75

 

232

 

2,504

 

6,846

 

Inventory obsolescence charge

 

—

 

—

 

(5

)

—

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

(622

)

(439

)

(20,796

)

(12,949

)

Other receivables, prepaid expenses and other current assets

 

232

 

(318

)

7,772

 

(9,364

)

Inventories and spare parts

 

(72

)

(120

)

(2,424

)

(3,530

)

Trade accounts payable, accrued expenses and other current liabilities

 

999

 

1,298

 

33,429

 

38,266

 

Deferred connection fees

 

(110

)

(51

)

(3,672

)

(1,495

)

Subscriber prepayments

 

47

 

(63

)

1,558

 

(1,851

)

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

4,420

 

3,460

 

$

148,085

 

$

99,180

 

 

18


 

“COMSTAR — United TeleSystems” OJSC

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

 

 

Three months
ended March 31,

 

Three months
ended March 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

(RUR million)

 

(US$ thousand)

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(388

)

(1,840

)

$

(12,976

)

$

(54,234

)

Proceeds from sale of property, plant and equipment

 

6

 

22

 

213

 

642

 

Purchases of intangible assets

 

(107

)

(184

)

(3,572

)

(5,430

)

Acquisition of subsidiaries

 

(187

)

—

 

(6,245

)

—

 

Purchases of long-term investments and loans

 

—

 

(14

)

—

 

(413

)

Proceeds from sale and redemption of long-term investments and loans

 

4

 

—

 

137

 

—

 

Purchases of short-term investments and loans

 

(9,200

)

—

 

(307,792

)

—

 

Proceeds from sale and redemption of short-term investments and loans

 

2,997

 

8,915

 

100,267

 

261,945

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) / provided by investing activities

 

(6,875

)

6,899

 

(229,968

)

202,510

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of Stream-TV

 

—

 

(103

)

—

 

(3,044

)

Acquisition of noncontrolling interests in existing subsidiaries

 

(175

)

(28

)

(5,856

)

(816

)

Proceeds from borrowings

 

—

 

56

 

—

 

1,641

 

Principal payments on borrowings

 

(231

)

(9,153

)

(7,729

)

(266,964

)

Principal payments on capital lease obligations

 

(13

)

(61

)

(444

)

(1,810

)

Dividends paid

 

—

 

(0

)

—

 

(3

)

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(419

)

(9,289

)

(14,029

)

(270,996

)

 

 

 

 

 

 

 

 

 

 

Effects of foreign currency translation on cash and cash equivalents

 

2

 

37

 

5,553

 

(6,585

)

 

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(2,872

)

1,107

 

(90,359

)

24,109

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of the period

 

7,517

 

1,822

 

248,542

 

62,005

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of the period

 

4,645

 

2,929

 

$

158,183

 

$

86,114

 

 

19