Sitronics receives 40 million euros in Middle East

May 13, 2008

The Sitronics Company has signed the largest contract to launch a wireless network in Syria. The contract is worth €40 million. Analysts are sure the Telecommunication Solutions business line is likely to gain momentum and to earn small profit.

Sitronics reports to have signed a contract with the Syrian Wireless Organization (SWO), Syrian state organization to develop communications, to set up a wireless telecommunication network. The contract was concluded by the Greece Intracom Telecom Company incorporated in Sitronics’ Telecommunication Solutions. The contract is worth €40 million and has been signed in Damask by representatives of the Syria’s Ministry of Communications and Greece Ministry of Foreign Affairs.

Under the project Itracom Telecom will build a nationwide wireless network in Syria to provide the state agencies with emergency and alarm communications and reserve lines in case of failure of terrestrial and cellular communication systems. The TETRA technology is planned to be used on the equipment of the Italian Selex Communications Company. Intracom Telecom specialists forecast 22 moths are necessary to fulfill the project.

‘The given project implementation provides for strengthening our strategic partnership with SWO, improving the company’s position in the markets of the Middle East and Africa and diversifies the portfolio of our successful international solutions’, - says Alexander Manos, Intracom’s Director General. Sergey Filippov, head of Sitronics Press Service, tells CNews currently talks are held to conclude several other contracts in telecommunications. However, neither operators nor geographical areas are named. ‘Russia remains our key market’, - remarks Mr. Filippov.

‘A contract for €40 million is significant for Sitronics, - says the UniCredit’s analyst Nadezhda Golubeva. – Usually, the company concludes contracts for much smaller sums. However, signing a contract with the Syrian operator has been quite expected and recorded in the company’s order portfolio for 2008, so the contract is unlikely to affect the investors’ mood’. The Bank of Moscow analyst Rostislav Musienko is sure the Telecommunication Solutions will show good results in 2008: the business line focuses on upgrading the MGTS network and building 3G networks for MTS in the regions. ‘The sad experience of 2007 is unlikely to be repeated’, - the expert says. It should be noted that last year Sitronics demonstrated recorded losses. The key indices were affected by the telecommunication business line, whose revenue fell down 20% as compared to 2006 from $708.2 million to $569.8 million. OIBDA losses of the given business line reached $74.3 million over 2007 vs the revenue of $148.4 million in 2006. The mentioned failure resulted from delays in signing a large contract in the Middle East and delays in launching 3G project for the activities of the market regulators, Sitronics explains.

According to Ms Golubeva, the business line will hardly reach the level of 2006 and is likely to go up 15-20% suffering certain damage. Mr. Musienko is more positive regarding the prospects for the Telecommunication Solutions. He believes the business line is likely to gain momentum, reach the before crisis level of revenue and earn small net profit. Sitronics rejects to give any forecasts pledging the telecommunication business line will surpass the market growth in general.

Sitronics is one of the largest hi-tech companies in CIS and Eastern Europe. It pooles the resources of a portfolio of enterprises in Russia, Ukraine, Czech and Greece in order to carry out large-scale projects in the hi-tech industry. Sitronics’ shareholders are AFK Sistema and its affiliated companies (76,88%), LLC Sitronics Management (11,72%), European Bank for Reconstruction and Development (3,67%), AFK Sistema’s president Alexander Goncharuk (4,82%), head of “Microelectronic Solutions’” division Gennady Krasnikov (2,37%). 0,54% belongs to the rest of shareholders. According to US GAAP the company’s net income in the nine months of 2006 was $36, 9 mln, which is 37% less as compared to the nine months of 2005.