Nizhny Novgorod, October 2005:  OJSC “VolgaTelecom” (RTS: NNSI, NNSIP; NNSIG, NNSIPG and MICEX: VTEL, VTELP) summed up the results of activity for the 1-st half of year 2005 in accordance with International Financial Reporting Standards (IFRS).

OJSC “VolgaTelecom” IFRS statement for 6 months of 2005 is presented to the extent of accounting balance sheet, income statement and also notes to the financial statement. This statement does not contain all required disclosures in accordance with IFRS; however, its volume is sufficient to have the idea of financial standing and the results of the Company’s activity for 6 months of year 2005.

OJSC “VolgaTelecom” publishes IFRS 6 months’ statement for the first time; this statement is non-audited consolidated financial statement. Audit, review or other similar procedures will not be carried out in the case of the statement. At the same time taking into account OJSC “VolgaTelecom” experience in presenting IFRS statements, the Company believes that the users of the financial statement may rely on it.

The specified statement is consolidated and comprises financial performance of OJSC “VolgaTelecom” and its subsidiary companies, among which the largest are mobile communication operators CJSC “Nizhegorodskaya cellular communication” (100%), OJSC “Tatincom-?” (50%+ 1 share), CJSC “Ulyanovsk -GSM» (60%) and CJSC “Orenburg -GSM» (51%).

For the purpose of comparison OJSC “VolgaTelecom” presents financial performance for year 2004 (December 31, 2004) and as of December 31, 2004.

Basic financial performance of OJSC ‘VolgaTelecom” activity in the first half of 2005-2004.

	1-st half of year 2005	2004
	US$ million	US$ million
Revenue	401,74	730,54
Expenses	-328,34	-582,92
Operating profit	73,41	147,62
Profit before  tax and  minority interest	61,78	130,29
Net profit	37,10	86,38
EBITDA*	133,14	226,37
EBITDA margin, %	33	31
Non-current assets	1027,81	1015,01
Long-term and short-term debt (with due account for liabilities under finance lease contracts)	358,79	357,45
Net profit margin, %	9	12

* EBITDA index is calculated as net profit less income tax, interest, depreciation and amortization.

The principal share in the revenue structure belongs to revenues from providing local (US$118,90 million, 29,6%) and domestic long-distance telephone calls (US$108,58 million, 27,0%), cellular communication services (US$47,89 million, 11,9%). US$23,50 million or 5,9% - is the share of revenues from telephone installation and connection fee for fixed-line subscribers, US$19,59 million (4,9%) – from providing value-added services (Internet, ISDN, IP-telephony, intelligent network services), US$23,57 million (5,9%) – from services rendered to Russian carriers.

In the reporting period the basic factors of revenue growth were the growth of the Company’s subscriber base, increase in DLD and ILD traffic, Internet traffic, mobile communication development, and also the increase in tariffs for local telephone communication.

 In future the Company expects decrease in the share of revenue from traditional telephony, and for the purpose of strengthening competitive positions OJSC “VolgaTelecom” adjusted its marketing policy. Customer –oriented approach has become the basis of the specified marketing policy.  The Company forms package proposals for various market segments – from largest corporations to small companies and residential sector.

“Realization of competitive advantages is only one of trends of raising the Company’s profitability” - notes OJSC “VolgaTelecom” General Director Mr. Sergey Omelchenko.  -  It is not less important to involve internal resource – expenses optimization, realization of program of improving business efficiency - which will contribute to the rise in profitability of OJSC “VolgaTelecom” business.

The complete text of non-audited consolidated financial statement of OJSC “VolgaTelecom” according to IFRS for 6 months of 2005 is presented at the Company’s site at: www.vt.ru

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OJSC “VolgaTelecom” is the largest telecommunication company of the Volga region providing telephony, cellular communication, Internet and data transfer, television and radio broadcasting services.  The Company was established in 2002, when within the terms of communication industry restructuring, 11 telecommunication operators of the Volga Federal district were consolidated into OJSC “VolgaTelecom”. The Company’s shares are traded at RTS (NNSI / NNSIP; NNSIG / NNSIPG) and MICEX (VTEL / VTELP), I-level American Depositary Receipts program is carried out (VLGAY / NZH).