Krasnodar, October 5, 2004: Southern Telecommunications Company (“UTK”) (RTS: KUBN; OTC: STJSY), the principal fixed-line telecommunications provider for Russia’s Southern Federal District, announces the development results of new technologies and value-added services as of September 2004.

Revenues from value-added services (VAS) in H1 2004 increased 67.3% to RUR 390.1 mln and accounted for 5.1% of total telecom revenues.

UTK results of the value-added services development:

Revenues from Internet services grew by 64.1%, from VPN-services — by 92.8%, intelligent network services — by 52.2%, ISDN services — by 44.9%. Internet services sales are supported by strong usage growth: Internet traffic is up 76.3% reaching 130.8 Tb, connect time via switched access to Internet is up 48.7% to 11.3 mln hours. Revenues from Internet services makes the main part (62.6%) of the revenues from VAS.

As of September 2004 31 ths assigned DSL ports and 20.4 ths dial-up ports, 17.2 of them being digital, were installed. Number of Ethernet ports reached 8.4 thousand, number of V.35 protocol-based ports made 2.1 thousand.

"UTK" PJSC introduces rapidly IP-telephony services by selling pre-paid IP-telephony cards. As a result 1H04 revenues from IP-telephony services increased by 122.6%. In summer of 2004 the Company’s branches started rendering IP-telephony services in the licensed territories of the Astrakhan Region, Kalmykia, Adygeia and Karachaevo-Circassian Republics.

According to the plan on development of the network of call-centers, Call centers in the Company’s branches “KabBalktelecom” and “Rostovelectrosvyaz” were put into operation in summer of 2004. Intelligent platforms for rendering information and inquiry services being of great demand in the region were also put into operation in the branches “KabBalktelecom” and “Electrosvyaz” of Stavropol Territory”. CTV network has been actively developing in Krasnodar, in summer of 2004 first subscribers were connected to cable TV. In addition, "UTK" PJSC expands provision of VPN-services in all its licensed territory.

In summer of 2004 UTK launched FreePhone service provided on the basis of the intelligent platform allowing a subscriber to make calls at the expense of the called party (an individual or a company subscribed to this service).

In 3Q04 "UTK" PJSC started commercial operation of the new service - video-conferencing. Large companies having branched organizational structure as well as state authorities have got an opportunity to use video conferencing on a regular basis for optimization of day-to-day management of their numerous structural divisions and for reduction of expenses on organization of out operational management meetings.

UTK branch “Sevosetinelectrosvyaz” put into pilot operation its multi-service network based on Cisco Systems equipment. Multi-media and multi-service network (MMS) has been developing in Krasnodar, its commercial operation has already started in elite districts of the city.