UTKs strategy

1
UTKs strategy increased focus on value-added
services
Georgy Romsky, CEO of UTK PJSC
2
Compactness and high economic potential of UTKs
licensed territory

• ECONOMIC
• Industrial output (04) RUR 567 bln (28)
• Well-developed business sector 475 ths
  enterprises (04) (16.8)
• Growth rate of average wages (04) 24.6
• Volume of foreign investments in 2004 USD 689
  mln (3.5)
• Powerful production basis and developed service
  sector

Volgograd

• GENERAL
• UTKs licensed territory - 520 ths sq km
• Population 18.8 mln people
• High density of population 38.6 people per one
  sq km
• Strategic geopolitical location
• Main health resorts of the country great
  amount of tourists

Rostov-on-Don
Elista
Astrakhan
Krasnodar
Stavropol
Maikop
Cherkessk
Nalchik
Vladikavkaz
3
Key business highlights

• GENERAL
• UTK occupies a leading position in the Southern
  Russian telecommunications market
• Share in the fixed-line regional market (04)
  89.4
• Head count (1h 05) 38.3 ths people
• NETWORK DEVELOPMENT
• Total installed capacity (1h 05) 4.2 mln lines
• Total equipped capacity (1h 05) 4.0 mln lines
• Digitization rate of local networks (1h 05) - 60
• Intra-zonal network digitization rate (1h 05) -
  90
• FINANCIAL
• Revenue (04, RAS) RUR 16, 753 mln (24.1)
• EBITDA (04, RAS) - RUR 4, 287 mln (25.3)
• Revenues from value-added services (04, RAS) -
  RUR 882 mln (73.4)

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UTKs strategy is aimed at increase of its market
share in the value-added regional market to at
least 50 and at retention of fixed-line market
share at the level of no less than 82
Marketing Policy

• Introduction of a unified tariff system for all
  customers and cross-subsidies reduction
• Introduction of flexible tariff plans for
  bundling services
• Introduction of additional traditional telephony
  services
• Reorganization of the Companys sales system and
  optimization of its tariff policy

Technical Policy

• Further development of multi-service networks,
  digital cable TV, IP-telephony, Internet
  services
• Upgrade of the Companys data networks and
  construction of new network nodes
• Organization of Call-centers and deployment of
  intelligent network services
• Introduction of a uniform billing system

Economic Policy

• Growth in local tariffs
• Staff optimization and drastic costs reduction
• Reorganization of subsidiaries and selling of
  non-core businesses
• Optimization of the balance sheet and payables
• Steady improvements in UTKs business efficiency
  and reliability

5
Strengthening of the Companys market positions
allows to reduce its investment program
Capital investments, RUR mln
80,8
78,6
47,5
60,8
21,4
19,2
39,2
51,2

• Share of investments in the lucrative market
  segment for advanced technologies will be
  increased
• Traditional telephony will be funded in the
  amount sufficient to finish the investment
  projects launched in 2003-2004

6
Enlargement of the Companys subscriber base
contributes to revenue growth from all types of
telecom services
In 2003-2004 UTK was the first among
mega-regional telecom entities in terms of the
subscriber base growthUTK is the first among
mega-regional telecom entities in terms of
intra-zonal network digitization rate UTK is the
second among mega-regional telecom entities in
terms of local network digitization rate
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UTK occupies a leading position in the Southern
Russian telecommunications market
UTKs market share for fixed-line services

• Maintaining the Companys positions in all
  segments of the fixed-line market
• Speeding up the development of value-added
  services

8
Stable increase in operating profit
RAS
Positive trend in revenue growth compared to the
UTKs operating costs
IFRS
9
EBITDA and net profit dynamics, RUR mln
RAS
25
25
8
41
IFRS
EBITDA as profit before income tax,
deprecations and amortization
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Dynamics of business efficiency indicators
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UTKs strategy increased focus on value-added
telecom services
Numerous subscriber base and infrastructural
resources of UTK PJSC
Segmentation of services market offers
Reorganization of business processes in
accordance with CRM concepts
High growth rates of revenues from value-added
services
Increasing share of UTK PJSC in the value-added
regional market
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Availability of considerable reserves for revenue
increase and growing share in the regional market
of value-added services
Dynamics of xDSL subscriber base growth

• Rapid development of the following services
  Internet access, access to information and
  entertainment resources, VPN services, other
  services of data transmission network
• Market capacity growth, increase in profits from
  existing users, switch over of subscribers from
  alternative operators

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