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MegaFon converts from reporting under US GAAP to IFRS(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 09 May 2013 Release date- 08052013 - Open Joint Stock Company 'MegaFon' ('MegaFon', the 'Company', or the 'Group') (LSE: MFON), a leading Russian universal telecommunications operator, today announces the completion of its project to convert its primary financial reporting framework from United States generally accepted accounting principles ('GAAP') to International Financial Reporting Standards ('IFRS'). In connection with this, it has released audited consolidated financial statements as of and for the year ended 31 December 2012 prepared in accordance with IFRS, including comparative statements for the years 2010 and 2011, and these are now available for download on the Company's website at: http://english.corp.megafon.ru/ The decision to change the Company's financial reporting to IFRS was made because many Russian and international peers of the Company already report under IFRS, and therefore the conversion to IFRS will provide the investment community and others with the opportunity to make a more meaningful comparison of the Company's reported numbers with those of its peers. The decision is also consistent with the global trend towards the convergence of GAAP into IFRS and with the Russian government's initiative (under Federal law # 208 on consolidated financial reporting) to bring Russian Accounting Standards closer to IFRS. Going forward, the Company will publish its financial results solely in accordance with IFRS and, as previously announced, the Company's first quarter 2013 results under IFRS will be announced on 15 May 2013. IFRS reporting will continue to be in Russian Rubles with the Ruble being the Company's operational currency. Key consolidated financial data line items showing the differences between GAAP and IFRS and relevant explanations are presented below. For a more detailed reconciliation of the major differences between GAAP and IFRS, please refer to Note 5 of the IFRS audited consolidated financial statements as of and for the year ended 31 December 2012 which, as noted above, are available for download on the Company's website at: http://english.corp.megafon.ru/ Key Consolidated Financial Data (In millions of Rubles) FY 2012 Differences US GAAP IFRS Revenue 272,637 272,336 (301) OIBDA 117,356 117,149 (207) OIBDA Margin 43.0% 43.0% - Net Profit 38,306 44,393 6,087 CAPEX (accrued) 44,074 45,227 1,153 CAPEX / Revenue 16.2% 16.6% 0.4 p.p Net Debt 121,788 120,600 (1,188) The 301 million Rubles difference in Revenue and the 207 million Rubles difference in OIBDA reflect the different treatment under IFRS of the award credits granted to our subscribers participating in the loyalty programme 'MegaFon Bonus', for which, under IFRS, the revenue is deferred until the unused award credits are redeemed or expire. In contrast, under GAAP no revenue is deferred, but rather the costs to provide certain services to redeem award credits are accrued. The 6,087 million Rubles difference in Net Profit is primarily due to the different treatment under IFRS and GAAP of the effects of the IPO-related share put option agreed to by our shareholders in April 2012. Under GAAP, the fair value of the put option, which was treated under GAAP as a freestanding financial instrument, was assessed as close to zero at inception and at all times until its expiry in November 2012. Under IFRS, the shares subject to the put option met the definition of a financial liability and, accordingly, that financial liability was measured and reported separately from equity in the amount of its expected net present value until it expired, at which time it was reclassified back to equity at its carrying amount and a corresponding gain was recognised. The 1,153 million Rubles difference in accrued Capital Expenditures (CAPEX) is primarily due to different accounting requirements in calculating decommissioning provisions between GAAP and IFRS. Cash CAPEX remained the same under IFRS and GAAP. The 1,188 million Rubles difference in Net Debt is due to the treatment of deferred issuance fees on loans and borrowings as a reduction of financial liabilities under IFRS. Notes to Editors MegaFon OJSC is a leading Russian universal telecommunication service provider, operating in all segments of the telecommunications markets in Russia. MegaFon was incorporated in June 1993 as CJSC 'Northwest GSM' and renamed OJSC 'MegaFon' in 2002. MegaFon was the first operator with a network covering all regions of Russia. The Company and its subsidiaries have licenses to operate in all of the Russian regions and in the Republics of Abkhazia, South Ossetia and Tajikistan. The Company was the first in Russia to launch 3G for commercial operations and is currently in the number one position among all operators in the provision of mobile Internet, and in the number two position as to the number of active subscribers in Russia. In 2009, MegaFon was selected as the Mobile General Partner of the XXII Winter Olympic Games and XI Paralympic Games to be held in Sochi in 2014. As a result of its acquisition of the Synterra Group, one of the leading Russian backbone operators, in June 2010, MegaFon substantially increased its fixed-line B2B and B2G businesses, as well as its provision of fixed broadband services. In July 2012 MegaFon was awarded one of four ten-year licenses for the provision of 4G/LTE services throughout the entire Russian Federation and, through its MVNO arrangement with Yota, has already started providing these services in 81 towns and cities in 29 different regions by the end of March 2013. In September 2012 the Company acquired the VAS Media group of companies, which are now being integrated with MegaLabs, its R&D subsidiary. In December 2012 the Company acquired a 25% interest in the Euroset retail chain, the largest chain in Russia providing telecommunications goods and services, and is committed to acquire a further 25% within the next three years. In November 2012 MegaFon successfully completed an initial public offering on the Moscow Stock Exchange and the London Stock Exchange. As of December 31, 2012, MegaFon has two principal shareholders, companies in the AF Telecom group (appr. 50.01%) and the TeliaSonera group (appr. 25.17%). Additional shares are held indirectly by its CEO, Ivan Tavrin (1.25%) and by a wholly owned subsidiary of the Company (8.82%, of which Mr. Tavrin has been granted an option to acquire up to 3.75% at various times prior to 2017), while the public float represents approximately 14.75% of the outstanding shares. Disclaimer/ forward looking statements The above information should be read in conjunction with the Company's IFRS audited consolidated financial statements as of and for the year ended 31 December 2012 available for download on the Company's website at: http://english.corp.megafon.ru/ Certain statements and/or other information included in this document may not be historical facts and may constitute 'forward looking statements' within the meaning of Section 27A of the U.S. Securities Act and Section 2(1)(e) of the U.S. Securities Exchange Act of 1934, as amended. The words 'believe', 'expect', 'anticipate', 'intend', 'estimate', 'plans', 'forecast', 'project', 'will', 'may', 'should' and similar expressions may identify forward looking statements but are not the exclusive means of identifying such statements. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues, operations or performance, future capital expenditures and financing needs, our plans or intentions relating to the expansion or contraction of our business as well as specific acquisitions and dispositions, our competitive strengths and weaknesses, our plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industry and the political, economic, social and legal environment in which we operate, and other information that is not historical information, together with the assumptions underlying these forward looking statements. By their very nature, forward looking statements involve inherent risks, uncertainties and other important factors that could cause our actual results, performance or achievements to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the political, economic, social and legal environment in which we will operate in the future. We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. We expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect actual results, changes in assumptions or in any other factors affecting such statements. Schedule 1: Definitions OIBDA (Operating Income Before Depreciation and Amortization) is a non-GAAP and non-IFRS financial measure; it should be considered as supplementary but not as an alternative to the information provided in the financial statements of the Company. OIBDA margin means OIBDA as a percentage of revenue. The Company believes that OIBDA provides a better measure of the Company's actual operational results including our ability to finance capital expenditures, acquisitions and other investments and our ability to incur and service debt. While it does not take into account depreciation of property, plant and equipment and amortization of intangible assets, which are considered as operating expenses in under GAAP and IFRS, these expenses primarily represent non-cash charges related to long-lived assets acquired or constructed in prior periods. OIBDA is widely used by investors, analysts and rating agencies as a measure to evaluate and compare current and future operating performance and to determine the value of companies within the telecommunications industry. Capital Expenditures (CAPEX) comprises the cost of purchases of new equipment, new construction, acquisition of new or upgrades to software and other intangible assets, and purchases of other long-term assets, together with related costs incurred prior to the intended use of the applicable assets, all accounted for as of the earliest time of payment or delivery. Long-term assets obtained through business combinations are not included in the calculation of capital expenditures. Net cash/ Net debt position means the difference between (a) cash, cash equivalents, short-term investments and long-term deposits and (b) total debt. It is a non-GAAP and non-IFRS financial measure and should be considered as supplementary but not as an alternative to the information provided in the Company's financial statements. The Company believes that this metric provides useful information as to the liquidity position of the Company after debt repayments. For more information OJSC MegaFon Media: Peter Lidov Tel: + 7 926 200 6699 [email protected] Investors: Dmitry Kononov Tel: + 7 926 200 6490 [email protected] Citigate Dewe Rogerson (London) Tel: +44(0)20 7638 9571 David Westover Marina Zakharova [Editorial queries for this story should be sent to [email protected]] ((Comments on this story may be sent to [email protected])) (c) 2013 Electronic News Publishing - |