28. Segment information

In 2011 the basis of segmentation has changed as compared with 2010 due to the reorganization of the Company completed on April 1, 2011 (refer to Note 1). As at December 31, 2010 there was no single management body that could be identified as chief operating decision maker. However, the financial information of former Rostelecom and IRCs comprising Svyazinvest Group was regularly analyzed by OJSC Svyazinvest, the Group's controlling shareholder, and was used for decision making in regards of their strategy and operations. Thus Rostelecom and IRCs were determined as operating and reportable segments with all subsidiaries included in the segment Other as they did not meet quantitative threshold.

After the merger the former Rostelecom branches and IRCs, which are located in the same geographical area, were integrated into macroregional branches of reorganised Company. Rostelecom Management Body which becomes chief operating decision maker started to analyze operating results of OJSC Rostelecom by macroregional branches. The results of subsidiaries are analysed on standalone basis. Consequently, the Group has determined its macroregional branches and subsidiaries as operating segments. However, subsidiaries do not meet quantitative threshold defined by IFRS 8 and financial information of these operating segments are combined and presented under the heading Other. Currently Group has nine reportable segments, which are the Group's strategic business units. While differentiate geographically, the strategic business units offer mainly the same services to the customers.

Management of the Company assesses the performance of the operating segments based on the accounting data that is prepared using Russian statutory accounting principles on unconsolidated basis. A measure of segment profit or loss reported to the management of the company is earnings before interest, taxes, depreciation and amortization (EBITDA).

The following table illustrates financial information of reportable segment required for disclosure by IFRS 8 for the year ended December 31, 2011:


2011 Corp. Center North-West Center South Volga Ural Sibir Far East Other Total segments Adjustments and eliminations Total
Revenue                        
Third party revenue 21,789 31,598 45,450 26,607 32,737 45,596 31,471 20,217 40,967 296,432 (417) 296,015
Revenue from other segments 1,374 846 1,007 929 1,026 798 1,352 353 5,000 12,685 (12,685) -
Total revenue 23,163 32,444 46,457 27,536 33,763 46,394 32,823 20,570 45,967 309,117 (13,102) 296,015
EBITDA 302 14,828 15,581 11,250 13,730 19,927 12,741 6,413 13,477 108,989 13,459 121,708
 

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended December 31, 2011:


EBITDA of reportable segments 94,772
EBITDA of other segments 13,477
Adjustments  
Depreciation, amortization and impairment losses (50,608)
Finance costs and other investing and financial gain (9,817)
Income from associates 3,439
Net gain for defined benefit plan 4,335
Share-based remuneration (588)
Reversal of leasing expenses recognized in statutory books 4,177
Reversal of income from revaluation of associates and available-for-sale
investments recognized in statutory books
(760)
Intragroup dividends (563)
Adjustments to loss on disposal of property, plant and equipment and intangible assets (1,227)
Other adjustments 388
Profit before income tax 57,025

The following table illustrates information about reportable segment revenue and EBITDA for the year ended December 31, 2010:


2010 Corp. Center North-West Center South Volga Ural Sibir Far East Other Total segments Adjustments and eliminations Total
Revenue                        
Third party revenue 18,448 30,869 43,777 25,831 31,788 45,472 31,000 19,609 30,416 277,210 (1,479) 275,731
Revenue from other segments 1,143 193 352 294 742 159 787 208 4,516 8,394 (8,394) -
Total revenue 19,591 31,062 44,129 26,125 32,530 45,631 31,787 19,817 34,932 285,604 (9,873) 275,731
EBITDA (4,349) 13,287 13,886 10,414 12,315 20,363 12,538 7,060 12,074 97,588 8,600 106,188

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended December 31, 2010:


EBITDA of reportable segments 85,514
EBITDA of other segments 12,074
Adjustments  
Depreciation and amortization (45,503)
Finance costs (9,053)
Income from associates 239
Personnel costs (3,930)
Net gain for defined benefit plan (923)
Intragroup dividends (499)
Loss on disposal of property, plant and equipment and
intangible assets
(754)
Reversal of leasing expenses recognized in statutory
books
5,219
Other adjustments (1,005)
Profit before income tax 41,379

The following table illustrates information about reportable segment revenue and EBITDA for the year ended December 31, 2009:


2009 Corp. Center North-West Center South Volga Ural Sibir Far East Other Total segments Adjustments and eliminations Total
Revenue                        
Third party revenue 16,823 29,401 40,556 24,771 30,951 43,929 30,028 15,015 35,410 266,884 (2,239) 264,645
Revenue from other segments 708 376 258 178 327 75 488 141 1,842 4,393 (4,393) -
Total revenue 17,531 29,777 40,814 24,949 31,278 44,004 30,516 15,156 37,252 271,277 (6,632) 264,645
EBITDA (6,540) 13,110 13,827 10,608 13,749 17,472 11,429 5,473 11,342 90,470 8,426 98,896

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended December 31, 2009:


EBITDA of reportable segments 79,128
EBITDA of other segments 11,342
Adjustments  
Depreciation, amortization and impairment losses (45,756)
Finance costs (13,215)
Net gain for defined benefit plan (1,011)
Intragroup dividends (609)
Income from associates 216
Loss on disposal of property, plant and equipment and
intangible assets
(454)
Reversal of leasing expenses recognized in statutory
books
4,941
Other adjustments (245)
Profit before income tax 34,337

Substantially all of the Group assets are located within the territory of the Russian Federation.

The Group had no individual customers, other than the Government of the Russian Federation and its related parties, that accounted for greater than 10% of its revenue during the years ended December 31, 2011, 2010 and 2009

History

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