2002 annual report of Southern Telecommunications Company PJSC

Transcription

1 2002 annual report of Southern Telecommunications Company PJSC

2 Structure of the report * General information about UTK PJSC * The Company governing bodies * Main corporate events of the year * The Company s organizational framework * Personnel policy * Position of the Company in the telecommunications sector * The Company s operating results * Distribution of the Company s retained earnings * Report of the Auditor * Report of the Company s Auditing Commission * Priority trends of the Company s activity * Strategic goals 2

3 General information about UTK PJSC Tel. +7(8612) Registered by the Act of the Krasnodar City Registration Board 494 A series by the Act of the Head of the Krasnodar City Administration 186-P of 20 May 1994 Seat: 66, Karasunskaya Str., Krasnodar 3

4 General information about UTK PJSC The Company s Auditor Ernst and Young Vneshaudit CJSC Location 20/12, Podsosenskiy per., Moscow Phone: (095) License: Central Certifying and Licensing Auditing Commission of the Ministry of Finance of the Russian Federation оf

5 General information about UTK PJSC The Company s Registrar CJSC «Registrator svyaz» Location 27, Presnenskiy Val St., Moscow License Issued by Federal Commission on Securities Market of the Russian Federation оf

6 General information about UTK PJSC Charter capital Size RUR 1 bln 297 mln 779 ths Common registered uncertificated shares 2 bln 960 mln 512 ths 964 shares Preferred registered uncertificated shares 972 mln 151 ths 838 shares Par value: RUR

7 General information about UTK PJSC Distribution of UTK PJSC shares among the shareholders 100% 80% Juridical persons Natural persons 60% 40% 20% 0% 88,7 82,91 11,3 17,

8 General information about UTK PJSC Share capital structure OJSC "Investitsionnaya Kompaniya Svyazi" ("Svyazinvest") 38% "ING BANK EVROASIA ZAO" CJSC 11% "Depository and Clearing Company" CJSC 13% "ABN AMRO BANK A.O." CJSC 5% CB "J.P. Morgan Bank International" Ltd. 4% Other 26% "Branswick UBS Warburg Nominees" CJSC 3% 8

9 General information about UTK PJSC UTK PJSC shares are used when calculating official stock market indices AK&M Composite Index AK&M Branch Index RTS Index S&P/RUX Index S&P/RUX - Telecom 9

10 General information about UTK PJSC Dynamics of the main quotes of the Company s shares 350,0 600,0 300, ,0 250,0 RTS Index 400,0 200,0 300,0 150,0 100,0 50,0 0,0 03,01, ,01, ,02, ,03, ,04, ,04, ,05, ,06, ,07, ,07, ,08, ,09, ,09, ,10, ,11, ,11, ,12, ,01, ,02, ,02, ,03, ,04, ,04, ,05,2003 mln USD RTS Index Capitalization 200,0 100,0 0,0 10

11 General information about UTK PJSC ADR program ,50 3,55 3,63 3,40 3,38 3,58 3,15 2,93 2,92 2,65 3,15 3,61 3,61 3,61 3,61 3,61 3,61 3,61 3,61 3,88 3,85 3,55 3,45 3,91 4,65 4,66 3,80 4,00 4, January 01 February 01 March 01 April 01 May 01 June 01 July 01 August 01 September 01 October 01 November 01 December 01 January 02 February 02 March 02 April 02 May 02 June 02 July 02 August 02 September 02 October 02 November 02 December 02 January 03 February 03 March 03 April 03 May 03 Capitalization, ths USD ADR price, USD 11

12 The Company s governing bodies Board of Directors 48 meetings were held 164 resolutions were considered and passed Main areas of activity: Financial and economic activity Financing new corporate developments Corporate restructuring Analysis of the efficiency of UTK PJSC shareholding in other companies Approval of dividend pay schedule Consideration and approval of business s and contracts 12

13 The Company s governing bodies Management Board 31 meetings were held 218 resolutions were considered and passed Main areas of activity: Financial and economic activity Capital construction Development and approval of the investment program Determination of the priority development trends Approval of the main documents regulating the Company s principal activity Accounts receivable and measures on their reduction Socioeconomic development 13

14 The Company s governing bodies The Company s Auditing Commission 2 meetings were held and 2 audits of financial and economic activity were performed Auditing Commission s terms of reference provide for: Checking data adequacy in the Company s reports and financial documents Revealing facts of infringements of accounting standards and procedures on submission of financial reports designated by the legal acts of the Russian Federation Checking the observance of legal regulations on taxation Evaluating economic expediency of economic and financial transactions of the Company 14

15 The Company s organizational framework UTK PJSC organizational framework General Shareholders Meeting Board of Directors Management General Director Board General Directorate Branches ( key activity 10 branches) Branches ( interregional 3 branches) Electrosvyaz of Adygeia Republic Svyazinform Astrakhan Region Volgogradelectrosvyaz KabBalktelecom Electrosvyaz Kalmykia Republic Kubanelectrosvyaz Rostovelectrosvyaz Sevosetinelectrosvyaz «Yugtaksofon» «UPC» «CNT» Karachaevo-Cherkesskelectrosvyaz Electrosvyaz Stavropol Territory 15

16 The Company s organizational framework The main functional blocks of UTK PJSC General Directorate s organization framework General management Economics Finances Accounting Technological Personnel control (HR issues) Investment and construction Marketing Corporate governance Legal Internal audit Security Administrative Public relations 16

17 Personnel Policy Effective usage of the existing intellectual potential of the Company % 100 Realization of the principle of professional knowledge conformity with position held 75,5 78,9 72,5% 85,8 89,3 83,9% Carrying out the unified policy on recruiting, training and professional development of the personnel Provision with specialists with higher education Provision with specialists with specialized secondary education Average in Svyazinvest OJSC 17

18 Main corporate events About the Company s reorganization - On May 17, 2002 Anti-Monopoly Ministry gave the permit for reorganization. - On August 15, 2002 FCSM of Russia registered the issue of additional securities in connection with reorganization. - On July 01, 2002 the merged companies registers were transferred to the single registrar CJSC Registrator-Svyaz in accordance with established procedure. - The Company s creditors were informed in proper time (December January 2002). - All the necessary actions dealing with redemption and cancellation of shares were carried out (January - February 2002). - All the necessary measures aimed at minimizing the risks related to reorganization were carried out. - In October 2002 licenses for provision of telecom services by the regional entity were obtained. - On October 31, 2002 an entry was made in the Common state register of juridical persons on cessation of activities of the merged companies. All the merging companies lost their legal status of juridical persons and became branches of Southern Telecommunications Company PJSC. Since then the single regional entity operates in the territory of the Southern Federal District. - On October 31, 2002 outstanding shares of the merged companies were exchanged for shares of new issuances of "Southern Telecommunications Company" PJSC in accordance with the exchange ratios. - On December 20, 2002 the report on the results of the securities issuance was registered by FCSM of Russia. 18

19 Main corporate events Approval of the Company s budget for 2002 Description Unit 2001 Actual 2002 On year change,% Increase in number of basic telephone sets Sets ,52 Length of long-distance telephone channels Ths ch/km 1 459, ,8 101,95 Average number of lines lines ,37 Sales revenue Ths RUR ,99 Revenues from value-added services Ths RUR ,50 Pre-tax profit Ths RUR ,66 Earnings per 1 line RUR ,22 121,68 Pre-tax profit per 1 line RUR ,66 159,59 Earnings per 1 employee RUR ,81 Pre-tax profit per 1 employee RUR ,51 Number of lines per 1 employee lines 66,9 71,91 107,49 Average number of employees on pay-roll people ,26 Average salary RUR ,1 123,9 Wages fund Mln RUR 1 997, ,6 120,7 Volume of capital investments Mln RUR 19 Ths Annual General 231,5 Shareholders Meeting 365,5 of UTK 157,88 PJSC Number capacity put into operation 1 763, ,5 201,72

20 Main corporate events Corporate governance score and credit rating On December 27, 2001 the international rating agency "Standard & Poor's" assigned its triple-c-plus long-term local and foreign currency corporate credit ratings to Southern Telecommunications Company PJSC. The outlook is stable. On April 2, 2003 the international rating agency "Standard & Poor's" raised long-term corporate credit rating of Southern Telecommunications Company PJSC to "B-" from "CCC+". Component of CGS Ownership structure and influence Financial stakeholder rights & relations Financial transparency and information disclosure Board structure and process Company SibirTelecom VolgaTelecom Dalsvyaz Uralsvyazinform UTK PJSC North-Western Telecom CenterTelecom Scores 20 5,5 6,3 4,7 4,4 Rating В В В- В-/В B- CCC CCC Outlook Stable Stable Stable Stable Stable Stable Stable Agency Fitch S&P Fitch S&P/Fitch S&P S&P S&P On February 12, 2003 "Southern Telecommunications Company" PJSC was assigned corporate governance score (CGS) of "CGS- 5.2" by international rating agency "Standard & Poor's". "Standard & Poor's" believes that governance practices at "UTK" PJSC are improving rapidly.

21 Main corporate events Participation in road-shows, major exhibitions and conferences «CeBit», Germany «SecurExpo», Krasnodar «Infocom», Moscow «Svyaz-Expocomm», Moscow General information and news on the official web-site of the Company 21

22 Position of the Company in the telecommunications sector Position of the Company in the telecommunications sector "UTK" PJSC 45 51,4 In 2002 the telecom market of the Southern Federal District amounted to RUR 22.6 bln. 0% 20% 40% 60% 80% 100% UTK PJSC revenue share in Svyazinvest OJSC revenue structure ,3 10,1 "UTK" PJSC 0% 20% 40% 60% 80% 100% 22

23 Position of the Company in the telecommunications sector UTK PJSC share in the telecom market of the Southern Federal District by kinds of services Total 51,4 45-6,4 Value-added services ,0 Long-distance telephony ,0 Local telephony ,0 0% 50% 100% 0% 50% 100% "UTK" PJSC 23

24 Financial and economic performance Structure and dynamics of balance sheet RUR ths accounts Assets ,7 1992, , ,5 +25% 2636,80 16% Current assets 15% 84% Non-current assets 13830,66 85% Non-current Assets Current Assets Fixed assets Other non-current assets Inventories Accounts receivable Cash and cash equivalents Other current assets ,9% +32,3%

25 Financial and economic performance Structure and dynamics of balance sheet RUR ths accounts Liabilities ,7 +25% 4073,16 31% 16467,5 6218,89 38% 69% 62% 9081, ,57 Liabilities Capital and Reserves Liabilities Capital and Reserves Long-term liabilities Short-term liabilities ,7% +12,9% Charter capital and reserve funds Retained earnings of the previous years Retained earnings of the reported period

26 The Company s operating results Capital investments, RUR mln 4879,8 3556,5 3571,6 +0,42% 1762,2 +102,67% +36,63% 1000 actually actually

27 The Company s operating results 32 35, , , , 6 Capital expenditures for the year 2002 Capex breakdown in terms of project types % 20% 40% 60% 80% 100% Expansion New construction Reconstruction Technical reequipment 27

28 The Company s operating results 74 77, 8 2, , 6 10 Capex breakdown in terms of kinds of services % 20% 40% 60% 80% 100% Local telephony Value-added services Long-distance telephone Other 28

29 The Company s operating results Capital investments 600 Number capacity put into service, ths 513,3 Average number of lines, ths lines , ,5 231,5 374,2 3199,3 3211,1 +61,7% +4,76% +2,38% +37,2% 3065,3 +0,37% +5,4% 3000 actually actually actually actually Production capacity 29

30 The Company s operating results Main indices of network development Growth of the length of fiber-optic communication lines, ths km ,9 686,9 627,4 actually +2,7% actually +192% Growth of the length of long-distance telephone channels, ths channel\km ,3 actually 1724,7 1629, ,8+11,7% +9,5% +5,8% actually 2001г. 2002г. 2003г. Increase in the number of outgoing automatic long-distance channels, channels actually ,9% +19,2% -6,2% actually 2001г. 2002г. 2003г.

31 The Company s operating results Main indices of network development Increase in the number of basic telephones, ths sets 244, ,6 171,6 165,9-3,32% +8,01% +47,4% Installed capacity, ths lines 0 actually actually 2001г. 2002г. 2003г ,9% +8,6% 3000 actually actually 2001г. 2002г. 2003г. 31

32 The Company s operating results Installed capacity, ths Kubanelectrosvyaz Rostovelectrosvyaz Volgogradelectrosvyaz Electrosvyaz Stavropol Territory Svyazinform Astrakhan Region KabBalktelecom Sevosetinelectrosvyaz Karachaevo- Cherkesskelectrosvyaz Electrosvyaz of Adygeia Republic Electrosvyaz Kalmykia Republic Installed capacity Equipped capacity 32

33 The Company s operating results Main indices of network development Equipped capacity level, % ,06 95,02 93,42 91,34-1,6 Specific weight of digital exchanges,% ,32 38, ,52 +7,1 75 Urban TN Rural TN TOTAL 0 Urban TN Rural TN TOTAL

34 The Company s operating results Digitization rate of UTK PJSC branches networks according to 2002 results ,5 62,2 63,1 64,8 55,8 17,2 51,0 42,8 3,2 50,6 40,4 17,2 42,9 38,9 9, ,5 18,0 32,1 35,9 29,3 7,7 31,4 21,7 4,0 Urban TN, % Rural TN,% Ub d l 16,2 14,4 6,6 10,0 7,3 7,9 Sevosetinelectrosvyaz Svyazinform Astrakhan Region Electrosvyaz Stavropol Territory Kubanelectrosvyaz Volgogradelectrosvyaz Rostovelectrosvyaz KabBalktelecom Karachaevo- Cherkesskelectrosvyaz Electrosvyaz of Adygeia Republic Electrosvyaz Kalmykia Republic

35 The Company s operating results Main 2002 performance results Revenue, RUR mln 13267, ,9 8218, ,9 +0,9% +28,2% +25,9% Revenue from telecom services, RUR mln 13011, actually actually ,1% ,1% +29,6% 7000 actually actually

36 The Company s operating results Main 2002 performance results Costs, RUR mln ,3% +5,0% +20,4% Operating profit, RUR mln , actually actually 2001г. 2002г. 2003г ,4% +42,2% +24,9% actually actually 2001г. 2002г. 2003г.

37 The Company s operating results Main 2002 performance results Pre-tax balance sheet profit, RUR mln Net profit, RUR mln ,79% +57,37% ,9 1648,4 1561,9-5,25% +59,72% 500 EBITDA, RUR mln actually 2001г. 2002г. 2234,6 actually actually ,8 3249,2-9,4% +45,4% +4,8% actually 2001г. 2002г. 2003г. Return on equities according to 2002 performance results amounted to ruble per share actually 2001г. 2002г. actually

38 The Company s operating results Main 2002 performance results , ,8 26,98 19,55 23, ,73 20,3 32,76 12, , Kubanelectrosvyaz Rostovelectrosvyaz Volgogradelectrosvyaz Electrosvyaz Stavropol Territory Svyazinform Astrakhan Region Sevosetinelectrosvyaz KabBalktelecom Karachaevo- Cherkesskelectrosvyaz Electrosvyaz of Adygeia Republic Electrosvyaz Kalmykia Republic EBITDA ACTUALLY 2002, RUR ths EBITDA margin ACTUALLY 2002, % 38

39 The Company s operating results Main 2002 performance results Source: data reported by the companies * Preliminary data CenterTelecom Uralsvyazinform SibirTelecom VolgaTelecom Revenue, RUR mln UTK North-Western Telecom Net profit, RUR mln Dalsvyaz

40 The Company s operating results 2002 Svyazi nvest O JSC 2002 "UTK " PJSC 2001 "UTK " PJSC 47, 9 54, 3 56, 6 1, 7 0% 20% 40% 60% 80% 100% 4, 7 1, 5 1, 9 2, 0 5, 5 5, 2 0, 4 0, 3 39, 1 31, 2 29, 3 7, 0 6, 5 3, 8 0, 8 0, 1 0, 2 UTK PJSC revenue structure by types of telecom services Domestic and international long-distance telephony Wired radio Document communication+value-added services Wireless radio communication Urban telephony Rural telephony Radio communication, TV and radio broadcasting 40

41 The Company s operating results UTK PJSC revenues from value-added services Revenues from value-added services, RUR mln ,3 305,4 +58,4% +37,7% 221,8-0,6% actually actually 2001г. 2002г. 2003г. Share of value-added services, % Provided traffic capacity, Gb ,5% +61,6% actually actually 2001г 2002г. 2003г ,5 2,7 2,95 2,9-0,05% +7,4% +20,7% actually actually 2001г. 2002г. 2003г.

42 The Company s operating results 2002 operating costs structure 31,8 0,4 11,2 9,9 11,3 2,4 14,6 16,8 1, ,2 0,3 11,4 10,5 11,3 2,3 13,7 16,8 1, % 20% 40% 60% 80% 100% Wages and salaries Payments to "Gossvyaznadzor" Social expenses Depreciation Material expenses Electricity charges Payments to "Rostelecom" Other costs Taxes 42

43 Personnel policy Labour and salary, improvement of management structure Average salary, RUR Average number of employees on payroll, employees ,6 3642,9 4515,1 +39,99% +12,95% +13,7% ,2% ,2% ,4% 3000 actually actually actually actually

44 The Company s operating results Main indices of business efficiency Tariff revenue per 1 line, RUR actually 71,91 66, ,34% +0,71% +22,9% actually Number of lines per 1 employee, lines 78,6 75,5 +12,86% +4,1% +4,99% Earnings per 1 employee, RUR actually ,1% actually ,5% +30,2% Cost price of 100 rubles of earnings, RUR 73,7 74,7 71,5 71,08 +4,4% +1,35% -4,8% 60 actually actually actually actually

45 The Company s operating results The Company s net assets 1. Net assets (RUR ths) 2. Authorized capital (RUR ths) 3. Reserve fund (RUR ths) 4. Net assets/authorized capital ratio (line.1/line.2) (%) 5. Net assets/sum of authorized capital and reserve fund ratio (line.1/(line.2+line.3)) (%) As at ,9 687,9 As at ,9 765, RUR mln 45

46 Distribution of the Company s retained earnings Main directions of retained earnings allocation Covering losses of the past years RUR mln Capital investments 58 RUR mln 376 RUR mln RUR mln Dividend payments Creation of reserves 151 RUR mln 428,5 RUR mln RUR mln Balance of retained earnings 378 RUR mln 2001 Total : RUR mln 16,0 RUR mln 88,2 RUR mln RUR mln

47 Distribution of the Company s retained earnings Planned directions of retained earnings distribution in 2003 Creation of reserves 0,1% Dividend payment 25,4% Increase of share capital 74,5% 47

48 Report of the Auditor Auditor s conclusion of ERNST AND YOUNG VNESHAUDIT CJSC on the statutory accounting reports of UTK PJSC for the year 2002 «In our opinion, in 2002 accounting procedures in respect to preparation of the statutory accounting reports of Southern Telecommunications Company PJSC, defined by the words as at the end of the reported period taking into consideration indices of the merged companies and For the reported period, meet the requirements of the Federal Law No 129-FZ as of 21 November 1996 «On Accounting», and the above mentioned statutory accounting reports are trustworthy and present, in all material respects, the financial situation of "Southern Telecommunications Company" PJSC as of 31 December 2002 and its financial and economic results for the period from 1 January to 31 December 2002 inclusive». Without making reservation in our report we would like to pay your attention to the section 4 Analysis and assessment of the balance structure of the Exatory notes describing surplus of short-term liabilities over the current assets of "Southern Telecommunications Company" PJSC amounting to RUR ths as of December 31, 2002, as well as s of the management in relation to this working capital shortage. 48

49 Report of the Company s Auditing Commission In the opinion of the members of the Auditing Commission statutory accounting reports of Southern Telecommunications Company PJSC are prepared in the way to present, in all material respects, the assets and liabilities of "Southern Telecommunications Company" PJSC as of 31 December 2002 and its financial results for the year 2002 in accordance with the normative documents of the Ministry of Finance of the Russian Federation (Orders 34n of , 43n of , 60n of , Amended and Restated)». 49

50 The Company s budget for 2003 Description Increase in number of basic telephone sets Measure unit Sets Actually Plan On year change,% 147,4 Length of long-distance telephone channels Ths ch/km 1523,2 1724,7 113,2 Average number of lines lines , ,2 105,4 Sales revenue Ths RUR ,0 125,9 Revenues from value-added services Ths RUR ,1 Pre-tax profit Ths RUR ,0 Earnings per 1 line RUR 3279,8 3918,0 119,5 Pre-tax profit per 1 line RUR 715,21 549,66 76,9 Earnings per 1 employee RUR , ,0 130,2 Pre-tax profit per 1 employee RUR , ,0 83,7 Number of lines per 1 employee Lines\emplo yee 75,5 78,61 104,1 Average number of employees on pay-roll people ,8 Average salary RUR 5099,6 5796,4 113,7 Wages fund Mln RUR 2 603, ,2 115,1 Volume of capital investments Mln RUR 3 571, ,8 136,6 Number capacity put into operation ,1 50

51 Priority trends of the Company s activity Value-added services Introduction of new technologies and services in conformity with the trends of telecom market development: by the end of this year the entire range of salable services will have become available in UTK PJSC licensed territory Development of common data networks (multi-service networks) in the Southern Federal District: in integration of network resources and creation of a single control center Introduction of universal prepaid service cards: in 2003 the Krasnodar Territory, in 2005 the licensed territory of the mega-regional entity Technical implementation of interregional roaming of services for all UTK PJSC customers by the year 2004 Growth of value-added services share in total revenue structure up to 12 percent in

52 Priority trends of the Company s activity Capacity of UTK PJSC multiservice networks 200 Number of upgraded nodes % 0 actually 2002г. 2003г. Increase in number of assigned ports ,7% Increase in number of Dial-up ports ,5% 0 actually 2002г. 2003г. 0 actually 2002г. 2003г. 52

53 Priority trends of the Company s activity Value-added services Provided traffic capacity, Gb ,9% 0 actually 2002г 2003г. 4 Share of VAS, % 2,9 Revenues from value-added services, RUR mln 3, ,6п ,5% 0 actually 2002г. 2003г. 0 actually 2002г 2003г. 53

54 The Company s development prospect Strategic goals Annual increase of sales volume by no less than 20 percent and growth of the Company s capitalization per one line up to the average value for telecom operators of Eastern European countries by 2006 Increasing the SFD telecom market share up to no less than 51percent by the year 2006 Technical reequipment and development of telecom networks at all levels, achieving digitization rate of 67 percent by 2006 Developing digital primary networks and providing each region with a digital channel by 2006 Creating common information area in the Southern Federal District and its integration with global information community Providing for realization of the federal Program Electronic Russia Executing the program of restructuring the merged telecom operators in all spheres till 2006 Developing market-oriented economically feasible tariff policy on the basis of separate expense accounting of telecom services production Annual increase of operating profit per one line and per one employee by no less than 18 percent at the expense of step-by-step reduction of operating costs during the process of technical reequipment Developing and approving the Code of corporate conduct in the current year Raising the level of provision with specialists with higher education up to 82 percent by 2006 Introducing ERP by 2006 Upgrading the Company s managerial effectiveness Improving the well-being of telecommunications workers 54

55 Thank you for your time!