The ‘A+’ rating indicates high credit capacity of the Company. Risk of a delay in meeting liabilities is insignificant.
The company has been active as an independent legal entity since 1992 primarily focusing on providing telecommunication and telematic services in the presence regions. It is the main structural unit of Tele2 Russia Holding A.B., one of the leading Russian cellular operators controlling Tele2-SP since 2003.
In St. Petersburg, Tele2-SP serves approximately 17% of subscribers trailing the Big Three Group operators (MTS, MegaFon, Beeline). The firm position in the regional market with a positive trend is one of the essential and appreciable arguments for the issuer’s credit score.
Tele2-SP’s key performance indicators are improving. The company’s revenue as per RAS for 2011 was RUB 8.913 billion increasing by 20.9% against the previous accounting period. It will be noted that the average profit growth rate across the industry was 9.7% in 2011. Gross profit of the enterprise also increased by 21% to RUB 4.219 billion. Gross profit margin matched the 2010 result (47%).
All the other profitability indicators also showed a good growth rate in absolute terms (from 15 to 21%) preserving the 2010 results in relative terms. In 2011, return on sales was 26.6%, net profit margin at cost was 40%.
The principal risk factors for the company are as follows: considerable debt burden, low liquidity, and high competition.
After the company placed three issues of bonds for a total of RUB 13 billion in summer 2011, the share of obligations in its liabilities reached 84.5% - which certainly affects the company’s financial independence. Equity to total assets ratio of the enterprise is 15.5%, far below the industry average level. It is obvious that the issuer primarily pursued general corporate objectives when placing these issues. However, with the holding’s total financial capacities in mind, the company’s debt obligations are not critically high.
The debt burden is partially offset by the fact that the company’s financial liabilities are long-term and covered by its long-term financial investments. Also, the company has a stably positive net CFO, which speaks well for the issuer’s credit capacity. Last year, CFO reached RUB 1.78 billion.
The company’s liquidity is mainly represented by its debt receivables, and is fairly low. In 2011, absolute liquidity ratio was 0.051, intermediate liquidity ratio was 0.65, current liquidity ratio was 0.75.
When doing business, the enterprise is faced with tough, sometimes uncompromising competition which may well become even more severe during the upcoming auctions awarding frequencies for 4G LTE-based networks to winners. In these auctions, the Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications (ROSKOMNADZOR) and the State Radio Frequency Commission will have the final word. In case Tele2 secures one of the four licenses to be allocated, it will boost the company's further development even though absorb heavy investments over a long period.
OJSC Tele2-Saint Petersburg is a large and rapidly developing Russian cellular operator, with all licenses required for the professional activity in the region.

This press release is based on the statement of assigning a credit rating to OJSC Tele2-Saint Petersburg.
The rating score, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities.
AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
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Press release by: A.V. Khibukhin
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