April 14th, 2009 North-West Telecom summed up its business results for 2008 by the Russian Accounting Standards (RAS). The accounts of N.W.Telecom were audited by Ernst and Young LLC.

Revenue increased by 4% YoY to reach RUR 24,500 million.

The key revenue drivers were new services (Internet and data transmission) and intra-zonal access. Compared to 2007, the revenue from Internet grew by 44% to reach RUR 4,152 million, and revenue from intra-zonal access increased by 10% to reach RUR 2,421 million.

The operating income was RUR 3,862 million, which is 35% lower than in 2007. The decline of income was attributable mostly to the recording of the Universal Communication Service in the accounts. N.W.Telecom records the costs as operating costs, while refunding from the Universal Service Reserve is recorded in the “Other Income (Expenses)” line. Provided that the indicators are comparable (with regard to the refunding from the Universal Service Reserve), the North-West Telecom operating income would have reached RUR 6,244 million, which corresponds to a 1% YoY.

North-West Telecom’s business efficiency indicators show a positive trend compared to the previous year*.

The net income of North-West Telecom by the results of 2008 was RUR 3,622 million, which is 2% higher than in 2007*. The EBITDA grew by 15% to reach RUR 9,561 million, and the EBITDA margin increased by 3.7 points reaching 39.0%*.

In 2008, North-West Telecom implemented a large-scale investment program amounting to RUR 13.5 billion. Over 500,000 broadband ports were installed, 324,000 telephone numbers were commissioned, over 3,000 km of FOCL were laid, and the network digitization level reached 67%.

In 2008, North-West Telecom continued active expansion on the broadband access market. Due to an aggressive marketing policy, broader range of services offered, and attractiveness of tariff plans, the company managed to increase the number of its broadband subscribers to 635,000, and its market share, to 39%**. Besides, despite the high competition by mobile and alternative operators, N.W.Telecom increased its overall number of subscribers by 37,000 fixed line users.

The company’s debt remained at a moderate level. The total debt by the end of 2008 was about RUR 16 billion (of which about 85% are long-term debts), the equity to total assets ratio was 0.59, and the Net debt/EBITDA was 1.84. 

Commenting on the 2008 results, Venera Khusnutdinova, Chief Financial Officer of N.W.Telecom, noted, “The last year was a successful year for us as regards further improvement of business efficiency; we came close to the EBITDA margin level of 40% and ensured a 15% net income margin for our shareholders, which meets the best worldwide standards for wire line operators. Our stronger market positions, and our traditionally stable financial status make a solid foundation for working through the challenging year 2009.”

The Balance Sheet and the Profit and Loss Statement of North-West Telecom for 2008, and the Auditor’s Opinion for 2008 are placed on the corporate website of N.W.Telecom in the “Economic and Finance” section.

*The indicators of net income, EBITDA, and EBITDA margin by the results of 2007 for comparability purposes are applied without the financial result of the divestment 15% stake in Telecominvest.

**The market share was calculated by revenue,, including the affiliates.

The EBITDA indicator is calculated by the formula “profit (loss) before tax + “interests payable” – “interests receivable” + “fixed assets wear and amortization” + “leasing costs”.