« Previous | Next » | All Messages |  MTRM Message Board Home | recommend post |  Ignore Poster

MTRM News Metromedia International Group Inc. Reports Preliminary Magticom Fiscal Year 2005 Financial Results and Impact of Restatement Activities Associated with Magticom's Fiscal Year 2004 Financial Results

CHARLOTTE, N.C.--(BUSINESS WIRE)--Metromedia International Group, Inc. (the “Company” or “MIG”) (currently traded as: PINK SHEETS: MTRM – Common Stock and PINK SHEETS: MTRMP – Preferred Stock), the owner of interests in communications businesses in the country of Georgia, announces the release of preliminary unaudited financial results, for the fiscal year ended December 31, 2005, for its principal Georgian business, Magticom Limited (“Magticom”).

Highlights for the full-year 2005 vs. full-year 2004:

• Revenues of $146.1 million vs. $102.0 million – improvement of 43%
• Net income of $63.4 million vs. $50.3 million – improvement of 26%
• EBITDA ¹ of $97.8 million vs. $73.3 million – improvement of 34%

Commenting on this announcement, Ernie Pyle, the Company’s Chief Financial Officer, said: “This press release contains the preliminary unaudited financial results for Magticom and as such this financial information is subject to adjustment until such time that the Company files its respective periodic reports with the United States Securities and Exchange Commission (“SEC”).”

Mr. Pyle further stated: “We anticipate that Magticom will realize the full year 2006 EBITDA of approximately $115 million projected in Magticom’s 2006 Business Plan as approved by its shareholders. Such information, together with the 2004-2005 financial performance results of Magticom, included herein, should enable the Company’s stakeholders to evaluate the attractiveness of the proposed sale of substantially all of the assets of MIG, as discussed in a parallel press release distributed today.”

Magticom, the leading mobile telephony operator in Tbilisi, Georgia, in which the Company presently owns a 50.1% ownership interest, operates a wireless communications network and markets mobile voice communication services to private and commercial users nationwide in the country of Georgia. Magticom’s network offers services using GSM standards in both the 900 MHz and 1800 MHz spectrum range and has recently launched 3^rd Generation (“3G”) GSM mobile voice, data and video services using the 2.1 GHz radio frequency spectrum. Prior to mid-February 2005, the Company had a 34.5% ownership interest in Magticom.

Magticom Unaudited Financial Results – Through Fourth Quarter 2005:

Magticom’s preliminary unaudited financial results for the full-year of 2005 were favorably affected by the strengthening of the Georgian Lari, Magticom’s functional currency, against the U.S. dollar. In relation to the U.S. dollar, the Georgian Lari average exchange rate increased by 4.9% for the full-year of 2005, as compared with the same period in 2004.

Revenues grew by approximately 30% in the fourth quarter of 2005 as compared to the same period in 2004, due principally to strong customer demand. Subscriber revenues grew by approximately 35% for the full-year of 2005 as compared to 2004, due principally to continuing strong customer demand. Year-over-year growth in inbound interconnection revenue reflected, in part, a significant change in a contractual arrangement with another mobile telephone provider in Tbilisi, Georgia.

Magticom is the market leader in Georgia, based on both revenues and number of subscribers, and anticipates further increases in its subscriber base as it continues to penetrate a market that currently has low telephone density rates. Magticom’s total and average subscribers have increased approximately 35% and 33%, respectively, since December 31, 2004. Average revenue per subscriber (“ARPU”) was favorably affected by the strengthening of the Georgian Lari against the U.S. dollar. Lari-calculated ARPU decreased by 6.6% in the three months ended December 31, 2005 when compared to the three months ended September 30, 2005 and decreased 3.2% in the full-year of 2005 as compared to the same period in 2004. Magticom anticipates that its Lari-calculated ARPU will likely remain flat in the near future; however, in the long-term, Magticom anticipates that its Lari-calculated ARPU will decline due to both competitive pressures on pricing of services and as a result of Magticom’s further penetration of the addressable market because new customers are anticipated to have lower usage rates than Magticom’s existing customer base.

Inbound revenues reflect revenues that Magticom earns as a result of its termination of other telephone service providers’ traffic on Magticom’s telecommunications network. The significant growth in inbound revenues in 2005 as compared to 2004 principally reflects a change in the contractual arrangement related to an interconnect arrangement with another mobile telephone service provider in Tbilisi, Georgia. Prior to October 1, 2004, Magticom’s arrangement with the other mobile telephone service provider, as set forth in the interconnect agreement between the parties, provided for the termination of traffic on each other’s network at no cost, unless certain net traffic volume thresholds were exceeded between the parties, an eventuality that never occurred. Effective October 1, 2004, the contractual arrangement was amended and Magticom began processing monthly invoices to the mobile telephone service provider based on its termination of traffic on Magticom’s telecommunication network and thus Magticom began recognizing inbound revenues for this relationship between the parties. For the first nine months of 2004, Magticom did not recognize inbound revenues from this mobile telephone service provider; however had the existing interconnect agreement been effective January 1, 2004, Magticom’s pro-forma inbound revenues for the full-year of 2004 would have increased by $14.2 million to $31.7 million and thus year-over-year inbound revenues would have increased by only approximately 3%.

Roaming revenues are based on Magticom subscribers originating calls using their Magticom-equipped mobile telephone in a territory not directly serviced by Magticom. Magticom bills its subscribers an international roaming premium on a per-minute basis for calls made while abroad. Given the nature of this revenue stream, which is dependent upon Magticom users traveling abroad and utilizing their respective Magticom-equipped mobile telephone, predicting future revenue levels is difficult.

Cost of services as a percentage of revenues increased slightly in the fourth quarter of 2005 as compared to the same period in 2004. Magticom has been able to maintain relatively stable costs of sales as a percentage of revenue principally due to its market leader position.

Cost of services as a percentage of revenues increased by approximately 43% for the full-year of 2005 as compared to the same period in 2004, due principally to the previously discussed change in a contractual arrangement related to an interconnect arrangement with another mobile telephone service provider in the Tbilisi, Georgia. Effective October 1, 2004, Magticom began receiving monthly invoices from the mobile telephone service provider based on Magticom’s termination of its traffic on the telecommunications network of the other mobile telephone service provider and as a result Magticom began recognizing interconnect costs for this relationship between the parties. For the first nine months of 2004, Magticom did not recognize inbound interconnect costs from this mobile telephone service provider; however, had the existing interconnect agreement been effective January 1, 2004, Magticom’s pro-forma interconnect costs for the full-year of 2004 would have increased by $17.4 million to $33.7 million. Accordingly, pro-forma cost of services as a percentage of revenue would have declined by approximately 21% in the full-year 2005 as compared to the same period in 2004, if the contractual interconnect arrangement had been in place for the entire fiscal year 2004. Magticom’s position as a market leader has allowed it to maintain its subscriber margins; however, Magticom anticipates that its costs of sales as a percentage of revenues will increase as competition intensifies in the region.

Magticom’s selling, general and administrative expenses increased by approximately 13% for the full-year of 2005 as compared to the same period in 2004, principally due to a $2.9 million, or 48%, increase in personnel related costs and a $0.3 million, or 26%, increase in advertising expenses. These amounts were partially offset by year-over-year reductions in both other general and administrative costs of $1.2 million and taxes other than payroll and income taxes of $0.8 million. The increase in Magticom’s personnel related costs are due to the significant increase in personnel employed, approximately an 18% year-over-year increase, wage increases provided to existing employees, effective January 2005, and the implementation of a performance bonus program in 2005 for all Magticom employees. The increase in advertising expenses was principally attributable to the “GEL 5 and 10 Mono Card” introduction campaign that was initiated in February 2005 and the “Bali Brand” introduction that was initiated in July 2005. The significant reduction in other general and administrative expenses was principally due to the $0.9 million obsolescence charge associated with uninstalled telecommunications equipment (spare parts) and fixed assets no longer in use that was recognized in the fourth quarter of 2004 with no similar charge in 2005. The reduction in taxes other than payroll and income taxes was principally due to a $0.5 million VAT accrual that was recognized in the fourth quarter of 2004 with no similar charge in 2005.

The significant growth in capital expenditures for the full-year of 2005 as compared to the same period in 2004 is principally due to the continued upgrade and expansion of the telecom infrastructure and Magticom’s acquisition of new mobile telephony frequency spectrum licenses operating in the 800 MHz, 1800 MHz and 2.1 GHz frequency ranges. The new mobile telephony spectrum licenses acquired in 2005 are for 18% of the 800 MHz radio frequency spectrum available in Georgia for offering CDMA, data, voice and video services, for 20% of the 1800 MHz (or equivalent to 15% of the combined 900 MHz and 1800 MHz) radio frequency spectrum available in Georgia for offering GSM data and voice services and 25% of the 2.1 GHz frequency spectrum available in Georgia for offering 3G GSM mobile voice, data, and video services. Magticom already offers services using GSM standards in both the 900 MHz and 1800 MHz spectrum range, however, the 800 MHz and 2.1 GHz license agreements require Magticom to offer commercial service using the spectrum covered by the licenses within one year and offer such service throughout Georgia within three years.

The currently budgeted capital expenditures program for Magticom for the twelve months ended December 31, 2006 is in excess of $60.0 million, which the Company anticipates will be internally funded by Magticom and not require additional Company investment.

Magticom Financial Results – Impact of Restatement Activities:

Revision of 2004 Preliminary Financial Results

The following table highlights the Company’s current preliminary financial results of Magticom for the year ended December 31, 2004, as compared to the preliminary results originally reported in April 2005: