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“SOUTHERN TELECOMMUNICATIONS COMPANY” PJSC

“SOUTHERN TELECOMMUNICATIONS COMPANY” PJSC. Agenda of the Annual General Shareholders’ Meeting of “UTK” PJSC 30.06.2004. “SOUTHERN TELECOMMUNICATIONS COMPANY” PJSC.

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“SOUTHERN TELECOMMUNICATIONS COMPANY” PJSC

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  1. “SOUTHERN TELECOMMUNICATIONS COMPANY” PJSC Agenda of the Annual General Shareholders’ Meeting of “UTK” PJSC 30.06.2004

  2. “SOUTHERNTELECOMMUNICATIONS COMPANY” PJSC Approval of the annual report, annual financial accounts including profit and loss statement (profit and loss accounts), distribution of profits and losses of the Company according to the results of the reporting financial year (2003). Speaker – I.F. Ignatenko, General Director of “UTK” PJSC

  3. STRUCTURE OF THE REPORT General information about “UTK” PJSC The Company’s structure Significant corporate events of the year Positioning in the market Performance results Financial results Auditor’s Opinion Report of the Auditing Commission Development prospects

  4. GENERAL INFORMATION ABOUT THE COMPANY Full registered name, date of the registration http:\\www.stcompany.ru E-mail: operator@mail.stcompany.ru Tel. +7(8612) 53-20-56 Registered by the Act of the Krasnodar City Registration Chamber №494 series А Head office: 66, Karasunskaya Street, Krasnodar

  5. GENERAL INFORMATION ABOUT THE COMPANY Authorized capital Size - 1 bln 297 mln 779 ths 384,66 rubles Par value - 0,33 ruble

  6. GENERAL INFORMATION ABOUT THE COMPANY Ownership structure

  7. GENERAL INFORMATION ABOUT THE COMPANY Capital structure

  8. GENERAL INFORMATION ABOUT THE COMPANY Market capitalization of inter-regional entities, USD mln

  9. Source: RTS database GENERAL INFORMATION ABOUT THE COMPANY Dynamics of UTK share prices and market indices in 2003

  10. GENERAL INFORMATION ABOUT THE COMPANY ADR capitalization of “UTK” PJSC in 2003, USD mln +65.3%

  11. GENERAL INFORMATION ABOUT THE COMPANY Rating Agency “Standard & Poor’s” • Corporate Governance Score 12 February 2003 11 November 2003 В - • Long-term corporate local and foreign currency credit rating ССС+ 02 April 2003 27 December 2001 On August 6, 2003 Standard & Poor's assigned its "ruBBB" Russia national scale rating to PJSC "Southern Telecommunications Company" ("UTK" PJSC). At the same time, Standard & Poor's assigned its "ruBBB" rating to "UTK" PJSC Russian ruble (RUR) 1.5 billion senior unsecured bond issue due 2006

  12. GENERAL INFORMATION ABOUT THE COMPANY The Company’s Auditor «Ernst and Young Vneshaudit» CJSC • Location • Building 1, 77, Sadovnicheskaya nab., Moscow, Russia • License • License No. Е003246 for auditing, in particular for general and bank auditing and for auditing of insurance companies, foundations and exchanges, was granted for five years and approved by Order No. 9 of the RF Ministry of Finance dated January 17, 2003 (valid till 17.01.2008).

  13. GENERAL INFORMATION ABOUT THE COMPANY Registrar «Registrator-svyaz» CJSC • Location • 15a, Kalanchevskaya Str., Moscow, 107078, Russia. • Tel./fax: (095) 933-42-21. • E-mail: regsw@asvt.ru • License • Number: 10-000-1-00258. • Date of issue: 1.10.2002 • Period of validity: unlimited. • Licensing body:Federal Commission for Securities Market of Russia.

  14. THE COMPANY’S STRUCTURE Board of Directors Elected on 25.06.2003 Corporate Governance Committee Budget and Investment Planning Committee Nominations and Compensation Committee Audit Committee 40 meetings were held 184 issues were considered and approved

  15. THE COMPANY’S STRUCTURE Management Board Elected on 25.06.2003 Financial and economic operations of the Company Capital construction Development of the Company’s investment program and budget for their submission to the Board of Directors for approval Determination of the priority development trends Approval of the internal documents regulating the Company’s operations Supervising accounts receivable and drawing up actions on their reduction Social and economic development 12 meetings were held 140 issues were considered and approved

  16. THE COMPANY’S STRUCTURE Auditing Commission Elected on 25.06.2003 The terms of reference of the Auditing Commission cover: checking the reliability of the data contained in the accounts and other financial documents of the Company; revealing any facts of violation of the procedure for book-keeping and submission of financial reports, established by the legal acts of the Russian Federation; checking the observance of the legal standards in tax calculation and payment; revealing any facts of violation of the legal acts of the Russian Federation, in compliance with which the Company performs its financial and economic operations; evaluating the economic advisability of financial and economic operations of the Company.

  17. THE COMPANY’S STRUCTURE Organizational structure General Shareholders’ Meeting Board of Directors General Director Management Board General Management Branches ( 10 branches of major business) Branches ( 3 branches of secondary business)

  18. THE COMPANY’S STRUCTURE Main functional blocks of the General Management organizational structure Technological Commercial Construction Financial Security Economic Legal Corporate Governance Administrative General management Information Internal Audit Personnel management Accounting

  19. THE COMPANY’S STRUCTURE The basic directions of optimization of the Company’s organizational structure are the following: Optimization of the number of structural divisions in the Company’s branches – according to management standards Establishment of effective vertical and horizontal relations between structural divisions – according to business management doctrine Optimization of the staff number in structural divisions – in conformity with scientifically proved labor standards Improvement of systems, forms and methods of management

  20. SIGNIFICANT CORPORATE EVENTS OF THE YEAR General Shareholders’ Meetings Extraordinary General Shareholders’ Meeting was held on 21.01.2003. Venue: 44, Krasnaya Street, Krasnodar, Krasnodar krai Annual General Shareholders’ Meeting was held on 25.06.2003. Venue::“Health-care center “Orbita” CJSC, Olginka, Tuapse district, Krasnodar krai.

  21. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Corporate reorganization Creation of communication networks’ management system Change of information technologies Rearrangement of organizational structure and human resources management Reorganization of logistical support Development of business opportunities Increase of efficiency of accounting and economic subdivisions Corporate actions of general character

  22. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Approval of 2003 Budget

  23. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Participation in exhibitions and congresses, meetings with investors Russian Economic Forum in London, 3.04.2003 International Congress "Trust and Security in the Information Society", 21-22.04.2003, Moscow International Investment Forums «South of Russia-2003», 6-9.04.2003, Madrid and 26-29.09.2003, Berlin

  24. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Participation in exhibitions and congresses, meetings with investors International Exhibition “Svyaz-Expocomm,2003», May, 2003, Moscow InternationalInvestment Forum «Days of the Krasnodar krai in Germany», May 2003, Hannover International Exhibition of telecommunications, new infocommunication technologies and their applications «Infocommunications of Russia XXI century», September, Russia World Exhibition «Telecom-2003», October, Switzerland, Geneva

  25. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Participation in exhibitions and congresses, meetings with investors On April 18, 2004 a meeting of "UTK" PJSC Management and top managers of the fund ‘’Templeton Russia Fund’’ headed by Mr. Mark Mobius, the Company’s shareholder, was held in Krasnodar. On 15 September 2003 a conference with analysts and investors devoted to placement of UTK series 01 bond issue to have been performed on 18.09.2003 was held in Moscow. The Company presented its plans of business development up to 2006 at the conference.

  26. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Actions on investor relations and development of the secondary market of shares Program on investor relations and development of the secondary market of shares in 2003was approved by the Board of Directors on 25 April 2003. Aims:to ensure fair market value and to form the Company’s liquid securities market, to make the Company more recognizable by the participants of the investment community

  27. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Customer service Integrated system of sales of telecom services and advertising in the telecommunications market of the Southern federal district Set up of Unified Accounting and Service Centers Main tasks: • To meet the requirements of various categories of customers for the range of telecommunications services available. To ensure a sufficiently high level of service for key customers • The efficient promotion of services to the telecommunications market of the SFD taking into account the Company’s service, regional and client segment priorities

  28. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Personnel management The main concept of the personnel management system used by the Company is to increase business efficiency of the company by raising the effectiveness of its human resources 81.6% Average over “Svyazinvest” OJSC 70.92%

  29. SIGNIFICANT CORPORATE EVENTS OF THE YEAR Improvement of quality management system Improvement of quality control system in accordance with ISO 9000 standards makes it possible to ensure reliable and stable operation of the Company as well as to achieve the set goal which is to provide Southern regions of Russia with full range of integrated telecom services of high quality

  30. POSITIONING IN THE MARKET Telecommunications market of the Southern federal district Goal: to increase UTK market share to 51%

  31. POSITIONING IN THE MARKET Telecommunications market of the Southern federal district

  32. POSITIONING IN THE MARKET Priority development trends Traditional telecommunications services Counteraction to competitors in the market of long-distance telephony. Sale promotion of services of long-distance fixed-line telephony. Development of public switched telephone network PSTN paying special attention to business sector (high profitability, good prospects of broadening the range of provided services). Introduction of universal service cards for payment of telecommunications services. Provision of package services. Introduction of time-based billing system SPUS. New value-added services Introducing new technologies and services corresponding to the tendencies of market development and meeting the customers’ real requirements (Call-centers, intelligent services, cable TV) Making value-added services more competitive including in the spheres of customer service. Developing integrated data networks (multi-service networks) in the Southern Federal District. Introduction of universal service cards to pay for telecommunications services provided. Popularization of the pre-paid cards. Technical realization of intra-regional roaming of services. Providing services “in package”.

  33. POSITIONING IN THE MARKET Priority development trends Tariff policy to even out tariffs in the framework of the inter-regional company, to minimize tariff differences in the consolidated company taking into account regional peculiarities; to introduce step-by-step unified tariff system for all categories of customers; to reduce cross-subsidies; to bring regulated tariffs to the level of economically justified costs on the basis of separate cost accounting and standard level of profit, their further rebalancing according to “price cap” method (limit pricing); to include investment component in tariff structure; to develop tariffs on value-added services on the basis of new technologies, using the experience of domestic and foreign operators; to elaborate various tariff plans for package services; to use flexible system of discounts with regard to customer demand, growth of volume of provided services and earnings increase.

  34. 310.1% 202.7% 267.8% 164.6% PERFORMANCE RESULTS Investment policy Capital expenditures, RUR mln Fixed assets put into operation, RUR mln

  35. PERFORMANCE RESULTS Investment policy Capex breakdown

  36. PERFORMANCE RESULTS Investment policy Allocation of capital expenditures

  37. 25% 75% 52% 48% 87,5% 12,5% PERFORMANCE RESULTS Investment policy Sources of financing, %

  38. 15% 43% 22% 25% 78% 14% 50% 33% 10% 10% PERFORMANCE RESULTS Investment policy Borrowed funds breakdown, %

  39. 532.5 142.3% 374.2 161.4% 231.9 PERFORMANCE RESULTS Investment policy Number capacity put into operation, ths lines

  40. 168.3% 111.6% 197.1% 102.7% PERFORMANCE RESULTS Indicators of network development Increase in the length of long-distance (intra-zonal) telephone channels , ths channel/km Fiber-optic lines put into service, km

  41. PERFORMANCE RESULTS Indicators of network development STM-1/4/16/64 STM-1/4/16/64 STM-1/4/16/64 SDH equipment manufactured by Siemens, Alcatel, Lucent Technologes, Huawei are deployed in the intra-zonal transportation network

  42. 296.8 178.9% 108.4% 165.8 153.1 PERFORMANCE RESULTS Indicators of network development Increase in the number of basic telephones, ths sets

  43. PERFORMANCE RESULTS Indicators of network development Equipped capacity factor,% Digitization rate,%

  44. 128.24% 128.15% 131.7% 127.1% PERFORMANCE RESULTS Main economic indexes Revenue from sale of goods, works, services, RUR mln Revenue from telecommunications services, RUR mln

  45. 50.4% 39.8% 4.1% 52.5% 36.8% 3.1% 54.4% 33.0% 3.0% PERFORMANCE RESULTS Main economic indexes Dynamics of revenue structure from telecommunications services, %

  46. 178.7% 123.2% PERFORMANCE RESULTS Main economic indexes Revenues from value-added services (VAS), RUR mln Dynamics of revenues from value-added services

  47. 130.29% 132.43% PERFORMANCE RESULTS Main economic indexes Costs , RUR mln Dynamics of costs structure, % 14.3% 9.3% 33.8% 10.5% 10.3% 32.8% 14.25% 10.9% 8.8% 9.9% 31.4% 11.4% 13.7% 11.3% 10.5%

  48. PERFORMANCE RESULTS Main economic indexes EBITDA in comparable conditions, RUR bln Cost price of one ruble of revenue, RUR

  49. PERFORMANCE RESULTS Main economic indexes Business efficiency Growth rates of revenues and business efficiency, %

  50. PERFORMANCE RESULTS Main economic indexes Business efficiency

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