Svyazinvest in 2002: restructuring continuing November 2002

2 Telecommunications is one of the most advanced sector of the Russian economy TotalRural New lines in service, th lines 42.8% 3.0% Revenues, bln RUR 40.0% New 27.6%53.4% 132,5 186,0 66,6 85,0 65,9 101, TotalTraditional Capital expenditure Fixed capital expenditure 1Q011Q021Q011Q02 3,65 6,36 2,15 5,12 Capex, bln RUR 174.2%241.9%

3 Svyazinvest dominates Russia’s wireline telecoms Svyazinvest JSC (established in 1995) Urals region Volga region North-West region Siberia region Central region Southern region Far East region State 75% - 1 share Mustcom 25% + 1 share 53% - Svyazinvest 13%< - foreign shareholders 34% - other shareholders 51% - Svyazinvest 14%< - foreign shareholders ~35% - other shareholders 51% - Svyazinvest 16%< - foreign shareholders 32% - other shareholders 51% - Svyazinvest 7%< - foreign shareholders 42% - other shareholders 51% - Svyazinvest 8%< - foreign shareholders 41% - other shareholders 51% - Svyazinvest 10%< - foreign shareholders 39% - other shareholders 51% - Svyazinvest 16% - foreign shareholders 33% - other shareholders Rostelecom 51% - Svyazinvest 49% - other shareholders  29,7 mln lines in service  providing local and long-distance services to 93% of the Russian customers

4 Svyazinvest financial highlights, 2000-F2002 (Rb mn) Svyazinvest has enjoyed strong financial and operating performances in Return on sales, % Return on assets, % Return on capital, % 7155EBITDA per employee, th RUR EBITDA per AL, th RUR 7066AL per employee Revenues per employee, th RUR Revenue per AL, th RUR

5 1H02 results show that this positive trend continues Bln RUR Increase1H %2.4Increase in capacity (2002 estimates), mln 4%0.53EBITDA per AL, th 22%1,95Revenue per AL, th RUR 9%75AL per employee 14%40EBITDA per employee, th RUR 33%146Revenues per employee, th RUR

6 Estimated Svyazinvest’s capitalization is $1.43 bln Estimated capitalization of Svyazinvest is US$ 1.43 bln as per 18 October 2002

7 North-West region North-West Telecom Lines in service: 3,2 mln Central region CenterTelecom Lines in service: 5,4 mln Southern region Southern Telecom Company Lines in service: 3,2 mln Far East Dalsvyaz Lines in service: 1.0 mln Siberia Sibirtelecom Lines in service: 3.3 mln Ural Uralsvyazinform Lines in service: 2,9 mln Volga region VolgaTelecom Lines in service: 3.7 mln Svyazinvest has consolidated its regional subsidiaries into seven mega-regional operators of fixed telephony

8 Urals, Far East, North-West and South swept shares recently: other mega-regionals to follow by the end of 2002 North West Urals Siberia South Far East Volga 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) Center Share swap – 11/30/02 Registration of Share Placement Report with FCSM – 12/31/02(E) Share swap – 11/30/02 Registration of Share Placement Report with FCSM – 12/31/02(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 – Completed 10/31/02 Registration of Share Placement Report with FCSM – 11/30/02(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’ MСap/AL is $703 vs Russian $63.

11 Although tariff level is growing constantly, … RUR

12 … it’s 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 Capex forecast, bln RUR New access lines, mln per year Network development is the key goal of Svyazinvest 14,24 17,63 18,52 27,89 32,52 34,24 1,191,07 1,72 2,40 3,00 3,20

14 Financial forecast of group Svyazinvest

15 Svyazinvest is increasing efficiency of mega-regionals within four blocks of corporate restructuring The finance and economic block in merged entities is designed to ensure an effective system of financial planning and control  Creating a methodology to calculate economically feasible costs  Creating a unified accounting policy and introducing separate accounting for revenues and expenses  Compiling financial statements in compliance with IAS  Budgeting  Cost-cutting program  Identifying a medium term marketing strategy for the mega-regional telecoms  Training and certifying the Company’s marketing staff Developing a methodology and carrying out:  assessment of key personnel,  recruiting qualified executives,  training key specialists. Creating a rotational policy and a result- oriented incentive system The marketing block is designed to give the merged entities a powerful marketing strategy HR management program  Technical audit of regional telecom operators  Technical development principles of merged entities  Working out a general network development plan for the holding company until 2007 Technological integration of the networks of merged entities

16  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 company’s operators are planning a trial application of the methodology, and beginning from 2003 – to adopt a long run incremental costs method In 2001 Svyazinvest implemented a number of projects aimed at creating an efficient system of business planning and control

17  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 Svyazinvest is currently working on:

18 Long-term local and foreign currency credit ratings were assigned to all seven surviving entities during Credit ratings of surviving entities are only 1-2 points lower than that of the Russian Federation CompanyCredit RatingOutlookAgency Sibirtelecom ВStableFitch VolgaTelecom Dalsvyaz В- В- Stable S&P Fitch Uralsvyazinform В-/ВStableS&P/Fitch South Telecom ССС+StableS&P North-West Telecom CCC+StableS&P CenterTelecom CCCStableS&P

19 Growth of capitalization in 1H % 3-5-fold increase in capitalization should the restructuring be completed and telecoms tariffs in Russia reach the level of Eastern European tariffs. Svyazinvest high performance figures led to a significant growth of its market capitalization

20  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) Bn, RUR Gross income Operating expenses Sales revenue All business efficiency indicators of the holding company are planned to increase in ,1 110,5 70,5 82,3 28,2 21,7 73,4 55,3 18,1 In 2002:

21 November 2002 Thank you!