Comstar - United Telesystems OJSC Financial Results for the Second Quarter and First Six Months of 2007.MOSCOW -- "COMSTAR COMSTAR COMmon System for Technical Analysis and Reporting - United TeleSystems" OJSC OJSC Open Joint Stock Company ("Comstar" or "the Group") (LSE LSE - Language Sensitive Editor : CMST CMST Capacitated Minimum Spanning Tree (problem) CMST Characterization, Monitoring, and Sensor Technology CMST Center for Mathematics, Science, and Technology ), the leading integrated telecommunications operator in Russia and the CIS Cis (sĭs), same as Kish (1.) (1) (CompuServe Information Service) See CompuServe. (2) (Card Information S , today announced its unaudited consolidated US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial results for the three and six months ended June 30, 2007. SECOND QUARTER HIGHLIGHTS * Revenues up 32% year on year to US$ 379.2 million * OIBDA OIBDA Operating Income Before Depreciation & Amortization (1) up 51% year on year to US$ 173.2 million and OIBDA margin of 46% * Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. up 54% year on year to US$ 135.7 million and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 36% * Net income before non-cash impact of revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of put and call option(1) of US$ 39.2 million * Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses up 41% year on year to US$ 112.4 million * 42% year on year growth in Moscow broadband Internet See broadband. subscriber base to 426,400 customers * 52% of MGTS MGTS Message Generator Traffic Simulator MGTS Message Generation Test System residential subscribers on unlimited tariff plan as at end of period HALF YEAR HIGHLIGHTS * Revenues up 32% year on year to US$ 708.0 million * OIBDA up 40% year on year to US$ 303.6 million and OIBDA margin of 43% * Operating profit up 40% year on year to US$ 228.5 million and operating margin of 32% * Net income before non-cash impact of revaluation of put and call option of US$ 75.3 million * Cash flow from operations up 27% year on year to US$ 201.5 million Sergey Pridantsev, President of Comstar, commented: "The second quarter performance provides a good platform for the first steps in the implementation of our revised strategy. Our objective is to create a world class integrated full service telecoms provider, and our strategy is focused on leveraging MGTS' incumbent infrastructure and unique last mile access in Moscow; increasing our broadband market share and ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. ; expanding our service offering; enhancing efficiency levels across the Group; further expanding our regional operations; streamlining our organization and ownership structures; and capitalizing on our financial investment in Svyazinvest". "Our primary revenue growth drivers will change over the coming years and shift increasingly to the provision of broadband fixed-line services to residential and corporate customers. This is why our unique position as owner of the 'last mile' access to 3.6 million Moscow households is so important. Our objective is to have a 50% share of the Moscow broadband market by 2011. We have therefore launched a new strategy to accelerate subscriber acquisition. This has started with an aggressive new marketing campaign and the introduction of new sales channels to leverage MGTS' network and human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. . We are also rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting our capital expenditure programs towards the selective modernization of Moscow's 'last mile' infrastructure." Nikolay Tokarev, Chief Financial Officer, added: "The increase in our OIBDA margin reflects the healthy underlying development of the business, as well as the ongoing reorganization and optimization processes. We continue to focus on unlocking our significant operational potential, in the form of substantial further revenue and cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. . We expect the trends and momentum that have been demonstrated in the first half of 2007 to continue, and therefore expect higher than anticipated full year 2007 revenue growth of between 25% and 30%, and an improved full year OIBDA margin of not less than 40%, before any further regulatory changes or acquisitions". FINANCIAL SUMMARY [TABLE OMITTED] OPERATING REVIEW Group Overview Comstar reported 32% year on year revenue growth in the second quarter and 15% quarter on quarter growth. This growth continued to reflect the high customer demand for the unlimited tariff plan introduced by MGTS from February 2007, as well as for Comstar's double and triple-play offerings. Comstar also received US$ 27.0 million of compensation from the Federal Budget for discounts provided to certain categories of customers prior to 2005, which compares with US$ 17.8 million of similar compensation received in the second quarter of 2006. In addition, the year on year growth reflected the impact of the introduction of the 'Calling Party Pays' ('CPP') regulation from July 2006, which contributed US$ 26.7 million of revenue in the second quarter; the change in the long-distance ('DLD/ILD') revenue recognition policy from January 1, 2006; as well as the continuing appreciation of the Russian Ruble The ruble or rouble (Russian: рубль rublʹ, plural рубли́ rubli against the US dollar. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding depreciation and amortisation charges, increased year on year and quarter on quarter, but were reduced as a percentage of revenue to 54%, from 63% in the second quarter of 2006 and 60% in the first quarter of 2007. This reduction was the net effect of the reorganization and headcount reduction at Comstar-Moscow, salary increases at MGTS, the optimization of the Group's sales and marketing activities following the 2006 rebranding campaigns, and the continuing appreciation of the Russian Ruble against the US dollar. Network traffic costs doubled year on year due to the introduction of CPP cpp - C preprocessor. , the increased scale of the Group, and the changes in the interconnection regime. However, network traffic costs declined 5% quarter on quarter, as Comstar-Moscow completed the transition of its customer base to the new 'agent' scheme for long distance traffic, and certain low margin traffic transit agreements There have been a number of Transit Agreements for people between states:
[TABLE OMITTED] Comstar therefore reported a 51% year on year and 33% quarter on quarter increase in OIBDA. The Group OIBDA margin expanded by almost 6 percentage points year on year and over quarter on quarter to 45.7%. The second quarter 2006 result included US$ 17.8 million of compensation from the Federal budget and a US$ 7.6 million gain from the sale of an MGTS building. Group depreciation and amortisation charges increased by 40% year on year to US$ 37.5 million, in line with the growth in the Group's asset base, additional charges for businesses acquired during 2006, and the previously announced acceleration in the depreciation of MGTS' analogue equipment. However, the charges remained stable quarter on quarter. The appreciation of the Russian Ruble also resulted in a positive effect when translating MGTS' Ruble-denominated depreciation and amortisation charges into the Group's US dollar reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. . Comstar therefore reported a 54% year on year and 46% quarter on quarter increase in operating profits, and an operating margin of 35.8%, compared to a margin of 30.8% for the second quarter of 2006 and 28.2% for the first quarter of the current year. The Group reported a largely stable net interest expense of US$ 10.0 million for the period, when compared to the first quarter of 2007. The net interest income of US$ 9.8 million for the same period of 2006 reflected the higher level of cash and short term investments following the Group's initial public offering and the lower level of corporate borrowing ahead of the US$ 1.3 billion acquisition of the 25% plus one share stake in Svyazinvest in December 2006. Comstar reported a US$ 0.1 million foreign exchange rate gain in the second quarter, compared to gains of US$ 4.4 million and US$ 3.4 million for the same period of 2006 and the first quarter of 2007, respectively. The lower gain was due to the revaluation of the Group's Euro-denominated capital lease obligations and amounts payable to equipment suppliers. The put and call option issued as part payment for the Svyazinvest stake continued to impact the Group's results and gave rise to a US$ 39.5 million non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. in the quarter, following the significant increase in Comstar's share price since the end of the first quarter of 2007. This compared with a US$ 13.5 million non-cash gain in the first quarter of 2007, and no such impact in the second quarter of 2006. The Group's effective tax rate, before the revaluation of the put and call option, was largely stable quarter on quarter at 28% for the period, compared to 30% for the first quarter. The 19% effective tax rate for the second quarter of 2006 reflected the tax benefit of the foreign exchange losses on the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. proceeds. The effective tax rate will continue to be affected by the quarterly revaluation of the put and call option. Group minority interests increased by 30% year on year and by 3% quarter on quarter to US$ 33.4 million, which reflected both the strong revenue growth at MGTS, which is 56% owned by Comstar, as well as MGTS' US$ 17.5 million minority interest in the non-cash put and call option charge. Comstar's net income in the second quarter of 2007 was impacted by the non-cash charge, arising from the revaluation of the put and call option, net interest expense as compared to net interest gain for the same period of 2006, and the higher effective tax rate following the use of the IPO proceeds in the fourth quarter of 2006 and a subsequent decrease in tax-deductible foreign exchange losses. Group net income before the non-cash impact of the revaluation of the put and call option therefore amounted to US$ 39.2 million in the quarter, compared to US$ 58.2 million for the same period of 2006 and US$ 36.1 million for the first quarter of 2007. Moscow City Telephone Network The Moscow City Telephone Network (Russian: Московская Городская Телефонная (MGTS) Comstar owns 56% of 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" in Moscow and has over 3.6 million subscribers. [TABLE OMITTED] MGTS generated 39% year on year and 18% quarter on quarter revenue growth in the second quarter, which largely reflected the US$ 70.4 million year on year and US$ 42.6 million quarter on quarter growth in residential and corporate voice revenues. Residential voice revenues were up 73% year on year and 36% quarter on quarter, with 52% of MGTS residential subscribers choosing to remain on the unlimited tariff plan of RUR 380 (approximately US $14.7) per month, including 18% VAT, introduced in February. MGTS received US$ 27.0 million of payments from the Federal Budget in the quarter by way of reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for discounts provided to certain categories of low income residential subscribers, including pensioners and military veterans, under the terms of pre-2005 legislation. This compares with the US$ 17.8 million of similar payments received in the second quarter of 2006. MGTS received the remaining US$ 9.6 million of compensation in July 2007, which will be recognized in the third quarter. No further payments are anticipated in 2007 or in the future. The introduction of CPP from July 2006 also continued to positively impact the revenue line by adding a further US$ 23.0 million in the second quarter. Residential CPP traffic increased by 12% quarter on quarter from 283 million minutes to 315 million minutes, and contributed US$ 15.4 million of revenue in the quarter. Corporate voice revenues were up 24% year on year and 10% quarter on quarter, whilst access node and trunk rental revenues increased by 15% year on year and 5% quarter on quarter. Corporate CPP traffic increased by 22% quarter on quarter from 107 million minutes to 130 million minutes, and contributed US$ 7.5 million of revenue in the quarter. Revenue from Operators was up 12% year on year and 1% quarter on quarter. The year on year growth reflected the 44% increase in access node and trunk rental revenues. Long-distance revenues, excluding the one-off recognition of US$ 5.5 million of revenue from Rostelecom in the second quarter of 2006, increased by 20% year on year as a result of the rise in per minute charges from February 1, 2007. MGTS therefore reported a 48% year on year and 32% quarter on quarter increase in OIBDA, and an increased OIBDA margin of 51.9%, when compared to 46.3% in the first quarter and 48.5% for the second quarter of 2006. The year on year development included the impact of the Federal budget compensation for both periods, the higher salary costs from October 2006, the higher revenues but adverse margin impact of the introduction of CPP from July 2006, and the US$ 7.6 million gain from the sale of an MGTS building in the second quarter of 2006. COMSTAR-MOSCOW Comstar-Moscow is a leading alternative fixed-line solutions provider for primarily corporate customers, which offers voice and data services to nearly 40,000 subscribers and has over 160,000 active lines in Moscow and the Moscow region. [TABLE OMITTED] The 25% and 33% respective year on year declines in corporate and residential voice revenues reflected the introduction of the new long distance regulations in 2006. Under the new rules, Comstar-Moscow recognizes the margin on long-distance traffic as agent fees from authorized long-distance providers and, therefore, classifies it as revenue from Operators. This compares with the prior recognition of the full per minute charge in the second quarter of 2006. Revenues from Operators consequently increased by 16% year on year. As at June 30, 2007, almost all Comstar Moscow subscribers have been transferred to the new 'agent' scheme. CPP revenues from calls to mobile users contributed approximately US$ 3.7 million of voice revenues in the quarter, compared to approximately US$ 3.4 million in the first quarter of 2007. Corporate customer data and internet service revenues increased by 11% and 4% year on year and quarter on quarter, respectively, following high demand from corporate subscribers. Corporate subscriber ARPU increased by 10% quarter on quarter to US$ 553.3, and partially reflected the fixing of tariffs in Russian Rubles for a substantial part of the subscriber base during the first six months of 2007. The lower year on year increase in ARPU reflected the above mentioned change in long-distance regulation and resulting reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of voice revenues. Comstar-Moscow's OIBDA was up 4% year on year and 8% quarter on quarter, following the cost optimization and workforce reduction programs implemented during the second half of 2006 and first six months of the current year. The more modest year on year growth reflects the fact that the Corporate Centre within Comstar-Moscow was created in the second half of 2006, and did not exist in the second quarter of 2006. The OIBDA margin therefore remained stable at 19.2% year on year and quarter on quarter. COMSTAR-DIRECT Comstar-Direct is the largest broadband service provider An ISP, telephone company, cable company or other carrier that offers high-speed communications to homes and businesses, typically for Internet access. Cable modems, DSL and T1 lines are the common technologies. See broadband, cable modem, DSL and T1. in Moscow, and has 426,400 residential subscribers, including 99,100 double-play (broadband Internet + IPTV (Internet Protocol TV) Also called "TV over IP," IPTV delivers scheduled TV programs and video-on-demand (VOD) via the IP protocol and digital streaming techniques used to watch video on the Internet. ) customers. The division is 52% owned and fully consolidated by the Group, with Sistema Mass Media owning the remaining 48% minority stake. [TABLE OMITTED] Comstar-Direct continued to increase its subscriber base during the period, with the number of residential broadband subscribers up 42% year on year and 4% quarter on quarter to 426,400. Comstar-Direct therefore had a 33% share of the Moscow broadband subscriber market as at June 30, 2007, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the latest independent survey data from the Direct Info research firm. Comstar-Direct revised its tariff plans during the quarter with a view to increasing the proportion of active pay-TV users in its double-play subscriber base. The number of double-play subscribers to the bundled data and 'Stream' IPTV services almost quadrupled year on year to 99,100 customers. The double-play base was stable quarter on quarter following the introduction of new balanced tariff plans. Residential broadband revenues increased by 9% quarter on quarter to US$ 25.8 million, following healthy subscriber growth and the quarter on quarter increase in average revenue per ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line line (ARPL ARPL Adjust Requested Privilege Level ARPL Average Revenue Per Line ARPL Annual Review of Population Law ARPL Anti-Referral Payments Law ARPL A Retrieval Process Language ARPL Atmospheric Research Pty Ltd (Australia) )9 from US$ 19.7 to US$ 20.1. Corporate customer broadband revenues were up 8% year on year and 13% quarter on quarter, in line with the growth in the subscriber base and the introduction of three unlimited tariff plans for corporate subscribers during the second quarter of 2007. Segment OIBDA increased eightfold eightfold Adjective 1. having eight times as many or as much 2. composed of eight parts Adverb by eight times as many or as much Adj. 1. year on year and almost doubled quarter on quarter, with the margin for the period increasing to 23.0%, from a breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations point a year ago, and from 12.4% in the first quarter of 2007. The quarter on quarter growth in the OIBDA margin partly reflected the reduced fees payable for the use of the MGTS data transmission network, following the high uptake of ADSL broadband services See broadband and broadband service provider. and a resulting recalculation re·cal·cu·late tr.v. re·cal·cu·lat·ed, re·cal·cu·lat·ing, re·cal·cu·lates To calculate again, especially in order to eliminate errors or to incorporate additional factors or data. of payments due for the period from January 1, 2007. A number of new initiatives were launched towards the end of the quarter and have been introduced since, in order to increase market share and ARPU. Comstar's goal is to have a 50% share of the Moscow broadband market in 2011. MGTS will play an active role in facilitating this growth by providing the 'last mile' access to its residential customer base and by utilizing its highly qualified technical support teams to sell in the new double-play offerings. In this context, Comstar is rebalancing its infrastructure investments to focus on the selective modernization of this 'last mile' access, so that the Group can offer greater capacity, higher speeds and enhanced services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; . A new offering structure and marketing campaign were launched on September 1, 2007. The new broadband development strategy is focused on introducing double-play services to homes and up-selling the existing subscriber base to higher tariffs with increased connection speeds and enhanced services. The first element of this strategy is being executed by the MGTS technical support teams and is targeted at PC owners, who either do not have an Internet connection or are using dial-up connections or home networks. MGTS is focusing on the mass market and has already started to install additional equipment in buildings in concentrated traffic areas. From September 15, 2007, MGTS will start selling broadband services to its 3.6 million subscribers. MGTS will exclusively offer credit-based tariffs for MGTS-branded broadband access See broadband and wireless broadband. , with speeds of between 128 and 512 kilobits per second (unit) kilobits per second - (kbps, kb/s) A unit of data rate where 1 kb/s = 1000 bits per second. This contrasts with units of storage where 1 Kb = 1024 bits (note upper case K). . MGTS customers will therefore receive a single bill for double-play services. The second element is being jointly implemented by the MGTS teams and the Comstar-Direct sales force, and is focusing on up-selling existing broadband subscribers by promoting prepaid tariffs for increased speeds of 1 to 6 megabits per second (unit) megabits per second - (Mbps, Mb/s) Millions of bits per second. A unit of data rate. 1 Mb/s = 1,000,000 bits per second (not 1,048,576). E.g. Ethernet can carry 10 Mbps. . MGTS will also act as an agent in selling Comstar-Direct's premium high-speed broadband internet, pay-TV and other value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. services. COMSTAR REGIONS & INTERNATIONAL Comstar's regional and international business comprises the Group's operations in the Russian regions (Sochi, Samara Samara, river, Russia Samara (səmä`rə), river, c.360 mi (580 km) long, rising in the foothills of the S Urals, European Russia. It flows generally northwest, and joins the Volga River at Samara. , St. Petersburg, Saratov and Tyumen) and the CIS (Ukraine and Armenia). [TABLE OMITTED] The residential revenue growth in the period reflected the 12% year on year increase in the residential subscriber base to 81,900, which was primarily driven by subscriber acquisition in the existing Saratov and Tyumen regional operations. Corporate revenues were similarly up 9% year on year, due to the 46% year on year increase in the customer base, healthy organic growth in Tyumen, and the inclusion of the recently acquired Ukrainian operations. The year on year growth in corporate revenues was adversely impacted by the change in long-distance regulation but the change also boosted operator revenues for the period. Segment revenues were up 34% year on year when excluding the Armenian and Ukrainian operations acquired in the fourth quarter of 2006. Segment OIBDA was stable year on year, with the year on year decline in the margin reflecting the impact of the acquisition of the earlier stage and therefore lower margin businesses mentioned above. However, both OIBDA and the OIBDA margin approximately doubled quarter on quarter as a result of the restructuring program, which commenced in the second quarter of 2007. Tyumenneftegazsvyaz became only the second operator to launch traffic and transit exchange services over a zonal telephone network in the Khanty-Mansy region of Russia in May, whilst Conversyia-Svyaz and Overta in Saratov launched broadband residential ADSL services in the Saratov region in July. Comstar also consolidated its ownership in Comstar Ukraine in June by acquiring the remaining 25% of the Company. Since the end of the reporting period, Comstar has become the largest alternative operator in 2014 Olympic Games Olympic games, premier athletic meeting of ancient Greece, and, in modern times, series of international sports contests. The Olympics of Ancient Greece Although records cannot verify games earlier than 776 B.C. host city Sochi, by securing approximately a 68%10 share of the local telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. market in August. This follows the acquisition and integration of leading local alternative operator Sochitelecomservice in August 2007. FINANCIAL REVIEW The Group's operations generated a 41% year on year and 26% quarter on quarter increase in net cash flow from operations to US$ 112.4 million in the second quarter. Net cash used in investing activities was less than a third of the level for the same period of 2006, due to the short term investment of the IPO proceeds in 2006. The 48% quarter on quarter increase to US$ 98.8 million reflected the impact of the US$ 20.0 million sale of the Group's 45% equity stake in ZAO ZAO Zakrytoe Aktsionernoe Obschestvo (Russian: Closed Joint Stock Corporation) ZAO Zenith Angle Offset ZAO Aluminium Doped Zinc Oxide (material for producton of organic light-emitting diodes) Metrocom in March 2007. Group capital expenditure declined by 17% year on year and by 14% quarter on quarter to US$ 68.5 million. Total capital expenditure for the year to date therefore amounted to US$ 148.1 million, which is comfortably in line with the Group's guidance for total capital expenditure of no more than US$ 350.0 million in 2007. The investments during the quarter primarily comprised the ongoing digitalization digitalization /dig·i·tal·iza·tion/ (dij?i-tal-i-za´shun) the administration of digitalis or one of its glycosides in a dosage schedule designed to produce and then maintain optimal therapeutic concentrations of its cardiotonic process and development of Next Generation Network ("NGN (Next Generation Networks) An umbrella term for mixed voice and data networks running over the IP protocol. See IP Multimedia Subsystem. ") infrastructure at MGTS. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying stabilized, as anticipated, after the initial impact of the introduction of the new MGTS tariffs. The Group therefore generated US$ 13.6 million of free cash flow (defined as net cash provided by operations less net cash used in investing activities) in the period. Comstar used US$ 20.9 million of cash for its financing activities in the second quarter, including the repayment of capital lease obligations and loans falling due during the period. The Group repaid the US$ 675.0 million bridge loan provided by ABN Amro ABN AMRO Algemene Bank Nederland-Amsterdam Roterdam Bank (Dutch bank) and Morgan Stanley  To comply with Wikipedia's , the introduction of this article needs a complete rewrite. in December 2006 with US$ 675.0 million of the 5-year
ruble-denominated RUR 26 billion (approximately US$ 1 billion) credit
facility provided by Sberbank in June 2007.
The Group's cash and cash equivalents therefore decreased by US$ 7.0 million during the second quarter to US$ 148.2 million. Total Group borrowings, including capital lease obligations, were 2% lower at US$ 823.5 million by the end of the period, due to the repayment of certain matured loans and capital lease obligations. The Group's net debt was reduced quarter on quarter to US$ 675.3 million and the debt to OIBDA ratio11 continued to decline quarter on quarter to 1.8 times as at the end of the period. [TABLE OMITTED] Comstar treats its shareholding in Svyazinvest as a financial investment, which also provides strategic upside through the resulting involvement in the privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned process. Comstar does not account for the investment under the equity method, but continues to carry it at original cost in the Group's balance sheet as at June 30, 2007. The Annual General Meeting of Comstar shareholders, held on June 27, 2007, approved the payment of a dividend of RUR 62.7 million (approximately US$ 2.4 million) for the twelve month period ended December 31, 2006. The dividend of RUR 0.15 per ordinary share, or approximately US$ 0.006 per share and Global Depositary Receipt depositary receipt A negotiable certificate that represents a company's publicly traded debt or equity. Depositary receipts are created when a company's shares or bonds are delivered to a depositary's custodian bank, which instructs the depositary to issue , was paid in full after the end of the quarter. The Annual General Meeting of MGTS shareholders, held on June 29, 2007, approved the payment of a dividend of RUR 1.3 billion (approximately US$ 51.5 million) for the twelve month period ended December 31, 2006, which is equivalent to 21% of MTGS' net income (under Russian accounting standards) of RUR 6.3 billion (approximately US$ 245.5 million) for the period. The dividend payment of RUR 8.75 per ordinary share (approximately US$ 0.34) and RUR 39.77 per preferred share (approximately US$ 1.54) will be paid by the end of 2007. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD Comstar announced on July 9, 2007 that its previously announced acquisition of a 51% stake in Hellas On Line SA (HoL) from Intracom Holdings Group (ASE (Adaptive Server Enterprise) A relational DBMS from Sybase that runs on Windows NT/2000, Linux and a variety of Unix platforms. ASE is a comprehensive and robust data management product with a long history dating back to the late 1980s. :INTRK) had been discontinued, due to the fact that the deadline for approval by the Greek regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities had passed. Comstar received approximately US$ 9.6 million of payments from the Federal Budget in July 2007, in compensation for discounts provided by MGTS to certain categories of low income residential subscribers, including pensioners and military veterans, under the terms of pre-2005 legislation. These payments will be included in the Group's accounts for the third quarter of 2007. The Group anticipates no further payments in 2007 and thereafter. Comstar announced on August 3, 2007 that it had completed the acquisition of 100% of Sochitelecomservice, a leading alternative telecommunications operator in the Russian city of Sochi, for a total cash consideration of US$ 0.75 million. Alexander Gorbunov (Comstar Vice President for strategy) and Anton Abugov (Sistema First Vice President and Head of Strategy & Development) were elected to the Svyazinvest Board of Directors by the Company's Annual General Meeting of shareholders, which was held on August 28, 2007. Alexander Gorbunov (Comstar Vice President for Strategy) was previously elected as a Board Director of Svyazinvest subsidiary and regional incumbent, Sibirtelecom, and Ivan Zolochevsky (Director of Mobile TeleSystems' North-West region) was elected as a Board Director of Svyazinvest subsidiary and regional incumbent, North West Telecom. OTHER INFORMATION Conference call Comstar will host a conference call today at 4.00 PM Moscow local time, 1.00 PM London local time and 8.00 AM New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of local time to present and discuss these results. Participants may dial the following numbers in order to access the call: UK / International: +44 20 7806 1961 US: +1 718 345 1391 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 '6409294#' pin code: UK / International: +44 20 7806 1970 US: +1 718 354 1112 A replay facility will be made available at http://www.comstar-uts.com/en/for_investors/finresults/2007/ within a month of this statement. For further information, please visit www.comstar-uts.com Comstar UTS (Universal Timesharing System) Amdahl's version of Unix System V. Release 4.0 is POSIX compliant. is the leading fixed-line telecommunications company See telecom company. in Moscow, both in terms of revenues and subscribers. Comstar UTS provides voice, data, Internet, pay-TV and other value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. to residential and corporate subscribers and operators, using its extensive backbone network A backbone network provides a path for the exchange of information between different LANs or subnetworks.[1] A backbone can tie together diverse networks in the same building, in different buildings in a campus environment, or over wide areas. and exclusive last mile access to 98% of Moscow households. The Company also offers communications services in five Russian regions and certain CIS countries There are two lists concerning CIS countries:
Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of US$ 708.0 million and a 43% OIBDA margin for the six months ended June 30, 2007. Comstar GDRs are listed under the symbol "CMST" on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. . Some of the information in this press release may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, (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 Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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 Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , 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 operating costs npl → gastos mpl operacionales 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 Long-Term Assets 1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation. 2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time. 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 [TABLE OMITTED] Reconciliation of Net Income before non-cash impact of revaluation of put and call option [TABLE OMITTED] ARPL (Monthly Average Revenue per Line), a non-US GAAP financial measure, is calculated for the relevant period by dividing Comstar UTS' Stream service revenue, including broadband internet, pay TV and bundled offering excluding connection fee, for that period by the average monthly number of the Comstar UTS' broadband subscribers during the period and by the number of months in the period. Reconciliation of ARPL to service revenues, the most directly comparable US GAAP financial measure, is presented below. We believe that ARPL provides useful information to investors because it is an indicator of the performance of the Group's business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and assists management in budgeting. The management also believes that ARPL provides useful information concerning usage and acceptance of the Group's services. ARPL should not be viewed in isolation from or as an alternative to other figures reported under US GAAP. Average Revenue per ADSL Line (Residential Segment) [TABLE OMITTED] CAPEX (Capital Expenditures) is cash expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. for purchases of property, plant and equipment and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , and non-cash additions of property, plant and equipment and intangible assets, excluding considerations paid in business combinations allocated to property, plant and equipment and intangible assets. CAPEX can be reconciled to the Group's consolidated statements as follows: [TABLE OMITTED] Attachment B "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED INCOME STATEMENTS consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. [TABLE OMITTED] (*) Certain prior year amounts have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the 2007 presentation. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED BALANCE SHEETS consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. [TABLE OMITTED] (*) Amounts as of December 31, 2006 were derived from audited financial statements as of December 31, 2006, 2005 and 2004 and for the years then ended. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED BALANCE SHEETS (continued) [TABLE OMITTED] (*) Amounts as of December 31, 2006 were derived from audited financial statements as of December 31, 2006, 2005 and 2004 and for the years then ended. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS [TABLE OMITTED] (*) Certain prior year amounts have been reclassified to conform to the 2007 presentation. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) [TABLE OMITTED] (*) Certain prior year amounts have been reclassified to conform to the 2007 presentation. 1 Here and below, please see Attachment A to this statement for a full definition of OIBDA and a reconciliation of Net Income before the non-cash impact of the revaluation of the put and call option. 2Please see Attachment A to this statement for a full definition of CAPEX. 3Excluding depreciation and amortisation, net. 4Excluding US$ 17.8 million and US$ 27.0 million of compensation received from the Federal Budget in the second quarters of 2006 and 2007, respectively. Here and below, ARPU calculations exclude connection fees. 5Primarily to Comstar Direct. 6DLD/ILD minutes in Q2 2006 and H1 2006 include zonal traffic, free for the subscriber before the introduction of the CPP Rule effective July 1, 2006. 7Comstar-Moscow's OIBDA has been recalculated and now includes corporate expenses in line with the recent merger of the Corporate Center into Comstar-Moscow . 8The number of residential broadband internet and double-play subscribers was recalculated in line with the new methodology for recognition of subscribers. Now subscribers at the stage of authorization are excluded from the subscriber base, while those with temporarily blocked access have been included in the client base. As a result, a subscriber is recognized in the subscriber base if the ADSL line is activated and a subscriber is paying for broadband services, or the access is temporarily blocked but can be activated immediately after payment. 9 Please see Attachment A to this statement for a full definition of ARPL. 10 Source: Company data, excl. interregional in·ter·re·gion·al adj. Of, involving, or connecting two or more regions: interregional migration; interregional banking. incumbent South Telecom and Transtelecom. 11 Calculated as total debt, as at the balance sheet date, divided by OIBDA for the twelve months preceding the balance sheet date. |
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