Svyazinvest: 2003 results and 2004 key objectives

1. Svyazinvest: 2003 results and 2004 key objectives April 2004 Evgeny Yurchenko, Deputy Director General Svyazinvest

2. Controlling stake State 75% - 1 share Mustcom 25% + 1 share Blocking stake JSC Svyazinvest JSC Rostelecom MGTS Other 7 mega-regionals Svyazinvest holds a leading position in the Russian fixed-line market • Company profile: • Svyazinvest foundation – 18 September, 1995 • Sale of Svyazinvest stake to Mustcom – July 1997 • Consolidation of companies – 72 regional telecom operators were merged into 7 mega-regionals in 2000-2002 Share capital (voting stock)

3. Consolidation of telecom operators enabled Svyazinvest to create economically viable, competitive companies JSC CenterTelecom 5.8 m lines in service market cap. $782 mn JSC Uralsvyazinform 3.3 m lines in service market cap. $1 518 mn JSC North-West Telecom 3.4 m lines in service market cap. $561 mn JSC South Telecom 3.4 m lines in service market cap. $376 mn JSC VolgaTelecom 4.0 m lines in service market cap. $970 mn JSC Sibirtelecom 3.5 m lines in service market cap. $761 mn JSC Dalsvyaz 1.1 m lines in service market cap. $157 mn • became more investor attractive • reduced the cost of borrowed funds • optimized equipment purchase In the result of consolidation, mega-regionals:

4. 2003 Svyazinvest major economic indicators Sales profit* Revenue and costs* 39,5 151,0 35,7 35,7 31,3 30,8 119,8 111,6 92,2 88,5 21,7 RUR bn 70,5 2001 2002 2003 (estimate) 2001 2002 2003 (estimate) Sales profit, RUR bn Profit margin, % Revenue Costs Average number of lines 29,8 Lines mn 28,2 26,9 2001 2002 2003 (estimate) * data include JSC MGTS figures

5. The holding company’s investment activity in 2003 Capital investments Roll-out of capital assets Digitalization level – 43.1% against 37.46% in 2002. Installed capacity – 33.4 mn lines against 31.26 mn lines in 2002. Increase in main telephone lines – 1.5 m against 1.34 m in 2002. Rural telephony: 302.3 thousand lines installed compared to 214.4 thousand lines in 2002. Automatic exchanges upgrade – 676.5 thousand lines. 46,4 41,7 RUR, bn RUR, bn 27,4 22,0 2002 2003 (estimate) 2002 2003 (estimate) 63,9 3,5 14,3 Km, th Lines, mn Chan-nels,th 53,0 2,6 9,5 Transmission lines rolled out Domestic / international channels deployed Lines installed

6. Corporate reform During 2003: 1. Svyazinvest in conjunction with the consulting firm developed a comprehensive Corporate Restructuring Program (CRP). The master plan of this program was approved by Svyazinvest management board in December 2003. 2. CRP Management Centers were set up at mega-regional companies; a number of meetings between Svyazinvest working group specialists, the consulting firm and specialists from every mega-regional company were held; development of master plans was launched. Under the Corporate Restructuring Program, at every mega-regional company a CRP master plan based on the standard structure and recommendations on implementing Svyazinvest methodical documents will be developed. Implementation of CRP master plans will improve asset management, reduce current costs, as well as enhance competitiveness and market capitalization of mega-regional companies.

7. Rebalancing of tariffs for telecom services Monthly rate for urban fixed subscribers Tariffs growth for local telephone services in 2003: 167 167 RUR 162 162 137 138 123 118 95 Average zonal tariff revision for domestic long-distance calls • In 2003 tariffs for domestic long-distance calls for budget-funded institutions, business organizations and residential customers were brought to a similar level. • In 2004 Svyazinvest will carry on increasing tariffs for local telephone services to the level of economically feasible costs, inclusive of target profitability, as well as optimizing tariffs for international calls. +2,3% +1,5% Business organizations Budget-funded institutions Residential customers -10,3% -8,3% -14,3% -25% Zones 1-4 Zones 5-7

8. Tariffs for local telephone services compared to European telecom operators Average monthly rate, US$ Average monthly rate in Russia is still about 3 times lower than in Central and Eastern Europe, and is 5 times lower than in Western Europe. TPSA 15.8 Matav 12,5 Cesky Telecom 11,4 5,4 Dalsvyaz Urasvyazinform 5,2 Average monthly rate at mega-regional companies amounts to $ 4.4 4,4 North-West Telecom 4,3 Sibirtelecom 4,2 VolgaTelecom 3,9 CenterTelecom South Telecom 3,7

9. Corporate governance rating of mega-regional companies (Standard & Poor’s) • Corporate governance ratings of 4 mega-regional companies assigned by S&P were above average ( 5 points out of 10); • Corporate governance ratings of 3 companies were upgraded; • The holding company’s target for 2004 is to further improve its corporate governance, meeting international standards.

10. MRC’s marketing strategies Clear-cut system of marketing planning and accounting Implementation of customer relationship management concept Work with allied operators Improvement of client service Regular marketing researches Program of aggressive service promotion for each customer category Transfer to unified billing system Upgrade of sales and major corporate client servicing systems Marketing Strategy 2004 key marketing objectives • To strengthen company’s presence in the telecom market • To increase market share in certain segments • To increase company’s profitability by means of enhancing revenue per customer and expanding subscriber base • To build sustainably growing client-base through increasing customer loyalty

11. Developmentof value-added services GSM subscriber base of Svyazinvest cellular companies, thousand Revenues from Internet services +47,3% 2,8 RUR bn 1,9 2002 2003 (estimate) Internet services development 2000 2001 2002 2004 2003 6 850 1100 1018 4 313 597 840 673 573 476 479 503 280 211 2002 2003 2002 2003 Data traffic through Internet, Tbyte Internet connections with PSTN access, min mn the Volga region the Urals Siberia

12. Credit ratings of mega-regional companies

13. 350 300 250 200 150 100 50 04.01.03 05.03.03 04.05.03 03.07.03 01.09.03 31.10.03 30.12.03 Telekomunikacja Polska Cesky Telecom Aggregate MRCs RTS index 2003 Capitalization dynamics + 221% + 221% + 57% + 57% + 16% + 16% In 2003 Svyazinvest calculated capitalization grew from $ 1.3 bn to $ 3.3 bn. In 2003 MRCs aggregate capitalization increase was over 220%. The best capitalization dynamics among Eastern European telecom companies.

14. 2004 key objectives • Further increase of revenues through stepping up the amount of services offered and raising tariffs for local telephone services. • Production cost optimization, maintaining high profitability of Svyazinvest companies. • Implementation of new approaches to investment planning. • Implementing provisions of the Code of Corporate Conduct across all mega-regional companies. • Development and implementation of measures under the Corporate Restructuring Program of Svyazinvest subsidiaries to enhance company value and management efficiency. • Working out tariff plans for providing local telephone services to subscribers as a basic type of tariff setting. • Gradual increase of tariffs for local telephone services to the level of economically feasible costs, target profitability inclusive. • Continuing the revamp of the holding company’s human resources policy to meet current market challenges.

15. Svyazinvest 2004 target performance indicators*: • Revenue per line – 6.0 thousand rubles (up 19% against 2003) • Profit per line – 1.6 thousand rubles (up 18.5% against 2003) • Profit margin – 35.8% (35.7% in 2003) • Investments – 54.6 bn rubles (up 17.7% against 2003) • Lines to be installed – 4.0 mn lines (3.46 mn in 2003) • A proportion of costs in revenues – 73.6% (73.9% in 2003) RUR bn 2004 2003 2004 2003 2004 2003 Revenue Sales profit Operating costs * 2003 estimated data.

16. Thank you! APRIL 2004, LONDON