ROS worthy of short here. 30.00
MOSCOW, Aug 1 (Reuters) - The liberalisation of Russia's telecoms market has halved the net profit of former long-distance monopoly Rostelekom (RTKM.RTS: Quote, Profile, Research), the firm said on Tuesday, an even bigger hit than analysts expected.
Rostelekom said first-half net profit, calculated to Russian accounting standards, fell 53 percent to 2.7 billion roubles ($100.7 million) compared with the same period a year ago. Some analysts said expectations had been for net profit to be over $130 million.
Rostelekom this year lost its monopoly on long-distance and international phone calls from Russia, and although it does not yet have any active rivals, several companies have received long-distance licences since the start of 2006.
In addition to adding the risk of competition, the reforms have also spurred a massive rise in expenditure, with changes in the system of payments to other operators driving costs up by 90 percent to 24.79 billion roubles.
Under the reforms, Rostelekom also has to compensate regional telecoms providers, which have reported healthy results by comparison, for low long-distance and international tariffs, which are set by the government.
Although Rostelekom's revenue rose 47.2 percent to 28.7 billion roubles, earnings before interest, taxation, depreciation and amortisation fell to 5.5 billion roubles from 7.7 billion. EBITDA margin, a key figure showing a company's efficiency, dropped to 19.1 percent from 39.7 percent.
Despite the poor performance, Rostelekom's shares (RTKM.MM: Quote, Profile, Research) were 2.9 percent up at 137.32 roubles by 1233 GMT. "When such figures are announced, it is clear that the share price movement is not at all related to the fundamentals of the business," said UBS analyst Vladimir Postolovsky.
He also said that he was worried by a 1 percent fall in long-distance traffic in the second quarter compared with the second quarter of 2005.
"This is either the onset of competition or mobile cannibalisation," he said, referring to competition from the huge numbers of mobile phones in use in Russia.
MDM bank analyst Yelena Bazhenova said a 20 percent fall in the share price of Golden Telecom (GLDN.O: Quote, Profile, Research), in which Rostelekom owns 11 percent, also affected Rostelekom's net profit.
"But even if you take all these reasons into consideration, net profit is still too low," Bazhenova said.
Rostelekom this year increased capex 70 percent to $350 million.
"The company is efficient enough, it should not have so much spending," Bazhenova said. "It is not clear at all where they spend it and costs do not fit any model. The company would not explain anything."
Bank of Moscow said it expected Rostelekom's results would worsen as real competition on the long-distance market starts from next year. It said in a research note it expected Rostelekom to lose up to 40 percent of its market share.
AI
Market Data 
Markets 
