Nizhny Novgorod, March, 2006: Based on 2005 results, the Company generated Rub 21,348.4 bln of revenue (a 114.7% increase y-o-y). Revenues from telecom services amounted to Rub 20,787.6 bln (114.4% higher than in 2004), accounting for 97.4% of the operator’s total revenue.

Revenue breakdown:

The structure of revenue by service consumer remained unchanged – 57% of revenues come from residential customers.

Main drivers behind the revenue growth are:

- A rise in local voice earnings (the operator added 257,700 main telephone sets (a 99.7% gain), the telecom carrier’s installed capacity totaled 4,952.7 lines);

- Higher VAS revenues (Rub 1,507 mln, i.e. up 160.8%), which accounted for 7.3% of the total communications services. The bulk of revenues in the operator’s revenue mix come from data transmission and Internet access services (+ 164.8%). The number of switched access users totaled 487,000 (a 142.8% surge), while dedicated access Internet subscribers grew nearly 4-fold, to 31,800 users;

- An increase in interconnect and traffic transit revenues;

- A change in rates for services rendered.

OAO VolgaTelecom 2005 expenses stood at Rub 15,333 mln (+ 114.7%). The cost of Rub 100 revenues was Rub 71,82 (+53 kopecks).

Cost breakdown:

2005 financial and economic highlights:

- Operatingincome- Rub6,015 mln, (+112.6 %);

- Pre-tax profit – Rub 3,430 mln (114.7 %);

- OIBDA – Rub 8,565.5 bln;

- OIBDA margin (OIBDA/sales) – 40.1;

- EBITDA – Rub 6,772 mln (+123 %);

- EBITDA margin – 31.7%;

- Net profit – Rub 2,261 mln (+110 %);

- Net profit margin-14.7%.

The operator considerably exceeded the budget in terms of net profit (+ Rub 193 mln) and EBITDA (+56 mln) target indicators.

The Company’ average headcount contracted by 1,483 employees to reach 47,635 employees. Number of lines per employee climbed 10.8% to stand at 97,3 lines.

OAO VolgaTelecom’s investments in the telecom infrastructure shrank in 2005 by 25% to reach Rub 5,244.3 bln. Fixed-line telephony represents a total of 53%, the largest share in the telecom carrier’s capex breakdown. The Company’s VAS investments equaled Rub 628 mln, or 11.8% of the total capex.

In 2005, OAO VolgaTelecom put into operation 494, 300 lines, of which 54.6% were earmarked for network expansion, and 45.4% - for network upgrade. Thus, the operator’s installed capacity amounted to 4,966 mln lines. The penetration rate advanced from 56.6% (in 2004) to 63.4% in 2005. The Company installed 257,7 mln main telephone services, the number of telephone sets per 100 residents came to 24 units.

OAO VolgaTelecom final performance results will be announced upon signing the official accounting statements within the deadline specified under the Russian Law.