JSC SVYAZINVEST ON TELECOMMUNICATIONS MARKET

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JSC SVYAZINVESTON TELECOMMUNICATIONS MARKET
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FORWARD-LOOKING STATEMENTS

• Certain statements in this presentation are not
  historical facts and represent forward-looking
  statements. Example of such forward-looking
  statements include, but are not limited to
• _projections or expectations of
  revenues, profit (or loss), earnings (or loss)
  per share, dividends, capital structure, other
  financial indicators or ratios
• _statements of our plans, objectives
  or goals, including those related to products or
  services
• _statements of future economic
  indicators
• _statements of prerequisites
  underlying such statements.
• Words such as believes, expects, supposes,
  plans, is going to and intends, as well as
  similar expressions, are intended to identify
  forward-looking statements but for all that are
  not the exclusive means of identifying such
  statements.
• By their very nature, forward-looking statements
  imply some inherent risks and uncertain points,
  both general and specific, and there is some risk
  that the plans, expectations, forecasts and other
  forward-looking statements will not be realized.
  You should remember that owing to a number of
  important factors, actual results might
  substantially differ from the plans, objectives,
  expectations, estimates and intentions expressed
  in such forward-looking statements, including our
  ability to execute our restructuring and cost
  reduction programme.
• When relying on forward-looking statements, you
  should carefully analyze the foregoing factors
  and other uncertainties and events which are not
  clear, especially in light of the political,
  economic, social and legal environment in which
  the Company operates. Such forward-looking
  statements are valid only as of the date on which
  they are published, and the Company does not
  undertake any obligation to update or revise any
  of them whether as a result of new information,
  new events or otherwise. The Company does not
  make any statement, does not provide any
  affirmation and does not publish any forecast
  that the results anticipated by such
  forward-looking statements will be achieved. Such
  forward-looking statements represent only one of
  many possible scenarios of situation and should
  not be considered as the most likely or standard
  course of events.

3

• SVYAZINVEST GROUP PROFILE AND DEVELOPMENT
  INDICATORS
• IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY
  OF SVYAZINVEST GROUP
• UNREGULATED SERVICES PRIMARY DEVELOPMENT TREND
  FOR SVYAZINVEST GROUP
• PROSPECTS FOR SVYAZINVEST GROUP

4
RUSSIA TODAY
Growth of Real Wage in Russia,
Pace of growth of Russian economy,
Direct foreign investment in Russian economy, USD
bln

• High and sustainable pace of growth of Russian
  economy

• Growth of common welfare and consumer's demand

• Russian economy is becoming more attractive in
  the eyes of foreign partners

- source Ministry for Economic Development and
Trade of the Russian Federation
5
SVYAZINVEST STRUCTURE AND COVERAGE
State 75 - 1 share
MGTS Finance 7.69
Comstar-UTS 17.31 1 share
Svyazinvest
MGTS
Other

• Rostelecom owns a powerful backbone network
  spreading across almost all the territory of
  Russia. The Companys network is around 200,000
  km long. The level of Companys market
  capitalization equals 7,746mln.
• At present, the estimated capitalization of
  Svyazinvest is some 9.8 bln.

• Foundation of Svyazinvest September 18, 1995
• Sale of the companys blocking stake to Mustcom -
  July 1997
• Corporate integration 72 telecom companies were
  consolidated into 7 interregional companies
  throughout 2000-2002

- market caps as of November 9, 2007
5
6
KEY PERFORMANCE INDICATORS OF SVYAZINVEST GROUP
66,5
International Accounting Standards
Russian Accounting Standards
17.9
16.0
17.9
17.9
REVENUE USD, bln
2005
2006
2007 F
2006
2005
3Q2006
3Q2007
16.9
21.9
14.6
15.9
EXPENSES USD, bln
2007 F
2006
2006
2005
2005
3Q2006
3Q2007
4.1
21.9
24.4
26.9
OPERATING INCOME USD, bln
2006
2007 F
2006
2005
2005
3Q2006
3Q2007
15.0
41.4
30.6
24.7
EBITDAUSD, bln
2006
2007 F
2006
2005
2005
3Q2007
3Q2006
47.7
13.6
71.6
32.1
NET PROFIT USD, bln
2007 F
2006
2006
2005
2005
3Q2006
3Q2007
- hereinafter (unless otherwise indicated)
a) aggregated indicators are given according to
RAS b) Svyazinvest Group includes the following
companiesRostelecom, 7 RTOs, Central Telegraph,
Dagsvyazinform
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MARKET SHARE OF SVYAZINVEST GROUP OF COMPANIES
INTRA-ZONAL TELEPHONY MARKET
DATACOM MARKET
TELECOMMUNICATIONS MARKET
LD / ILD MARKET
MOBILE TELEPHONY MARKET

LOCAL TELEPHONY MARKET
- as of the end of 1H2007 - on the licensed
coverage area of 7 RTOs
.
8
KEY INFRASTRUCTURE INDICATORS OF SVYAZINVEST GROUP
INSTALLED CAPACITY, mln lines
DIGITALIZATION RATE,
5
-1
9
INVESTMENT POLICY DYNAMICS AND STRUCTURE OF
CAPITAL INVESTMENT
INVESTMENT, USD, bln
1.93
1.53
1.40
10
KEY OPERATIONAL INDICATORS OF SVYAZINVEST GROUP
LINES PER EMPLOYEE, unit
REVENUE PER EMPLOYEE, USD thousand
16
30
22
30
23
15
NUMBER OF EMPLOYEES, employees, thousand
-5.0
- forecast
11
DEBT OVERVIEW
CAPITAL STRUCTURE, USD bln
RATIO BETWEEN CURRENCY AND RUBLE-DENOMINATED LOANS
14.2 bln.
12.2 bln.
10.4 bln.
AVERAGE COST OF CREDIT RESOURCES,
In 2006 2007, major changes were made to the
structure, cost and amount of the debt portfolio
of the companies in Svyazinvest Group. Changes in
the cost of attracting credit resources are due
both to the upgrade of the RTOs credit ratings
and to the general market correction.
- forecast
12
BOND ISSUES

• Total volume of placement in 2006-2007 was Rub
  19.2 bln (USD 716 mln)

Estimated average USD rate was based on the
exchange rate quoted by the CBR as of the
placement date
13
SVYAZINVEST GROUP DYNAMICS OF CAPITALIZATION
CALCULATED COMPARED WITH THE RTS INDEX, 2006-2007
14
RTOs AND ROSTELECOM SHAREHOLDER CAPITAL STRUCTURE
NORTH-WEST TELECOM
CENTERTELECOM
VOLGATELECOM
39
37
42
38
38
40
11
11
9
14
9
12
SIBIRTELECOM
URALSVYAZINFORM
SOUTH TELECOM
25
39
38
38
41
38
12
13
10
13
22
11
ROSTELECOM
DALSVYAZ
17
36
38
38
9
14
36
12
15
RTOs AND ROSTELECOM CREDIT RATINGS
16

• SVYAZINVEST GROUP PROFILE AND DEVELOPMENT
  INDICATORS
• IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY
  OF SVYAZINVEST GROUP
• UNREGULATED SERVICES PRIMARY DEVELOPMENT TREND
  FOR SVYAZINVEST GROUP
• PROSPECTS FOR SVYAZINVEST GROUP

17
IN 2007, THE RUSSIAN TELECOM MARKET HAS DEVELOPED
ACCORDING TO GENERAL INTERNATIONAL TENDENCIES
83,4
HOWEVER, IT HAS ALSO BEEN CHARACTERIZED BY A
NUMBER OF SPECIFIC FEATURES
GENERAL TENDENCIES
SPECIFIC TENDENCIES

• Mobile traffic replacing fixed traffic

1

• Switch to new system of tariff plans

1

• Development of broadband Internet access

• Introduction of Calling Party Pays principle

2
2
3
3

• Liberalization of LD market

• Introduction of new interconnect rules

• Convergence of telecom services

4
ALL THESE FACTORS HAVE A DIFFERENT IMPACT
COMPANIES OF SVYAZINVEST GROUP KEEP THEIR MARKET
POSITIONS
18
LIBERALIZATION OF LD MARKET

• SINCE JANUARY 1, 2006 LD MARKET HAS BEEN
  LIBERALIZED

• 32 LICENCES HAVE BEEN ISSUED TO DATE

• SEVERAL PROVIDERS ARE ACTUALLY OPERATING ON
  THE LD MARKET ROSTELECOM, GOLDEN TELECOM, MTT,
  TRANSTELECOM

MARKET POSITION OF ROSTELECOM ON ILD MARKET,
ESTIMATED TRAFFIC (1H 2007)
MARKET POSITION OF ROSTELECOM ON LD MARKET,
ESTIMATED TRAFFIC (1H2007)
91
89
- Share of Rostelecom
- Share of other operators
Source iKS-consulting, internal accounts of
Svyazinvest
19
INTRODUCTION OF ?ALLING PARTY PAYS PRINCIPLE
F2M REVENUE, USD MLN
MOU F2M, MIN / MONTH
24
11
16
12
21
17
17
32
SUBSCRIBERS ACTIVITY FOR F2M CALLS AS OF JUNE,
2007,
SUBSCRIBERS ATTITUDE TO THE INTRODUCTION OF CPP,
Source Research by ROMIR, June 2007
Source Research by ComCon, March 2007
20
SWITCH TO NEW SYSTEM OF TARIFF PLANS (1)

• TARIFF PLANS (PSTN, average for RTOs), USD

SUBSCRIBER TARIFF PLAN (PSTN, average for RTOs),
USD
CURRENT TARIFFS (PSTN as of date below, average
for RTOs), USD
- 32
11

0.7

368 min
16
0.9
8
FORMATION OF TRANSITIONAL PERIOD MASS PR CAMPAIGN
CONDUCTED
ACCORDING TO RF CIVIL CODE, THE CURRENT PAYMENT
SYSTEM REMAINS EFFECTIVE FOR THOSE WHO FAIL TO
SELECT A TARIFF PLAN
- Total fee incl. line rental
- Tariff for regions where it is not
technically possible to introduce tariff plans
21
SWITCH TO NEW SYSTEM OF TARIFF PLANS (2)
83,4
BREAKDOWN OF INDIVIDUAL SUBSCRIBERS BY TARIFF
PLAN (IN REGIONS WHERE IT IS TECHNICALLY POSSIBLE
TO INTRODUCE TARIFF PLANS), AS OF OCTOBER 1, 2007
BREAKDOWN OF INDIVIDUAL SUBSCRIBERS BY TARIFF
PLAN (TAKING INTO ACCOUNT THE REGIONS WHERE IT IS
NOT TECHNICALLY POSSIBLE TO INTRODUCE TARIFF
PLANS), AS OF OCTOBER 1, 2007
22

• SVYAZINVEST GROUP PROFILE AND DEVELOPMENT
  INDICATORS
• IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY
  OF SVYAZINVEST GROUP
• UNREGULATED SERVICES PRIMARY DEVELOPMENT TREND
  FOR SVYAZINVEST GROUP
• PROSPECTS FOR SVYAZINVEST GROUP

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GROWTH ON DATACOM MARKET
8
EARNINGS FORM DATACOM SERVICES, USD BLN
GROWTH FORECAST FOR TELECOM MARKET, USD BLN
?AGR
?AGR
11
annual average
23
annual average
23
30
11
Internet and datacom
Mobile communications
Individuals
0
LD services
17
Organisations
Local voice
8
Source McKinsey
Source McKinsey
INTERNET PENETRATION AND BIA IN RUSSIA
(SUBSCRIBERS),

• Datacom will be the fastest growing market
  segment. Most expansion will come from broadband
  Internet access.
• The penetration of broadband Internet access
  (BIA) will grow in line with disposable income,
  computerization, network upgrades and cost
  reduction.

Source UralSib
24
GROWTH POTENTIAL OF SVYAZINVEST GROUP IN THE NEW
SERVICES SEGMENT, USD mln
REVENUE FROM NEW SERVICES IN TOTAL REVENUE OF
SVYAZINVEST GROUP, USD mln
DYNAMICS OF INVESTMENTS IN THE DEVELOPMENT OF NEW
SERVICES AND IT TECHNOLOGIES, USD mln
BREAKDOWN OF REVENUE FROM UNREGULATED SERVICES IN
2007 (FORECAST)
70

• Based on our forecast, Internet and datacom will
  achieve revenue growth of 70 in 2007.

- not incl. cellular communication
25
BROADBAND ACCESS SERVICES
MARKET SHARE OF DATACOM SERVICES,
NUMBER OF xDSL ANF ETTH PORTS ENABLED AS OF
OCTOBER 1, 2007, TH.
40
24
KEY REGIONAL BRANDS AND ARPL (3Q2007)
26
SVYAZINVEST GROUP ON THE MOBILE TELEPHONY MARKET
MOBILE SUBSCRIBERS BASE, thousand
LICENCE COVERAGE OF GSM OPERATORS OF SVYAZINVEST
GROUP

• In 2006, the Groups mobile business policy was
  to increase the presence of RTOs on the cellular
  market and to consolidate assets.
• Svyazinvest Group companies offer mobile services
  in 27 regions of the Russian Federation.

27
FINANCIAL RESULTS OF CELLULAR OPERATORS OF
SVYAZINVEST GROUP
VOLGA, USD mln
URAL, USD mln
SIBIR, USD mln
28
TRENDLINES IN AVERAGE ARPU AND MOU OF MOBILE
ASSETS OF SVYAZINVEST GROUP IN THE MAIN REGIONS
AVERAGE MOU TRENDLINE, min.
AVERAGE ARPU TRENDLINE, USD
ARPU average revenue per user MOU minutes
of use per subscriber
29

• SVYAZINVEST GROUP PROFILE AND DEVELOPMENT
  INDICATORS
• IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY
  OF SVYAZINVEST GROUP
• UNREGULATED SERVICES PRIMARY DEVELOPMENT TREND
  FOR SVYAZINVEST GROUP
• PROSPECTS FOR SVYAZINVEST GROUP

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SVYAZINVEST GROUP PRIMARY OBJECTIVES

• To boost revenue by broadening the scope of
  services provided (employing modern technologies)
  and by raising tariffs for local voice services.
• To maintain strong operating efficiency with a
  view to revised relations between operators,
  liberalization of the LD market and emergence of
  new competitive environment.
• To roll out new generation networks (NGNs) and
  provide a technological framework so that the
  company can rapidly create and provide top-notch
  services throughout the Russian Federation.
• To take further steps towards improving the
  efficiency of Svyazinvest Groups management
  system (to phase in ERP, to introduce a unified
  billing system and OSS Operations Support
  System to implement a set of actions to use
  human resources more effectively, etc.)

31
DEVELOPMENT OF LOCAL TELEPHONY MARKET
83,4
LOCAL TELEPHONY MARKET

Svyazinvests position in 2007
Market Tendencies
Objectives for 2012
To keep leading positions in the local telephony
segment

• MOU growth in the local connections segment, MIN
  / MONTH

• Mobile traffic replacing fixed traffic
• Alternative operators and players from other
  segments entering the market
• Switching voice traffic to datacom networks

20
Svyazinvest Initiatives

• Revenue growth in the local connections segment,
  USD MLN

• To increase the value of subscriber line
• Digitalization of networks
• Introduction of service packages
• New communication services
• Unlimited tariffs

Market share of Svyazinvest Group in this segment
81
18
- line rental and connection services
32
DEVELOPMENT OF INTRA-ZONAL TELEPHONY MARKET
83,4
INTRA-ZONAL TELEPHONY MARKET

Svyazinvests position in 2007
Market Tendencies
Objectives for 2012
To keep leading positions in the intra-zonal
telephony segment

• F2M revenue growth, USD MLN

• Mobile traffic replacing fixed traffic
• Reduction of tariffs
• New players entering the market

17
Svyazinvest Initiatives

• F2F revenue decrease, USD MLN

• To provide package offers
• To optimize tariffs

-12
Market share of Svyazinvest Group in this segment
92
33
DEVELOPMENT OF INTERNET AND DATACOM MARKET
83,4
INTERNET AND DATACOM MARKET

Market Tendencies
Svyazinvests position in 2007
Objectives for 2012

• Growth of demand for and speed of Internet access
  
• Switching to unlimited offers
• Competition between technologies (DSL, ETTH,
  Wi-Fi, Wi-Max, 3G)
• Content becoming increasingly important

To increase market share in the Internet access
and datacom segment

• Internet and datacom revenue growth, USD MLN

62
Svyazinvest Initiatives

• Rapid growth of subscriber database, xDSL
  ETTH, th. ports

• To develop DSL access on existing subscribers
  lines
• To develop ETTH as soon as market saturation
  occurs
• To establish partnerships with content
  aggregating agents

Market share of Svyazinvest Group in this segment
59
27
As of Jan 1
28
As of Apr 1
31
As of Jul 1
As of Oct 1
34
DEVELOPMENT OF LD MARKET
83,4
LD MARKET

Market Tendencies
Svyazinvests position in 2007
Objectives for 2012

• New players entering the market and competition
  increasing
• Voice traffic switching to datacom networks
• Mobile traffic replacing fixed traffic
• Development of intelligent telecom networks

To keep leading positions in the LD
communications segment

• Prices for services rendered are lower than
  competitors Average Income Rate, USD MIN

Svyazinvest Initiatives

• Market share is decreasing as a result of
  liberalization

• To protect companys positions on the retail
  market
• To develop intelligent telecom networks
• To strengthen positions on the corporate clients
  market, incl. at the federal level

Market share of Svyazinvest Group in this segment
60
35
GROWTH OF OPERATING RESULTS
Income
Good FINANCIAL RESULTS, as the company
anticipates that income will grow more than
expenses
Between 2008 and 2012, the income CAGR will
equal 8,5
Svyazinvest Initiatives
2012

• To increase the share of broadband services
• To promote bundled services
• To increase customer loyalty
• To diversify distribution channels and roll out a
  system for active agent sales
• To increase the share of corporate clients

Between 2008 and 2012, the expenses CAGR will
equal 7,2
Expenses
Svyazinvest Initiatives
EBITDA margin 41,4

• To introduce outsourcing
• To develop e-auctions
• To optimize real estate assets
• To optimize business processes and organizational
  structure
• To roll out New Generation Networks
• To optimize the number of employees

- 7 RTOs
36
SVYAZINVEST GROUP PROSPECTS OF KEY PERFORMANCE
INDICATORS FOR 2008
REVENUE, USD bln
OPERATING EXPENSES, USD bln
OPERATING INCOME, USD bln
NUMBER OF EMPLOYEES, thousand
- 7 RTOs Rostelecom
37
55 bld. 2 ulitsa Plyuschikha 119121 Moscow
RUSSIA Phone [phone] Fax [phone]
0475 E-mail ir_at_svyazinvest.ru Web site
www.svyazinvest.ru