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North-West Telecom

January 26, 2005

The Board of Directors of OJSC North-West Telecom has approved the Company’s business plan for the year 2005

On 21st January 2005 the Board of Directors of OJSC North-West Telecom approved the Company’s business plan for the year 2005 and instructed the company’s management to prepare a programme for a radical cut-down of costs within 3 months. Thus, NWT has become the first telecommunication interregional company that has declared its intention to cardinally improve the efficiency of its operation.    

In compliance with the approved business plan, in 2005 the consolidated proceeds of North-West Telecom will amount to RUR 20.1 billion and, as compared to the year 2004, will grow by 15%. At the same time, operating income will grow only by 12%. For the first time since the united company started its operation, the growth rate of income is faster than the operating expenses.

EBITDA will grow by 23%, to 4.8 billion roubles. Thus, in compliance with the earlier announced strategy in the field of financial and economic policy, the EBITDA margin will grow by 1.5 points, to 23.9%.

The year’s net profit will grow by 13% and amount to over RUR 1.5 billion. The investment programme of 2005 will amount to RUR 5 billion, which will be 4% higher than the volume of actual investment in 2004. The bulk of investment will be allotted for the network upgrading and digitalization programme, for reducing the queue to get a telephone instalation and for expanding the zonal telecommunication networks in regions. 221,000 of the existing telephone lines will be digitalized and 149,000 new lines will be put into operation. RUR 300 millions will be invested in developing highly profitable services. The income from new services will grow 1.3 times, to RUR 900 millions.

Besides, the investment programme takes into account NWT’s participation in a number of programmes in the field of information technologies that are being implemented in a centralized way by Svyazinvest holding’s companies, as well as potential merger and takeover transactions. Thus, at the past meeting of the Board of Directors a decision was taken to start talks on buying the group of companies, controlling 60% of the Internet access market in a region of the North-West Telecom’s licensed territory. In 2005 NWT’s financial stability will remain at the high level: own funds will comprise at least 58% of the company’s liabilities (59% in 2004). The net financial debt will grow by RUR 2 billion.

To increase the working capital ratio (from 0.58 in 2004 to 0.77 in 2005), the company is planning to float a bonded loan of RUR 3 billion for six years and to attract long-term bank loans to the amount of RUR 1 billion. These funds will make it possible to re-finance the current short-term debt and to finance the investment programme for 2005. 

In compliance with the decision of the Board of Directors, the basic parameters of OJSC NWT’s budget for the year 2005 will be revised in the 2nd quarter of 2005 after the cost cut-down programme is approved.




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