Svyazinvest in 2002 restructuring continuing November 2002 Telecommunications

Svyazinvest in 2002: restructuring continuing November 2002

Telecommunications is one of the most advanced sector of the Russian economy New lines in service, th lines 42. 8% 2017 1405 3. 0% 155 2000 2001 Total Revenues, bln RUR 159 2000 2001 Rural 40. 0% 27. 6% 53. 4% 186, 0 132, 5 66, 6 101, 1 85, 0 65, 9 Capex, bln RUR 174. 2% 241. 9% 6, 36 5, 12 3, 65 2000 2001 Total 2000 2001 Traditional 2000 2001 New 2, 15 1 Q 01 1 Q 02 Capital expenditure Fixed capital expenditure 2

Svyazinvest dominates Russia’s wireline telecoms 29, 7 mln lines in service providing local and long-distance services to 93% of the Russian customers State 75% - 1 share Mustcom 25% + 1 share 51% - Svyazinvest JSC (established in 1995) 53% - Svyazinvest 51% - Svyazinvest 51% - Svyazinvest 13%< - foreign 10%< - foreign 16% - foreign shareholders 34% - other shareholders ~35% - other shareholders 16%< - foreign shareholders 32% - other shareholders Siberia region 7%< - foreign shareholders 42% - other shareholders Central region shareholders Far East region 14%< - foreign Volga region 49% - other Southern region Urals region North-West region Rostelecom 8%< - foreign shareholders 41% - other shareholders 39% - other shareholders 33% - other shareholders 3

Svyazinvest has enjoyed strong financial and operating performances in 2001 Revenue per AL, th RUR Revenues per employee, th RUR AL per employee. EBITDA per AL, th RUR EBITDA per employee, th RUR Return on sales, % Return on assets, % Return on capital, % 2000 2. 37 156 66 0. 84 55 12. 0 3. 83 5. 73 2001 2. 99 210 70 1. 01 71 11. 5 4. 54 6. 67 Svyazinvest financial highlights, 2000 -F 2002 (Rb mn) 4

1 H 02 results show that this positive trend continues 1 H 2002 Revenues per employee, th RUR 146 EBITDA per employee, th RUR 40 AL per employee 75 Revenue per AL, th RUR 1, 95 EBITDA per AL, th 0. 53 Increase in capacity (2002 estimates), mln 2. 4 Increase 33% 14% 9% 22% 4% 26% Bln RUR 5

Estimated Svyazinvest’s capitalization is $1. 43 bln Estimated capitalization of Svyazinvest is US$ 1. 43 bln as per 18 October 2002 6

Svyazinvest has consolidated its regional subsidiaries into seven mega-regional operators of fixed telephony North-West region North-West Telecom Lines in service: 3, 2 mln Central region Center. Telecom Lines in service: 5, 4 mln Southern region Southern Telecom Company Lines in service: 3, 2 mln Volga region Volga. Telecom Lines in service: 3. 7 mln Uralsvyazinform Lines in service: 2, 9 mln Siberia Sibirtelecom Lines in service: 3. 3 mln Far East Dalsvyaz Lines in service: 1. 0 mln 7

Urals, Far East, North-West and South swept shares recently: other mega-regionals to follow by the end of 2002 Share swap – Completed 10/31/02 Registration of Share Placement Report with FCSM – 11/30/02(E) North West Share swap – Completed 09/30/02 Registration of Share Placement Report with FCSM – 10/31/02(E) Far East Urals Center Share swap – Completed 09/30/02 Registration of Share Placement Report with FCSM – 10/31/02(E) Share swap – 11/30/02 Registration of Share Placement Report with FCSM – 12/31/02(E) Share swap – Completed 10/31/02 Share swap – 11/30/02 Registration of Share Placement Report with FCSM – 11/30/02(E) Registration of Share Placement Report with FCSM – 12/31/02(E) South Siberia Volga Share swap – 11/30/02 Registration of Share Placement Report with FCSM – 12/31/02(E) 8

Russian mega-regionals are large enough to compete with European peers … Lines in service, mln 1 H 2002 9

… but they are relatively cheap Average CEE telecoms’ MСap/AL is $703 vs Russian $63. 10

Although tariff level is growing constantly, … RUR 11

… it’s still very low comparatively to European telecoms Russian monthly tariff is about 3 times less than CEE average and 8. 6 than in Western Europe. mega-regional average tariff is $2. 9 per month 12

Network development is the key goal of Svyazinvest Capex forecast, bln RUR New access lines, mln per year 3, 20 34, 24 3, 00 32, 52 2, 40 27, 89 17, 63 14, 24 1, 72 18, 52 1, 19 1, 07 13

Financial forecast of group Svyazinvest 14

Svyazinvest is increasing efficiency of mega-regionals within four blocks of corporate restructuring v v v Creating a methodology to calculate economically feasible costs Creating a unified accounting policy and introducing separate accounting for revenues and expenses Compiling financial statements in compliance with IAS Budgeting Cost-cutting program The finance and economic block in merged entities is designed to ensure an effective system of financial planning and control The marketing block is designed to give the merged entities a powerful marketing strategy v v Identifying a medium term marketing strategy for the mega-regional telecoms Training and certifying the Company’s marketing staff v v v Technical audit of regional telecom operators Technical development principles of merged entities Working out a general network development plan for the holding company until 2007 Technological integration of the networks of merged entities HR management program Developing a methodology and carrying out: v assessment of key personnel, v recruiting qualified executives, v training key specialists. Creating a rotational policy and a resultoriented incentive system 15

In 2001 Svyazinvest implemented a number of projects aimed at creating an efficient system of business planning and control v Preparations for transition to reporting under IAS • Training and implementation of in-house IAS reporting • Quarterly IAS reporting since 2002 v A new budgeting methodology was worked out and launched v A uniform management accounting system was elaborated v Preparations to change the tariff regulation system • An economically feasible cost calculation methodology was worked out • Beginning from 2002 the holding company’s operators are planning a trial application of the methodology, and beginning from 2003 – to adopt a long run incremental costs method 16

Svyazinvest is currently working on: v Foreign currency loans reduction switching over rubble loans v New HR program v Guidelines for mega-regionals’ marketing strategy v General plan for network development of mega-regionals and Rostelecom, as integral parts of the telecommunications network of the Russian Federation for the period until 2007 v Separate accounting of revenues and expenses from different services 17

Long-term local and foreign currency credit ratings were assigned to all seven surviving entities during 2001 -02 Credit ratings of surviving entities are only 1 -2 points lower than that of the Russian Federation Company Credit Rating Outlook Agency Sibirtelecom В Stable Fitch Volga. Telecom В- Stable S&P Dalsvyaz В- Stable Fitch Uralsvyazinform В-/В Stable S&P/Fitch South Telecom ССС+ Stable S&P North-West Telecom CCC+ Stable S&P Center. Telecom CCC Stable S&P 18

Svyazinvest high performance figures led to a significant growth of its market capitalization Growth of capitalization in 1 H 2002 - 75% 3 -5 -fold increase in capitalization should the restructuring be completed and telecoms tariffs in Russia reach the level of Eastern European tariffs. 19

All business efficiency indicators of the holding company are planned to increase in 2002 v Bn, RUR 110, 5 v Operating profit per employee – RUR 85, 000 (148% compared to 2001) v Number of lines per employee – 76 (109% compared to 2001) v Gross revenue per line – RUR 4, 000 (119% compared to 2001) v Operating profit per line – RUR 1, 116, 000 (136% compared to 2001) v Installation of new telephone capacity – 2. 4 million lines (1. 9 million lines in 2001) v A proportion of expenses in the gross income – 72% (down 3% as compared to 2001) 92, 1 82, 3 73, 4 70, 5 55, 3 28, 2 18, 1 2000 2001 2002 Gross income 2000 2001 2002 Operating expenses 21, 7 2000 2001 2002 Sales revenue In 2002: Gross income per employee – RUR 310, 000 (130% compared to 2001) 20

Thank you! November 2002 21