September 4, 2008
Comstar Takes Over Management of STREAM-TV Regional Assets
"COMSTAR - United TeleSystems" JSC ("Comstar" or "the Group") (LSE: CMST), the leading integrated telecommunications operator in Russia and the CIS, today announced that it has commenced the integration of the regional operators of STREAM-TV Group, which is owned by Sistema Mass Media ("SMM"), and providing cable TV and broadband internet access services in 40 Russian cities with a combined population of over 15 million people.
Comstar is taking over the management STREAM-TV Group, which is the largest pay-TV operator in Russia and had a 17% share of the Russian subscriber market as at the end of 2007(1). The networks pass over 3.5 million households and have over 1.5 million active pay-TV subscribers and over 200 thousand broadband internet subscribers.
Approximately 30% of STREAM-TV Group's network has already been modernized to enable the provision of triple-play services (VoIP, internet and pay-TV). Comstar and STREAM-TV's regional broadband market share stood at 13% as at the end of 2007(1). STREAM-TV Group reported revenues of US$ 89.8 million, and an OIBDA margin of 24.6% for the twelve months ended December 31, 2007.
The agreement follows the approval by the Comstar and SMM Boards of Directors in July 2008 for the transfer of the STREAM-TV business to Comstar.
The next stage of the integration process comprises the acquisition of STREAM-TV Group from SMM. The structure of the deal is currently under discussion and the assets are being independently valued by Ernst&Young. Comstar expects to complete the deal by the end of 2008.
Vitaly Savelyev, First Vice President of Sistema and Chairman of Comstar's Board of Directors, commented: "The decision to separate the operations of our subsidiaries is in line with the development strategy for Sistema's telecommunications and media businesses. Comstar will continue to focus on providing broadband access, telephony services and pay-TV solutions, while Sistema Mass Media will be responsible for multi-media activities, such as content development and aggregation. This structure will enable us to further strengthen our business segments, and provide a powerful impetus to the development of the telecommunications market by further strengthening one of Russia's largest multi-service telecommunications operators."
Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, added: "The consolidation of STREAM-TV under our management will enable us to become a national broadband internet access provider in Russia. We will service 67 Russian cities with a combined population of over 48 million people. We intend to selectively modernize up to 90% of the newly acquired networks using fiber-to-the-building technology. We will combine the networks to create a unified infrastructure providing a wide range of telecommunications services - telephony, internet access and pay-TV - to the mass market. In addition, we plan to further extend the networks, in order to provide enhanced services for corporate subscribers".
(1) Source: J'son & Partners
For further information, please visit www.comstar-uts.com
Comstar UTS is the leading fixed-line telecommunications company in Moscow. Comstar provides voice, data, television and other value-added services to residential and corporate subscribers and operators, using its extensive backbone network and exclusive last mile access to 97% of Moscow households. The Company also offers communications services in five Russian regions, Armenia and Ukraine. Comstar had 3.6 million residential subscribers and 750 thousand residential broadband internet subscribers in Moscow, as well as 40 thousand residential regional and international broadband internet subscribers at the end of March 2008. Comstar generated US$ 1,562.4 million and US$ 417.0 million of revenues and a 42.5% and 40.8% OIBDA margin for the twelve months ended December 31, 2007 and the three months ended March 31, 2008, respectively. Comstar's Global Depositary Receipts are listed on the London Stock Exchange (ticker: CMST).
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Comstar UTS. You can identify forward looking statements by terms such as "expect,""believe,""anticipate,""estimate,""intend,""will,""could,""may" or "might", the negative of such terms or other similar expressions. Comstar UTS wishes to caution that these statements are only predictions, and that actual events or results may differ materially. Comstar UTS does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Comstar UTS, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Comstar UTS operates in, as well as many other risks specifically related to Comstar UTS and its operations.