OREANDA-NEWS. On 03 July 2008 Far East Telecom (RTS: ESPK, MICEX: DLSV, ADR: FEEOY, Deutsche Bourse and Berlin Stock Exchange: D7A), a leader at telecommunications market of Far East Region, announces audited 2007 financial results according to International Financial Reporting Standards.

Results of Far East Telecom Group will be commented by executives at the conference call (web-cast) today at 02:00 pm (UK time). Please, visit http://dsv.ru/news.php?id=16&idnews=1189 for further information about the conference call.

Consolidated financial includes property, liabilities and operation results of Far East Telecom and its subsidiaries specializing in local fixed, cellular and other telecommunication services.

According to Anton Kolpakov, Far East Telecom Chief Executive Officer, in 2007 Far East Telecom Group achieved better revenues and operational profitability as well as better tax load and liquidity. "Far East Telecom revenues increased by 38%, EBITDA by 62%, net indebtedness reduced by 10.3%, absolute liquidity ratio increased 6 times", - mentioned CEO. "Except the financial results themselves, it is important that we obtained a positive auditor's opinion in IFRS terms after the valuation of fixed assets fair value for the major companies in Far East Telecom Group", - emphasized Anton Kolpakov.

The results growth was influenced to a great extent by Sakhatelecom consolidation into the Group financial statements. Sakhatelecom is a fixed line telecom, served Yakutia territory. "We use all the assets on Far East Telecom Group for pursuing a single strategy (marketing, technical, financial and personnel). Joint management of Far East Telecom Group allows for taking advantage of each asset for the Group business and market share growth", - mentioned Far East Telecom Chief Executive Officer Anton Kolpakov.

Far East Telecom Group revenues for 2007 reached 15,001 mln rubles (37.6% surplus), revenues from communication services increased by 4,026 mln rubles up to 14,240 mln rubles. The high growth rate is explained by Sakhatelecom consolidation into Far East Telecom Group accounting statements.

Other reasons for the revenues growth are as follows:

increase in income from new communication services;

increase in income from local telecommunication;

increase in income from mobile communication.

New Services (Internet, ISDN, ADSL, IP Voice, IPTV etc.)

Internet broadband access service showed the highest income growth rate. The main driver for the income is subscriber base enlargement. It increased by 99,582 subscribers (2) as compared to December 31st 2006 (including growth due to Sakhatelecom 18,301 subscribers (2)). Besides, the income growth was influenced by Internet channels expansion in Primorsky and Khabarovsky branches in December 2007.

Income from IP TV increased by 1027% (2) as compared to 2006. The increase is conditioned by enlarged coverage of the service in Khabarovsky and Kamchatsky regions and Republic of Sakha.

IP VPN demonstrated considerable income growth (204%) (2) due to subscriber base enlargement.

Local telephone communication services

Increase in income from local telecommunication services is caused by local telecommunication tariff growth and implementation of new tariff plans (unlimited, combined time-based) beginning from February 1st 2007.

Intrazone telephone communication services

In 2007 income from intrazone telecommunication services in creased by 48.3% as against 2006. The increase is mostly related to the CPP principle implementation in July 2006, where calls from fixed to mobile telephones within the administrative center became paid.

Mobile radiotelephone (cellular) communication services

Income from mobile radiotelephone (cellular) communication services increase by 18.2% in 2007 as against 2006. The increase is explained by subscriber base growth (2):

Far East Telecom (Kamchatsky and Magadansky branches) - 4% growth up to 104,284 subscribers (as against 100,022 subscribers in 2006);

AKOS - 20% growth up to 231,071 subscribers (as against 191,827 subscribers in 2006);

Wireless Information Technologies Ltd. - 13% growth up to 8,518 subscribers (as against 7,568 subscribers in 2006).

Wages, salaries, other benefits and payroll taxes

Expenses on salary and other social deductions for staff (including discharge allowances and carry-over vacation benefits) increased by 21.7% in 2007 because of Sakhatelecom figures consolidation into the accounting statements. Without Sakhatelecom indices the expenses reduced by 7.7% as compared to similar period of 2006 due to implementation on Far East Telecom headcount optimization program.

Materials, repairs and maintenance, utilities

49.9% growth in "Materials, repairs and maintenance, utilities" is explained by Sakhatelecom figures consolidation into the accounting statements. Without Sakhatelecom indices growth in the expenses counted for 16.6% due to raised price for services and materials.

Interconnection charges - domestic operators

Expenses on communication operator services increased by 76.2% up to 1,681 mln rubles. Without Sakhatelecom indices the expenses increased by 45.6% because of the changed settlement procedure for traffic accommodation and transmission, with outside cellular operators effective from July 1st 2006. The item growth is compensated by increasing revenues from CPP principle implementation for cellular network subscriber incoming calls.

Depreciation and amortization

"Depreciation and amortization" showed 15.2% because of OJSC Sakhatelecom indices consolidation into the accounting statements. Without OJSC Sakhatelecom figures depreciation costs would reduce by 12.9% as a result of fixed assets fair value and useful life appraisal.

Other operating expenses, net

Other operating expenses increased by 5.7%. Growth in note in the following items: expenses on consulting services, expenses on advertising, expenses on agency fees.

EQUITY AND BORROWED CAPITAL

Far East Telecom Group net assets as of December 31st 2007 increased by 42.2% up to 8436 mln rubles (as against 5933 mln rubles as of December 31st 2006). Specific weight of borrowed capital reduced by 5.8% (from 62.4% down to 56.6%) as compared to the beginning of the report period.

LIQUIDITY

Company improved its liquidity for the report period. Net cash flow counted plus 334 mln rubles as a result of operating and investment activities in 2007 (minus 2,219 mln rubles in 2006 (9) ). Reserve strength as of December 31st 2007 counted for 1,020 mln rubles (as against 2,977 mln rubles in 2006).