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UTK’s strategy – increased focus on value-added services

UTK’s strategy – increased focus on value-added services. Georgy Romsky, CEO of “UTK” PJSC. Compactness and high economic potential of UTK’s licensed territory. ECONOMIC Industrial output ( `04) – RUR 567 bln (+28%)

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UTK’s strategy – increased focus on value-added services

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  1. UTK’s strategy – increased focus on value-added services Georgy Romsky, CEO of “UTK” PJSC

  2. Compactness and high economic potential of UTK’s licensed territory • ECONOMIC • Industrial output (`04) – RUR 567 bln (+28%) • Well-developed business sector – 475 ths enterprises (`04) (+16.8%) • Growth rate of average wages (`04) – +24.6% • Volume of foreign investments in 2004 – USD 689mln (+3.5%) • Powerfulproduction basis and developed service sector Volgograd • GENERAL • UTK’s licensed territory - 520 ths sq km • Population – 18.8 mln people • High density of population – 38.6 people per one sq km • Strategic geopolitical location • Main health resorts of the country – great amount of tourists Rostov-on-Don Elista Astrakhan Krasnodar Stavropol Maikop Cherkessk Nalchik Vladikavkaz

  3. Key business highlights GENERAL • UTK occupies a leading position in the Southern Russian telecommunications market • Share in the fixed-line regional market (`04) – 89.4% • Head count (1h 05) – 38.3ths people NETWORK DEVELOPMENT • Total installed capacity (1h 05) – 4.2 mln lines • Total equipped capacity (1h 05) – 4.0 mln lines • Digitization rate of local networks(1h 05) - 60% • Intra-zonal network digitization rate (1h 05) - 90% FINANCIAL • Revenue (`04, RAS) – RUR 16, 753 mln (+24.1%) • EBITDA (`04, RAS) - RUR 4,287mln (+25.3%) • Revenues from value-added services (`04, RAS) - RUR882 mln (+73.4%)

  4. UTK’s strategyis aimed at increase of its market share in the value-added regional market to at least 50% and at retention of fixed-line market share at the level of no less than 82% Marketing Policy • Introduction of a unified tariff system for all customers andcross-subsidies reduction • Introduction of flexible tariff plans for “bundling services” • Introduction of additional traditional telephony services • Reorganization of the Company’s sales system and optimization of its tariff policy Technical Policy • Further development of multi-service networks, digital cable TV, IP-telephony, Internet services • Upgrade of the Company’s data networks and construction of new network nodes • Organization of Call-centersand deployment of intelligent network services • Introduction of a uniform billing system Economic Policy: • Growth in local tariffs • Staff optimizationand drastic costs reduction • Reorganization of subsidiaries and selling of non-core businesses • Optimization of the balance sheet and payables • Steady improvements in UTK’s business efficiency and reliability

  5. Strengthening of the Company’s market positions allows to reduce its investment program Capital investments, RUR mln 80,8% 78,6% 47,5% 60,8% 21,4% 19,2% 39,2% 51,2% • Share of investments in the lucrative market segment for advanced technologies will be increased • Traditional telephony will be funded in the amount sufficient to finish the investment projects launched in 2003-2004

  6. Enlargement of the Company’s subscriber base contributes to revenue growth from all types of telecom services In 2003-2004 UTK was the first among mega-regional telecom entities in terms of the subscriber base growthUTK is the first among mega-regional telecom entities in terms of intra-zonal network digitization rate UTK is the second among mega-regional telecom entities in terms of local network digitization rate

  7. UTK occupies a leading position in the Southern Russian telecommunications market UTK’s market share for fixed-line services • Maintaining the Company’s positions in all segments of the fixed-line market • Speeding up the development of value-added services

  8. Stable increase in operating profit RAS Positive trend in revenue growth compared to the UTK’s operating costs IFRS

  9. EBITDAand net profit dynamics, RUR mln RAS 25% 25% 8% 41% IFRS * EBITDA as profit before income tax, deprecations and amortization

  10. Dynamics of business efficiency indicators

  11. UTK’s strategy – increased focus on value-added telecom services Numerous subscriber base and infrastructural resources of “UTK” PJSC Segmentation of services’ market offers Reorganization of business processes in accordance with CRM concepts High growth rates of revenues from value-added services Increasing share of “UTK” PJSC in the value-added regional market

  12. Availability of considerable reserves for revenue increase and growing share in the regional market of value-added services Dynamics of xDSL subscriber base growth • Rapid development of the following services:Internet access, access to information and entertainment resources, VPN services, other services of data transmission network • Market capacity growth,increase in profits from existing users,switch over of subscribers from alternative operators

  13. THANK YOU FOR YOUR TIME ! Any statement made or opinion expressed in the presentation by UTK, including any slides shown, are those of UTK only and not Brunswick UBS. Brunswick UBS was not involved in the preparation of these materials and Brunswick UBS assumes no responsibility for the presentation.

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