On 24th June, 2008 the Arbitrage of Kaliningrad region has invalidated the ruling and warrant of the Office of the Federal Antimonopoly Service of Kaliningrad region on the violation by the OJSC “North-West telecom” of the federal law FZ-135 “On Competition” in terms of the Company’s establishing prices on the traffic passage services.

On 04.12.2007, OFAS of Kaliningrad region has issued a Ruling on the antimonopoly case No. 08 dd. 04.12.2007 in which a conclusion was made on the Company’s violation of the general part of cl.1 art.10 of the Federal Law dd. 26.07.2007 No. 135-FZ « Î n Protection of Competition»4 the above mentioned violation was expressed in the Company’s abuse of its domineering position on the local telephone communications’ market, namely, in inflicting unprofitable terms and conditions to the connected communications’ operators in the form of a connection contract which stated the price limit for connecting and traffic passage services. To the OFAS’ opinion, the connection contract price is unprofitable for the connected operators and leads to restriction of competition on the telecommunications’ and dial-up Internet access market in Kaliningrad region.*

Î No. 8 dd. 04.12.2007 according to which the it (OJSC «NWŇ») had to stop the abuse of its domineering position and introduce modifications into the economical connection terms in force from 01.07.2006 in terms of establishing prices for the service of local initiation and termination of calls from the moment they were received.

OJSC «NWŇ» disagreed with this point of view of the antimonopoly body and went to the Arbitrage of Kaliningrad region with a petition to invalidate the OFAS’ ruling and warrant.

The Arbitrage found no grounds for admitting that the OJSC «North-West Telecom» had really violated art.10 of the Federal Law « Î n Competition». The above stated ruling and warrant of the OFAS of Kaliningrad region were found illegitimate and allegedly made with significant violations of the legislation in force.

Notwithstanding the fact that a similar suit filed against the OJSC «NWŇ» at the initiative of OFAS of St. Petersburg and Leningrad region was adjudicated by judicial bodies in favour of the OJSC «NWŇ» , the representatives of the Company think that Kaliningrad OFAS will use its right to appeal the decision of the Arbitrage in the appellate order.

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* Prices for traffic passage services are subject to state regulation, and the price limits for traffic passage services were approved for the OJSC «NWŇ» by the corresponding authoritative body (as of 01st July, 2006 by Rossvyaznadzor).