Financial news

Ratings review as of 10.10.2007.

Agency Moody's increased the rating of the company "Mobile Telesystems" up to "Ba2", forecast — "positive"

International rating agency Moody's Investors Service today increased from "Ba3" up to "Ba2" a corporative credit rating and rating of bonds, which are in circulation, of the company "Mobile Telesystems" ("MTS" or "company"). Forecast of ratings — "positive".

Ratings increase reflects:

• significant operational and financial results of the company activity in the second half of 2006 and first half of 2007;
• (II) the demonstrated capabilities to maintain its share of the market in Russia, strong positions in Ukraine and many other countries of CIS;
• (III) generation of positive free money flow in the first half of 2007;
• (IV) significant enhancement of profitability indexes;
• (V) moderate correlation of total updated debt and EBITDA that made up 1,0 per 6 months in annual calculation;
• (VI) relatively conservative and consequent strategy of management relating acquisition of new assets;

and (VII) increase of predictability level of the company financial policy for the last 12 months.
Moreover, in new ratings a possibility to perform a significant capital investments in the coming three-five years is taken into account in connection with implementation 3G third generation network. Agency Moody's also notes officially announced by MTS growth strategy in the way of expansion into CIS countries. Nevertheless, into the ratings there were not included risks of unfavorable events or integration risks connected with acquisition of large-scale assets, which would be reviewed by Moody's agency separately in the course of their influence onto ratings.

• Estimating credit risks of mobile telesystems, agency Moody's takes into account strategic approach of its main shareholder that has control packet of shares, — JSFC "System" (rating of Moody's agency— B1). In spite of growing business diversification "Systems", realization of its ambitious expansive strategy, everything still depends on dividend stream, coming from MTS. Rating agency positively estimates current low correlation of loan capital and equity but will continue to observe the dividends payment volume to shareholders, as they potentially can have negative consequences for money flows of company.
  Moody's agency considers that MTS has all possibilities for redemption of its 9,75% bonds for the total amount USD 400 bln, which redemption term is 30 January 2008, as it stocks money which constitute by the end of June 2007 about USD 760 bln., stable quarter money flows from operations at the amount more than USD 1,3 bln. on average, and also reasonable program of capital deposits and new assets purchase. Taking into account "positive" forecast, ratings rising in future is quite possible. Such rising will have place if company will stably demonstrate high financial and operation indexes in next 6-12 months, generate positive spare money flow (excluding new assets purchase) and will preserve conservative correlation of debt and equity, and ensuring its financial policy transparence.
  Together with it, increase of equity capital share over the level, expecting by Moody's agency can lead to worsening of company credit profile, its position weakening at the market because of competition strengthening and leading of aggressive financial policy can be negatively reflected on company's ratings. Open joint-stock company "Mobile telesystems", with headquarter in Moscow (Russia), is the biggest operator of cellular communications in Russia and CIS countries. For the first six months of a current year company's proceeds constituted USD 3,7 bln., and OIBDA margin — 51,8%. MTS telephone subscribers quantity by the end of August 2007 constituted 76,06 mln. of people. In Russia which is the main MTS market, company's share is 33% from total users quantity.
  MTS also has totally consolidated subsidiaries in Ukraine (market share on subscribers quantity — 39%), in Uzbekistan (56%) and Turkmenistan (83%). In September 2007 MTS company purchased the biggest operator of cellular communications of Armenia "К-Telecom", which share is 67% of total subscribers quantity in Armenia. MTS also has 49% of shares of mobile communication operator in Belarus "Mobile TeleSystems LLC", which share is 54% of total subscribers quantity in Belarus.

Moody's assigned to "DFEC "rating "В2"

International rating agency Moody's assigned to "Donbass fuel-energy company" (DFEC) long-term corporate rating «В2» with forecast of change "stable". It is said in DFEC message, by Ukrainian News text.
In accordance with rating agency opinion, vertical integration of DFEC allows company to control quality and reliability of its production chain, and also successfully govern efficiency and productivity.
As agency informed, in February 2006 System Capital Management company found DFEC for performance of enterprises management on electro energy production. DFEC combines 15 enterprises including energy generating company "Vostokenergo", energy supplying companies "Service-Invest", "PES"Gorenergo". Also DFEC includes mines "Pavlogradugol", " Donbas Komsomolets ", LLC "Mospinske coal processing enterprise".

"Credit-Rating" confirmed rating of Mykolayiv "uaBBB"

Rating agency "Credit-Rating" (Kyiv) at the end of September confirmed rating «uaBBB» to Mykolayiv. Representative of press-service of Mykolayiv municipal executive committee informed Ukrainian News about it.
Rating Forecast — "stable" in accordance with national rating scale.
As agency informed, in July "Credit-Rating" has already informed rating of Mykolayiv «uaBBB»
In accordance with agency data, borrower rating «uaBBB» reflects sufficient borrower ability timely and completely perform in terms of Ukrainian financial market its debt obligations, however such a borrower has enhanced sensibility to influence of unfavorable changes in commercial, financial and economic conditions, in comparison with borrowers with higher ratings.
Rating was assigned in the second half of 2006. In May Mykolayiv municipal council said about intention to issue municipal bonds at the amount UAH 50 mln. by the end of current year. About 0,5 mln. people live Mykolayiv.

Source: Information agency Сbonds