Ekaterinburg - May 17, 2005 - Uralsvyazinform (RTS: URSI/URSIP) the leading carrier of fixed-line and mobile services in the Urals region, Russia reports the unconsolidated 1Q 2005 financial and operational results under Russian accounting standards (RAS).

• Revenue growth was 18% compared to 1Q 2004 mainly due to the increase in DLD and ILD traffic, rise in local tariffs, and growth of fixed-line and GSM subscriber bases;
• EBITDA increased by 21% vs 1Q 2005, EBITDA margin was 37%;
• Net profit increased by 15%, net margin remained at 9%;
• Fixed-line segment delivered 20% revenue growth;
• Mobile revenues increased by 30%;
• Long-distance revenues increased by 12%;
• Total subscriber number reached 5.8 mln, including 2.4 mln GSM subscribers;
• As of April 14, 2005 Standard & Poor's, an international rating agency, upgraded Uralsvyazinform credit rating from B to B+/Stable;
• As of April 21, 2005 Uralsvyazinform placed its 05-series bond issue (non-convertible interest-bearing documentary bearer bonds). Total nominal value is RUR 2.0 bln. The auction fixed the coupon rate at 9.19% p.a. Effective YTM is 9.40% p.a. The issue was placed in full during the auction;
• As of April 25, 2005 Fitch Ratings affirmed its credit rating of Uralsvyazinform at BB-/Stable.

Anatoly Ufimkin, CEO commented the results of the quarter: "The successful start to the year comes in line with our expectations. Although, the growth rates in revenue terms decreased significantly from 31% in the last year to 18% in 1Q 2005, we were able to preserve the outpacing rates for revenue compared to the costs as we implement the costs optimization program. As a result, EBITDA margin increased to 37%, one of the highest indicators within the industry.

However, we recognize that the growth in the "traditional" segments is somewhat slowing, and we trust that the below should address the issue: first, cost optimization through optimization of staff and reduction of network-related operating costs; second, development of value-added services.

In 2004, Uralsvyazinform initiated a major Russian NGN project (next generation networks). On May 13, 2005 Uralsvyazinform was the first to present a beta project of NGN-based networks in Chelyabinsk, using the equipment and solutions provided by Nortel. The project integrates each component of an up-to-date telecommunication infrastructure (backbone packet-switched network, SoftSwitch, multimedia servers) into the existing fixed-line urban network in Chelyabinsk.

The switchover toward NGN technology is seen as the future of the company's fixed-line networks. The next generation networks, based on packet-switched technology should fully replace the existing channel-switched networks. By the end of 2007, our network should be capable of transferring any type of traffic (voice, data, and video) in a single stream regardless its volume.

We have also continued the consolidation of fixed-line and mobile businesses, and trust that the benefits of the consolidation should add up to preserve our leading position in the regional fixed-line and mobile markets, as well as optimize costs and boost efficiency. The first stage of the consolidation should be completed by the end of the 2Q 2005. At the EGM of March 31, 2005 the shareholders approved the merger of ZAO "Ermak RMS", OOO "South Urals Cellular Phone", OOO "Tyumenruscom" (mobile operators), and OOO "Uralcom", ZAO "VSNET" (Internet providers) with and into Uralsvyazinform. The mobile assets constitute a basis for a single inter-regional mobile division, covering the whole service territory under a single license and brand. Data transmission assets will be consolidated with corresponding regional divisions of Uralsvyazinform.

Generally, we trust that our strategy proved consistent, and our mid-term goals will be achieved".

To proceed with the complete 2004 results operational and financial overview, please download PDF version. Complete accounting statements of Uralsvyazinform as of 2004 may be found in the Financials section.