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North-West Telecom

October 10, 2005

The corporate governance score of OJSC North-West Telecom has been raised to CGS-5.4

The Standard & Poor’s Corporate Governance Rating Service raised the corporate governance score (CGS) of OJSC North-West Telecom from 5.0 to 5.4, Russian scale. Simultaneously, the agency confirmed the Company’s rating of CGS-5, international scale.

According to Standard & Poor's, “the increase in the CGS of OJSC NWT reflects an improvement in the time and quality of the company reporting in the IAS format, active operation of the Board of Directors and its four committees, two of which are independent, as well as favorable changes in the governmental regulation of the industry”.

In the opinion of Standard & Poor’s experts, the score was increased based on the following favorable factors of the NWT corporate governance practice:

Important role of independent directors in the Board of Directors. These directors make up the Audit Committee and account for a majority in the Appointments and Remunerations Committee. The experts note positive changes in the working procedures of the Board of Directors and the transformation of the Board of Directors committees into real decision-making bodies.

Better reporting in the IAS format. The 2004 reports were published in late June, not in mid-August or September as in the past years. Furthermore, NWT brought the accounting of pension liabilities in full compliance with the IAS. As the result, the company obtained for the first time the auditor’s report without a qualification on this point. The remaining defects relating to fixed assets accounting in the past periods are to be corrected in the IAS reports as early as this year.

Lower risks relating to adverse regulation aspects. The Government abolished with effect from 2005 the obligation of fixed-communications operators to provide services for the underprivileged categories of subscribers at reduced prices. Other regulation initiatives, including the recently started “versatile service” program and the expected liberalization of the long-distance communications market create opportunities for a more transparent social policy and a greater competition in the telecommunications industry.

The procedures for preparing and holding shareholders’ meetings on the whole meet the procedures of leading international companies with a high corporate governance level.

NWT is transparent and ready for a dialogue with investors in accordance with its charter documents and bylaws. This approach is stated in the Corporate Governance Code (approved by the Board of Directors on September 22, 2004) and in the Capitalization Increase Concept (approved by the Board of Directors on August 18, 2005). NWT provides a special distribution of the company news and organizes special meetings with analysts.

Thus, in the opinion of the Standard & Poor’s experts, the level of the NWT corporate governance practice is one of the highest among all Russian fixed-communications operators: no Russian interregional communications company has been assigned a higher CGS to date. The official rating published by the agency confirmed the recently published results of a study according to which NWT occupied the 7th place by information transparency among all Russian public companies.

For a full report on the rating, visit the Standard & Poor’s web-site: https://www.standardandpoors.ru/page.php?path=issuerr&id=54 or the NWT web-site: https://www.nwtelecom.ru/pubsas/test--3BA3FDA33A89414ABD25153B54C9D26E/index.html

 

 

 

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