NW Telecom Reorganizes

ST. PETERSBURG -- The results of the year 2005 show that North-West Telecom has been the most efficient in the fixed communication business, having confirmed once again its long-term business forecasts: net income margin has reached 9% and EBITDA margin 26.8 %.

One of the basic goals of JSC North-West Telecom's long-term development strategy is to maintain the level of EBITDA margin growth at at least 1 p.p. per year. To achieve the targets, JSC North-West Telecom is implementing a strategy of improving the efficiency of asset and subsidiaries management.

The main goal of JSC North-West Telecom's business reorganization is to liquidate investments in non-core or unprofitable assets and to develop Company's participation in strategic profile companies. In 2005, as a result of withdrawal from 10 commercial and 5 nonprofit companies, the income of JSC North-West Telecom from selling those assets made RUR 4.1 million. In 2006 JSC North-West Telecom plans to terminate its participation in 8 commercial and 1 nonprofit organizations, the income from selling those interests are expected to amount to about RUR 41 million.

A significant part of Company's assets are real estate and land plots: at the moment, the property of North-West Telecom includes 1,356,500 sq. m of areas (including 529,600 sq. m in St. Petersburg) and 4,044,800 sq. m of land plots (including 507,600 sq. m in St. Petersburg). The share of operating premises is 60%.

As a result of network reorganization and updating in 2005, North-West Telecom abandoned 6,100 sq. m of leased premises, and another 21,500 sq. m in the 1st six months of 2006; leased out 67,500 sq. m, and 74,900 sq. m in the 1st six months of 2006. The income from leasing out the premises amounted to RUR 187.8 million in 2005; and according to the plans of 2006 they will amount to RUR 200 million. To improve the efficiency of property management, JSC North-West Telecom has planned an at least 3% annual reduction of the quantity of leased spaces.

In 2005 North-West Telecom sold 28 sites of real estate, and another 31 sites in the 1st half of 2006. It is expected that in 2006 over 25,000 sq. m of Company's real estate will be sold. The income from real estate sale in 2005 amounted to RUR 27.4 million and in 2006 it is expected to earn RUR 68.2 million.

JSC North-West Telecom