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Report plan

Report plan. OJSC FETEC ( Dalsvyaz) is the telecommunications leader of the Far Eastern federal district Financial and economic indices of the OJSC FETEC (Dalsvyaz) Technical and technological indices and opportunities of the OJSC FETEC (Dalsvyaz) Plans for Company development

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Report plan

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  1. Report plan • OJSC FETEC (Dalsvyaz)is the telecommunications leader of the Far Eastern federal district • Financial and economic indices of the OJSC FETEC (Dalsvyaz) • Technical and technological indices and opportunities of the OJSC FETEC (Dalsvyaz) • Plans for Company development • OJSC FETEC (Dalsvyaz) is a member of national and international financial market

  2. OJSC FETEC is the telecommunications leader of the Far Eastern federal district

  3. Region description • Territory of the Far Eastern Federal district covers 36.4% (6.2 mln. Sq. km.) of All-Russian and plays key geopolitical role in Asian Pacific Rim. The region has land frontiers with China, North Korea and maritime boundary with USA and Japan. • Sea ports provide export flows of Russian goods to world markets and supplies of import products from APR to Russia. Far eastern Coast has 32 sea ports where 22 are commercial ports and 10 are fishing ports. • Main railway lines pass along central and southern part of the Far East. These are eastern sections of Trans-Siberian and Baikal-Amur Railway. Trans-Siberian railway is the largest. Final pieces of Trans-Siberian and Baikal-Amur lines end in sea ports and some pieces are connected with North eastern provinces of China. • The region has significant resources of minerals, nonferrous and noble metals, iron ore, coal (20 bln. tons), oil (9,6 bln. tons), natural gas (14 trillion cub. m.), timber as well as water-power resources. According to forecast Far Eastern sea shelf has 30 bln. Tons of hydrocarbon. Over 60% of Russian fish and seafood is obtained here. • The Far East has economically favorable zones providing tax and customs benefits (Magadan, Sakhalin, Kamchatka, Primorsky and Khabarovsk region)

  4. 738.0 630.0 Telecommunications sector, total 557.0 428.0 340.5 406.0 254.0 340.0 312.0 192.5 240.0 175.0 135.8 OJSC FETEC 115.3 2000 2001 2002 2003 2004F 2005F 2006F Far Eastern Telecommunications Market – forecasted growth of 3.8 • Telecommunications market growth from 2000 to 2006 - 3,8 times up to USD 738 mln. From 2003 to 2006 by 72%; • Main market growth factors: • Unsatisfied demand for traditional communication services; • Growth of the regional economy; • Increased demand for alternative telecommunication services; • Forecasted market share of the OJSC FETEC in 2006 is 55% (USD365 mln.); • Increase of the OJSC FETEC services at the expense of both traditional and new services. Regional telecommunications market and share of the OJSC FETEC from 2000 to 2006, USD mln. х3.8

  5. OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district OJSC FETEC (Dalsvyaz) Mission: Formation and full satisfaction of clients’ needs in modern communication within far Eastern Federal District. Key factors of Company success: • Marketing policy aimed at providing all categories of consumers with full complex of telecommunication services • Implementation of modern technological solutions • Highly skilled personnel • Company Information openness • Long-term open cooperation

  6. OJSC FETEC is the telecommunications leader of the Far Eastern federal district • FETEC (Dalsvyaz) today is: • The largest company of the Russian Far East and one of the biggest Russian communication operators. • Reliable partner, the biggest communication operator of the Russian Far East providing all modern high-quality services available to all categories of consumers • Company telephone network is a public network including alternative and cellular communication operators • International level of business organization and service provision

  7. OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district Main licenses: • Local, long-distance and International telephone communication • Wired sound program translation • Telegraph communication • Cellular radiotelephone communication 900 MHz (Kamchatka and Magadan region) • Data transmission services • Local and intrazone telephone communication • Leasing of communication channels (local, long-distance channels and routes, transmission of television, sound broadcasting channels, physical lines for telecommunication signals) • Telematic services (e-mail, fax, information access, inquiry service, voice communication, audio conference, video conference)

  8. OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district • Services: • Local, International and long-distance telephone communication, • Internet, • Corporate network arrangement, • Videoconference communication • Cellular communication (Magadan and Kamchatka region), • Network development, • Equipment installation and setup, • Arrangement of specialized data transmission networks for financial and banking services, • Paging communication, • Data transmission, • IP-telephony, • Trunk communication, • Wireless radio access

  9. Financial and economic indices of 2003 according to Russian Standards of Accounting

  10. Realization of OJSC FETEC (Dalsvyaz) Strategy – profit rise and service quality improvement Billion rubles Proceeds rise by 82%for 4 years 12.2 • Company main tasks: • Increasing range of telecommunication services; • Creating image of reliable operator being the leader of high quality services for all categories of consumers; • Complex development of services based on modern technologies; • Increase of share of new communication services in total proceeds; • Creating conditions for employee self-actualization; • Company Profit and capitalization rise; • Favorable conditions for investment attraction. 10.2 8.9 6.7 5.3 4.2 2001 2002 2003 2004П 2005П 2006П • Strategy implementation will enable the OJSC FETEC (Dalsvyaz): • To gain at least 55% share of regional communication market; • Efficient development of regional branches; • Service structure optimization and twofold profit increase by 2006; • Strengthening its positions on cellular market; • Expansion and retention of client base in segment of individuals and profit organizations. • OJSC FETEC Marketing strategy provides: • Retaining dominating position on the regional market; • Creating conditions for communication service development in the region; • Full complex of modern communication services; • Significant influence on market development.

  11. OJSC FETEC (Dalsvyaz) Proceeds Structure for 2003

  12. Telephone network capacity 2001to 2004 Quantity of numbers

  13. Capital investments 2001-2004 Thousand$

  14. Investments (structure)2001 – 2004

  15. Telephones per 100 19.4 19.7 22.2 23.7 26.2 Technical indices of the OJSC FETEC (Dalsvyaz) are constantly improving Assembled capacity (mln. lines) and equipped capacity ratio +41% • At present the OJSC FETEC (Dalsvyaz) has: • 80% of local wire communication of the Far East; • 87% or International regional communication; • 59% of regional Internet market; • 51% of proceeds from Far Eastern communication market; • Communication services in over 46 cities; • Assembles capacity of over 1.3 mln. numbers; • 1372 automated telephone exchanges; • Plan till 2006: • Increase of assembled capacity by 1,4; • Increase of equipped capacity ratio up to 93%; • Digitalization rise up to 74%; • Increase of telephone capacity by 35%; • Growth of local telephone network capacity is 280-290 thousand numbers annually; • Construction of 3809 km of additional transmission lines (line cable structures, relay transmission lines,optical fiber communication line). 1.86 1.69 1.52 Free capacity 1.32 1.19 93% 1.12 91% 1.09 87% 86% 91% 92% 89% Equipped capacity 2000 2001 2002 2003 2004F 2005F 2006F digitalization, % 44% 48% 56,6% 66,3% 74%

  16. Technological potential of the OJSC FETEC (Dalsvyaz) Extension of optical fiber communication lines Extension of optical fiber communication lines • Trunk and intrazone transmission lines – 505,4 km • CTX –805 km • VTX –1 km Number transmission line channels formed under Optical Fiber Communication Line:

  17. Technical performance of the OJSC FETEC (Dalsvyaz) Assembled capacity – 1 330 698 numbers City Telephone Exchange – 1 138 765 Village Telephone Exchange – 191 933 Equipped capacity – 1 142 461 numbers CTX – 986 442 VTX – 156 019 Free capacity – 188 237 numbers number of ATXs – 1372 CTX – 381 VTX – 991 where digital – 150 (81 – CTX, 61 – VTX) line digitalization – 48,3 % (CTX – 54,1%, VTX – 14,1%) Telephones per 100 residents – 19,7 pcs

  18. Company development plans for 2004 • Network digitalization • Putting into operation new lines, extension of Optical Fiber Communication Lines • Access to services

  19. Medium and long-term plan of the Company development • New Services - Implementation of Intellectual Network Services - Cards covering the whole region. Roaming card. - Unified card. (Payment of all communication services.) - NGN network. - Call-Center services. - Audio and videoconference communication. - Payment. - Data storage services. (Outsourcing of data storage systems.) All services save the lastare planned for 2004.

  20. Medium and long-term plan of the Company development • Network digitalization

  21. Medium and long-term plan of the Company development Optical Fiber Communication line

  22. OJSC FETEC (Dalsvyaz) is an active member of International Financial Market • Russian Exchange market: • Company shares have listing of RTS exchange and are included in list of shares for RTS index. Company shares also circulate on Moscow Interbank Currency Exchange and Saint Petersburg Exchange • Company capitalization as of the end of March 2004 is over $150 mln. USD • The Company placed a 3-year issue of bonds for amount of $1 billion. Bonds were registered by Federal Securities Committee on July 18, 2003 and they circulate on MIBCE. Bond yield subject to retirement in March 2004 was 7-8% per annum.

  23. Distribution of the OJSC FETEC authorized capital

  24. Distribution of OJSC FETEC voting shares

  25. OJSC FETEC (Dalsvyaz) Capitalization (mln. $) mln. USD

  26. Dynamics of OJSC FETEC (Dalsvyaz) shares quotations Dynamics of preferred shares quotations Dynamics of ordinary shares quotations Weighted average price, USD Trade volume, USD

  27. OJSC FETEC capitalization in comparison with capitalization of the far East Companies, mln. $ (data as of March 31, 2004)

  28. OJSC FETEC (Dalsvyaz) is a member of International Financial Market • International exchange market: • OJSC FETEC (Dalsvyaz) realizes the program of American Depository Receipts of the 1st level. J.P. Morgan is Depository Bank of ADR issue service • Russian Federal Securities Committee made Order No., 703-p dated August 16, 2001 permitting circulation of OJSC FETEC (Dalsvyaz) ordinary registered non-documentary shares as depository securities beyond Russian Federation.US Securities and Exchange Commission gave its permission in September of 2001. • Federal Securities Committee permitted circulation beyond Russia of shares of additional issues placed by conversion of affiliated companies’ shares to FETEC (Dalsvyaz) shares (order No., 1041/р datedAugust 16, 2002) • FETEC (Dalsvyaz) ADRs are traded on American OTC.

  29. OJSC FETEC Ratings • OJSC FETEC (Dalsvyaz) Ratings on International Financial Markets • In March of 2004 Fitch Ratings International Rating Agency rose main unsecured rating of the OJSC FETEC (Dalsvyaz) in foreign currency up to В (rating forecast is positive) and confirmed В short-term rating • In July of 2003 the Board of Standard & Poor’sRating Company decided to rate the OJSC FETEC (Dalsvyaz) 5,3Corporate Management rating (10-point scale) including component points as follows: • ownership structure and shareholders’ influenceis 5,5 (10 maximum); • rights of persons with financial interest and relations with themare 6,3 (10 maximum); • Financial transparency and information disclosure is 4,7 (10 maximum); • Membership and activity of the Board of Directors is 4,9 (10 maximum);

  30. OJSC FETEC (Dalsvyaz) Website:www.dsv.ru E-mail:pr@dsv.ru Address: 57 Svetlanskaya St., Vladivostok 690950 Tel.: (4232) 222384, Fax: (4232) 408030

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