Ekaterinburg – January 24, 2005 – Uralsvyazinform (RTS and MICEX: URSI/URSIP) the leading carrier of fixed-line and mobile services in Urals region reports on its plans to consolidate its subsidiary data transmission businesses

On December 17, 2004 the Board of Directors approved the decision to reorganize the data transmission and telematic businesses. The reorganization will include consolidation of the major internet providers – OOO "Uralcom" and ZAO "VSNET" into the parent Uralsvyazinform.

Acting CEO Anatoly Ufimkin explained that the consolidation is focused on the increased profitability and competitiveness, and higher level of manageability and efficiency of the data transmission business. The company has already had an experience of large-scale reorganizations, that of mobile business, when ZAO "Ermak-RMS", OOO "South Urals Cellular Phone" and OOO TyumenRusCom" joined Uralsvyazinform, Mr Ufimkin pointed out.

"Uralsvyazinform has developed as a versatile info-communications company offering both fixed-line and mobile services, and Internet and cable TV services. The versatility of this kind lets us stand firmly on our feet, and benefit from the synergies which bundled services offer. Consolidating internet subsidiaries should secure Uralsvyazinform’s position as the largest ISP in the Urals." – Mr Ufimkin commented.

Internet, data transmission and telematic services are offered by both regional divisions of Uralsvyazinform, and its subsidiary companies. The largest subsidiaries are OOO "Uralcom" and ZAO "VSNET".

OOO "Uralcom" (ex-OOO "Perminform")

Established in 1995. Uralcom offers data transmission services in Perm and Sverdlovsk regions. Uralsvyazinform is the sole participant in OOO "Uralcom".

ZAO "VSNET"

Established in 1995. The company’s service area includes Khanty-Manyisky AD-Yugra. As of the decision date, VSNET’s shareholders were Uralsvyazinform (51.88%), ZAO "Firma INKREMENT" (38.12%), OAO "Surgutsky Joint-Stock Commercial Bank AKKOBANK" (10.00%)

In December, 2004 the Board of Directors approved the purchase of 48.12% stake from VSNET’s shareholders, worth RUR 41.17 mln. The price has been confirmed by an independent appraiser. The transaction has been affirmed by the Federal Anti-Monopoly Service, as required by Russian legislation. The transaction is now complete.

The procedure of consolidation of Uralsvyazinform with Uralcom and VSNET is due accomplished by August 1, 2005.

As of October 1, 2004 Uralsvyazinform and its subsidiaries had 88 thous. subscribers, connected via dedicated channels (a 22% up over 9M 2004), and 261 thous. dial-up subscribers (up 24% over 9M 2004). The dedicated channels are built using fiber-optics, xDSL and ISDN technology. The dial-up services are distributed using pre-paid cards and "Internet on credit" system, which provides public authorization codes, with bills to be paid together with general subscription charges for fixed-line services.

The consolidated (including subsidiaries) revenues from data transmission services as of 9M 2004 totaled RUR 688 mln (compared to RUR 650 mln in 2003). In revenue terms, Uralsvyazinform retains 39% market share of Internet services in the Urals region.