Comstar -- United Telesystems OJSC Financial Results for the Fourth Quarter and Full Year 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 fourth quarter and twelve months ended December 31, 2007. FULL YEAR FINANCIAL HIGHLIGHTS * Consolidated revenues up 39% year on year to US$ 1,562.4 million * OIBDA OIBDA Operating Income Before Depreciation & Amortization up 55% year on year to US$ 663.2 million (excluding US$ 62.1 million stock bonus awards in Q42006) with increased margin of 42.5% * 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. of US$ 485.3 million with increased margin of 31.1% * Net income of US$ 43.8 million * Cash CAPEX1 up 13% year on year to US$ 345.4 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 40% year on year to US$ 488.4 million (excluding stock bonus awards in Q4 2006) * Total assets up 31% year on year to US$ 4.6 billion FOURTH QUARTER FINANCIAL HIGHLIGHTS * Consolidated revenues up 65% year on year to US$ 482.1 million * OIBDA more than doubled year on year to US$ 200.0 million (excluding US$ 62.1 million stock bonus awards in Q42006) with increased margin of 41.5% * Operating income of US$ 139.2 million with increased margin of 28.9% * Net income of US$ 51.8 million * Cash flow from operations up 46% year on year to US$ 153.4 million (excluding stock bonus awards in Q4 2006) FOURTH QUARTER OPERATING HIGHLIGHTS * 81% year on year growth in Moscow residential broadband internet See broadband. subscriber base to 651,000, including 122,300 triple-play (voice + broadband internet + pay-TV) subscribers, 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. of US$ 17.5 * 32,900 regional residential broadband internet subscribers and 102,200 regional residential pay-TV subscribers * 51% of MGTS MGTS Message Generator Traffic Simulator MGTS Message Generation Test System residential subscribers on unlimited tariff plan at year end * Acquisition of Digital Telephone Networks and Regional Technical Centre with consolidation of combined full year 2007 revenues of US$ 80.6 million * Ground-breaking agreement to build wireless WIMAX network in Moscow * Completion of Long Distance network build-out in February 2008 Sergey Pridantsev, President and Chief Executive Officer, commented: "We are pleased to report a healthy set of results, which reflect a number of positive changes that we made during 2007. Comstar has now successfully restructured a group of diverse companies into a single, efficient and integrated operator that is fit to compete in the global telecommunications marketplace. We are already the largest and the most profitable fixed-line telecommunications operator in Russia. "We have developed, and begun to implement, a long-term and highly proactive five point strategy, which is centred around Broadband development, Regional expansion, MGTS, Group structure and Svyazinvest, and which underlines the fact that we are on the competitive offensive in the market place with a unique offering of bundled communications services. We have already achieved a number of important operating and financial milestones during 2007. The strategic objectives are integrated into our forward budgets and operational planning, and we are committed to delivering on the aggressive targets set before us, including the expansion of our residential broadband subscriber base in Moscow to over 1 million customers by the end of 2008 and the doubling of our regional broadband subscriber base." Irina Matveeva, Chief Financial Officer, added: "We made significant steps during 2007 to simplify the legal and organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. of the Group, in order to streamline our business processes and the efficiency of the overall business. This work is continuing in 2008. Despite this ongoing restructuring process and the changing regulatory environment, we have continued to demonstrate sustainable growth and healthy profitability levels. "Looking forward, we expect Group revenues to grow organically by 15 to 20% in 2008 when excluding the Federal Budget compensation received in 2007. We also expect to deliver a full year 2008 OIBDA margin of between 38 and 40 per cent, despite the fact that we will not receive any Budget compensation in 2008 and excluding the impact of the new long term incentive plan introduced from April 2008, further acquisitions and any unforeseen regulatory changes. The margin guidance does however include the ongoing investments and start-up projects in the regions, which are expected to be principal drivers of revenue growth and profitability from 2009. "We launched a number of strategic projects during 2007, including the selective modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, of the 'last mile' in Moscow, green-field start-ups in the Moscow suburbs, and the new WiMAX network development in Moscow. We therefore expect 2008 cash capital expenditure to continue to represent approximately 25% of revenues, again when excluding the non-recurring Federal Budget contribution received in 2007." FINANCIAL SUMMARY [TABLE OMITTED] OPERATING REVIEW Group Overview Comstar reported 65% year on year revenue growth in the fourth quarter following continued high consumer demand for the MGTS unlimited tariff plan for regulated residential voice services introduced in February 2007, as well as the ongoing revenue boost from fixed-to-mobile calls and the appreciation of the Russian Ruble The ruble or rouble (Russian: рубль rublʹ, plural рубли́ rubli against the US dollar. The growth also included the consolidation of the full year 2007 results of Digital Telephone Networks South (DTN See disruption-tolerant network and delay-tolerant network. ) and Regional Technical Centre (RTC See real time clock. ) in the fourth quarter results, following the completion of the two acquisitions during the fourth quarter. The two operations reported combined full year 2007 revenues of US$ 80.6 million, up 49.8% year on year. Fourth quarter Group revenues were up 41.5% year on year on a pro-forma2 basis. Group revenues were up 30% in the fourth quarter when compared to the third quarter of 2007, despite the fact that the third quarter revenues included US$ 9.6 million of compensation from the Federal Budget for previously provided customer discounts3. No further compensation is anticipated moving forward. Fourth quarter Group revenues were up 8% quarter on quarter on a pro-forma2 basis. Comstar generated 39% year on year revenue growth for the twelve months ended December 31, 2007, again reflecting the high demand for the unlimited tariff plan, as well as the US$ 36.6 million of compensation from the Federal Budget (compared to US$ 25.8 million in 2006), increased revenues of US$ 118.8 million from fixed-to-mobile calls (compared to US$ 36.3 million in 2006), higher regional revenues of US$ 127.7 million or 8% of Group revenues in 2007 (compared to US$ 39.2 million or 3% of Group revenues in 2006), and the ongoing appreciation of the Russian Ruble against the US dollar4. [TABLE OMITTED] Group 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. increased by 45% year on year in the fourth quarter, and were up 33% quarter on quarter. This increase primarily reflected the scaling of the Group's operations, the inclusion of the full year of expenses for the acquired DTN and RTC businesses, the growing level of Calling Party Pays (CPP cpp - C preprocessor. ) traffic, and the increased level of sales and marketing expenses in line with the accelerated growth of the Moscow broadband subscriber base. However, operating expenses as a percentage of sales declined from 67% to 59% year on year but increased from 57% in the third quarter. Group OIBDA, excluding the US$ 62.1 million of non-comparable stock bonus awards in the fourth quarter of 2006, consequently more than doubled year on year, and increased by 25% quarter on quarter, to US$ 200.0 million. The OIBDA margin increased from 33.3% to 41.5% year on year, and was down from 42.9% in the third quarter. The year on year increase reflected the margin benefit of the introduction by MGTS of the unlimited tariff plan, the contribution of the high margin businesses acquired in the fourth quarter of 2007. The quarter on quarter decline reflected the Federal Budget compensation received in the third quarter. Group OIBDA for the year, when excluding the non-recurring stock bonus awards in the fourth quarter of 2006, increased by 55% year on year. The full year OIBDA margin increased from 38.3% to 42.5%. When excluding the US$ 36.6 million and US$ 25.8 million of compensation from the Federal Budget received in 2007 and 2006, respectively, and the stock bonus awards in 2006, the OIBDA margin amounted to 41.1% in 2007, compared to 36.8% in 2006. The Group's depreciation and amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. charges increased from US$ 39.7 million in the fourth quarter of 2006 and US$ 41.9 million in the third quarter of 2007 to US$ 60.8 million in the fourth quarter and reflected the acquisitions and capital expenditure made during 2007. Underlying Group operating income, excluding the stock bonus awards, increased by 2.4 times year on year in the fourth quarter and by 18% quarter on quarter to US$ 139.2 million, with an operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 28.9%. Fourth quarter net interest expenses increased from US$ 0.6 million to US$ 8.9 million year on year, and reflected the lower amount of cash and cash equivalents during the period, as well as the increased gearing in the Group's balance sheet. The Group's fourth quarter 2006 results below the 'Operating Income' line also included a US$ 60.0 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. arising from the 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 the call and put option issued in part payment for the acquisition of a 25% plus one share stake in regional telecommunications holding company Svyazinvest in December 2006. The call element of the option was exercised in December 2007, with the substantially less volatile put element remaining in place for up to twenty four months. The revaluation of the instrument gave rise to a US$ 66.4 million non-cash gain in the fourth quarter of 2007. The 44% minority interest in the revaluation of the call and put option reduced the total net impact of the instrument on the Group's net income by US$ 26.6 million to US$ 33.4 million loss in the fourth quarter of 2006 and by US$ 29.4 million to a US$ 37.0 million gain in the fourth quarter of 2007. The call and put option adversely affected the 2007 full year results by US$ 145.9 million before a US$ 64.6 million positive impact at the minority interest level. In the fourth quarter Comstar also made a provision for long term investments for the total amount of US$ 22.7 million. Group pre-tax profit for the fourth quarter, when excluding the stock bonus awards in 2006, the impact of the revaluation of the call and put option in both periods and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of long-term investments in 20076, increased by 109% year on year to US$ 129.6 million in the fourth quarter, and by 27% from the third quarter. The effective tax rate, when excluding the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. items, was 19.7% in the fourth quarter of 2007 and 26.5% for the full year 2007, compared to 23.5% and 21.4% for the respective periods of the previous year. The lower effective rate in 2006 was primarily due to the non-taxable foreign exchange gains 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, which were held as cash and short-term investments for a period of time. Such cash and investments were held in the Group's functional currencies in 2007 so did not create such a beneficial effect. However, the 2007 effective rate was positively affected by the US$ 19.9 million decrease in MGTS' deferred tax liability following the deduction of depreciation charges for certain property, plant and equipment items. The Group reported a net profit of US$ 51.8 million in the fourth quarter, compared to a net loss of US$ 63.1 million for the same period of 2006. Group net income for the year amounted to US$ 43.8 million compared to US$ 82.5 million in 2006. Broadband Business in Moscow & the Regions The Broadband business comprises the Group's broadband operations in Moscow and the Russian Regions. Moscow's broadband business was previously primarily reported within the Comstar--Direct business area. The presentation below therefore provides an aggregated breakdown of the broadband business across the Group, but the operating and financial results are included in each of the three business units, in line with the provision of services by each business unit. [TABLE OMITTED] Broadband is the primary driver of the fixed-line telecommunications business in Russia over the next five years. This reflects the rapidly evolving market environment in both Moscow and the Russian regions. Comstar is therefore investing in technology and marketing, in order to ensure market leadership across Russia through 2011 and beyond. Broadband is rapidly replacing Dial-up in Moscow as a mass market product. Broadband penetration in Moscow is forecast to reach 83% by 2011, compared to an estimated level of 49% at the end of 20077, with broadband infrastructure already covering large parts of the city and now developing in the suburbs. The next few years therefore offer a critical window for signing up residential users to a service that is affordable, easy to use, reliable and simple to upgrade to. Comstar is using the MGTS sales and technical support teams and dealer network to market broadband services See broadband and broadband service provider. to MGTS's 3.6 million subscriber households, as well as introducing post-paid tariffs and single billing for all services, and selectively modernizing MGTS's unique 'last mile' access in Moscow. Comstar's Moscow broadband subscriber base grew by 81% in 2007 to 695,000 customers, including 651,000 residential subscribers. This growth was driven primarily by the launch of MGTS's "Broadband in every Home" campaign in November and the active engagement of retail chains at the point of sale. The new broadband strategy provides a significant competitive advantage and a platform for delivering a range of 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. . The number of pay-television subscribers in Moscow increased by 47% year on year to 122,300 homes. A Group record of 198,000 residential broadband subscribers were added in the fourth quarter alone, representing 68% of the 291,000 additions for the whole year. 97% of the new subscribers in the fourth quarter chose tariff plans with speeds of not less than 1 megabit per second A megabit per second (abbreviated as Mbit/s, Mbps, or mbps) is a unit of data transfer rate equal to 1,000,000 bits per second. Because there are 8 bits in a byte, a transfer speed of 8 megabits per second (8 Mbps) is equivalent to 1,000,000 bytes . Comstar's share of the Moscow broadband market consequently increased to 34% at the end of 2007, compared to 32% at the end of 2006. Comstar's objective is to have a market share of approximately 50% by the end of 2011. Despite the substantial acceleration in the subscriber intake at the end of the year, monthly broadband residential ARPU in Moscow was US$ 17.5 in the fourth quarter and US$ 17.1 for the full year, compared to US$ 17.9 in the third quarter. The number of broadband access See broadband and wireless broadband. points used by corporate subscribers in Moscow also more than doubled to 44,000 during 2007, and partly reflected the change in the way that corporate users are serviced with effect from the beginning of the fourth quarter. The selective modernization of the "last mile", using "fiber to the curb Fiber to the curb (FTTC), also called fibre to the kerb (FTTK),[1] is a telecommunications system based on fiber-optic cables run to a platform that serves several customers. " and ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line 2+ technologies, provides existing subscribers with more bandwidth and the capacity to deliver high-speed Internet See broadband. at 24 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. , as well as to offer new value-added services such as High Definition Television. HDTV (High Definition TV) A set of digital television (DTV) standards that offer the highest resolution and sharpest picture. Although some HDTV sets are available in standard (rather square) screen sizes, the overwhelming majority of sets are wide screen, which eliminates tests were launched in parts of Moscow after the end of the year in February 2008, with the full commercial launch of such new services on the modernized mod·ern·ize v. mo·dern·ized, mo·dern·iz·ing, mo·dern·iz·es v.tr. To make modern in appearance, style, or character; update. v.intr. To accept or adopt modern ways, ideas, or style. network anticipated in the summer of 2008. Comstar's committed deployment of a mobile WiMAX See WiMAX and 802.16. network in Moscow in late 2008, in cooperation with Intel, will provide even greater flexibility for users. Comstar will therefore be able to offer an unrivalled 'quintuple' play service offering - local and long distance telephony, unlimited wire-line broadband Internet and HDTV - all in the home - and WiMAX mobile Internet Refers to gaining access to the Internet using a lightweight, handheld device. See Mobile IP, PDA, smartphone and mobile TV. access from a laptop Same as laptop computer. laptop - portable computer when on the move. Furthermore, subscribers will be charged for the services on a single bill. Comstar's regional broadband subscriber base outside Moscow grew to over 43,400 users by the end of the year, up twenty times year on year. The number of regional residential broadband subscribers increased from 800 at the beginning of the year to 32,900 by the end of 2007. DTN, which was acquired during the fourth quarter, is the largest alternative telecommunications operator in Russia, and accounts for over 30,000 of Comstar's regional broadband subscribers. Comstar's regional and international companies started offering broadband services on their own Next Generation Networks in the second half of 2007, and currently provide broadband services in St. Petersburg and the 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. , Saratov, Tyumen and Orenburg regions, as well as in the Yamalo-Nenets and Khanti-Mansi Autonomous Areas An autonomous area is an area of a country that has a degree of autonomy, or freedom from an external authority. Typically it is either geographically distinct from the country or is populated by a national minority. Countries that include autonomous areas are often federacies. . SEGMENTAL segmental /seg·men·tal/ (seg-men´t'l) 1. pertaining to or forming a segment or a product of division, especially into serially arranged or nearly equal parts. 2. undergoing segmentation. OPERATING REVIEW 1. Traditional Segment in Moscow Comstar owns 56% of Moscow City Telephone Network The Moscow City Telephone Network (Russian: Московская Городская Телефонная (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 has over 4.4 million residential and corporate active lines. MGTS is the Group's provider of regulated voice services and unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. mass market broadband connection See broadband and wireless broadband. services for residential subscribers in Moscow. Operating Highlights [TABLE OMITTED] MGTS had a total installed capacity of 4.8 million telephone lines in Moscow by the end of 2007, including 4.4 million active residential and corporate lines. MGTS therefore accounted for 97% of the active residential lines in the City, and 21% of the overall Moscow fixed-line telecommunications market in terms of revenues generated in 2007. MGTS has increased the level of its network 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 from 13% to 54% over the past five years, and 63% of the network is planned to have been digitalized by the end of 2008. MGTS is also simultaneously and selectively modernizing its 'last-mile' infrastructure, using Fiber-to-the-curb (FTTC (Fiber To The Curb) The installation of optical fiber to within several hundred feet of the home or office. At that point, the optics are converted into electronics for delivery into the premises, typically using DSL. ) and ADSL2+ technology, in order to exploit technical and marketing synergies by delivering broadband Internet access Broadband Internet access, often shortened to just "broadband", is high speed Internet access—typically contrasted with dial-up access over modem. Dial-up modems are generally only capable of a maximum bitrate of 56 kbit/s (kilobits per second) and require the full use of a at higher speeds and providing additional value-added services such as High Definition Television. MGTS replaced a total of 47 analogue (electronics) analogue - (US: "analog") A description of a continuously variable signal or a circuit or device designed to handle such signals. The opposite is "discrete" or "digital". automated telephone stations in 2007 with the resulting introduction of 660,500 new numbers. MGTS plans to install a further 450,000 numbers in 2008. In addition, MGTS also expanded the capacity of its data-exchange network by equipping e·quip tr.v. e·quipped, e·quip·ping, e·quips 1. a. To supply with necessities such as tools or provisions. b. its automated telephone stations with additional Digital Subscriber Line Access Multiplexers A Digital Subscriber Line Access Multiplexer (DSLAM) allows telephone lines to make faster connections to the Internet. It is a network device, located near the customer's location, that connects multiple customer Digital Subscriber Lines (DSLs) to a high-speed Internet (DSLAMs), in order to accelerate the growth in the broadband subscriber base. As a result, the monitored capacity of the data exchange network reached 822,000 ADSL ports by the end of 2007. MGTS continued to act as an agent to licensed long-distance operators In telephony, the long-distance operator is available to assist with making long-distance telephone calls, answering billing questions, making collect calls and other functions, including emergency assistance. Rostelecom and MTT MTT 3-(4,5-Dimethylthiazol-2-Yl)-2,5-Diphenyltetrazolium Bromide MTT Machine Tool Technology MTT Microwave Theory and Techniques MTT Mobile Task Team MTT Multi-Table Tournament (poker) during 2007, in order to provide DLD/ILD services to its subscribers. The volume of DLD/ILD traffic decreased year on year due to the regulatory change in the contractual relationships with licensed long distance carriers. Comstar is also implementing a major restructuring programme at MGTS, in order to enhance business efficiency levels and streamline operating processes. The number of management layers has been reduced, with corporate functions moved to Comstar and non-core services outsourced. In turn, a number of technical personnel have been moved from Comstar to MGTS. The MGTS headcount is being steadily reduced from the more than 15,600 employees at the beginning of 2007 to 13,400 at the year end. The tactical goal is to increase the number of lines per employee from 290 in 2007 up to 900 by the end of the digitalization process. Financial Highlights [TABLE OMITTED] MGTS generated 42% year on year revenue growth in the fourth quarter, which largely reflected the regulated residential voice tariff increases introduced by the Federal Tariff Service in February 2007, as well as higher revenues from operators due to the increase in the fees paid by other operators to use the MGTS network. 51% of MGTS residential subscribers were on the 'unlimited' tariff plan for regulated voice services by the end of 2007, with 28% on the 'per minute' plan, and the remaining 22% electing the 'combined' plan. The time limit on the combined plan was increased to 450 minutes at the beginning of December, whilst the price for the unlimited monthly tariff plan was reduced by 10% from 380 Rubles to 345 Rubles9 with effect from February 2008, following changes made by the Regulator regulator, n the mechanical part of a gas delivery system that controls gas pressure that allows a manageable flow of drug vapor to escape. regulator see reducing valve. in December 2007. The introduction of CPP from July 2006 also continued to positively impact residential subscriber revenues by contributing US$ 19.9 million of revenue in the fourth quarter, compared to US$ 12.9 million for the same period of 2006. Residential CPP traffic levels increased by 14% quarter on quarter from 339 million minutes to 386 million minutes. Corporate voice revenues were up 15% year on year in the quarter, with corporate CPP traffic increasing by 14% quarter on quarter from 147 million minutes to 167 million minutes and contributing US$ 10.2 million of revenue in the quarter, compared to US$ 5.4 million for the same period of 2006. Revenue from Operators was up 49% year on year in the quarter, which reflected the 55% increase in access node and trunk rental revenues. Long-distance revenues increased by 26% year on year in the quarter as a result of the rise in per minute charges from February 1, 2007 and the introduction of the compensation surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. . MGTS therefore reported a 74% year on year increase in fourth quarter OIBDA, and an increased OIBDA margin of 49.4%, which compared to 40.3% in the fourth quarter of 2006 and 50.2% in the third quarter of 2007. The quarter on quarter decline in the OIBDA margin is due to the compensation received from the Federal Budget in the third quarter. When excluding this non-comparable item from the third quarter results, the OIBDA margin increased from 48.5% in the third quarter. 2. Alternative Segment in Moscow (Comstar & Comstar--Direct) Comstar owns a group of leading alternative fixed-line telecommunications operators in Moscow, which provide broadband internet and multi-service solutions to residential and corporate subscribers in Moscow and the Moscow region. This segment includes the Comstar-Direct and Comstar-Moscow operations, which were previously reported as separate business segments, but have been merged with effect from the fourth quarter of 2007 in line with the Group's operational reorganization. Operating Highlights [TABLE OMITTED] The number of residential subscribers increased by 37% year on year to 660,000 at the end of 2007 following the rapid growth in the residential broadband subscriber base. The corporate subscriber base was stable year on year at 35,000, despite the competitive disadvantage under which Comstar operated by providing long-distance services as an agent to licensed DLD/ILD operators, and therefore having to change the contracts with all of its corporate subscribers. The major achievement in this respect occurred after the end of the reporting period in February 2008 when Comstar completed the construction of its own domestic and international long-distance network. The US$ 14 million investment to build out the network will enable Comstar to strengthen its corporate client service offering by providing its own long-distance services. A fixed exchange rate of 28.7 Russian Rubles per US dollar was established during the year, in order to offset the fact that a large proportion of services provided to corporate and high-income clients are priced in US dollars following earlier periods of high inflation in Russia. Comstar is also developing its alternative fixed-line business in the priority region around Moscow City. The Moscow Region is the fastest growing regional telecommunications market in Russia and there is a clear overlap in the existing and potential customer base. The region has a population of 6.6 million people and 2.5 million residential households. Fixed line telephony penetration is growing fast but remains low at 26%, with broadband penetration at only 6%. New property development and rising personal income levels are the key drivers of growth, and provide the impetus for the rapid emergence of 'Triple-Play' residential service offerings. Comstar had a 2.7% share of the estimated US$ 378 million combined traditional and alternative fixed-line telecommunications market (in terms of revenues) in the Moscow suburbs by the end of 2007. Comstar intends to significantly grow this market share. Comstar had already established points of presence in 26 out of the 36 regional districts by the end of 2007, and had also implemented a major marketing program to increase the number of subscribers using wireless broadband High-speed wireless transmission of data. What is "high" speed is always a changing number. Wireless systems are typically slower than land-based, wireline networks. In the past, wireless broadband started at 250 Kbps, whereas land-based broadband was generally considered to start at T1 technology as an interim solution whilst the network is built. Comstar expects to be present in all districts by the end of 2008. Comstar is also in the process of merging all of its Moscow and Moscow Region operating companies operating company A business that engages in transactions with outsiders. into a single entity. Contrast-Telecom, Telmos and MTU-Inform were integrated during 2007, and Golden Line and Port Telecom will be integrated in the first half of 2008. Financial Highlights [TABLE OMITTED] The combined value of the fixed-line telecommunications market in Moscow, including both traditional and alternative services, was estimated at US$ 5.210 billion in 2007. Comstar's 2007 revenues represented an 8% share of this market, or 29% when including MGTS, which makes the Group the clear market leader. Comstar's Alternative Segment revenues in Moscow increased by 34% year on year in the fourth quarter, due primarily to the rapid increase in the broadband residential subscriber base, growing CPP traffic and the appreciation of the Russian Ruble against the US dollar. CPP revenues from calls to mobile users contributed US$ 4.8 million of corporate and residential voice revenue in the quarter, compared to approximately US$ 4.2 million in the third quarter of 2007 and US$ 1.8 million in the fourth quarter of 2006. Segment OIBDA increased by 11% year on year following the changes in the management and organizational structure. The OIBDA margin decreased to 13% from 16% in the fourth quarter of 2006, primarily as a result of the 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 the existing stock option plan from equity to liability, which resulted in an approximately US$ 6.2 million catch-up adjustment to fair value of the non-vested options accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. to date, which was recorded in the fourth quarter of 2007. 3. Alternative segment in the regions & CIS (Comstar) Comstar's regional and international business comprises the Group's operations in the Russian regions (5 federal regions: Central, North-West, South, Volga and Ural), and in Ukraine and Armenia. Comstar completed the acquisition of 100% of DTN, the largest alternative fixed line telecommunications company See telecom company. in Russia and operating in the Southern Federal District, for a total cash consideration of RUB 4.1 billion (approximately US$ 167.4 million) in November 2007. Comstar also completed the acquisition of 87.5% of RTC, an alternative fixed line telecommunications operator in the Khanty-Mansi region, for a total cash consideration of US$ 21.0 million in December 2007. Both businesses significantly enhance Comstar's presence in key regions of Russia, which are showing strong growth and increasing penetration levels. Operating Highlights [TABLE OMITTED] Comstar is developing its alternative business in Russia's regional markets and the CIS as an integral part of the overall corporate development strategy. Internet and broadband penetration levels outside Moscow are low but increasing rapidly, underlining un·der·lin·ing n. 1. The act of drawing a line under; underscoring. 2. Emphasis or stress, as in instruction or argument. the long-term attraction of the regional markets. The share of dial-up access hot Dial-up access is a form of Internet access via telephone line. The client uses a modem connected to a computer and a telephone line to dial into an Internet service provider's (ISP) node to establish a modem-to-modem link, which is then routed to the Internet. is simultaneously expected to fall from 28% at the end of 2007 to 15% by the end of 2010. Comstar's broadband strategy also extends to the Russian regions, where Comstar had 43,400 broadband users at the end of 2007. The Pay-TV subscriber base reached 102,200 subscribers at the end of the year following the acquisition of DTN. Comstar has 68,800 dial-up subscribers outside Moscow. A new branch was opened in St. Petersburg in August, in order to boost the market share of Comstar's existing Astelit subsidiary, whilst Comstar also acquired 100% of the shares of alternative operator Sochitelecomservice, located in 2014 Olympics host city Sochi in the Krasnodar Region, for US$ 0.75 million in August. Sochitelecomservice and DTN will subsequently be integrated into Comstar's Southern regional Branch. Alongside the organic development of the existing regional operations, Comstar is also expanding into target markets through the acquisition of market-leading Competitive Local Exchange Carriers, with a particular focus on the Southern, Volga and Ural Federal Districts. The acquisitions of DTN and RTC in the fourth quarter demonstrate this commitment, and significantly add to Comstar's regional footprint. Comstar also expanded its license coverage in 2007 by obtaining licenses for IP Voice Data transmission, including WiMAX services, in the twenty largest regions in Russia in January 2007. Comstar continued to invest in regional network infrastructure during 2007. Comstar's Saratov branch launched an NGN (Next Generation Networks) An umbrella term for mixed voice and data networks running over the IP protocol. See IP Multimedia Subsystem. network in September, with 22 access points covering the whole of the city, as well as a telematics Originally coined to mean the convergence of telecommunications and information processing, the term later evolved to refer to automation in automobiles. GPS navigation, integrated hands-free cellphones, wireless communications and automatic driving assistance systems all come under the access network based on ADSL2+ technology with 37 access points and 5,000 ports. Comstar's Tyumenneftegazsvyaz (TNGS TNGS Training Subject ) subsidiary, which is the leading CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) in the Tyumen Region, announced the completion of the first phase build-out of its microwave backbone infrastructure in the Khanty-Mansi Autonomous Region, and the neighbouring Yamalo-Nenets Autonomous Region, after the end of the period in January 2008. Comstar plans to increase the number of broadband access points by 10,000 ports in 2008. Comstar is in the process of integrating its separate operating entities into a single subsidiary in Ukraine. Comstar also launched 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. services in Odessa after the end of the period in March 2008. Comstar announced after the end of the period in January 2008 that it had begun building a wireless broadband network in Armenia, which is expected to be completed in late 2008. Comstar initially plans to build 24 base stations and use leased fiber-optic lines, as well as radio relay channels In information theory, a relay channel is a probability model on the communication between a sender and a receiver aided by one or more intermediate relay nodes. It is a combination of the broadcast channel (from sender to relays and receiver) and multiple access channel (from sender and and bridges. The WiMAX network will be used as a base to provide voice services, high-speed internet access, and multi-media content delivery to residential and corporate subscribers. Financial Highlights [TABLE OMITTED] Revenues increased by almost 6 times year on year in the fourth quarter, primarily as a result of the two largest acquisitions of controlling stakes in Comstar's history, with the subsequent recognition of the full year results of the two operations in the fourth quarter. Both acquired companies have higher OIBDA margins than Comstar's existing operations outside Moscow, the majority of which are in the early stages of development. DTN increased its revenues by 60% year on year to US$ 60.3 million and reported on OIBDA margin of 51.5% in 2007. RTC had revenues of US$ 20.3 million, up 26% year on year, with an OIBDA margin of 22.4% in 2007. As a result of the consolidation of these assets and ongoing restructuring and conversion of subsidiaries into branches Comstar's OIBDA margin outside Moscow significantly improved year on year to 31.5%, and the combined operations For the department of the British War Office during World War II, see . In the military, combined operations are operations conducted by forces of two or more allied nations acting together for the accomplishment of a single mission. See also
FINANCIAL REVIEW Group net cash provided by operations increased by 46% year on year to US$ 153.4 million in the fourth quarter, when excluding the stock bonus awards in the fourth quarter of 2006, and was up from US$ 133.5 million in the third quarter. Net cash used in investing activities increased to US$ 714.4 million in the fourth quarter in line with higher capital expenditure levels, as well as the acquisition of the DTN and RTC businesses and the US$ 424.9 million purchase of short term investments. Group capital expenditure increased by 35% year on year and by 103% quarter on quarter to US$ 135.8 million, and primarily comprised the ongoing digitalization process, the development of Next Generation Network infrastructure at MGTS, the modernization of the "last mile", and the development of DLD/ILD network. Total capital expenditure for the twelve month period amounted to US$ 345.4 million, despite the development of Comstar's own long-distance network and the modernization of the "last mile" access in Moscow. Net cash from financing activities totaled US$ 471.7 million in the quarter, and primarily comprised the US$ 322.2 million in proceeds from the exercise of the call option in December 2007, and the US$ 158.4 million of monies drawn down from the existing credit facility provided by Sberbank. The Group's cash and cash equivalents increased in the quarter to US$ 179.8 million, whilst total Group borrowings, including capital lease obligations, increased to US$ 1,011.3 million. The Group's net debt position therefore increased to US$ 831.5 million, but the Group's total debt to twelve month trailing OIBDA ratio11 continued to decline to 1.4 times, compared to 1.7 times as at September 30, 2007. Comstar accounts for its 25% plus one share holding in Svyazinvest at cost on the Group's balance sheet. The investment has already proved highly successful, with the value of the stake, based on the combined market value of the listed Svyazinvest subsidiaries, having risen by 51% from US$ 1.6 billion at the date of purchase on December 11, 2006 to US$ 2.4 billion at the end of 2007. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD On January 24, 2008 Comstar announced that it signed an agreement with Cisco for the delivery of equipment to build NGN multi-service network in Ukraine. Kvazar Mikro, a subsidiary of SITRONICS, will act as a subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. for the installation and launch of the network. On January 29, 2008 Comstar and SKYLINK, mobile broadband Description Mobile Broadband is a type of wireless internet access that differs from Wi-Fi. Mobile Broadband is the name used to describe the 3G services which are made possible by HSDPA and HSUPA, the latest technologies on the W-CDMA evolutionary path. Internet and voice services provider in 31 constituent entities of the Russian Federation Russian Federation: see Russia. , signed agreements to join efforts for services and products implementation in Moscow. Under the agreements, at the first phase of cooperation the companies will promote each other's services: Moscow sales offices of both companies will offer both SKYLINK and Stream full package products. The second phase implies introduction of converged services, developing of more flexible charging and reward programs for subscribers of Comstar and SKYLINK. On January 30, 2008 Comstar announced that Tyumenneftegazsvyaz JSC JSC Johnson Space Center (NASA) JSC Joint Stock Company JSC Java Studio Creator JSC Joint Steering Committee JSC Joint Standing Committee JSC Journal of Symbolic Computation JSC Joint Scientific Committee (TNGS), the leading competitive operator in the Tyumen Region, a member of COMSTAR-UTS Group, completed the first phase of the microwave backbone (MB) construction in the Khanty-Mansiysk Autonomous Okrug For the village in Croatia, see . Okrug (Bulgarian: окръг; Serbian and Russian: о́круг; Ukrainian: (KMAO). The backbone is expected to go across the KMAO and the Yamalo-Nenets Autonomous Okrug Yamalo-Nenets Autonomous Okrug (Russian: Яма́ло-Нене́цкий автоно́мный (YNAO). On January 31, 2008 Comstar announced that it started building a wireless broadband network based on the 802.16e standard WiMAX technology in the Republic of Armenia. The project is expected to be completed in the second part of 2008. On February 14, 2008 Comstar announced that Comstar-Direct has soft-launched the TV-on-Demand service. On February 27, 2008 - Comstar announced that Comstar-Direct soft-launched the High-Definition Television high-definition television (HDTV) Any system producing significantly greater picture resolution than that of the ordinary 525-line (625-line in Europe) television screen. Conventional television transmits signals in analog form. ("HDTV") service. On February 28, 2008 Comstar announced that it completed building its inter-city and international network. The total volume of capital investments in the project amounted to approximately US$ 14 million. Comstar applied to the Ministry for Information Technologies and Communications of the Russian Federation to receive access codes for providing long distance services. On February 29, 2008 Comstar announced that its Board of Directors adopted the Comstar Group strategy on technology, finance and marketing. On March 3, 2008 Comstar announced that COMSTAR-Ukraine is the first to have launched an interactive digital TV (IP-TV) service in Odessa. On March 28, 2008 Comstar announced that it completed the design phase of its launch of a telecommunications and multimedia FTTB FTTB Fiber To The Building FTTB Fiber To The Business (NEC) FTTB For The Time Being FTTB Fiber to the Block network in 2014 Olympic host city Sochi in the south of Russia. On March 31, 2008 Comstar announced that its Board of Directors approved the introduction of a long-term incentive programme for the Company's management team. The programme is set to run from April 1, 2008 with a two year vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. The programme participants are defined by the Board of Directors every two years starting from the launch of the programme. A total of 151 managers will participate in the scheme during 2008-2010, including the Company's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and a wide range of parent and subsidiary company management team members. Comstar was a communication service provider for the summit between the Presidents of Russia and the USA in Sochi on April 6, 2008. Following the Extraordinary General Meeting of its Shareholders on April 14, 2008, the new Board of Directors of the Company was elected. The shareholders approved the new Board of Directors as follows: Anatoly Akimenko, Vice President of Access Industries, Anna Goldin, Vice President for Legal Issues and Head of Legal Group of Sistema, Sergey Drozdov, Senior Vice President, Head of Property Group of Sistema, Dietmar Kuhnt, Member of Supervisory Boards Supervisory board The board of directors that represents stakeholders in the governance of the corporation. of Allianz-Versicherungs-AG, BDO BDO Big Day Out (Australian music festival) BDO Banco de Oro (Philippines) BDO 1,4-Butanediol BDO British Darts Organisation BDO Block Development Officer BDO Big Dumb Object Deutsche Warentreuhand AG, Dresdner Bank Dresdner Bank AG is one of Germany's largest banking corporations and is based in Frankfurt. History 19th century Dresdner Bank was established on 12 November 1872 through the conversion of financial institution Michael Kaskel. AG, GEA Group GEA (FWB: G1AG) The Global Engineering Alliance AG (from 2000 to 2005: mg technologies AG, before 2000: Metallgesellschaft) is a company based in Bochum, Germany (until 2005: Frankfurt/Main). It specializes in process engineering, plant engineering, and mechanical engineering. AG, Hapag Lloyd AG, Hochtief AG and TUI AG TUI AG (Touristik Union International) (ISIN: DE000TUAG000) is a German based company. Until 2001 it was an industrial and transportation company named Preussag AG, which in the mid-1990s decided to reinvent itself as a tourism, shipping, and logistics company. ; Independent Director of Comstar UTS (Universal Timesharing System) Amdahl's version of Unix System V. Release 4.0 is POSIX compliant. , Andrey Matyukhov, Director of Portfolio Strategy Department of Strategy and Development Division of Sistema, Sergey Pridantsev, President and CEO of Comstar UTS, Yngve Redling, Chairman of the Swedish-Russian bilateral working group for Information Technology, Independent Director of Comstar UTS, Vitaly Savelyev, First Vice President, Head of Telecommunications Asset Management Division of Sistema, Dmitry Ustinov, Head of Financial Department of Finance and Investments Division of Sistema. Mr. Savelyev was elected as Chairman of Comstar's Board of Directors. On April 15 2008 Comstar accomplished re-organization of 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) Golden Line in the form of legal merger with COMSTAR-UTS OJSC. 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 CET abbr. Central European Time CET Central European Time CET n abbr (= Central European Time) → hora de Europa central CET abbr ) / 4.00 pm (Moscow Time Moscow Time (Russian: Моско́вское вре́мя) is the time zone for the city of Moscow, Russia and most of western Russia, including Saint Petersburg. ). Participants may access the call by dialling the following numbers: UK / International: +44 20 8609 3823 US: +1 866 388 1926 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 8609 0289 US: +1 866 676 5865 PIN: 211387# The replay facility will also be made available at http://www.comstar-uts.com/en/for_investors/finresults/2007/ in due course. For further information, please visit www.comstar-uts.com 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 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 97% of Moscow households. The Company also offers communications services in five Russian regions, Armenia and Ukraine. Comstar had 695,000 broadband subscribers in Moscow. Comstar had 3.6 million residential subscribers in Moscow, including 651,000 residential broadband internet subscribers in Moscow, 102,000 corporate subscribers in Moscow, and approximately 448,000 regional and international subscribers including 33,000 residential broadband internet subscribers and 102,000 residential pay-TV subscribers, at the end of 2007. Comstar generated US$ 1,562.4 million of revenues and a 42.5% OIBDA margin for the twelve months ended December 31, 2007. Comstar's Global Depositary Receipts 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 are listed 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. (ticker ticker An automated quotation system on which security transactions are reported after they occur on an exchange floor. Even though the newer systems are electronic and no longer actually tick, the name of the old mechanical device has stuck. : CMST). 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 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] ADJUSTED PRE-TAX INCOME Pre-tax income before non-recurring stock bonus, impairment of long-term investments and the non-cash impact of the revaluation of the call and put option is pre-tax income adjusted for the effect of stock bonus, impairment of long-term investments and the change in the fair value of the derivative financial instrument (call and put option). This measure is included in the results statement in order to provide additional information regarding the Group's underlying performance. Stock bonus and impairment of long-term investments have non-recurring nature. While the revaluation of derivative financial instruments is included in the determination of pre-tax income under US GAAP, this item only partially affects the Group's future cash flows and is not under the control of the management, as the fair value of the call and put option is dependant primarily on the market price of Comstar UTS GDRs. [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] (*) Amounts for the year ended December 31, 2006 were derived from the audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge of Comstar UTS as of December 31, 2006, 2005 and 2004 and for the years then ended and should be read in conjunction with these statements. 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 the audited consolidated financial statements of Comstar UTS as of December 31, 2006, 2005 and 2004 and for the years then ended and should be read in conjunction with these statements. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED BALANCE SHEETS (continued) [TABLE OMITTED] (*) Amounts as of December 31, 2006 were derived from the audited consolidated financial statements of Comstar UTS as of December 31, 2006, 2005 and 2004 and for the years then ended and should be read in conjunction with these statements. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS [TABLE OMITTED] (*) Amounts for the year ended December 31, 2006 were derived from the audited consolidated financial statements of Comstar UTS as of December 31, 2006, 2005 and 2004 and for the years then ended and should be read in conjunction with these statements. 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] (*) Amounts for the year ended December 31, 2006 were derived from the audited consolidated financial statements of Comstar UTS as of December 31, 2006, 2005 and 2004 and for the years then ended and should be read in conjunction with these statements. Certain prior year amounts have been reclassified to conform to the 2007 presentation. Attachment C "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED PRO FORMA As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma (*) INCOME STATEMENTS [TABLE OMITTED] (*) Unaudited consolidated pro forma income statements are prepared on the basis of consolidation of the income statements of the acquired companies from the date of acquisition selected for accounting purposes and not from the beginning of the year (current policy of Comstar). 1 Cash CAPEX includes cash spent on acquisition 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. . 2 Newly acquired subsidiaries are consolidated from the beginning of the year in accordance with Comstar's accounting policy. Pro-forma information is adjusted to include the results of the acquired subsidiaries from the date of acquisition - see Attachment C to this statement. 3 MGTS received payments from the Federal Budget 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. MGTS does not now provide such discounts and receives full tariffs from virtually all of its subscribers. 4 The average exchange rate for the period was RuR 24.6499 per US$ 1 in the fourth quarter of 2007; RuR 26.5905 per US$ 1 in the fourth quarter of 2006; RuR 25.5157 per US$ 1 in the third quarter of 2007; RuR 25.577 per US$ 1 for the twelve months of 2007; and RuR 27.1852 per US$ 1 for the twelve months of 2006. 5 Operating expenses, excluding depreciation and amortisation and stock bonus, net 6 Please refer to Attachment A. 7 Penetration is calculated as % of households - source: Company data, Pyramid Research, J'son & Partners 8 The quarter on quarter decline in installed capacity is attributable to the ongoing digitalization of the network and, therefore, the temporary simultaneous existence of analogue and digital lines at the end of the fourth quarter of 2006 and third quarter of 2007. 9 Including 18% VAT, US$ 15.6 and US$ 14.1, respectively, using the Bank of Russia exchange rate as at February 1, 2008 10 Source: Direct Info 11 Calculated as total debt, as at the balance sheet date, divided by OIBDA for the twelve months preceding the balance sheet date. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion