OREANDA-NEWS. On 18 April 2008 “COMSTAR – United TeleSystems” , the leading integrated telecommunications operator in Russia and the CIS, announced its unaudited consolidated US GAAP financial results for the fourth quarter and twelve months ended December 31, 2007.

FULL YEAR FINANCIAL HIGHLIGHTS
Consolidated revenues up 39% year on year to US\\$ 1,562.4 million
OIBDA up 55% year on year to US\\$ 663.2 million (excluding US\\$ 62.1 million stock bonus awards in Q42006) with increased margin of 42.5%
Operating income of US\\$ 485.3 million with increased margin of 31.1%
Net income of US\\$ 43.8 million
Cash CAPEX[1] up 13% year on year to US\\$ 345.4 million
Cash flow from operations up 40% year on year to US\\$ 488.4 million (excluding stock bonus awards in Q4 2006)
Total assets up 31% year on year to US\\$ 4.6 billion

FOURTH QUARTER FINANCIAL HIGHLIGHTS
Consolidated revenues up 65% year on year to US\\$ 482.1 million
OIBDA more than doubled year on year to US\\$ 200.0 million (excluding US\\$ 62.1 million stock bonus awards in Q42006) with increased margin of 41.5%
Operating income of US\\$ 139.2 million with increased margin of 28.9%
Net income of US\\$ 51.8 million
Cash flow from operations up 46% year on year to US\\$ 153.4 million (excluding stock bonus awards in Q4 2006)

FOURTH QUARTER OPERATING HIGHLIGHTS
81% year on year growth in Moscow residential broadband internet subscriber base to 651,000, including 122,300 triple-play (voice + broadband internet + pay-TV) subscribers, and ARPU of US\\$ 17.5
32,900 regional residential broadband internet subscribers and 102,200 regional residential pay-TV subscribers
51% of MGTS residential subscribers on unlimited tariff plan at year end
Acquisition of Digital Telephone Networks and Regional Technical Centre with consolidation of combined full year 2007 revenues of US\\$ 80.6 million
Ground-breaking agreement to build wireless WIMAX network in Moscow
Completion of Long Distance network build-out in February 2008

Sergey Pridantsev, President and Chief Executive Officer, commented: “We are pleased to report a healthy set of results, which reflect a number of positive changes that we made during 2007. Comstar has now successfully restructured a group of diverse companies into a single, efficient and integrated operator that is fit to compete in the global telecommunications marketplace. We are already the largest and the most profitable fixed-line telecommunications operator in Russia.

“We have developed, and begun to implement, a long-term and highly proactive five point strategy, which is centred around Broadband development, Regional expansion, MGTS, Group structure and Svyazinvest, and which underlines the fact that we are on the competitive offensive in the market place with a unique offering of bundled communications services. We have already achieved a number of important operating and financial milestones during 2007. The strategic objectives are integrated into our forward budgets and operational planning, and we are committed to delivering on the aggressive targets set before us, including the expansion of our residential broadband subscriber base in Moscow to over 1 million customers by the end of 2008 and the doubling of our regional broadband subscriber base.”

Irina Matveeva, Chief Financial Officer, added: “We made significant steps during 2007 to simplify the legal and organizational structure of the Group, in order to streamline our business processes and the efficiency of the overall business. This work is continuing in 2008. Despite this ongoing restructuring process and the changing regulatory environment, we have continued to demonstrate sustainable growth and healthy profitability levels.

“Looking forward, we expect Group revenues to grow organically by 15 to 20% in 2008 when excluding the Federal Budget compensation received in 2007. We also expect to deliver a full year 2008 OIBDA margin of between 38 and 40 per cent, despite the fact that we will not receive any Budget compensation in 2008 and excluding the impact of the new long term incentive plan introduced from April 2008, further acquisitions and any unforeseen regulatory changes. The margin guidance does however include the ongoing investments and start-up projects in the regions, which are expected to be principal drivers of revenue growth and profitability from 2009.

“We launched a number of strategic projects during 2007, including the selective modernization of the ‘last mile’ in Moscow, green-field start-ups in the Moscow suburbs, and the new WiMAX network development in Moscow. We therefore expect 2008 cash capital expenditure to continue to represent approximately 25% of revenues, again when excluding the non-recurring Federal Budget contribution received in 2007.”