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Kazkommerts Securities

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Recent changes in shareholdings in OJSC Kazakhtelecom
and the intention to offer a significant stake to a strategic investor

On 31 May 1997, Daewoo Corporation (Korea) purchased 40% of the outstanding shares (common voting shares) in Kazakhtelecom from the Government of Kazakhstan, through a privatisation tender. In February 1998, as a result of a strategic decision to focus on selected core businesses, Daewoo engaged Kazkommerts Securities, the investment banking subsidiary of Kazkommertsbank, to assist it in the disposal of its shareholding in Kazakhtelecom. By the end of February 1998, approximately 10% of the shareholding was placed by Kazkommerts Securities among several financial institutions, with the remainder being purchased by an affiliate of Kazkommertsbank. This transaction was partially financed by the Chase Manhattan Bank.

This is the first time Kazakh investors have acquired a major shareholding in a Kazak company from a foreign entity. Kazkommertsbank views itself as having a long term interest in Kazakhtelecom and intends to take an active role in the development of Kazakhtelecom. This will include sponsoring the introduction of other long term strategic investors, promoting increased transparency for the benefit of existing and future shareholders, improvements in operational and financial management, and the introduction of new services. These initiatives are expected to lead to a significant improvement in the quality and breadth of telecommunication services available in Kazakhstan.

As a result of the acquisition by its affiliate of a significant minority stake in Kazakhtelecom, Kazkommertsbank has assumed certain obligations previously assumed by Daewoo under the privatisation agreement signed with the Government of Kazakhstan. The obligations include an undertaking to ensure the repayment of certain Kazakhtelecom indebtedness and to assist Kazakhtelecom in retaining financing of up to US$1bn on market terms upon the approval of an economically justifiable business plan by the Supervisory Board of Kazakhtelecom, under the terms of the privatisation contract. None of the financial investors who have purchased the shares of Kazakhtelecom have any obligations towards Kazakhtelecom or the Government of Kazakhstan.

Kazakhtelecom and Kazkommertsbank have initiated a process to offer a significant minority stake in Kazakhtelecom to an international strategic telecommunications investor with experience in operating and developing national telecommunication networks. This investor is expected to be instrumental in the further development of the network and the services of Kazakhtelecom. Kazkommerts Securities and Chase Manhattan plc will act as financial advisors on this transaction and intend to contact potentially interested parties in the near future.

For further details please, contact:

Mr. Nicolay Varenco
Kazkommerts Securities/ Kazkommertsbank
tel: +7 3272 50 90 60
fax: +7 3275 81 14 98
Email: varenco@kazks.kz

Mr. Andrea Salvato
Chase Manhattan plc
tel: +44 171 777 1560
fax: +44 171 777 1640
Email: andrea.salvato@chase.com

Mr. Choi Kye-Yong
Daewoo Corp.
tel: +7 3272 533 885
fax: +7 3272 533 76

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