Introduction to troubled-debt restructuring Corporate Restructuring Tim Thompson.
Svyazinvest in 2002: restructuring continuing
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Transcript of Svyazinvest in 2002: restructuring continuing
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Svyazinvest in 2002: restructuring continuing November 2002
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Telecommunications is one of the most advanced sector of the Russian economy
Total Rural2000 2001 2000 2001
New lines in service, th lines42.8%
3.0%1405
2017
155 159
Revenues, bln RUR40.0%
2000 2001New
27.6% 53.4%
132,5
186,0
66,6 85,065,9
101,1
2000 2001 2000 2001Total Traditional
Capital expenditure Fixed capital expenditure
1Q01 1Q02 1Q01 1Q02
3,656,36
2,15
5,12
Capex, bln RUR 174.2% 241.9%
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Svyazinvest dominates Russia’s wireline telecoms
Svyazinvest JSC (established in 1995)
Urals region
Volga region
North-West region
Siberia region
Central region
Southern region
Far East region
State75% - 1 share
Mustcom25% + 1 share
53% - Svyazinvest13%< - foreign shareholders34% - other shareholders
51% - Svyazinvest14%< - foreign shareholders~35% - other shareholders
51% - Svyazinvest16%< - foreign shareholders32% - other shareholders
51% - Svyazinvest7%< - foreign shareholders42% - other shareholders
51% - Svyazinvest8%< - foreign shareholders41% - other shareholders
51% - Svyazinvest10%< - foreign shareholders39% - other shareholders
51% - Svyazinvest16% - foreign shareholders33% - other shareholders
Rostelecom51% - Svyazinvest49% - other shareholders
29,7 mln lines in service providing local and long-distance services to 93% of the Russian customers
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Svyazinvest financial highlights, 2000-F2002 (Rb mn)
Svyazinvest has enjoyed strong financial and operating performances in 2001
20012000
11.512.0Return on sales, %
4.543.83Return on assets, %
6.675.73Return on capital, %
7155EBITDA per employee, th RUR
1.010.84EBITDA per AL, th RUR
7066AL per employee.
210156Revenues per employee, th RUR
2.992.37Revenue per AL, th RUR
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1H02 results show that this positive trend continues
42,3
54,2
13,6 14,8
3,9 5,8
0
10
20
30
40
50
60
Sales EBITDA Net profit
1H01 1H02
Bln RUR
9,2 10,7
23,829,3 29
36,9
0
10
20
30
40
50
ROS ROA ROE
1H01 1H02
Increase1H 2002
26%2.4Increase in capacity (2002 estimates), mln
4%0.53EBITDA per AL, th
22%1,95Revenue per AL, th RUR
9%75AL per employee
14%40EBITDA per employee, th RUR
33%146Revenues per employee, th RUR
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Estimated Svyazinvest’s capitalization is $1.43 bln
Estimated capitalization of Svyazinvest is US$ 1.43 bln as per 18 October 2002
South6%
North West10%Center
11%others
12%
Urals12%
Volga8%
Siberia8%
Far East2%
Rostelecom31%
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North-West regionNorth-West Telecom
Lines in service: 3,2 mln
Central regionCenterTelecom
Lines in service: 5,4 mln
Southern regionSouthern Telecom Company
Lines in service: 3,2 mln
Far EastDalsvyazLines in
service: 1.0 mln
SiberiaSibirtelecom
Lines in service: 3.3 mln
UralUralsvyazinform
Lines in service: 2,9 mln
Volga regionVolgaTelecom
Lines in service: 3.7 mln
Svyazinvest has consolidated its regional subsidiaries into seven mega-regional operators of fixed telephony
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Urals, Far East, North-West and South swept shares recently: other mega-regionals to follow by the end of 2002
North West
Urals
SiberiaSouth
Far East
Volga
Share swap – Completed 09/30/02
Registration of Share Placement Report with FCSM – 10/31/02(E)
Share swap – Completed 09/30/02
Registration of Share Placement Report with FCSM – 10/31/02(E)
Center
Share swap – 11/30/02
Registration of Share Placement Report with FCSM – 12/31/02(E)
Share swap – 11/30/02
Registration of Share Placement Report with FCSM – 12/31/02(E)
Share swap – 11/30/02
Registration of Share Placement Report with FCSM – 12/31/02(E)
Share swap – Completed 10/31/02
Registration of Share Placement Report with FCSM – 11/30/02(E)
Share swap – Completed 10/31/02
Registration of Share Placement Report with FCSM – 11/30/02(E)
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Russian mega-regionals are large enough to compete with European peers …
0.8 1.12.9 3.3 3.7
6.3
10.5
1.02.9 3.2 3.2 3.3 3.7
5.4
European peersRussian mega-regionals
Lines in service, mln 1H2002
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471607
8831032
19874696
6174
424851525576118
Far EastSouthVolga
CenterSiberia
North WestUralsTPSA
Cesky TelecomOTE
MatavTelenor
KPN Sonera
Russian mega-regionalEuropean peers
… but they are relatively cheap
Average CEE telecoms’ MСap/AL is $703 vs Russian $63.
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0
30
60
90
120
150
as of 01/01/01 as of 01/01/02 as of 01/09/02
residential governmental business
Although tariff level is growing constantly, …
RUR
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… it’s still very low comparatively to European telecoms
Average tariff's level, US$ per month
2.4
2.4
2.6
2.8
3.0
3.4
3.7
5.2
9.1
9.7
9.8
10.2
Center
South
Volga
Siberia
North West
Urals
Far East
Cesky Telecom
OTE
TPSA
Matav
KPN
Russian monthly tariff is about 3 times less than CEE average and 8.6 than in Western Europe.
mega-regional average tariff is $2.9 per month
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0
10
20
30
40
1999 2000 2001 2002 2003 20040
500
1000
1500
2000
2500
3000
3500
1999 2000 2001 2002 2003 2004
Rostelecom
Far East
Siberia
Urals
South
Volga
Center
North West
Capex forecast,bln RUR
New access lines, mln per year
Network development is the key goal of Svyazinvest
14,24
17,6318,52
27,89
32,5234,24
1,19 1,07
1,72
2,40
3,00
3,20
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93,9109,8
129,2
31,2
77,661,1
34,746,4
2,72,2
1,9
3,2
5,4
0
20
40
60
80
100
120
140
1997 1998 1999 2000 2001 2002E 2003F 2004F0
1
2
3
4
5
6
Revenue (bln RUR) Revenue (bln US$, right axis)
Financial forecast of group Svyazinvest
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Svyazinvest is increasing efficiency of mega-regionals within four blocks of corporate restructuring
The finance and economic block in merged entities is designed to ensure
an effective system of financial planning and control
Creating a methodology to calculate economically feasible costs
Creating a unified accounting policy and introducing separate accounting for revenues and expenses
Compiling financial statements in compliance with IAS
Budgeting Cost-cutting program
Identifying a medium term marketing strategy for the mega-regional telecoms
Training and certifying the Company’s marketing staff
Developing a methodology and carrying out:
assessment of key personnel, recruiting qualified executives, training key specialists.Creating a rotational policy and a result-
oriented incentive system
The marketing block is designed to give the merged entities a powerful
marketing strategy
HR management program
Technical audit of regional telecom operators
Technical development principles of merged entities
Working out a general network development plan for the holding company until 2007
Technological integration of the networks of merged entities
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Preparations for transition to reporting under IAS• Training and implementation of in-house IAS reporting • Quarterly IAS reporting since 2002
A new budgeting methodology was worked out and launched A uniform management accounting system was elaborated Preparations to change the tariff regulation system
• An economically feasible cost calculation methodology was worked out
• Beginning from 2002 the holding company’s operators are planning a trial application of the methodology, and beginning from 2003 – to adopt a long run incremental costs method
In 2001 Svyazinvest implemented a number of projects aimed at creating an efficient system of business planning and control
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Foreign currency loans reduction switching over rubble loans
New HR program
Guidelines for mega-regionals’ marketing strategy
General plan for network development of mega-regionals and
Rostelecom, as integral parts of the telecommunications
network of the Russian Federation for the period until 2007
Separate accounting of revenues and expenses from different
services
Svyazinvest is currently working on:
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Long-term local and foreign currency credit ratings were assigned to all seven surviving entities during 2001-02
Credit ratings of surviving entities are only 1-2 points lower than that of the Russian Federation
Company Credit Rating Outlook AgencySibirtelecom В Stable Fitch
VolgaTelecom
Dalsvyaz
В- В-
Stable
Stable
S&P
Fitch
Uralsvyazinform В-/В Stable S&P/Fitch
South Telecom ССС+ Stable S&P
North-West Telecom CCC+ Stable S&P
CenterTelecom CCC Stable S&P
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Growth of capitalization in 1H 2002 - 75%3-5-fold increase in capitalization
should the restructuring be completed and telecoms tariffs in Russia reach the level of Eastern European tariffs.
Svyazinvest high performance figures led to a significant growth of its market capitalization
169
341
185
244
173
220
142
149 214
386
114
233
1152
0
50
100
150
200
250
300
350
400
mln
$
Center North-West Volga South Urals Siberia Far East
early 2001
November 20 2002
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Gross income per employee – RUR 310,000 (130% compared to 2001)
Operating profit per employee – RUR 85,000 (148% compared to 2001)
Number of lines per employee – 76 (109% compared to 2001)
Gross revenue per line – RUR 4,000 (119% compared to 2001)
Operating profit per line – RUR 1,116,000 (136% compared to 2001)
Installation of new telephone capacity – 2.4 million lines (1.9 million lines in 2001)
A proportion of expenses in the gross income – 72% (down 3% as compared to 2001)
Bn, RUR
Gross income
Operatingexpenses
Sales revenue
All business efficiency indicators of the holding company are planned to increase in 2002
2000 2001 2002
92,1
110,5
70,582,3
28,221,7
73,4
55,3
18,1
In 2002:
2000 2001 2002 2000 2001 2002
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November 2002
Thank you!