2008 Operating Report

Financial Performance

In 2008, the total turnover of the CyberPlat® payment system reached 160.8 billion rubles (or 6.5 billion US dollars). The CyberPlat® company collects more than 25% of the entire revenue of the leading cellular communication operators in Russia. It is the largest partner of Beeline, MTS and MegaFon in the volume of accepted subscriber payments.

According to statistics of December, 2008, 91% of turnover of the CyberPlat® company falls within the payments accepted from the subscribers of mobile network operators, 3% - from subscribers of commercial television operators, 2% - from Internet and IP-telephony users, 1.5% - are payments for housing and public utilities and electricity. The remaining 2.5% are payments for fixed-line communication, security alarm systems, retail loan repayments and other.

CyberPlat® is the first one out of Russian electronic payment systems and it was established in 1997. The first online payment was effected for the benefit of Garant-Park company on March 18, 1998, whereas the first payment in favor of a cellular communication operator – Beeline - was effected on August 12, 1998. For almost 10 years of operating at the electronic payment market the CyberPlat® company has been showing a dynamic and stable growth of its key performance indicators – the turnover and the number of payment acceptance outlets.

Transactions

In 2008, 1.5 billion payments were effected through the universal payment system CyberPlat®. According to the experts’ estimations, by the volume of daily processed payments, CyberPlat® exceeds in number of its transactions the Central Bank of the Russian Federation, international payment systems VISA and MasterCard in Russia altogether.

Herewith, it is noteworthy that overall payment operation processing within CyberPlat® technology is performed with the use of electronic digital signature in the on-line mode and does not take more than 2 seconds.

Payment acceptance network

In 2008, CyberPlat® passed another stage of its development and became an international global payment system of transnational character with 400,000 payment acceptance outlets totally, where 230,000 of outlets are located in Russia and CIS countries and 170,000 – in the largest cities of all countries worldwide.

The total number of payment acceptance outlets of the CyberPlat® system in Russia and CIS countries increased in 2008 more than twofold, and by the beginning of 2009 comprised over 230,000 outlets.

According to statistics of the Central Bank of the Russian Federation (http://www.cbr.ru/statistics/bank_system/print.asp?file=inform_08.htm) as of December 1, 2008, the number of banking institutions in Russia servicing the population, inclusive of all their branches, departments and even movable pay offices does not exceed 43 thousand, i.e. the CyberPlat® payment system’s network is FIVE times larger than the entire banking system of the country. One should also consider that offices of the banks do not operate round-the-clock compared to numerous payment acceptance outlets and self-service terminals. Besides, these offices are not located in places which are convenient for the population but in places where the requirements of the Central Bank to a certain bank office can be met.

The cost of processing a payment in a retail chain is considerably lower than in the banking system: the payment is accepted at a regular cash-register and the cashier, apart from accepting payments, maintains the main operations of the trading company. This allows acceptance and processing of even very small payments, effecting of which by banks is loss-making due to higher costs of the banking transactions. The CyberPlat® company complements the payment system in Russia and saves it from a great number of economically unprofitable operations.

Cooperation with Western Union

In 2008 CyberPlat®, the largest integrated versatile multibanking system of Internet-payments in Russia, and Western Union, the world leader in the field of money transfers performed without setting up a bank account, signed a service agreement regarding accepting payments for cellular communication services provided by the operators Beeline, MTS and MegaFon. Accounts can be replenished in all offices of Western Union outside Russia offering the QuickPay service. The QuickPay service is provided in more than 170,000 offices of Western Union in more than 200 countries and territories worldwide.

Thus, Russians who travel abroad have obtained an opportunity to pay for the cellular communication services in practically every country all over the world as easy as they do it at home. Over many years, Western Union has been giving its clients in the USA an opportunity to pay for the services of mobile network operators using its service locations. Thanks to the alliance contracted with the CyberPlat® payment system, Western Union can now offer this service to its clients in Russia.

Client base

Steady and dynamic growth of business became possible due to connection to CyberPlat® of new networks of payment terminals, trading and dealer companies, as well as branches and offices of numerous banks.

In particular, in 2008, the largest Russian banks - TransCreditBank, Rosselhozbank, Bank of Moscow, Credit Bank of Moscow, Sudostroitelny Bank, as well as many other banks became participants in the payment system. In total, 127 banks are participants in the CyberPlat® payment system.

The leading position of the CyberPlat® payment system is associated with the permanent improvement of quality of its services provided to its clients. In the accounting period, the CyberPlat® payment system was establishing a fruitful co-operation with the largest Russian retail networks – Russian Post, Euroset, Svyasnoy, the retail network of MTS, chains of electronics stores Eldorado, Mir, and Bely Veter, terminal networks Elecsnet, I-Box, Multikassa, Molniya, Platforma and many others.

It ought to specially note the promotion of a joint global project of the federal state unitary enterprise Russian Post and CyberPlat® in cash payment acceptance from the population within the large network of post offices in Russia. Cooperation with the Kazpochta JSC (Kazakhstan) has been dynamically developing.

Partners to the CyberPlat® payment system primarily are the large companies with steadily growing turnover and a high level of technological and corporative culture – whether they are retail and terminal networks or companies, specializing in providing mobile communication services, commercial television, and telecommunication and provider services.

Providers

In 2008, the CyberPlat® payment system embodied new opportunities in the payment acceptance market and considerably increased the number of payment gateways - up to 440 - to the billing systems of various service providers.

In 2008, the CyberPlat® payment system completed its integration with the largest Russian operators of fixed-line communication comprising the holding "Svyazinvest». In the accounting period, the companies North-West Telecom and Southern Telecommunications Company became participants in the CyberPlat® payment system.

Everyone has already got used to paying practically at any place for the services provided by operators of the mobile and fixed communication, commercial television, Internet-providers, banks and satellite security systems. Today, it is also possible to pay for housing and communal services using the CyberPlat® system in Moscow, St. Petersburg, Tyumen, Penza, Ulyanovsk, Reutov, Dzerzhinsk and other cities. Such payments are fast, comfortable, hassle-free and are made without standing in lines.

Following the strategy of the leader in the payment acceptance market, the CyberPlat® system has introduced a possibility of accepting payments for housing and communal services, as well as payments for electricity in several biggest regions. In particular, acceptance of payments for housing and communal services in the sales and service outlets of retail and terminal networks has been implemented in Saratov, Tver, Izhevsk and Ekaterinburg. In 2008 the following companies became participants in the CyberPlat® payment system: Yakutskenergo, Magadanenergo, Krasnoyarskenergosbyt, Nizhegorodskaya sbytovaya kompaniya (the retail electricity company in Nizhny Novgorod), Voronezhskaya sbytovaya kompaniya (the retail electricity company in Voronezh)and Karelskaya sbytovaya kompaniya (the retail electricity company in Karelia)

Terminal business

A considerable number of payment terminal networks, as they develop and enlarge, express a desire to do business with a payment system which does not have a terminal network of its own and hence cannot be a competitor to their business a priori. For this particular reason, in 2008, many payment terminal networks, operating through competitors, switched over to taking the service from the CyberPlat® company.

Within the CyberPlat® software, the clients have an opportunity to choose the service providers in whose favor they can accept payments. In this case, the CyberPlat® payment system, unlike its competitors, does not impose upon its clients any servicing or services which the latter do not need.

In 2008, CyberPlat® actively developed the pre-processing software which expands functionalities on management and monitoring of terminal networks’ operating capacity. The pre-processing system of the CyberPlat® payment system, which allows carrying out the remote monitoring of terminal networks’ operation and terminating software of the terminal, provides unique functional capabilities in utilization, and high reliability, accompanied by a number of technological advantages.

The software is available for free of charge downloading from the website of the CyberPlat® payment system, in the “Files” section. This enables the pre-processing system users to adjust it according to own requirements. In return this allows the CyberPlat® payment system to be completely integrated into business processes of its partners.

One of the key advantages of the Cyberplat® payment system’s software for terminals, which the company updated and improved in 2008, is its versatility, and simplicity of installation and running of the said software. Availability of public codes of the developed programs is the CyberPlat® software’s distinctive feature which attracts major clients.

The partners of Cyberplat® have access to the initial codes of the CyberPlat® client applications for payment terminals, mobile handsets and pocket PCs. If necessary, the open codes allow adjusting software applications to the requirements of large networks, as well as adjusting CyberPlat® applications for their integration into accounting systems, enterprise management systems and client accounting systems. The access to initial codes of programs makes CyberPlat® solutions more flexible and allows them to be entirely integrated with business processes of partners.

Technilogical and financial innovations

In 2008, the CyberPlat® payment system implemented a new and unique for the Russian e-payment market product – “change onto mobile phone” using a bar-code card.

While the customer pays for the purchases at a cash-register of a retain chain, he either gives the cashier a card with the encoded mobile phone number or the very handset which screen shows the image of the bar-code. Then he asks the cashier to transfer the amount of his change to his personal account with the telecommunication operator’s billing system. The cashier scans the bar-code, effects the payment online and gives the client a receipt. For the purpose of implementing this project the CyberPlat® system developed a special technological solution which can be integrated with the software for cash-registers used in the retail chains.

The use of the bar-code considerably simplifies and accelerates the performance of payment transactions. This technology reduces the time for servicing each customer which is quite crucial for the retail chains with high customer flow. Considerable economy of time for effecting transactions makes it appealing as for the customers so for the retail chains.

The pilot project on crediting the change to the phone account has been launched by the CyberPlat® payment system jointly with the “Ostrov” supermarket chain. While paying for the purchases in 24 supermarkets of the “Ostrov” retail chain in Moscow, Moscow region and Tula, subscribers of MTS can give directions to the cashier to transfer the amounts of their change to their mobile phone accounts. The addresses of the ”Ostrov” chain supermarkets can be found at: www.octrov.ru

The CyberPlat payment system uses the bar-code technology for payment time saving, for convenience purposes and for the reduction of labor costs. The subscriber’s phone number is transformed into a bar-code and is placed on a special plastic card, piece of paper, mobile phone screen or any other carrier. Thus, in order to effect a payment, the cashier only needs to hold, for example, the card or the mobile phone screen against the same scanner which is used to scan the bar-codes on goods.

The payer can receive his private bar-code at the website of his service provider or at the website of the CyberPlat® payment system, as well as using his handset by sending as SMS to the short number 7117 (which is currently available only for MTS subscribers and will soon be available for the other mobile network operators).

The “change to mobile” brings a number of advantages to all participants of settlements.

1. The customers no longer need to leave “tips” for the cashiers and overload their wallets and purses with a great number of coins. In this case, the major advantage which is available to the customers is time saving. The procedure of paying for a mobile phone using the bar-code card becomes fast, convenient and comfortable for the payer.
2. The trading company starts earning on the “change” process through receiving additional income in form of a commission fee for accepting payments and brings down its costs by getting rid of the necessity to order and receive the hard money in the bank. Besides, it is expected that implementation of this project will also decrease the circulation of small denominations such as 10 roubles and 50 roubles.
3. The cashiers get rid of their “headache” associated with coins and small denominations. The very procedure of giving the change is accelerated and it results in the increase of the number of customers serviced by one cashier.

The turnover of the store depends to a wide extend on the customer flow, i.e. on the number of people visiting the store every day. The implementation of the “change onto mobile” top-up project using the cash registers of the trading companies makes it appealing to the potential customers and increases their loyalty to the retailer. Finally, all of this results in the increase of trade receipt and profit of the retailer.

Technological and accounting audit.

ICYBERPLAT OJSC, the creator and operator of the largest in Russia payment system CyberPlat® has successfully passed the operation audit performed in accordance with the international standard SAS 70, Type I. The SAS 70 standard, developed by the American Institute of Certified Public Accountants (AICPA), determines the requirements for preparation of reports on the internal control system of the organizations which render services. The standard is widely applicable in the international practice.

The audit was performed by the company “KPMG Limited” which is a part of the “great four” among the audit and consulting companies.

The audit based on the SAS-70 standards includes description and analysis of objectives and instruments of internal control in the course performing transactions of the payment system, informational interaction within the scope of corporate procedures, audit of accounting operations, status of information systems and technologies, as well as control measures necessary for performance on the side of the CyberPlat® clients.

Upon completion of the audit, the audit company noted that no material weaknesses of control measures were discovered in the course of audit and concluded that the control measures analyzed within the audit had been duly designed and implemented.

Over the period of several years, financial performance of the company has been audited in accordance with the International Accounting Standards by the leading Russian auditing company BDO UNICON. It proves the status of the CyberPlat® system as of a reliable financial partner. This factor favorably distinguishes the CyberPlat® payment system among its competitors who carry out non-transparent activity.

Regional development.

In 2008, the CyberPlat® company successfully developed and expanded its business in the territory of Kazakhstan, the Ukraine and Uzbekistan within the scope of the full scale international expansion program.

Historically, CyberPlat® is the first payment system in Kazakhstan. The subsidiary company in Kazakhstan – TOO CyberPlat-Kazakhstan – was established a long time before the competitors came there, namely, as early as September 15, 2005. The first payments were effected through the system in April, 2006. By the end of 2008 the payment acceptance network already consisted of more than 10,000 outlets. Nowadays, the subscribers are welcome to use the services of the wide network of payment acceptance outlets. This network includes most frequently visited public places – stores, post offices of Kazpochta JSC, mobile shops, payment terminals and gas stations.

The business of the CyberPlat® payment system has been dynamically developing in the Ukraine. The largest retail chains of the country – Eldorado and Mobilochka – became clients of the company.

“Long-term experience, high technological and financial stability, unique security level and diversified client base have led to the point where the CyberPlat® payment system is currently the standard for organizing an electronic payment system,” — Andrey Gribov, President & CEO of CyberPlat OJSC, remarked.

CYBERPLAT OJSC is the leading Russian Internet company offering its services in the e-commerce segment, including payment processing and secure online document interchange. The company’s product CyberPlat®, the versatile multibanking integrated internet-payment system, is the absolute leader in the payment acceptance market. Currently, the CyberPlat® payment acceptance network consists of more than 400,000 outlets accepting cash payments for the benefit of the leading telecommunication operators, commercial television and numerous service providers nationwide, including Beeline, MTS, MegaFon, Tele2, NTV-Plus and many others. The total turnover of the system comprised 6.5 billion US dollars (or 160 billion roubles) in 2008. The electronic payment processing system CyberPlat® is the member of the GSM World Association. BDO Unicon is the official auditor of CyberPlat®. www.cyberplat.ru