/Standard & Poor's, Moscow, June 8, 06/ - Standard & Poor's Governance Services said today it lowered its corporate governance score (CGS) on Russian mobile telecommunications operator Vimpel-Communications (JSC) (VimpelCom) to 'CGS-6' from 'CGS-7'. Concurrently, the Russia national scale CGS on the company was lowered to 'CGS-6.4' from 'CGS-7.4'. Both scores remain on GovernanceWatch with negative implications, where they were placed on Feb. 20, 2006.

The lowering of the CGS reflects concerns about the inability of the company's largest shareholders, Telenor ASA and Altimo, part of Alfa Group, to resolve their long-standing dispute over VimpelCom's expansion strategy in Ukraine. This dispute has become disruptive for the board process, as demonstrated by the board's repeated failure to approve VimpelCom's budget for 2006, and threatens to affect the company's operations. Telenor continues to pursue its legal battle against VimpelCom, seeking to invalidate the results of VimpelCom's extraordinary general meeting convened on Sept. 14, 2005, which approved the acquisition of CJSC Ukrainian Radio Systems (URS) with overwhelming support from minority shareholders.

On May 22, 2006, Altimo announced it was suspending negotiations with Telenor with regard to VimpelCom's merger with CJSC Kyivstar GSM, which is jointly owned by Telenor and Alfa Group. According to Altimo, the companies were unable to resolve important differences over the terms of the merger, including the proposed market-based separation mechanism involving their equity positions in VimpelCom. On June 2, VimpelCom announced the withdrawal of its proposal to acquire Kyivstar.

"We are particularly concerned about the pressure that the ongoing dispute exerts on VimpelCom's management," said Standard & Poor's governance analyst Oleg Shvyrkov. "Another concern is the mutual public accusations by blockholders made in the course of the ongoing board election campaign, statements that create negative publicity for VimpelCom and could be confusing for minority shareholders."

"As long as the dispute continues, the risk of blockholders negatively affecting shareholder value remains," added Dr. Shvyrkov.

The overall CGS on VimpelCom is the result of four component scores on global and Russia national scales of 1 (low) to 10 (high). The global scale score is shown first below, and the Russia national scale score second:

• Ownership structure and external influences - 5/5.0
• Shareholder rights and stakeholder relations - 8/8.3
• Transparency, disclosure, and audit - 7+/7.6
• Board structure and effectiveness - 6/6.2

Despite the ongoing dispute, the global and national scale CGS on VimpelCom remain among the highest in Russia due to several important governance strengths. These include a high degree of transparency, good investor relations, and strong internal controls and executive incentive systems. Positively, the board currently retains the ability to reach consensus on issues not involving the company's operations in Ukraine. This may change, however, following the upcoming annual general meeting (AGM). Among the agenda items, shareholders will be asked to choose between independent directors nominated by Telenor and Altimo. Contested elections appear to contradict the terms of the shareholder agreement, which calls for coordinated nomination policies. The GovernanceWatch is likely to be resolved following the AGM.

A GovernanceWatch placement is used to highlight the fact that identifiable governance events and short-term trends have caused a CGS to be reviewed. GovernanceWatch does not mean that a change to the CGS is inevitable. Changes to the CGS may occur without the CGS having first being placed on GovernanceWatch.

For detailed information apply: Oleg Shvyrkov, Moscow, (7) 495-783-4045 oleg_shvyrkov@standardandpoors.com Ilya Vorobyev, Moscow, (7) 495-783-4042 ilya_vorobyev@standardandpoors.com Governance@standardandpoors.com

[2006-06-09]