1

September, 2004

2003 IAS Results

Inter-Regional Telecommunication Company “VolgaTelecom”Inter-Regional Telecommunication Company “VolgaTelecom”

VolgaTelecom offers:VolgaTelecom offers:

Traditional telecommunication services:• Local (city and rural) telephony• DLD, ILD• Radio and TV broadcasting

Value-added services:• Internet and data transmission• ISDN• IP-telephony• Intelligent communication network services • Mobile communication• Paging

Fixed-line penetrationFixed-line penetration

- VolgaTelecom license area

Territory – 665,000 sq.km Population – 21 million

19.5

20.621.4

2002 2003 2004Е

Urban penetration 2003 - 25.6%

LocalILD and

DLDDial-upinternet

Dedicatedinternetaccess

Cellular

20032004 E

8676

64

44290

20

40

60

80

100

Market share, %Market share, %87

80

50

70

29

3

Charter capitalCharter capital – – USD 55.7 mln USD 55.7 mln

Nominal share valueNominal share value – – USD 0.17USD 0.17

Charter capitalCharter capital

Ordinary shares 75%(incl. 13% ADRs)

Preferred shares25%

Capitalization growth Capitalization growth

• Dividend yield (2003) – 1.7% for ordinary and 6.9% for preferred stocks

• Payout ratio on ordinary and preferred stock – 10% on both

0.032

0.085

0.005 0.009 0.010.0230.02

0.036 0.031

0.059

0

0.02

0.04

0.06

0.08

0.1

1999 2000 2001 2002 2003

Com m on shares Preferred shares

Dividend policy, $Dividend policy, $

Ratings of international rating agencyRatings of international rating agency « «Standard & Poor’sStandard & Poor’s»»

• Corporate Governance RatingCorporate Governance Rating ( (CGRCGR) – 5+) – 5+• By Russian scaleBy Russian scale – 5 – 5..99

• Credit ratingCredit rating – «В», – «В», forecastforecast « «stablestable»»• By Russian scaleBy Russian scale – « – «ru Aru A», », forecastforecast « «stablestable»»

Mar-03 Nov-03 Jul-04

454621

870

0

200

400

600

800

1000$ m

4

Financial Highlights (IAS)Financial Highlights (IAS)

US$, million Rate of growth,

%2002 2003

Revenues 420.46 546.29 29.929.9

Operating Expenses 341.84 435.68 27.527.5

Operating Profit 78.62 110.61 40.740.7

Profit Before Tax 72.23 97.65 35.235.2

Net Income 29.14 58.39 100.4100.4

Net Margin % 7 11

EBITDA 134.83 173.79 28.928.9

EBITDA Margin, % 32 32

Property, Plant & Equipment 544.82 725.19 33.133.1

Long- & Short-term Debt

(excluding liabilities)

70.10 155.41 121.7121.7

Cash Flows From Operating Activity 127.66 148.46 16.316.3

Cash Flows From Investment Activity 110.25 171.11 55.255.2

Cash Flows From Financial Activity 8.90 28.31 218.3218.3

* The indicators were calculated by the rates:1$= 2002 2003 1$= 2002 2003

Ruble’s average rate 31,4 30,7 The rate as of 31.12., ruble 31,8 30,0

5

VolgaTelecom plans to increase revenues through:

Increasing the number of fixed-line subscribers (in 2004, net adds are expected to hit 250,000)

Raising VAS revenues (mobile, Internet, IP-telephony, multi-service networks, etc.)

Increasing the cellular subscriber base in 2004 from 857,000 in 2003 to 1,200,000

Expanding DLD and ILD traffic (which annually grows at around 21%)

Revenue structureRevenue structure

35%

5%24%

8%

12%

10%3%3%

DLD ILD Local Installation

Cellular VAS Leased lines Other

6

Expenses can be streamlined through:

- Rationalizing personnel

- Raising digitalization, which helps reduce maintenance costs

- Cutting G&A expenses as a result of corporate restructuring

- Switching over from wire broadcasting to on-air broadcasting; communication lines modernization

Breakdown of expensesBreakdown of expenses

39.5%

15.0%11.6%2.0%

15.9%

11.3%0.9%

3.7%

Salaries , including social expensesInterconnectMaterials , repairs and m aintenance, utilitiesTaxes other than on incom eDepreciation and am ortization Losses on disposal of PPEBad debt Other

7

913.8

764.7

545.7

Net additionsNet additions

166.5

221.7

546

765

345

914

Waiting listWaiting list

Share of local communication in Share of local communication in the Company’s total revenuesthe Company’s total revenues

20022002 20032003

32.9% 32.8%

Wireline network developmentWireline network development

‘000 lines

169

213247 250

0

50

100

150

200

250

300

2001 2002 2003 2004 Е

913765

561

350

0

200

400

600

800

1000

2001 2002 2003 2004 Е

‘000 lines

3,9994,242

4,4624,672

33.8 40.8 48.3 55.6

3,000

3,500

4,000

4,500

5,000

2001 2002 2003 2004 E

0

20

40

60

80

100

Installed capacity Digitalization

‘000 lines

%

8

Since August, 2003Since August, 2003 OJSC OJSC “VolgaTelecom” switched over to a “VolgaTelecom” switched over to a new system of settlements with OJSC new system of settlements with OJSC “Rostelecom”;“Rostelecom”; in accordance with this in accordance with this system the integral settlement rate system the integral settlement rate was disclosedwas disclosed..

1,355

61

1,640

68

1,996

75

2,410

86

2001 2002 2003 2004 E

DLD ILD

1,274 1,9201,572 2,324

Number of automatic LD exchanges Number of automatic LD exchanges – – 1212

Installed capacityInstalled capacity – – 5151,,145 145 channelschannels

DigitalizationDigitalization – – 9494..1%1%

Total length of channelsTotal length of channels – –1515..2 2 m channels-kmm channels-km

Length of intra-zone linesLength of intra-zone lines – – 2121,,330000 kmkm

m minm min

Traffic growthTraffic growth

DLD and ILD servicesDLD and ILD services

Share of DLD and international Share of DLD and international traffic in the Company’s total traffic in the Company’s total

revenuesrevenues

20022002 20032003

39.4% 38.9%

9

Value-added services:Value-added services:

• Internet• ISDN• IP-telephony• Intelligent communication network

7.4

14.5

2002 2003

Revenue growth of value-added Revenue growth of value-added servicesservices

$ m

Number of Internet subscribersNumber of Internet subscribers

61.2123.2

210.7

336.4

2001 2002 2003 2004 Е

Dial-up Dedicated

‘000

Value-added servicesValue-added services

Share of revenues of value-Share of revenues of value-added services in the added services in the

Company’s total proceedsCompany’s total proceeds

20022002 20032003

1.7% 2.64%

10

350

614

1,200

857

2002 7/1/03 2003 2004 E

Market share, %Market share, % 20022002 20032003 2002004 Е4 Е

35 29 28

ARPU, $ARPU, $ 24 14 11

Company Standard Region Stake Subscribers

NCC GSM Nizhny Novgorod 100% 523,000Ulyanovsk GSM Ulyanovsk 51% 115,000Tatincom-Т DAMPS/GSM Tatarstan 50%+1 ordinary share 109,000Orenburg GSM Orenburg oblast 51% 54,000VolgaTelecom GSM Mary El 100% 92,000

985,100Total cellular subscribers

53,81267,655

23,68533,135

2002 2003Revenues EBITDA

$ m

SubscribersSubscribers

‘000

Share of revenues of cellular Share of revenues of cellular business in the Company’s total business in the Company’s total

proceedsproceeds

20022002 20032003

10.8% 12.3%

Cellular businessCellular business

OJSC “VolgaTelecom” OJSC “VolgaTelecom” major cellular assets major cellular assets (the data as of August 2004)

Financial indicators (IASFinancial indicators (IAS))

11

Growth of capital investments (IAS)Growth of capital investments (IAS)

545.7

55%

Investment policyInvestment policy

Allocation of capital investments in 2003Allocation of capital investments in 2003

The cost of a new line installation, USD 275

The cost of modernization of an analog line, USD 190

97

405

214

443 462

179 199212

2001 2002 2003 2004 Е

Installation of digital exchangesDismantled exchanges

Capacity growth, ‘000 linesCapacity growth, ‘000 lines

54%

10%

18%

7%11%

Local DLD and ILDCellular Value-added Other

163.2167.1

140

150

160

170

180

2002 2003

$ m

12

Thank you for your attentionThank you for your attention!!

JSC “VolgaTelecom”JSC “VolgaTelecom”

603000 Russia, Nizhny Novgorod, Maksim Gorky sq., Dom SviaziTel.: +7 (8312) 33-20-47; Fax: +7 (8312) 30-67-68E-mail: tn@sinn.ru http://www.volgatelecom.ru