Ukrtelecom’s 2008 bottom line spoiled by hryvnya depreciation

According to preliminary financial data from Ukrtelecom (UTEL), the company decreased its 2008 net revenue by 2% yoy to USD 1278 mln; cut its EBITDA 4.1% yoy to USD 223 mln; and lowered its net income by about USD 350 mln to negative UAH 1.52 bln (USD -290 mln). Alexander Paraschiy: We explain Ukrtelecom’s large reported losses to the impact of hryvnya depreciation. The company took a USD-nominated 500 mln loan from CSFB and Deutsche Bank in 2005. With sharp hryvnya deprecation in 4Q08, the company had to report an increase in its loan obligations from UAH 2.2 bln (in 3Q08) to UAH 3.5 bln. The exchange rate effect of UAH 1.3 bln (USD 250 mln, calculated using the 2008 average exchange rate) was reported as non-operating loss, significantly spoiling the company’s 2008 bottom line.