For Press

Russian telecom holding ER-Telecom has summed up the performance results for 2011 based on immediate reporting prepared according to the IFRS principles. ER-Telecom revenues for the year totaled RUB 9,688 million, having grown by 43% compared to 2010. The subscriber base as of the end of the year exceeded 3.9 million. In 2011 the company carried out 15 start-up projects, having extended the geography of operations to 42 Russian cities from 27 in 2010.

Key financial highlights

 - In 2011 the revenues totaled RUB 9,688 million net of VAT. A year earlier the revenues totaled RUB 6,792 million. The growth to 2010 is 43%. A year earlier the revenue growth rate amounted to 45%. The average revenue growth rate in the last 5 years is 117%.

- The reduction of project margin was dues to the fact that ER-Telecom entered the active investment stage – the rollout of Urban Universal Telecom Networks from scratch. In 2011 the company started network construction and rendering of services in 15 new cities, in 2010 – in 10 cities, including Saint-Petersburg and Yekaterinburg, Ufa and Rostov-na-Donu.

Financial results	2011	2010	Change to the prev. year	2009	Change to the prev. year
1	2	3	4=2/3	5	6=3/5
Revenue and incomes
Revenue net of VAT (RUB mln.)	9 688,0	6 791,5	43%	4 672,0	45%
EBITDA (RUB mln.)	-814,9	1 151,1	-	1 149,7	0%
EBITDA margin (%)	-8%	17%	-	25%	-33%
Net profit (RUB mln.)	-2 083,1	225,2	-	334,8	-33%
Net margin (%)	-22%	3%	-	7%	-57%

Key operational highlights

In 2011 the number of homes passed grew 55% vs. 2010 to 6.7 million households compared to 4.3 million a year earlier.

As of January 1, 2012, the total number of the company’s subscribers amounted to 3,912 thousand, up 1,195 thousand or 44% to 2010. The number of cable TV users reached 1,747 thousand by the end of 2011, up 529 thousand or 43% to 2010. The number of internet users grew to 1,899 thousand, up 535 thousand or 39%. The number of internet users grew to 1,899 thousand, up 535 thousand or 39%. About 265 thousand subscribers take up fixed-line telephony, up 98% to the preceding year.

In 2011 broadband revenues amounted to RUB 6,166 million net of VAT (64% in the general revenue structure), cable TV revenues – to RUB 2,868 million net of VAT (29% in the general revenue structure), telephony revenues – to RUB 650 million net of VAT (about 7% in the general revenue structure).

The average monthly revenue per user (ARPU) amounted to RUB 285 in 2011, including 18% VAT. APRU growth was due to the scheduled increase of subscriber fees for cable TV and telephony in line with overall market trends and the introduction of new services plans for internet services with improved consumer quality.

Operating results	2011	2010	Change to the prev. year	2009	Change to the prev. year
1	2	3	4=2/3	5	6=3/5
Homes passed (thousands households)	6 729	4 328	55%	3 331	30%
Total subscribers (thousands)	3 912	2 717	44%	2 012	35%
Cable TV
Subscriber base, thousands	1 747	1 219	43%	973	25%
ARPU with VAT	189	183	3%	166	10%
Revenues (RUB 000 net of VAT)	2 867 960	2 052 985	40%	1 582 571	30%
Broadband
internet
Subscriber base, thousands	1 899	1 364	39%	969	41%
ARPU with VAT	369	362	1%	348	3%
Revenues (RUB 000 net of VAT)	6 166 011	4 356 653	42%	2 839 420	53%
Telephony
Subscriber base, thousands	265	134	98%	70	91%
ARPU with VAT	318	346	-11%	343	3%
Revenues (RUB 000 net of VAT)	650 922	374 540	74%	227 042	65%

Movement towards the strategic objective. Key events

As you may remember, in the beginning of 2010 ER-Telecom announced the beginning of the company’s leadership strategy implementation, aimed at achieving not less than 20% market share in the internet and cable TV market in Russia by revenues to 2014. To attain this goal the company’s analysts had monitored and analyzed for 5 years the markets of 90 Russian cities with population over 200 thousand people. This information was used to work out the “Development Strategy to 2014”, which required additional investments of about USD 500 million apart from the company’s own resources intended for reinvestment into the development.

According to the plan, the strategy is financed from internal and raised funds:

- In October 2010 investment fund Baring Vostok Capital Partners (BVCP) became one of ER-Telecom shareholders with a 10% stake.

- In February Russian Sberbank extended to the company a loan facility of RUB 6 billion.

- The main shareholder, PFIG Holding, also takes active part in the strategy financing.

“Today we can state that the strategy implementation keeps the scheduled pace and fully complies with our announced plans. In 2011 we have completed the start up program, having launched network rollout in 15 new cities and having opened 15 new branches, respectively. Successful implementation of the leadership strategy is largely due to the fact that the company works with professional investors, retaining management team and preserving and developing the necessary competencies”, explains Andrey Semerikov, the General Director of CJSC ER-Telecom Holding.

In 2010 ER-Telecom Holding was the first in Russia to introduce in 20 large cities a triple play package, comprising cable TV + internet + telephony. In the last two years bundled offers became a key factor of the company’s growth. Owing to the rollout of brand new optical fiber networks in each city and provision of better quality services at the best price ER-Telecom is confidently growing its shares in local markets.

ER-Telecom was awarded international evaluation from authoritative auditing and consulting agency Deloitte, having occupied the 11^th position in Top 500 Deloitte Technology Fast 500 EMEA rating, having outpaced other Russian and the CIS companies included into the rating.

Plans for 2012

In 2012 ER-Telecom will continue active development of local markets of 42 Russian cities: expansion of network coverage, connection of new subscribers and market share growth. The main growth drivers in 2012 include last year regional expansion and high brand awareness in the cities. With account of these factors by the end of 2012 revenue will grow by almost 50% to over RUB 14 billion.

“According to our forecasts in 2012 the growth of broadband market will be around 9%, whereas the growth of pay TV market will stay at 13% per year. Russian pay TV and broadband internet are moving towards their saturation, resulting in year on year slowdown in growth rates. The growth of overall Russian market is driven by regions, which account for 90-95% of new connections in 2011”, notes Andrey Semerikov.