On the 3rd of November 2006  the Board of Directors of JSC North-West Telecom took a decision to acquire 100% of the shares of CJSC Petersburg Transit Telecom (P.T.T.) and proposed the issue of approving the transaction to an extraordinary general meeting of the shareholders of JSC North-West Telecom.

CJSC P.T.T. is the biggest alternative operator of St. Petersburg in the "operator for operators" services market segment. This decision is in line with the declared strategy of North-West Telecom in the field of M&A:  buying a profile asset in order to strengthen Company's market position in one of the most attractive telecommunication market segments in the largest megapolis of the Northwestern Federal District.

It should be reminded that the Internet providers from Novgorod – LLC Novgorod Datacom and LLC Novgorod Deitacom (see Press Release of 09.02.2005.) have been already bought and JSC North-West Telecom's share in LLC Parma Inform, one of the biggest Internet providers of the Republic of Komi has been increased to 100% in the framework of this strategy.

The market value of CJSC P.T.T. was determined by the independent appraiser Deloitte Touche.

The purchase of CJSC P.T.T. will facilitate a significant strengthening of North-West Telecom's market positions in the segment of the wholesale market of services, increasing the income and cutting the expenses for traffic transit and is aimed at increasing the Company's market value.   

Besides, JSC North-West Telecom will get a well-known brand and a clients base in the B2B segment, as well as a free number capacity and an up-to-date transit network in St. Petersburg, which will logically and efficiently supplement the available telecommunication network of the Company.   

It is expected that the transaction will be closed during 2007 after approval by the general meeting of the shareholders of JSC North-West Telecom, the antimonopoly authorities of the Russian Federation and the general meeting of the shareholders of JSC Telecominvest.

In spite of a certain increase in the debt load of JSC NWT as a result of the transaction, the key financial ratios of the Company expected as of 31.12.06 and 31.12.07, will remain at a high level: the equity to total assets ratio will be 0.52, while the Debt/EBITDA will not exceed 2.0.

In compliance with the decision of the Board of Directors of JSC North-West Telecom, the issue of approving the transaction of acquiring 100% of shares JSC NWT has been put forward for consideration by the extraordinary general meeting of the shareholders that will take place on the 18th of December 2006.

The purchase of P.T.T is an efficient method of significantly strengthening the market position of JSC North-West Telecom in the B2B segment. It will make it possible both to reduce the time that would be needed for construction of own transit network and to get a synergy effect from the acquisition as soon as in the next year.  

Brief information on CJSC P.T.T.:

CJSC Petersburg Transit Telecom was established in 2000. 100% of the stock belong to JSC Telecominvest. P.T.T. is a local and areal communication operator in codes ABC 812 (St. Petersburg) and 813 (Leningrad Oblast) and provides both the services of passing traffic to fixed and cell communication operators and to Internet providers and the services of telephony and data transmission to retail clients.   The transport network of P.T.T. consists of more than 700 km of fibre-optic lines embracing all districts of St. Petersburg: the company has 7 transit switchboards. According to the results of the 1st six months of 2006, the financial performance of the Company according to US GAAP amounted to:  proceeds from sales -34,887 thousand US dollars, EBITDA – 18,191 thousand US dollars, EBITDA margin - 52%,: net income -14,363 thousand US dollars, According to the results of 2005: proceeds from sales: -57,006 thousand US dollars, EBITDA -30,992 thousand US dollars, EBITDA margin - 54%: net income -18,475 thousand US dollars.