On October 9, 2002 Rostelecom completed the acquisition of 50% stake in Westelcom from RTDC holding, thus increasing its share in the company to 100%.  The value of the transaction is USD 15 million. 

As a result of the acquisition Rostelecom gains full control over strategically important assets, including international switching centers in Moscow and St. Petersburg as well as participation in international cable systems.  

Westelcom was founded in 1992 by Rostelecom and US West for the purpose of executing joint investments into a number of telecom projects.  Initially Rostelecom and US West each invested USD 17.4 million in the company, getting a 50% stake each.  Later US West’s stake was purchased by RTDC holding.  In addition, during almost 10 years of its existence Westelcom rendered services to Rostelecom on average in the amount of USD 14 million per year. 

Today Westelcom is an actual owner of three out of 11 international switching centers that form the basis of Rostelecom’s international trunk network.   

Westelcom also owns the Russian part of the international digital trunk line “Novorossiysk – Sochi - Poti” – the only fiber-optic line that connects Russia and Georgia.  In addition, 9% of capacity in the Black Sea Fiber-Optic Cable System (Russia-Ukraine-Bulgaria) belongs to Westelcom.  Over USD 20 million has been invested in these projects by Westelcom. 

The above-mentioned assets are historically an integral part of Rostelecom’s international trunk network.  Prior to the acquisition the Company had to pay for the possibility of using them.  As a result of this transaction Rostelecom acquired full control, which should result in significant cost savings for the Company. 

Rostelecom indicated its interest in international telecom assets of Westelcom already in spring 2002 when its daughter company RTC-Leasing acquired 95% in RTDC holding.  «We successfully continue to implement our strategy of consolidating core assets and concentrating value in Rostelecom.  The acquisition of Westelcom is an important step towards reaching this goal.  Moreover, full control over Westelcom’s assets will result in lower ILD traffic transit cost for Rostelecom thus strengthening our competitive position in the Russian telecommunications market», said Sergei I. Kuznetsov, General Director of Rostelecom.  

Certain statements in this press-release are “forward-looking statements” within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby.

These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. 

These risks include the risk of changes the Company’s operations and business prospects, the general financial and economic circumstances,  relating to regulation of the Russian telecommunications industry and the Russian legislation; the competition and other risks.

For a more detailed discussion of these and other factors, see the Company’s Annual Report on Form 20-F for its most recently completed fiscal year and the Company’s other public filings with The U.S. Securities and Exchange Commission.  Many of these factors are beyond the Company’s ability to control or predict.  Given these and other uncertainties, the Company  cautions not to place undue reliance on any of the forward-looking statements contained herein or otherwise. 

The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required under applicable the U.S. federal securities laws. 

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