2007 Operating Report

Financial Performance

In 2007, the total turnover of the CyberPlat® payment system reached 120.7 billion rubles (or 4 billion 737 million US dollars). Hence, the CyberPlat® Company has not only proved but reinforced its leadership among payment systems in Russia. The largest payment system – CyberPlat® - collects more than 25% of the turnover of the leading Russian cellular communication operators, being the largest partner of Beeline, MTS and MegaFon in the volume of accepted subscriber payments.

According to December, 2007 statistics, 94% of the turnover of the leader in electronic payments industry – the CyberPlat® Company – is accounted for by the payments accepted from the subscribers of mobile operators, 2.5% - from subscribers of commercial television, 1% - from Internet and IP-telephony users, 1% - are payments for communal services and electricity. The remaining 1.5% is payments for fixed-line communication, security alarm systems, retail loan repayments and other.

CyberPlat® is the first Russian electronic payment system which was established in 1997. The first online payment was effected for the benefit of Garant-Park company on March 18, 1998, whereas the first payment in favor of a cellular communication operator, Beeline, was effected on August 12, 1998. For almost 10 years of operating at the e-payment market CyberPlat® company has been showing a dynamic and stable growth of its key performance indicators – the turnover and the number of payment acceptance outlets.

Transactions

In 2007, 1 billion 250 million payments were processed via the universal payment system CyberPlat®. According to the experts’ estimations, by the volume of daily processed payments, CyberPlat® multiply exceeds in number of its transactions the Central Bank of the Russian Federation, international payment systems VISA and MasterCard in Russia altogether.

Herewith, it is noteworthy that overall payment operation processing within CyberPlat® technology is performed with the use of an electronic digital signature in the on-line mode and takes no more than 2 seconds.

International business

In 2007, the CyberPlat® Company displayed the most advanced payment technologies at the CeBIT-2007 world exhibition. At CeBIT-2007 exhibition the CyberPlat® Company presented the whole range of its payment solutions, software and technological developments intended for payment acceptance in the real time mode via numerous electronic devices. Particular attention at the exposition of the CyberPlat® during the international exhibition CeBIT-2007 was focused on the demonstration of payment instruments and technologies based on the electronic terminals developed by the payment system in response to the growing requirements of the progressing information technology market.

Kazakhstan

The CyberPlat® Company, within the framework of its full-scale program of international expansion, successfully develops and spreads its business in the territory of the Republic of Kazakhstan. CyberPlat® is historically the first payment system in Kazakhstan. A Kazakhstan subsidiary company – CyberPlat®-Kazakhstan LLC – was incorporated as early as on March 15, 2005. The first payments via the system were effected in April, 2006. Already by the end of 2007 the cash top-up network in the territory of Kazakhstan comprised more than 5000 points.

By virtue of co-operation of Kar-Tel LLP (Beeline trademark) and the CyberPlat® a wide network of payment acceptance outlets is currently at the service of mobile telephony subscribers in Kazakhstan. Most frequently visited public places are among them – these are stores, Kazpochta JSC post offices, mobile shops, payment terminals and gas stations.

In 2007, Kar-Tel LLP (Beeline trademark) has once again awarded CyberPlat® payment system with the Certificate of Acknowledgement for the highest records of the volume of payments accepted from Beeline subscribers for the year of 2007.

During the whole operating time of the CyberPlat® Company the process of payment for mobile communication in Kazakhstan became highly comfortable thanks to availability of a developed infrastructure, as well as swiftness and convenience of payment. Regular payments for mobile telecommunication via the absolute leader at the e-payments market in Kazakhstan – the CyberPlat® Company are being effected in the entire territory of the Republic.

It is noteworthy, that successful and high quality performance of the largest e-payment system CyberPlat® has been recognized by the awards of Kar-Tel LLP two years in succession, which is an indisputable recognition of leadership of CyberPlat® at the payment acceptance market in the Republic of Kazakhstan. The Cyberplat® payment system collects more than 10% of the total turnover of Kar-Tel LLP in Kazakhstan.

The Ukraine

Within the framework of the global international development program the CyberPlat® payment system has been dynamically developing its business in the territory of the Ukraine in 2007. Currently, the CyberPlat® cash acceptance network in the Ukraine consists of more than a thousand outlets, and their number keeps expanding. In 2007 there started and successfully develops a project on accepting payments via the CyberPlat® Company in the mobile shops of the largest Ukrainian retailer – Mobilochka mobile shops network. For the subscribers paying for the services of the leading mobile network operators in Mobilochka shops in the entire territory of the Ukraine is fast, convenient and secure.

Uzbekistan

A representative office of the CyberPlat® payment system was opened and began operating in the territory of Uzbekistan in the reporting period. Within this period, the CyberPlat® Company has created in Uzbekistan a payment infrastructure, consisting of more than 600 payment outlets and their number steadily grows.

Payment acceptance network

The total number of payment acceptance outlets of the CyberPlat® system increased in 2007 more than twofold, and by the beginning of 2008 comprised over 100 000, and inclusive of the sub-dealer outlets - more than 140 000. This sustainable and dynamic business growth was achieved by connecting new payment terminal networks, retail and dealer companies, as well as branches and departments of various banks to CyberPlat®. Particularly, in 2007 Svyazbank, Bank of Moscow, Promsvyazbank, Sudostroitelny Bank, Moskomprivatbank, as well as TS-Retail mobile shops network and many others became participants of the CyberPlat® payment system.

The Russian leading payment system, CyberPlat®, during the past years has been repeatedly marked by diplomas and awards from the top communications operators for the successful operation.

Beeline Company brought the CyberPlat® payment system up to the first place in Russia in the aggregated volume of payments accepted from the Beeline subscribers for the year of 2007. The CyberPlat® payment system has been taking the leading position in the volume of accepted in favor of Beeline payments, proving by that its status as of the leader in the e-payment market.

In 2007 the CyberPlat® payment system became a winner of the CNews AWARDS prize “For Creation and development of the electronic payment market in Russia”. The CNews AWARDS prize is the all-nation award in the high technology and Internet segment, which encourages the prominent services of the leading companies in the segment of information processing technologies and electronic communication, governmental and public organizations, business structures, as well as individual actors, who made a considerable contribution to the development in Russian IT-market.

Obtaining by the CyberPlat® payment system the most prestigious prize in the IT-segment has once again proved its reputation as of a dynamic, technologically prominent, successfully developing company. The obtaining of the most prestigious CNews AWARDS prize became an extra motivation for the CyberPlat system for development and promotion of the new communication and payment technologies, as well as reinforcement of its indisputable leadership position in the e-payment acceptance market.

The leading positions of the CyberPlat® payment system are associated with the permanent perfection of the quality of its services provided to its clients. In the reporting period the CyberPlat® payment system was establishing a fruitful co-operation with the largest Russian retail networks – Russian Post, Evroset, Svyasnoy, Dixis, Tsifrograd, Beta Link, Eldorado electronics stores network, Mir, Bely Veter, Elecsnet terminals network, I-Box, Multikassa, Platforma and many others.

It is worthy of special note the promotion of a joint global project of the federal state unitary enterprise Russian Post and CyberPlat® in cash payment acceptance from the population within the widely spread network of post offices in Russia. The number of Russian Federation subjects where payments can presently be made via post offices has expanded from 58 to 78. Co-operation with Kazpochta JSC (Kazakhstan) has been dynamically developing.

It is also worthy of special note that partners to the CyberPlat® payment system primarily are the large companies with steadily growing turnover and high level of technological and corporative culture – should they be retail and terminal networks or companies, specializing in providing mobile communication services, commercial television, telecommunication and provider services.

Providers

In 2007, CyberPlat® embodied new opportunities in the payment acceptance market and considerably increased the number of payment gateways to the billing systems of different service providers.

In the accounting period, the largest Russian operator of fixed-line communication «CenterTelecom» OJSC became the participant of the CyberPlat® payment system. The operator renders a wide range of communication services and provides private clients, business structures and the state bodies within the territory of Central federal district with access to world information resources. More than 6.6 million subscribers of all 15 branches of «CenterTelecom» OJSC now can pay for the services through the electronic payment system CyberPlat®.

In 2007, there has been taking place an active and fruitful cooperation between the CyberPlat® payment system and the largest Russian operators of the fixed-line communication comprising the holding "Svyazinvest». In the accounting period, the companies VolgaTelecom, Sibirtelecom, Multiregional Transit Telecom and Dalsvyaz became the participants of the CyberPlat® payment system.

The CyberPlat® Company was the first Russian payment system which started the project on the payment of electronic tickets (e-ticketing). The electronic tickets offer additional conveniences for passengers, time-saving when purchasing air tickets, broad use of web-booking and web-sales which are the most fast-growing segments of the world aviation market. «Sky Express» airline has been the first airline which became a partner to the CyberPlat® payment system. Its clients now can pay for electronic tickets via the widely spread payment acceptance network of CyberPlat®.

In 2007, the clients of the largest world air carriers, such as "Aeroflot", British Airways, Alitalia, KLM Royal Dutch Airlines, Austrian Airlines, Air Canada, LOT, Swiss International Airlines and many others have obtained an opportunity to make cash payments for their flight-tickets and additional services in the sale outlet network of the CyberPlat® electronic payment system.

The Russian ticket sale market capacity exceeds $10 billion a year and shows steady rates of increase of the airline business scale. Payment for the air carrier services is a new and very challenging development trend in the business of the CyberPlat® payment system. It has a significant growth potential, which can be compared in its volume with the of mobile payment market.

The payment for electronic tickets of "Aeroflot" airline and other world leaders of air transportation system within the framework of payment solution of CyberPlat® can be executed with the use of the whole range of the most popular communication devices: payment and cashier terminals, PCs, mobile phones, ATMs and POS-terminals. The payment for electronic tickets is available only via outlets functioning in the on-line mode.

Everyone has already got used to paying practically anywhere for the services provided by operators of the mobile and fixed communication, commercial television, Internet-providers, banks and satellite security systems. Also, it is now possible in Moscow to pay via the CyberPlat® system for communal services. Such payment is fast, comfortable, hassle-free and is made without standing in lines. In 2007, over 3 000 points of payment acceptance, located in the mobile shops of "Euroset’", "Svyaznoy", "Dixis", "Betalink", "Cifrograd", terminals’ networks "I-Box" , "Platforma", "Molniya" and many others throughout Moscow, and connected to the payment system CyberPlat (КиберПлат), have accepted payments for housing and public services. A similar project has dynamically developed in St.-Petersburg.

Following a leadership strategy in the payment acceptance market, the CyberPlat® system has launched a project of accepting payments for communal services, including electricity bills in a number of the largest subjects of Russia. In particular, payment for communal services in retail network shops has been implemented in Tyumen, Ulyanovsk, Reutov and Dzerzhinsk. In 2007 Dalenergo, Tyumenenergosbyt and Sverdlovsk energy and gas company became the participants of the CyberPlat® payment system.

In the near future, the CyberPlat® payment system is preparing a release of new revolutionary and hi-tech products which have no analogue in the electronic payment market.

Cross-border payments

In the reporting period, the CyberPlat® payment system was developing a cross-border payment system. Subscribers from three states - Russia, Kazakhstan and Ukraine can now pay for cellular communication via the largest payment system CyberPlat®, regardless of the country of their presence.

Russian citizens have long been accustomed to making fast and hassle-free cash payments for mobile communication, using a wide network of cash acceptance outlets via CyberPlat® throughout entire Russia. Now they can top-up their mobile telephones with local currencies in the neighboring countries, Kazakhstan and the Ukraine. Russian visitors are offered a developed network of top-up outlets deployed in the territory of Kazakhstan and Ukraine in the retail and service points connected to the CyberPlat® payment system.

Likewise, Kazakh and Ukrainian residents, while visiting Russia, can easily replenish their cellular accounts at over 100 000 top-up points of the cash acceptance network. All payment acceptance operations are performed in the online mode and the use of the Electronic Digital Signature eliminates fraud risks, making the replenishment of the personal account in the mobile operators' billing systems irrefutable.

The cross-border payment infrastructure developed by CyberPlat® creates ultimately comfortable conditions for the residents of the three neighboring countries. Uzbekistan is going to join the three said countries in the nearest future.

This service is particularly in demand by the mobile communication subscribers living in the cross-border regions. The new service of the CyberPlat® payment system allows millions of people as they visit their relatives, make a business trip, or go on a vacation to always keep in touch wherever they are.

Terminal business

A considerable number of payment terminal networks, as they develop and enlarge, express a desire to work with the payment system which does not have a terminal network of its own and hence cannot be a competitive to their business a priori. For this particular reason, in 2007 most of payment terminal networks, acting through competitors, switched over to taking the service from the CyberPlat® Company.

For various reasons, 2007 became the year of active development of the market of accepting payments via self-service payment terminals. During the current year CyberPlat® has developed and adjusted the pre-processing software which expands functionalities on management and monitoring of terminal network working capacity. The pre-processing system of the CyberPlat® payment system allows carrying out the remote monitoring of terminal networks, and terminal software functioning, provides unique functional capabilities in utilization, and high reliability, having a number of technological advantages.

The utilization of the pre-processing system of the CyberPlat® Company allows to operate the network of cash-in and POS-terminals for payment acceptance using the uniform interface. The resources of the pre-processing system allow creating the hierarchy of sub-agents (for example, branches of a large network in different cities), uniting the payment acceptance points into groups, creating virtual accounts and operating system of limits established under these accounts. Thus, the entire detailed hierarchy within the cash payment system will be shown as a single payment point which reduces dependence of the terminal network upon payment platform which it historically has been operating with.

One more advantage of pre-processing within CyberPlat® payment system is the possibility of accepting payments in favor of local operators. Any user of the CyberPlat® pre-processing system will have an opportunity to add any number of local providers.

The major advantage of the pre-processing system software is an opportunity to choose the payment system in the automatic mode which enhances the fault-tolerance and reliability of the terminal network functioning. In the case when there is a technical malfunction on the side of one payment platform, the user of the pre-processing system has a chance of on-line switching a payment stream for processing in another payment system which concurrently has a higher degree of fault-tolerance.

New software is available for free of charge downloading from the website of the CyberPlat® payment system, in the “Files” section. This enables the pre-processing system users to adjust it according to own needs. In return this allows the CyberPlat® payment system to be completely integrated into business processes of its partners.

One of the key advantages of the software for terminals of the CyberPlat® payment system which the company updated and improved in 2007 is its universality, simplicity of installation and running the software.

In 2007, a number of Russian terminal networks successfully used the technological developments of CyberPlat®. Particularly, during the reporting period, there successfully developed a joint project with "Evroset’" company on installation of the payment terminals using CyberPlat® processing in the retailer’s shops and independent platforms. More than 500 payment terminals were set in 2007, within the framework of the project with "Euroset’". At the moment, more than 750 payment acceptance terminals function in mobile shops of “Euroset’" in Moscow, St.-Petersburg, Voronezh, Nizhni Novgorod, Krasnodar, Samara, Ufa, Penza and Ekaterinburg. Until the end of 2008 1000 payment terminals are supposed to be put into operation.

In 2007, the projects on installation of the payment terminals using CyberPlat® processing have also been implemented within the retail networks Dixis, Alt-Telecom and Ultra. Availability of open codes of the developed programs is the distinctive feature of the CyberPlat® software, which attracts the large clients.

The partners of CyberPlat® have access to source codes of CyberPlat® client applications for payment terminals, mobile phones and pocket PCs. If necessary, the open codes allow adjusting software applications to various requirements of large networks, as well as updating CyberPlat® applications for their integration into accounting systems, enterprise management systems and client accounting systems. The access to initial codes of programs makes CyberPlat® solutions more flexible and allows them to be entirely integrated with business processes of partners.

Technological and financial innovations

Following the strategy of providing maximum convenience for clients, the CyberPlat® payment system released a new version of the payment mobile module in 2007. CyberPlat® innovation is implemented on the basis of the Java platform and allows considerably expand payment reception opportunities when using cellular phone.

New version of the software on the basis of Java considerably increased the speed of the application operations. Thanks to the experts of the CyberPlat® payment system a new cryptographic kernel of the payment mobile module was created, and a full program code re-structuring was effected. The said technology innovations allowed to improve quality of software properties on the basis of Java platform, and also to miniaturize the payment mobile module while preserving a high degree of transaction performing safety.

For the reason of providing maximum comfort for clients of the CyberPlat® payment system a new, user-friendly interface was designed. Within the framework of the new interface there were implemented graphic indicators of condition control over the payment process. These can make operating with the payment mobile module on the basis of the Java-application more convenient and comfortable for users.

There considerably increased the number of mobile phone models which can be used for payment acceptance using all existing functions of the CyberPlat® payment system. Thus, payment safety is at traditionally high level. All the transactions, made by users, are protected by electronic digital signatures which exclude any chance of fraud and make operations incontestable.

In 2007 the scope of distribution of such service as short-term crediting of CyberPlat® partners was enlarged. This allows clients to continue accepting payments even after their accounts have been depleted. It provides an extra convenience for the system partners and allows them to increase their revenues even under conditions of operating assets deficiency. Hence, a cooperation agreement with Rosbank within the framework of which there operates a crediting program for the CyberPlat® payment system clients was concluded.

Under the terms and conditions of the partner agreement the dealer of the CyberPlat® company with at least three months of service experience can receive the credit in the form of an overdraft in Rosbank for the period of not more 30 days in the amount of100 thousand and up to 4.5 million rubles under the annual rate of at least 12 %. The decision on granting the credit is accepted by the bank within several days. The limit of crediting is established at a rate of not less than 20 % from the monthly turnover under the dealer settlement accounts. In order to receive the loan funds the dealer should apply to the nearest office of Rosbank, to point out that he is the partner of the CyberPlat® payment system, to fill out the application for reception of an overdraft and to submit all necessary documents.

Regional development

In 2007 particular attention was allocated to the maximum expansion of regional presence of the CyberPlat® cash acceptance network. New projects of organizing payment acceptance in the entire territory of Russia were launched. Currently, CyberPlat® is the most widely used technology for collecting revenues in the prevalent majority of large and mid-size cities in all Federal districts.

To expedite interaction with clients, as well as for increasing the market share and developing regional business, in 2007 CyberPlat®’s regional representative offices were successfully working in the North-West, Urals, Central, Southern Privolzskiy and Far East federal districts.

Due to this advanced technological solution, high security level of transaction processing, and its long experience in electronic financial settlements, CyberPlat® was able to occupy a dominant position among payment systems in Russia and Kazakhstan.

Electronic technologies, modern and convenient for partners, guaranteeing high speed, as well as safety of transactions, secured by the electronic digital signature (EDS), comfortable financial terms including a possibility of crediting against payment acceptance – all that makes CyberPlat® quite an attractive business partner for the leading Russian companies.