Svyazinvest: 2003 results and 2004 key objectives April 2004 Evgeny Yurchenko, Deputy Director...
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Transcript of Svyazinvest: 2003 results and 2004 key objectives April 2004 Evgeny Yurchenko, Deputy Director...
Svyazinvest: 2003 results and 2004 key objectives
April 2004
Evgeny Yurchenko, Deputy Director General
Svyazinvest
2 APRILAPRIL 2004, 2004, LONDONLONDON
Svyazinvest holds a leading position in the Russian fixed-line market
Company JSC Svyazinvest Foreign shareholders
Other
CenterTelecom 51% 8% 41%
North-West Telecom 51% 14% 35%
VolgaTelecom 51% 17% 32%
South Telecom 51% 10% 39%
Uralsvyazinform 53% 13% 34%
Sibirtelecom 51% 7% 42%
Dalsvyaz 51% 16% 33%
Rostelecom 51% 27% 22%
State75% - 1 share
Mustcom25% + 1 share
JSC Svyazinvest
7 mega-regionals
JSC Rostelecom MGTSOther
Controlling stake
Blocking stake
Company profile:
• Svyazinvest foundation – 18 September, 1995
• Sale of Svyazinvest stake to Mustcom – July 1997
• Consolidation of companies – 72 regional telecom operators were merged into 7 mega-regionals in 2000-2002
Share capital (voting stock)
3 APRILAPRIL 2004, 2004, LONDONLONDON
JSC North-West Telecom 3.4 m lines in service market cap. $561 mn
JSC CenterTelecom 5.8 m lines in service market cap. $782 mn
JSC South Telecom 3.4 m lines in service market cap. $376 mn
JSC Dalsvyaz 1.1 m lines in service market cap. $157 mn
JSC Sibirtelecom 3.5 m lines in service market cap. $761 mn
JSC Uralsvyazinform 3.3 m lines in service
market cap. $1 518 mn
JSC VolgaTelecom 4.0 m lines in service market cap. $970 mn
Consolidation of telecom operators enabled Svyazinvest to create economically viable, competitive companies
In the result of consolidation, mega-regionals:
became more investor attractive reduced the cost of borrowed funds optimized equipment purchase
4 APRILAPRIL 2004, 2004, LONDONLONDON
2002 2003 (estimate)
Revenue per line, RUR, th 4,279 5,06 +18,6%
Revenue per employee, RUR, th 330,1 430,3 +30,4%
Lines per employee 77 85 +9,9%
Profit per line, in thousands of RUR 1,18 1,32 +18,2%
Domestic/international traffic per line, min 445,9 488,2 +9,5%
Profit margin, % 35,7 35,7
2003 Svyazinvest major economic indicators
30,8
39,5
31,3
21,7
35,7 35,7
92,2
70,5
119,8
88,5
151,0
111,6
2001 2002 2003 (estimate)2001 2002 2003 (estimate)
Revenue CostsSales profit, RUR bnProfit margin, %
RU
R b
n
Revenue and costs* Sales profit*
26,928,2
Average number of lines
29,8
2001 2002 2003 (estimate)
Lin
es
mn
* data include JSC MGTS figures
5 APRILAPRIL 2004, 2004, LONDONLONDON
The holding company’s investment activity in 2003
2002 2003 2002 2003
Capital investments
Lines installedDomestic /
international channels deployed
Transmission lines rolled out
2002 2003
RU
R,
bn
Lines, mn
Chan-nels,
th
Km, th
Digitalization level – 43.1% against 37.46% in 2002.
Installed capacity – 33.4 mn lines against 31.26 mn lines in 2002.
Increase in main telephone lines – 1.5 m against 1.34 m in 2002.
Rural telephony: 302.3 thousand lines installed compared to 214.4 thousand lines in 2002.
Automatic exchanges upgrade – 676.5 thousand lines.
2002 2003 (estimate) 2002 2003 (estimate)
46,4
27,4
41,7
22,0
3,5
2,653,0
63,9 14,3
9,5
Roll-out of capital assets
RU
R,
bn
6 APRILAPRIL 2004, 2004, LONDONLONDON
Corporate reform
During 2003:
1. Svyazinvest in conjunction with the consulting firm developed a comprehensive Corporate Restructuring Program (CRP). The master plan of this program was approved by Svyazinvest management board in December 2003.
2. CRP Management Centers were set up at mega-regional companies; a number of meetings between Svyazinvest working group specialists, the consulting firm and specialists from every mega-regional company were held; development of master plans was launched.
Under the Corporate Restructuring Program, at every mega-regional company a CRP master plan based on the standard structure and recommendations on implementing Svyazinvest methodical documents will be developed.
Implementation of CRP master plans will improve asset management, reduce current costs, as well as enhance competitiveness and market capitalization of mega-regional companies.
7 APRILAPRIL 2004, 2004, LONDONLONDON
01/01/03 01/07/03 01/08/03
Residentialcustomers(including VAT)
Budget-fundedinstitutions(excluding VAT)
Businessorganizations(excluding VAT)
RUR
Monthly rate for urban fixed subscribersTariffs growth for local telephone services in 2003:
Urbantelephony
Rural telephony
Residential customers
29% 30%
Budget-funded institutions
22% 22%
Business organizations
21% 21%
Rebalancing of tariffs for telecom services
123
167 167
118
162 162
95
137 138
In 2003 tariffs for domestic long-distance calls for budget-funded institutions, business organizations and residential customers were brought to a similar level.
In 2004 Svyazinvest will carry on increasing tariffs for local telephone services to the level of economically feasible costs, inclusive of target profitability, as well as optimizing tariffs for international calls.
Average zonal tariff revision for domestic long-distance calls
Res
iden
tial
cu
sto
mer
s
Bu
dg
et-
fun
ded
in
stit
uti
on
s
Bu
sin
ess
org
aniz
atio
ns
+2,3%
-14,3%
+1,5%
-8,3% -10,3%
-25%Zones 1-4 Zones 5-7
8 APRILAPRIL 2004, 2004, LONDONLONDON
Tariffs for local telephone services compared to European telecom operators
Average monthly rate, US$
Average monthly rate in
Russia is still about 3 times
lower than in Central and
Eastern Europe, and is 5
times lower than in
Western Europe.
Average monthly rate at mega-regional companies amounts to $ 4.4
3,9
3,7
4,2
4,3
4,4
5,2
5,4
11,4
15.8
12,5
CenterTelecom
South Telecom
VolgaTelecom
Sibirtelecom
North-West Telecom
Urasvyazinform
Dalsvyaz
Cesky Telecom
TPSA
Matav
9 APRILAPRIL 2004, 2004, LONDONLONDON
Corporate governance rating of mega-regional companies (Standard & Poor’s)
Corporate governance ratings of 4 mega-regional companies assigned by S&P were above average ( 5 points out of 10);
Corporate governance ratings of 3 companies were upgraded;The holding company’s target for 2004 is to further improve its corporate governance,
meeting international standards.
Company Rating as of early 2003
Rating as of year end 2003
Change
JSC North-West Telecom 5,6 5,9 0,3
JSC CenterTelecom - 5,3
JSC South Telecom 5,2 5,6 0,4
JSC VolgaTelecom - 5,8
JSC Uralsvyazinform 6,0 6,1 0,1
JSC Sibirtelecom - 5,7
JSC Dalsvyaz - 5,3
JSC Rostelecom - 6,4
10 APRILAPRIL 2004, 2004, LONDONLONDON
Marketing Strategy
2004 key marketing objectives To strengthen company’s presence in the telecom market
To increase market share in certain segments
To increase company’s profitability by means of enhancing revenue per customer and expanding subscriber base
To build sustainably growing client-base through increasing customer loyalty
Work with allied operators
MRC’s marketing strategies Clear-cut system of marketing planning and accounting
Program of aggressive service promotion for each customer category
Regular marketing researches
Implementation of customer relationship management concept Improvement of client service
Transfer to unified billing system
Upgrade of sales and major corporate client servicing systems
11 APRILAPRIL 2004, 2004, LONDONLONDON
Data traffic through Internet, Tbyte Internet connections with PSTN access, min mn
Development of value-added services
113 250530
2150
3000
1,9
2,8
2002 2003 (estimate)
RUR bn
Revenues from Internet services GSM subscriber base of Svyazinvest cellular companies, thousand+47,3%
2000 2001 2002 2003 2004
Jan. 2003
July 2003
Dec 2003
479573
211
503
673840
1100
280
476
597
1018
4 313
6 850
2002 2003 2002 2003
Internet services development
the Volga region the Urals Siberia
12 APRILAPRIL 2004, 2004, LONDONLONDON
Credit ratings of mega-regional companies
Company Rating Outlook Agency
North-West Telecom В- Stable S&P
South Telecom В- Negative S&P
CenterTelecom CCC+
Stable S&P
VolgaTelecom В Stable S&P
Dalsvyaz В Positive Fitch
Uralsvyazinform В/ВB- Stable /Stable
S&P/Fitch
Sibirtelecom В+ Positive Fitch
Rostelecom В Positive S&P
13 APRILAPRIL 2004, 2004, LONDONLONDON
2003 Capitalization dynamics
In 2003 Svyazinvest calculated capitalization grew from $ 1.3 bn to $ 3.3 bn.
In 2003 MRCs aggregate capitalization increase was over 220%.
The best capitalization dynamics among Eastern European telecom companies.
+ 16%
+ 221%
+ 57%
50
100
150
200
250
300
350
04.01.03 05.03.03 04.05.03 03.07.03 01.09.03 31.10.03 30.12.03
Telekomunikacja Polska Cesky Telecom Aggregate MRCs RTS index
+ 16%
+ 221%
+ 57%
14 APRILAPRIL 2004, 2004, LONDONLONDON
2004 key objectives
Further increase of revenues through stepping up the amount of services offered and raising tariffs for local telephone services.
Production cost optimization, maintaining high profitability of Svyazinvest companies.
Implementation of new approaches to investment planning. Implementing provisions of the Code of Corporate Conduct across all mega-
regional companies. Development and implementation of measures under the Corporate
Restructuring Program of Svyazinvest subsidiaries to enhance company value and management efficiency.
Working out tariff plans for providing local telephone services to subscribers as a basic type of tariff setting.
Gradual increase of tariffs for local telephone services to the level of economically feasible costs, target profitability inclusive.
Continuing the revamp of the holding company’s human resources policy to meet current market challenges.
15 APRILAPRIL 2004, 2004, LONDONLONDON
Revenue per line – 6.0 thousand rubles (up 19% against 2003)
Profit per line – 1.6 thousand rubles (up 18.5% against 2003)
Profit margin – 35.8% (35.7% in 2003)
Investments – 54.6 bn rubles (up 17.7% against 2003)
Lines to be installed – 4.0 mn lines (3.46 mn in 2003)
A proportion of costs in revenues – 73.6% (73.9% in 2003)
151,0
186,4
111,6
137,3
39,549,1
1 2 3 4 5 6
RUR bn
2003 2004 2003 2004 2003 2004
Revenue Operating costs Sales profit
Svyazinvest 2004 target performance indicators*:
* 2003 estimated data.