Fitch Ratings London May 14, 2003: Fitch Ratings, the international rating agency, has upgraded OAO Sibirtelecom's (Sibirtelecom) Senior Unsecured rating to 'B+' (B plus) from 'B'. The Short-term rating of 'B' has been affirmed. The Outlook is Positive.

The upgrade underlines the successful completion of the company's first two phases of restructuring, which resulted in the merger of 11 fixed-line telecom operators in the Siberian region. Further growth of the Russian economy has assisted in improvements in the operating performance of the enlarged Sibirtelecom, a fixed-line monopoly provider in the Siberian region, an area of 5.1 million sq. km, with a population of 21m. The region generates c.15% of Russian GDP and at the end of 2002 had a fixed line penetration rate of 18.9%.

Sibirtelecom's structure has not changed after the merger, and state-owned Svyazinvest remains the main shareholder with 50.67% stake. At the end of 2002, Sibirtelecom had an installed fixed-line capacity of 3.4 million lines and digitalisation level of c.43%. The tariff rebalancing programme should help the company to improve its operating performance, although it is being implemented at a slow pace reflecting its political sensitivity. The enlarged company plans to invest further in development of its mobile network, consolidating it under one regional brand. The first step was taken in February 2003 when Sibirtelecom agreed to purchase the remaining stakes in two regional mobile operators, ZAO Baikalvestkom (49% stake at USD8.5m) and ZAO Eniseitelecom (49% at USD12.5m).

Continuing economic growth in Russia and successful integration of the merged regional entities should benefit Sibirtelecom's business growth. The company's investment requirements remain high, although discretional, and progress will depend on availability of capital. The agency's view is that Sibirtelecom will continue to operate a low leveraged structure, however the company has indicated some moderate increase in debt levels to finance its fixed-line and mobile network development in the short to medium term.

Fitch indicates that Sibirtelecom post-restructuring stage may pose some implementation risk, reflecting the degree of operational complexity in integrating 11 operators under the Sibirtelecom brand.

Raymond Hill, London Tel: +44(0)20 7417 4314
Larissa Malycheva, London Tel: +44(0)20 7417 4207

Media Relations: Kris Anderson, London Tel: +44 20 7417 4361