Krasnodar, 5 October 2006:  Southern Telecommunications Company [(RTS: KUBN, KUBNP;MICEX: UTEL, UTELP; ADR OTC: STJSY, KUE FRA)], the principal fixed-line telecommunications provider for Russia’s Southern Federal District announces its 1H2006 results and 2H2006 plans on development of new technologies and rollout of value-added services. 

1H2006 revenues from value-added services* increased by 28.2 % over 1H2005 to RUR 832.2 million.Revenues from Internet services grew by 59.5%, from VPN (virtual private networks) services - by 52.9%, from intelligentservices -  by 60%. Share of revenues from value-added services increased to10.5% of total revenues from telecom services (versus 7.6% in 1H2005). Revenues from Internet services and VPN services accounted for major part of revenues from value-added services representing80.6% versus 64.8% in 1H2005 and 18.3% versus 15.4% in 1H2005, respectively.

Breakdown of UTK’s revenues from value-added services in 2005-2006

Due to active rollout of new technologies and improvements in sales system, "Southern Telecommunications Company" PJSC occupies strong positions in the regional value-added market.

In 2006 demand for Internet services was still growing in the region. At the end of 1H2006 total number of UTK’s dial-up users in the Southern federal district reached 283.1 thousand subscribers compared to 208.78 thousand as of the end of 1H2005. In 1H2006 number of xDSL subscribers in the Southern federal district increased by 143.3% over the past year.

Internetservicessales were supported by strong usage growth: Internet traffic for 1H2006 increased by 1.8 times to 468Tb, connection time via dial-up access to the Internet was up 44.4%  to  1,505.9 mln minutes. 

Operational highlights of new technologies rollout, "UTK" PJSC, 2005-2006

ARPU(monthly)

Under the business plan for 2006 the Company is to continue rapid rollout of new technologies. According to the Company’s budget, 2006 revenues from value-added services are expected to reach RUR 1,751.6 million, gaining 18.1% over 2005. Percentage of VAS revenues in total revenues from telecom services is expected to increase from8.3%to11%. Revenues from Internet services are to grow by49.9% to RUR 1,423.2 million, 684.8 mln rubles of them are expected to be revenues from xDSL  services (representing a 107.8%-increase).

The Company set the following priority tasks for 2006 in the most lucrative segments of the value-added regional market:

Internet services

According to 2006 estimates, dial-up Internet traffic is expected to increase by 35.4% to 2,968.4 million minutes.

The Company continues active rollout and promotion to the market of broadband access technologies. In 1H2006 revenues from xDSL-based Internet services made RUR 298.4 million that is up 2.3 times over a year-ago. The expected number of newly-connected xDSL subscribers being 36.9 thousand users (2.16 times more over 2005), the Company  plans to increase total number of the equipped xDSL ports to 68.7 thousand ports.

Building of virtual private networks (VPN)

2006 revenues from building of corporate networks based on VPN technology are estimated at 310.8 mln rubles which is up 37% over a year-ago. The Company  plans to put 2,400 VPN ports into service in 2006 (a 42.2%-gain over 2005).  Estimates of VPN revenue dynamics are based on expansion of business practices in respect of large corporate customers havinggeographically-distributed offices. These practices imply organization of target offers based on flexible tariff policy.

Intelligent services

2006 revenues from intelligent services are expected to increase by 24.2% to 11.8 million rubles. Due to intelligent network upgrade the range of offered intelligent services will be broadened thus contributing to revenue increase. Since April 2006 "UTK" PJSC has introduced its universal telephone card - «Card Number One», which can be used in all licensed territories of the Company’s branches. 1H2006 revenues from sales of universal telephone cards have made 1,282.35 thousand rubles.

Digital TV services (IP-TV)

Due to the expansion of multimedia and multi-service networks and introduction of broadband access based on Ethernet-to-home technology the Company started to provide multi-channel digital TV (IP-TV) services in 2004. Since 2005 the Company provides its Krasnodar customers with the following MMS services: video on demand, games on demand, video conferencing, home education, video control and monitoring, high-speed Internet. The most promising areas for deployment of MMS services on the basis of Ethernet-to-home technology are urban micro-districts with high population density. All spectrum of MMS services can be also provided on the basis of ADSL 2+ technology, that allows to expand the coverage area of the multimedia and multi-service network.

At the end of 1H2006 the subscriber base of the Krasnodar multimedia and multi-service network exceeded 3.1 thousand IP-TV users. By the end of the year the Krasnodar branch of "UTK" PJSC plans to increase the number of subscribers to 3.6 thousand.

Call-centers

The Company put into operation Call-centers in its seven branches: Krasnodar branch, Rostov branch, Volgograd branch, Astrakhan branch, Kabardino-Balkarian branch, Karachaevo-Cherkessian branchand Northern Ossetian branch.  In the fourth quarter of 2006 the Company plans to start construction of Call-centers in itsStavropol branch and Krasnodar branch (in the city of Sochi). The construction of regional Call – centers will be completed in the first half of 2007 by creation of a Call – center in UTK’s Adygeia branch, which is stipulated by the branch’s investment program. Traffic of new information and inquiry services in the Kalmykia branch will be processed by one of the existingCall – centers. Call – centers provide the following services: order of domestic and international long-distance calls through an operator, information and inquiry services (including MTS information service), reception of telegrams. In the cities of Krasnodar, Rostov-on-Don, Volgograd, Astrakhan and Stavropol operators of Call – centers process incoming orders from phone number of technical support so that technical personnel does not receive incorrect orders. The Company continues to work on integration of the existing Call centers operating in the branches into UTK’s uniform platform that will allow to reduce failures and to improve call processing so that every call irrespective of the region of its initiation is answered.According to 1H2006 estimates, revenues from chargeable services of Call – centers amounted to 10,345.72 thousand rubles versus the planned 8,718.60 thousand. These revenues do not include earnings from intercity calls.

* Value-added services rendered by "UTK" PJSC include: VPN services on the basis of MPLS and other technologies; services of data transmission; Internet access services (hardwired IP-connection, dial-up access, xDSL-based broadband access, Ethernet to the home, wireless access on the basis of Wi-Fi technology); digital cable TV services (IPTV);  video telephony and  video conferencing; intelligent services (on the basis of SCP-SSP); content services (including on the basis of Call-centers); Hosting and Co-location services.