Krasnodar, December 19, 2005:Southern Telecommunications Company (“UTK”) [(RTS: KUBN, KUBNP; OTC USA: STJSY), the principal fixed-line telecommunications provider for Russia’s Southern Federal District, reports today that it has received a RUR 916.9 mln back-tax claim from Russia’s  tax authorities (Decision of Russia’s Inter-regional Tax Inspectorate ? 9 dated 16 December 2005). The back-tax and penalty claims relate to 2002-2003 reporting years and are based on the results of the scheduled traveling tax check. The bulk of the claims (RUR 677.4 mln) are for taxes. The tax check was performed from 5 April 2005 till 16 November 2005.

UTK’s Deputy Director General Irina Prokofieva said: «Three fourth of the claim amount relate to the tax authorities’ attempt to revise the terms of interconnection settlements for DLD and ILD traffic transit. In 2004-2005 similar claims were received by other telecoms operators both belonging or not to Svyazinvest holding. Telecoms operators did not agree with these claims. By now several court decisions have been passed in favor of taxpayers».

The Company  does not agree with the claim of Russia’s Inter-regional Tax Inspection ? 7 and will take it to court. The Company considers prospect of its back-tax claim appeal to be positive.

According to 2002 and 2003 performance results pretax profit of the Company  was RUR 3,408.2 million (RUR 1,743.1 mln in 2002 and RUR 1,665.1mln in 2003). The Company paid tax for profit in the amount of RUR 989 mln (RUR 411.4 mln in 2202 and RUR 577.6 mln in 2003)

"UTK" PJSCis an honest and law-abiding taxpayer and it is the first time that controlling bodies have presented the Company with such claims.In 2002 – 2003. the Tax Inspectorate of Russia and  Inter-regional Tax Inspectorate of the Krasnodar krai sent "UTK" PJSC letters of gratitude for sizeable tax payments to state budgets of all levels and for proper book-keeping and tax accounting procedures.