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PeterStar
Consolidated Business Venture
PeterStar, in which the Communications Group owns a 71% indirect interest,
operates a fully digital, city-wide fiber optic telecommunications network in St.
Petersburg, Russia. PeterStar provides integrated, high quality,
telecommunications services with modern digital transmission switching and
transmission equipment, including local, national and international long
distance, data and Internet access and value-added services, to businesses in St.
Petersburg.
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Three Months Ended Six Months Ended Six Months
June 30, June 30, Percent Change
------- ------ ------- ----
2002 2001 2002 2001 2001 to 2002
------- ------ ------- ---- ------------
(In millions,
except subscriber
data)
Subscribers 94,061 90,183 94,061 90,183 4.3%
Revenue $14.3 $11.8 $26.9 $23.7 13.5%
Gross Margins $11.0 $9.3 $20.1 $18.9 6.3%
Selling, general
& administrative $3.5 $3.3 $6.9 $7.4 -6.8%
Depreciation and
amortization $2.7 $2.7 $5.7 $5.4 5.6%
Operating Income $4.7 $3.3 $7.6 $6.1 24.6%
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PeterStar
revenues increased for the three months ended June 30, 2002 compared to the same
period in 2001 due to growth in the underlying business and residential services.
PeterStar experienced strong growth of its subscriber base as a result of its
aggressive sales effort and the general improvement of economic conditions in St
Petersburg. In comparison with second quarter of 2001, PeterStar has had a shift
of its product mix to data services and rapidly developing dial-up Internet
access. In addition, growth in revenues in 2002 resulted from better utilization
of spare capacity and higher transit revenues, which typically bear a lower
margin. Gross margins increased in 2002 over 2001 due to the increase in revenue
and certain cost savings from channel and long distance providers, which
compensated for the downward rate pressure from competition. The increase in
SG&A compared to second quarter 2001 is mainly due to variance in bad debt
provision, which was increased this year to reflect longer terms of payment on
certain wholesale contracts.
PeterStar revenues for the six months ended June 30, 2002 increased compared
to the same period last year due to growth in the underlying business and
residential services. The revenue increase was partially offset by the expected
loss of mobile traffic revenues to a competitor in late 2000 and early 2001.
First quarter 2001 revenues included approximately $0.4 million of mobile
traffic revenue that was in the process of switching over to the competitor.
Gross margins were negatively impacted by the aforementioned loss of high margin
mobile traffic revenue. The decrease in SG&A is principally due to lower
management fees and staff reductions.
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