Annual report 2010 _ eng

www.sitronics.com Annual Report 2010

SITRONICS at a Glance Business Structure
Business Structure

Key Indicators SITRONICS is the largest high technology company in Eastern Europe in the fields such
CEO’s Statement as telecommunication solutions, information technologies and microelectronics.
2010 Milestones

Business Geography
The Company’s operating activities are divided into three segments:

SITRONICS at a Glance SITRONICS SITRONICS SITRONICS
Business Strategy
Telecommunication Information Microelectronics
Business Segments Overview

SITRONICS Solutions Technologies
Telecommunication Solutions

SITRONICS is a leading global developer and provider is one of the major system integrators is the largest manufacturer and exporter
Information Technologies of comprehensive telecommunications and leading providers of IT products, of microelectronics in Russia and the CIS
SITRONICS solutions and technology solutions and services in Eastern Europe
Microelectronics and the CIS
Financial Overview

Corporate Governance

Personnel

Social Responsibility

Capital Market Activities

Risk Management

Financial Statements

Glossary

Responsibility Statement

Contacts

2


SITRONICS at a Glance Key Indicators
Business Structure

Key Indicators Financial Highlights Operational Highlights
CEO’s Statement

2010 Milestones Revenues US$ Over

1,167 million 3,500 customers
Business Geography

up 14% year on year in 62 countries

OIBDA US$ Represented in

105.6 million 30 countries
SITRONICS at a Glance

Business Strategy


SITRONICS US$ 6.7 million in 2009

SITRONICS
Information Technologies

SITRONICS
OIBDA margin About

9.1% 8,000 employees
Microelectronics

Financial Overview


Personnel 0.7% in 2009


Risk Management Total assets US$

Glossary

2,010 million 4 R&D centers
US$ 1,927 million in 2009 in Athens (Greece), Prague (Czech Republic), Zelenograd (Russia) and Moscow (Russia)
Contacts

3


SITRONICS at a Glance CEO’s Statement
Business Structure

Key Indicators Dear Colleagues, Investors, Customers and Business Partners,
CEO’s Statement 2010 was a successful year for SITRONICS on many fronts. We ful-
2010 Milestones filled the promises that we made to the investment community and
Business Geography laid solid foundations for the future development of the business.
The gradual transition of Russia away from a primarily resource-
based economy to an innovation-led economy is gathering pace.
There is no doubt that this trend is positive as the intellectual po-
tential of the country becomes more valuable. In this context, tech-
nology developments and the creation of intellectual property are
now prioritised as key contributing factors in the country’s econom-
SITRONICS at a Glance ic development.
Business Strategy

Business Segments Overview SITRONICS’s role in the overall modernisation of Russia is there-
SITRONICS fore also becoming more prominent, and we have considerably
strengthened our position in this area during 2010. Full year rev-
SITRONICS
enues were up 14% to US$ 1,167 million and OIBDA was up over fif-
teen fold to US$ 105.6 million with a 9.1% margin. Our year on year
SITRONICS
Microelectronics revenue growth rate accelerated to 21% in the fourth quarter and
Financial Overview we also delivered a US$ 73.8 million positive year on year swing
Corporate Governance from an OIBDA loss to an OIBDA profit of US$ 54.8 million with a
Personnel margin of 11.3%. We reported a quarterly net profit for the first time
Social Responsibility in four years in the fourth quarter.

Risk Management We were able to achieve these financial results by adhering closely
to our strategy. We strengthened our position as a primary tech-
Glossary
nological partner of the State and proved once again that we are
a leading Russian ICT innovator with a clear focus on investing in
R&D. Our successful track record in public to private partnerships
Contacts
included our participation in the Republic of Bashkortostan’s E-

4


SITRONICS at a Glance Government project, which resulted in the launch of Russia’s first plan to commence manufacturing by the end of 2011. This will posi-
Business Structure full-scale inter-agency legal documentation management system. tion Russia as one of 10 countries globally to own this advanced
Key Indicators Similar projects were launched during the year in Mordovia and the technology. Furthermore, the Prime Minister of Russia and various
CEO’s Statement Yamal-Nenets Autonomous Region. In addition, we have already Government departments have recently mandated certain mea-
2010 Milestones won a large scale tender to create an intelligent transport system sures to stimulate the accelerated development of the semiconduc-
Business Geography for the Moscow city authority in 2011. This system will provide in- tor industry in Russia.
formation for the road infrastructure development programme and
facilitate improved coordination of the State Traffic Safety Inspec- We signed a contract during 2010 to deliver SIM cards to Vimpel-
torate, road services and first response capabilities. Com and we are therefore now supplying SIM cards to all of the “Big
Three” mobile telecommunications operators in Russia, which to-
A number of prominent IT projects were implemented during 2010 gether account for approximately 60% of the SIM cards in Russia
including a CRM system based on Oracle software for Sberbank of and the CIS today. We renewed the US$ 100 million contract with
SITRONICS at a Glance Russia; an SAP enterprise management system for Bashneft; and the Moscow Metro and started supplying RFID tickets to Aeroex-
Business Strategy a number of hardware and software projects for Mobile TeleSys- press, which operates the rail services between Moscow and the
Business Segments Overview tems. Our focus in the telecommunications sector was on the de- surrounding airports. We also continued to export our microelec-
SITRONICS velopment of our billing and billing-related solutions. As a result, tronic components to South-East Asia and our RFID tickets are now
our flagship FORIS solution has continued to gain popularity and in use by Istanbul’s overground transport network.
SITRONICS
our FORIS OSS and FORIS InterPartner solutions were implemented
for Indian mobile network operator Sistema Shyam TeleServices. I would like to thank you all for your support in 2010 and into 2011.
SITRONICS
Microelectronics We also signed a long-term contract with Ugandan mobile network We greatly appreciate your trust and are more optimistic than ever
Financial Overview operator Warid Telecom Uganda to provide 1.1 million FORIS billing about the future of SITRONICS. This confidence is based on our on-
Corporate Governance system licences, and we continued our successful cooperation with going partnership with the State, our market leading positions in
Personnel MTS in Russia, Belorussia and Ukraine. key vertical industry sectors and across multiple geographies. We
Social Responsibility are committed to further developing our position as a leading ICT
Capital Market Activities The performance of our microelectronics business also deserves company and playing an ever increasing role in the building of Rus-
Risk Management attention. Russia has managed to close a five-year development sian innovation.
gap in the last four years by launching a state-of-the-art manufac-
Glossary
turing process at our Mikron plant. Microelectronics is the basis of
90% of innovation, which is why research and development in this Sergey Aslanian
field is discussed at the very highest level in Russia. We produced President of SITRONICS
Contacts
our first 90 nanometer microchip samples at the end of 2010 and

5


SITRONICS at a Glance 2010 Milestones
Business Structure

Key Indicators January system in Russia for interagency relevant
CEO’s Statement SITRONICS and MTS launched a project for in low document management at the con-
2010 Milestones automated transport monitoring using NIKA stituent territory level was implemented.
Business Geography navigation service for Unimilk Company.
SITRONICS completed the implementation of FORIS
February Fix billing solution for MGTS.
SITRONICS took part in setting up a new data processing centre for
MTS in Novosibirsk. June
SITRONICS placed commercial bonds of BO-1 series totalling to 2
March billion rubles on the MICEX Stock Exchange. The issue sponsor and
SITRONICS at a Glance SITRONICS, ROSNANOTECH State Corporation and STMicroelectro- underwriter was the Bank of Moscow.
Business Strategy nics signed a tripartite agreement on the transfer of 90 nm feature
Business Segments Overview size IC manufacture. SITRONICS signed a contract with SMARTS, the largest telecom-
SITRONICS munication operator of the Volga Region, to deliver 0.5 million SIM
SITRONICS have entered into a credit agreement with the Bank of cards.
SITRONICS
Moscow worth 4 billion rubles.

SITRONICS
July
Microelectronics INTRACOM TELECOM received the HP Communications and Media INTRACOM TELECOM signed a frame contract with Rolaware —
Financial Overview Solutions Partner of the Year 2009 award. a Greek broadband access service provider — to supply Wi-
Corporate Governance BAS systems (point-to-multipoint). The contract value is 3.4
Personnel April million euros, and the maturity date is 3 years.
Social Responsibility SITRONICS bought out ownership interest in SITRONICS Smart
Capital Market Activities Technologies (SST) from German company Giesecke&Devrient SITRONICS Information Technologies signed a contract with a
Risk Management GmbH (G&D) for 101.9 million rubles. As the result, the SITRONICS's Vnesheconombank's subsidiary company in Ukraine —Prominvest-
ownership interest in SST has increased from 65% to 100%. bank — to implement Oracle FLEXCUBE Universal Banking solution.
Glossary

May INTRACOM TELECOM signed a contract with data services provider
SITRONICS finished the first stage of the 'Republic of Bashkortostan DiscoveryTel Ghana (DTG) to deploy the first WiMAX network in Gha-
Contacts
E-Government. First Phase' project. As the result, the first full-scale na. The contract is worth 1.2 million US dollars.

6


SITRONICS at a Glance August placement, SITRONICS now owns 24.95% of the com-
Business structure SITRONICS commercial bonds of BO-01 series totalling to 2 billion pany's shares.
Key indicators rubles were quoted on the Bank of Russia Lombard List.
CEO’s Statement SITRONICS and Ericsson agreed on mutual coop-
2010 Milestones SITRONICS Smart Technologies won a tender arranged by Sberbank eration. The parties also concluded a distribution
Business Geography of Russia to provide services of banking cards personalisation. agreement, under which SITRONICS acts as a dis-
tributor of Ericsson IP solutions, IMS solutions and
SITRONICS signed a contract with Aeroexpress, the subsidiary fixed broadband access solutions in the CIS.
of Russian Railways, to deliver RFID tickets.
SITRONICS signed a new contract with mobile network op-
September erator Warid Telecom Uganda to supply 1.1 million FORIS billing
Mikron started exporting chips on 200 mm wafers to South system licences.
SITRONICS at a Glance East Asia. RFID tags produced by Mikron will be used in access
Business Strategy cards, electronic keys for houses and hotels. December
Business Segments Overview SITRONICS signed a contract with VimpelCom to supply 1 million SIM
SITRONICS SITRONICS-Tatarstan, a subsidiary company, was set up in Kazan. cards with 64KB of memory.

SITRONICS
SITRONICS placed commercial bearer bonds of BO-2 series totalling

SITRONICS
to 3 billion rubles on the MICEX Stock Exchange. The issue was spon- milestones after the reporting date
Microelectronics sored by the Bank of Moscow and the Moscow Bank for Reconstruc-
Financial Overview tion and Development. February
Corporate Governance The Bank of Moscow and SITRONICS-Nano signed an agreement on
Personnel October opening a letter of credit with post-financing for 27 million euros in
Social Responsibility SITRONICS signed long-term contracts with Sistema Shyam TeleSer- favour of STMicroelectronics NV to finance the transfer of licences
Capital Market Activities vices Ltd. for an overall amount of 22 million US dollars to imple- and technology to SITRONICS-Nano.
Risk Management ment a number of its solutions (FORIS billing solution, CRM, STP
platform and MNP solution) and provide technical support. March
Glossary
Mikron supplied contactless transport RFID tickets for Istanbul sur-
November face transport in amount of 2.42 million tickets.
SITRONICS purchased additionally issued shares of Intellekt Telekom,
Contacts
Sistema Group research and development centre. As a result of this

7


SITRONICS at a Glance Business Geography Saint Petersburg
Zelenograd
Business Structure Moscow Yekaterinburg
Nizhny Novgorod Novosibirsk
Key Indicators Minsk Kazan
Samara Ufa
CEO’s Statement Prague Kiev
Votice
2010 Milestones Voronezh
Krasnodar
Belgrade Kishinev Almaty
Business Geography Banja Luka Bucharest
Pristina Vladivostok
Sofia
Skopje Yerevan
Tirana Tashkent
Thessalonike
Patras Athens
Nicosia Tokio
Atlanta
Damascus
Lahore

New Delhi
Dubai Taipei
Gurgaon Shenzhen
Riyadh Hong Kong
SITRONICS has representative
Business Strategy

Business Segments Overview offices in 51 cities of 30 countries
SITRONICS
worldwide
Kuala Lumpur
SITRONICS Kampala

SITRONICS
Brazzaville
Microelectronics

Financial Overview Headquarters Representative Offices Research and
Corporate Governance Development Centers
Moscow (Russia) Asia CIS Europe Russia
Personnel China / Hong Kong Armenia / Yerevan Albania / Tirana Saint Petersburg Russia
Manufacturing plants China / Shenzhen Belarus / Minsk Bulgaria / Sofia (HQ), Plovdiv, Varna, Nizhny Novgorod Moscow
Social Responsibility Czech Republic / Votice India / New Dehli Kazakhstan / Almaty Pomorie, Plewen, Sliven, Montana, Kazan Zelenograd
(contract manufacturing India / Gurgaon Moldova / Kishinev Gotse Delchev Krasnodar Saint Petersburg
of microchips for industrial Malaysia / Petaling Jaya Uzbekistan / Tashkent Samar
Saudi Arabia / Riyadh Ukraine / Kiev Bosnia and Herzegovina / Banja Luka Ufa Europe
Risk Management electronics)
Syria / Damascus Cyprus / Nicosia Vladivostok Czech Republic / Prague
Financial Statements Romania / Bucharest UAE / Dubai Czech Republic / Prague Novosibirsk Greece / Athens
(manufacturing Pakistan / Lahore Greece / Athens, Thessalonike, Patras Yekaterinburg
Glossary Macedonia / Skopje Asia
of telecommunication equipment) Taiwan / Taipei India / New Dehli
Japan /Tokio Romania / Bucharest USA
Russia / Voronezh Serbia / Belgrade Atlanta
Contacts (manufacturing of microchips) Kosovo / Pristina
Africa
Russia / Zelenograd Republic of the Congo / Brazzaville
(manufacturing of microchips, Uganda / Kampala
RFID and smart cards)

8


Business Strategy Mission, Vision, Values
Mission, Vision, Values

Three Major Vectors For Development Our mission is to build an efficient and innovative economy,
Five Focus Growing Points thus raising society’s living standards via the generation
Business Segments Strategy
and promotion of modern technological solutions.

SITRONICS Vision


Business Strategy


SITRONICS
We generate We understand We develop We contribute We are
SITRONICS
innovations business partnerships to business efficiency the leaders
We improve people’s We work in a rapidly Our partnerships with We develop competen- We are the leaders in all
SITRONICS
Microelectronics living standards via the evolving high tech in- global leaders in innova- cies and constantly im- the main spheres of our
Financial Overview implementation of new dustry. We understand tion guarantee that the prove our solutions, thus business — the develop-
Corporate Governance technologies. These tech- the details of each of solutions that we offer to increasing the competi- ment and implementation
Personnel nologies favour economic our client’s businesses, our customers are best tiveness of our clients’ of new solutions and
Social Responsibility growth, provide equal which allow us to share a one available, and give businesses business development.
Capital Market Activities access to modern world common language our clients the competi- We seek to maximize the
Risk Management services and form the tive edge they seek Company’s shareholder
continuous evolution of value
Glossary
society


Contacts

10


Business Strategy Mission, Vision, Values

Three Major Vectors For Development

Five Focus Growing Points


SITRONICS Values


Business Strategy


SITRONICS
Result oriented Openness Innovative Continuous improvement Teamwork
SITRONICS
We focus our efforts on We are open to new We are always searching We strive for continu- One of the key factors in
achieving measurable re- contacts, ideas and for the best innovative ously improvement of our success is teamwork,
SITRONICS
Microelectronics sults in every project and initiatives. We are ready solutions. Every em- our skills, products and in which we use our
Financial Overview initiative — and for every to share our expertise, ployee is encouraged to services. This we pass on knowledge, experience,
Corporate Governance customer knowledge and experi- contribute to the overall to our customers motivation and desire
Personnel ence with our customers success, with original to achieve results. Our
Social Responsibility and partners ideas and proposals actions are based on
Capital Market Activities confidence, responsibil-
Risk Management ity and professionalism
of all team members
Glossary


Contacts

11


Business Strategy Three Major Vectors For Development

Three Major Vectors For Development 1. Being the technological 2. Becoming a global ICT 3. Becoming a leading
Five Focus Growing Points partner of the State company focused on key company in development
verticals and implementation of
innovation products and
technologies

SITRONICS at a Glance The first vector implies the development The second vector involves the build-up of The third vector aims at strengthening the
Business Strategy of partner relationships with the State at a major ICT company, strengthening of the SITRONICS's position in the fields of cre-
Business Segments Overview all levels, including expert appraisal in the Company's position in the target markets ation and implementation of new products
SITRONICS fields of creation and management inno- in Russia and the CIS, and expansion ini- and technologies through the development
vative projects, industrial parks and R&D tiatives into global markets. SITRONICS is of a complex system, from research proj-
SITRONICS
centres. oriented to efficient progress through bal- ects to the commercial launching of new
anced growth and investment in the devel- products and services.
SITRONICS
Microelectronics opment of the Company’s own competen-
Financial Overview cies and solutions, strategic partnerships
Corporate Governance and M&A, while implementing consistent
Personnel integration and centralisation of processes
Social Responsibility such as sales and marketing, and R&D.

Risk Management


Glossary


Contacts

12


Business Strategy Five Focus Growing Points

Three Major Vectors For Development

Five Focus Growing Points Growing points Products and solutions offered by the Company in the market

1.
A convergent telecommunications solution, including:
• Equipment for creating wireless • Equipment for developing optical • OSS/BSS solution package (real-time
networks and providing broadband networks based on the xPON tech- accounting and billing, policy-based
EFFICIENT
Internet access nology applications and services)
TELECOM

2.
Hardware and software solutions for power engineering and housing and communal services, including:
• Energy resource accounting • Integration of specialists and infor- • Modern RFID-based solutions,
SITRONICS at a Glance and billing mation systems over the entire asset Glonass/GPS and 3D for the areas
EFFICIENT • Decision support systems life cycle
Business Strategy of asset servicing and personnel
POWER ENGINEERING • Situation and crisis centres training

3.
SITRONICS An overall solution for automation of a constituent territory, including:
• “Electronic Government” services • Executive body integrated automation • Infrastructure for Universal Electronic
SITRONICS
for the region Cards (UEC), integration of E-payment
Information Technologies EFFICIENT
and UEC systems, provision of access
SITRONICS REGION to E-payment services in rural areas
Microelectronics

4.
Financial Overview A solution for integrated automation of a modern city, including:
• City and municipal asset management • City-based public transport and • City safety management
Personnel special transport management
EFFICIENT • Transport payment automation
Social Responsibility CITY based on RFID technology

5.
Risk Management A multilevel solution for integrated automation of a company, including:
Financial Statements • IT infrastructure deployment (DPCs, • Development of the IT strategy, • Development of the Company's
etc.) with the possibility of outsourc- selection and implementation of integrated safety system
Glossary EFFICIENT ing of these functions solutions such as BI, ERP, CRM
Responsibility Statement COMPANY
Contacts

13


Business Strategy Business Segments Strategy

Three Major Vectors For Development Strategic priorities of the Strategic priorities of the
Five Focus Growing Points Telecommunication Solutions: Information Technologies:
Business Segments Strategy • Expansion of the current product and service portfolio due to • Increase of the Company’s share in the IT markets in the Russian
the rapid response to the existing and future market demands Federation, Ukraine, and other CIS countries in the following
and our customers' requirements industries: telecommunications, transport, the public sector,
• Increased focus on emerging markets where a share of existing power engineering, banking, retail, education
“technological know-how” is relatively small, while growth po- • Increase of the share of high margin services and business prof-
tential is high itability on the whole
• Entry to new industrial markets, particularly development and • Priority development of consulting and system integration ser-
promotion of solutions for housing and communal services, de- vices
SITRONICS at a Glance velopment of comprehensive products and solutions for corpo- • Strengthening of strategic alliances with industry leaders to
Business Strategy rate and government customers speed up access to the latest technologies and newest markets
Business Segments Overview • Strengthening of existing and creation of new strategic allianc- • Use of synergetic communication with other SITRONICS’s seg-
SITRONICS es in R&D, and also launching jointly-developed solutions with ments
leading global market players
SITRONICS
• Improvement of the sales system aimed at external markets
through, among other activities, use of geographic and market-
SITRONICS
Microelectronics ing synergies with SITRONICS’s segments
Financial Overview • Use of synergetic communication with the Information Technol-
Corporate Governance ogies segments with regard to telecommunications solutions
Personnel integration


Risk Management


Glossary


Contacts

14


Business Strategy

Three Major Vectors For Development Strategic priorities
Five Focus Growing Points of the Microelectronics Solutions:
Business Segments Strategy • Strengthening of the market position as a technology-sector • Development of partnerships with the government in the area
leader, owning the most state-of-art production facilities and of R&D, capital investment and creation of new distribution
technology, and a leading IC and smartcard manufacturer in the markets
Russian Federation and the CIS • Development of partnerships with international microelectronic
• Participation in national upgrade programs through the produc- companies
tion of newly developed special chips for industrial and aero- • Increased focus on the exportation of hi-tech products outside
space purposes, manufacture of chips for bio-passports and the Russian Federation: to the Asian-Pacific region (China, Tai-
other social projects, strengthening of positions in the segment wan, South Korea) and Europe, due to new technologies devel-
SITRONICS at a Glance of SIM cards, transport cards, RFID cards and other types of opment, cost structure improvement and product quality en-
Business Strategy cards available in the Russian Federation hancement
Business Segments Overview • Creation of a complete added value chain, from the production • Use of product and geographic synergies with other SITRON-
SITRONICS technology creation and chip development, design and manu- ICS’s segments
facture to the production and assembly of end products and so-
SITRONICS
lutions (chip packaging, smartcards and solutions based on the
smartcard technology, etc.)
SITRONICS
Microelectronics • Development of the design centre, provision of access to a full
Financial Overview range of services in IC design and manufacture
Corporate Governance • Development of partnerships with leading Russian companies
Personnel with the aim of scientific and technical cooperation and produc-
Social Responsibility tion of power electronics

Risk Management


Glossary


Contacts

15

sitronics
telecommunication
solutions

16


Business SITRONICS Telecommunication Solutions
Segments Overview
SITRONICS Telecommunication Solutions comprises companies developing
software and hardware for fixed and mobile network operators.
This business line generated 45% of the Group’s revenue in 2010.

revenue 2009–2010 key products
(us$ mln) (in % of the segment revenue)

Business Strategy 250 -9.2%
FY 2009: 579 FY 2010: 525.9 18% Operations and business
208 processes support
200
SITRONICS 191 (OSS/BSS)
Telecommunication Solutions -8.6% 25% Network deployment
SITRONICS 150
141 133 22% Telecommunication
Information Technologies 124
software
106 107
SITRONICS 100 95
Microelectronics
18% Outsourcing

Financial Overview 50
17% Other

0
Personnel
1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q
‘0

‘1
‘0

‘1
‘0

‘1
‘0

‘1
0

0

0
9

0
9

9

9


Risk Management

SITRONICS offers telecommunication solutions in all key invest- (OSS/BSS) for telecommunications operators; 3) increase average
Glossary
ment areas for telecommunications operators. With the solutions revenue per user through the introduction of new services and QoS
offered by SITRONICS, telecommunications operators can: 1) at- enhancement.
tract new subscribers through the network expansion; 2) reduce
Contacts
costs with the help of operation and business support systems

17


“In 2010 we focused on the expansion of the global sales of our broadband wireless systems and value-
Business added software applications which employ the newest technologies to enable our customers to differen-
Segments Overview tiate, generate new revenue streams and improve their profitability. We further expanded into the Asian
markets, while we signed significant new contracts for our wireless systems in Eastern Europe, Russia
and the Middle East, where we have been operating for the last decade. We forecast further growth in
sales in Russia, Pakistan, Syria, India and Romania, where we have greatly enhanced our sales teams.
Our major goal is to be listed among the top international players in the market of wireless network sys-
tems and telecom software. We invest in R&D in order to continue the development of innovative telecom-
munication products which contribute to the success of our customers”

Alexandros Stergios Manos,
Managing Director of INTRACOM TELECOM

SITRONICS at a Glance Telecommunications equipment • iBAS is a multiservice access platform intended for concurrent
Business Strategy SITRONICS’s solutions, developed by its subsidiary company, INTRA- providing numerous broadband (high-speed Internet, broad-
Business Segments Overview COM TELECOM, help operators establish a powerful and cost-efficient band TV, games) and narrowband (voice, leased lines, subscrib-
SITRONICS telecommunications infrastructure, satisfying both current and future er multiplexing) services with one unit.
possible requirements to data communication and subscriber access.
SITRONICS
Some of the new customers are Syrian Telecommunications Estab-
Key SITRONICS solutions: lishment, a major fixed network operator in Syria, and Moldtelecom,
SITRONICS
Microelectronics • OmniBAS is a solution for providing broadband wireless access a leading telecommunications operator in Moldavia (supply of Wi-
Financial Overview and data communication based on the radio-relay technology in BAS and iBAS solutions and technical support for one year). A new
Corporate Governance next generation networks. contract with Telecom Srbija to supply IPTV equipment was also
Personnel • INTRALINK is a range of homogeneous digital point-to-point concluded in 2010. In June of 2010, agreements were concluded
Social Responsibility radio-relay products for providing broadband wireless access. with DiscoveryTel Ghana (a licensed data communication provider)
Capital Market Activities • OmniMAX is a solution for providing broadband wireless access to deploy the first mobile WiMAX network in Ghana, and with Ro-
Risk Management and voice communication using the WiMAX technology, at bi- laware (Greek broadband access provider) to deliver WiBAS within
trates up to 120 Mbit/s, irrespective of the geographic location, three years. In November of 2010, new contracts were signed with
Glossary
in any types of buildings, and while in motion. Pakistan Telecommunication Company Limited (PTCL), a leading

• WiBAS is a solution for creating broadband wireless access net- telecommunications operator in the Middle East, to deliver the Wi-
works, based on the FDD-TDMA (IEEE 802.16) standard, to pro- BAS solution, and with Telekom Srpske, a telecommunications oper-
Contacts
vide carrier-class point-to-multipoint wireless communication. ator in Bosnia and Herzegovina, to deliver INS, INTRALINK and IPTV

18


“In the second half of 2010 we worked hard towards the Company restructuring, reviewing the product
Business strategy, developing a proactive position with regard to the promotion of STS products and strengthening
Segments Overview cooperation with our customers and partners. By the end of the year, we have already demonstrated a
significant increase in key performance indicators, higher production efficiency and improvement of the
quality of our products and solutions. This allowed us to offer new services to our customers. Our major
task today is to surpass what we have accomplished and move forward in line with market requirements.”

Mikhail Bondarenko,
General Director of JSC “SITRONICS Telecom Solutions”

solutions. Moreover, Comstar put a WiMAX network based on the including major telecommunications companies (2N TELEKOMU-
SITRONICS at a Glance OmniMAX equipment into pilot operation in Tsahkadzor (Armenia). NIKACE and PRINCIP А.S. (Czech Republic), ERL Electronic GmbH
Business Strategy and Nanotron Technologies GmbH (Germany), Zenitel Norway AS
Business Segments Overview Telecommunications software (Norway)) and companies in other industries (Consilium Fire&Gas
SITRONICS This segment includes the following three focus areas: A.B. (Sweden) — electrical equipment manufacturer, KV2 Audio In-
1. BSS/OSS (Business Support System/Operation Support Sys- ternational (UK) — audio equipment and sound system provider).
SITRONICS
tem), our key business driver, providing for the development, im-
plementation and technical support of the FORIS OSS billing so- SITRONICS’s flagship product is FORIS — a comprehensive system
SITRONICS
Microelectronics lution and related products (FORIS InterPаrtner, FORIS Business for convergent billing and service management, intended for the
Financial Overview Intelligence, FORIS Revenue Assurance, etc.), through which ser- support of fixed and mobile network subscribers and real-time bill-
Corporate Governance vices are provided to subscribers and which are actively used by ing for all types of services.
Personnel operators. SITRONICS is a top 5 player in the OSS/BSS market
Social Responsibility in Eastern Europe, South-East Asia and Africa, and the leader Advantages of the solution:
Capital Market Activities among Russian billing solution developers in terms of business • A carrier-class scalable billing platform specifically designed
Risk Management scale, customer pool, and product and process quality. for market-leading operators providing services to a large num-
2. Network Solutions, providing for the development of MEDIO ber of subscribers and/or to a rapidly growing number of users
Glossary
SCP, MEDIO STP, GMSC, TENNET and other products, which are • Suitable for providing services to any types of subscribers — pre-
in between hard- and software. paid or postpaid, corporate clients or individuals
3. The plant in Votice (a small town in the Czech Republic), manufac- • Billing for all types of services: voice, data communication, VAS
Contacts
turing products and assembling equipment for external customers, • Network technology convergence: fixed, mobile, NGN, IMS

19


geographies ing Transfer Point (STP) platform and Mobile Number Portability
Business (in % of the segment revenue) (MNP) solution, and also technical support)
Segments Overview • WARID TELECOM UGANDA (technical support services)
• TELECOM SRBJIА (technical support services)
2% Ukraine • MTS Belarus (delivery of the FORIS and FORIS InterPartner re-
1% Other leases), and others
28% Russia and CIS
(excl. Ukraine)
In 2010, the billing system was implemented for MTS India; migra-
32% Central and Eastern
Europe (excl. Greece) tion of prepaid and postpaid MTS Uzbekistan subscribers to the FO-
21% Greece RIS platform in the Tashkent region was completed; obligations to
11% Middle East and Africa roll out the FORIS solution releases in the MTS Russia regions were
5% Asia-Pacific region fulfilled; the Mobile Internet service based on the FORIS/MSCP con-
vergent solution was implemented for prepaid CDMA subscribers of
SITRONICS at a Glance MTS Ukraine; the FORIS Fix system was put into operation for the
Business Strategy Moscow City Telephone Network (MGTS), and the subscribers were
Business Segments Overview migrated to this system.
SITRONICS With the FORIS solution, operators can support more than 10 mil-
lion subscribers, ensure cost control and increase service profit- Nowadays SITRONICS’s solutions and products are used by more
SITRONICS
ability due to billing support. In 2010, FORIS was awarded Certifi- than 50 telecommunications operators worldwide.
cate of Compliance OC-1-CT-02-71, confirming that the system can
SITRONICS
Microelectronics be used in public communications networks supporting up to 35 Research and Development
Financial Overview million subscribers and is intended for billing automation and pro- In 2010, we continued developments in the key focus areas with re-
Corporate Governance vision of different telecommunications services. gard to telecommunications solutions: OSS/BSS systems for tele-
Personnel communications operators and equipment for wireless access and
Social Responsibility Today, the FORIS solution is used by fixed and mobile network op- data communication. New versions of FORIS OSS, OmniBAS, Om-
Capital Market Activities erators supporting over 100 million subscribers in Russia, the CIS, niMAX, WiBAS and other products were released, the development
Risk Management India, the Czech Republic, Serbia, Congo and Uganda. of a new billing product based on policy management, ActionRuler,
was started.
Glossary
In 2010, SITRONICS concluded several major contracts for delivery
of FORIS solutions and provision of technical support services to 3G Indoor and convergent access system developments, which were
the following customers: started in 2009, continued in 2010, and as a result, applications for a
Contacts
• MTS India (implementation of the FORIS billing system, Signal- patent in Russia and approval of a new project in this area were filed.

20


The “SITRONICS Research Institute” autonomous non-profit organ- • Companies focus on infrastructure cost reduction: infrastruc-
Business isation together with the Lobachevsky State University of Nizhni ture sharing between telecommunications operators, solutions
Segments Overview Novgorod examined the possibility of using 256QAM modulation in based on SaaS and cloud computing.
the 3GPP HSPA+ system for Nokia Siemens Networks. • Many operators switch from in-house OSS/BSS systems to com-
mercial industrial solutions.
A cooperation agreement with one of the world-leading providers of • Wireless segment (3G, LTE) is expanding; therefore, content vol-
technology solutions and professional services for telecommunica- ume is growing, including billing requirements.
tions operators, Ericsson, was concluded. As part of the partner- • Convergent FMC operators emerge, the MVNO market is developing.
ship, we are planning to develop competencies and expertise in IP
solutions, and also create a centre of competence and implement While infrastructure development was restrained during the
joint projects with the aim of development IMS and VAS applica- crunch, growing traffic volumes force operators to expand and up-
tions and BSS/OSS systems. grade the existing mobile and wireless network infrastructure. The
world markets growth rates in 2010: Wireless networks — by 5.6%,
SITRONICS at a Glance At the end of 2010, the SITRONICS Telecommunication Solutions WiMAX — by 25%, IPTV — by 22.5%, NGN — by 13%. Expected OSS/
Business Strategy management adopted a decision to develop regional R&D cen- BSS market growth in 2011 will be at 8%.
Business Segments Overview tres and increase investments to R&D significantly for 2011. New
SITRONICS R&D centres are being established in the premises of SITRONICS target oss/bss market (eastern europe,
branches in St. Petersburg and Krasnodar. A development team the middle east and africa; million us dollars)
SITRONICS
was assembled in SITRONICS Tatarstan, responsible for the de-
velopment of the FORIS InterPartner system, intended for the sup- 250
SITRONICS
Microelectronics port of settlement processes between operators. With the direct
Financial Overview involvement of the team, the solution was implemented in MTS 200

Corporate Governance Belarus and MTS Uzbekistan, and now the works are in progress
150
Personnel in MTS India.
Social Responsibility 100
Capital Market Activities Industry Trends and Future Development
Risk Management Telecommunications market features: 50

Financial Statements • Observation indicates growth rate slowdown worldwide.
Glossary
• Major telecommunications market players tend to consolidate 0

(fixed and mobile network operators.

20

20

20

20

20

10

11

12

13
09
• Competition is becoming more intense (especially in the OSS/
Contacts Professional Services License Data Processing and Hosting
BSS market).
Source: Gartner

21


Business iptv implementation costs in the world, in/vas costs in the world,
Segments Overview million us dollars million us dollars

10,000 500,000

%
8,000 = 22.1 400,000
C AG R
%
= 30.9
6,000 300,000 C AG R

4,000 200,000

2,000 100,000

SITRONICS at a Glance 0 0

Business Strategy
20

20

20

20

20

20

20

20

20

20
10

11

12

13

10

11

12

13
09

09

SITRONICS
Source: IPTV Infonetics, estimated figures by INTRACOM TELECOM Source: Gartner, VAS Portio Research
SITRONICS
New service implementation the Czech Republic, which is going to manufacture own products.
SITRONICS
Microelectronics It is anticipated that in the coming years operators will invest more As part of the development of its key product, FORIS, the Company
Financial Overview to technologies, which ensure the offered services range expansion has plans to focus on the FORIS functionality enhancement, in-
Corporate Governance and QoS enhancement. First of all, this means network migration to crease activity in the CIS and in the world, and work towards higher
Personnel IP technology, creation of Intelligent Networks (IN) and implemen- brand recognition in the market as a whole.
Social Responsibility tation of additional value-added services (VAS).

Risk Management SITRONICS will continue to promote OmniBAS and OmniMAX solu-
tions in the target markets.
Glossary
With regard to telecommunications software, we plan to strengthen
and develop profitable areas, competencies and products. This is
Contacts
true in respect of the OSS/BSS, Network Solutions and the plant in

22

sitronics
information
technologies

23


Business SITRONICS Information Technologies
Segments Overview
SITRONICS Information Technologies is the largest system integrator in Ukraine
and one of the Russian top 10 largest IT companies

revenue 2009–2010 key products
(us$ mln) (in % of the segment revenue)

180 +46% 181
FY 2009: 221.5 FY 2010: 323.6 18% IT Infrastructure and
150 System integration
44.5% Telecommunications
Business Strategy 120 121 +50% Integration solutions

90
37.5% Business Consulting
and IT outsorcing
SITRONICS
Telecommunication Solutions 63
60
46 46
SITRONICS
35 34
Information Technologies 30
19
SITRONICS
Microelectronics 0
1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q
Financial Overview
‘0

‘1
‘0

‘1
‘0

‘1
‘0

‘1
0

0

0
9

0
9

9

9


Personnel

Social Responsibility SITRONICS Information Technologies is one of the major system SITRONICS Information Technologies:
Capital Market Activities integrators and a leading provider of IT products, solutions and 1. Is a qualified team with a unique experience in implementing
Risk Management services in Russia and the CIS. The Company offers a broad range international projects in different industries
of solutions for the telecommunications, financial, and public sec- 2. Demonstrates many years of successful cooperation with lead-
Glossary
tors, as well as for the industrial sector. The Information Technolo- ing global vendors, which is confirmed by high partner statuses
gies line of business generated 28% of the total Group revenue 3. Holds a portfolio of the most in-demand solutions and services
for 2010. aimed at increasing efficiency and competitiveness of our cus-
Contacts
tomers’ businesses

24


“SITRONICS Information Technologies demonstrated faster growth during 2010 than the market did. I
Business think that the key factors of this success are our high expertise level, experience in implementing most
Segments Overview complex projects and increased focus on services provision for IT intensive industries.”

Vladimir Yasinsky,
Head of SITRONICS Information Technologies

IT Infrastructure creation and The first stage of the NIKA project for the Moscow heating systems
SITRONICS at a Glance system integration company Moskovskaya Teplosetevaya Kompaniya (MTK) to pro-
Business Strategy • IT infrastructure creation. A wide range of infrastructure solu- vide an integrated service for vehicles monitoring and manage-
Business Segments Overview tions based on developments by internationally-known com- ment was completed during 2010. Concurrently, another project
SITRONICS panies: IBM, Oracle, Hewlett-Packard, EMC, HDS, Cisco Sys- was launched to implement automated vehicle fleet monitoring
tems, АРС, and others. based on the navigation service NIKA for PalletTrade. Pilot sys-
SITRONICS
• System integration. Integration of enterprise information tem operation provided savings on the vehicle fleet maintenance
resources and software systems into a single system. Soft- costs at about 40%.
SITRONICS
Microelectronics ware audit services. Creation of portals and intranet systems,
Financial Overview knowledge base management systems, and document man- Telecommunication integration
Corporate Governance agement and workflow systems. • Design and construction of networks for mobile operators, in-
Personnel cluding wireless networks, and also implementation of OSS/
Social Responsibility Implementation of the E-Government project in Bashkortostan BSS for mobile network operators. Design and deployment of
Capital Market Activities continued in 2010, and other similar projects were launched in intranet portals, including the design of specialised distrib-
Risk Management Mordovia and the Yamal-Nenets Autonomous Area. SITRONICS uted systems of different complexity levels.
installed Multimedia Information and Educational Environment
Glossary
(MIEE) for the Bashkortostan Ministry of Education, and with During 2010, SITRONICS completed the implementation of IBM
compliments to the support of the Tula branch of Sberbank, Tyvoli Fault Management and Performance management subsys-
the MIEE software was installed in the regional school Vozro- tems at MTS with the aim of improvement data transport network
Contacts
zhdeniye. management. Concurrently, the project for a data transport net-

25


work upgrade at the MTS offices in Moscow was also completed. tems based on Microsoft System Center for Moscow City Telephone
Business The scope thereof included an SCS audit, network refit, equip- Network (MGTS) is in the final stage. In 2010, SITRONICS actively
Segments Overview ment replacement, and also the design and mounting of new developed portal solution creation and maintenance practices. The
workplaces. Simultaneously, a comprehensive upgrade of sepa- Company launched a project for intranet portal development based
rate data transport networks for joint-stock oil company Bashneft on Microsoft SharePoint 2010 for Rostelecom. At the same time, a
was implemented. As a result, an integrated data communication pilot project for intranet portal development for the Russian Tech-
environment and a unified Voice over IP telephony system were nologies State Corporation was also initiated.
established. A unified communication system was built for Sber-
bank of Russia in Ukraine, based on a multifunction, multiservice, SITRONICS started integrating the Oracle FLEXCUBE Universal
fail-safe network. Banking solution for Prominvestbank, and also automated the
budgeting process in VTB (Ukrainian branch) with Oracle Hyper-
Business consulting and IT outsourcing ion Planning. The VTB project became the first Oracle Hyperion
• Management consulting: implementation and integration of implementation in the Ukrainian banking sector.
SITRONICS at a Glance business applications. Implementation of, and support for,
Business Strategy Enterprise Resource Planning (ERP) systems, Corporate Infor- SITRONICS, with MTS and Oracle, performed one of the fastest
Business Segments Overview mation Systems (CISs) consulting services, implementation of and largest Oracle Hyperion Planning implementations in the Rus-
SITRONICS analytic systems, CRM (Customer Relationship Management) sian telecommunications sector. As a result, a budgeting and bud-
systems, electronic document management and workflow sys- getary control system for an MTS retail chain was created. As part
SITRONICS
tems, Business Intelligence technology, access control systems. of the project, the Oracle Hyperion Planning budgeting system
was integrated with the MTS retail chain corporate information
SITRONICS
Microelectronics In 2010, SITRONICS embarked on a project for Sberbank of Russia infrastructure.
Financial Overview and its branch in Ukraine to implement the Oracle Siebel CRM sys-
Corporate Governance tem. The first stage of the Oracle Hyperion EPM system implementa- • IT outsourcing. Support for IT processes, technical support for
Personnel tion in the International Innovative School Skolkovo was completed. equipment.
Social Responsibility SITRONICS completed the project for the supply and commission-
Capital Market Activities ing of equipment for joint-stock oil company Bashneft, with the aim The long-term projects for the provision of technical support for
Risk Management of creating hardware resources for the SAP ERP platform. Within software and equipment from world-leading vendors gained new
the scope of this project a Modular Data Processing Centre (MDPC), life in 2010. A new large-scale project for the provision of out-
Glossary
Daterium, was supplied. Furthermore, the first ITSM project for ar- sourcing support of user workplaces at MTS (AnyKey) was imple-
ranging the automated support based on the Axios assyst platform mented in Russia. The project covered the Southern and Far East-
for MTS retail chain operation was successfully implemented. The ern macroregions. A similar outsourcing project concomitantly
Contacts
project for creating infrastructure monitoring and management sys- started in the Ural and Northwestern macroregions. A project for

26

Annual report 2010 _ eng

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