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Investor presentation based on 1Q2006 financial results

Investor presentation based on 1Q2006 financial results. Disclaimer.

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Investor presentation based on 1Q2006 financial results

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  1. Investor presentation based on 1Q2006 financial results

  2. Disclaimer This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of JSC Comstar United TeleSystems (“Comstar UTS”) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The presentation is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Comstar UTS has not registered and does not intend to register any portion of the Offering in the United States of America or to conduct a public offering of any securities in the United States of America. Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events revenues or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “predict”, “could”, plan”, “project,” “will,” “may,” “should” and similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, growth in demand for our products; economic outlook and industry trends; developments of our markets; legal trends and the impact of regulatory initiatives; and the strength of our competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control and we may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the achievement of the anticipated levels of revenues, profitability and growth, cost and synergy of our recent acquisitions and restructuring, the timely development and acceptance of new products, the impact of competition and competitive pricing, the ability to obtain necessary regulatory approvals and the ability to fund our future operations and capital needs through borrowing or otherwise, the ability to successfully implement any of our business strategies, the ability to integrate our business and to realise anticipated cost savings and operational benefits from such integration, our expectations about growth in demand for our products and services, the effects of inflation, interest rate and exchange rate fluctuations, and our success in identifying other risk to our business and managing the risk of the aforementioned factors, the condition of the economy and political stability in Russia and the other markets of operations and the impact of general business and global economic conditions. Neither we, nor any of our respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. All information not separately sourced is from Comstar UTS data.

  3. Our Profile • Leading provider of integrated communications services in Moscow and Moscow region • A growth company delivering wide range of consumer services in the traditional and alternative fixed line segments • Controls access to last mile in Moscow and Moscow region through incumbent operator MGTS (68% of telephone lines in Moscow*) • Listed on LSE since February 2006 • Committed to best practice corporate governance and disclosure: • Three Board committees - Strategy, Appointments & Remuneration, and Corporate governance • Quarterly reporting • Launch of Enterprise Resource Planning (ERP) system • Establishment of Corporate Center in order to increase operating efficiency and streamline inter-segment sales *Source: Direct INFO

  4. Comstar UTS new brand strategy Corporate Centre • In May 2006, Comstar-UTS and MTS launched a re-branding campaign in order to create a unified brand as a basis for further convergence of telecommunication services. • Brand will address market and technology challenges such as fixed to mobile convergence • Brand will allow further exploring synergies among all telecom companies part of Sistema Telecom • Establishment a group level corporate center to streamline operations by exploiting synergies, benefiting from economies of scale, and integrating strategic, technological and marketing activities • Appointment of the new CEO and CFO Regional Triple-Play Launch • Launch of Stream and StreamTV in Tyumen region in second half 2006 as test model for bringing “Moscow Model” to the regions MTS/ Comstar UTS Wi-Fi Partnership • Roll-out of Wi-Fi services in cooperation with MTS • MTS users can pay for Wi-Fi with mobile phones over SMS service 2006 highlights

  5. Public Investors 35% 50%3 15% 48%2 52% 65%1 (54%) Branches: Volga region South region Moscow region 100% Others/Public1 28%1 (23%) Unitel Contrast Telecom Konversya Svyaz Overta Tyumenneftegazsvyaz Port Telecom City Telecom TVT Ukraine Astelit 7% (23%)4 Ownership Structure Update on MGTS Shares Purchase November 2005 - Sistematransferred 55.62% of MGTS common share capitalto Comstar UTS in exchange for152,241,100 Comstar UTS’ shares 1 Based on voting percentage (economic ownership in brackets). MGTS has preferred shares which are non-voting as long as dividends are paid. Ultimate stake is subject to outcome of mandatory offer to remaining minority shareholders 2 Sistema owns a 48% stake in MTU-Intel through its ownership in Sistema Mass-Media. The other 52% is owned by subsidiaries of Comstar UTS 3 Owned directly and through affiliates 4 Including preferred shares

  6. Our History Network reconstruction and digitalisation launched Eurobonds placement Privatisation Acquired by Sistema Founded Launch Payphones IPO on LSE Internet services NGN services launched ADSL launched Dial-Up Astelit Founded as Joint-Venture with Marconi Created acquired ISDN services launched Internet services Quality Award (Ministry of Communications) Free Phone-800 Founded as Joint-Venture with AT&T acquired Re-branding campaign ADSL launched Prepaid cards (Magic Phone, Discount, Travel) Tyumenneftegazsvyazacquired IN Services (Televoting, Call Centre) Construction of SDH network is completed Brand of the year EFFIE (Logic Line) Launch of operations Wi-Fi services launched Founded Dial-Up Residential ADSL launched Corporate broadband launched StreamTV launched Dial-Up Brand of the year EFFIE Founded 1882 1989 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Long history: main subsidiary established in 1882

  7. Map of Our Operations Sergiev Posad Obninsk Ivanovo Lipetsk Odessa Saratov Toliatty Stavropol Tymen Well positioned on the Moscow market. Penetrating the regions, offering new services. - subsidiaries of Comstar - United Telesystems

  8. Unified Strategy • Vertical and horizontal integration of Comstar UTS • Regional presence • Focus on profitable growth • Use of synergy potential for the combined business • Leverage cross-selling of universal products within the group • Coordinating work of technology dept and sales • Increasing market share

  9. A Uniquely Balanced Fixed-Line Business with Fast Growing Triple Play Potential Segments Main Brand Services Provided 2005 Revenue1($m) Key Value Drivers • Unified branding with MTS • NGN development • Further M&A and organic growth • Cross selling and bundling with MGTS Corporates/ Operators • Corporate voice/data • Corporate broadband • Interconnection • Numbering capacity 30% 3042 Alternative Fixed-Line 7% High- Value Residential • Residential broadband/dial-up • Residential Pay-TV • VoIP • Promote Triple-Play offer • Pay-TV (including PPV and VoD) • Broadband Internet (ADSL) • Leverage regional expansion (ADSL/Stream TV pilot in Tyumen) 7% 69 Traditional Fixed-Line • Regulated voice • VAS • Wholesale access • Interconnection • Digitalization of the network • 85% of copper lines – ADSL compatible • Controls access to last mile • Increase local tariffs to economic levels • Up-sell VAS (e.g. voicemail, caller ID) 63% 640 1 Including intercompany revenues of $105m. Percentage represents portion of respective segment revenues over total revenues before elimination of intercompany 2 Includes other revenues and recent acquisition for a total of $45m

  10. Growth potential FixedVoice Penetration PC Penetration Source: Pyramid Research, 3Q05 data Source: Pyramid Research, 3Q05 data Internet Penetration Broadband Penetration Source: Pyramid Research, 3Q05 data Source: Pyramid Research, 3Q05 data Well positioned in Favourable Market Conditions Note: Penetration in all charts calculated as % of households

  11. Capitalise on GDP growth and improving disposable income Continue to utilise strong brands and marketing expertise Employ strategy to address competition from Home Networks Provide high quality, innovative products and integrated customer service Utilise new corporate structure to promote cross-selling and bundling Triple Play Penetration Potential Increasing Triple-Play Penetration CAGR1 9.4%CAGR 13.7%CAGR 25.1%CAGR 30.4%CAGR Source: Pyramid Research (Nov 2005) for penetration. Penetration based on number of households 1 CAGR 2005E-10E based on number of households using the product/service

  12. Broadband Penetration Potential Internet Penetration (2005) Home Computers Penetration Level (2005) 100% = 3,728 households 48.0% Dial-up 50.9% not connected to the Internet 23.8% connected to the Internet 76.2% 1,939 householdswitha computer Broadband 49.1% 52.0% 1,478 households connected to internet Well positioned to capitalize on Moscow broadband market growth opportunity Source: Pyramid Research (Nov 2005) for penetration. Penetration based on number of households

  13. Moscow Fixed Line Market Development Source: Direct INFO Residential and Corporate segments demonstrate the fastest growth rates

  14. Moscow Fixed Line Market- Key Operators Moscow Telecom Market Share (Sales, 2005) Moscow Share of Lines (2005) Alternative Operators 32% Others28% 10.4% CentralTelegraph 11% 30% 68% Golden Telecom23% 18.2% Equant 8% Others¹31.2% Total: 6.2m Lines 28.6% Source: Direct INFO Moscow Broadband Segment Residential (Subscribers, 2005)3 Rostelecom19.5% Golden Telecom14.3% HomeNetworks/Others50.1% Equant, Central Telegraph, Corbina 6.4% 41.0% AKADO 4.1% Total Market: $3,566m2 Centel 4.8% Total: 610k Subs Source: Direct INFO Source: Direct Info Leading Position onMoscow Fixed Line Market 1 Includes more than 400 companies 2 Calculated based on RAS financials before intercompany eliminations 3 Includes 35k corporate subscribers

  15. Growth Profile 1 Revenue OIBDA $908m $359m 31 31% 26% 44% $695m 95 338 $250m 282 85 21% 22% 267 539 $250m $205m 99 167 413 78 102 85 151 126 Q1 05 Q1 06 (60) 2005 (58) 2004 2004 2005 Q1 05 Q1 06 Traditional Fixed-Line Alternatives Fixed-Line Traditional Fixed-Line Alternative Total OIBDA Acquisitions Sustainable organic revenue growth. OIBDA margin remaining stable y-o-y 1 OIBDA is a non-GAAP financial measure and is defined as operating income before depreciation and amortization.

  16. Impact from US$ exchange rate FY2005 FY2004 1Q2006 2Q2006 2Q2005 1Q2005 Tariffs in our traditional segment are denominated in RuR, while we reporting currency is US$

  17. Regulatory changes

  18. Summary Financial Results

  19. Alternative Segment : Residential Customers

  20. Alternative Segment: Business Customers & Operators 1 Average revenue per line for residential and corporate; average revenue per access node for operators.

  21. Triple Play Offering • “Triple play" = Voice + Broadband Internet + Digital TV • Broadband Internet • Monthly tariffs range from US $20 for 160 kBit/sec to US $45 for 7500 kBit/sec • Pay-TV • Monthly tariffs range from US $18 for 80 channels to US $49 for 87 channels. In addition, US $0.1 per 1 mBite of ADSL Internet • TV offering includes • Triple play offer • Monthly tariffs range from US $21 for 256 kBit/sec+ 49 channels to US $55 for 7500 kBit/sec+ 80 channels

  22. Subscriber Evolution Broadband Quarterly Subscriber Evolution (k) StreamTV Monthly Subscriber Evolution (k) x 5.5 Net SubscriberAdditions 37.8 29.6 24.5 50.9 33.8 On average 2,500 new subscribers a month

  23. Traditional Segment KPIs 1 Average Revenue Per Line for Residential and Corporate; Average Revenue per Access Node for Operators.

  24. MGTS Tariffs

  25. Segmental Operating Expenses Alternative Segment ($m) 1 Including 1,075 employees of operators, acquired at the end of 2005/1Q2006 Traditional Segment ($m)

  26. Capital Expenditure Development Capital Expenditures ($m) Comments 374 • Capex to Sales ratio is expected to decline in the medium to long term • MGTS network is expected to be fully digitalised by 2012 (according to the business plan, current level up to 40%) • All network development reconstruction is planned to be based on NGN technology, thus leapfrogging one generation in technology 258.1 229.1 18.1 CustomerInstallations 17.0 122.8 NetworkMaintenance & Development 140.8 129.5 122.4 10.2 4.8 48.0 54.3 New Technology/Projects 58.4 38.3 39.1 16.1 IT & Other 58.8 47.2 44.3 43.6 2002A 2003A 2004A 2005A 2006E Capex to Sales Ratio (%) Note: 2006/7 Capital expenditures per Company’s IPO prospectus

  27. Contacts Masha Eliseeva Head of Investor Relations Phone:+7 495 956 21 70 Cell: +7 495 997 08 52 E-mail: Eliseeva_MS@comstar-uts.ru Web-site: www.comstar-uts.com

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