OREANDA-NEWS. October 2, 2007. The auditors of the Certification Association “Russian Register” delivered a favourable decision about KAMAZ Inc. meeting the requirements of the named ecological standards. The corresponding certificate will be delivered to the enterprise at the beginning oOREANDA-NEWS. October 2, 2007. Dalsvyaz (RTS: ESPK, MICEX: DLSV, US OTC: FEEOY, Frankfurt and Berlin exchanges: D7A) hereby announces its unaudited financial results for the first 6 months of 2007 in accordance with international financial reporting standards (IFRS).

Consolidated financial reporting includes assets, obligations, the company’s results and those of its subsidiaries, the main activity of which is to provide local voice services, cellular communication and other telecommunications services.

Acquisition of a stake in Sakhatelecom.  In accordance with a decision adopted by the Board of Directors dated November 30, 2006, Minutes # 5, the Company acquired a stake in Sakhatelecom.  The purchase/share agreement was signed on December 12, 2006.  As a result of the transaction, the company became the owner of 51 % of the common shares of Sakhatelecom.  The number of shares purchased was 764,769 and the price of the acquisition was Rub 2,295,000.

The stake was purchased for the purpose of long-term financial investment.  An entry in the shareholder register, confirming the transfer of title to the relevant securities, was made on January 25, 2007.  The main type of activity performed by Sakhatelecom is the provision of fixed-line telecommunications services in the territory of the Republic of Sakha (Yakutia).  The company retained an independent appraiser to ascertain the fair value of the identified assets and obligations of Sakhatelecom.  The results of the upcoming appraisal of fixed assets will be reflected in financial reports in accordance with 2007 IFRS requirements.

The mandatory budget reserve accrued for violation of the anti-monopoly legislation impacted the operator’s H107 financial statement, which showed lower net profit and financial efficiency indicators.

The Moscow Arbitration Court ruled on June 5, 2007 to deny the company’s claim on invalidating the Order of the Federal Antimonopoly Service dated January 23, 2006 to transfer revenue to the budget which was generated as a result of violation of the anti-monopoly legislation, as demonstrated by fees paid for network upgradation in the process of merging the networks of other operators. The decision was left unchanged in a ruling handed down by the Ninth Arbitration Appeals Court dated August 20, 2007.  The amount of the claim filed by Dalsvyaz was Rub 205,767.  The likelihood that these rulings will be overturned by the Cassation Court is negligible.  For this reason, the company recognized a loss amounting to Rub 205.8 mln in its H107 financial statement, which was recorded as expenses related to the formation of a reserve within the framework of sundry operating expenses.

As noted by Dalsvyaz CEO Anton Kolpakov, the Group’s business has improved markedly compared to H106.  “We’ve been looking for ways and means to fortify our market positions, boost profit margins and we found them.  As a result of having acquired control over Sakhatelecom, the earnings of Dalsvyaz Group surged 40%, EBITDA jumped 32% and net profit doubled.  And although Sakhatelecom’s profit margins were lower in this report than those of Dalsvyaz, the Group’s overall EBITDA margin reached 36%.  This same metric for the Dalsvyaz Group (not including the mandatory budget reserve for violation of anti-monopoly legislation) exceeded 42%. 

“We use all assets which are part of the Dalsvyaz Group of companies to implement our unified strategy (marketing, technical, financial and HR).  The unified asset management of the Dalsvyaz Group of companies makes it possible to use the strong points of each individual asset to grow the business and raise the Group’s market share”.
f November 2007.