Moody's upgrades Kyivstar's ratings to Ba3; outlook positive

London, 26 January 2007 -- Moody's Investors Service has today upgraded the ratings of Kyivstar G.S.M. Joint Stock Company ("Kyivstar" or "the company"). The outlook on the ratings is positive. The ratings affected are as follows: -Corporate family rating upgraded to Ba3 from B1 - US$266 million loan participation notes due 2009 upgraded to Ba3 from B1 - US$175 million loan participation notes due 2012 upgraded to Ba3 from B1 The ratings upgrade reflects (i) the company's ongoing strong financial and operational performance; (ii) its leading market share in the context of a vigorous competitive environment; (iii) the company's free cash flow generation on the first nine month basis in 2006; and (iv) Kyivstar's modest leverage of approximately 0.5x Total Debt to reported EBITDA on a nine month annualised basis. At the same time Moody's notes the unresolved shareholder disputes between Alfa Group and Telenor ASA. As a result, the Ba3 rating reflects a degree of near term uncertainty associated with the company's financial policies, particularly with regards potential shareholder distributions. As of 30 September 2006, Kyivstar had approximately US$473.1 million in cash and cash equivalents and was free cash flow positive. The rating also takes into account the impact of a vigorous competitive environment. The positive outlook on the ratings relies on Moody's expectation of the company's continued robust operational and financial performance. The positive outlook is further supported by the agency's expectations of the company's maintenance of its existing conservative financial policy notwithstanding limited visibility regarding potential shareholder distributions. What could change the rating -- up Increased visibility as regards medium term financial policies in combination with conservative leverage parameters supported by the elimination of the uncertainties that have been raised by the shareholder disputes What could change the rating -- down Material debt- financed shareholder distributions with leverage rising above 2.0x Total Debt to EBITDA or a change in the ownership structure in combination with the introduction of aggressive financial policies

• Full name
  CJSC Kyivstar GSM
• Industry
  Communication