OREANDA-NEWS. June 28, 2007.  Sibirtelecom OJSC (RTS: ENCO/ENCOP, ENCOG/ENCOPG; MICEX: STKM/STKMP, ADR: OTC – SBTLY, Frankfurt and Berlin Stock Exchanges - ISIN: US8257351036, WKN: 260452), the operator of telecommunication services in the Siberian Federal District, presents the audited consolidated financial statements for the year of 2006 prepared in accordance with the International Financial Reporting Standards (IFRS). The audit of financial data reporting for the year 2006 has been performed by ZAO KPMG.

 The consolidated financial statements include the assets, liabilities and financial results of Sibirtelecom OJSC (the “Company”) and its subsidiaries, main activity of which is to provide cellular and other telecommunication services.

In 2006, the Company’s consolidated revenues amounted to 30,174.6 million rubles, having increased by 2,742.5 million rubles, or 10.0% against 2005.

 The main components of the Company’s revenue structure are revenues from cellular services and local telephone calls (27.4% and 26.8% accordingly).

Substantial elements of the Company’s revenues are revenues from national operators (15.2%), intrazone  telephone services (12.3%) and new services – Internet, data transfer, IP-telephony, Intelligent network services (5.7%).

The main factors of revenue increase in the reporting year are growth of cellular and fixed communications subscriber base, broadband access services development, change in relations between telecom operators and coming into force principle “Calling Party Pay” according to amendment to article 54 of Federal Low “On Communications”.

 In 2006 in comparison with 2005:

The largest increase of revenues is the increase of revenues from rendering services to national operators amounted to 2,497.7 million rubles or 119.3% due to change in relations between telecom operators according to regulatory legal acts in telecommunication branch (since January 1, 2006 the revenue is accrued not only for the termination of a call to the network of the operator, but for the initiation of the call from the operator’s network as well) and increase of rendered services to connected operators.

Increase of revenues from cellular services amounted to 1,767.0 million rubles or 27.2% due to increase of subscribers base (within the reporting period the number of subscribers to cellular communications services has increased in 1.6 times and amounted to 3.14 million).

Increase of revenues from rendering of local telephone calls amounted to 1,095.7 million rubles or 15.6%. Main factors are - the increase of subscriber base (the number of basic telephone sets increased by 141.5 items or 3.5% and amounted to 4,197 thousand items at the end of 2006) and tariff indexing since November 1, 2005.

Increase of revenues from intrazone telephone communication services amounted to                    1,024.9 million rubles or 38.3% due to including into that item since July 1, 2006 revenues of fixed line subscribers’ connections to mobile line subscribers in the same settlement, increase of revenues from connected operators’ channel leasing, change in a way of registering revenues from connected operators’ subscribers connections.

Increase of revenues from providing of new services (Internet, data transfer, IP-telephony and Intelligent network services) amounted to 516.5 million rubles or 43.4% due to increase of revenues from dial-up and broadband Internet access services (Internet traffic of parent company with the access through the public telephone network increased by 30.7% and amounted to 2,643 million minutes; volume of information transferred via Internet through dedicated channels increased  by a factor of  3.7 and amounted to 619 TByte).

In 2006, the Company’s expenses increased by 2,414.7 million rubles or 10.0% against 2005 and amounted to 26,663.1 million rubles.

Wages, salaries, other benefits and payroll taxes (44.4%), other operating expenses (17.6%), depreciation and amortization (14.5%), charges and expenses related to materials, repairs and maintenance, utilities (11.7%) constitute a major share in the total amount of the expense growth.

In 2006 in comparison with 2005:

Costs related to services of telecom operators (Interconnection charges) decreased by 1,158.4 million rubles or 33.2% due to change in relations between telecom operators according to regulatory legal acts in telecommunication branch.

Increase of expenses related to wages, salaries, other benefits and payroll taxes amounted to 1,529.3 million rubles or 14.8%. Major factors determining this increase were the growth of the average wage size attributed to situation on labour market, the increase in charge of the provision on remuneration’s payment for the year results, the presenting obligations existed under the defined benefit plans.

Increase of other operating expenses amounted to 920.5 million rubles or 24.4% mainly caused by increase of agency fees, increase of expenses related to increase of base stations and sale offices in daughter enterprises (using of radio-frequency spectrum, leasing) assessments to the Universal Service Reserve Provision, increase of advertising expenses, creation of provision for decrease of material assets.

The size of depreciation and amortization increased by 616.4 million rubles or 19.0%, in connection with an active investment policy of the Company directed to the communication network development. Consolidated capital expenditure amounted to 11.5 million rubles in 2006, increased by 24.3% as compared with 2005.

Increase of expenses related to materials, repairs and maintenance, and utilities amounted to 353.1 million rubles or 12.7% mainly caused by broadening of network of service of cellular companies, increase of expense to utilities due to prices increase.

The increase of the EBITDA parameter in 2006 against the previous year totaled 944.2 million rubles or 14.7%. EBITDA margin – 24.4%.

Operating profit amounted to 3,511.5 million rubles, having increased by 327.8 million rubles, or 10.3%. Operating profit margin amounted to 11.6%.

Profit before income tax amounted to 2,329.1 million rubles, having increased by 102.5 million rubles, or 4.6%.

Profit for the year amounted to 1,159.5 million rubles (-21.0% against the previous year). The reduction of profit for the year was caused by an increase in income tax expenses due to an increase in expenses that do not reduce the taxable income. Profit for the year margin amounted to 3.8%.

The complete consolidated financial statements of Sibirtelecom OJSC for 2006 in accordance with International Financial Reporting Standards are available in the Company’s corporate web-site at: http://www.sibirtelecom.ru/english/investors/financial.php(the English version).