september, 2005 investing in russian telecoms
TRANSCRIPT
September, 2005 WWW.CENTERTELECOM.RU
Investing in Russian Telecoms
WWW.CENTERTELECOM.RU
This presentation contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, the actual results of operations of the Company may be different from the Company's current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments.
September, 2005 2
WWW.CENTERTELECOM.RU
CFD Market Share – 2005 forecast
Local calls – 94.3%
Mobile telephony – 3%
CenterTelecom Is the Leading Fixed Telecommunications Provider in the Central Federal
District of Russia
CenterTelecom today:CFD is the most populous area of Russia
17 regions
CFD square is 650,700 square km (3,8% of Russia’s territory)
Population is 38 million people (26,2% of Russia’s population)
Share in Russia’s GDP - 12,8%
Share in Russia’s telecoms market – 43,4%
Long distance calls – 81.7%
Data transfer, Internet, ISDN IP-telephony, INS,) – 45.3%
15 branches
6,8 mln. access lines installed
416 140 Internet users
6,3 mln access lines subscribers
mobile subscribers: 96 247 - GSM 17 779 - NMT-450
61 thsd. cable TV subscribers
September, 2005 3
CenterTelecom’s StrategyCenterTelecom’s Strategy
Proactive development of the value added services Keeping of the share in market of traditional services Development of sales system for corporate and VIP-clients
Costs optimizationTariff policy optimization,Traffic and income growth provisionImprovement of corporate governance level and Corporate RestructuringOptimization of the quantity of personnel
Development of the positive credit historyExpansion of the structure and range of financial toolsAttraction of the cheap financial resources from international stock market
Improving appeal in capital markets
Improving efficiency
Improving competitiveness
WWW.CENTERTELECOM.RU 4 September, 2005
Capital ExpendituresCapital Expenditures
WWW.CENTERTELECOM.RU
Share of CAPEX in revenues:
2002-2004 – 10% growth
2005 – forecast CAPEX cutting
stipulated by Company investment
programme.
forecast
RUR, bln.
CAPEX dynamic
0
2
4
6
8
10
2002 2003 2004 2005 Е 2006 Е 2007 Е
Ow n capital Borrow ed capital
36%
78%82%
68%27%29%
64%
4,8 22%
18%32%
73 %
71%
7,6
9,8
5,44,4
6,3
5 September, 2005
0%
10%
20%
30%
40%
50%
2002 2003 2004 2005Е 2006Е 2007Е
29%
-19%
18%15%20%
39%36%
Income Structure – Communication Income Structure – Communication servicesservices
WWW.CENTERTELECOM.RU
Indicators 20042005
(forecast)Growth
Total: 24 603 462 26 930 815 109,46%
Including:
Local communications 10 615 341 12 793 387 120,52%
New services 920 138 1 240 511 134,82%
Long distance and International communications
9 588 987 9 221 464 96,17%
6
Other
14%
Other
14%Local communications
43%
Local communications
47%
LD and International communications
39%
LD and International communications
34%New services
4%
New services
5%
2004 2005 (forecast)
September, 2005
RUR, thsd.
Decrease of dependence on tariff
profits is the vector of the further
development and the keystone to
the company’s future success
WWW.CENTERTELECOM.RU
20052006
20072008
2009
Internet, data transmission, ISDN, INS, IP-telephony
Long-distance communication
Local communication
87%86%
85%
84%84%
85%82%
79%
78%77%
70% 71%72% 73% 74%
65%
70%
75%
80%
85%
90%
CenterTelecom on the telecommunication CenterTelecom on the telecommunication market of the Central Federal Districtmarket of the Central Federal District - -
forecastforecast
* Including affiliated businesses
Keeping Company’s leadership at CFD telecoms market and qualitative change in profit earning by wide application of
broadband Internet services
7 September, 2005
WWW.CENTERTELECOM.RU
Local Telecommunications Overview – A Local Telecommunications Overview – A Competitive EnvironmentCompetitive Environment
Capacity Launch (thousands of telephone numbers)
Subscribers’ growth (thousands people)
Number of lines per employee (units)
Applications for telephone line installation (thousands)
468599 619
106210 230
157270 258
44 70 90
2002г 2003г 2004г 2005г Е 2006г Е 2007г Е
75,0
84,091,9
96,7100,8 106,0
2002г 2003г 2004г 2005г Е 2006г Е 2007г Е
+9,4%+5,2%
+4,2%+5,2%
260
312345
142112
140
2002г 2003г 2004г 2005г Е 2006г Е 2007г Е
+10,5% -58,8% +25%
1 2251 106
916 930 936 907
2002г 2003г 2004г 2005г Е 2006г Е 2007г Е
-17,1%+1,5%
+3,3%
-4,4%
-82,9%
-82,9%
+98,1%
Putting into operation Replacement
September, 2005 8
WWW.CENTERTELECOM.RU 9
InternetInternet
Volume of the transferred data on Internet allocated lines, Gbyte.
105 12475 660
0
30 000
60 000
90 000
120 000
2004 2005 (forecast)
1 749
2 011
1 600
1 700
1 800
1 900
2 000
2 100
2004 2005 (forecast)
Internet switched connections, mln min
Only for I half year 2005 the quantity of xDSL users has increased 1,7 times in comparing to 2004.
1141
5845
21000
0
5000
10000
15000
20000
25000
2003 2004 2005 (forecast)
xDSL services user's base dynamics
September, 2005
September, 2005
WWW.CENTERTELECOM.RU
Managing Costs
In 2004 operation expenditures grew 26,4% in comparison to 2003 caused by investment politics (input of number capacity, digitalization level increase, introduction of billing systems (Oracle, Amdocs)).
Amortization 13,0%
Wages32,4%
Social insurance10,4%
Materials6,6%Electricity
1,8%
Payments to operators
2,4%
Payments to Rostelecom
15,8%
Outsourcing8,5% Other
9,1%
RUR, thsd
Expenditures item 2003 2004Growth
rate
Labor costs 5 168 993 6 387 314 23,57%
Deductions to social insurance 1 703 826 2 046 042 20,09%
Depreciation of fixed assets 1 668 127 2 555 221 53,18%
Tangible costs 1 257 472 1 291 366 2,70%
Electric power 308 980 358 877 16,15%
Expenditures on telecom operators 423 483 477 512 12,76%
Expenditures on Rostelecom services
2 140 925 3 119 074 45,69%
Outsourcing costs 1 371 874 1 666 450 21,47%
Other expenditures 1 543 699 1 800 252 16,62%
TOTAL 15 587 379 19 702 108 26,40%
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September, 2005
WWW.CENTERTELECOM.RU
Financial results (RAS)Financial results (RAS)
2002 2003 2004 2005Е 2006Е 2007Е
Profit 16 389 20 890 24 963 27 285 29 880 34 171
Costs 12 132 15 587 19 702 21 078 23 874 27 064
Sales profit 4 257 5 261 5 303 6 206 6 006 7 108
Pre-tax profit 1 604 2 303 971 1 071 1 360 2 198
Net profit 838 1 482 398 473 705 907
Operating margin,% 6,9% 9,5% 2,0% 2,2% 3,0% 3,4%
EBITDA 3 627 5 131 5 377 7 017 6 916 8 270
EBITDA margin,% 29,9% 32,9% 27,3% 33,3% 29,0% 30,6%
fact forecast
RUR, Mln Profit and expenditure dynamics
0
10
20
30
40
2002 2003 2004 2005Е 2006Е 2007Е
Profit Expenditures
RUR, Bln
EBITDA dynamics
RUR, Bln
2002 2003 2004 2005Е 2006Е 2007Е
3,65,1 5,4
7,0 6,98,3
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September, 2005
Operations efficiency indicatorsOperations efficiency indicators
WWW.CENTERTELECOM.RU
Number of lines per employee(unit)
2002 2003 2004 2004 / 2003 2005Е 2006Е 2007Е
Profit per line, RUR 3 011 3 697 4 037 109,20% 4 223 4 648 5 213
Profit per employee, thousand RUR
221 301 366 121,59% 416 463 545
EBITDA per line, RUR 666 880 870 98,86% 1 086 1 076 1 262
Number of employees74 320
69 44868 195
65 98164 575
62 658
2002 2003 2004 2005Е 2006Е 2007Е
-6,6%-1,8%
-3,2%-2,1%
-3,0%
12
September, 2005
75,0
84,091,9
98,6 100,8106,0
2002г 2003г 2004г 2005г Е 2006г Е 2007г Е
+9,4%+7,2%
+2,2%
+5,2%
WWW.CENTERTELECOM.RU
CONTACTSCONTACTS
Deputy Director General – Commercial director Sergey Pridantsev Tel.: (095) 209-57-47Fax: (095) 209-66-14, 793-23-15E-mail: [email protected]
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THANKS FOR YOURTHANKS FOR YOUR ATTENTIONATTENTION
September, 2005