Svyazinvest in 2002: restructuring continuing

1
Svyazinvest in 2002 restructuring continuing
November 2002
2
Telecommunications is one of the most advanced
sector of the Russian economy
3
Svyazinvest dominates Russias wireline telecoms

• 29,7 mln lines in service
• providing local and long-distance services to
  93 of the Russian customers

State 75 - 1 share
Mustcom 25 1 share
Rostelecom
51 - Svyazinvest 49 - other
shareholders
Svyazinvest JSC (established in 1995)
4
Svyazinvest has enjoyed strong financial and
operating performances in 2001
Svyazinvest financial highlights, 2000-F2002 (Rb
mn)
5
1H02 results show that this positive trend
continues
Increase
1H 2002
33
146
Revenues per employee, th RUR
14
40
EBITDA per employee, th RUR
9
75
AL per employee
22
1,95
Revenue per AL, th RUR
4
0.53
EBITDA per AL, th
26
2.4
Increase in capacity (2002 estimates), mln
Bln RUR
6
Estimated Svyazinvests capitalization is 1.43
bln
Estimated capitalization of Svyazinvest is US
1.43 bln as per 18 October 2002
7
Svyazinvest has consolidated its regional
subsidiaries into seven mega-regional operators
of fixed telephony
Central region CenterTelecom Lines in service
5,4 mln
Ural Uralsvyazinform Lines in service 2,9 mln
North-West region North-West Telecom Lines in
service 3,2 mln
Far East Dalsvyaz Lines in service 1.0 mln
Southern region Southern Telecom Company Lines in
service 3,2 mln
Siberia Sibirtelecom Lines in service 3.3 mln
Volga region VolgaTelecom Lines in service 3.7
mln
8
Urals, Far East, North-West and South swept
shares recently other mega-regionals to follow
by the end of 2002
Share swap Completed 10/31/02 Registration of
Share Placement Report with FCSM 11/30/02(E)
Share swap Completed 09/30/02 Registration of
Share Placement Report with FCSM 10/31/02(E)
Share swap Completed 09/30/02 Registration of
Share Placement Report with FCSM 10/31/02(E)
Share swap 11/30/02 Registration of Share
Placement Report with FCSM 12/31/02(E)
Share swap Completed 10/31/02 Registration of
Share Placement Report with FCSM 11/30/02(E)
Share swap 11/30/02 Registration of Share
Placement Report with FCSM 12/31/02(E)
9
Russian mega-regionals are large enough to
compete with European peers
Lines in service, mln 1H2002
10
but they are relatively cheap
Average CEE telecoms M?ap/AL is 703 vs Russian
63.
11
Although tariff level is growing constantly,
RUR
12
its still very low comparatively to European
telecoms
Russian monthly tariff is about 3 times less than
CEE average and 8.6 than in Western Europe.
mega-regional average tariff is 2.9 per month
13
Network development is the key goal of Svyazinvest
Capex forecast, bln RUR
New access lines, mln per year
3,20
3,00
2,40
1,72
1,19
1,07
14
Financial forecast of group Svyazinvest
15
Svyazinvest is increasing efficiency of
mega-regionals within four blocks of corporate
restructuring
16
In 2001 Svyazinvest implemented a number of
projects aimed at creating an efficient system of
business planning and control

• Preparations for transition to reporting under
  IAS
• Training and implementation of in-house IAS
  reporting
• Quarterly IAS reporting since 2002
• A new budgeting methodology was worked out and
  launched
• A uniform management accounting system was
  elaborated
• Preparations to change the tariff regulation
  system
• An economically feasible cost calculation
  methodology was worked out
• Beginning from 2002 the holding companys
  operators are planning a trial application of the
  methodology, and beginning from 2003 to adopt a
  long run incremental costs method

17
Svyazinvest is currently working on

• Foreign currency loans reduction switching over
  rubble loans
• New HR program
• Guidelines for mega-regionals marketing strategy
• General plan for network development of
  mega-regionals and Rostelecom, as integral parts
  of the telecommunications network of the Russian
  Federation for the period until 2007
• Separate accounting of revenues and expenses from
  different services

18
Long-term local and foreign currency credit
ratings were assigned to all seven surviving
entities during 2001-02
19
Svyazinvest high performance figures led to a
significant growth of its market capitalization
Growth of capitalization in 1H 2002 -
75 3-5-fold increase in capitalization should
the restructuring be completed and telecoms
tariffs in Russia reach the level of Eastern
European tariffs.
20
All business efficiency indicators of the holding
company are planned to increase in 2002
In 2002
Bn, RUR

• Gross income per employee RUR 310,000 (130
  compared to 2001)
• Operating profit per employee RUR 85,000 (148
  compared to 2001)
• Number of lines per employee 76 (109 compared
  to 2001)
• Gross revenue per line RUR 4,000 (119 compared
  to 2001)
• Operating profit per line RUR 1,116,000 (136
  compared to 2001)
• Installation of new telephone capacity 2.4
  million lines (1.9 million lines in 2001)
• A proportion of expenses in the gross income
  72 (down 3 as compared to 2001)

110,5
92,1
82,3
70,5
73,4
55,3
28,2
21,7
18,1
Gross income
Operating expenses
Sales revenue
21
Thank you!
November 2002