COMSTAR - United TeleSystems OJSC Financial Results for the Second Quarter and First Half of 2009
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MOSCOW--(Business Wire)--
"COMSTAR - United TeleSystems" OJSC ("Comstar" or "the Group") (LSE: CMST), the
largest integrated telecommunications provider in Moscow and 69 Russian cities,
today announced its unaudited consolidated US GAAP1 financial results for the
quarter and six months ended June 30, 2009.
SECOND QUARTER HIGHLIGHTS
* Consolidated revenues up 19% year on year and 3% quarter on quarter in ruble
terms to US$ 363.6million2
* OIBDA3 up 28% year on year and 12% quarter on quarter in ruble terms to US$
149.3 million with increased OIBDA margin of 41.1%
* Net income attributable to Comstar-UTS up 36% year on year and doubled quarter
on quarter in ruble terms to US$ 30.0 million
* Cash flow from operations up 12% year on year and down 4% quarter on quarter
in ruble terms to US$ 102.2 million
* Cash capital expenditure4 of US$ 15.5 million
* Total assets of US$ 3.7 billion
* Residential broadband ARPU in Moscow up 2% quarter on quarter to RUR 330
* Residential broadband subscriber base in Moscow up 11 thousand since June 30,
2009 to 802 thousand as at August 16, 2009
* DLD/ILD traffic passed through Comstar` proprietary network increased by 50%
quarter on quarter to 71.8 million minutes
HALF YEAR HIGHLIGHTS
* Consolidated revenues up 15% year on year in ruble terms to US$ 698.0million
* OIBDA up 15% year on year in ruble terms to US$ 275.7 million with stable
OIBDA margin of 39.5%
* Net income attributable to Comstar-UTS down 28% year on year in ruble terms to
US$ 42.6 million
* Cash flow from operations up 3% year on year in ruble terms to US$ 201.4
million
* Cash capital expenditure of US$ 75.2 million
DELIVERY IN LINE WITH STRATEGIC GOALS
* Broadband development
* Commercial launch of mobile WiMax network in Moscow
* 1,000 "Comstar-FON" WiFi hot spots in Moscow
* Residential broadband sales launched in Tver, Kaluga, Tambov, Balakovo and
Mirny
* Restructuring of regional operations
* 7 largest regional subsidiaries merged into "Comstar-Regions" in August 2009
* STREAM-TV headcount reduced by 12% to 2.9 thousand from since the beginning of
2009
* New organizational structure for Comstar-Regions created with common standards
for cash management, budgeting, financial and management reporting introduced
across STREAM-TV Group
* 42% increase in weighted average regulated per minute ruble charge for
operators interconnected to Comstar network in Moscow from the second quarter of
2009
* 17% increase in weighted average regulated per minute ruble charge for
operators interconnected to MGTS network in Moscow from September 2009
Sergey Pridantsev, President and Chief Executive Officer, commented: "Our second
quarter results once again demonstrate the resilience of our business in adverse
economic conditions. The investment case remains the same but we revised our
strategic priorities for 2009 at the beginning of the year, in order to meet the
challenges presented by the current environment. As before, our core objective
this year is to maximize cash flows and optimize our investment programmes. We
have significantly enhanced the profitability of the Group during the first half
of the year following the various cost reduction measures that we have taken. We
have also managed to maintain and even grow our subscriber base despite a lower
level of investment in marketing. We have not seen any significant impact on
churn levels from the increase in tariffs that we introduced from March, which
again shows that there is little price elasticity. Furthermore, the
stabilization of the dollar/ruble exchange rate has reduced the fluctuation in
bad debt levels."
Irina Matveeva, Chief Financial Officer, added: "We have continued to grow
despite the economic downturn, with healthy subscriber acquisition and ARPU
levels. Organic year on year revenue growth in the quarter was 9% in ruble
terms. Our strict cost control measures enabled us to actually increase our
OIBDA margin during the second quarter. We generated RUR 2.8 billion of free
cash flow during the second quarter of 2009 and had over RUR 6 billion of cash,
cash equivalents and short term investments at the end of June."
Consolidation and Combination of STREAM-TV
In accordance with the provisions of FASB Statement No. 141 "Business
Combinations" and FASB Statement No. 154 "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3", and
given that Comstar and Sistema Mass Media are commonly controlled, the Group`s
consolidated financial information for the periods prior to the acquisition of
STREAM-TV Group shall be restated as if STREAM-TV had been owned and
consolidated in the prior periods. Scrutiny and restatement of STREAM-TV`s
historical quarterly financial information, in order to conform it to Comstar`s
accounting policies, is currently underway, so the comparative financial
information for the second quarter and first six months of 2008 have been
presented in this report as it was reported in 2008, which is a departure from
US GAAP. Management expects to eliminate this departure when Comstar is
reporting full year 2009 results.
FINANCIAL SUMMARY
RUR millions, Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
except where stated otherwise
Revenues 11,702 9,858 19% 11,343 3% 23,045 19,972 15%
OIBDA 4,803 3,764 28% 4,291 12% 9,094 7,898 15%
Margin (%) 41.0% 38.2% 37.8% 39.5% 39.5%
Operating income 3,378 2,529 34% 2,798 21% 6,176 5,478 13%
Margin (%) 28.9% 25.7% 24.7% 26.8% 27.4%
Net income attributable to Comstar-UTS 958 703 36% 494 94% 1,452 2,015 (28%)
Basic EPS (RUR) 2.7 1.7 54% 1.4 94% 4.1 5.0 (19%)
Basic weighted average number of shares outstanding (000s) 358,225 404,457 (11%) 358,225 0% 358,225 404,457 (11%)
Cash flow from operations 3,308 2,966 12% 3,460 (4%) 6,768 6,564 3%
Cash CAPEX 500 2,213 (77%) 2,024 (75%) 2,524 3,265 (23%)
% of revenues 4.3% 22.4% 17.8% 11.0% 16.3%
Total Assets 116,591 116,701 (0%) 116,017 0% 116,591 116,701 0%
US$ millions, Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
except where stated otherwise
Revenues 363.6 417.3 (13%) 334.4 9% 698.0 834.2 (16%)
OIBDA 149.3 159.3 (6%) 126.4 18% 275.7 329.6 (16%)
Margin (%) 41.1% 38.2% 37.8% 39.5% 39.5%
Operating income 105.1 107.1 (2%) 82.2 28% 187.3 228.4 (18%)
Margin (%) 28.9% 25.7% 24.6% 26.8% 27.4%
Net income attributable to Comstar-UTS 30.0 29.9 0% 12.6 138% 42.6 84.0 (49%)
Basic EPS (US$) 0.08 0.07 13% 0.04 138% 0.12 0.21 (43%)
Basic weighted average number of shares outstanding (000s) 358,225 404,457 (11%) 358,225 0% 358,225 404,457 (11%)
Cash flow from operations 102.2 125.8 (19%) 99.2 3% 201.4 274.2 (27%)
Cash CAPEX 15.5 92.4 (83%) 59.7 (74%) 75.2 135.8 (45%)
% of revenues 4.3% 22.1% 17.8% 10.8% 16.3%
Total Assets 3,726.1 4,975.0 (25%) 3,410.9 9% 3,726.1 4,975.0 (25%)
OPERATING REVIEW
Group Overview
Comstar generated 19%year on year ruble revenue growth in the second quarter,
which reflected:
* the consolidation of STREAM-TV from the first quarter of 2009 and Interlink
and UTC from the second and the third quarters of 2008, respectively, all of
which contributed a combined RUR 972 million of revenue in the second quarter of
2009
* growing `Calling Party Pays` volumes
* the average 8% regulatory ruble price increase for MGTS residential and
corporate voice services from March 1, 2009
* the average 12% ruble price increase for Comstar residential and corporate
services from March 1, 2009
* the launch of direct sales of long distance voice services on Comstar`s
proprietary network from October 2008, which contributed RUR 339 million of
revenue in the second quarter of 2009
The underlying or organic ruble revenue growth when excluding the newly
consolidated STREAM-TV, Interlink and UTC results, was 9%.
Revenues from fixed-to-mobile calls increased by 20% year on year to RUR 1,222
million in the second quarter and represented 10% of Group revenues, whilst
traffic levels were up 13% year on year to 844 million minutes.
The significant weakening of the Russian ruble currency against the US dollar
since September 2008 adversely affected the Group`s US dollar reported results.
Operating Expenses5 Excluding depreciation and amortisation, net, Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
RUR millions
Employee costs 2,589 2,302 12% 2,754 (6%) 5,342 4,540 18%
Network traffic 1,602 1,297 23% 1,537 4% 3,139 2,564 22%
Selling & marketing 300 364 (18%) 345 (13%) 645 710 (9%)
Repairs & maintenance 447 533 (16%) 406 10% 853 977 (13%)
Taxes 339 286 19% 328 3% 667 582 15%
Utilities 316 252 25% 400 (21%) 716 549 30%
Other, net 1,307 1,061 23% 1,282 2% 2,589 2,151 20%
Total 6,899 6,094 13% 7,052 (2%) 13,951 12,074 16%
% of revenues 59.0% 61.8% 62.2% 60.5% 60.5%
Operating Expenses6 Excluding depreciation and amortisation, net, Q2 2009 Q2 2008 Growth Q1 2008 Growth 1H 2009 1H 2008 Growth
US$ millions
Employee costs 80.2 97.4 (18%) 81.3 (1%) 161.5 189.6 (15%)
Network traffic 49.8 54.9 (9%) 45.3 10% 95.0 107.1 (11%)
Selling & marketing 9.3 15.4 (40%) 10.1 (8%) 19.4 29.7 (35%)
Repairs & maintenance 14.0 22.5 (38%) 11.9 18% 25.8 40.9 (37%)
Taxes 10.5 12.1 (13%) 9.7 9% 20.2 24.3 (17%)
Utilities 9.8 10.7 (8%) 11.8 (17%) 21.6 22.9 (6%)
Other, net 40.7 44.9 (9%) 37.9 7% 78.6 89.9 (13%)
Total 214.2 257.9 (17%) 208.0 3% 422.3 504.6 (16%)
% of revenues 58.9% 61.8% 62.2% 60.5% 60.5%
Total operating expenses, when excluding depreciation and amortisation costs,
decreased by 2% quarter on quarter in ruble terms due to the implementation of
the previously announced cost optimization programmes. In addition, the decrease
reflected lower employee costs as the vacation period began and in line with the
operational integration of STREAM-TV and the resulting headcount reduction in
the regions, as well as reduced advertising and marketing expenses and the
seasonal decline in utility costs. Total operating expenses, when excluding
depreciation and amortisation costs, increased by 13% year on year in ruble
terms in the second quarter due to the consolidation of STREAM-TV from January
1, 2009, and of Interlink and UTC from the second and the third quarters of
2008, respectively. The newly consolidated companies contributed RUR 830 million
of operating expenses (excluding depreciation and amortisation costs) in the
second quarter of 2009. Organic operating expenses (excluding depreciation and
amortisation costs) were down 0.4% year on year in ruble terms in the second
quarter.
Group OIBDA was up 28% year on year in ruble terms in the second quarter, and
12% quarter on quarter, with an increased OIBDA margin of 41.0%. The increase
was achieved despite the consolidation of the lower margin STREAM-TV business,
which was offset by the tariff increases and the ongoing cost optimization
programme.
Group depreciation and amortisation charges were up 15% year on year and down 5%
quarter on quarter in ruble terms in the second quarter. The year on year
increase reflected the increase in property, plant and equipment and intangible
asset balances, which was in line with the organic growth of the Group and the
consolidation of the acquired businesses. The quarter on quarter decrease
reflected the fact that certain equipment items have now been fully depreciated.
Interest expenses doubled year on year in ruble terms in the second quarter
following the increase in the interest rate payable on the Sberbank credit
facility from 7.6% to 9.5% in July 2008 and to 13.35% in January 2009, as well
as the drawing down of the remaining RUR 4.5 billion of monies from the Sberbank
facility during the fourth quarter of 2008. Interest expenses decreased by 24%
quarter on quarter due to the full payment of the obligation under the Access
put option by the end of the first quarter of 2009. The lower level of interest
income reflected the decrease in the Group`s average cash and short-term
investments balances over the period.
The Group`s income tax charges decreased year on year in line with the reduction
in the Russian corporate income tax rate from 24% to 20% from the beginning of
2009.
Net income attributable to the noncontrolling interests, which primarily
comprise the amounts attributable to the minority shareholders of MGTS, totalled
RUR 1,1 billion (US$ 33.5 million) in the quarter. Net income attributable to
Comstar therefore increased by 36% year on year and almost doubled quarter on
quarter to RUR 1.0 billion (US$ 30.0 million) in the second quarter.
Overview of Broadband Internet & Pay-TV Business Potential in Moscow & the
Regions
This section covers the Group`s development potential in the broadband internet
and pay-TV markets in Russia. The operating and financial results for these
broadband businesses are included in each of the three following reporting
segments.
Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
MOSCOW
Residential segment
MGTS Voice subscribers (000s) 3,600 3,575 1% 3,595 0% 3,600 3,575 1%
ARPU (US$) 9.7 12.0 (19%) 8.8 11% 9.3 12.0 (23%)
ARPU (RUR) 314 283 11% 299 5% 306 288 6%
Broadband internet subscribers7 Subscribers of Voice + Broadband Internet service (000s) 791 783 1% 795 0% 791 783 1%
ARPU (US$) 10.2 12.8 (20%) 9.5 7% 9.9 13.1 (25%)
ARPU (RUR) 330 303 9% 323 2% 326 314 4%
Premium subscribers8 Including Broadband Internet, Pay-TV (IPTV and HDTV), VOD and other value added services (000s) 608 686 (11%) 635 (4%) 608 686 (11%)
ARPU (US$) 11.1 13.9 (20%) 10.1 10% 10.6 14.3 (26%)
ARPU (RUR) 358 329 9% 342 5% 350 341 2%
Mass-market subscribers (000s) 182 97 89% 160 14% 182 97 89%
ARPU (US$) 7.1 4.9 45% 6.8 4% 7.0 4.0 75%
ARPU (RUR) 228 116 97% 231 (2%) 229 95 142%
Pay-TV subscribers9 Including subscribers of Voice + Broadband Internet + Pay-TV service (000s) 133 147 (10%) 137 (3%) 133 147 (10%)
ARPU (US$) 17.1 21.4 (20%) 14.6 17% 15.8 22.1 (29%)
ARPU (RUR) 550 506 9% 496 11% 522 530 (2%)
Corporate segment
Corporate broadband internet subscribers (000s) 48 51 (6%) 51 (6%) 48 51 (6%)
ARPU (US$) 128.1 173.4 (26%) 112.8 14% 120.3 171.5 (30%)
ARPU (RUR) 4,118 4,096 1% 3,830 8% 3,971 4,104 (3%)
REGIONS
Residential segment
Households passed10 Including STREAM-TV and Comstar branches (000s) 3,919 212 1,744% 3,866 1% 3,919 212 1,744%
Pay-TV subscribers (000s) 1,953 142 1,278% 1,953 0% 1,953 142 1,278%
ARPU (US$) 3.3 3.2 4% 3.0 9% 3.2 3.0 4%
ARPU (RUR) 106 75 42% 103 3% 105 73 44%
Premium subscribers (000s) 1,579 142 1,015% 1,575 0% 1,579 142 1,015%
ARPU (US$) 4.0 3.2 26% 3.7 8% 3.8 3.0 27%
ARPU (RUR) 129 75 72% 126 2% 127 73 75%
Social subscribers (000s) 374 0 0% 378 0% 374 0 0%
ARPU (US$) 0.4 0.0 0% 0.4 0% 0.4 0 0%
ARPU (RUR) 13 0 0% 12 0% 13 0 0%
Broadband internet subscribers11 Including subscribers of Pay-TV + Broadband Internet service (000s) 324 49 565% 310 4% 324 49 565%
ARPU (US$) 9.5 20.2 (53%) 9.0 6% 9.3 21.3 (56%)
ARPU (RUR) 307 477 (36%) 306 0% 306 509 (40%)
Voice subscribers (000s) 262 226 16% 261 0% 262 226 16%
ARPU (US$) 8.0 10.8 (26%) 9.0 (12%) 8.5 10.4 (18%)
ARPU (RUR) 255 255 0% 307 (17%) 281 248 13%
Corporate segment
Corporate broadband internet subscribers (000s) 18 13 40% 18 2% 18 13 40%
ARPU (US$) 112.0 142.8 (22%) 110.5 1% 111.2 137.1 (19%)
ARPU (RUR) 3,606 3,373 7% 3,718 (3%) 3,661 3,279 12%
TOTAL NUMBER OF BROADBAND INTERNET SUBSCRIBERS (000s) 1,181 895 32% 1,174 1% 1,181 895 32%
Broadband in Moscow
The Group continued to rationalize its broadband subscriber base in Moscow. As a
result of the tariff increase in March, part of Comstar`s subscriber base has
continued to migrate, with lower ARPU subscribers switching from Comstar to more
attractive MGTS package offerings in the current economic environment. This is
reflected in the significant increase in the number of double-play subscribers
in the mass market segment. The number of premium segment subscribers decreased
quarter on quarter in line with the migration to the mass-market offering by
MGTS and seasonal churn levels. Premium segment ARPU continued to increase in
line with the focus on increasing the loyalty of higher ARPU subscribers and
up-selling customers to additional services.
The number of triple-play subscribers (voice, broadband internet & pay-TV)
decreased by 3% quarter on quarter to 133 thousand due to customers optimizing
their spending in the adverse economic climate, while pay-TV ARPU in rubles
increased by 11% over the same period due to the churning out of lower ARPU
subscribers using mass-market TV packages with a limited number of channels.
Broadband in the Regions
The regional operations now cover 69 cities with a combined population of over
30 million. Comstar`s regional subsidiaries have historically been applying
various technologies to provide their services. The Group`s regional networks
pass around 3.9 million of households outside the Moscow region. Around 0.5
million of the households passed in the regions are connected with MMDS
technology which will be fully substituted by FTTB technology in the process of
the network modernization. 2.3 million of the passed households are internet
ready, with 1.2 million of these households passed by the networks which do not
require a further modernization to provide high-speed internet access. 1.1
million of the households are internet ready, but the network should be
modernized to increase the service quality. The remaining households passed by
the Comstar`s networks which are not capable of receiving internet connection
will be partly modernized depending on demand for such services and required
investment levels. Comstar`s goal is to have 80% of the households passed
broadband ready by 2011.
Over 50% of the potential households, or 2.0 million active subscribers, were
using pay-TV services by the end of the second quarter of 2009. This included
374 thousand subscribers to low-cost packages comprising 20 TV channels. Pay-TV
subscribers are more likely to switch to extended offerings, which drives pay-TV
premium ARPU growth.
The residential broadband subscriber base increased by 4% quarter on quarter to
324 thousand at the end of the quarter.
SEGMENTAL OPERATING REVIEW
1. Traditional Segment in Moscow
Comstar owns 56% 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 the `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 services in Moscow and IP TV and DLD/ILD services as an agent to
Comstar.
Operating Highlights
Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Installed telephone lines (000s) 4,856 4,812 1% 4,856 0% 4,856 4,812 1%
Residential
Number of subscribers / active lines (000s) 3,600 3,575 1% 3,595 0% 3,600 3,595 0%
CPP traffic (millions of minutes) 492 438 12% 464 6% 956 837 14%
ARPU (US$) 10.1 12.2 (17%) 9.1 11% 9.6 12.3 (22%)
ARPU (RUR) 326 296 10% 309 5% 318 294 8%
Corporates
Number of active lines (000s) 762 790 (4%) 765 0% 762 790 (4%)
Number of subscribers (000s) 70 90 (23%) 96 (27%) 70 90 (23%)
CPP traffic (millions of minutes) 222 193 15% 194 14% 416 360 16%
ARPU (excl. revenue from points of interconnect) (US$) 169.0 177.9 (5%) 131.3 29% 148.8 182.3 (18%)
ARPU (excl. revenue from points of interconnect) (RUR) 5,442 4,436 23% 4,457 22% 4,914 4,484 10%
Number of points of interconnect (000s) 30 31 (6%) 30 0% 30 31 (6%)
Average monthly revenue per point of interconnect (US$) 165.1 200.4 (18%) 155.7 6% 160.4 194.4 (17%)
Average monthly revenue per point of interconnect (RUR) 5,314 4,735 12% 5,271 1% 5,292 4,651 14%
Operators
Number of interconnected operators 267 247 8% 247 8% 267 247 8%
Number of points of interconnect (000s) 223 236 (6%) 222 0% 223 236 (6%)
Average monthly revenue per point of interconnect (US$) 36.4 55.7 (35%) 33.3 9% 34.9 61.5 (43%)
Average monthly revenue per point of interconnect (RUR) 1,171 1,316 (11%) 1,129 4% 1,150 1,473 (22%)
Financial Highlights
RUR millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Residential 3,561 3,091 15% 3,374 6% 6,936 6,325 10%
Corporate 1,888 1,772 7% 1,817 4% 3,705 3,408 9%
Operators 1,855 2,026 (8%) 1,960 (5%) 3,815 4,148 (8%)
Total 7,304 6,889 6% 7,152 2% 14,456 13,881 4%
Intersegment sales (679) (943) (28%) (743) (9%) (1,422) (1,760) (19%)
Net Revenues 6,626 5,945 11% 6,408 3% 13,034 12,122 8%
Operating Expenses12 Excluding depreciation and amortisation charges 3,817 3,822 (0%) 3,971 (4%) 7,788 7,529 3%
OIBDA 3,488 3,067 14% 3,180 10% 6,668 6,353 5%
Margin (%) 47.7% 44.5% 44.5% 46.1% 45.8%
US$ millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Residential 110.7 130.9 (15%) 99.5 11% 210.2 264.2 (20%)
Corporate 58.6 75.0 (22%) 53.6 9% 112.2 142.4 (21%)
Operators 57.6 85.7 (33%) 57.7 (0%) 115.4 173.3 (33%)
Total 226.9 291.6 (22%) 210.8 8% 437.8 579.9 (25%)
Intersegment sales (21.3) (39.9) (47%) (21.9) (3%) (43.2) (73.6) (41%)
Net Revenues 205.7 251.7 (18%) 188.9 9% 394.6 506.2 (22%)
Operating Expenses13 Excluding depreciation and amortisation charges 118.6 161.8 (27%) 117.1 1% 235.7 314.6 (25%)
OIBDA 108.3 129.8 (17%) 93.8 16% 202.1 265.3 (24%)
Margin (%) 47.7% 44.5% 44.5% 46.2% 45.7%
Ruble revenues were up 6% year on year and 2% quarter on quarter in the second
quarter, which reflected the 8% average regulatory ruble price increase for MGTS
residential and corporate voice services tariffs from the beginning of March
2009 and the growing level of CPP traffic. The revenue growth in ruble terms was
achieved despite the reduction in traffic volumes from interconnected operators.
Intersegment sales decreased by 28% year on year and 9% quarter on quarter in
ruble terms, which was in line with the change in the interconnect regime from
the beginning of March 2008.
Operating expenses, excluding depreciation and amortisation charges, marginally
decreased year on year and were down 4% quarter on quarter. The year on year
decrease was primarily due to the net effect of a decrease in selling and
marketing expenses and bad debt expenses, headcount reductions, and the increase
in network traffic costs and regulated utility prices. Quarter on quarter
decrease was driven by reduction in employee costs due to both reduction in
headcount and seasonality factor, seasonal decrease in utility costs and a
decrease in bad debt expense, net of increase in repair and maintenance costs.
Segment OIBDA therefore rose by 14% year on year in ruble terms, with an
increased OIBDA margin of 47.7%.
2. Alternative Segment in Moscow
Comstar owns a group of leading alternative fixed-line telecommunications
operators, which provide broadband internet and multi-service solutions to
residential and corporate subscribers in Moscow and the surrounding region. The
segment includes the Comstar-Direct and Comstar-Moscow operations.
Operating Highlights
Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Installed capacity / telephone lines (000s) 658 652 1% 653 1% 658 652 1%
Residential subscribers
Number of subscribers (000s) 632 730 (13%) 666 (5%) 632 730 (13%)
ARPU (US$) 12.9 14.3 (10%) 10.8 19% 11.8 14.7 (20%)
ARPU (RUR) 416 337 24% 367 13% 391 353 11%
Corporate subscribers
Number of subscribers (000s) 28 30 (6%) 29 (4%) 28 30 (6%)
ARPU (US$) 430.1 447.7 (4%) 358.9 20% 394.2 418.9 (6%)
ARPU (RUR) 13,833 10,575 31% 12,199 13% 13,009 10,023 30%
Operators
Number of active lines (000s) 438 448 (2%) 438 0% 438 448 (2%)
- of which, used by mobile operators (000s) 307 316 (3%) 307 0% 307 316 (3%)
Financial Highlights
RUR millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Corporate 1,613 1,398 15% 1,486 9% 3,099 2,772 12%
Operators 851 864 (2%) 819 4% 1,670 1,819 (8%)
Residential 810 744 9% 772 5% 1,581 1,514 4%
Total 3,273 3,006 9% 3,077 6% 6,350 6,106 4%
Intersegment sales (156) (6) 2391% (98) 60% (254) (47) 438%
Net Revenues 3,117 3,000 4% 2,979 5% 6,097 6,059 1%
Operating Expenses14 Excluding depreciation and amortisation charges 2,452 2,612 (6%) 2,495 (2%) 4,946 5,100 (3%)
OIBDA 822 394 108% 582 41% 1,404 1,006 40%
Margin (%) 25.1% 13.1% 18.9% 22.1% 16.5%
US$ millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Corporate 50.1 59.2 (15%) 43.8 15% 93.9 115.8 (19%)
Operators 26.5 36.6 (28%) 24.2 10% 50.6 75.9 (33%)
Residential 25.1 31.5 (20%) 22.7 10% 47.8 63.2 (24%)
Total 101.7 127.2 (20%) 90.7 12% 192.4 255.0 (25%)
Intersegment sales (4.9) (0.3) 1742% (2.9) 70% (7.8) (1.9) 301%
Net Revenues 96.8 127.0 (24%) 87.8 10% 184.6 253.1 (27%)
Operating Expenses15 Excluding depreciation and amortisation charges 76.0 110.5 (31%) 73.5 3% 149.5 213.3 (30%)
OIBDA 25.7 16.7 54% 17.2 49% 42.9 41.7 3%
Margin (%) 25.3% 13.1% 19.0% 22.3% 16.4%
Ruble revenues were up 9% year on year and 6% quarter on quarter in the second
quarter due to the combined effect of increasing long-distance traffic volumes
passing through Comstar`s proprietary long-distance network, increase in CPP
traffic volumes and the 42% increase in the regulated per minute ruble charge
for operators interconnected to the Comstar network in Moscow from the second
quarter of 2009.
Operating expenses, excluding depreciation and amortisation charges, were down
6% year on year and 2% quarter on quarter due to the ongoing cost optimization
programmes and seasonality factors.
OIBDA more than doubled year on year in ruble terms and was up 41% quarter on
quarter, with an increased OIBDA margin of 25.1%.
3. Alternative segment in the Regions & CIS
Comstar`s regional and international business comprises the Group`s operations
in 69 Russian cities with a combined population of more than 30 million people,
and in Ukraine and Armenia.
Operating Highlights
Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Residential subscribers
Number of subscribers16 Including all kinds of services (000s) 2,535 459 453% 2,532 0% 2,535 459 453%
ARPU (US$) 4.6 9.7 (52%) 4.5 4% 4.5 9.5 (52%)
ARPU (RUR) 149 229 (35%) 152 (2%) 150 226 (34%)
Corporate subscribers
Number of subscribers (000s) 42 36 15% 46 (8%) 42 36 15%
ARPU (US$) 134.2 170.7 (21%) 115.9 16% 124.7 319.0 (61%)
ARPU (RUR) 4,319 4,005 8% 3,920 10% 4,113 3,786 9%
Operators
Number of active lines (000s) 2 2 (11%) 2 (4%) 2 2 (11%)
Financial Highlights
RUR millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Residential 1,149 289 298% 1,159 (1%) 2,308 565 309%
Corporate 555 423 31% 539 3% 1,094 801 37%
Operators 329 201 64% 286 15% 615 427 44%
Total 2,033 913 123% 1,984 2% 4,017 1,793 124%
Intersegment sales (74) - (29) 157% (103) -
Net Revenues 1,959 913 115% 1,955 0% 3,914 1,793 118%
Operating Expenses17 Excluding depreciation and amortisation charges 1,527 589 159% 1,424 7% 2,951 1,204 145%
OIBDA 505 324 56% 560 (10%) 1,065 588 81%
Margin (%) 24.9% 35.5% 28.2% 26.5% 32.8%
US$ millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Revenues
Residential 35.7 12.2 192% 34.1 5% 69.8 23.6 196%
Corporate 17.2 17.9 (4%) 15.9 8% 33.2 33.5 (1%)
Operators 10.2 8.5 20% 8.4 21% 18.7 17.8 5%
Total 63.2 38.7 63% 58.5 8% 121.7 74.9 62%
Intersegment sales (2.3) - (0.8) 176% (3.1) -
Net Revenues 60.9 38.7 57% 57.7 6% 118.5 74.9 58%
Operating Expenses18 Excluding depreciation and amortisation charges 47.5 24.9 90% 42.2 13% 89.7 50.3 78%
OIBDA 15.7 13.7 14% 16.3 (4%) 32.0 24.6 30%
Margin (%) 24.8% 35.5% 27.9% 26.3% 32.9%
Ruble revenues more than doubled year on year and were up 2% quarter on quarter.
The year on year development primarily reflected the consolidation of STREAM-TV,
Interlink and UTC. The quarter on quarter increase was attributable to the
increase in revenues from operators, primarily intragroup, including the
commission charged to Comstar by regional operators for handling DLD/ILD calls.
Ruble operating expenses, excluding depreciation and amortisation charges, more
than doubled year on year for the same reason and the OIBDA margin consequently
declined to 24.9% due to the lower prevailing margins in the acquired
businesses.
FINANCIAL REVIEW
Net cash generated by operating activities increased by 12% year on year to RUR
3.3 billion in the second quarter due to the net effect of the increase in OIBDA
and the increase in interest paid to Sberbank following the rise in total
borrowings and interest rate payable.
Net cash used in investing activities amounted to RUR 0.2billion in the quarter
and included cash capital expenditure of RUR 500 million. The investments
primarily comprised the connection of new subscribers, the WiMax project in
Moscow, the switching of MGTS subscribers from analogue to digital equipment
installed during 2008, and proceeds from the redemption of investments and
loans.
Free cash flow19 generation therefore more than tripled year on year to RUR 2.8
billion in the second quarter.
Net cash used in financing activities amounted to RUR 0.7 billion, and primarily
comprised the repayments of MGTS ruble bonds and other indebtedness that matured
during the quarter.
The Group`s cash and cash equivalents and short term investments therefore
amounted to RUR 6.1 billion at the end of the second quarter.
The Group`s total borrowings including capital lease obligations amounted to RUR
29.2 billion at the end of the second quarter, compared to RUR 29.9 billion at
the end of the first quarter of 2009. The borrowings primarily comprised the RUR
26.0 billion Sberbank credit facility, the RUR 1.8 billion debt to Sistema Mass
Media OJSC, and RUR 0.3 billion of vendor financing for equipment purchased
during the second quarter of 2009.
The Group`s net debt20 therefore decreased from RUR 25.9 billion to RUR 23.1
billion during the quarter and from RUR 26.2 billion at the end of 2008.
Approximately 98% of the Group`s total debt was ruble denominated at the end of
the second quarter of 2009, and the Group`s total debt stood at 1.6 times
annualized quarterly OIBDA, compared to 1.7 times as at the end of the first
quarter and 1.8 times at the end of 2008.
OTHER INFORMATION
Conference call
Comstar will host a conference call today at 8.00 am (ET) / 1.00 pm (UK time) /
2.00 pm (CET) / 4.00 pm (Moscow Time). Participants may access the call by
dialling the following numbers:
UK / International: +44 20 8515 2302
US: +1 480 629 9770
A replay facility will also be made available for 7 days after the call and may
be accessed by dialing the following numbers and using the following pin code:
UK / International: +44 20 7154 2833
US: +1 303 590 3030
PIN: 4136784#
The replay facility will also be made available at
http://www.comstar.ru/en/for_investors/finresults/2009/2q/ in due course.
For further information, please visit www.comstar-uts.com or contact:
***
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 97% of Moscow households. The
Company also offers communications services in five Russian regions, Armenia and
Ukraine. Comstar had 3.6 million residential subscribers and 791 thousand
residential broadband internet subscribers in Moscow, as well as 324 thousand
residential regional and international broadband internet subscribers and 2.0
million residential regional pay-TV subscribers at the end of June 2009. Comstar
generated US$ 698.0 million of revenues and a 39.5% OIBDA margin for the six
months ended June 30, 2009. 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.
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
RUR millions Q2 2009 Q2 2008 Q1 2009 1H 2009 1H 2008
RUR `mln % of revs RUR `mln % of revs RUR `mln % of revs RUR `mln % of revs RUR `mln % of revs
Operating profit 3,378 28.9% 2,529 25.7% 2,798 24.7% 6,176 26.8% 5,478 27.4%
Add: depreciation and amortisation OIBDA (reported) 1,425 12.2% 1,235 12.5% 1,493 13.2% 2,918 12.7% 2,420 12.1%
OIBDA 4,803 41.0% 3,764 38.2% 4,291 37.8% 9,094 39.5% 7,898 39.5%
US$ millions Q2 2009 Q2 2008 Q1 2009 1H 2009 1H 2008
US$ `mln % of revs US$ `mln % of revs US$ `mln % of revs US$ `mln % of revs US$ `mln % of revs
Operating profit 105.1 28.9% 107.1 25.7% 82.2 24.6% 187.3 26.8% 228.4 27.4%
Add: depreciation and amortisation OIBDA (reported) 44.2 12.2% 52.2 12.5% 44.1 13.2% 88.4 12.7% 101.2 12.1%
OIBDA 149.3 41.1% 159.3 38.2% 126.4 37.8% 275.7 39.5% 329.6 39.5%
Underlying effective tax rate is income tax expense adjusted for the effect of
change in statutory tax rate divided by income before taxes adjusted for the
non-deductible effects of revaluation of put option and foreign currency
transactions. This measure is included in this results statement in order to
provide additional information regarding the Group`s effective tax rate without
the effect of major items that comprise income before taxes but have no tax
effect, or adjustments to income tax expense. Underlying effective tax rate can
be reconciled to the Group`s consolidated statements as follows:
RUR millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Income before taxes (reported) 2,484 2,548 (3%) 1,113 123% 3,597 5,645 (36%)
Less change in fair value of put option - (75) - - (424)
Add back / (less) non-deductible / (non-taxable) portion of foreign currency transactions losses/(gains), net (564) - 1,300 (143%) 736 -
Income before taxes (adjusted) 1,920 2,473 (22%) 2,413 (20%) 4,333 5,221 (17%)
Income tax expense 441 556 (21%) 518 (15%) 959 1,241 (23%)
Underlying effective tax rate 23.0% 22.5% 21.5% 22.1% 23.8%
US$ millions Q2 2009 Q2 2008 Growth Q1 2009 Growth 1H 2009 1H 2008 Growth
Income before taxes (reported) 77.3 107.9 (28%) 29.0 166% 106.4 235.4 (55%)
Less change in fair value of put option - (3.2) - (17.6)
Add back / (less) non-deductible / (non-taxable) portion of foreign currency transactions losses/(gains), net (17.5) - 41.6 (142%) 24.1 -
Income before taxes (adjusted) 59.8 104.7 (43%) 70.6 (15%) 130.4 217.8 (40%)
Income tax expense 13.7 23.5 15.1 (9%) 28.8 51.4 (44%)
Underlying effective tax rate 23.0% 22.4% 21.4% 22.1% 23.6%
Attachment B
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED INCOME STATEMENTS
RUR million, except for share Three months Six months
and per share amounts ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Operating revenues 11,702 9,858 23,045 19,972
Operating expenses, excluding depreciation and amortisation, net (6,899) (6,094) (13,951) (12,074)
Depreciation and amortisation (1,425) (1,235) (2,918) (2,420)
__________ __________ __________ __________
Operating income 3,378 2,529 6,176 5,478
Interest income 102 262 348 520
Interest expense (874) (368) (2,019) (733)
Change in fair value of put option - 75 - 424
Change in fair value of purchased call option (33) - (170) -
(Impairment) / reversal of impairment of long-term investments and loans, net (2) - 148 -
Foreign currency transactions (loss) / gain, net (87) 50 (886) (44)
__________ __________ __________ __________
Income before income taxes and income from investments 2,484 2,548 3,597 5,645
Income tax expense (441) (556) (959) (1,241)
Income from investments (2) - (2) -
__________ __________ __________ __________
Net income / 2,041 1,992 2,636 4,404
Less: net income attributable to the noncontrolling interest (1,083) (1,289) (1,184) (2,389)
__________ __________ __________ __________
Net income attributable to Comstar-UTS 958 703 1,452 2,015
Weighted average number of common shares outstanding - basic 358,224,856 404,456,856 358,224,856 404,456,856
Earnings per common share - basic RUR 2.7 RUR 1.7 RUR 4.1 RUR 5.0
Weighted average number of common shares outstanding - diluted 358,224,856 404,456,856 358,224,856 405,351,792
Earnings per common share - diluted RUR 2.7 RUR 1.7 RUR 4.1 RUR 5.0
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts. Net income attributable to the noncontrolling interest was
reclassified pursuant to the provisions of SFAS No. 160 (As Amended),
"Noncontrolling Interests in Consolidated Financial Statements".
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED INCOME STATEMENTS
US$ thousand, except for share Three months Six months
and per share amounts ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Operating revenues $ 363,579 $ 417,271 $ 697,950 $ 834,226
Operating expenses, excluding depreciation and amortisation, net (214,243) (257,939) (422,251) (504,646)
Depreciation and amortisation (44,244) (52,248) (88,376) (101,163)
__________ __________ __________ __________
Operating income 105,092 107,084 187,323 228,417
Interest income 3,206 11,096 10,587 21,766
Interest expense (27,187) (15,580) (61,077) (30,615)
Change in fair value of put option - 3,199 - 17,568
Change in fair value of purchased call option (584) - (5,394) -
(Impairment) / reversal of impairment of long-term investments and loans, net (83) - 4,246 -
Foreign currency transactions (loss) / gain, net (3,108) 2,146 (29,319) (1,768)
__________ __________ __________ __________
Income before income taxes and income from investments 77,336 107,945 106,366 235,368
Income tax expense (13,748) (23,510) (28,839) (51,406)
Income from investments (56) - (56) -
__________ __________ __________ __________
Net income / 63,532 84,435 77,471 183,962
Less: net income attributable to the noncontrolling interest (33,539) (54,561) (34,879) (100,003)
__________ __________ __________ __________
Net income attributable to Comstar-UTS $ 29,993 $ 29,874 $ 42,592 $ 83,959
Weighted average number of common shares outstanding - basic 358,224,856 404,456,856 358,224,856 404,456,856
Earnings per common share - basic US$ 0.08 US$ 0.07 US$ 0.12 US$ 0.21
Weighted average number of common shares outstanding - diluted 358,224,856 404,456,856 358,224,856 405,351,792
Earnings per common share - diluted US$ 0.08 US$ 0.07 US$ 0.12 US$ 0.21
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts. Net income attributable to the noncontrolling interest was
reclassified pursuant to the provisions of SFAS No. 160 (As Amended),
"Noncontrolling Interests in Consolidated Financial Statements".
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED AND COMBINED BALANCE SHEETS
June 30, December 31, June 30, December 31,
2009 2008 (*) 2009 2008 (*)
Assets (RUR million) (US$ thousand)
Current assets:
Cash and cash equivalents 5,345 1,821 $ 170,831 $ 61,974
Short-term investments and loans 717 9,478 22,928 322,606
Trade receivables, net 4,819 4,891 154,020 166,478
Other receivables, prepaid expenses and other current assets 2,499 2,327 79,873 79,197
Inventories and spare parts 1,123 966 35,829 32,952
Deferred tax assets, current portion 711 327 22,739 11,142
_________ __________ __________ __________
Total current assets 15,214 19,810 486,220 674,349
Property, plant and equipment, net 53,341 54,532 1,704,705 1,856,064
Intangible assets, net 9,095 9,505 290,676 323,499
Investments in shares of Svyazinvest 36,460 36,460 1,165,226 1,240,977
Other long-term investments and loans 2,471 2,660 78,948 90,509
Other long-term assets 10 185 315 6,308
_________ __________ __________ __________
Total assets 116,591 123,152 $ 3,726,090 $ 4,191,706
(*) The amounts as of December 31, 2008 were restated due to combination of
Stream-TV entities` accounts.
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED AND COMBINED BALANCE SHEETS (continued)
June 30, December 31, June 30, December 31,
2009 2008 (*) 2009 2008 (*)
(RUR million) (US$ thousand)
Liabilities and shareholders` equity:
Current liabilities:
Trade accounts payable, accrued expenses and other current liabilities 6,914 7,940 $ 220,955 $ 270,243
Deferred connection fees, current portion 883 917 28,204 31,216
Subscriber prepayments 1,208 1,272 38,614 43,311
Debt, current portion 9,787 15,052 312,795 512,324
Capital lease obligations, current portion 73 163 2,321 5,563
_________ __________ __________ __________
Total current liabilities 18,865 25,344 602,889 862,657
Long-term liabilities:
Deferred connection fees, net of current portion 2,915 3,019 93,175 102,764
Debt, net of current portion 19,338 22,214 618,030 756,099
Capital lease obligations, net of current portion 2 30 71 1,021
Post-retirement obligations 866 859 27,680 29,250
Property, plant and equipment contributions 2,756 2,738 88,067 93,197
Deferred tax liabilities, long-term portion 3,493 3,018 111,617 102,712
Payable to Sistema Hals, related party 1,117 1,081 35,695 36,807
Other long-term liabilities 5 55 153 1,874
_________ __________ __________ __________
Total long-term liabilities 30,492 33,014 974,488 1,123,724
_________ __________ __________ __________
Total liabilities 49,357 58,358 1,577,377 1,986,381
Shareholders` equity:
Comstar-UTS shareholders` equity:
Common stock 418 443 23,900 24,728
Treasury stock (60) (60) (2,545) (2,545)
Additional paid-in capital 27,869 29,783 1,004,465 1,072,015
Prepayment for the acquisition of Stream-TV - (2,461) - (86,842)
Retained earnings 19,645 18,923 688,757 675,512
Accumulated other comprehensive loss (2,511) (2,515) (264,909) (181,434)
_________ __________ __________ __________
Total Comstar-UTS shareholders` equity 45,361 44,113 1,449,668 1,501,434
Noncontrolling interest 21,873 20,681 699,045 703,891
_________ __________ __________ __________
Total shareholders` equity 67,234 64,794 2,148,713 2,205,325
_________ __________ __________ __________
Total liabilities and shareholders` equity 116,591 123,152 $ 3,726,090 $ 4,191,706
(*) The amounts as of December 31, 2008 were restated due to combination of
Stream-TV entities` accounts. Equity attributable to the noncontrolling interest
was reclassified pursuant to the provisions of SFAS No. 160 (As Amended),
"Noncontrolling Interests in Consolidated Financial Statements".
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
RUR million Three months Six months
ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Operating activities:
Net income 2,041 1,992 2,636 4,404
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortisation 1,425 1,235 2,918 2,420
Stock-based compensation . 46 144 86 100
Change in fair value of put option - (75) - (424)
Change in fair value of purchased call option 33 - 170 -
Impairment / (reversal of impairment) of long-term investments and loans, net 2 - (148) -
Loss from disposal of fixed assets and other non-cash items, net 50 27 79 40
Compensation of losses from third parties (56) (78) (92) (142)
Amortisation of deferred finance charges 2 3 5 5
Deferred taxes 48 (12) 87 (44)
Foreign currency transactions loss / (gain) on non-operating activities, net 102 (15) 857 84
Postretirement benefits 8 14 24 37
Bad debt expense 74 74 306 137
Inventory obsolescence charge 22 37 22 45
Changes in operating assets and liabilities:
Trade receivables 204 (43) (235) (453)
Other receivables, prepaid expenses and other current assets 115 (36) (203) (273)
Inventories and spare parts (55) (13) (175) (89)
Trade accounts payable, accrued expenses and other current liabilities (664) (329) 634 700
Deferred connection fees (88) 3 (139) (26)
Subscriber prepayments (1) 38 (64) 43
__________ __________ __________ __________
Net cash provided by operating activities 3,308 2,966 6,768 6,564
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts. Presentation of the operating activities section has been adjusted to
conform to new income statement presentation pursuant to the provisions of SFAS
No. 160 (As Amended), "Noncontrolling Interests in Consolidated Financial
Statements".
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
RUR million Three months Three months
ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Investing activities:
Purchases of property, plant and equipment (412) (2,080) (2,252) (3,048)
Proceeds from sale of property, plant and equipment . 18 23 40 38
Purchases of intangible assets (88) (133) (272) (217)
Acquisition of subsidiaries, net of cash acquired - (198) - (198)
Acquisition of minority interests in existing subsidiaries - - (28) -
Purchases of long-term investments and loans - - (14) (39)
Proceeds from sale and redemption of long-term investments and loans 4 - 4 2
Purchases of short-term investments and loans (200) (908) (200) (2,403)
Proceeds from sale and redemption of short-term investments and loans 461 5,792 9,376 6,641
Decrease in restricted cash - - - 37
__________ __________ __________ __________
Net cash provided by / (used in) investing activities (217) 2,496 6,654 813
Financing activities:
Acquisition of Stream-TV - - (103) -
Proceeds from borrowings - 59 56 72
Principal payments on borrowings (596) (1,954) (9,749) (2,133)
Principal payments on capital lease obligations (67) (73) (128) (134)
Dividends paid - - - (13)
__________ __________ __________ __________
Net cash used in financing activities (663) (1,968) (9,924) (2,208)
Effects of foreign currency translation on cash and cash equivalents (12) - 26 -
__________ __________ __________ __________
Net increase in cash and cash equivalents 2,416 3,494 3,524 5,169
Cash and cash equivalents, beginning of the period 2,929 6,088 1,821 4,413
__________ __________ __________ __________
Cash and cash equivalents, end of the period 5,345 9,582 5,345 9,582
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts.
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
US$ thousand Three months Six months
ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Operating activities:
Net income $ 63,532 $ 84,435 $ 77,471 $ 183,962
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortisation 44,244 52,248 88,376 101,163
Stock-based compensation . 1,267 6,001 2,336 4,207
Change in fair value of put option - (3,199) - (17,568)
Change in fair value of purchased call option 584 - 5,394 -
Impairment / (reversal of impairment) of long-term investments and loans, net 83 - (4,246) -
Loss from disposal of fixed assets and other non-cash items, net 1,546 1,114 2,404 1,645
Compensation of losses from third parties (1,732) (3,293) (2,789) (5,912)
Amortisation of deferred finance charges 77 104 157 204
Deferred taxes 1,354 (484) 2,380 (1,805)
Foreign currency transactions loss on non-operating activities, net 3,173 (550) 25,418 3,449
Postretirement benefits 256 584 740 1,521
Bad debt expense 2,309 3,095 9,155 5,689
Inventory obsolescence charge 685 1,544 685 1,879
Changes in operating assets and liabilities:
Trade receivables 6,348 (1,784) (6,601) (18,694)
Other receivables, prepaid expenses and other current assets 3,554 (1,487) (5,810) (11,276)
Inventories and spare parts (1,713) (517) (5,243) (3,664)
Trade accounts payable, accrued expenses and other current liabilities (20,615) (13,743) 17,651 28,669
Deferred connection fees (2,722) 104 (4,217) (1,089)
Subscriber prepayments (44) 1,595 (1,895) 1,794
__________ __________ __________ __________
Net cash provided by operating activities $ 102,186 $ 125,767 $ 201,366 $ 274,174
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts. Presentation of the operating activities section has been adjusted to
conform to new income statement presentation pursuant to the provisions of SFAS
No. 160 (As Amended), "Noncontrolling Interests in Consolidated Financial
Statements".
"COMSTAR - United TeleSystems" OJSC
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
US$ thousand Three months Six months
ended June 30, ended June 30,
2009 2008 (*) 2009 2008 (*)
Investing activities:
Purchases of property, plant and equipment $ (12,774) $ (86,879) $ (67,008) $ (126,789)
Proceeds from sale of property, plant and equipment . 552 956 1,194 1,576
Purchases of intangible assets (2,723) (5,527) (8,153) (9,008)
Acquisition of subsidiaries, net of cash acquired - (8,279) - (8,279)
Acquisition of minority interests in existing subsidiaries - - (816) -
Purchases of long-term investments and loans - - (413) (1,617)
Proceeds from sale and redemption of long-term investments and loans 115 - 115 91
Purchases of short-term investments and loans (6,208) (37,924) (6,208) (99,540)
Proceeds from sale and redemption of short-term investments and loans 14,312 241,871 276,257 276,887
Decrease in restricted cash - 2 - 1,536
__________ __________ __________ __________
Net cash provided by / (used in) investing activities (6,726) 104,220 194,968 34,857
Financing activities:
Acquisition of Stream-TV - - (3,044) -
Proceeds from borrowings - 2,451 1,641 3,004
Principal payments on borrowings (18,503) (81,609) (285,467) (88,994)
Principal payments on capital lease obligations (2,086) (3,060) (3,896) (5,570)
Dividends paid (10) (20) (13) (540)
__________ __________ __________ __________
Net cash used in financing activities (20,599) (82,238) (290,779) (92,100)
Effects of foreign currency translation on cash and cash equivalents 9,856 1,832 3,302 11,762
__________ __________ __________ __________
Net increase in cash and cash equivalents 84,717 149,581 108,857 228,693
Cash and cash equivalents, beginning of the period 86,114 258,906 61,974 179,794
__________ __________ __________ __________
Cash and cash equivalents, end of the period $ 170,831 $ 408,487 $ 170,831 $ 408,487
(*) As reported in 2008 without the effect of combination of Stream-TV entities`
accounts.
1 Except for the presentation of comparative financial information that has not
been restated to reflect the retrospective combination of the financial
statements of STREAM-TV, which is a departure from US GAAP (see detailed
explanation below)
2 The average exchange rate for the periods were: 32.21 Russian Rubles (RUR) per
US$ 1 in the second quarter of 2009; RUR 33.93 per US$ 1 in the first quarter of
2009; RUR 23.63 per US$ 1 in the second quarter of 2008; RUR 33.07 per US$ 1 in
the first six months of 2009; and RUR 23.94 per US$ 1 in the first six months of
2008
3 Here and below, please refer to Attachment A to this statement for a full
definition of OIBDA
4 Here and below, cash capital expenditure comprises purchases of property,
plant and equipment, and intangible assets
5 Excluding depreciation and amortisation, net
6 Excluding depreciation and amortisation, net
7 Subscribers of Voice + Broadband Internet service
8 Including Broadband Internet, Pay-TV (IPTV and HDTV), VOD and other value
added services
9 Including subscribers of Voice + Broadband Internet + Pay-TV service
10 Including STREAM-TV and Comstar branches
11 Including subscribers of Pay-TV + Broadband Internet service
12 Excluding depreciation and amortisation charges
13 Excluding depreciation and amortisation charges
14 Excluding depreciation and amortisation charges
15 Excluding depreciation and amortisation charges
16 Including all kinds of services
17 Excluding depreciation and amortisation charges
18 Excluding depreciation and amortisation charges
19 Calculated as net cash provided by operations less cash CAPEX
20 Calculated as total debt less cash and cash equivalents and short term
investments
Comstar-UTS
Masha Eliseeva
Tel: +7 985 997 08 52
ir@comstar-uts.ru
or
Shared Value Limited
Matthew Hooper
Tel. +44 (0) 20 7321 5010
comstar@sharedvalue.net
Copyright Business Wire 2009
http://www.businesswire.com/news/home/20090826006031/en
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