119121 Moscow, Plyushikha St. 55, building 2, tel:(095) 727-04-18/fax (095) 727-04-75
December 25, 2001 Moscow
A joint meeting was held in Moscow between executives of OJSC Svyazinvest and regional operators. The meeting was devoted mainly to the upcoming merger and how to phase in per-minute billing. The three main issues on the agenda were as follows:
1. Progress of the merger of OJSC Svyazinvest subsidiaries;
2. The budget system used at OJSC Svyazinvest and its regional subsidiaries;
3. The technical preparation of subsidiary networks for per-minute billing.
On the first item the current situation was assessed and the main objectives were established for regional divisions as far as the merger is concerned. OJSC Svyazinvest executives expressed their approval of the merger process to date and feel confident that plans will proceed on schedule in the coming months.
On the second issue the main principles, guidelines and approaches towards framing the 2002 budget were established.
In recognizing revenues and expenses the following principles should be adhered to:
· the budget should not show a deficit;
· all expenses should be covered;
· compliance with payment/receipt schedules;
· revenues and expenses should be recognized according to approved statutory budgeting methods.
IAS 2000 should be adhered to in all financial planning and also in the assessment of key business indexes per 2001.
In addition, at least 10% of net profits should be allocated to dividends on common shares and 5% of revenues should be allocated to overhead, which includes:
· deductions for R& D (1.5% of the planned cost);
· expenses payable to the State Telecommunications Inspectorate (0.3% of planned revenues earned from primary business activity);
· merger expenses related to drafting contracts;
· expenses associated with non-commercial partnership (at least 1% of revenues);
· the remaining amount (roughly 2% of revenues) should be allocated to insuring production assets under the centralized program, and for supporting a pension and retirement plan for employees in the telecom industry;
· 2001 budgets should be submitted for consideration to the executive boards, approved by acceptance committees in the regions and then approved by regional boards of directors;
On the third item a discussion was held on phasing in the per-minute billing system (PMBS) at regional telecoms.
At present the per-minute billing system is up and running at 80 telephone exchanges nationwide, 15 of which include large cities (Nizhny Novgorod, Yaroslavl, Kemerovo, Novokuznetsk, Perm, Pskov, etc.).
Great efforts have been made to equip regional telecom networks with per-minute billing systems, which is in line with the target of having these systems in place by 2002. The fact that subscribers are pleased with the system is borne out by data from a number of regional carriers, which have been using the system for several years.
The introduction of per-minute billing will make it possible to apply a differentiated and fair approach to billing telephone services, as it will be based on real consumption. The new system should also allow operators to optimize and upgrade their networks.
Proposals from regional telecom operators are to be submitted to OJSC Svyazinvest during Q1 2002 on how to best implement the per-minute billing system. These proposals will then be used to make recommendations for phasing in PMBS in various regions throughout Russia.