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2004 FINANCIAL STATEMENTS UNDER IAS: REVENUES UP 22%, OIBDA MARGIN 30%

23.06.2005

The financial statements consolidate property, obligations and financial results of OAO "Uralsvyazinform" and its 15 subsidiaries, the largest of which are ZAO "Ermak RMS", OOO "South Urals Cellular Phone", OOO "Uralcom" and ZAO "VSNET".

• Revenue grew by 22.2% on a year-on-year basis, as compared to 2003, mainly due to:

  • Increase of revenues from local services, including installation fees, which increased by 33%, y-o-y. Over the reporting year, the number of local subscribers has increased by 220 thous.
  • Increase of revenues from mobile services by 18.2%, y-o-y. Net additions to GSM subscriber base totaled 935 thous. in 2004. As of Jan 1, 2005 the mobile subscriber base totaled 2.0 mln (2.6 mln as of June 1, 2005).
  • Long-distance revenues increased by 9.7%, y-o-y. DLD and ILD traffic increased by 19.4% and 15.8%, respectively.
  • New services revenues (Internet, broadband, ISS, ISDN, etc.) were up 69.9% on 2003.
  • Revenues from operators (interconnection services) saw 87.9% rise.
• OIBDA was up 29.6% on 2003, with OIBDA margin at 29.8% versus 28.1% in 2003.
• 25.8% of revenues came from mobile services.
• Net cash flows from operating activities increased by 10.4%. Earnings per share (EPS) were up 60% on the previous year.

Anatoly Ufimkin, CEO commented 2004 results: "We are pleased that in 2004 we achieved healthy organic growth in all business segments - local, long-distance, mobile and data transmission. For the reporting year we adjusted our investment policy to provide for a basis for development in the following years. Most notably, during 2004 we focused on the establishment of a technological infrastructure which is more oriented to the growth of business in the long-term, higher volumes of traffic and increasingly, the customer shift towards new broadband-based services.

In 2004, GSM-900/1800 networks ranked first in terms of investment volume, with over RUR 3.0 bln. The major GSM project this year was the start-off of a GSM network in Ekaterinburg and Sverdlovsk region, as of September 28, 2004. During 2004, Uralsvyazinform put NGN technology (Next Generation Networks) on practical rail. NGN-networks that use packet-switched technology are planned to gradually replace the existing channel-switched networks. Meanwhile 2005 has become an NGN landmark for two major regional cities, Ekaterinburg and Chelyabinsk where newly-installed local lines will be fully NGN-functional. Above the traditional functionality, NGN lines offer the customers a wide range of services, including video-on-demand, virtual cinema hall, broadband Internet access, videoconferencing etc. At Uralsvyazinform, we consider the transition to NGN as the pathway to the successful future.

Highlights for 2005 include:

• Capacity extension of fixed-line networks;
• Extension of GSM-900/1800 coverage area and network capacity; switchover to a single brand for mobile services;
• Deployment of intra-zone DLD fiber-optical and radio microwave lines, complete coverage of urban Kurgan and Sverdlovsk regions with digital transport lines;
• Promotion of new services (Internet, VoIP, Cable TV, Call centers);
• Focus on NGN solutions;
• Sales of bundled services;
• Convergence of fixed-line and mobile networks in progress.

To continue with financial and operational review please download pdf version.

Complete version of 2004 IAS consolidated financial statements of Uralsvyazinform with commentary may be found in the Financials sections.