OREANDA-NEWS. On May 16, 2007 Sistema (LSE: SSA), the largest private sector consumer services company in Russia and the CIS, announced its unaudited consolidated US GAAP financial results for the fourth quarter and full year ended December 31, 2006, reported the press-centre of  Sistema.

FULL YEAR HIGHLIGHTS
Consolidated revenues up 43,1% year on year to US$ 10,9 billion
OIBDA up 36,0% year on year to US$ 4,0 billion
Operating income up 41,3% year on year to US$ 2,7 billion
Net income up 69,0% year on year to US$ 903,3 million
Total consolidated assets up 53,8% year on year to US$ 20,1 billion
Earnings per share up 67,4% year on year to US$ 94,4
US$ 1,060.0 million raised through successful initial public offering and listing on London Stock Exchange of Comstar UTS in February 2006

FOURTH QUARTER HIGHLIGHTS
Consolidated revenues up 56,4% year on year to US$ 3,4 billion
OIBDA up 52,5% year on year to US$ 1,0 billion
Operating income up 68,3% year on year to US$ 640,2 million
Net income down 7,0% year on year to US$ 93,2 million
US$ 432,1 million raised through successful initial public offering and listing on London Stock Exchange of Sistema Hals in November 2006
Acquisition of a blocking stake of 25% plus one share in Svyazinvest for US$ 1,3 billion in December 2006
Bitel write-off by MTS in the amount of US$ 150 million
Alexander Goncharuk, President and Chief Executive Officer of Sistema, commented: "Sistema Group companies delivered solid operational results in 2006. We have expanded margins while maintaining high growth rates in our non-telecom businesses. Our operational performance was supplemented by a number of sizable transactions, including the strategic acquisition of a 25 per cent plus one share stake in Svyazinvest, IPOs of Comstar UTS and Sistema Hals. We have made significant efforts to realign our Group telecom operations and focus our priorities on consistently delivering on our targets in the future".

FINANCIAL SUMMARY
The reported financial results of Sistema are presented in the following summary. They include three items, two of which were in Comstar UTS, for the fourth quarter and the full year which are not comparable to the previous reporting periods and impact Sistema in the fourth quarter of 2006.  The first item was the non-recurring US$ 62,3 million stock bonus awards to employees of Comstar UTS, which impacted the Group's OIBDA. The second item was a non-cash charge of US$ 60,0 million, which arose from the revaluation in Comstar UTS of the put and call option issued in connection with the acquisition of a 25% plus one share stake in State Telecommunications Investment Company ‘Svyazinvest' on December 11, 2006.  The third item, write-off of MTS' investment in Bitel, impacted the Group's net income for both the fourth quarter and the full year by a US$ 79,7 million (net of minority interest).

FINANCIAL HIGHLIGHTS
Net cash provided by operating activities was up 18,0% year on year to US$ 2,1 billion in 2006. The increase in the Group's operating cash flows was primarily related to the growth in the profitability of its operations.
Net cash used in investing activities was US$ 5,4 billion for the full year of 2006, and included capital expenditures of US$ 2,4 billion for the full year of 2006, compared to US$ 2,5 billion a year ago. The Group spent US$ 631,4 million for the full year of 2006 on purchases of businesses.
Cash flow from financing activities amounted to US$ 3,3 billion for the full year of 2006, which primarily reflected proceeds of US$ 1,5 billion received from the initial public offering of Comstar UTS, which took place in February 2006, and the initial public offering of Sistema-Hals, which took place in November 2006.
The Group's net debt amounted to US$ 6,3 billion at the end 2006, compared to US$ 3,9 billion as at December 31, 2005. The Group's increase in borrowings included the US$ 675 million loan facility arranged by Comstar UTS with ABN AMRO N.V., US$ 285 million of consolidated debt as a result of the acquisition of Intracom Telecom, US$ 160 million received from the bond offering of MBRD in March and June 2006, and US$ 200 million raised by the SITRONICS Finance from the bond placement in February 2006, as well as additional financing attracted by MTS.
The Group's net cash balance amounted to US$ 543,4 million at the end of 2006, compared to US$ 482,6 million as at December 31, 2005.
In February 2007, Standard & Poor's (S&P) Ratings Services revised its outlook on Sistema to positive from stable. At the same time the 'BB-' long-term corporate credit rating on the company was reaffirmed.

ACQUISITIONS AND DISPOSALS
In December 2006, Comstar UTS announced the acquisition of a blocking stake 25% plus one share in Telecommunication Investment Joint Stock Company (Svyazinvest) from Mustcom Limited for a total cash consideration of US$ 1.3 billion. The Company arranged a US$ 675 million six month loan facility with ABN AMRO Bank N.V. in connection with this transaction. The interest rate was fixed at 1.2% above LIBOR. The term of the loan can be extended to twelve months.
In December 2006, Comstar UTS announced that it has reached an agreement with Intracom Holdings (ASE:INTRK) to subscribe to a 51% stake in Hellas On Line SA (HoL) for a cash consideration of ? 47,9 million. The closing of the transaction, which is subject to certain conditions precedent including approval of Greek regulatory authorities, is expected during the first half of 2007.
In October 2006, Comstar announced the acquisition of two telecom operators in Kiev, Ukraine - DG Tel and Technologic Systems - through its local subsidiary Comstar - Ukraine for a total cash consideration of US$ 4,7 million; the acquisition of Astelit, an alternative fixed-line operator, for US$ 7.8 million and the acquisition of Unitel for a total cash consideration of US$ 4.8 million. Unitel is an alternative wireless fixed-line telecommunications company serving customers in the Moscow region.
In August 2006, the Group acquired a 81,25% stake in ZAO Sahles, the owner of controlling stakes in the entities that together comprise the Perm Motors Group, for US$ 122 million. Perm Motors is one of Russia's largest manufacturers of jet aircraft engines and industrial turbines. The Group did not obtain control over operating activities of the acquired companies and therefore they were not consolidated as of the end of 2006.
In July 2006, MTS acquired a 75% controlling stake in Dagtelecom from Glaxen Corp. for US$ 14,7 million. Dagtelecom is the GSM-900 mobile services provider with 1,7 million subscribers in the Republic of Dagestan, in the south of Russia, with a population of approximately 2,6 million people. 
In July 2006, the Group disposed of Glorely, a subsidiary holding 35% interest in Sistema-Invest, the owner of the Group's energy companies in the Republic of Bashkortostan, for a total cash consideration of US$ 201,0 million.
In June 2006, SITRONICS acquired 51% voting stake in Intracom Telecom, a provider of telecommunications solutions and services in the Eastern Europe and Middle East, for a total  cash consideration of US$ 150,6 million, including US$ 43,9 million payable upon the completion of due diligence. Additionally, SITRONICS entered into a put agreement to acquire the remaining 49% of Intracom Telecom. The exercise period of the put option is 36 months following a 24 months period post the acquisition date.
In March - October 2006, Sistema purchased in a series of transactions 2,9% of its total shares outstanding for a total cash consideration of US$ 347,1 million. Sistema plans to establish a share option programme for the top management of the Company. The acquired shares are intended for the funding of this programme, and may also be used in connection with certain future acquisitions.
In March 2006, Intourist purchased a 20% equity interest in Cosmos Hotel for approximately US$ 20,8 million. It now has a controlling interest in Cosmos Hotel of 64,1%. 
In February, March and October 2006, Comstar UTS completed several transactions on acquisition of MGTS' common stock under unconditional purchase offers. As a result of these transactions, Comstar UTS purchased 11,3% of voting and 9,4% of total shares of MGTS for a total cash consideration of $181,4 million, increasing its ownership interest and voting interest in MGTS to 55,7%.
In February 2006, Sistema Mass Media and ECU GEST acquired 90% and 10%, respectively, of JIR Broadcast and JIR Inc., the owners of 100% of United Cable Networks, for a total cash consideration of US$ 145,9 million. UCN is a Pay-TV and broadband service provider with 724,000 subscribers in 17 metropolitan areas across the Russian Federation.

SIGNIFICANT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD
In March 2007, Sistema-Hals announced the results of an independent valuation of its real estate property and projects. According to the valuation carried out by Cushman and Wakefield  Styles & Riabokobylko (C&WS&R), the value of the Sistema-Hals stake in the property and projects increased by 35% in the period from June 30, 2006 to January 1, 2007.
In March 2007, Comstar sold its 45% equity stake in ZAO Metrocom, an alternative fixed-line telecommunications operator based in St. Petersburg, to сlosed joint-stock company MST. The shares were sold for a total cash consideration of US$ 20 million. Comstar acquired the stake in September 2005 for US$ 12,2 million in cash. The sale was in line with Comstar's intention to have controlling stakes in all of its operations and Comstar is evaluating other means of expanding its operations in the St. Petersburg area.
In February 2007, Sistema completed the sale of a 49,2% stake in ROSNO to Allianz, Sistema's strategic partner in ROSNO, for a total cash consideration of US$ 750,0 million, resulting in a gain from disposal of US$ 591,8 million. Sistema remains a shareholder in ROSNO with a 2,8% stake in the subsidiary.