Rostelecom posts 9M 2009 Net Profit of 3.261 billion Roubles

Russian fixed line telecom provider, Rostelecom, has posted a 9M 2009 net Profit of 3.261 billion Roubles under IFRS.

The bottom line is down 72% year on year, with OIBDA down 19.5% year on year to 9.495 billion Roubles, on the back of Revenues of 48.764 billion Roubles, down 0.3% year on year.

Rostelecom attributed the result to a sharp downturn in demand which saw leased line service revenues fall by 8%, domestic long distance calls down 7% and outgoing international calls down 14%. This was mitigated marginally by revenues from data and intelligent network service rise 1.8 times, with new and value added services increasing by 19%.

The company also noted the continued migration of long distance services from fixed line to mobile networks.

Sergey Vasin, analyst at IFC Metropol, said the results weren’t surprising, and reflected currency volatility and the economic downturn, with growing internet revenues the only upside.

“If we compare the results with the report for the first six months, we will see that revenue growth slowed down dramatically in Q3.

The only source of revenue that did well is Internet access. These revenues more than doubled over the past year. Rostelecom achieved better results here because the Internet is becoming increasingly popular in remote regions while broadband is not available there. However, just this one source of revenues would not be sufficient to keep the entire company growing.

The profitability of the company is declining as well, but that’s mostly due to the devaluation of the Rouble in 2009. Some of Rostelecom’s spending is in foreign currencies – mostly payments to foreign operators. As the Rouble rate was falling, these expenditures exceeded the revenue growth and caused a decline in profitability.

However, such results will hardly surprise the market. Basically, they match analysts’ forecasts, because the company has already released its RAS (Russian Accounting Standards) report for the first nine months of 2009. Moreover, most people pay little attention to the results of Rostelecom per se, as the main questions is still the reorganization of Svyazinvest and possible coefficients for exchanging the shares of regional operators for those of Rostelecom.