Structure of operating expenses


RUB million FY 2011 FY 2010 %
change,
y-o-y
Personnel costs 74,838 74,417 1%
Interconnection charges 40,225 37,374 8%
Materials, repairs and maintenance, utilities 27,282 25,072 9%
Other operating income (14,638) (14,629) 0%
Other operating expenses 50,600 47,461 7%
Total 178,307 169,695 5%

Operating expenses, before depreciation and amortization expenses, increased by 5% year on year to RUB 178.3 billion for the year to date (including expenses of "NTK" and Volgograd GSM, acquired in 2011). The performance primarily reflected:

  • a 7% year on year increase in other expenses due to one-off rebranding campaign and cost related to the promotion of cloud computing solutions and E- Government project;
  • an 8% year on year increase in interconnect charges mainly due to an increase in the share of transit to mobile operators.

The Company reported a 11% increase in OIBDA to RUB 117.7 billion for the year to date, with an OIBDA margin of 39.8%.

Depreciation and amortization expenses decreased by 3% year on year for the year to date to RUB 54.0 billion, primarily due to the reversal of the reserve on Amdocs software in line with the plans to launch CRM system based on Amdocs and subsequent conversion of licenses for billing software into CRM licenses.

Rostelecom`s capital expenditure increased by 60% year on year for the year to date to RUB 82.8 billion. The Company's capital expenditure primarily comprised the launch of new projects to modernize broadband networks and IT systems; the launch of new services; and the construction of 3G and data transmission networks.

The Company reported an operating profit of RUB 63.7 billion for the year to date, with an operating margin of 21.5%.

The year on year increase in financial expenses reflected the payment of interest on the credit lines which were used to acquire the 25% stake in Svyazinvest and 71.8% in NTK. The Group's equity participation in the earnings of Svyazinvest and Bashinformsvyaz totaled RUB 3.4 billion for the year to date.

Profit before taxes increased by 38% year on year for the year to date to RUB 57.0 billion.

The Company's income tax increased 9% year on year for the year to date to RUB 11.0 billion respectively, which reflected an increase in profit before taxes.

Rostelecom's effective tax rate was 19% for the year to date, which was below the Russian Statutory Income tax rate of 20%, mainly due to certain expenses which were non-taxible, primarily the income from the decrease in long-term social obligations, as well as the reversal on Amdocs and revaluation of Volgograd-GSM.

Net income for the year to date increased by 47% year on year to RUB 46.1 billion. Net income adjusted for the reversal of Amdocs reserve increased by 23% year on year to RUB 42.7 billion for the year to date.

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