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JSFC Sistema (SSA)

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Thursday 05 October, 2006

JSFC Sistema

Interim Results

JSFC Sistema
                  

                                FINANCIAL RESULTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2006

Sistema (LSE: SSA), the largest private sector consumer services company in
Russia and the CIS, today announced its unaudited consolidated US GAAP financial
results for the six months ended June 30, 2006.

HIGHLIGHTS

    --  Consolidated revenues up 37% year on year to US$ 4.6 billion

    --  OIBDA(1) up 16% year on year to US$ 1.7 billion

    --  Operating income up 10% year on year to US$ 1.04 billion

    --  Net income up 36% year on year to US$ 310.1 million

    --  Total consolidated assets up 49% year on year to US$ 17.3 billion

    --  Earnings per share up 31% year on year to US$ 0.64

Alexander Goncharuk, President and Chief Executive Officer of Sistema,
commented: “The company has demonstrated impressive results in the first half of
2006, and we are happy to see all of our target strategic goals for the period
being met. This relates both to the financial results presented today, and to
the key operational performance indicators».

FINANCIAL SUMMARY

-0-
*T
 (US$ millions)                    1H 2006         1H 2005 Year-on-year        FY 2005
                                                                  Growth
Revenues                          4,598.0         3,360.1            37%      7,593.5
Operating income                  1,038.6           941.3                     1,957.4
Margin                                 23%             28%           10%           26%
Net Income                          310.1           227.7                       534.4
Margin                                  7%              7%           36%            7%
OIBDA                             1,653.1         1,421.9                     2,982.0
Margin                                 36%             42%           16%           39%
*T

OPERATING REVIEW

Sistema’s consolidated revenues increased by 37% year on year, which reflected a
solid performance by the Group’s Telecommunications businesses and the rapid
development of the Group’s non-telecommunications operations. The
non-telecommunications businesses accounted for 28% of Group consolidated
revenues for the first half of the year, compared to 21% for the same period of
2005. The organic year on year and like for like growth was 29% and amounted to
US$ 4,252.9 million in the first half of 2006, excluding businesses acquired or
divested since the end of the first half of 2005.

Group OIBDA increased by 16% year on year for the first six months ended June
30, 2006 with the lower OIBDA margin impacted by relative margin pressures in
the wireless telecommunications business. The non-telecom segments showed lower
margins compared to the Telecommunications segment due to their comparatively
early stages of development.

Consolidated depreciation and amortization expense was up by 28% year on year
following the increase in depreciation in the Group’s telecommunication segment.
Selling,General and Administrative expenses rose by 61%, from US$ 574.4 million
to US$ 924.9 million in the first half of 2006, as a result of the strong growth
in the existing and newly acquired businesses. US$ 94 million, included in S,G&A
expense, reflects the fair value of non-cash compensation to employees.

Group operating income was up 10% year on year and included the net gain of US$
121.6 million on the disposal of interest in certain subsidiaries, including 5%
of SITRONICS stock.

The effective tax rate increased from 30.9% to 37.2% year on year as a result of
foreign exchange gains on non-ruble denominated long-term debt, which are
taxable under Russian statutory law.

The marginal decrease in minority interest reflects further consolidation of
minority shares in the telecommunication segment, as well as the acquisition of
an additional 2.3% of the outstanding shares of MTS in December 2005, offset by
the decline of the Group’s ownership in Comstar UTS to 59% following its IPO.

Net income for the first half of the year was up 36% year on year to US$ 310.1
million, from US$ 227.7 million.

The weighted average number of shares outstanding increased year on year from
464,944,750 in 2005 to 481,342,813 in 2006, and the Group reported a 31% year on
year increase in basic and diluted earnings per share from US$ 0.49 to US$ 0.64.

Telecommunications(2)

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*T
(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                      3,297.4             2,680.0
OIBDA                                                         1,551.1             1,383.0
Operating Income                                                954.0               920.5
Net Income                                                      570.9               620.8
*T

The Telecommunications segment reported 23% year on year revenue growth and
accounted for 72% of Group consolidated revenues for the first half of 2006,
compared to 79% for the first half of 2005. The growth was primarily organic
with neither MTS or Comstar UTS having made any scale acquisitions since the end
of the first half of 2005. MTS continued to be the main contributor and
accounted for 78% of the segment’s year on year growth.

MTS added 5.9 million subscribers during the first six months of 2006, of which
the majority were in the Russian and Ukrainian markets, and reported 21% year on
year revenue growth for the period from US$ 2.3 billion to US$ 2.8 billion. MTS
results for the second quarter of 2006 showed an increase in ARPU to US$ 7.5
from US$ 6.6 in the first quarter of 2006. Comstar UTS generated 28% year on
year revenue growth from US$ 419.4 million to US$ 536.3 million, following
continued increases in traditional fixed-line regulated revenues, as well as
increasing demand for the ADSL and pay-TV offerings.(3). These broadband data
and video services accounted for 18% of Comstar UTS’s total alternative
fixed-line revenues for the period, compared to only 11% a year ago.

Segment OIBDA was up 12% year on year, with the lower year on year OIBDA margin
of 47% (52%) resulting from the decrease in margin in the wireless
telecommunications business. MTS’s OIBDA for the period increased by 10% year on
year from US$ 1.2 billion to US$ 1.3 billion. Comstar UTS reported a 26% year on
year increase in OIBDA from US$ 173.5 million to US$ 218.7 million.

The year on year fall in segment net income was due to the lower contribution
from MTS of US$ 479.1 million (US$ 536.3 million), which was impacted by
increasing service costs in the Company and, as a result, a declining net
margin. Comstar UTS meanwhile reported almost doubling net income year on year,
from US$ 49.6 million to US$ 97.4 million.

Technology

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(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                        696.6               426.5
OIBDA                                                            80.6               115.4
Operating Income                                                 62.4               109.9
Net Income                                                       33.7                64.6
*T

The Technology segment generated 63% year on year revenue growth for the period
and accounted for 12% of Group revenues, compared with 8% for the same period of
2005. The growth was primarily driven by the Telecom Solutions business, which
accounted for 51%, or US$ 352.2 million (US$ 166.1 million), of segment revenues
and included the newly acquired Intracom Telecom. Improved profitability levels
in the segment were distorted in the second quarter of 2006 as a result of the
consolidation of Intracom Telecom. Intracom Telecom was acquired on the last day
of the reporting period, with the resulting consolidation effect that the
business’ revenues and expenses were consolidated for the entire first six
months of the year, whilst the earnings for the period prior to the acquisition
of the controlling interest are reported in minority interests and are not
therefore included in the operating income for the period. Thus, Intracom
Telecom accounted for US$ 217.0 million of the increase in Technology segment
revenues and for US$ 21.1 of the increase in its OIBDA.

Real Estate

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(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                        106.5                33.7
OIBDA                                                            44.4                 3.9
Operating Income                                                 42.7                 3.2
Net Income                                                        9.3                 3.5
*T

Sistema Hals revenues have tripled year on year in the first half of 2006, which
was primarily due to the sale of the Pokrovka 40, an office and hotel complex,
for approximately US$ 75.0 million. OIBDA was up more than 10 times, from US$
3.9 to US$ 44.4 million primarily due to the sale of the premises described
above.

The June 30, 2006, report from Cushman&Wakefield Styles&Riabokobylko valued 88
properties/projects in the portfolio, with 100% share of freehold and leasehold
interest held by Sistema Hals in each property, at US$ 1 865 403 000, and
attributable value (excluding minority interest) at US$ 1 509 534 000.

Insurance

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*T
(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                        280.8               197.9
Gross Premiums Written                                          411.0               317.9
Net Premiums Earned                                             255.8               183.2
Net Income                                                       17.3                 7.9

Key Ratios
Loss ratio                                                      (53.5)              (57.1)
Expense Ratio                                                   (38.9)              (36.8)
Combined Ratio                                                  (92.3)              (93.9)
*T

Revenues for the Rosno insurance business increased by 42% year on year in the
first half of 2006 and reflected the expansion of the client base and the
overall positive development in the Russian insurance market. Gross premiums
written increased by 29% year on year with voluntary medical insurance premiums
up 72%, automotive insurance premiums up 74%, and non-life insurance premiums up
59%.

Allianz-Rosno Asset Management increased its assets under management from US$
441.4 million to US$ 467.5 year on year, which included particularly strong
growth in third party funds.

The growth in premiums and investment returns resulted in a more than doubling
of net income year on year.

Banking

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(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                         87.8                45.8
Operating Income                                                  8.6                 3.1
Net Income                                                        3.7                 1.2
*T

The Moscow Bank for Reconstruction and Development (MBRD) reported an almost
doubling of revenues year on year, following a doubling of the bank’s loan
portfolio and increasing interest income from the retail banking operations. The
acquisition of Sistema’s leasing companies in March 2006 also contributed US$
5.1 million to the year on year growth. The bank increased its interest income
from non-group clients following the expansion of the retail business to 12
branches and 41 mini-offices.

Both the operating and net income margins increased year on year.

Retail

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(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                        117.9                45.2
OIBDA                                                            (7.4)                4.6
Operating Income                                                 (8.3)                3.8
Net Income                                                       (9.8)                2.3
*T

Detsky Mir, the specialist children’s goods retailer, more than doubled its
revenues year on year following the opening of seven new retail stores during
the first half of the year and the opening of 28 new outlets since the end of
the first half of 2005. These 28 stores contributed US$ 21.4 million in new
sales, or 18% of total revenues, while the wholesale company C-Toys accounted
for US$ 26.9 million or 23% of the Company’s total revenue for the period.

The Company’s profitability was adversely affected during the period of rapid
expansion: Detsky Mir now has 48 stores in 19 Russian cities, compared to only
20 a year ago. This additional scale will enable the company to benefit from
increased purchasing and sales synergies and will allow it to secure the
footprint in the prime segment of the retail market.

Media

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*T
(US$ millions)                                                 1H 2006             1H 2005
---------------------------------------------------- ----------------- -------------------
Revenues                                                         45.6                93.5
OIBDA                                                             9.9                 3.9
Operating Income                                                  2.8                 0.5
Net Loss                                                         (0.2)               (1.5)
*T

Sistema Mass Media’s results reflected the transfer of the MTU-Intel and Golden
Line businesses to the Telecommunications segment. The two businesses
contributed US$ 51.3 million of revenues in the first half of 2005. US$ 26.1
million of the division’s revenues for the first half of 2006 were generated by
companies acquired since the beginning of 2005, whilst US$ 68.6 million of the
first half 2005 revenues were accounted for by companies that were subsequently
sold or transferred to other Group reporting segments.

The division’s operating profitability however improved by US$ 2.3 million year
on year primarily due to the consolidation of the results of United Cable
Network acquired in February 2006 which contributed US$ 3.5 million to the
Segment’s operating income.

FINANCIAL HIGHLIGHTS

Sistema generated a 16% year on year increase in cash flow from operations from
US$ 584.8 million to US$ 677.8 million for the first half of the year. The
increase was primarily related to organic business growth and increased
profitability.

Net cash used in investing activities was US$ 2.0 billion in the first half of
2006 and reflected marginally increased capital expenditure of US$ 999.7
billion, compared to US$ 981.5 million in the prior year, as well as the
purchase of businesses for a total combined consideration of US$ 394.9 million.

Cash flow from financing activities amounted to US$ 2.0 billion in the first
half of 2006 and reflected US$ 977 million of net proceeds from the Comstar UTS
initial public offering, which took place in February 2006.

The Group’s net debt amounted to US$ 4.5 billion at the end of the first half of
2006, compared to US$ 2.5 billion as at June 30, 2005 and US$ 3.9 billion as at
December 31, 2005. The Group’s increase in borrowings included US$ 285.0 million
of debt consolidated as a result of the acquisition of Intracom Telecom, US$
160.0 million of proceeds from the MBRD bond offering in March and June 2006,
and the US$ 200.0 million raised by the Sitronics Finance bond offering in
February 2006.

ACQUISITIONS AND DIVESTITURES

In Technology segment, Sitronics acquired 51% of voting stake of Intracom
Telecom, a provider of telecommunications solutions and services in the Eastern
Europe and Middle East. The total cash consideration for the deal is US$150.6
million, including US$ 43.9 million payable upon due diligence completion.
Additionally, Sitronics entered into a put option agreement to acquire the
remaining 49.0% of common shares of Intracom Telecom.

Comstar UTS announced an unconditional purchase offer for MGTS ordinary shares
in December 2005. Comstar UTS acquired 3,363,332 MGTS shares during the first
two months of 2006, equivalent to 4.21% of the outstanding ordinary shares, for
a total cash consideration of RUR 1,600 million (equivalent to US$ 59.1 million
as at June 30, 2006). Comstar UTS purchased an additional 3.82% of MGTS common
stock from minority shareholders for US$ 71.5 million in March 2006. As a
result, Comstar UTS's voting and economic interests in MGTS have increased to
53.0%.

Comstar UTS also purchased 100% of Astelit, an alternative fixed-line
telecommunications company, for US$ 7.8 million in June 2006. Astelit holds
licences to provide integrated fixed-line services across 51 Russian regions to
large corporate customers, and has over 200 km of its own fiber optic
infrastructure in city centres. Astelit has subsequently been rebranded as
M-Telecom.

ROSNO acquired a 51% stake in Medexpress, which is a provider of voluntary
medical insurance in the North-western region of the Russian Federation, for US$
6.6 million in January 2006. The Group plans to further develop Medexpress'
operations and use its distribution network as an additional sales channel for
ROSNO products.

Sistema Mass Media and ECU GEST acquired 90% and 10% respectively of JIR
Broadcast and JIR Inc., which are the owners of 100% of United Cable Networks
('UCN'), for a total cash consideration of US$ 145.9 million in February 2006.
UCN is a pay-TV and broadband service provider with 724,000 subscribers in
17 metropolitan areas across the Russian Federation. Sistema Mass Media sold its
ownership in Gazeta Metro in June 2006 for US$ 1.9 million in cash. Sistema Mass
Media acquired GK Sendi, which is an internet provider in Nizhny Novgorod, and
Informservis, which is a cable television operator in the same region, for US$
6.3 million in January 2006. The Group intends to use these acquisitions to
further develop its digital TV and broadband networks in the regions.

Detsky Mir completed the acquisition of 99% of Tireks Development, which owns a
30% stake in Group subsidiary Dom Igrushki, for a cash consideration of US$ 2.4
million in March 2006.

Intourist purchased a 20% equity interest in Cosmos Hotel for approximately US$
20.8 million in March 2006, and now controls the Company with a 63.4%
shareholding.

Concern RTI acquired a 50% plus one share interest in UralEleketro, and a 100%
stake in UralElektro-K, for a combined cash consideration of US$ 5.4 million in
March 2006. Both companies manufacture electronic equipment.

RECENT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

In October 2006, Sistema acquired a 66% controlling stake through directed new
share issue in WaveCrest Group Enterprises Ltd. (“WaveCrest”). WaveCrest is a
global communications service provider offering wholesale (operator) and retail
(residential) telephony services, using conventional circuit-switched and
Internet protocol (IP) telephony.

MTS acquired a 75% controlling stake in Dagtelecom from Glaxen Corp. for
$14.7 million in July 2006. Dagtelecom is the GSM-900 mobile services provider
in the Republic of Dagestan, in the south of Russia, with a population
of 2.6 million, and has 1.7 million subscribers.

Intourist Overseas Limited purchased a 51% stake in Tatilya Turizm Seyahat
Insaat, a Turkish travel operator, for US$ 0.3 million in July 2006.

The Group acquired a 81.25% share in ZAO Sahles, the owner of controlling stakes
in the entities that together comprise the Perm Motors Group for US$ 122 million
in August 2006. Perm Motors is one of Russia’s largest manufacturers of jet
aircraft engines and industrial turbines.

In July 2006, the Group disposed of Glorely, a subsidiary holding 35% interest
in Sistema-Invest, the owner of the Group’s energy companies in the Republic of
Bashkortostan for a total cash consideration of $201.0 million.

In July-September 2006, Sistema Mass Media acquired several cable television
operators in various Russian regions, namely 74% share in Smolensk-based
“Teleradiotekhnika” for $1.2 million, 100% share in Voronezh-based
“Elecom-service” for $1.0 million, 100% share in “Telesat” located in Nizhny
Tagil for $0.4 million, 74% share in a group of operators based in Ivanovo for
$7.1 million, 55% share in “Electronica” in Balakovo for $0.8 million and 90%
share in “Sallak” based in Krasnodar for $0.2 million. These acquisitions
contibuted to the Group’s expansion in the regional cable television market.

In August 2006, the Group sold for $20.0 million its 8% interest in MTK
(“KOMKOR”) together with additional 3% interest acquired from a related party
after June 30, 2006.

OTHER INFORMATION

Conference call information

The company will host a conference call today at 18.00 (Moscow local time),
15.00 (London local time), 10.00 (New York local time). To participate in the
conference call, please dial the following numbers:

UK: +44 20 7138 0837
US: +1 718 354 1172

A replay facility will also be made available and may be accessed by dialing the
following numbers and entering the replay access code – 5837451#

UK: +44 20 7806 1970
US: +1 718 354 1112

For further information, please visit www.sistema.com or contact:

-0-
*T
Sistema Investor Relations                                                      Shared Value Limited
Victor Kurilo                                                                   Larisa Kogut-Millings
Tel: +7 495 629 2741                                                            Tel. +44 (0) 20 7321 5037
kurilo@sistema.ru                                                               sistema@sharedvalue.net
*T

Sistema is the largest private sector consumer services company in Russia and
the CIS, with over 50 million customers. Sistema develops and manages
market-leading businesses in selected service-based industries, including
telecommunications, technology, insurance, banking, real estate, retail and
media. Founded in 1993, the company reported revenues of US$ 4.6 billion for the
first half of 2006, and total assets of US$ 17.3 billion as at June 30, 2006.
Sistema’s shares are listed under the symbol “SSA” on the London Stock Exchange,
under the symbol “AFKS” on the Russian Trading System (RTS), and under the
symbol “SIST” on the Moscow Stock Exchange (MSE).

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 Sistema. 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. We wish to caution you that these statements are only predictions
and that actual events or results may differ materially. We do 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 our
projections or forward-looking statements, including, among others, general
economic conditions, our competitive environment, risks associated with
operating in Russia, rapid technological and market change in our industries, as
well as many other risks specifically related to Sistema and its operations.

SISTEMA JSFC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)

-0-
*T
                                                           June 30,        June 30,
                                                             2006            2005
                                                         -------------   ------------

Sales                                                   $   4,262,297   $  3,144,208
Revenues from financial services                              335,662        215,842

                                                         -------------   ------------
TOTAL REVENUES                                              4,597,959      3,360,050
                                                         -------------   ------------

Cost of sales, exclusive of depreciation and
 amortization shown separately below                       (1,865,658)    (1,217,934)
Financial services related costs, exclusive of
 depreciation and amortization shown separately below        (232,387)      (166,238)

                                                         -------------   ------------
TOTAL COST OF SALES                                        (2,098,045)    (1,384,172)
                                                         -------------   ------------

Selling, general and administrative expenses                 (924,914)      (574,392)
Depreciation and amortization                                (614,479)      (480,590)
Other operating expenses, net                                 (87,375)       (13,531)
Equity in net income of investees                              43,838         34,356
Net gain/(loss) on disposal of interests in
 subsidiaries and affiliates                                  121,600           (452)

                                                         -------------   ------------
OPERATING INCOME                                            1,038,584        941,269
                                                         -------------   ------------

Interest income                                                30,381         35,712
Interest expense, net of amounts capitalized                 (165,511)      (122,491)
Currency exchange and translation loss                           (788)       (12,157)

                                                         -------------   ------------
Income before income tax, equity in net income of
 energy companies in the Republic of Bashkortostan and
 minority interests                                           902,666        842,333
                                                         -------------   ------------

Income tax expense                                           (335,954)      (260,626)
Equity in net income of energy companies in the
 Republic of Bashkortostan, net of income tax effect of
 $27,618                                                       87,461              -

                                                         -------------   ------------
Income before minority interests                              654,173        581,707
                                                         -------------   ------------

Minority interests                                           (344,095)      (354,052)

                                                         -------------   ------------
NET INCOME                                              $     310,078   $    227,655
                                                         =============   ============

Other comprehensive income/(loss):
Unrealized gain on securities available for sale, net
 of income tax effect of $163 and nil, respectively               585            307
Change in fair value of interest rate swaps, net of
 income tax
effect of $360 and $245, respectively                           1,520           (776)
Translation adjustment, net of minority interest of
 $36,157 and $4,530, respectively, and income tax
 effect of nil                                                 50,576        (11,798)

                                                         -------------   ------------
Comprehensive income                                    $     362,759   $    215,388
                                                         -------------   ------------

Weighted average number of common shares outstanding      481,342,813    464,944,750

Earnings per share, basic and diluted                   $        0.64   $       0.49
*T

SISTEMA JSFC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AMOUNTS)

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*T
                                                         June 30,      December 31,
                                                           2006            2005
                                                       -------------   ------------

ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                           $   1,214,368   $    482,647
  Short-term investments                                    952,738        594,196
  Loans to customers and banks, net                       1,015,999        451,395
  Insurance-related receivables                             220,606        149,589
  Accounts receivable, net                                  996,618        442,643
  Other receivables and prepaid expenses, net               713,938        578,152
  VAT receivable                                            398,830        495,191
  Inventories                                               688,610        482,909
  Deferred tax assets, current portion                      162,267        123,681

                                                       -------------   ------------
     Total current assets                                 6,363,974      3,800,403
                                                       -------------   ------------

PROPERTY, PLANT AND EQUIPMENT, NET                        6,789,681      5,876,124
Advance payments for non-current assets                     319,885        233,761
Investments in affiliates                                 1,047,057        914,203
Other investments                                           150,000        150,000
Goodwill                                                    530,032        330,932
Licenses, net                                               518,651        615,042
Other intangible assets, net                                954,352        886,272
Loans to customers and banks, net of current portion        221,974        117,107
Debt issuance costs, net                                     83,547         82,662
Deferred tax assets, net of current portion                  73,019         33,472
Other non-current assets                                    240,559         50,872

                                                       -------------   ------------
TOTAL ASSETS                                          $  17,292,731   $ 13,090,850
                                                       =============   ============
*T

SISTEMA JSFC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AMOUNTS)

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*T
                                                           June 30,      December 31,
                                                             2006            2005
                                                         -------------   ------------

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
  Accounts payable                                      $     828,412   $    594,816
  Bank deposits and notes issued                              573,425        496,829
  Insurance-related liabilities                               606,079        412,328
  Taxes payable                                               186,628        125,474
  Deferred tax liabilities, current portion                    48,475         28,149
  Subscriber prepayments, current portion                     497,937        472,673
  Accrued expenses and other current liabilities            1,143,844        520,671
  Short-term notes payable                                    314,925        637,769
  Current portion of long-term debt                           536,091        520,310

                                                         -------------   ------------
     Total current liabilities                              4,735,816      3,809,019
                                                         -------------   ------------

LONG-TERM LIABILITIES:
  Capital lease obligations                                     8,384          6,682
  Long-term debt                                            4,837,823      3,202,629
  Subscriber prepayments, net of current portion              161,424        163,897
  Deferred tax liabilities                                    298,798        237,916
  Postretirement benefit obligation                            13,625         16,217

                                                         -------------   ------------
     Total long-term liabilities                            5,320,054      3,627,341
                                                         -------------   ------------

Deferred revenue                                              133,691        125,700

                                                         -------------   ------------
TOTAL LIABILITIES                                          10,189,561      7,562,060
                                                         -------------   ------------

Minority interests in equity of subsidiaries                3,160,813      2,295,147

Commitments and contingencies                                       -              -

SHAREHOLDERS’ EQUITY:
  Share capital (482,500,000 and 9,650,000 shares
   issued as of June 30, 2006 and December 31, 2005,
   respectively, with par value of 1.8 ruble and 90
   rubles, respectively)                                       30,057         30,057
  Treasury stock (2,228,200 shares with par value of
   1.8 ruble as of June 30, 2006)                             (50,892)             -
  Additional paid-in capital                                1,886,568      1,479,743
  Retained earnings                                         1,996,376      1,696,276
  Accumulated other comprehensive income                       80,248         27,567

                                                         -------------   ------------
TOTAL SHAREHOLDERS’ EQUITY                                  3,942,357      3,233,643

                                                         -------------   ------------
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY              $  17,292,731   $ 13,090,850
                                                         =============   ============
*T

SISTEMA JSFC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)

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*T
                                                                 June 30,        June 30,
                                                                   2006            2005
                                                               -------------   ------------

OPERATING ACTIVITIES:
  Net income                                                  $     310,078   $    227,655

  Adjustments to reconcile net income to net cash provided by
   operations:
     Depreciation and amortization                                  614,479        480,590
     Loss on disposal of property, plant and equipment                1,516             15
     Gain on disposal of interests in subsidiaries                 (121,600)             -
     Non-cash compensation to employees                              90,778              -
     Minority interests                                             344,095        354,052
     Equity in net income of investees                             (131,299)       (34,356)
     Deferred income tax benefit                                    (65,238)       (41,873)
     Provision for doubtful accounts receivable                      59,923         30,704
     Allowance for loan losses                                       14,669           (444)
     Inventory obsolescence charge                                    6,361          1,752

  Changes in operating assets and liabilities, net of effects
   from purchase of businesses:
     Trading securities                                             (87,350)      (353,315)
     Loans to banks                                                (356,816)       (89,839)
     Insurance-related receivables                                  (62,295)       (54,228)
     Accounts receivable                                           (253,447)      (106,221)
     VAT receivable                                                  97,555        (37,490)
     Other receivables and prepaid expenses                        (111,106)      (146,327)
     Inventories                                                    (69,847)       (37,483)
     Accounts payable                                               110,640        132,664
     Insurance-related liabilities                                  180,405        167,152
     Subsñriber prepayments                                          22,791         37,916
     Taxes payable                                                   50,472         53,310
     Accrued expenses and other liabilities                          35,638           (269)
     Postretirement benefit obligation                               (2,592)           801
                                                               -------------   ------------

        Net cash provided by operations                             677,810        584,766
                                                               -------------   ------------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                       (878,984)      (836,849)
  Purchases of intangible assets                                   (120,667)      (136,276)
  Purchases of businesses, net of cash acquired                    (394,880)       (55,405)
  Purchases of long-term investments                                 (1,679)       (64,304)
  Purchases of other non-current assets                             (60,878)        (3,804)
  Purchases of short-term investments                              (410,336)      (687,515)
  Proceeds from sale of short-term investments                      124,910         54,909
  Proceeds from sale of property, plant and equipment                 2,281          2,500
  Proceeds from disposal of interests in subsidiaries and
   affiliates                                                        65,387              -
  Net increase in loans to customers                               (303,966)       (40,094)
                                                               -------------   ------------

        Net cash used in investing activities                    (1,978,812)    (1,766,838)
                                                               -------------   ------------
*T

SISTEMA JSFC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS OF U.S. DOLLARS)

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*T
                                                              June 30,       June 30,
                                                                2006           2005

FINANCING ACTIVITIES:
  Principal payments on short-term borrowings, net              (451,171)      (143,966)
  Net increase/(decrease) in deposits from customers              40,125        (16,257)
  Net increase in bank promissory notes issued                    36,471          2,709
  Proceeds from capital transactions of subsidiaries             979,343              -
  Purchase of treasury stock                                     (50,892)             -
  Proceeds from long-term borrowings, net of debt issuance
   costs                                                       1,703,194        878,724
  Principal payments on long-term borrowings                    (222,737)      (236,494)
  Principal payments on capital lease obligations                 (1,610)        (5,017)
  Proceeds from issuance of common stock                               -      1,284,649
                                                            -------------  -------------

        Net cash provided by financing activities          $   2,032,723  $   1,764,348
                                                            -------------  -------------

INCREASE IN CASH AND CASH EQUIVALENTS                      $     731,721  $     582,276

CASH AND CASH EQUIVALENTS, beginning of the period               482,647        503,747
                                                            -------------  -------------

CASH AND CASH EQUIVALENTS, end of the period               $   1,214,368  $   1,086,023
                                                            =============  =============

CASH PAID DURING THE PERIOD FOR:
  Interest, net of amounts capitalized                     $    (165,335) $     (96,286)
  Income taxes                                                  (317,911)      (274,969)

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Property, plant and equipment contributed free of charge $           -  $       3,322
  Equipment acquired through vendor financing                      2,000          2,533
  Equipment acquired under capital leases                          5,214          2,568
*T

SISTEMA JSFC AND SUBSIDIARIES
SEGMENT NOTE
(Amounts in thousands of U.S. dollars)

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For the six months ended  Telecommu-    Tech-                          Mass      Real            Corporate
 June 30, 2006             nications    nology   Insurance  Banking     Media   Estate   Retail   and Other     Total
------------------------- ----------- ---------- --------- ---------- -------- -------- -------- ----------- -----------

Net sales to external
 customers (a)             3,292,847    547,520   262,542     73,120   33,397  102,765  117,903     167,865   4,597,959
Intersegment sales             4,505    149,084    18,256     14,708   12,181    3,771       19      26,631     229,155
Income from equity
 investees                    43,686         16       176          -        -        -        -      87,421     131,299
Interest income               29,766      3,828       378          -       97      841      771      10,119      45,800
Interest expense            (100,807)   (16,382)        -          -   (1,422)  (2,599)  (3,104)    (50,538)   (174,852)
Net interest revenue (b)           -          -    32,286     13,181        -        -        -           -      45,467
Depreciation and
 amortization               (597,063)   (18,192)   (1,947)    (1,130)  (7,099)  (1,735)    (891)     (7,218)   (635,275)
Operating income/(loss)      954,008     62,405    34,752      8,620    2,823   42,692   (8,321)     37,792   1,134,771
Income tax expense          (279,658)   (13,515)   (9,397)    (4,894)  (1,728)  (5,294)     274     (29,391)   (343,603)
Income/(loss) before
 minority interests          628,216     37,064    17,555      3,726     (239)  30,662   (9,654)     72,518     779,848
Investments in affiliates    258,019          -         -     17,749    5,100        -        -     766,189   1,047,057
Segment assets            11,742,137  1,580,357   803,432  1,904,791  303,460  393,009  164,693   2,701,704  19,593,583
Indebtedness (c)          (3,417,379)  (519,737)   (1,523)  (350,938) (30,956) (42,017) (55,089) (1,286,861) (5,704,500)
Capital expenditures         881,182     41,266     4,670      3,354   20,642   42,540    8,953       4,258   1,006,865

(a) – Interest income and expenses of the Insurance and Banking segments are presented as revenues from financial
 services in the Group’s consolidated financial statements.
(b) – The Banking segment derives a majority of its revenue from interest. In addition, management primarily relies on
 net interest revenue, not the gross revenue and expense amounts, in managing that segment. Therefore, only the net
 amount is disclosed.
(c) – Represents the sum of short-term and long-term debt, including vendor financing, and capital lease obligations
*T

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For the six months ended    Telecommu-   Tech-                         Mass      Real             Corporate
 June 30, 2005               nications   nology  Insurance  Banking     Media   Estate   Retail    and Other    Total
--------------------------- ----------- -------- --------- ---------- -------- -------- --------- ---------- -----------

Net sales to external
 customers(a)                2,652,866  265,612   182,800     33,048   71,344   32,647    45,143     76,590   3,360,050
Intersegment sales              27,160  160,929    15,069     12,770   22,196    1,082        19      3,517     242,742
Income from equity
 affiliates                     31,493        -       307          -      384        -         -      2,172      34,356
Interest income                 18,339      248         -          -       30      338         5     21,753      40,713
Interest expense               (81,650)  (5,177)        -          -     (740)  (2,793)     (507)   (43,716)   (134,583)
Net interest revenue(b)              -        -         -      4,146        -        -         -          -       4,146
Depreciation and
 amortization                 (462,515)  (5,462)   (1,871)    (1,005)  (3,436)    (732)     (819)    (4,750)   (480,590)
Operating income/(loss)        920,523  109,942    13,640      3,141      463    3,215     3,811    (11,429)  1,043,306
Income tax expense            (222,354) (19,211)   (6,435)    (1,939)  (1,442)  (1,164)     (892)    (7,189)   (260,626)
Income/(loss)before
 minority interests,
 extraordinary gain and
 cumulative effect of a
 change in accounting
 principle                     633,935   85,243     6,060      1,202   (1,536)   3,452     2,169    (48,282)    682,243
Investments in affiliated
 companies                     203,213        -         -     16,518      808      103         -     44,179     264,821
Segment assets               8,414,326  426,080   633,771  1,122,469  106,339  239,624    66,531  1,884,048  12,893,188
Indebtedness (c)            (2,552,221) (27,023)     (517)  (150,000) (26,596) (33,375) (183,866)  (588,297) (3,561,895)
Capital expenditures           880,712   15,469     4,575      2,145    5,982   16,093       703     55,869     981,548

(a) – Interest income and expenses of the Insurance and Banking segments are presented as revenues from financial
 services in the Group’s consolidated financial statements.
(b) – The Banking segment derives a majority of its revenue from interest. In addition, management primarily relies on
 net interest revenue, not the gross revenue and expense amounts, in managing that segment. Therefore, only the net
 amount is disclosed.
(c) – Represents the sum of short-term and long-term debt, including vendor financing, and capital lease obligations
*T

Attachment A

Non-GAAP financial measures. This press release includes financial information
prepared in accordance with accounting principles generally accepted in the
United States of America, or US GAAP, as well as other financial measures
referred to as non-GAAP. The non-GAAP financial measures should be considered in
addition to, but not as a substitute for, the information prepared in accordance
with US GAAP.

Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA margin.
OIBDA represents operating income before depreciation and amortization. OIBDA
margin is defined as OIBDA as a percentage of our net revenues. Our OIBDA may
not be similar to OIBDA measures of other companies; is not a measurement under
accounting principles generally accepted in the United States and should be
considered in addition to, but not as a substitute for, the information
contained in our consolidated statement of operations. We believe that OIBDA
provides useful information to investors because it is an indicator of the
strength and performance of our ongoing business operations, including our
ability to fund discretionary spending such as capital expenditures,
acquisitions of mobile operators and other investments and our ability to incur
and service debt. While depreciation and amortization are considered operating
costs under generally accepted accounting principles, these expenses primarily
represent the non-cash current period allocation of costs associated with
long-lived assets acquired or constructed in prior periods. Our OIBDA
calculation is commonly used as one of the bases for investors, analysts and
credit rating agencies to evaluate and compare the periodic and future operating
performance and value of companies within the wireless telecommunications
industry. OIBDA can be reconciled to our consolidated statements of operations
as follows:

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                                                          June 30,           June 30,
                                                            2006               2005
---------------------------------------------------- ------------------ ------------------

 Operating Income Before Depreciation and
  Amortization                                                 1,038.6              941.3

---------------------------------------------------- ------------------ ------------------

 Depreciation and Amortization                                   614.5              480.6

---------------------------------------------------- ------------------ ------------------

 OIBDA                                                         1,653.1            1,421.9
*T

(1) OIBDA is defined as operating income before depreciation and amortization.
See Attachment A for this statement for the whole definition of OIBDA and a
reconciliation of OIBDA to operating income.

(2) Here and further, in the comparison of period to period results of
operations, in order to analyze changes, developments and trends in revenues by
reference to individual segment revenues, revenues are presented on an
aggregated basis, which is revenues after elimination of intra-segment (between
entities in the same segment) transactions, but before inter-segment (between
entities in different segments) eliminations, unless accompanied by the word
“consolidated”. Amounts attributable to individual companies, where appropriate,
are shown prior to both intra-segment and inter-segment eliminations.

(3) Here and further, in the comparison of period-to-period results, Comstar
UTS’s results include the results of MGTS.