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COMSTAR - UTS

December 5, 2006

Comstar-UTS announces interim financial results

“COMSTAR – United TeleSystems” OJSC (“Comstar UTS” or “The Group”) (LSE: CMST),  the leading provider of integrated communications services in Moscow, today announced its unaudited consolidated US GAAP financial results for the third quarter and nine months ended September 30, 2006.

HIGHLIGHTS FOR THE THIRD QUARTER OF 2006

• Consolidated revenues up 34% year on year to US$ 291.8 million
• Net Alternative segment revenues up 29% year on year to US$ 109.4 million
• Net Traditional segment revenues up 38% year on year to US$ 182.4 million
• Revenue from CPP US$ 15.7 million
• Group OIBDA  up 18% year on year to US$ 113.9 million and OIBDA margin of 39.0%
• Operating income up 6% year on year to US$ 76.5 million
• Net income up 41% year on year to US$ 48.3 million
• Cash Flows from operations up 2% to US$ 88.9 million

HIGHLIGHTS FOR THE NINE MONTHS OF 2006

• Consolidated revenues up 30% year on year to US$ 828.2 million
• Net Alternative segment revenues up 27% year on year to US$ 311.7 million
• Net Traditional segment revenues up 32% year on year to US$ 516.5 million
• Group OIBDA1 up 23% year on year to US$ 331.2 million and OIBDA margin of 40.0%
• Operating income up 20% year on year to US$ 240.0 million
• Net income up 74% year on year to US$ 145.6 million
• Cash Flows from operations up 14% to US$ 249.0 million for year to date

Eric Franke, Chief Executive Officer of Comstar UTS, commented: “We are reporting a healthy operating performance for both the quarter and year to date, with over 30% year on year revenue growth and 41% increase in net profit for the quarter.  In addition to a solid underlying organic performance across our businesses, the newly acquired regional businesses added US$ 12.8 million of revenue in the quarter. Introduction of Calling Party Pays was very positive for us and contributed approximately US$ 15.7 million of revenues.  We expect that fixed to mobile traffic volumes will continue to provide an additional source of revenue growth.

We also generated an increasing level of broadband subscriber intake in September following the seasonally quiet summer period.  This strong growth has continued into the fourth quarter.  We remain uniquely well-positioned to lead the development of the broadband market and bundled offerings by leveraging our extensive combined network infrastructure and the 3.6 million MGTS residential customers that are now being targeted through direct marketing campaigns.  We will continue our regional expansion and we expect to benefit from anticipated changes to regulatory tariff structures”.

Nikolay Tokarev, Chief Financial Officer, added: “We have focused on improvement in the operational efficiency of Comstar.  We commenced the previously announced workforce reduction program beginning of November and intend to reduce staffing levels in Moscow alternative business by 20% by the end of 2006, reduce rented office space, cut and outsource non-core activities, optimize marketing spent and reexamine network capacity and maintenance purchasing.  We expect these measures to result in approximately US$ 8 million annual cost savings starting from 2007”.

 

 


 

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