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September 25, 2002

OJSC MGTS: subscriber fees slated to go up

Effective November 1, 2002 monthly fees are scheduled to go up for household subscribers and state-subsidized organizations telecom in Moscow.  

This round of tariff hikes is based on a resolution passed on September 25, 2002 by the Executive Board of the Anti-Monopoly of the Russian Federation.  

As of November 1, 2002 monthly subscriber fees for households will be raised to Rub 110.  The last time a tariff hike took placed was on January 1, 2002.  

The monthly subscriber fee for state subsidized organizations will be Rub 125 beginning November 1, 2002.  The fee for subsidized organizations previously stood at Rub 100.  The tariff hike for subsidized organizations is in line with Svyazinvest's policy to decrease cross subsidization and streamline tariffs for both business and state-subsidized organizations.  Eventually they are to converge into a single category, pursuant to RF Government  Decree No. 715 dated October 11, 2001 "On improving the mechanism for regulating telecom tariffs".   

The cost of operating one subscriber line during the first six months of 2002 was in excess of Rub 100 per month.  Telephone density in Moscow stands at 50.4 lines per 100 inhabitants, which is comparable to European statistics and nearly three times the average density ratio for the rest of Russia.  Analysts estimate that subscriber tariff fees currently cover about 80 percent of total operator service and maintenance expenses. Once inflation is factored in, around 12 - 15 percent annually, the new tariffs will still insufficient to reach the break-even mark and do not include the so-called investment component.  

In compliance with federal  and Moscow city legislation, OJSC MGTS continues to offer its previous rebates to a whole range of special discount customers, including World War II veterans, pensioners, disabled persons, etc. (for a total of roughly 1.4 mn subscribers).  The company also intends to continue offsetting the associated losses incurred by drawing on its own equity.




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