Daily analyst comments

On March 14, Sibirtelecom reported its preliminary FY 2007 financials calculated to RAS. We have always maintained that RAS is an inadequate measure of a company's performance, especially if a significant part of its business falls to its subsidiaries, and this is the situation at Sibirtelecom. On March 18, an Internet-conference is to be held with the company's management on the www.finam.ru site, at which the managers may disclose some financial indicators to IAS, and after which it should be possible to make certain conclusions about the operator's performance in 2007.

The company posted strong financial results in general, as was expected. Revenue increased 16% in ruble terms (excluding the subsidiaries' results). We expect higher revenue growth to IAS, but what is most likely is that the subsidiaries achieved stronger financial results than the head company. Therefore it is possible that the final financial results exceed our expectations.

Sibirtelecom: RAS financial results mn RUB

The company's revenues on Internet-access services mostly lived up to our estimates, at 61% vs. 65%, which confirms our forecast that most classic telecom service providers are soon to begin to derive a large sum of their revenues, up to 25%, from the provision of so-called ‘new services'.

Local telecom providers, which make up the core of Sibirtelecom business, reported revenues in line with our expectations. This segment rarely brings surprises, as it is under state control.

Certain deviations from our projections on the company's EBITDA and net margins are due to the fact that our estimates were made to IAS, while EBITDA and net margins under RAS differ from those calculated to IAS.

We reiterate our BUY recommendation for the operator's common and preferred shares and set the target prices at USD 0.15 and USD 0.1 per share.