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Far East Telecommunications Company
The First Nine Months Financial Results
November, 2004
RTS: ESPK MICEX: DLSV
Over-the-Counter Market USA: FEEOY
Investor Relations
Safe Harbor
The forward-looking information , which is included in this presentation, are the statements, made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. The presentation contains information about the future events and financial results, estimated by the Company in the future. These statements involve a number of risks and uncertainties. Among the factors that could cause future results include: deterioration of economy; changes of the laws, which are currently in force; increase in dependence on “Rostelecom”,OJSC, concerning the questions of proportion establishment, according to which the payment for international and long-distance traffic is divided: changes in rate of currency exchange; changes in percentage rates; changes in prices for raw materials and services, used by the issuer; changes in political situation in the country; military conflicts and cases of emergency; impossibility to continue the license for carrying out activity. The more detailed description of risks and uncertainties of the company you can find in the quarterly accounts and annual reports of “DALSVYAZ”, OJSC. The majority of the mentioned factors are beyond the control or the possibility of prognostication on the Company’s behalf. Taking onto consideration all the above-mentioned information, the Company does not recommend to rely upon any forward-looking statements, included into this presentation. The Company does not commit itself to disclosing any changes to this presentation with the aim to show the events or circumstances, which took place after the date of this presentation, or with the aim o show the unforeseen events, with the exception of the cases when this disclosure is required in accordance to the Private Securities Litigation Reform Act of 1995.
All the financial results, included in this presentation, were accounted according to Russian Accounting Standards.
1
Welcome
2
Dear Shareholders, Investors and Analysts,
Thank you for your interest to the Public Joint Stock Company “Far East Telecommunications Co”. Let me tell you about its fiscal third quarter results.
In the third quarter we increased twice the revenue growth rate and made important decisions regarding increasing corporate governance quality.
The Board of Directors ratified the conditions and formed 4 committees, including the Corporate Governance Committee, Human Resources, Motivation and Compensation Committee, Audit Committee, and Strategic Management Committee.
The Board of Directors also made a decision to liquidate FETEC’s Jewish Autonomous Regional branch and to reorganize it into communications Hub of JAR. It will allow the company to decrease operational expenses by reduction of the administrative staff and fee (salary) fund.
Igor V. Zabolotny
Chief Executive Officer
Contents
3
Financial Summary
Financial Results of the 9 Months 2004
Financial Results Dynamics of the 9 Months 2004
FETEC at the Capital Markets
Dynamics of 2004 Quarter Results
Guidance for 2004
Financial Summary (9 months 2004)
4
The Leader of the Far East Telecommunications Market FETEC’s market share 59.5%
72% Internet market 87% Local telecommunications market 81% Long-distance telecommunications market 100% Mobile market in Magadan Region and 50% in Kamchatka Region.
Strong Growth Potential (compared 9 months 2003) Installed network capacity increased 13% Revenue increased to 31%;Net Income 2.6 times;
Increased Revenue from: mobile service - 72% (234 million rubles.)
other operators connection - 4 times (637 million rubles) new services (Internet, IP, ISDN) – 54% (355 million rubles) local service – 31% (2,2 billion rubles)
long-distance and international telecommunications – 12% (2,4 billion rubles)
Staff amount decreased to 316 people; Market Cap increased to $140 million or 15%;EBITDA increased 2,6 times.
Contents
5
Financial Summary
Financial Results of the 9 Months 2004
Detailed Financial Results the 9 Months 2004
Dynamics of 2004 Quarter Results
FETEC at the Capital Markets
Guidance for 2004
Net Income Increased 2.6 times up to the 1 billion rubles
9 months 2004
Income Statement
Thousand rubles
Revenue 4 828 115 Operational Expenses 3 984 530 Income 843 585 Net Income 402 162
EBITDA 804 000 EBITDA to Revenue 17%
Income statement
Thousand rubles
Revenue 6 338 702 Operational Expenses 5 391 815 Income 946 887 Net Income 1 062 224
EBITDA 2 100 000 EBITDA to Revenue 33%
9 months 2003
Growth
31% 35% 12%
164%
161%
124%
6
Growth of served telephones - 33 278 units. Growth of served telephones - 74 415 units.
Revenues by Service Shares
Revenues from telecommunications services,
thousand rubles.4 743 757 6 242 283
31,6%
9 months 2003 9 months 2004
7
New Services
Mobile Services
Connection of other operators
Others Services
6%
4%
10%
10%
38%
35,6%
35%
5%
3%
3%
10%
45%
Local services
New Services
Mobile services
Connection of other operators
Other services
Long-distance and international
Local services
Long-distance and international
8
Прочие расходы
Охрана
Информационные услуги
Консультационные услуги
Транспортные услуги
Расходы на подготовку кадров
Содержание и ремонт
Теплоэнергия
Материальныерасходы+электроэнергияРасходы по Ростелекому
Лизинговые платежи
Амортизация
Единый соц налог
Заработная плата
9 months 2004 9 months 2003
(Others)
(Guard Expanses)
(Rostelecom)
(Tangible expenses and power)
(Heat-and-Power energy)
(Maintains)
(Staff Education)
(Information)
(Consulting)
(Transport)
(Leasing payments)
(Amortization)
(Social taxes)
(Salary)
3 984 530
5 391 815
1 954 487
1 498 907
592 760
463 997
57 686
885 894
422 931
683 291
486 639
232 878
574 112
70 213
357 349
463 944
Operation Expenses, thousand rubles
Analysis of Expenses
Contents
9
Financial Summary
Financial Results of the 9 Months 2004
Detailed Financial Results of the 9 Months 2004
Dynamics of 2004 Quarter Results
FETEC at the Capital Markets
Guidance for 2004
10
Revenue to one line, thousand rubles.
Revenue to one worker, thousand rubles.
9 months 2003 9 months 2004
5.2
4,3
9 months 2003 9 months 2004
Profitability Ratios
260
343.5
10
EBITDA
11
804
2 083
9 months 2003 9 months 2004
EBITDA, million rubles.
Revenue from Local Services
Rural Local Services
City Local Services
Far East Telecom serves 7 regions of the Russian Far East Federal District. There are 80% people live in the cities.
The Far East telecommunications market is still far from satiation. The amount of orders (demand) to the installation of telephone service is 201 thousand people of 3Q 2004.
Local Services Revenues, million rubles.
12
9 months 2003 9 months 2004
1 697178
2202 223
13
Revenues from Long-Distance and International Services, million rubles.
Rent of the telecommunications equipment
International Service
Long-Distance Service
1 884
Revenues from Long-Distance and International Services
2 123
354
1 661
394
2 378
9 months 2003 9 months 2004
13
Revenues from New Services
Revenue shares are:
The Internet – 95.6%
IP –Telephony – 3.5%
ISDN (digital net with integrated services) – 0.9%
Revenue from New Services, million rubles.
14
9 months 2003 9 months 2004
231
355
Revenues from Mobile Services
Revenues from Mobile Services, million rubles. FETEC has mobile business GSM 900/1800 in Kamchatka Region and GSM 900 in Magadan Region.
The revenue from mobile service increased 72% in 3 quarter 2004, compared to 3 quarter 2003.
The third quarter the amount of subscribers of mobile service increased to 27.8 thousand or 2.8 times compared to 3 quarter 2003.
15
9 months 2003 9 months 2004
136
234
Revenues from the Connection of Other Operators
Revenues from connection of other operators, 2004, million rubles. FETEC improved structure of
relationship with a connected operators since 1 June 2003 by approving equal tariffs to all connected operator. This had positive influence to the connection of other operators revenue growth rate.
16
152
637
9 months 2003 9 months 2004
Subscribers Increasing
Amount of mobile subsidiaries, 2004, thousand people.
17
The amount of DSL – clients, 2004, thousand people.
The amount of subscribers of local service, 2004, thousand people.
Corporate clients
Personal Clients
9 months 2003 9 months 2004 9 months 2003 9 months 2004
9 months 2003 9 months 2004
1 1081 205
10
28
1.3
3,9
Increasing of the Installation and Net Digitalization
18
The amount of installed Automotive Phone Stations, 2004.
1 196
1 350
9 months 2003 9 months 2004
Contents
19
Financial Summary
Financial Results of the 9 Months 2004
Detailed Financial Results of the 9 Months 2004
Dynamics of 2004 Quarter Results
FETEC at the Capital Markets
Guidance for 2004
2004 Quarters Results Dynamics
20
2 030
2 094
2 215
Revenue, million rubles
I Q. II Q. III Q. I Q. II Q. III Q.
Operating Expenses, million rubles
1 757
1 871
1 763
I Q. II Q. III Q.
Income, million rubles
I Q. II Q. III Q.
273222
452
39
133
Net Income, million rubles
Including Income from the selling of share of
Primtelefon and DVSS-900 (mobile companies)
890
Contents
21
Financial Summary
Financial Results of the 9 Months 2004
Detailed Financial Results the 9 Months 2004
Dynamics of 2004 Quarter Results
FETEC at the Capital Markets
Guidance for 2004
FETEC shares at the RTS
QUOTES
November 15, 2004
Common shares Ticker: ESPK Face-value 20 rub. Shares outstanding 95 581 421 52 weeks max. price $1.45 52 weeks min. price $0.89 52 weeks WA price $1.11 The last price $1.23 Change +3.28% Trading volume 4 816 508 USD Dividends 0.40 rub.
Proffered shares Ticker: ESPKP Face-value 20 rub. Shares outstanding 31 168 901 52 weeks max. price $1.20 52 weeks min. price $0.76 52 weeks WA price $0.95 The last price $1.20 Trading volume 2 105 433 USD Dividends 0.73 rub.
Common shares, November 15, 2003 – November 15, 2004, USD.
ESPK
1.14
ESPK
22
ESPK
1,05
FETEC Shares at MICEX (out of list)
QUOTES
November 17, 2004
Common shares Ticker: DLSV Face-value 20 rub. Shares outstanding 95 581 421 52 weeks max. price 52 rub. 52 weeks min. price 26 rub. The last price 34.9 rub. Trading volume 12 146 650 rub. Dividends 0.40 rub.
Proffered shares Ticker: DLVP Face-value 20 rub. Shares outstanding 31 168 901 52 weeks max. price 38 rub. 52 weeks min. price 22 rub. The last price 38 rub. Trading volume 5 527 028 rub. Dividends 0.73 rub.
23
Common shares, November, 2003 – November 15, 2004
DLSV
FETEC plans to take listing at Moscow Inter Banks Currency Exchange until the end of fiscal 2004.
ADR of FETEC is traded on OTC
Dalsvyaz is implementing ADR program of 1 level (Pink Sheets) since 2002.
Transfer agent is
The trading is on Over the Counter Market.
1 ADR is equal 30 common shares of Dalsvyaz OJSC.
The amount of shares outstanding is 79 406 units.
52 weeks max. price is $ 27.5.
52 weeks min. price is $ 25.
The last price is $26.1
The company issued financial results accordingly IAS since 2002 – www.dsv.ru the IR section.
For more information visit www.adr.com
FEEOY
24
The trading history of FETEC ADR
25
FEEOY July – October, 2004
0
2000
4000
6000
8000
10000
12000
14000
16000
07.01
.04
07.12
.04
07.21
.04
07.30
.04
08.10
.200
4
08.19
.04
08.30
.04
09.09
.04
09.20
.04
09.29
.04
10.08
.04
10.19
.04
10.28
.04
23,52424,52525,52626,52727,528
Volume
Price
$
Market Capitalization
Feb.04.
30 September 2003 – 23 September 2004,
million USD.
115 116
133
147
157
145
133125
106
126
140
Sep.03. Okt.03. Nov.03. Dec.03. Jan.04. Apr.04. May04. Jun.04. Jul.04. Augг.04.
26
Sep.04.
Market cap as of September 30, 2004 increased to $140 million USD or 15% compared to September 23, 2003.120
The Increasing of International Ratings
The Rating of Corporate governance of Standard & Poors
The Credit Rating of Fitch Ratings
5.3
5.8
2003 2004
Fitch Ratings increased the long run and credit ratings of Dalsvyaz from B- forecast “stable” to “B” forecast “positive”.
The increasing of rating is because of: - strong position of Dalsvyaz at the Far East region; - accountability to the main shareholder Svyazinvest OJSC; - improvement of financial results.
The increasing of corporate governance rating to 5.8 is because of:
- continuous increasing of quality of corporate governance of the Company;
-the increasing of number of independent directors in the Board of Directors to 4 persons;
- the creation four committees with Board of Directors;
-the Code of corporate governance took place.
В - В -
В
2002 2003 2004
27
Contents
28
Financial Summary
Financial Results of the 9 Months 2004
Detailed Financial Results of the 9 Months 2004
Dynamics of 2004 Quarter Results
FETEC at the Capital Markets
Guidance for 2004
Guidance to 2004
29
5,3
6,8
8,9
2002 2003 2004
Revenue, billion rubles
2002 2003 2004
932 981
1 260
Income, million rubles
2002 2003 2004
0.1 0.2
1.1
Net Income, billion rubles
Including Income from the selling of share of
Primtelefon and DVSS-900 (mobile companies)
IR Contacts
30
Questions?
Investor Relations Department“Far East Telecommunications Company” OJSC
Svetlanskaya St., Vladivostok,Russia 690950
Тel.: +8 (4232) 208-500, ext. [email protected]
www.dsv.ru