Krasnodar, March 28, 2005 – JSC “Southern Telecommunications Company” (UTK) (RTS: KUBN; OTC USA: STJSY), the principal fixed-line telecommunications provider for Russia’s Southern Federal District, announced today its 2004 results on the development of new technologies and the deployment of value-added services*.

Due to an active investment and marketing policy, UTK’s revenues from value-added services increased by 79.5% to RUR 957.7 million in 2004. Capital investments in the deployment of new telecom services was RUR559.8 million, representing 4% of the Company’s overall investment program. The value-added-services share of the total tariff revenues increased from 4.0% to 5.9% in 2004.

Internet services

Internet access services accounted for most of the revenue increase in 2004, showing a 71% growth rate to RUR564.8 million. The progress was achieved due to technological and marketing solutions. In 2004, the carrying capacity of external Internet channels in the company’s branches tripled to 255 Mbit/sec. The increase allowed the Company to substantially increase the volume of transmitted information and the quality of communication. The volume of traffic via dedicated lines increased 2.3 times to 153.8 Tbyte in 2004. The time of Internet connections through switched lines increased by 52.8% to 24.6 million hours.

In 2004, revenues from Internet xDSL-based broadband access increased seven times to RUR77.9 million.  UTK put into operation 29,206 xDSL ports in 2004, up 11.3 times over 2003, and sold 8,553 equipped ports, up 8.5 times.

In 2004, the Company started to install “ADSL 2+” broadband access equipment, which enables receiving speeds of 12 to 24 Mbit/sec. The relatively low cost of “ADSL 2+” network construction (due to the modernization of the existing xDSL network) and the expected increase in traffic volume are the main contributors to the growth in profitability of Internet services.

Though high-speed Internet access is very popular, Internet access services through switched lines (dial-up) maintains high growth rates. In 2004, revenues from Internet services through switched lines came to RUR350.9 million. The number of dial-up ports reached 20,830, up 53%.

Along with promotional activities relating to fixed-line Internet access technologies, UTK began to deploy wireless Internet access systems based on the Wi-Fi technology. This technology has the following advantages: mobility, simple and quick to build local networks, flexible settings and low maintenance costs. Wi-Fi systems are being deployed in the most promising regions, including Krasnodar krai (51 base stations) and the Rostov region (12 base stations).

IP telephony

Due to the development of IP cards dealer network and the growth of IP-connections, revenues from IP telephony reached RUR48.6 million in 2004, an increase of 48.6% over last year.

Cable (CTV) and digital TV (IP-TV)

In 2004, the UTK continued constructing a multipurpose, broadband cable TV network in the Volgograd region. The number of cable TV subscribers of the Company increased by 2.3% to 89,900 users. Revenues reached RUR15 million in 2004, up 17.2%.

Due to the expansion of multimedia and multi-service networks and the introduction of broadband access based on the Ethernet-to-home technology, UTK started to provide a wide range of new services in 2004, including multi-channel digital TV (IP-TV) and the building of virtual private networks. In 2005, the Company plans to offer the following multimedia message services (MMS) to the connected subscribers: video upon request, games upon request, video conferencing, home education, video control and monitoring, and distant control of household equipment. The most promising areas for introducing MMS are urban micro-districts with high population densities.

Building virtual private networks (VPN)

In 2004, revenues from building corporate networks based on VPN technology increased by 68.1% to RUR157.5 million. The demand from large companies and enterprises for reliable corporate networks is quickly growing. In the reporting year, UTK equipped 967 VPN ports, a 59.9% gain over 2003.

ISDN services

UTK increased the number of ISDN ports equipped by 133.3% to 5,008 ports in 2004. Due to the active promotion of ISDN services, the revenues-growth rate was 205.4%. The expediency of the promotion of ISDN services can be explained by the fact that ISDN ports are included in digital telephone exchanges. This allows the Company to use resources of the local telephone system more effectively.

Intelligent services (ISS)

Revenues from intelligent services (ISS) increased 389.4% to RUR69.5 million over 2003, due to the active introduction of intelligent platforms (Telspec, PL on the basis of “Protey,” P 90 “Telligent,” SSP on the basis of “Berkut”). This enabled UTK to provide traditional services and to develop and introduce new services, including a wide range of intelligent services. DLD and ILD telephone calls using prepaid cards are also available on intelligent platforms. This service is very convenient for subscribers; they can pay for telecom services without going out.

Others

To improve the quality of services and perfect its customer service, UTK installed Service Selection Gateway equipment at the end of 2004, allowing the company to deploy various services in MMS and to control and use its resources more efficiently.

By introducing the modern automated billing system, Onyma, in all branches of UTK at the beginning of 2004, the company modernized the billing system of value-added services. The new billing system allowed UTK to considerably broaden customer services and to improve their quality. Now a subscriber can get information twenty-four hours a day, thus around-the-clock work of operators is not necessary. Due to the new billing system, universal plastic cards that allow customers to pay for Internet and IP-telephony services have appeared. In 2004, UTK sold 3.6 million prepaid service cards, of those 900,000 were universal cards.

*Value-added telecom services provided by UTK:
- VPN construction from MPLS and other technologies;
- Data transmission;
- Internet access (permanent IP-circuit, switched access, xDSL-based broadband access, Wi-Fi-based wireless access);
- Termination of IP-traffic;
- Digital cable TV network (IPTV);
- Multimedia and multi-service networks from HFC, Ethernet to the home, and other technologies;
- Video telephony and video conferencing;
- Intelligent services from SCP-SSP;
- Content services, including call-centers;
- Hosting and co-location.
** Figures of 2003 revenues from value-added services are shown in comparable conditions.