ComstarUTS Corporate presentation

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Comstar-UTSCorporate presentation

• 3Q2007

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Disclaimer
Matters discussed in this presentation may
constitute forward-looking statements.
Forward-looking statements include statements
concerning plans, objectives, goals, strategies,
future events revenues or performance, and
underlying assumptions and other statements,
which are other than statements of historical
facts. The words believe, expect,
anticipate, intends, estimate, forecast,
predict, could, plan, project, will,
may, should and similar expressions identify
forward-looking statements. Forward-looking
statements include statements regarding
strategies, outlook and growth prospects future
plans and potential for future growth liquidity,
capital resources and capital expenditures,
financing needs, plans or intentions relating to
acquisitions, our competitive strengths and
weaknesses, growth in demand for our products
economic outlook and industry trends
developments of our markets legal trends and the
impact of regulatory initiatives and the
strength of our competitors. The forward-looking
statements in this presentation are based upon
various assumptions, many of which are based, in
turn, upon further assumptions, including without
limitation, management's examination of
historical operating trends, data contained in
our records and other data available from third
parties. Although we believe that these
assumptions were reasonable when made, these
assumptions are inherently subject to significant
uncertainties and contingencies which are
difficult or impossible to predict and are beyond
our control and we may not achieve or accomplish
these expectations, beliefs or projections. In
addition, important factors that, in our view,
could cause actual results to differ materially
from those discussed in the forward-looking
statements include the achievement of the
anticipated levels of revenues, profitability and
growth, cost and synergy of our recent
acquisitions and restructuring, the timely
development and acceptance of new products, the
impact of competition and competitive pricing,
the ability to obtain necessary regulatory
approvals and the ability to fund our future
operations and capital needs through borrowing or
otherwise, the ability to successfully implement
any of our business strategies, the ability to
integrate our business and to realize anticipated
cost savings and operational benefits from such
integration, our expectations about growth in
demand for our products and services, the effects
of inflation, interest rate and exchange rate
fluctuations, and our success in identifying
other risk to our business and managing the risk
of the aforementioned factors, the condition of
the economy and political stability in Russia and
the other markets of operations and the impact of
general business and global economic
conditions. Neither we, nor any of our respective
agents, employees or advisors intend or have any
duty or obligation to supplement, amend, update
or revise any of the forward-looking statements
contained in this presentation. The information
and opinions contained in this presentation are
provided as at the date of this presentation and
are subject to change without notice.

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Combined Telecom Operator
Comstar-UTS
Sister companies
CLECs in Moscow and regions 0.6 mln active lines
in Moscow 0.9 million subscribers outside
Moscow Multi-service solutions to corporates
developers
ILEC in Moscow 3.6 million residential
subscribers More than 90 of lines are ADSL
compatible
CLEC in Moscow 1 broadband provider 33
market share 0.453 million residential
subscribers
STATE HOLDING Comstar owns 251 share 7 ILECs,
Rostelecom, Central Telegraph Owner of the last
mile in the regions 32 million installed lines
covering 90 of Russia
ILD/DLD OPERATOR Cooperation with
Comstar DLD/ILD services to Comstar clients
MOBILE OPERATOR Cooperation with
Comstar 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
MGTS
Alternative operators
Inter-company eliminations
Guidance for 2007 Revenue growth by 30-35
OIBDA margin not less 40
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Excluding US 62.1 million non-recurring stock
bonus awards
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Value drivers

• Simplifying Organizational Structure

• Unlocking Operational Potential

• Increasing Broadband Market Share ARPU

• Selective Modernisation of the Last Mile

• Regulated tariff rebalancing
• Cost optimization
• Increase in efficiency

• Driving Regional Expansion

• Capitalising on Svyazinvest stake
• as a financial investment and through
  participation in privatization

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Simplifying Organizational Structure
Now
Objective
Free float
35

• Elimination of cross ownership between MGTS and
  Comstar
• Integration of Comstar-Direct
• Turning regional subsidiaries into affiliates

Regional branches
51
48
56
14
52
17.3
23
21
7.7
Other
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Unlocking Operational Potential

• Management by processes
• Comstar focus
• Strategy
• Regions (MA, Greenfield)
• SvyazInvest
• MGTS focus
• Network modernization maintenance
• Mass market sales
• Comstar Direct focus
• High-value broadband sales
• Outsourcing of non-core functions

Lines / Employees

• Potential for Significant headcount reduction

Source Analysts reports
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Increasing Broadband Market Share

• Objective of gt50 market share in Moscow by 2011
  from current 33
• Revised broadband strategy
• Direct sales using MGTS technicians and brand
• Unique Post-paid tariffs, One Bill for all
  telecom services for residentials
• Selective Modernization of the Last Mile
• Fiber to the Curb (FTTC)- started Sep. 07
• CAPEX of up to 100 million
• 70-80 of the last mile is to be Speed Up to
  20-25 Mbps by 2010

Moscow Residential BB Market, 3Q07
452.6 thousand subs
Total 1.4 mn subs
Source Company data, Direct INFO, wire-line
subscribers only
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Modernization of the Last mile
35 000 apartment blocks
1. Fiber to the curb
Services
2. Moving DSLAM closer to the customer- to the
curb
Speed
1 Gbps
3. Selective installation of fiber to the home
Apartment

• HDTV
• Internet (100 Mbps)
• Smart home
• Video monitoring
• etc

Fiber
Set- top-box
250 switching centers
Modem
20-25 Mbps

Box

• HDTV (2-3 TV sets)
• Internet (10-20 Mbps)

300 ?.
6 Mbps
Copper
Copper
DSLAM
Curb
Curb
Fiber
Fiber

• IPTV (1 TV set)
• Internet (up to 2 Mbps)

11 000 curbs
1,5 ??backbone
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Regulated tariff rebalancing- residential
Residential Subscriber Mix
Growth in Regulated Tariffs (US)

• MGTS generated US 385.9 million residential
  voice revenues for the 9m2007

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Regulated tariff rebalancing- corporate
Monthly Subscription Fee (US) State Financed
and Corporate Sectors
Regulated Voice Tariffs, Feb. 2007

• 3 tariff plans are expected to be implemented in
  2008 for Public Sector and Corporate Subscribers
  of MGTS instead of currently implemented combined
  tariff plan
• MGTS generated US 204.8 million revenue from
  corporate subscribers for the 9m2007

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Driving Regional Expansion
- Comstar presence (Current)
- Comstar target (Future)
Russian Fixed Line Market (2007E)
- 17,8 BN
100
Strategy
4,4 BN
3
DLD/ILD/Transit
80

• Increasing market share in the regions of
  presence
• Expansion into the target regions
• Entering the DLD/ILD segment

1,3 BN
60
ILEC
1,3 BN
1,6 BN
ILEC
40
2,3 BN
ILEC
1,2 BN
ILEC
3,4 BN
1,2 BN
20
2
1
CLEC
CLEC
CLEC
CLEC
1 BN
0
Regions of presence
Moscow
Target regions
Other regions
Source ?omstar-UTS estimates

• Tyumen
• Saratov
• Volga
• South
• Saint Petersburg

• South
• Volga
• Ural
• Siberia

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Driving Regional Expansion
Comstar revenue outside Moscow
Extended regional strategy (depends on
Shareholders decisions)
550 mln
3. Entering the DLD/ILD segment
50 mln
300 mln
2. Expansion into the target regions (MA)
200 mln

• Increasing market share
• in the regions of presence

41 mln
2011
2006
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Capitalizing on Svyazinvest Investment
Russian regional market, US, 2006

• 25 1 share acquired for US 1.3 billion in
  December 2006
• Call (by December 2007) and put (2 year) option
  agreement with Seller for 11 of Comstar shares
  currently held by MGTS Finance
• 2 seats on the Board of Directors
• Successful financial investment
• Upside option as Strategic Player in
  privatization process

Including Rostelecom 16
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The Unique Investment Opportunity
USD 1.98 billion
USD 5.43 billion
USD 5.24 billion
USD 3.70 billion
USD 4.26 billion
USD 3.00 billion
USD 2.28 billion
EV/EBITDA 2007 6.0x
EV/EBITDA 2007 8.8x
EV/EBITDA 20071 4.9x
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
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¹Source Consensus (Morgan Stanley, URALSIB,
Goldman Sachs, Deutsche UFG, Troika Dialog, Aton
Capital, Alfa Bank, ING, Renaissance Capital,
UBS, Merrill Lynch, Veles capital, Credit Suisse,
FIM, MDM Bank, JPMorgan, Citi, HSBC). All data as
at 28 November 2007
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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

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Appendix
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Combining Growth Profitability
Source Company reports
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Income Statement

• 9m2007 Highlights
• 30 year on year revenue growth
• 42.9 OIBDA margin
• US 118.3 million change in fair value of call
  and put option less minority share

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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

• 9m2007 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
• Cash and cash equivalents of US 120.2 million
• Total debt of US 838.5 million
• Net debt of US 718.4 million
• Total debt/OIBDA of 1.68