Urals Region telecoms mergers.Current situation and prospects.

Vladimir I. Rybakin,General Director

Industrial Output USD 37 bln% of overall Russian Industrial Output 15.5% Average USD Rate Exchange in 2001 - 29,2 RUR

PermЕкатеринбургEkaterinburg

Tyumen

Khantymansiysk

Salekhard

ChelyabinskKurgan

Consolidated Urals Region Company

Industry fuel, electroenergetics, ferrous and non-ferrous metallurgy,petrochemical, oil- and gas-extracting machinery, metalworks

Area 2.0 ml.sq.km. Population 15.5 ml. Natural Resources oil, gas, coal, iron and copper ores, potassium food salt, marble, asbest, bauxites, gold, diamonds

UralsvyazinformUraltelecom of Sverdlovsk RegionSvyazinform of Chelyabinsk RegionTyumentelecomKhantymansiyskokrtelecomYamalelectrosvyazElectrosvyaz of Kurgan Region

The Nation Wide Position of the United Ural Region Company

Gross regional product per capita, 2001E

0

20

40

60

80

100

120

140

Urals Far East North West Siberia Central Volga South

US

D

0

100

200

300

400

UralSvyazInf Far EastTelecom

North WestTelecom

Siberia Telecom Center Telecom Volga Telecom South Telecom

US

D m

ln

Revenues in 2001

Average USD Rate Exchange in 2001 - 29,2 RUR

Uralsvyazinform Mission

Shaping and meeting customers’ needs in telecommunication and information services, integration into the Global

Information Community of 21st century.

As of 1.04.2002

Consolidated Stock Capital

Svyazinvest 41% (51,4% of voting

shares)

Federal Property Fund 5%

(6,2% of voting shares)

ADR 4% (4,9% of voting

shares)

Individuals 50%

(37,5% of voting shares)

• Book capital USD 153 ml

• Number of shares 40 169 386 628

• Share of preferred stock 19,5%

• Number of shareholders 25 650

• Market cap USD374 ml

Rate Exchange 1 USD = 31,15 RUR

Merger Goals

• Creating a robust, profit-making nation-scale company with strong market cap;

• Upgrading telecommunication systems to world standards, integration into the global information community of 21st century;

• Better quality and transparency of corporate governance through optimization of decision-making process, bringing the quality of business in compliance with international standards;

• Boosting competitiveness;

• Reduction of costs by means of streamlining the expenditure structure;

• More efficient use of assets and prioritizing on lucrative projects.

Assets valuation and fixing of swap ratios March-April 2001

Decision of the Board of Directors to approve swap ratios, buyback share prices and announce the AGM July 2001

Shareholder support August 2001

Approval by the EGM - 97.54%

September - October 2001

Affiliates formation September 2001

Decision of additional shares issue and prospectus to be adopted by the Urasvyazinform Board of Directors January 2002

Obtaining the MAP of Russia approval January 2002

Merger in Progress

Joint General Shareholder Meeting

4Q2002

Transfer of assets and emloyees to Uralsvyazinform 2Q2002

Expunction of companies merging with Uralsvyazinform from the State Register of Legal Entities and share swap 3Q2002

Federal registration of issues

2Q2002

Actions Scheduled to Complete Reorganization

Market Share of United Company in Urals Region

2001Population Business

sector

Long-distance fixed-line telephony 92,07% 88,97%

Local fixed-line telephony 85,8% 56,89%

Internet 56,88% 56,29%

Mobile telephony 55,4% 55,4%

Paging 29,36% 30,61%

17,619,3

20,9

23,225,3

0

5

10

15

20

25

30

2001 2002E 2003E 2004E 2005E

Telephone Penetration in Urals Region(lines per 100 inhabitants)

Waiting list612 467(as of 1.01.2002)

74,282,8

100,3

149,6

125,0

40

60

80

100

120

140

160

2001 2002E 2003E 2004E 2005E

Lin

esLines per Employee

49%

62%66%

70%

19%

65%

57% 55%

37%

27%

0%

20%

40%

60%

80%

2001 2002E 2003E 2004E 2005E

Switching systems Intrazone Lines

Digitalization

International traffic

95

116

137

197

164

0

50

100

150

200

2001 2002E 2003E 2004E 2005E

Mln

min

1211

1473

1767

2121

2499

0

500

1000

1500

2000

2500

2001 2002E 2003E 2004E 2005E

Mln

min

Domestic Long-Distance Traffic

Monthly Fee(as of 01.03.2002)

4,1

7

4,1

7

4,1

7

4,1

7

4,1

7

9,3

2

11

,07

4,1

7

4,1

7

4,1

7

4,1

7

4,1

7

8,0

3

11

,07

2,5

7

2,5

7

2,5

7

2,5

7

2,5

7

3,5

3

4,8

1

0

2

4

6

8

10

12

Perm Ekaterinburg Chelyabinsk Kurgan Tyumen Khanty-Mansyisk

Yamal

US

D

Business Budget Residents

Rate Exchange 1 USD = 31,17 RUR

Installation Fee(as of 01.03.2002)

193

193

289

193

225

193

257

193

193

289

193

225

193

257

193

193

193

193

177 19

3

193

0

100

200

300

Perm Ekaterinburg Chelyabinsk Kurgan Tyumen Khanty-Mansyisk

Yamal

US

D

Business Budget Residents

Rate Exchange 1 USD = 31,17 RUR

Time-based Billing

Time-based billing is introduced:

• Perm region - 87,5%

• Tyumen region - 67,8%

Introduction of time-based billing is sheduled for 2002 in:

• Sverdlovsk region

• Chelyabinsk region

• Kurgan region

• Khanty-Mansyisk district

• Yamal-Nenets district

365

444

546

764

828

287328

380

475514

69119

165

289314

0

200

400

600

800

1000

2001 2002E 2003E 2004E 2005E

US

D m

ln

Revenues

Costs

Operating Profit

Financial Performance

Average USD Rate Exchange: 2001 - 29,2 RUR; 2002E - 31,5 RUR; 2003E - 33,2 RUR; 2004E - 35,3 RUR; 2005E - 37,2 RUR

1012

16

27

24

0

10

20

30

2001 2002E 2003E 2004E 2005E

US

D t

hs

Revenues per Employee

Average USD Rate Exchange: 2001 - 29,2 RUR; 2002E - 31,5 RUR; 2003E - 33,2 RUR; 2004E - 35,3 RUR; 2005E - 37,2 RUR

132,0

150,0160,0

190,0181,0

0

50

100

150

200

2001 2002E 2003E 2004E 2005E

US

DRevenues per Line

Average USD Rate Exchange: 2001 - 29,2 RUR; 2002E - 31,5 RUR; 2003E - 33,2 RUR; 2004E - 35,3 RUR; 2005E - 37,2 RUR

Revenue Structure

31%

31%

32%

33%

35% 2%

2%

2%

2%

3%

30%

35%

41%

50%

53%

1%

1%

2%

2%

4%

1%

1%

2%

2%

2%

24%

23%

16%

9%

6% 1%

6%

5%

4%

3%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2001

2002п

2003E

2004E

2005E

Urban Fixed-line Network Rural Fixed-line Network Long-Distance Network Data transmission

Wired radio Mobile Radio and TV New services

Cost Structure

42%

43%

39%

36%

34%

31%

29%

31%

34%

34%

16%

16%

17%

16%

18%

11%

12%

13%

14%

14%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2001

2002E

2003E

2004E

2005E

Operational costs Wages Amortization Taxes and deductions

1930

83

157183

85102

195

319

379

0

100

200

300

400

2001 2002E 2003E 2004E 2005E

US

D m

ln

Net Profit EBITDA

EBITDA and Net Profit

USD Rate Exchange: 01.01.02 - 30,14 RUR; 01.01.03 - 32,86 RUR; 01.01.04 - 33,54 RUR; 01.01.05 - 37,06 RUR; 01.01.06 - 37,34 RUR

88

166

218200

155

0

50

100

150

200

250

2001 2002E 2003E 2004E 2005E

US

D m

lnOverall Capital Expenditure

Average USD Rate Exchange: 2001 - 29,2 RUR; 2002E - 31,5 RUR; 2003E - 33,2 RUR; 2004E - 35,3 RUR; 2005E - 37,2 RUR

25

Investment Sources

47%

36%

40%

35%

51%

53%

3%

15%

35%

53%

33%

49%

2%

11%

1%

13%

23%

2001

2002E

2003E

2004E

2005E

Amortization Profit Credits Bonds Shares

United Company Investment Schedule

2001avail-able

2002E 2003E 2004E 2005E Put intooperationin 2002 –

2005г.

Totalas for

01.01.06

Fixed-line Network,thous. lines 2 983 384 330 379 363 1 456 4 085

Mobile-line Network,thous. lines 220 145 269 359 69 842 1 062

Wireless loop, thous. lines

27 3 26 24 59 112 139

Intrazone/Trunk FOLs , km

1 032 529 2 262 3 399 3 573 9 763 10 795

Intrazone/Trunk DigitalMicrowave cable, km 1 705 1 071 1 213 1 962 3 028 7 274 8 979

Put into operation

192201

166

124

5341 37

28 24

214

0

50

100

150

200

250

01.01.01 01.01.02 01.01.03E 01.01.04E 01.01.05E

US

D

mln

Debts as for the beginning of the year including in foreign currency

Debts

USD Rate Exchange: 01.01.02 - 30,14 RUR; 01.01.03 - 32,86 RUR; 01.01.04 - 33,54 RUR; 01.01.05 - 37,06 RUR; 01.01.06 - 37,34 RUR

Investment Priorities

Capacity growth and network upgrade: Digital switching systems; Optical access networks; Long-distance Core Networks; Wireless Loop;

Mobile telephony of GSM-900/1800 standards; Packet switching network:

Multiservice network buildup; Internet enhancement;

Intelligent network;

Cable TV.

Multi-Service Network General Structure

Optical AccessNetwork

Content-Providers

PSTN

InternetManagementSub-Systems

ServiceSelectionGateway

IP Backbone

Corportion AOffice 1 Corportion B

Office 2

Corportion BOffice 2

Corportion AOffice 1

Corporate VirtualPrivate Networks

High- speedInternetAccess

Small office

InternetAccess Virtual

PrivateNetwork

Optical Access Network Implementation

Тelemetry2,4 - 64 кbits

nx64 кbits

District Fiber Ring

Exchange

10/100 ВТ

ADSL

COAX

POTS /ISDN

OLT

ONU 6ONU 4

ONU 3

ONU 2

ONU 5

ONU 1

PC

TV

ISDN

IP

ServerVOD

SecondaryFiber Ring

CATVCable TV /

Internet

PBX

Е1

Corporate VirtualPrivate Network

STB

Video onDemand

ADSL

GSM-900 Network Development

GSM subscribers in Urals region as of 1.04.02г. 152,6 thousand

Салехард

Екатеринбург

Perm

Khanty-Mansyisk

Chelyabinsk

40%

20%

20%

50%

Kurgan

Salekhard

EkaterinburgTyumen • «Ermak-RMS» - 40,2 thous.

subscribers

• «South-Urals Cellular Phone» - 52,4 thousand subscribers

• JSC «Uralsvyazinform» 60 thousand subscribers

220

365

634

9931062

0

200

400

600

800

1 000

1 200

2001 2002E 2003E 2004E 2005E

Th

s n

um

be

rsMobile Installed Capacity in Urals Region

31

2523

2220

0

10

20

30

40

2001 2002E 2003E 2004E 2005E

US

DAverage Revenue Per User

Development of Uralsvyazinform and Rostelecom’s Digital Transport Network based on Digital Microwave, Optical Fiber Links in Ural Region

Digital Transport Network

Uralsvyazinformlines

Uralvyazinform projected lines

Rostelecomlines

Salekhard

Perm

Chelyabinsk

Tyumen

Khanty-Mansyisk

NizhnevartovskSurgut

Berezniki

Serov

N.Tagil

N.Urengoy

Ekaterinburg

Kurgan

Satellite dish

Yamal

Intelligent Network setup in Urals Region

Max. Virtual network capacity is 12 mln. numbers

PSTN PSTN PSTN PSTN PSTNPSTNEkaterinburg Tumen Chelyabinsk Kurgan Yamal Khanty-Mansiysk

Perm SMP

SCPSSPToll Exchange

INAP INAP INAP INAP INAP INAP

SSP

Toll Exch.

SSP

Toll Exch.

SSP

Toll Exch.

SSP

Toll

Exch.

SSP

Toll

Exch.

SSP

Toll Exch.

Uralsvyazinform

Available services Freephone; Premium access; Account card access; Pre-paid card access; Televote.

Prospective Services Pre-paid access to Internet;

Pre-paid access to mobile network;

Personal number service;

Virtual private networks.

Investor Relations

• IAS reporting

• Annual International Audit since 1995

• Level 1 ADR programme

• Fitch credit rating of ‘B’

• Standard & Poor’s rating of ‘В-’Outlook

• Additional shares placement

• Level 3 ADR registration

Uralsvyazinform shares are listed on:

• Russian Trading System, MICEX, MSE

• Berlin, Frankfurt, NewEx Stock Exchanges

• US Secondary market

Stock Performance

0%

50%

100%

150%

200%

250%

300%

03

.01

.01

17

.01

.01

31

.01

.01

14

.02

.01

28

.02

.01

14

.03

.01

28

.03

.01

11

.04

.01

25

.04

.01

09

.05

.01

23

.05

.01

06

.06

.01

20

.06

.01

04

.07

.01

18

.07

.01

01

.08

.01

15

.08

.01

29

.08

.01

12

.09

.01

26

.09

.01

10

.10

.01

24

.10

.01

07

.11

.01

21

.11

.01

05

.12

.01

19

.12

.01

02

.01

.02

16

.01

.02

30

.01

.02

13

.02

.02

27

.02

.02

13

.03

.02

27

.03

.02

Market Cap of United Company

RTS Index

AKM Telecom Index

Volume of Trading Ural Region Telcom shares on the European Stock Exchanges

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1,8

Jan 2

001

Feb 2

001

Mar 2

001

Apr 2

001

May 2

001

Jun 2

001

Jul 2

001

Aug 2

001

Sept

2001

Oct 2

001

Nov 2

001

Dec 2

001

Jan 2

002

Feb 2

002

Mar 2

002

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

Jul

200

1

Aug

200

1

Sep

t 200

1

Oct

200

1

Nov

200

1

Dec

200

1

Jan

.200

2

Berlin Stock Exchange NewEx

US

D m

ln

US

D m

ln

Contacts:

68 Lenin Str.

Russia, 614096, Perm

tel.: +7 3422 34 12 00

fax: +7 3422 34 33 36

e-mail: investor@usi.ru

www.uralsviazinform.com