STARMAN                        FINANCIAL REPORT                        21.11.2005



COMMENTS TO THE CONSOLIDATED INTERIM REPORT FOR 9 MONTHS OF THE YEAR 2005



General information



The first 9 months of the year 2005 were successful  for  the  Company.  Starman's

total revenue for 3 quarters amounted to 8.9  million  euros  -  a  29%  increase,

compared to the same period last year. EBITDA for the first 9 months  amounted  to

3 million euros - a 40% increase compared to the last year,  and  its  net  profit

amounted to 1.16 million euros, which is almost  twice  the  result  of  the  same

period in 2004.

The results of the first 3 quarters include 0.3 million  euros  worth  of  one-off

expenses. Those non-recurrent expenses did not have an effect on  the  profit  for

the third quarter which was closed at the net profit of 0.45 million euros.

Starman started to offer digital television services in September. In addition  to

the effect of strengthening its private consumer oriented product  portfolio,  the

new services should increase the  cable  television's  average  revenue  per  unit

(ARPU) in the long run.





Financial ratios



A selection of ratios for evaluating  the  economic  activities  in  the  first  9

months of the year 2005:



                          2003      2004       2005      

                                               9 months  

                                                         

 Sales increase           35%       44%        29%       

 EBITDA margin            38%       32%        34%       

 Gross margin             16%       12%        16%       

 Net margin               13%       10%        13%       

 Revenue/average assets   0.62      0.68       0.66      

                                                         

 Equity ratio             70%       51%        53%       

 Debt to equity           0.34      0.73       0.69      

 Debt/EBITDA              1.05      2.08       1.71      

 Investments/EBITDA       0.78      2.15       1.17      

                                                         

 Current ratio            0.66      0.78       0.89      

 Invoice turnover rate    23.5      18.5       22.6      

 (annual)                                                



Definitions:

Sales increase = increase compared to the same period last year

EBITDA = operating profit + depreciation and amortisation

EBITDA margin = EBITDA/total revenue

Gross margin = operating profit/total revenue

Net margin = net profit/total revenue

Revenue/average assets - for comparison purposes, the  revenue  for  the  first  9

months of the year 2005 have been multiplied by 4/3

Equity ratio = equity/total assets

Debt = borrowings + long-term borrowings

Debt/EBITDA - for comparison purposes, EBITDA for the first 9 months of  the  year

2005 has been multiplied by 4/3

Current ratio = current assets/current liabilities

Invoice turnover rate = revenue for the period/accounts receivable at the  end  of

the period; for comparison purposes, revenue for the first 9 months  of  the  year

2005 has been multiplied by 4/3





Group structure



Starman Group incorporates AS Starman, the parent company,  and  AS  Levi  Kaabel,

Tallinna Kaabeltelevisiooni AS and AS Telset Telecommunications Group,  the  fully

owned subsidiaries. These companies were incorporated into the  Starman  Group  in

June 2004. The primary assets of the subsidiaries were sold to the parent  company

immediately after the acquisition of the subsidiaries. In effect, those  companies

have had no economic activities since December 2004.  Moreover,  the  subsidiaries

have had no extra-group turnover since December 2004.

On  31-th   May   2005,   Starman   acquired   full   ownership   of   AS   Telset

Telecommunications Group from AS Levi Kaabel. On the same  day,  Starman  and  its

subsidiaries signed a merger agreement on the merger of Starman  and  all  of  its

subsidiaries. The merger process is scheduled to be completed at the beginning  of

2006.





Revenue and expenses



Traditionally, cable television and Internet services contributed the majority  of

Starman's total revenue for the first 9 months, accounting  for  52%  and  40%  of

total revenue, respectively. Revenue from cable television services  increased  by

38%, compared to the same period in 2004. Organic growth of the market has  mostly

been achieved at the expense of price increase in  recent  years.  However,  cable

television service  prices  are  still  relatively  low,  considering  the  living

standard in Estonia. At the end of September 2005, the Company had a total of  128

thousand cable television customers, 0.4% of which were digital television  users.



Revenue from Internet services increased by 17%, compared to the  first  9  months

of the year 2004. As of the end of September 2005, the  Company  had  27  thousand

Internet customers. Over the first 9 months of  the  year,  Starman  succeeded  in

maintaining its ARPU, despite the  fact  that  the  competitive  pressure  on  the

margins continued in that period.

Backed by a rapid expansion in  customer  numbers,  telephone  services  showed  a

notable increase in sales month after month. By the end  of  September  2005,  the

Company had  a  total  of  10.6  thousand  telephone  customers.  While  telephone

services contributed 4% of the total revenue for the first 9 months  of  the  year

2005, a substantial increase can be expected here in the near future.



Starman's operating expenses amounted to 5.9 million euros in the first  9  months

of the year 2005, having grown by 24% compared to the same  period  in  2004.  The

operating expenses include one-off charges in the amount of  0.27  million  euros,

the most significant of which are the  fringe  benefit  tax  assessed  on  options

issued to members of the Management  Board  and  costs  relating  to  the  Initial

Public Offering of shares (IPO).



If we disregard those  one-off  expenses,  it  can  be  concluded  that  personnel

expenses, costs of network maintenance-related services  and  materials  -  mainly

relating to the upgrading of the outdated cable network acquired as a part of  the

TELE 2 transaction - as well as programs costs increased at a growing rate in  the

first 9 months of the year 2005, compared to the same  period  in  2004.  For  the

majority of expense items, the rate of growth in expenses  was  smaller  than  the

increase in revenue.

Personnel expenses increased by 40% compared to last year. The average  number  of

employees was 180 during the first 9 months of the year 2005. As of  30  September

2005, the Company employed 198 people - a 21% increase (34 persons) when  compared

to the end of 2004. Employee numbers rose due to the increased focus on  improving

customer service.

As regards expenses related to  asset  valuation,  the  provision  for  bad  debts

amounted to just 53 thousand euros, i.e., 0.6% of the  turnover  for  the  period.

Loss of inventories and discounts totalled  67  thousand  euros  in  the  first  9

months of the year 2005.



EBITDA for the  first  9  months  of  2005  amounted  to  3  million  euros.  Upon

elimination of one-off expenses, the EBITDA margin would amount to 37%.



Depreciation costs increased by 19% compared to the first 9  months  of  the  year

2004.

As to financial expenses, the negative effect of the significant  appreciation  of

the US dollar on  the  Company's  financial  results  deserves  to  be  separately

mentioned. The results recorded under financial expenses make up less than a  half

of the estimated total foreign exchange loss.



The net profit for the first 9 months of 2005  amounted  to  1.16  million  euros.

Upon elimination of one-off expenses, the margin would amount to  16%  instead  of

the "official" margin of 13%.





Balance sheet, investments, financing



In the first 9 months of the year 2005,  Starman's  investments  in  fixed  assets

amounted to 3.5 million euros, of which 1.14 million euros were  invested  in  the

third  quarter.  The  Company  made  the  following  investments:  cable   network

renovation and construction - 1.17 million euros; telephone modems - 0.65  million

euros; DIGI TV Head-End - 0.43 million euros; Internet  equipment  -  0.4  million

euros (incl. Head-Ends - 0.27 million euros); analogue cable television  Head-Ends

and equipment - 0.27 million  euros  (incl.  cable  television  Head-Ends  -  0.23

million euros); telephone Head-End - 0.27 million euros; STBs  for  digital  TV  -

0.1 million euros; other investments - 0.2 million euros.

When compared to previous years, the investments made  in  2005  include  two  new

development projects - the DIGI TV Head-End and the  extension  of  the  telephone

Head-end that enables interconnection. Said equipment was ready for  provision  of

services in the third quarter. Interconnection enables Starman to  end  using  the

services of intermediaries, which represents a change that will  have  a  positive

effect on profit margins.

Upgrading of and enhancement of the data communication capability of the  existing

network made up the majority of the investments in the  cable  network.  While  at

the end of 2004, Starman covered 243 thousand households with 161 thousand -  i.e.

66% of the households - being  serviced  by  a  network  with  data  communication

capabilities, the respective numbers as of 30 September  2005  were  246  thousand

and  192  thousand  (the  data  communication  capability   increased   to   78%).

Investments in telephone modems and STBs were directly related to  the  growth  in

customer numbers. The majority of investments in  Internet  and  cable  television

equipment scheduled for the year 2005,  which  enhance  quality  and  support  the

growth in customer numbers, were made in the first 9 months of the year.



In the first 9 months of the year 2005, Starman succeeded in  maintaining  a  high

capitalisation, a relatively low debt  level  and  a  sufficient  liquidity.  When

assessing the balance sheet prepared as of 30 September 2005, it  should  be  kept

in mind that the levels of inventories and accounts payable  are  somewhat  higher

than average due to preparations for the sales period of autumn and winter.





Rändy Hütsi

Member of the Management Board

+372 677 9977

Additional information: AS Starman consolidated interim report  for  9  months  of

the year 2005