Svyazinvest: 1H2004 Key Performance Indicators

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Svyazinvest 1H2004 Key Performance Indicators
November, 2004
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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)
Company JSC Svyazinvest Foreign shareholders Other
CenterTelecom 51 8 41
North-West Telecom 51 14 35
VolgaTelecom 51 17 32
South Telecom 51 10 39
Uralsvyazinform 53 13 34
Sibirtelecom 51 7 42
Dalsvyaz 51 16 33
Rostelecom 51 27 22
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Consolidation of telecom operators has enabled
Svyazinvest to create economically viable and
competitive companies
JSC CenterTelecom 5.8 m lines in service market
cap. 518 mn
JSC Uralsvyazinform 3.3 m lines in service
market cap. 1,117 mn
JSC North West Telecom 3.4 m lines in service
market cap. 372 mn
JSC South Telecom 3.4 m lines in service market
cap. 272 mn
JSC Dalsvyaz 1.1 m lines in service market cap.
106 mn
JSC Sibirtelecom 3.5 m lines in service market
cap. 620 mn
JSC VolgaTelecom 4.0 m lines in service market
cap. 726 mn

• become more investor attractive
• reduced the cost of borrowed funds
• optimized equipment purchase

As a result of consolidation, mega-regionals have
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Svyazinvest in 2003

• Revenues from core operations - USD 4.74 bn (up
  51.0 against 2002)
• Gross revenue USD 4.92 bn (up 29.0)
• Operating costs USD 3.64 bn (up 29.0)
• Profit from sales USD 1.29 bn (up 28.9)
• Payroll USD 1.02 bn (up 29.6)
• Average number of employees 350,305 (down 3.8)
• Average monthly salary USD 256 (up 39.2)

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Svyazinvest major economic indicators, 1H2004
Operating profit and EBITDA
Revenues and costs
3.05
906
744
2.30
677
2.14
1.75
559
523
USD bn
1.58
503
1.24
1H02
1H03
1H04
1H02
1H03
1H04
Operating profit, USD mnEBITDA, USD mn
Revenues Costs
Average number of lines
31.3
1H03 1H04 1H04
Revenues per line, USD 73 98 34
Revenues per employee, USD, th 6.06 8.97 48
Lines per employee 83 92 11
Profit per line, USD 19 24 26
Domestic/international traffic per line, min 237 251 5.5
29.4
Lines mn
27.8
1H02
1H03
1H04
data include JSC MGTS figures
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2004 Investment Program
Installed capacity
34.9
lines, mn
33.0

• Total capex of Svyazinvest group of companies is
  estimated at USD 1.92 bn
• 4 mn telephone lines, planned for commissioning,
  will raise network digitalization rate to 51.3
  and expand installed capacity to 35 mn lines.

31.3
29.7
Local network digitalization
51.3

43.8
37.5
31.12
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Marketing Strategy
2004 key marketing objectives

• To strengthen companys presence in the telecom
  market
• To increase market share in certain segments
• To increase companys profit margins by enhancing
  revenue per customer and expanding subscriber
  base
• To build a steadily growing client-base by
  boosting customer loyalty

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Rebalancing of tariffs for telecom services
Monthly rate for urban fixed subscribers
Tariffs growth for local telephone services in
2004
USD
7.5
Urban telephony Rural telephony
Residential customers 30 31
Business organizations 29 30
5.6
5.5
4.3
4.1
3.0
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 ILD
  tariff.

2.3
1.5
Budget-funded institutions
Business organizations
Residential customers
-10.3
-8.3
-14.3
-25
Zones 1-4 Zones 5-7
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Tariffs for local telephone services compared to
European telecom operators
Average monthly rate, US
Average monthly rate in Russia is still about 70
lower than in Central and Eastern Europe, and is
80 lower than in Western Europe.
TPSA
15.8
12.5
Matav
Cesky Telecom
11.4
5.4
Dalsvyaz
5.2
Urasvyazinform
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
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Corporate governance rating of mega-regional
companies (Standard Poors)
Company 1? 2003 1? 2004 Change
JSC North-West Telecom 5.6 5.9 0.3
JSC CenterTelecom 5.3 5.8 0.5
JSC South Telecom 5.2 5.6 0.4
JSC VolgaTelecom 5.8 5.9 0.1
JSC Uralsvyazinform 6.0 6.2 0.2
JSC Sibirtelecom - 5.7
JSC Dalsvyaz 5.3 5.8 0.5
JSC Rostelecom - 6.4

• Corporate governance ratings of all mega-regional
  companies assigned by SP were above average (5
  points out of 10)
• Corporate governance ratings of six companies
  were upgraded
• The holding companys target for 2004 is to
  further improve its corporate governance, meeting
  international standards.

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Credit ratings of mega-regional companies
Company Rating Outlook Agency
North West Telecom ?- Stable SP
South Telecom ?- Negative SP
CenterTelecom CCC Stable SP
VolgaTelecom ? Stable SP
Dalsvyaz ? Positive Fitch
Uralsvyazinform ?/?B- Stable / Stable SP/ Fitch
Sibirtelecom ? Positive Fitch
Rostelecom ? Positive SP
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License Portfolio of Svyazinvest GSM operators
- GSM-900/1800
- GSM-900
- GSM-1800
Subscriber growth
Svyazinvest share in the cellular market
As of Subscriber base Growth rate
January 1, 2000 113,000
January 1, 2001 250,000 up 120
January 1, 2002 530,000 up 100
January 1, 2003 2,150,000 up 300
January 1, 2004 3,000,000 up 50
Volga the Urals Siberia
Svyazinvest 19 50 18
MTS 27 27 35
Bee Line 20 5 32
Megafon 22 12 0
Other 12 6 15
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Cellular Business Development an important part
of Svyazinvest holdings investment strategy

• Svyazinvest holds a strong position in regional
  cellular market and is focused on further
  reinforcing this position by developing the
  existing operators
• In Urals region Uralsvyazinforms Board of
  Directors has decided to consolidate the assets
  of its subsidiary GSM-operators.
• In Volga region VolgaTelecoms Executive Board
  is currently working to consolidate the assets of
  its subsidiary GSM-operators.
• In the Far East region to increase its
  coverage territory, Dalsvyaz is planning to
  acquire cellular assets ZAO Akos, Primorsky krai
  company-operator and OOO Wireless Information
  Technologies, a license holder in Sakhalin and
  Chukotka.

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Svyazinvest 2004 target performance indicators

• Revenues from core operations - USD 6.32 bn (up
  33.4 against 2003)
• Gross revenue USD 6.54 bn (up 32.8)
• Operating costs USD 4.82 bn (up 32.4)
• Profit from sales USD 1.72 bn (up 33.8)
• Labor remuneration fund USD 1.35 bn (up 32.0)
• Average number of employees 337,300 (down 3.7)
• Average monthly salary USD 354.6 (up 38.5)

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