1. Telecommunications Market Development in Russia April 2002

2. 2 OJSC Svyazinvest State Mustcom 75% - 1 share 25% + 1 share ГосударствоRostelecom (LD and international traffic) 74 regional operators 51% Over 25% Over 50% Services: Local traffic LD and international traffic Radio & TV broadcasting Data transmission & Internet Wireless communication MGTS Kostroma GTS Komisvyaz Sakhalinsvyaz Telecom companies not incorporated in the holding company: Chechnya Ingushetia TyvaTatarstan BashkiriaChukotka Yakutia Svyazinvest is the Russia’s Leading Telecommunications Group

3. 3 The Holding Company’s Performance Improved in 2001 $, bnLines, mln

4. 4 Target indicators for 2010: Increase in telephone lines from 31.2 mln to 47.7 mln Growth of mobile subscribersfrom 8.3 mln to 22.2 mln Growth of the Internet usersfrom 2.5 mln to 26.1 mln Increase in digitalisation of networks in Russia from 26% to 94% Volume of non-governmental investments -$33 bn To ensure satisfaction of growing demand in telecoms services and advanced development of the national telecoms infrastructure To ensure provision of generally accessible telecoms services to every urban and rural community in Russia To improve the infrastructure efficiency and investment attractiveness of the telecoms sector, to create conditions for a fair competition Concept’s Guidelines Creating conditions for balanced dynamic development of the telecoms market Involving all market players in the solution of state social tasks Improving state regulation methods Objectives Results are achieved by:

5. 5 Svyazinvest Structural Problems Disintegration of the holding company – 78 regional operators (after completion of intra- regional mergers) high costs poor marketing inefficient management low degree of transparency low market capitalization and liquidity of shares difficulty in implementing large-scale projects inconvenience for customers …. OBJECTIVE Increase in efficiency and investment attractiveness Svyazinvest average regional operator versus American companies

6. 6 North-West region «North-West Telecom» Number of line in service: 3,2 mln Central region «CenterTelecom» Number of line in service: 5,3 mln Southern region «Southern Telecom Company» Number of line in service: 3,1 mln Far East «Dalsvyaz» Number of lines in service: 1.0 mln Siberia «SiberiaTelecom» Number of lines in service: 3.2 mln Ural «Uralsvyazinform» Number of line in service: 2,8 mln Volga region Nizhegorodsvyazinform Number of lines in service: 3.6 mln Formal Svyazinvest Restructuring

7. 7 Market capitalization ($, bn) Main telephone lines (million) Comparison with European Operators Average market capitalization in 2001

8. 8 Average Monthly Charges for Local Calls ($ in month)

9. 9 North- West 95 % 5 % Urals 97 % 3 % Siberia 93 % 7 % South 97 % 3 % - In favour of the restructuring - Against the restructuring Center 95 % 5 % 97 % 3 % Far East 98 % 2 % Volga Restructuring: Distribution of Shareholders’ Votes

10. 10 Corporate Restructuring Is a Natural Follow-Up to the Merger Process Corporate restructuring Technical policy Marketing policy HR policy Financial and economic policy OJSC Svyazinvest  TTransition to the economically feasible cost calculation of telecoms services  IIntroducing advanced corporate governance methods  RReporting under IAS  UUnification of accounting policies  Providing mega- regional companies with a marketing policy  Technical audit of regional operators  Guidelines of development of a mega- regional company  Drafting a general strategic development plan for the period ending 2007  Recruiting and training qualified personnel  Improving the system of incentives

11. 11 Svyazinvest Intends to Create an Effective System of Business Planning and Control in Mega-Regional Companies Tasks Unification of accounting policies Elaboration of an economically feasible cost calculation methodology Working out budgeting procedures IAS  Creating a tariff policy for a mega-regional company  Phasing in and broadscale application of tools used in business planning, budgeting and control  Ensuring transparency of a mega-regional company’s activity

12. 12 Regional market valuation to identify its major development trends Working out guidelines of a marketing strategy for a mega- regional company and elaboration of methodological recommendations on market research and identifying marketing strategies Identifying a medium-term marketing strategy for mega- regional companies Advanced training of marketing personnel Svyazinvest is Striving to Provide Mega- Regional Companies with a Strong Marketing Strategy Main tasks at the current stage:

13. 13 Svyazinvest is Taking Steps to Integrate Telecom Networks within Mega-Regional Companies Main tasks:  WWorking out a general development plan for mega-regional companies and Rostelecom as integral parts of the interconsistent communications network of the Russian Federation for the period ending 2007 on the basis of two research papers:  system network solutions concerning the development of infocommunications networks of mega-regional companies and Rostelecom as integral parts of the interconsistent communications network of the Russian Federation for the period ending 2007;  working out guidelines for the development of infocommunications networks of mega-regional companies and Rostelecom.

14. 14 Change in Capitalization Growth of capitalization in 2001 - 70%. 3-5-fold increase in capitalization should the restructuring be completed and telecoms tariffs in Russia reach the level of Eastern European tariffs.

15. 15 Results of Investment 2.4 million new telephone lines about 60 000 km of trunk cable Or Cost saving due to the restructuring ~$ 200 mln Additional investment opportunities ~$ 1 bn

16. 16 Thank you! April 2002