Comstar UTS: Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2006.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 combined telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. 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, 2006. FULL YEAR HIGHLIGHTS * Consolidated revenues up 23% year on year to US$ 1.12 billion * Group OIBDA OIBDA Operating Income Before Depreciation & Amortization (1) before non-recurring US$ 62.1 million stock bonus awards up 19% year on year to US$ 428.6 million with margin of 38.3% * 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 25% year on year to US$ 333.7 million before US$ 62.1 million stock bonus awards * US$ 975.5 million raised through successful initial public offering and listing on 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. * US$ 181.4 million invested to increase shareholding in MGTS MGTS Message Generator Traffic Simulator MGTS Message Generation Test System from 46% to 56% * US$ 1.3 billion of cash invested in landmark acquisition of 25% plus 1 share stake in state telecommunications operator Svyazinvest FOURTH QUARTER HIGHLIGHTS * Consolidated revenues up 8% year on year to US$ 292.1 million * Group OIBDA before the stock bonus awards up 9% year on year to US$ 97.4 million with margin of 33.3% * Cash flow from operations up 72% year on year to US$ 91.8 million before the stock bonus awards * US$ 33.4 million adverse impact on net income following 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 issued as part of Svyazinvest share acquisition Eric Franke, Chief Executive Officer, commented: "2006 was a year of significant and far reaching change for the Group. The year started with the raising of nearly one billion US dollars through our 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. and ended with the strategic acquisition of a 25 per cent plus one share stake in state telecommunications investment company Svyazinvest. During 2006 Comstar was successfully transformed from a loose collection of related but un-integrated telecommunications companies See telecom company. and brands. The re-branding program has been successfully accomplished, and the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of Comstar Moscow has now been largely completed. We have reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. the Group from the top down and put in place a new management structure. Despite the regulatory changes we managed to show healthy revenue and OIBDA growth. Our efforts to optimize optimize - optimisation the Group's operations have laid the foundation for increasing profitability moving forward, despite the wide ranging regulatory changes to which we have successfully adopted." Nikolay Tokarev, Chief Financial Officer, added: "The US$ 976 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from our successful IPO at the beginning of the year, combined with substantially increased cash flow from operations, enabled us to invest over US$ 300 million in our existing operations, and to spend over US$ 1.5 billion on key scale acquisitions in existing and new markets, as well as increased shareholdings in core assets. The Svyazinvest acquisition has already created significant value for Comstar shareholders when acquisition cost is measured against 25% of the total of the current market values of Svyazinvest' stakes in its publicly listed subsidiaries. "The fourth quarter results were adversely impacted by the exceptional US$ 62.1 million stock bonus awarded under the approved by shareholders in 2006 share option program, as well as by a 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. to net income of US$ 33.4 million arising from the revaluation of the put and call option issued in connection with the acquisition of the stake in Svyazinvest. Excluding these items, Comstar delivered solid operating performance. With 23% growth to over 1.1 billion dollars in revenues, and with OIBDA margin before stock award of over 38%, Comstar is among the largest and fastest growing public fixed-line telecoms operators in Russia. It is also the most profitable among them." FINANCIAL SUMMARY The following summary has been restated to exclude two principal non comparable items that impacted results of the fourth quarter of 2006. The first was the non-recurring US$ 62.1 million stock bonus awards, which impacted the Group's OIBDA for both the quarter and the full year. The second item was a non-cash charge of US$ 60.0 million, which arose from the revaluation of the put and call option issued in connection with the acquisition of a 25% plus one share stake in State Telecommunications Investment Company 'Svyazinvest' on December 11, 2006. The revaluation adversely impacted the Group's net income with a charge of US$ 60.0 million and positively impacted the minority interest line by US$ 26.6 million for both the quarter and the year to date. [TABLE OMITTED] OPERATING REVIEW The Group generated 23% year on year revenue growth to over US$ 1.12 billion in 2006, which primarily reflected the full year impact of the October 2005 tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic increases at MGTS, the growth in data and Internet offerings to corporate customers, the introduction of Calling Party Pays ("CPP cpp - C preprocessor. "), the growth in residential broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). revenues, and the reimbursements received from the Federal Budget. The Group's fourth quarter year on year organic growth rate, when excluding the regional acquisitions made in 2005 and 2006, was 16%. The reported year on year growth rate of 8% reflected the impact of the US$ 33.8 million revenue contribution from newly acquired operations in 2005 (TNGS TNGS Training Subject , Overta, Conversiya Svyaz, CTK CTK Christ The King (school; various locations) CTK Ceská Tisková Kancelár (Czech News Agency) CTK Composite Tool Kit CTK Configuration Toolkit CTK Chance to Kill (video games) Contrast Telecom, Unitel) and the US$ 11.4 million revenue contribution from newly acquired businesses in 2006 (DG Tel and Technologic Systems in Ukraine, Cornet and Callnet in Armenia, and Astelit). With the exception of Astelit, which was acquired in June 2006, all of the other operations were acquired and consolidated in the fourth quarter of each year and, in each case, the entire full year results were therefore accounted for in the fourth quarter. Fourth quarter consolidated revenues were only up marginally compared to the third quarter of 2006, due to the higher proportion of long-distance revenue earned and reported 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 new regulations in the final quarter of the year, as well as the US$ 8.0 million of reimbursements received from the Federal budget in the third quarter. Net revenues for the Traditional segment grew by 29% year on year in 2006 and by 21% in the fourth quarter, which was primarily due to the increase in regulated voice tariffs This is a list of tariffs and trade legislation:
tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. Comstar for discounts provided to certain categories of low income residential subscribers, including pensioners and military veterans, under the terms of pre-2005 legislation. Alternative segment net revenues were up 15% year on year in 2006, which reflected a 54% increase in total residential broadband subscriber revenues to US$ 77.5 million and a 30% increase in corporate data transmission and Internet access See how to access the Internet. service revenues. Total residential broadband subscriber revenues were also up 26% year on year to US$ 20.6 million in the fourth quarter, with a 41% increase in corporate internet access and data transmission service revenues. The year on year comparison of total segment revenues in the fourth quarter is dislocated dis·lo·cate tr.v. dis·lo·cat·ed, dis·lo·cat·ing, dis·lo·cates 1. To put out of usual or proper place, position, or relationship. 2. by the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. recognition of the entire years' revenues of those regional operators acquired in the fourth quarter of 2005. Comstar's regional operations therefore generated a 33% year on year increase in revenues to US$ 49.8 million for the full year, following the acquisition of the Armenian and Ukrainian operations in the fourth quarter of 2006. Fourth quarter 2006 regional revenues were up 48% when compared to the third quarter, but down 44% year on year due to the impact of the new acquisitions. The 2006 top line results were also adversely affected by the change in the long distance calling regime introduced from January 1, 2006. If the Group had continued to recognize revenues collected from customers for long distance calling on behalf of licensed long distance providers as its own revenues, alternative segment revenues would have been up 19% year on year in 2006. Operating costs operating costs npl → gastos mpl operacionales excluding depreciation and amortization and also excluding the stock bonus award increased by 26% year on year to US$ 699.2 million in 2006, which principally comprised the US$ 53.6 million increase in network traffic and capacity costs driven by the introduction of CPP and changes in the interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. regime, the US$ 44.4 million of growth in personnel costs associated with inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. pressures on labour costs in traditional segment, establishment of the corporate centre, restructuring of the alternative segment and adding personnel of newly acquired entities. Total employee costs declined as a percentage of sales from 26% to 25% in 2006, when excluding the stock bonus awards. Comstar made a provision of US$ 5.5 million in the fourth quarter of 2006 following the outcome of a legal dispute with Rostelecom regarding call charges for certain type of the traffic. MGTS had filed claims in the Moscow Arbitration Court against Rostelecom regarding disputed payments for traffic to mobile networks generated by MGTS subscribers and transferred via Rostelecom. The disputed revenues, which were recorded by MGTS as receivable from Rostelecom, amounted to US$ 5.5 million for the first half of 2006. No revenue was recognized in relation to disputed traffic in the second half of the year. The ongoing workforce restructuring process at Comstar Moscow resulted in a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of approximately US$ 3.0 million in the fourth quarter, which was in line with the Group's previous guidance. This restructuring is expected to result in approximately US$ 8.0 million of annual cost savings from 2007 onwards on·ward adj. Moving or tending forward. adv. also on·wards In a direction or toward a position that is ahead in space or time; forward. Adv. 1. . The fourth quarter results also included US$ 0.7 million of expenses arising for the first time on the stock options granted to senior management and members of the Board of Directors on November 15, 2006. The costs for the stock options granted to date will recur at approximately US$ 1.3 million per quarter until November 2008, when the options will be fully vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) . The options have been classified as equity in the Group's balance sheet and the performance of Comstar's share price will not therefore affect the costs to be incurred for the options granted to date. Full year OIBDA was positively impacted by a net gain of US$ 7.6 million on the disposal of an MGTS building in the second quarter of 2006, while the prior year OIBDA result included US$ 5.8 million of insurance monies received in 2005. Excluding the non-recurring US$ 62.1 million stock bonuses awarded to members of the Board of Directors during the fourth quarter, Comstar reported a 19% year on year increase in OIBDA to US$ 428.6 million in 2006 and the full year OIBDA margin of 38.3%, which compares with a full year margin of 39.5% for 2005. OIBDA before the stock bonus award for the fourth quarter was up 9% year on year to US$ 97.4 million, with an OIBDA margin of 33.3%, which was above the 32.9% reported for the fourth quarter of 2005. The 39.0% OIBDA margin reported for the third quarter of 2006 included the benefit of the compensation received from the Federal budget, and did not include the impact of the relatively lower margin results for the Armenian and Ukrainian operations acquired in the fourth quarter. The Group's depreciation and amortization charges increased year on year from US$ 21.6 million to US$ 39.7 million in the fourth quarter and from US$ 90.4 million to US$ 130.9 million for the full year. The increase is primarily attributable to the increased level of capital expenditure in 2006; the previously announced revision of the estimated remaining useful life of MGTS 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". equipment; the depreciation and amortization charges arising from the purchase of the increased shareholding in MGTS; and the currency translation effect of a weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. US dollar on MGTS's Rouble ROUBLE. The name of a coin. The rouble of Russia, as money of account, is deemed and taken at the custom-house, to be of the value of seventy-five cents. Act March 3, 1843. denominated depreciation and
amortization charges.
Net interest expense amounted to US$ 0.6 million (compared to a net interest expense of US$ 3.5 million) in the fourth quarter of 2006, and a gain of US$ 21.4 million (compared to an interest expense of US$ 10.3 million) for the full year of 2006. Interest income declined in the fourth quarter in line with the use of the Group's deposits to acquire the stake in Svyazinvest, and interest expense rose in line with the use of the newly arranged US$ 675.0 million loan. Comstar also reported a US$ 4.9 million foreign exchange rate gain in the fourth quarter, and a gain of US$ 19.9 million for the full year, as a result of the increasing proportion of the Group's deposits that were held in Russian Roubles as the Rouble significantly appreciated against the US dollar. As part of the purchase price consideration for the 25% plus 1 share of Svyazinvest, MGTS Finance S.A., a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of MGTS, issued a put and call option to the seller over 46,232,000 Comstar shares owned by MGTS Finance S.A. The optioned shares represent 11.06% of Comstar's total issued shares as at December 31, 2006. The fair value of the put and call option was estimated to be US$ 90.0 million at the time of acquisition on December 11, 2006. The Comstar share price rose by 20% between the acquisition date and the end of the reporting period and the estimated value of the option therefore increased to US$ 150.0 million. The resulting US$ 60.0 million increase in the value of the liability was therefore reported as a non-cash charge to the Group's income statement. The impact of the charge on the Group's net income was however reduced to US$ 33.4 million by the 44% minority interest in the charge. The liability under this put and call contract will continue to be revalued on a quarterly basis and will result in the recognition of non-cash gains or losses until such times as the option is exercised or expires. Group income tax charges remained at a relatively stable level through the year and amounted to US$ 14.6 million (US$ 9.0 million) in the fourth quarter and US$ 72.4 million (US$ 59.3 million) for the full year. The effective tax rate increased substantially in the fourth quarter due to the fact that the stock bonus and stock option awards, and the option revaluation charge, are non tax-deductible. The effective tax rate for the fourth quarter of 2005 was also lower due to the reversal of tax contingency contingency n. an event that might not occur. provisions, which resulted in an approximately US$ 5.0 million reduction in income tax expense. The Group reported a more than tripling in income from affiliates to US$ 1.2 in the fourth quarter and US$ 3.3 million for the full year, as Comstar benefited from its 45% participation in the earnings of Metrocom in St Petersburg. Comstar is yet to determine the most appropriate accounting treatment of the Svyazinvest shareholding, and the shares of Svyazinvest were therefore carried at cost as at December 31, 2006. The full year 2006 net income, excluding the effects of the stock bonus awards and the revaluation of the put and call option, increased by 68% year on year to US$ 178.1 million from US$ 105.9 million. The fourth quarter net income before non-comparable items increased by 47% year on year from US$ 22.1 million to US$ 32.5 million. The total number of issued and outstanding Comstar shares increased from 221,198,360 at the end of 2005 to 349,451,599 at the end of 2006, and the Group therefore reported US$ 0.24 of basic earnings per share and US$ 0.21 of diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the full year. Comstar bought back 10,746,761 of its own shares for US$ 73.9 million between October and December 2006 and subsequently awarded 8,776,757 of these shares as stock bonuses to two members of the Board of Directors. OUTLOOK Comstar expects to generate organic revenue growth in line with 2006 result excluding the effect of any possible acquisitions. The Group's revenue growth is being driven by increasing MGTS tariffs; increase in revenues from sales of data and internet to corporate customers, the positive impact of CPP on both corporate and residential voice service revenues; and the US$ 36.3 million3 of anticipated reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. payments from the Federal Budget. The 2007 like for like OIBDA margin is expected to improve from the adjusted 2006 level, before the impact of any further regulatory changes or acquisitions. The margin is expected to be positively affected by the new MGTS tariffs; the ongoing cost optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. program in Moscow; but will also be adversely impacted by regulatory changes, namely the lower margin interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. regime and the introduction of CPP. Comstar's capital expenditure is expected to total no more than US$ 350.0 million in 2007, and is expected to gradually decrease year on year as a percentage of revenues in 2007 and moving forward. Alternative Segment Revenue Breakdown - Moscow, Russia Regions & CIS [TABLE OMITTED] Net revenues for the Alternative segment were up 15% year on year to US$ 425.2 million in 2006, with revenues from residential subscribers growing by 28% year on year to US$ 90.8 million. The growth was driven by a 44% increase in the broadband subscriber base over the year and a 7% increase in the 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) )4 from US$ 18.82 in 2005 to US$ 20.17 in 2006. ARPL was up marginally year on year in the fourth quarter from US$ 19.21 to US$ 19.48, and from US$ 19.21 in the third quarter of 2006. This development reflected the balance of lower ARPL new subscribers due to the aggressive subscriber acquisition campaigns, and the increasing proportion of higher revenue 'double-play' subscribers as a percentage of the total broadband customer base. Broadband revenues accounted for 84% (US$ 76.0 million) of total residential revenues in 2006, compared to 70% (US$ 49.5 million) in 2005. The Group's dial-up internet access See dial-up. subscriber base and revenues continued to decline as broadband penetration increased and Comstar successfully up sold subscribers to broadband subscriptions. Revenues generated from residential subscribers for calls to other (primarily, mobile) operators, under the newly introduced CPP Rule, contributed approximately US$ 0.1 million to residential voice revenues during the fourth quarter and approximately US$ 0.3 million for the full year. Revenues from corporate subscribers were up 11% year on year to US$ 163.6 million in 2006 following a 30% growth in the Group's data transmission and internet access revenues, which is the principal driver of Comstar's corporate business. Similarly, revenues were up 13% in the fourth quarter to US$ 44.0 million when compared to the third quarter of 2006. Corporate voice revenues declined year on year but were stable quarter on quarter, primarily due to the change in the long-distance traffic routing rules and the corresponding change in the reporting of revenues derived from long-distance services. Comstar entered into agent agreements with authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: long distance telephony service providers A telephony service provider, as defined in Microsoft's TAPI specification, is a software interface to a physical telephony device (such as a modem) that can be accessed programmatically to perform actions such as dialing a phone number or logging a call. during 2006, in order to comply with the new long distance traffic routing rules introduced in January 1, 2006. As a result, the Group had almost completed the migration of its customer base to the new agent contracts by the end of the year. Under the new agreements, the Group distributes the services of authorized long distance operators and receives a commission on the resulting long distance revenues from the operators. This commission is approximately equal to the gross margin earned under the old rules, under which the Group reported the full long distance calling revenue and expensed the corresponding settlement cost. The breakdown of revenues from long distance telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. services to corporate subscribers is detailed in the table below. [TABLE OMITTED] Had the Group continued to recognize all proceeds collected from customers for long distance traffic on behalf of long distance providers as its own revenues, the US$ 2.9 million of commission revenue recognised in the fourth quarter of 2006 would have been reported as approximately US$ 5.8 million of revenue with a corresponding US$ 2.9 million of settlement costs included in 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. . Corporate customer voice revenues would then have increased by 10% or US$ 1.9 million year on year in the fourth quarter and by 12% or US$ 9.1 million for the full year. Had the Group continued to recognize all revenues collected from customers for long-distance traffic on behalf of long distance providers as its own revenues under the pre-2006 rules, Alternative segment revenues would have increased by 19% year on year in 2006. In addition, these revenues would have been reported as Corporate revenues but are now reported as revenues from long distance carriers in the 'Operators' line of the 'Alternative Segment Revenue Breakdown' table above. This change affects the 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. and full income statement presentation of revenues and costs, but has no material impact on the Group's profitability, as explained above. Revenue from 'Operators' was therefore flat year on year at US$ 108.0 million in 2006 and included US$ 4.6 million of such agent fee revenues. Revenue from operators amounted to US$ 23.6 million in the fourth quarter, compared to US$ 29.9 million in the third quarter of 2006 and US$ 25.1 million in the fourth quarter of 2005, as the Group cancelled low marginal transit of traffic from other operators in the third and the fourth quarters of 2006. Revenues generated from corporate subscribers for calls to mobile operators under the CPP rule contributed approximately US$ 1.7 million to corporate voice revenues during the forth quarter and approximately US$ 3.1 million for the full year. The Group's regional businesses comprise Porttelecom, Comstar-Ukraine, Sochi branch, Povozhie branch, Overta, Conversia, Kontrast, Unitel, TNGS, Astelit, DG Tel, Technologic Systems, Callnet and Cornet. The combined regional operations, net of intercompany transactions Intercompany transaction Transaction carried out between two units of the same corporation. , generated a 33% year on year increase in revenues to US$ 49.8 million for the full year. The latter four of these operations were acquired in the fourth quarter of 2006 and Astelit was acquired in June 2006. These newly acquired operations generated US$ 11.4 million of revenues in 2006, whilst the pre-existing operations generated 4% year on year organic growth to US$ 39.1 million for the full year. The full year revenues for the four operations acquired in the fourth quarter of 2006 were included in the fourth quarter results, according to the Group's accounting policy. The four Armenian and Ukrainian operations therefore contributed US$ 8.3 million of revenues in the fourth quarter and full year results. Similarly, Comstar acquired TNGS, Overta, Conversiya Svyaz, CTK Contrast Telecom, Unitel operations in the fourth quarter of 2005, which were accounted for in the same way and the Group therefore recognized US$ 33.8 million of fourth quarter and full year revenues from these newly acquired businesses in 2005. The full year 2006 adjusted OIBDA margin for the Alternative segment, when excluding the US$ 62.1 million of stock bonus awards, was 18.1% compared to 25.4% in 2005. The decline in the margin primarily reflected the lower margin regional operations, the restructuring of the Moscow operations including the set up the corporate center, and the aforementioned impact of the introduction of the CPP principle. Comstar Moscow remains focused on the priority of growing its corporate customer base and increasing profitability through the launch of new, integrated and value enhancing solutions. The operation is also expected to continue to benefit from ongoing cost savings through the further improvement of efficiency levels, such as the joint NGN (Next Generation Networks) An umbrella term for mixed voice and data networks running over the IP protocol. See IP Multimedia Subsystem. build-out by Comstar Moscow and MGTS, as well as the exploitation of synergies within the wider Comstar and Sistema Telecom Groups. This collaboration to optimize the use of converging con·verge v. con·verged, con·verg·ing, con·verg·es v.intr. 1. a. To tend toward or approach an intersecting point: lines that converge. b. technologies and customer offerings is also expected to be a key revenue driver for the Group. Comstar continues to selectively review acquisition opportunities in the Moscow region, in order to strengthen its market position and network infrastructure. The renaming of Comstar Direct has now been completed and the business is focused on consolidating its market leading position and improving customer service quality in order to take share in the increasingly competitive Moscow market. The creation of a single corporate brand will facilitate greater brand awareness and recognition levels. Comstar Direct will continue to migrate its dial-up subscriber base to broadband services See broadband and broadband service provider. , and to increase 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. through the launch of additional services and new tariff structures. The increased cooperation between MGTS and Comstar Direct will also speed up line testing for broadband capability and make it part of an accelerated sign-up process. The combination of MGTS and Comstar Direct's sales offices, and of the Comstar Moscow and Comstar Direct call centre services, will also simplify and improve the installation process and ongoing customer assistance. Comstar Direct's 'double-play' pricing proposition for broadband and pay-TV services is the most competitive package on the market, and will be further enhanced through the bundling of residential fixed line services through Comstar Moscow. Comstar's acquisition of a 25% plus one share stake in Svyazinvest does not detract from detract from verb 1. lessen, reduce, diminish, lower, take away from, derogate, devaluate << OPPOSITE enhance verb 2. the Group's focus on the previously identified priority regions, but also opens up the possibility of cooperation with Svyazinvest's regional ILECs. Comstar will continue to pursue the consolidation of the core regional markets through selective acquisitions, and utilize wireless technologies to expand further through joint ventures with sister company MTS (1) See Microsoft Transaction Server. (2) (Modular TV System) The stereo channel added to the NTSC standard, which includes the SAP audio channel for special use. 1. MTS - Message Transport System. 2. and green field projects. Traditional Segment Revenue Breakdown - Moscow [TABLE OMITTED] Net Revenues for the Traditional segment increased by 29% year on year to US$ 695.0 million in 2006, with the majority of the increase in revenues being generated by residential subscribers. Revenues from residential subscribers were up 37% year on year to US$ 333.5 million, with the 40% increase in revenues from voice services reflecting the increase in regulated tariffs in October 2005 from RUR 170 to RUR 200, and the appreciation of the Russian Rouble against the US dollar in 2006. Segment residential subscriber revenues also included the US$ 25.8 million of compensation received by MGTS from the Federal budget in the second and third quarters of 2006. In addition, the residential and corporate subscriber business' revenue growth reflected the positive impact of the introduction of CPP from July 1, 2006, which contributed US$ 32.9 million of additional revenues from subscribers during the year. Residential subscriber revenues similarly increased by 25% year on year in the fourth quarter to US$ 85.1 million, with voice services up 28% to US$ 81.1 million, and reflecting the US$ 12.9 million positive impact of CPP. The year on year growth in the fourth quarter was not affected by the increase in regulated tariffs, which were introduced from the beginning of the fourth quarter of 2005. Revenues from corporate subscribers were up 20% year on year to US$ 60.7 million in the fourth quarter and US$ 222.9 million for the full year, due to the increase in regulated tariffs and the introduction of CPP. CPP alone contributed approximately US$ 9.1 million to annual revenues. Revenues from operators grew by 17% year on year to US$ 244.5 million in 2006, due to the increase in non-regulated tariffs for the use of MGTS' infrastructure by other operators. The full year OIBDA margin for the traditional segment increased year on year from 41.7% in 2005 to 44.3% in 2006. The increase reflected the balance of the positive revenue effects described above, with the impact of the lower margin CPP revenues during the second half of the year and increase in employee salary costs from October 2006. The former effect reflects the fact that the prevailing margin for fixed-to-mobile calls is approximately 24% and, therefore, well below the Group's overall margin. Comstar continues to focus on executing 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 and restructuring of MGTS. Approximately 42% of MGTS lines were digitalized by the end of 2006. MGTS already benefits from a lower cost per line than incumbents in more mature markets and the restructuring will further increase the number of lines per employee. The fact that MGTS is now moving directly from analogue to next generation networks will enable the Group to cut total investments per number by up to 20%. Comstar does not expect to realize cash from the development of MGTS's surplus property portfolio until 2009 at the earliest, but such realizations will then be used to finance the 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, process. Comstar is well-positioned to continue to benefit from the improving tariff environment, with CPP revenues expected to continue to positively impact on total revenues given the attractive tariff structure, and the penetration of the Group's 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. expected to increase in line with the modernization program. FINANCIAL REVIEW Net cash generated by the Group's operations, excluding the US$ 62.1 stock bonus awards, increased by 72% year on year to US$ 91.8 million in the fourth quarter and by 25% to US$ 333.7 million for the full year. Group capital expenditure increased by 6% year on year from US$ 87.9 million to US$ 92.8 million in the fourth quarter and increased by 32% from US$ 228.5 million to US$ 301.7 million for the full year. The investments primarily comprised the ongoing digitalization process at MGTS and the development of Next Generation Network ("NGN") infrastructure at MGTS and Comstar Moscow. The Group's NGN investments are now entirely focused on an integrated MGTS network that will also be used by Comstar Moscow, which is the reason why full year capital expenditure was lower than the previous US$ 315.0 million guidance level. Net cash used in investing activities increased year on year to US$ 1.06 billion (US$ 49.0 million) in the quarter and to US$ 1.75 billion (US$ 251.4 million) for the full year. The investments primarily comprised the US$ 1.3 billion in cash paid for the acquisition of a 25% plus one share equity stake in state-controlled Telecommunications Investment Company "Svyazinvest" from Mustcom Limited. Comstar raised US$ 975.5 million, net of costs, from the February 2006 initial public offering and invested a total of US$ 1.5 billion in acquisitions during 2006, including US$ 181.4 million for a further 11.25% common stock of MGTS, and the acquisitions of Astelit, two Ukrainian and two Armenian operators, and the final payment for the Unitel business, which was acquired in 2005. The acquisition of the additional MGTS shares during the year and the revaluation of the put and call option which adversely impacted MGTS' net income also resulted in a decrease in the minorities line in the income statement. Comstar reported a US$ 638.9 million inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. from financing activities in the fourth quarter of 2006, compared with an outflow of US$ 18.1 million in the final quarter of 2005. This primarily reflected the arrangement of a US$ 675.0 million six month extendable loan with ABN AMRO ABN AMRO Algemene Bank Nederland-Amsterdam Roterdam Bank (Dutch bank) Bank N.V., in order to finance the acquisition of the stake in Svyazinvest. The increased borrowing level improved the Group's capital structure and thereby significantly reduced the Group's weighted average cost of capital Weighted average cost of capital (WACC) Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment. Often the weighted average of the cost of equity and the cost of debt The weights are determined by the relative proportions of equity . The cash inflow of US$ 1.55 billion for the full year compared with an outflow of US$ 20.3 million in 2005, and primarily comprised the net proceeds from the IPO and the loan monies referenced above. The Group's cash and cash equivalents increased year on year from US$ 62.0 million to US$ 136.6 million as at the end of the reporting period, and short term investments totaled US$ 68.8 million (US$ 128.8 million). Total Group borrowings increased year on year from US$ 233.6 million to US$ 842.9 million by the end of the period, and compared to US$ 180.2 million as at September 30, 2006. Group net debt therefore increased year on year from US$ 171.7 million to US$ 706.3 million, and compared with a net cash position of US$ 345.6 million as at September 30, 2006. The Group had a working capital deficit of US$ 694.7 million at the end of the year. This was primarily attributable to the above mentioned $675.0 million loan and the US$ 150.0 million liability under the put and call option agreement granted in connection with acquisition of the Svyazinvest shares. The call will be settled in Comstar shares and will not require additional cash outflow from the Group. The exercise of the call option is expected to yield approximately US$ 332.2 million of cash proceeds from the sale of Comstar stock. Comstar UTS (Universal Timesharing System) Amdahl's version of Unix System V. Release 4.0 is POSIX compliant. has conservative leverage levels and good credit ratings, and should therefore be able to obtain financing as required on an ad hoc For this purpose. Meaning "to this" in Latin, it refers to dealing with special situations as they occur rather than functions that are repeated on a regular basis. See ad hoc query and ad hoc mode. basis. Additionally, capital expenditure can be deferred to meet short-term liquidity requirements. Cash flows from operating and financing activities are therefore sufficient for the Group to meet its obligations as they fall due. SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD On April 17, 2007 Comstar Direct, the leading provider of 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 in Moscow under "STREAM" brand and a subsidiary of "COMSTAR - United TeleSystems" 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 , added the 400,000th subscriber to its network. It was first among all operators in the Moscow market to reach 400,000 subscribers target. Comstar Direct has increased its subscriber base by 11% since the end of 2006. On April 5, 2007, the Extraordinary General Meeting of Svyazinvest shareholders elected Sergei Shchebetov (Chairman of the Comstar Board of Directors) and Anton Abugov (First Vice President and Head of Strategy and Development at Sistema) to the Svyazinvest Board of Directors. Comstar announced the appointment of Victor Koresh as Vice President with responsibility for the development of the Group's operations on April 3, 2007. Mr. Koresh's role is focused on the integration of Comstar's existing and newly acquired regional operations and driving improved profitability levels by enhancing the companies' business processes, maximising potential synergies and leveraging the Group's increased scale and range of product offerings. Before joining Comstar, Mr. Koresh served as General Director of PeterStar, and was previously General Director of Sovintel's branch in St. Petersburg. Comstar announced on March 30, 2007 that it had completed the renaming of its Comstar Direct subsidiary, which is the leading provider of broadband Internet access in Moscow. The renaming process started in December 2006, when MTU-Intel was renamed as Comstar Direct, in order to highlight its affiliation with the Comstar UTS Group. The change of name will be reflected in the Company's logotype with effect from April 2007. The "Stream" trade mark will continue to be used as the brand for the services provided by Comstar Direct. Comstar announced on March 21, 2007 that it has been awarded licenses to provide data transmission in the Kemerovo, Chelyabinsk, Novosibirsk, Sverdlovsk and Tumen regions, as well as in the Stavropol and Primorsk territories, and in the Republic of Tatarstan. The licenses are valid until February 9, 2012. Comstar plans to extend its current telephony offering by rolling out a range of data services to its growing corporate client base. Comstar announced on March 14, 2007 that it had sold its 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, an alternative fixed-line telecommunications operator based in St. Petersburg, to Slosed joint-stock company joint-stock company A rare type of business organization characterized by some features of a partnership and some features of a corporation. Shares are transferrable and the company is assessed taxes according to corporate tax rates. MST See micro systems technology. . The shares were sold for a total cash consideration of US$ 20.0. Comstar acquired the stake in September 2005 for US$ 12.2 million in cash. The transaction therefore realized a cash gain of approximately US$ 7.8 million. Comstar's equity participation in the results of Metrocom was therefore discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: with effect from the date of the announcement, and the financial impact of the transaction will be included in Comstar's financial results for the first quarter of 2007. The sale was in line with Comstar's intention to have controlling stakes in all of its operations and Comstar is evaluating other means of expanding its operations in the St. Petersburg area. Comstar announced the commercial launch of Wi-Fi Internet in the Moscow subway subway: see rapid transit. subway Underground railway system used to transport passengers within urban and suburban areas. The first subway line, 3. system on March 7, 2007. The ground breaking project, with 21 wireless hot-spots over a two square kilometre Square kilometre (U.S. spelling: square kilometer), symbol km², is a decimal multiple of the SI unit of surface area, the square metre, one of the SI derived units. 1 km² is equal to:
A metro station is a railway station for a rapid transit system, often known by names such as "metro", "underground" and "subway". It is often underground or elevated. At crossings of metro lines they are multi-level. - "Okhotny' Riyad", "Teatral'naya" and "Ploschad' Revolyutsii". The service is planned to cover all of the interchange stations An interchange station in British English, also known as a transfer station in American English, is a train station for more than one railway route in a passenger transport system. Such stations usually have more platforms than single route stations. in the Moscow underground and tests for similar services in St. Petersburg are already being carried out. Comstar announced the launch of intra office telephony services via Wi-Fi on February 28, 2007. This is the first such intra-office Wi-Fi solution for corporate wireless networks and the first commercial project of its kind in Russia. The service is targeted at large and medium sized companies in sectors that require employee mobility, such as hospitality, retail, logistics and exhibitions. The service enables Comstar corporate clients to introduce secure intra office telephony networks without the need for significant investment in the installation of equipment at client premises. Standard & Poors Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a 'BB-' long term corporate credit rating to Comstar United TeleSystems (JSC) in February 2007, with a 'positive' outlook. Standard & Poors also assigned its 'ruAA' Russia national scale rating to the Group. Comstar further expanded its license coverage with effect from January 29, 2007, when it was announced that Comstar had obtained licenses for IP Voice and Data transmission (including WiMAX services) in the twenty largest regions in Russia. The licenses are valid until November 17, 2011. Comstar plans to start up green field operations in the new license areas and thereby further extend its coverage and service offering in priority regions. Comstar announced the re-organization of its alternative telecom operating companies operating company A business that engages in transactions with outsiders. on January 10, 2007. The Extraordinary General Meeting of Comstar shareholders, which was held on December 25, 2006, approved the legal merger of Comstar's wholly owned subsidiaries - Telmos, MTU-Inform, CTC CTC - Cornell Theory Center Contrast-Telecom and M-Telecom Holding (100% owner of Astelit) - with Comstar. The reorganization is being implemented in order to optimize the Group's legal structure and is in line with the wider Group re-organization program announced in October 2006. OTHER INFORMATION Extraordinary General Meeting of Shareholders The Comstar EGM EGM Electronic Gaming Machine EGM Electronic Gaming Monthly EGM Extraordinary General Meeting EGM Expert Group Meeting EGM Estudio General de Medios (Spanish: General Means Study) EGM Emergency General Meeting held on December 12, 2006 elected Mr. Dietmar Kuhnt and Mr. Yngve Redling as independent non-executive members of the Board of Directors. The EGM also elected Mr. Eric Franke and Mr. Shamil Kurmashov to the Board and reelected five existing Board members. The newly elected Board of Directors therefore comprises Sergey Bayda, Deputy Chief Executive Officer for Strategy at Sistema Telecom; Alexey Goltsov, Chief Executive Officer of MGTS; George Kikvadze, Director for Investments at Sistema Telecom; Dietmar Kuhnt, member of the Supervisory Boardsof 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. ; Shamil Kurmashov, Deputy Chief Executive Officer for Finance and Investments at Sistema Telecom; Vladimir Lagutin, Member of the Board of Directors of Sistema Telecom; Eric Franke, Chief Executive Officer of Comstar; Yngve Redling, Chairman of the Swedish-Russian/CIS Chamber of Commerce and Chairman of the Swedish-Russian bilateral bilateral /bi·lat·er·al/ (-lat´er-al) having two sides, or pertaining to both sides. bi·lat·er·al adj. 1. Having or formed of two sides; two-sided. 2. working group for Information Technology; and Sergei Shchebetov, Chief Executive Officer of Sistema Telecom. The Board reelected Mr. Sergei Shchebetov as Chairman of the Comstar Board of Directors. Conference call Comstar management will host a conference call today at 5.00 PM Moscow local time, 2.00 PM London local time and 9.00 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 7138 0837 US: +1 718 354 11 72 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 '5416315#' pin code: UK / International: +44 20 7806 1970 US: +1 718 354 1112 For further information, please visit www.comstar-uts.com. Comstar UTS is the leading combined telecommunications operator in Moscow and the Moscow region, both in terms of revenues and subscribers. Comstar UTS provides voice, data, Internet, pay-TV 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 unique last mile access to 98% of Moscow households. The Company also offers communications services in several Russian regions, and CIS and Eastern European countries. Comstar UTS had 3.6 million traditional fixed-line subscribers, over 500,000 alternative operator segment subscribers in Moscow, and almost 100,000 alternative segment subscribers in the Russian regions outside Moscow, as at December 31, 2006. Comstar UTS reported operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of US$ 1.12 billion for the twelve months ended December 31, 2006, and had consolidated assets totalling US$ 3.54 billion as at the end of the period. Comstar UTS securities are listed under the symbol "CMST" on the Moscow Stock Exchange and the London Stock Exchange. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" 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. 1 OIBDA is defined as 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 amortization. Please see Attachment A to this statement for a full definition of OIBDA and a reconciliation of reported OIBDA and Adjusted OIBDA to operating income. 2 Please see Attachment A to this statement for reconciliation of Adjusted OIBDA, Operating and Net Income and Cash Flow from Operations and a full definition of CAPEX 3 As of December 31, 2006 4 Please see Attachment A to this statement for a full definition of ARPL. Attachment A NON-GAAP FINANCIAL MEASURES This results statement includes financial information prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 amortization, 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 amortization are considered operating costs under US GAAP, these items primarily represent the non-cash current period allocation of costs arising from the acquisition or development of long-term assets 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 Adjusted OIBDA [TABLE OMITTED] Reconciliation of Adjusted 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. [TABLE OMITTED] Reconciliation of Adjusted Net Income [TABLE OMITTED] Reconciliation of Adjusted Operating Cash Flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. [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 See broadband. , 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 AND COMBINED INCOME STATEMENTS [TABLE OMITTED] (*) Amounts as of December 31, 2005 and for the year then ended were derived from audited financial statements as of December 31, 2005 and 2004 and for the years then ended. 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 2006 presentation. (**) Earnings per share are computed based on earnings for the periods subsequent to the Group's restructuring (from November 22, 2005 to December 31, 2005, and for the year and three-month period ended December 31, 2006). Net income available to Comstar UTS's shareholders for each period is divided by the weighted average number of common shares during the period. Earnings-per-share amount for the period from November 22, 2005 to December 31, 2005 may not be comparable to earnings-per-share amounts determined for the year and three-month period ended December 31, 2006 and for the future years and, further, such earnings per share amount may not fully reflect the expected relationship between earnings for the year and three-month period ended December 31, 2005 and the amount of outstanding stock as of that date. "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, 2005 and for the year then ended were derived from audited financial statements as of December 31, 2005 and 2004 and for the years then ended. Certain prior year amounts have been reclassified to conform to the 2006 presentation. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED BALANCE SHEETS (continued) [TABLE OMITTED] (*) Amounts as of December 31, 2005 and for the year then ended were derived from audited financial statements as of December 31, 2005 and 2004 and for the years then ended. Certain prior year amounts have been reclassified to conform to the 2006 presentation. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS [TABLE OMITTED] (*) Amounts as of December 31, 2005 and for the year then ended were derived from audited financial statements as of December 31, 2005 and 2004 and for the years then ended. Certain prior year amounts have been reclassified to conform to the 2006 presentation. "COMSTAR - United TeleSystems" OJSC UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (continued) [TABLE OMITTED] (*) Amounts as of December 31, 2005 and for the year then ended were derived from audited financial statements as of December 31, 2005 and 2004 and for the years then ended. Certain prior year amounts have been reclassified to conform to the 2006 presentation. |
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