Corporate presentation

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Corporatepresentation

• September 2007

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Comstar at a Glance

• The leading combined fixed-line
  telecommunications company in Moscow
• - MGTS incumbent Moscow AltNet with 5 million
  active lines 11,000 km fiber-optic network
• Owner of last mile access to 3.6 million Moscow
  households 98 market share
• - Last mile is not unbundled and 90 ADSL
  compatible
• Number 1 residential broadband provider in Moscow
• - 426k subscribers 33 market share
• Integrated operator providing full spectrum of
  fixed-line services
• - local, long distance through sister company
  MTT, broadband Internet, WiFi, WiMax, VPN etc
• Owner of 25 1 share in state-owned Svyazinvest
  national fixed line incumbent
• - Financial investment with upside as strategic
  player in privatization process
• Regional expansion
• - Focus on priority regions with expansion
  through selective MA cooperation with Sistema
  companies

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Combined Telecom Operator
Comstar-UTS
Sister companies
56 economic interest
52 ownership
100 subsidiary
25 1 share
100 subsidiaries
50 owned by Sistema
52.8 owned by Sistema
Broadband Moscow
Fixed Line Moscow
Regions International
Moscow City telephone (MGTS)
Svyazinvest
Multiregional Transit Telecom
Mobile Tele- Systems
ILEC Moscow fixed line incumbent 4.3 million
active lines Provider of basic services to mass
market
CLEC 0.6 mln active lines Provider of
multi-service solutions to corporate developers
CLEC 1 broadband provider in Moscow with 33
market share 426,400 residential
subscribers 23 double-play penetration (data
pay-TV)
CLEC 92,000 subscribers Provider of voice
services to corporate developers
STATE HOLDING 7 ILECs, Rostelecom, Central
Telegraph 32 million installed lines covering 90
of Russia
ILD/DLD OPERATOR Owner and operator of a digital
multi-service national-scale network whose nodes
are installed in all 88 subjects of
RF Cooperation with Comstar-UTS DLD/ILD services
to Comstar-UTS clients
MOBILE OPERATOR The largest mobile operator
in Russia and the CIS Cooperation with
Comstar-UTS joint use of network infrastructure,
convergent projects, joint sales efforts
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Proven Track Record
Revenues
OIBDA
1,120.2
428.6
907.6
358.8
695.1
249.9
589.2
235.7
189.9
438.8
By 2011 revenue growth will be driven by the
development of broadband fixed-line services to
residential and corporate users
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Markets with Still Low Penetration Levels
PC Penetration (2006)
Fixed Voice Penetration (2006)
Broadband Penetration (2006)
Internet Penetration (2006)
Source Company data, Pyramid Research, stats
agencies, Direct INFO
Note Penetration in all charts calculated as
of households
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Strategic Objectives

• Creating a World Class Integrated Full Service
  Telecommunications Provider
• the Pan-Russian Wire-line Champion
• Leveraging incumbent infrastructure unique last
  mile access through network upgrade
  co-marketing
• Increasing broadband market share ARPU through
  subscriber acquisition expanded service
  offering
• Driving regional and CIS expansion through
  cooperation and acquisition
• Unlocking operational potential by enhancing
  efficiency levels through integration,
  restructuring extracting synergies
• Simplifying structure by streamlining management
  eliminating cross holdings minority interests
• Capitalising on Svyazinvest stake as a financial
  investment and through participation in
  privatization

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Leveraging Incumbent Infrastructure Last Mile
Access

• MGTS IS the infrastructure provider
• network development modernization
• network support
• Management by processes
• Strategic activities will be transferred to
  Comstar
• Significant headcount reduction
• Growing number of lines per employee and
  productivity
• Control over the split of subscriber base
  between three tariff plans- client oriented
  approach
• Refocused investment program
• Selective modernization of the last mile (FTTx)
  will lead to increased speeds for premium clients
  and increased capacity
• Digitalization 45 of lines are digital at the
  end of the 1H2007 - transition to Next Generation
  Network, financed by disposal of freed up real
  estate, is a technological necessity, will
  decrease opex capex per line

Growth in Regulated Tariffs (US)
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Moscows Leading Alternative Network Solution
Provider for Corporate Clients
Moscow Corporate Market, 2006 (US)

• Services to large and medium-sized clients
• Individual approach
• Introduction of standards for VIP clients
• Addition of long-distance services to provide
  full-scale of integrated services
• VPNs for clients with regional branches
• Cross sell of Comstar-Moscow services to MGTS
  corporate client special tariffs
• Services to Small and Medium Enterprizes
• Bundled products
• Development of sales channels
• Active promotion
• Services to developers
• Multi-service solutions for business-centers
• Segmentation of client base (Comstar-Moscow-
  premium business segment, MGTS
  Comstar-Direct- low segment, large-scale
  development

Source Direct INFO, in terms of sales
Bundle of services, coordination of tariff policy
and marketing initiatives will lead to an
increase in ARPU client base, decrease in churn
outside the Group
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Increasing Broadband Market Share ARPU
Moscow Broadband Pay-TV Penetration
Moscow Residential Broadband Market, 2Q2007
Total 1.3 mn subs
426 thousand subs
Source Company data, Direct INFO, Pyramid
ResearchNote CAGR represents growth in
projected users. Penetration calculated as of
households
Comstar Direct Residential Subscribers

• 1 provider with 33 market share in Moscow
• Objective of 50 market share in Moscow by 2011
• 90 of MGTS lines are ADSL compatible
• 42 year on year growth in customer base
• 23 double play penetration
• Measures to boost broadband net adds
• Enhancing sales channels
• Optimization of sales channels
• Direct marketing/sales to MGTS subscribers
• Investing into future development
• Fibre to the Curb/Home, WiFi, WiMax initiatives
• Client orientation
• Call center capacity doubled, IVR

(000s)
Broadband
Dial up
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Driving Regional Expansion

• Current presence of Comstar-UTS
• Tyumen region
• Saratov region
• Volga region
• South region
• Saint Petersburg
• Armenia
• Ukraine

• Development of operating clusters around regional
  branches through
• MA targeting leading regional CLECs to
  complement Svyazinvest presence and increase
  footprint
• Cooperation with sister companies
• Upside of engagement in Svyazinvest privatisation
  process

Saratov region alternative fixed-line market
Tyumen region alternative fixed-line market
Sochi alternative fixed-line market
Source ?omstar-UTS estimates, in terms of
sales, 2007. excl. ILECs and Transtelecom
Source Direct INFO, in terms of sales, 2006
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Unlocking Operational Potential

• Digitalization of MGTS network - transition to
  Next Generation Network, financed by disposal of
  freed up real estate, is a technological
  necessity, will decrease opex capex per line
• Optimization of the Groups structure- separating
  core functions from non-telecom-related,
  reduction in headcount
• Outsourcing of non-core functions
• Management by processes
• Integration of newly acquired operations
  expansion of margins

Lines / Employees
Number of MGTS Employees
(000s)
Source Deutsche UFG
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Simplifying Organizational Structure
Shareholder Meeting

• JSC Sistema
• Setting KPIs overseeing execution
• Assisting with MA / negotiations

MGTS
Free Float incl. GDRs
14 Ownership
35 Ownership
51 Ownership
Board of Directors 9 Members 3 non-executive
independent Directors
Audit Committee
Strategy Committee
Remuneration Nomination Committee
Corporate Governance Committee
Budget Investment Committee
Technical ??mmittee
Management Board
Tariffs Committee
Purchasing Committee
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Simplifying Ownership Structure
Objective
Now
Free float

• Elimination of cross ownership between MGTS and
  Comstar
• Consolidation of MGTS minorities
• Integration of Comstar Direct
• Participation in restructuring / privatization of
  Svyazinvest

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Regional branches subsidiaries
51
48
14
56
52
17.3
23
21
7.7
Other
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Capitalizing on Svyazinvest Investment

• 25 plus one share stake acquired for US 1.3
  billion in December 2006
• - Comstar acquired 17.3 MGTS Finance acquired
  7.7
• Call (by December 2007) and put (2 year) option
  agreement with seller for 11 of Comstar shares
  currently held by MGTS Finance
• Represented by 2 seats on Board of Directors
• Successful financial investment with 50
  increase in combined market cap of listed assets
  from US 5.8 billion in December 2006 to US 8.8
  billion in July 2007
• Upside option as Strategic Player in
  privatization process

• Svyazinvest companies
• Center Telecom
• North-West Telecom
• Uralsvyazinform
• VolgaTelecom
• SibirTelecom
• South Telecom
• Far East Telecom
• Rostelecom

• 28 economic interest / 23 voting interest in
  MGTS

• 2006 highlights
• Revenue US 7.7 billion
• EBITDA US 2.3 billion
• Net income US 0.2 billion
• Employees 273.4 thousand

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Combining Growth Profitability
Source Company reports
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The Investment Opportunity
USD 1.79 billion
USD 5.36 billion
USD 5.18 billion
USD 3.66 billion
USD 4.26 billion
USD 3.15 billion
USD 2.48 billion
EV/EBITDA 2007 6.0x
EV/EBITDA 2007 8.8x
EV/EBITDA 20071 5.2x
EV/EBITDA 2007 8.5x
Comstar Market Cap
21.6 of Svyazinvest
Comstar Market Cap ex Svyazinvest
Comstar EV
Valuation at ILEC Multiples
Valuation at Broadband Multiples
Valuation at Altnet Multiples
¹Source Consensus (Morgan Stanley, URALSIB,
Goldman Sachs, Deutsche UFG, Troika Dialog, Aton
Capital, Alfa Bank, ING, Renaissance Capital,
DrKW, Credit Suisse, FIM) All data as at 07
September 2007
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Investment Case

• Scale player with market leading positions
  track record of balancing growth profitability
  -
  US 1.1 billion revenue fixed-line operator with
  20 revenue growth 40 OIBDA margin
• Well positioned convergence play on incumbent
  infrastructure, alt net development increasing
  broadband penetration in high growth markets
• Expanding service offering geographical
  footprint
• Substantial synergies and efficiency gains to be
  extracted from integration of the companies of
  the Group
• Simplification of structure unlocks significant
  value
• Upside potential from
• - Buying out minorities in key assets (MGTS,
  Comstar Direct)
• - Svyazinvest privatisation
• - Addition of LD service to corporate service
  package
• - Realisation of property portfolio

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Summary Financials
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Income Statement

• Half Year Highlights
• 32 year on year revenue growth
• 42.9 OIBDA margin
• US 14.5 million change in fair value of call and
  put option

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Q2 2007 Results
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Segmental Breakdown
Excluding US 62.1 million Stock Bonus Awards
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Cash Flow Statement
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Balance Sheet

• Half Year Highlights
• US 675 million 6 month loan facility arranged in
  December 2006 with ABN AMRO Bank N.V.
• Refinanced in June 2007 with 5 year RUR 26
  billion credit facility from Sberbank
• Total debt of US 823.5 million
• Net debt of US 675.3 million

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Contacts
For additional information please visit
www.comstar-uts.com or contact Masha
Eliseeva Head of Investor Relations Phone 7 985
997 08 52 E-mail ir_at_comstar-uts.ru