A PRESENTATION TO

1
Reorganization of OAO Svyazinvest Volga
region telecom operators merger
Presentation to minority shareholders
September, 2001
2
Disclaimer
ANY INFORMATION CONTAINED IN THIS PRESENTATION
SHALL BE CONSIDERED AS INFORMATION GIVEN IN ORDER
TO PROVIDE BROAD ASSISTANCE TO MERGING COMPANIES
SHAREHOLDERS BUT NO ACTION SHOULD BE TAKEN ON
THE BASIS OF THE PRESENTATION. WHILE CARE WAS
TAKEN IN PREPARING THE PRESENTATION, ZAO GAMMA
CAPITAL ACCEPTS NO RESPONSIBILITY TO ANY PERSON
FOR CONSEQUENCES OF SUCH PERSON'S INVESTMENT
DECISIONS TAKEN ON THE BASIS OF THE PRESENTATION.
THE PRESENTATION SHOULD NOT BE USED OR RELIED
UPON AS A SUBSTITUTE FOR DETAILED ADVICE OR AS A
BASIS FOR FORMULATING BUSINESS DECISIONS. THE
PRESENTATION HAS BEEN PREPARED BY ZAO GAMMA
CAPITAL ON THE BASIS OF THE INFORMATION AND DATA
SUPPLIED BY OAO SVYAZINVEST AND OTHER INDICATED
SOURCES AND ZAO GAMMA CAPITAL SHALL NOT BE
LIABLE FOR THE COMPLETENESS OR ACCURACY OF SUCH
INFORMATION.
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• Summary Information
• Valuation
• Fundamental Analysis
• Technical Analysis
• Preferred Stocks
• Swap Ratios

4
Merger is About Creating Value for Shareholders
Through

• Improved transparency in corporate governance
• Stronger market position in highly competitive
  environment
• Increased bargaining power with suppliers and
  customers
• Reduction in capital needs
• Better access to capital markets at a lower cost
• Enhanced management flexibility with regard to
  the Companys future operations
• Increased stock liquidity

5
Merging Companies
OAO Nizhegorodsvyazinform
OAO Svyazinform Samara
??? Svyazinform Chuvashia
??? Electrosvyaz Orenburg
??? Martelcom Mariy El
??? Saratovelectrosvyaz
OAO Svyazinform Mordovia
OAO Svyazinform Penza
OAO Udmurttelecom
??? Kirovelectrosvyaz
OAO Ulyanovskelectrosvyaz
6
Merging Companies LIS Key Financials
Headquarter will be based in Nizhny Novgorod
Source Svyazinvest
7
Volga Compared to Other Regions
Merged company is the third largest by LIS
Source Svyazinvest
8
Major Events to Date
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Merger Timetable
Dec 00
Aug 01
Nov 01
Jan 02
Dec 02
Sep 02
New share issue
Redemption, meetings with creditors
Swap ratios
Shareholders meetings
Merger completion

• Prospectus for new share issue
• Filing the prospectus with FSC
• Transferring property and staff settling
  other administrative and organizational issues.
• Technical conversion of shares

• Registration of statutory prospectus
• Conduction of general meeting of the consolidated
  company
• Registration of new companys charter and
  liquidation of separate legal entities

• Due Diligence
• Valuation
• Swap ratios
• Redemption price
• Preparation statutory merger agreement

• Board of Directors
• Extraordinary shareholders meetings

• Redemption of stocks
• Negotiations with creditors
• Approval of merger by Ministry of Antimonopoly
  Policy

10
Important Legal Issues

• The rules on reorganization of a company in the
  form of a merger are set out in the Law on Joint
  Stock Companies, 26 Dec. 1995 (JSCL)
• Before the merger is put on vote to the General
  Shareholders Meeting the decision on merger
  should be approved by the companys Board of
  Directors by the majority votes (JSCL, Art. 68.3)
• The merger should be approved by General
  Shareholders Meeting by no less than ѕ of votes
  present (JSCL, Art. 49.4)
• Shareholders of preferred stock should
  participate in the vote (JSCL, Art. 32.3)
• Shareholders not present and/or voting against
  the merger may require the company to buy out
  their shares within 45 days after the General
  Shareholders Meeting decision (JSCL, Art. 75.1
  Art. 76.3)
• Company creditors should be notified about the
  merger within 30 days after General Shareholders
  Meeting decision (JSCL, Art. 15.5)

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Timetable of Extraordinary Shareholders Meetings

• OAO Kirovelectrosvyaz October 22, 2001 Ul.
  Moskovskaya 20, Kirov
• OAO Svyazinform Mordovia October 23, 2001
  Pr. Lenina 12, Saransk,
• OAO Electrosvyaz Ulyanovsk October 24,
  2001 Ul. Radischeva 1, Ulyanovsk
• OAO Electrosvyaz Orenburg October 30,
  2001 Ul. Kobozeva 43, Orenburg
• OAO Svyazinform Samara October 31, 2001 Ul.
  Kievskaya 1, Samara
• OAO Udmurttelecom November 1, 2001 Ul.
  Pushkinskaya 278, Izchevsk
• OAO Saratovelectrosvyaz November 2, 2001 Ul.
  Kiseleva 40, Saratov
• OAO Svyazinform Chuvashia November 2, 2001 Ul.
  Lenina 2, Cheboksary
• OAO Svyazinform Penza November 5, 2001 Ul.
  Stavskogo 13, Penza
• OAO Martelkom November 6, 2001 Ul. K.Marksa
  87, Ioshkar-Ola,
• OAO Nizhegorodsvyazinform November 9, 2001
  Dom Svyazi, Nizhny Novgorod

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• Summary Information
• Valuation
• Fundamental Analysis
• Technical Analysis
• Preferred Stocks
• Swap Ratios

13
Valuation
FUNDAMENTAL ANALYSIS
TECHNICAL ANALYSIS

• Discounted Cash Flow (DCF)
• Multiples/Comparable companies
• Net Asset Value (NAV)

• Historical quotes

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• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

15
DCF Underlying Assumptions

• Basis for the operating projections is budget
  approved by Board of Director and Svyazinvest
• Discount rate Weighted Average Cost of Capital
  (WACC)
• Cost of equity Capital Assets Pricing Model
  (CAPM)
• Risk free rate 15.70 (YTM as of Jan-05 2001 of
  Russian eurobonds maturing in 2005)
• Market risk premium 6.99 (Ibbotson Associates
  estimates)
• b calculated for each company based on RTS Index
  and quotes
• Cost of debt
• Cost of debt Risk free rate Credit risk
  premium
• Credit risk premium depends on operating data and
  company size
• Subsidiaries are valued separately

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Valuation of Subsidiaries

• Subsidiaries substantial contribution to value
  (mobile operators and ISP)
• Mobile operators discounted MTS and Vimpelcom
  multiples
• ISP transaction multiple
• Source companies financial reports, NYSE

Source RTS, NYSE, ZAO Gamma Capital estimates
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• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

18
Multiples of Comparable Companies

• Comparison data base Svyazinvest subsidiaries
• Source financials (Svyazinvest), quotes (RTS)
• Multiple used
• EV / LIS
• EV / EBITDA
• EV / Sales
• For the purpose of EV calculation equal weighting
  of 1/3 applied to each multiple

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EV / LIS Multiple

• Depending on the number of LIS, regional telecoms
  were divided into 5 groups
• lt 150,000 LIS
• 150,000 250,000 LIS
• 250,000 400,000 LIS
• 400,000 600,000 LIS
• gt 600,000 LIS
• Each peer group of companies has individual
  EV/LIS multiple
• Volga telecoms breakdown by LIS

Source ZAO Gamma Capital calculations
20

EV / EBIDTA Multiple

• Depending on the amount of EBITDA volume,
  regional telecoms were divided into 4 groups
• lt 5,000,000
• 5,000,000 10,000,000
• 10,000,000 15,000,000
• gt 15,000,000
• Each peer group of companies has individual
  EV/EBITDA multiple
• Volga telecoms breakdown by EBITDA

Source ZAO Gamma Capital calculations
21

EV / Sales Multiple

• The same approach used for EV/Sales Multiple
• Regional telecoms were divided into the following
  groups
• lt 10,000,000
• 10,000,000 - 20,000,000
• 20,000,000 - 30,000,000
• 30,000,000 - 40,000,000
• gt 40,000,000
• Volga telecoms breakdown by Sales

Source ZAO Gamma Capital calculations
22
Multiples Quotes

• For comparable company multiples calculation RTS
  data were used
• Market capitalization for each company is based
  on the average daily prices for the year 2000
• The following formula was applied to calculate
  prices
• Spread lt 100 60bid 40ask
• 200 gt Spread gt 100 90bid 10ask
• Spread gt 200 100bid 0ask

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Applied Multiples
Source Svyazinvest, RTS
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• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

25
Net Asset Valuation
Source Independent Appraiser OOO NPP
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• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

27
Historical Quotes Underlying Assumptions

• RTS bid/ ask quotes for the year 2000
• The same formula applied to calculate prices
• Spread lt 100 60bid 40ask
• 200 gt Spread gt 100 90bid 10ask
• Spread gt 200 100bid 0ask
• When quotes are missing prices for the previous
  day are used

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• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

29
Valuing Preferred Stocks Pro Rata Approach

• Pro-Rata approach assumes equal share of the
  preferred equity in total equity value for all
  Volga regional telecoms
• The average discount of preferred to common
  stocks equals to 70.84 (based on on historical
  share trading prices of the companies in the year
  2000)
• Preferred-to-common stocks discount translates
  into 8.84 share of the preferred equity in total
  equity

30

• Summary Information
• Valuation
• Fundamental Analysis
• DCF
• Multiples
• NAV
• Technical Analysis
• Quotes
• Preferred Stocks
• Swap Ratios

31
Swap Ratios Fundamental Analysis
DCF
45
Swap Ratios (Fundamental Analysis)
Multiples
25
NAV
30
Swap Ratios (Technical Analysis)
Historical Quotes
Source ZAO Gamma Capital calculations
32
Swap Ratios Technical Analysis
DCF
45
Swap Ratios (Fundamental Analysis)
Multiples
25
NAV
30
Swap Ratios (Technical Analysis)
Historical Quotes
Source ZAO Gamma Capital calculations
33
Swap Ratios Final Results (Common Stocks)
Swap Ratios (Fundamental Analysis)
90
10
Swap Ratios (Technical Analysis)
Source ZAO Gamma Capital calculations
34
Swap Ratios Final Results (Preferred Stocks)
Source ZAO Gamma Capital calculations
35
Redemption Prices Common Preferred
Note Exchange rate used as of August 24 2001
(29.37 Rub/)
Source Independent Appraiser OOO NPP
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Russia
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