Ukrtelecom Reports Preliminary 2007 Results

Ukrtelecom (UTEL: HOLD) reported USD 1,348 mln net revenue for 2007 (+1.6% yoy). The company’s EBITDA dropped 1% yoy to USD 387.5 mln (EBITDA margin decreased 0.7 pp to 28.7%). Net income slid 47% yoy to USD 52.9 mln (net margin of 3.9%). Alexander Paraschiy: Costs related to launching its 3G mobile operator and promoting its broadband services harmed Ukrtelecom’s financials: the company’s marketing costs grew 6.7 times yoy (to USD 105 mln) in 2007. We do not expect rapid payback from Ukrtelecom’s mobile project, expect a decrease in the company’s revenue from fixed line telephony in 2008, and thus forecast a decrease of EBITDA in 2008. Privatization of the company and the arrival of a new strategic investor would become a driver for the company’s profits stabilization/increase in 2009.