On May 13th, 2002 Standard & Poor’s, an international rating agency, revised the corporate governance score (CGS) of OJSC North-West Telecom, assigning it the value 5.0.

As can be seen from the Standard & Poor’s press release, the agency explains the score reduction by the lack of transparency in the sales of Delta Telecom stock. Having assigned the Company the “GovernanceWatch” status, the agency believed that the North-West Telecom had to decide on an additional assessment and start looking for other applicants for the Delta Telecom block of shares.

Considering that the North-West Telecom is a public company, and all our activity is closely watched by the shareholders, investors, and customers, we see it as our duty to call public attention to certain facts left out in the press release of Standard & Poor’s.

Despite the expressed intention of Standard & Poor’s to meet with the North-West Telecom management for making a decision on the score reduction, the agency’s representatives limited themselves to a request for the minutes of the Board of Directors’ meeting and for the independent assessor’s report.

The Company’s transaction procedure has been assessed by the agency before. In particular, blocks of shares owned by the Company in JSC Nevsky Sindikat and JSC U Krasnogo Mosta had been sold in a similar manner even before the initial score of 5.6 was assigned. The lack of transparency in those procedures complying with Russian law was rated by the agency as rather low. Selling the Delta Telecom stock, the Company followed the same procedures. Moreover, previously similar transactions (sales of blocks of shares) were entered into just upon submission of the Management Board’s materials, while this time (in particular, for assessment of the CJSC Delta Telecom shares) St. Petersburg’s largest independent assessor was invited. Although Russian laws do not require this. In fact, the CJSC Delta Telecom stock owned by the North-West Telecom is now priced several times as low. Both analysts and journalists have already said much to this effect. Just as the causes of the drop in the value of Delta Telecom have been much discussed. The cellular market of St. Petersburg saw a few changes last year, and that was admitted in the independent assessor’s report.

Nevertheless, the agency decided to bring the score down to 5.0.

The North-West Telecom considers the completed transaction profitable for the Company, and therefore for our shareholders. This is how Nikolai Bredkov, Deputy General Director (Corporate Governance), North-West Telecom comments on the situation:

– Although the Standard & Poor’s approach to the procedure of the North-West Telecom corporate governance assessment is unclear, we acknowledge the professional skills of the agency’s employees and managers, are willing to provide any official information, and look forward to continuing cooperation. The Company wishes to be transparent and attractive for the investor community, and intends to regularly undergo the rating procedure.