Quarterly report

Plans of Issuer's Future Operation

Brief description of the issuer’s future activity plans and the sources of future revenues:

One of the main directions of "UTK" PJSC business activity in order to increase revenues, raise the Company’s business efficiency and strengthen its financial position is the increase in number of basic telephone sets. "UTK" PJSC is actively developing its communication network and increasing its number capacity.

UTK’s main task for 2007 is to strengthen its position in the market of perspective and higher-margin services and to increase VAS share in total revenue structure in order to raise the Company’s business efficiency.

2007 investment program of the Company is worth 3,024.0 million rubles. Its implementation will allow it to maintain the Company’s 93.5%-market share of traditional telephony and to raise its share on the Internet market to 58%.

Medium-term strategic directions of "UTK" PJSC development:

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  strengthening the Company’s leading position in the fixed-line market;
  
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  Creation of the competitive advantages providing customers with additional value of traditional services: to increase broadband access subscriber base (incl. IP-TV) to at least 200 thousand ports;
  
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  bringing a share of value-added services in the Company’s revenue structure to at least 13.6 %.
  
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  the Company’s capitalization growth
  
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  ;
  
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  Introduction of advanced technologies and new services corresponding to the market development trends and meeting customers’ requirements;
  
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  making investments in projects related to development of advanced technologies and new services which pay-back periods do not exceed three years;
  
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  stirring up the Company’s investment and marketing activities in priority local regions.
  

Long-term strategic directions of "UTK" PJSC development:

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  creation of up-to-date telecommunication system including imposed digital telecommunication network equipped with digital automatic switching exchanges, digital transmission systems, fiber-optic communication lines (FOLs);
  
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  introduction of new technologies: ISDN, IP-telephony, ATM, xDSL;
  
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  integration of communication and management infrastructures with international informational and switching systems;
  
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  improvement of the provided services;
  
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  optimization of the provided services’ list , aiming at increasing proportion of the most progressive services;
  
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  maximization of the Company’s profitability;
  
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  optimal tariff policy taking into consideration interests of the Company and its shareholders;
  
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  pressing marketing policy;
  
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  hard control of expenditures’ volume;
  
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  improvement of corporate management
  

High requirements to quality of services alongside with application of modern equipment call for high professional level of UTK’s specialists.

Share of the Company’s specialists having higher professional education is constantly growing. Staff planning, recruitment, distribution and training are the main trends of the Company’s activity.
Plans on modernization and reconstruction of the Company’s fixed assets:

Main technical parameters of networks’ modernization.

The Company plans the following actions aimed at fulfillment of its strategic goals:

- To bring digitization level of municipal communication centers to 100% (FOL, CRRL), to construct data transmission network (access nodes) in all the above mentioned centers;

- to construct FOLs on local primary networks in cities and big localities, to update (increase the carrying capacity) the existing rural copper wired communication lines using HDSL technology;

- to develop fixed-line telephone network on the basis of only NGN-technologies with installation of MSAN nodes and usage of V5.2 protocol (PRI – when it is technically possible), to plan optimal proportion of SIP-subscribers and POTS analog subscribers;

- active deployment of SoftSwitch equipment for network development and replacement of analog equipment when integrating program switchboards of different manufactures;

- upgrading parameters of copper wired access lines to technical standards allowing maximal usage of xDSL technology in order to organize broadband access.
Possibility of the change of the Issuer’s core activity:

“UTK” PJSC does not plan to change the profile of its core activity – rendering telecom services according to the licenses in force and the Company Charter.

Sources of future revenues:

The Issuer‘s core activity.

2. Participation of the Issuer in industrial, banking and financial groups, holdings, concerns and associations

№	Name of organization	Activity	Goal of participation
1	Association of MDKR network operators (CDMA).	Coordination of work of Russia operators building and operating CDMA-based radio telephone networks	Development of national CDMA-based radio telephone networks through integration of works of operators building and operating CDMA-based radio telephone networks, as well as of Russia and foreign legal entities engaged in development, manufacture, delivery of the equipment, scientific and technical support and organization of CDMA networks.
2	Non-commercial partnership "Board of Directors of enterprises and organizations of the Volgograd region"	Support of economic reforms and market relations development to ensure efficient industrial activity of enterprises and organizations. Support of socially-oriented economic policy, formation of system of partnership in the sphere of social and labor relations.	Popularization of scientific, technical and economic achievements, distribution of best management practices in market conditions.
3	Non-commercial partnership «Union of employers of the Rostov region»	Representation and protection of common interests and rights of employers in relations with governmental bodies, institutions of local governing, trade unions and other public associations. Coordination of activity of employers – members of Partnership on execution and control of obligations under contracts and collective agreements.	Participation in development and realization of statutory acts, plans and programs being of great social and economic importance
4	Non-commercial partnership "Research center on problems of telecommunications development"	Research of the problems on development of telecommunications market, assistance to increase competitive strengths of telecom companies, creation and maintenance of good image and reputation of these companies for Russian and foreign investors, customers and other persons.	Development of telecommunications infrastructure, reception of analytical information on the conditions and development prospects of telecommunication market and telecommunications sector as a whole
5	Non-commercial partnership "Russian club of telecommunications workers"	Creation of scientific - methodical and material base for development and realizations of noncommercial socially useful projects and actions for the benefit of telecommunications workers of the Russian Federation. Participation in preparation of draft laws and statutory acts, normative documents regulating telecommunication sector, making proposals on improvements in the legislation of the Russian Federation as well as participation in discussion of similar projects, their estimation and making conclusions on them. Carrying out meetings and negotiations on behalf of members of Partnership with representatives of judicial bodies and bodies of the government carrying out interrogations of experts and other competent persons, as well as studying public opinion on the problems representing interest for members of Partnership. Broadening and deepening of international relations, organization of information and creative communications.	Creation of the Russia professional club will have a positive effect on development of the telecommunications sector. It will simplify a procedure for developing common position of the members of the club on actual problems of infocommunication community, ensure effective and coordinated dialogue with the state and controlling bodies as well as with population. Participation of leading Russian telecommunication companies in the Partnership will be a powerful instrument in solving the problems which solution requires joint efforts of key enterprises and top managers of the telecommunications sector.