First Acquisition outside of Tatarstan

    RNS Number : 3895C
  Teleset Networks PCL
  01 September 2008
   

    
    Press Announcement


 FOR IMMEDIATE RELEASE  1 September 2008

    Teleset Networks makes first acquisition outside Tatarstan
    Teleset Networks PCL ("the Company"; LSE: TNW), announces that it is continuing to pursue its strategy, as a regional telecom industry
consolidator in Russia, with the purchase of 51 per cent of OOO Simbirsky Telecommunications Systems ("STS") for a cash consideration of
US$15.7 million 
    STS is based in Ulyanovsk, the capital city of the Ulyanovsk Region of Russia which sits astride the Volga River.  Ulyanovsk is 870
kilometres south-east of Moscow and 240 kilometres from Kazan, where Teleset is headquartered.  STS is the leading independent fixed-line
operator in Ulyanovsk with a market share of approximately 13 per cent and just under 30,000 subscriber's and a network which covers all
four districts of the city.  This acquisition will increase the Company's total subscriber base to approximately 160,000 
    The customers of STS are residential subscribers and corporate clients which include Alfa Bank and Sberbank (leading Russian banks),
Metro Cash & Carry and Eldorado (retail), as well as state regulatory bodies and authorities.
    STS has recently won a zonal licence, allowing it to handle traffic between local networks within the Ulyanovsk Region. This part of the
business is starting to generate incremental revenues and is expected to become a significant contributor to revenues in future.
    The acquisition has been completed with effect from 1 September 2008.
    The remaining 49 per cent shareholders of STS, whose business interests include real estate development in Ulyanovsk, have agreed to
support the future development of the business and not to sell their shares for at least 12 months. The Company has the right of first
refusal to acquire the minority shares on the same price-earnings multiple as has been paid for the 51 per cent acquired.  
    For 2007, STS made a profit after tax of US$1.6 million on revenues of US$4.6 million. The vendors have warranted that STS will achieve
a minimum profit after tax of US$2.0 million in the 12 months following completion of the acquisition.
    STS is expected to start contributing to the profitability of the group immediately after the completion of the acquisition. However,
the full benefits of STS's addition are expected to enhance earnings from early 2009, once the business has been fully integrated.
    Ulyanovsk has a population of 635,000 and is an expanding commercial and industrial city.  In June 2008, the city was granted "Free
Economic Zone" status by the Russian Ministry of Economic Development and Trade, a move that is expected to attract new investment and
business to the Ulyanovsk Region.  Ulyanovsk is already a significant industrial centre with UAZ (automotive), Aviastar (civil airplanes)
and Volzhanka (confectionery) among the companies with manufacturing operations located there.  With 11 educational institutions and
universities, the city has a significant academic population creating additional demand for broadband internet services.
    Yiannis Demetriou, CEO of Teleset Networks, commented:
    "The management team of Teleset has delivered everything it has promised over the last two years which has involved the successful
integration of two significant acquisitions whilst continuing to achieve strong organic growth. Now is the right time to take the business
to the next stage by expanding outside Tatarstan. The acquisition of STS confirms our position as a regional consolidator within the Russian
telecoms industry. We expect that the enlarged group will generate significant further economies of scale as well as the advantages of
owning a zonal licence."   
    END


    CONTACTS

 Teleset Networks                                 +357 22 450 790
 Yiannis Demetriou

 Blue Oar Securities Plc - Nominated Adviser    +44 20 7448 4400 
 Shane Gallwey, Matt Marchant, Toby Gibbs

 Metropol (UK) Limited - Broker                  +44 20 7439 6880
 Alexander Selegenev

 Bankside Consultants - Financial PR adviser     +44 20 7367 8888
 Simon Bloomfield, Steve Liebmann, Andy Harris


    About Teleset Networks

    Teleset is a leading alternative fixed-line telecom operator headquartered in the Republic of Tatarstan, Russian Federation, where the
business has been operating since 1996. 

    In Kazan, the capital of the Republic of Tatarstan, Teleset owns an all-digital local network with current switching capacity of 135,000
lines. Its US$17 million acquisition of TNPKO in November 2006 improved its coverage of Kazan where its market share is approximately 29 per
cent for voice traffic and 29 per cent for data traffic. 

    Management's strategy is to become Tatarstan's leading telecom operator and to expand into other cities within the Russian Federation,
both organically and through carefully selected acquisitions. The US$10.8 million acquisition in November 2007 of OOO Svyazinvest, the third
largest fixed-line telecom operator in Naberezhnie Chelny, was the first strategic move by Teleset outside Kazan. Naberezhnie Chelny, where
the Company has a market share of approximately 10 per cent, is the second largest city after Kazan in the Republic of Tatarstan.  The
US15.7 million acquisition of a 51% interest in OOO Simbirsky Telecommunications Systems expands Teleset's business beyond the Republic of
Tatarstan and into the Ulyanovsk Region of Russia.


This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
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