Research Notes

• According to our forecasts, despite a far from favorable location of the region the telecom operator will exhibit strong financial performance, although one major factor is the privatization of state-run telecom holding Svyazinvest in 2006.

• The company's core asset, as is the case for nearly all regional telecom operators (RTOs), is monopoly access to end consumers: Far East Telecom could substantially raise earnings from ISP and other promising services. Moreover, revenue from local voice services will also rise at quite a rapid pace due to the upside of effective demand for these services.

• The presence of heavy tax claims does not affect the telecom entity's operations, but produces a negative impact on investor sentiment. We view as positive the operator's actions aimed at asserting its rights in court.

• The arrival of the new owner will bring reforms to the company and we hope that these reforms will improve the operator's financial performance.

Ivan Kobulaev

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