1. SVYAZINVEST Svyazinvest: New Growth Opportunities Deputy General Director of OAO Svyazinvest K.V.Belyaev June, 2005

2. SVYAZINVEST I. OAO Svyazinvest in the telecommunications sector II. VAS development III. Corporate reform and business optimization IV. Natural monopoly status and tariff regulation Svyazinvest – new growth opportunities

3. SVYAZINVEST JSC Svyazinvest: group structure State 75% - 1 share Mustcom 25% + 1 share JSC Svyazinvest 7 mega-regionals JSC Rostelecom MGTS Other Controlling stake Blocking stake Company history: Svyazinvest foundation – 18 September, 1995 Sale of a 25% + 1 share stake to Mustcom – July 1997 Regional consolidation of companies – 72 regional telecom operators were merged into 7 mega-regionals in 2000-2002

4. SVYAZINVEST JSC North West Telecom 3.6 m lines in service market cap $688 mn JSC CenterTelecom 6.2 m lines in service market cap $813 mn JSC South Telecom 3.8 m lines in service market cap $444 mn JSC Dalsvyaz 1.2 m lines in service market cap $171 mn JSC Sibirtelecom 3.8 m lines in service market cap $995 mn JSC Uralsvyazinform 3.8 m lines in service market cap $1,568 mn JSC VolgaTelecom 4.3 m lines in service market cap $1,274 mn Svyazinvest Companies’ Geography JSC Rostelecom extensive backbone network covers virtually all Russia’s territory. Its total length approaches 200,000 km. The company’s market capitalization stands at $ 1,963 mn

5. SVYAZINVEST Svyazinvest major economic indicators, 2004 1.561.56 1.28 0.99 3.8 2.82.8 4.94.9 3.6 6.46.4 4.94.9 2002 2003 2004 2002 2003 2004 Revenue Expense Revenue and operating expense* Operating income* 31.3 33.0 Installed capacity 34.9 200220032004 Lines, mn 2005 (estimate) 5.7 7.6 1.82 2005 (estimate) 36.0 USD, bn * data include JSC MGTS figures

6. SVYAZINVEST I. OAO Svyazinvest in the telecommunications sector II. VAS development III. Corporate reform and business optimization IV. Natural monopoly status and tariff regulation Svyazinvest – new growth opportunities

7. SVYAZINVEST OAO Svyazinvest possesses substantial resources to expedite VAS development  Infrastructure of Svyazinvest companies is unique  Svyazinvest companies have significant subscriber bases and access to end users  Svyazinvest companies’ geography spans the entire territory of the Russian Federation  Svyazinvest companies’ marketing strategy sees the roll out of multi-service networks as a major priority  Svyazinvest companies’ test facilities serve as platforms to try out new equipment for multi-service networks Development of multi-service networks will boost electronic commerce, facilitate consolidation of branches and business partners into a single information environment

8. SVYAZINVEST Intelligent networks In 2004, companies’ revenue generated from intelligent services rose 50% y-on-y Services Pre-paid universal card Televoting Extra-pay services ‘Hot lines’ Intelligent platforms of various levels are used by all mega-regional companies OAO Rostelecom provides intelligent services Russiawide

9. SVYAZINVEST Development of multi-media services OAO Uralsvyazinform was the first in Russia to build a commercial network based on NGN technology broadband Internet access video-on-demand (VOD) Internet-Protocol TV (IPTV) virtual private networks (VPN) virtual leased lines (VLL) IP Centrex – virtual private voice networks video- and audio- conferences IP-contact center Svyazinvest companies, running NGN are able to provide new intelligent multi-media services Services for residential customers Services for businesses

10. SVYAZINVEST Internet-Services and IP-Telephony 597 1018 200220032004 Internet traffic, TB 1 868 61 91 20022003 USD, mn Revenues from Internet-services and IP-telephony 2004 156 2005 revenues from Internet and IP-telephony guidelines are $260 mn

11. SVYAZINVEST  Svyazinvest provides cellular services in 20 regions of the Russian Federation.  Svyazinvest subsidiaries and affiliates pursue the policy of cellular business consolidation and its integration with the fixed-line business.  In 2004 revenues from cellular services amounted to $519 mn, up 40% against 2003. Subscriber base growth (GSM-standard): Svyazinvest holds a strong position in regional cellular market 01.01.04 01.01.0201.01.0301.01.05 1 200 1 908 2 367 subscribers, th Regional subscriber bases (01.04.05): SibireaVolga Urals 01.04.05

12. SVYAZINVEST Integration of fixed and mobile communications – new development opportunities OAO Uralsvyazinform is consolidating its subsidiary GSM assets, aiming to converge traditional and value-added services Synergetic effect from fixed and mobile communications integration Integration of products and services Integration of operational functions Integration of network infrastructure Promotion of packet services Designing new products Unified marketing and sales strategy Creation of unified brand Unified call centers Consolidation of call centers Integration of back offices Unified network development strategy Software integration Integration of billing and IT services Single vendor equipment Enhancing competitiveness

13. SVYAZINVEST Growing investments in VAS development in 2005 Traditional telephony USD 661 mn USD 464 mn USD 239 mn USD 371 mn Other 2003 2005, target2004 159,6 298,6 464,0 Development of infrastructure VAS and IT technologies Dynamics of investments in VAS  Share of investments in development of VAS will double to reach 27% of the total investments.  Payback period will be 3-4 years. USD mn Investment plan breakdown

14. SVYAZINVEST I. OAO Svyazinvest in the telecommunications industry II. VAS development III. Corporate reform and business optimization IV. Natural monopoly status and tariff regulation Svyazinvest – new growth opportunities

15. SVYAZINVEST ERP system – implementation results financial planning and data consolidation implementation of separate accounting drawing up tax and management reports management of payables and receivables management of fixed assets cash flow control system management of investments and various financial instruments operational cost cutting equipment cost cutting personnel cost cutting fully functional HR management (staff list, payroll, training) Comprehensive financial management Efficient human resources management Effective procurement management

16. SVYAZINVEST The first phase of the billing system transformation is being successfully completed: Unified billing system – implementation results Higher revenue Lower costs Higher quality customer service IMPLEMENTATION RESULTS Improved corporate governance standards Modernization of infrastructure Major results: - Existing billing systems and processes at all companies have been assessed - Terms of Reference for automated billing systems have been worked out - A 4-year high-level plan has been drawn up - An in-depth model implementation plan has been designed for all companies of the holding

17. SVYAZINVEST  to establish an operating risk management system, allowing to forecast risks and reduce risk losses in RTO business processes Objective:  to identify and estimate risks of a process at RTOs  to uncover and rectify defects in the internal control systems and to work out control procedures to confine, minimize or eliminate the outcome of risk events  to create a system to monitor business processes in order to detect risks of a process and to take the necessary measures Tasks :  Reduction of financial losses through minimization, localization and removal of risk events  Gaining additional financial benefits by improving management system Results : Operating risk management OAO Sibirtelecom and OAO STC are implementing pilot projects: key approaches to risk management of a process have been developed, internal audit department structures have been modified

18. SVYAZINVEST Headcount optimization The program of headcount optimization is under way in Svyazinvest Group of companies 43.8 56.0 51.1 43,8 % 37.5 % 77 102 95 85 Lines/employee Number of employees Lines per employee and local network digitalization rate Employees, th

19. SVYAZINVEST I. OAO Svyazinvest in the telecommunications sector II. VAS development III. Corporate reform and business optimization IV. Natural monopoly status and tariff regulation Svyazinvest – new growth opportunities

20. SVYAZINVEST ‘natural monopoly – is market situation where from the technological point of view demand is met more effectively in the absence of competition and there are no close substitutes for the goods produced by the natural monopoly holder…’* * Law ‘On Natural Monopolies’ Criterion № 1 – absence of competition Criterion № 2 – no close substitutes for goods Mobile cannibalization can be observed on the telecom market – mobile communications ousts fixed-line one Dynamics of mobile communications in Russia Dynamics of installed capacity at RTOs A drop in Svyazinvest revenue mix share points to a high level of competition on Russia’s telecom market The need has arisen to review ‘natural monopoly’ criteria

21. SVYAZINVEST Tariffs for local telephone services Average monthly rate, USD* Average monthly rate in Russia is still about 50% lower than in Central and Eastern Europe, and is 60% lower than in Western Europe. Average monthly rate for mega-regional companies is $6,9 per line 5.75.7 6.06.0 6.36.3 6.96.9 12.5 11.4 7.87.8 6.96.9 8.78.7 17.0 18.0 15.8 STCVolgaTele com Centertel ecom Sibirtelec om NWTUralsvyaz inform DalsvyazCesky- Telecom MatavTPSALietuvos Telecomas Lattelekom * CeskyTelecom, Matav, Lietuvos Telecomas, Lattelekom – Company estimates

22. SVYAZINVEST The need to finetune regulatory policies  To recognize competition in the fixed-line sector in large Russian cities and to release these markets from tariff regulation  To enable the holding’s companies to work out flexible tariff plans for different customer categories (that will become possible after the RF Government adopts the resolution ‘On State Regulation of Tariffs for Public Telecommunications and Postal Services’

23. SVYAZINVEST Thank you!