Segment information

In 2011 the basis of segmentation has changed as compared with 2010 due to the reorganization of the Company completed on 1 April 2011 (refer to Note 1). As at 31 December 2010 there was no single management body that could be identified as chief operating decision maker. However, the financial information of former Rostelecom and IRCs comprising Svyazinvest Group was regularly analyzed by OJSC Svyazinvest, the Group’s controlling shareholder, and was used for decision making in regards of their strategy and operations. Thus Rostelecom and IRCs were determined as operating and reportable segments with all subsidiaries included in the segment Other as they did not meet quantitative threshold.

After the merger the former Rostelecom branches and IRCs, which are located in the same geographical area, were integrated into macroregional branches of the reorganised Group. Rostelecom Management Body which becomes the chief operating decision maker started to analyze operating results of OJSC Rostelecom by macroregional branches. The results of subsidiaries are analyzed on standalone basis. Consequently, the Group has determined its macroregional branches and subsidiaries as operating segments. However, subsidiaries with the exception of Skylink do not meet quantitative threshold defined by IFRS 8 and financial information of these operating segments are combined and presented under the heading Other. Currently Group has eleven reportable segments, which are the Group’s strategic business units. While differentiated geographically, the strategic business units offer mainly the same services to the customers.

Management of the Group assesses the performance of the operating segments based on the accounting data that is prepared using Russian statutory accounting principles on unconsolidated basis. A measure of segment profit or loss reported to the management of the company is earnings before interest, taxes, depreciation and amortization (EBITDA).

The following tables illustrate financial information of reportable segment required for disclosure by IFRS 8 for the year ended 31 December 2012, 2011 and 2010:

The following table illustrates information about reportable segment revenue and EBITDA for the year ended 31 December 2012:


2012 Corp. Center IRC North-West IRC Center IRC South IRC Volga IRC Ural IRC Sibir IRC Far East IRC Moscow Sky Link Other operations and reconciliation Total segments Adjustment and eliminations Total 
Revenue                            
Third party revenue 26,146 33,420 35,857 29,118 35,390 46,673 32,828 20,672 18,498 4,349 41,695 324,646 (3,395) 321,251
Revenue from other segments 936 389 145 326 559 152 984 160 372 205 5,846 10,074 (10,074) -
Total revenue 27,082 33,809 36,002 29,444 35,949 46,825 33,812 20,832 18,870 4,554 47,541 334,720 (13,469) 321,251
EBITDA (18,343) 16,240 14,883 12,043 17,401 20,033 14,523 7,790 9,010 (1,576) 14,811 106,815 16,512 123,327

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended 31 December 2012:


EBITDA of reportable segments 92,004
EBITDA of other segments 14,811
Adjustments
Depreciation, amortization and impairment losses (57,134)
Finance costs and other investing and financial gain (14,565)
Net gain for defined benefit plan (374)
Income from associates 4,293
Share-based remuneration (18)
Intragroup dividends (675)
Adjustments to loss on disposal of property, plant and equipment and intangible assets 57
Reversal of income from revaluation of associates and available-for-sale investments recognized  in statutory books 1,148
Reversal of material expenses recognized in statutory books and capitalized in property, plant and equipment under IFRS 3,202
Other adjustments 1,284
Profit before income tax 44,033

The following table illustrates information about reportable segment revenue and EBITDA for the year ended 31 December 2011:


2011 Corp. Center IRC North-West IRC Center IRC South IRC Volga IRC Ural IRC Sibir IRC Far East IRC Moscow Skylink Other operations and reconciliation Total segments Adjustment and eliminations Total 
Revenue                            
Third party revenue 21,439 31,507 33,471 26,538 32,702 45,571 31,425 20,215 16,439 6,538 34,738 300,583 911 301,494
Revenue from other segments 1,724 937 1,031 998 1,060 823 1,398 355 704 159 4,862 14,051 (14,051) -
Total revenue 23,163 32,444 34,502 27,536 33,762 46,394 32,823 20,570 17,143 6,697 39,600 314,634 (13,140) 301,494
EBITDA 302 14,833 13,544 11,363 14,163 20,636 12,769 6,413 8,312 (1,793) 10,543 111,085 10,725 121,810

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended 31 December 2011:


EBITDA of reportable segments 100,542
EBITDA of other segments 10,543
Adjustments  
Depreciation, amortization and impairment losses (53,761)
Finance costs and other investing and financial gain (10,991)
Net gain for defined benefit plan 4,335
Income from associates 4,474
Share-based remuneration (589)
Intragroup dividends (563)
Adjustments to loss on disposal of property, plant and equipment and intangible assets (1,227)
Reversal of material expenses recognized in statutory books and capitalized in property, plant and equipment under IFRS 1,814
Reversal of income from revaluation of associates of available-for-sale investments recognized  in statutory books (760)
Other adjustments (522)
Profit before income tax 53,295

The following table illustrates information about reportable segment revenue and EBITDA for the year ended 31 December 2010:


2010   Corp. Center IRC North-West IRC Center IRC South IRC Volga IRC Ural IRC Sibir IRC Far East IRC Moscow Skylink Other operations and reconciliation Total segments Adjustment and eliminations Total 
Revenue                            
Third party revenue 18,448 30,869 34,115 25,831 31,788 45,472 31,000 19,609 14,954 1,961 25,125 279,172 (1,675) 277,497
Revenue from other segments 1,143 193 226 294 742 159 787 208 1,116 27 4,400 9,295 (9,295) -
Total revenue 19,591 31,062 34,341 26,125 32,530 45,631 31,787 19,817 16,070 1,988 29,525 288,467 (10,970) 277,497
EBITDA (4,343) 13,307 14,605 10,414 12,803 21,649 12,700 7,060 6,142 (346) 9,188 103,179 3,638 106,817

The following table illustrates reconciliation of reportable segment EBITDA to profit before income tax for the year ended 31 December 2010:


EBITDA of reportable segments 93,991
EBITDA of other segments 9,188
Adjustments  
Depreciation, amortization and impairment losses (46,582)
Finance costs and other investing and financial gain (9,700)
Income from associates 353
Share-based remuneration (3,930)
Net loss for defined benefit plan (923)
Intragroup dividends (499)
Adjustments to loss on disposal of property, plant and equipment and intangible assets (754)
Other adjustments (631)
Profit before income tax 40,513

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