Vladivostok, October 25, 2005 OJSC "FETEC" (RTS: ESPK, MICE: DLSV, ADR: FEEOY) declares 9M2005 results according to Russian Accounting Standards (RAS).

9M2005 Financial Highlights  

According to OJSC "FETEC" General Director, the Company nowadays continues to lead policy of business soundness securing at the expense of diversification, controllable services share reducing in total earnings volume and services competitive ability increasing. The Company actively develops profitable business segments and terminates projects of low profitability with long payback long periods. OJSC "FETEC" 9M2005 revenues structure reflects the Company vigorous activity for data transmission service development, local telephone communication, as the “vehicle” for high profitability services delivery to subscriber and for work with inner operators.

As he said, OJSC "FETEC" declares itself as a major telecommunications operator and a major wholesale refiler. The Company is now implementing a project of fiberglass transmission lines construction that will be able to unite five regions of Far Eastern region into one multi service network (namely Primorsky, Khabarovsky, Amursky, Sakhalin regions and JAR). The project is aimed at Company expenses for channels rent reducing, transfer to the Company’s own networks and free resources sale.

The Company started satellite network project implementation that will cover northern territories and will give the possibility of operating cost reducing and the Company presence at Far Eastern market widening.

As Mr. Alexeev noted, efficiency enhancement program is realized in the Company, the aim of which is expenses reducing for unprofitable directions, direct cost and personnel capacity optimizing.

Now efficiency enhancement work is in progress. “We actively work at Far Eastern telecommunications services market and reconsider our activity inside the Company as well”, noted Mr. Alexeev.

Communication services revenues growth dynamics, 9M2005

Communication services revenues structure change, 9M2005

Internet access services revenues of OJSC "FETEC" during 9M2005 increased by 59.3 % in comparison with the same period and comprised RUR 540.1 mln. Subscriber base growth of Internet access service users comprised 32.4 %, 152 956 users (during efficiency enhancement program it was 115 580). DSL internet access services users subscriber base increased 5.9 times, up to 22 717 subscribers (during 9M2004 it was 3 869).

Internet access services rendering vigorous growth is connected with new users active canvassing and consumable services volume increasing.

As for 9M2005 results, OJSC "FETEC" shows its stable position at the cellular services market in Kamchatka and Magadan regions and presents high growth rates of cellular communication subscriber base in conditions of market demonopolization process and severe competitive struggle.****

In case of cellular communication services revenues slight decreasing, the Company increases subscriber base vigorously. During 9M2005 cellular communication subscribers quantity in Kamchatka and Magadan region increased 1.8 times and came up to 50 343 subscribers (in comparison with 9M2004 it was 27 772). Subscriber base in Kamchatka region increased 1.7 times up to 31 072 subscribers (18 259), in Magadan region it increased 2 times up to 19 270 users (9 513).

Cellular communication subscribers total number, including affiliate “Akos” subscribers (90 790 users), according to OJSC "FETEC" 9M2005 results comprised 141 133 subscribers.

Local telephone communication services revenues growth is determined by subscriber base growth, services sales volume and local communication rates increasing***** . As for the accounting period results, local traffic subscriber fee increased by 8.2 % up to 1 302 543 subscribers (1 204 701). The Company presents vigorous activity results in corporative customers sector, legal bodies quantity increased by 4.3 % from 187 633 subscribers to 195 622. Physical bodies subscriber base increased by 8.8 %, from 1 017 038 users to 1 106 921.

The Company revenues growth positive revenues influenced dynamics increase of alternative operators joining and traffic transmission.

Under efficiency enhancement program implementation, OJSC "FETEC" presents improved expenses control quality, revenues growth rate (+ 17.6%) exceeds over expenses growth rate (+13.0%).

On July 1st, 2005 OJSC "FETEC" started personnel capacity optimization campaign. As for the end of accounting period, payroll strength decreased by 6.7 %, 1 265 persons, and comprised 17 495 employees (18 760).

Income per employee increased by 21% up to RUR 422.2 thousand (RUR 348.8 thousand). Income per line increased by 6.2 % up to RUR 5.65 thousand (RUR 5.32 thousand). Lines quantity per employee increased by 13.9 % from 65.6 each to 74.7 each.

Prime cost for one ruble of earnings decreased from 85 kopecks to 82 kopecks.

9M2005 Expenses Structure