14/12/2004   PeterStar Summing Up Results For 9 Months of 2004

Consolidated receipts* of the PeterStar Company for January-September of 2004 under the international financial accounting standards US GAAP have made up at USD56.5m compared to USD46.2m last year, i.e. increased 22%. The EBITDA (earnings before income tax, depreciation and amortization) figure has reached USD26.4m to compare with USD22.5m for a similar period last year. According to the results of the last reporting period the breakeven level for EBITDA made 47%.

From the beginning of 2004 PeterStar’s activities have been aimed at the growth of basic business along with optimizing inherent costs and integrating the acquired companies. Within the scope of arrangements on reorganizing the network a share of digital connections based on the company own infrastructure rather than on a leased one, has achieved approx. 90%. These measures allowed the company to maintain the level of profitability in spite of a successive upward movement of prime cost due to the tariffs raised by the natural telephone communication monopolist of the Northwest Federal Okrug – ÎÀÎ North-West Telecom (NWT).

Along with the above, the improvement of the company’s financial indicators has ensured a necessary volume of spare funds for the regional development program. During a period from January to September 2004 PeterStar brought to an end a number of deals on purchasing assets in the Northwest Region, including an 80% stake in OAO PCTN, 100% - in OAO Pskovintercom, 100% - in OAO ADM-Murmansk. Moreover, PeterStar opened its affiliates in Veliki Novgorod and Petrozavodsk.

The volume of capital investments of PeterStar amounted to USD10m; approx. 15% out of this amount was aimed at switching facility expanding, 25% - at line and cable structures expanding, 15% was invested in data services, about 10% - at WLL systems developing. The rest of the funds were allocated for purchasing subscriber access systems and connecting customers.

According to the Finance Director of ZAO PeterStar Arthur Akopyan “at present the PeterStar Company has a high financial stability, is capable of investing money in the development of its presence in new cities, concurrently modernizing and expanding its existing technical base, and all the above - with no need for attracting borrowed funds.” PeterStar’s revenue structure reflects the trends existing on the telecommunications market. While in 2001 revenue from business telephony services made 2/3 of the volume of revenue, by 2004 the share of these services has been reduced down to 1/2. Plus the Internet and data segment has been increasing: revenues from these services demonstrate a steady growth – at a level of 28-30% a year.

The total number of telephone lines connected during the 9 months of 2004 has reached approx. 8,500 connections; over 6,000 out of them are digital communication lines. The volume of data service connections has made about 1,500 terminals. The volume of activated cards for IP telephony and Internet access among end users has increased more than 5 times – 86,500 cards monthly.

“This year we have actively started the development of our affiliated network in the regions, as well as establishing relationships with new subdivisions. We are striving for constructing an integrated company with common management and control processes. It’s our opinion that as early as next year this will allow us to feel the scale-based saving effect that is a major advantage in the telecommunications industry.” – says the General Director of ZAO PeterStar Victor Koresh.

* Financial results involve the subsidiaries’ results: ZAO BCL, ZAO Computer Networks (from 01.05.04), ÎÀÎ PCTN and Pskovintercom (from 01.06.04), ÎAÎ ADM-Murmansk (from 01.09.2004).

ABOUT COMPANY:

ZAO PeterStar is one of the leaders of the telecommunications market of the Northwest Region of Russia, specializing in the provision of telephony, Internet and data services. From 1992 the company has invested over $150m in the construction of its network, having materially contributed to the city telecommunications infrastructure development. The PeterStar transport network is the second city network in terms of capacity, yielding to OAO North-West Telecom, PTN’s affiliate. PeterStar possesses the largest fiber network in the city which length is approaching 2000 km. The total number of connected PeterStar telephone lines makes approx. 100 thousand. PeterStar occupies a 70% share of the telephone operators market among alternative operators. During five years PeterStar has been rendering social support to the city, serving the city infrastructure of the Vassilievski Island telephone network under the tariffs of the OAO North-West Telecom affiliate (PTN).

ZAO PeterStar is the owner of the 100% stake in the telecommunications company Baltic Communications Ltd. (BCL), 100% stake in the Petersburg Internet provider Comset, 80% stake in OAO Pskov City Telephone Network, 100% stake in OAO Pskovintercom, as well as the 100% stake in OAO ADM-Murmansk.

Press Service of ZAO PeterStar
Alina Karpichenko, karpichenko@office.peterstar.com
(812) 329 9053, 962 3582