#1URALSVYAZINFORM Company Presentation November, 2003 Sergey Kuzyaev, Chief Financial Officer www.uralsviazinform.com#2Disclaimer Certain statements in this presentation are “forward-looking statements”. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks include the risk of changes the Company's operations and business prospects, the general financial and economic circumstances, relating to regulation of the Russian telecommunications industry and the Russian legislation; the competition and other risks. Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, the Company cautions not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required under applicable Russian federal securities laws. URALSVYAZINFORM#3Region Economic indicators ■ Territory - 1,9 mln sq. km ☐ ■ Population 15,5 mln - (9% of overall population of Russia) Urban population - 80 % Industrial output in 2002 - USD39,4 bln (18% of Russia's overall industrial output) Natural resources Khanty-Mansiysk-Yogra Yamalo-Nenetsky Perm region Perm autonomous district Khanty-Mansiysk autonomous district 1 Salekhard Moscow Kazakhstan Kara Sea Chelyabinsk region Kurgan region Sverdlovsk region South Tyumen region Chelyabinsk Kurgan Ekaterinburg Tyumen Oil (65% of national reserves / 6% of world resources) Gas (95 % of national reserves / 26 % of world resources) ■ Iron (21 %) and manganese (9%) ore, copper, gold, silver, diamonds URALSVYAZINFORM Overview#4Key Facts Technical Major telecommunications carrier in Urals region / Urals federal district and Perm region Overall installed capacity - 4,4 mln lines, including mobile telephony - 1,1 mln lines ☐ Wire-line subscriber number - 3,1 mln, mobile - 1,0 mln Number of employees - 35,6 thous. Financial Revenue'02/IAS - USD564 mn EBITDA'02/IAS - USD169 mn Capitalization as of 31/10/03 - USD1 165 mn (+150% since of 01/01/03) USD exchange rate as given here and henceforth: 2001 - RUR 29,5/2002 - RUR 31,4/2003E - RUR 30,7 URALSVYAZINFORM Overview#5Market performance Local telephony* Uralsvyazinform Market share Subscribers, mln 4,5 87 Alternative&departmental 13 operators DLD/ILD telephony* Uralsvyazinform 71 3,0 0,20 0,25 0,32 2,90 2,94 2,98 3,04 3,07 3,08 3,10 1,00 0,70 0,50 0,40 Alternative&departmental 29 operators Mobile telephony* 1,5 55 Uralsvyazinform 55 MTS 26 Mobile GSM-subscribers Wire-line subscribers MegaFon 17 0 Other 2 *07/01/03 data. As a percentage of total subscriber number URALSVYAZINFORM 10'02 20'02 30'02 40'02 10'03 20'03 01.11.03 Overview#6Ownership structure ☐ Book capital - USD 158 mn Number of shares - 40 134 723 306 including common 32 298 782 020/80,5 % preference 7 835 941 286/19,5% ☐ Number of stockholders - 22 thous. As of 01/10/03 Svyazinvest 41,4% (51,4%*) Individuals 9,4% (5,8%) Management 6,0% (6,1%) State ownership 4,7% (5,8%) ADR 10,1% (9,5%) Institutional * stake in common shares 28,4% (21,4%) Free float -48% URALSVYAZINFORM Overview#7Financial Performance Revenues, USD mn Expenses, USD mn 660 Operating profit, USD mn 618 564 471 471 443 440 361 220 0 348 293 2001 175 + 81% 123 93 68 2002 2002/IAS 2003F Revenue growth rate has exceeded this of expenses over the last years. As a consequence, operating profit is going up. Operating margin (RAS): 2001 - 18,8 %, 2002 - 26,1 %, 2003F - 28,3 % URALSVYAZINFORM Overview#8Financial Performance EBITDA, USD mn Net profit, USD mn 270 238 180 90 116 170 169 53 +38% 37 29 21 0 2001 2002 2002/IAS 2003F ☐ EBITDA margin: 2001 -32,1 %, 2002 - 36,1 %, 2003F - 38,5 % Net margin: 2001 - 5,8 %, 2002 - 6,2 %, 2003F - 8,6 % URALSVYAZINFORM Overview#9Quarterly Financial Highlights'03/RAS Revenue, USD mln. EBITDA, USD mln. 90 180 163 148 132 120 60 60 60 50 10'03 20'03 Operating profit, USD mln. 3Q'03 30 58 63 49 10'03 20'03 30'03 Net profit, USD mln. 17 16 14 12 21 60 49 43 40 34 20 10'03 2Q'03 3Q'03 URALSVYAZINFORM 7 10'03 20'03 3Q'03 Overview#10Revenue structure 46% 35% 12% 3% 4% 2003F 48% 33% 10% 3% 6% 2002 2001 53% DLD/ILD Telephony 31% 6% 1% 9% Urban Telephony Mobile Telephony New services (Internet, Data transmission, DSL, ISDN, Intelligent network) Other (TV&Radio, Telex&Telegraph, Rural telephony) Highly profitable services take up a higher share in revenue structure URALSVYAZINFORM Overview#11Expenditure structure 44%(14%) 31% 14% 11% 2003F 46% (13%) 30% 13% 11% 2002 2001 43% (12%) 30% 14% 13% Operating expenses (including Rostelecom fees) Wages Depreciation Taxes & Deductions Plans to increase depreciation deductions, as well as budgets for marketing, advertizing, sales promotion, staff training, R&D URALSVYAZINFORM Overview#12GSM 900/1800 Uralsvyazinform South-Urals Cellular Phone Ermak RMS Total subscribers as of 01.11.03 1,0 mln (+119% since 01.01.03) 2003 Penetration into mobile market of Sverlovsk region and Ekaterinburg Prospects consolidation - of mobile business under one brand Perm Ekaterinburg Chelyabinsk Kurgan Salekhard Khanty-Mansyisk Tyumen On September 24, 2003 an agreement to acquire 33,4% of Tatinkom-T, a mobile operator in Tatarstan was signed. Its subscriber base as of Sept. 1, 2003 totaled 120 thousand. URALSVYAZINFORM Overview#13Customer welfare... Average salary, USD Russian average, USD 240 161 160 146 80 99 111 217 138 190 142 Halılı 0 Central North-West South Volga Urals Siberia Far East Russia As a region of Russia, Ural ranks first in terms of customers' incomes / income per capita - subsistence wage ratio According to Goskomstat (State Committee for Statistics) data as of 01.07.2002 URALSVYAZINFORM Strategic investment priorities - potential for growth#14along with pent-up demand for local telephony services ... Wire-line telephone penetration as of January 1, 2003, % 69 67 59 57 46 23 38 38 30 24 19 0 US UK Taiwan Czech. Rep. Hungary Poland Russia Ural Waiting list as of January 1, 2003 accounts for 538 thous., 90% of which are urban. Each urban account covers installation costs, generating USD190 in revenue According to GEM Telecom Overview/ING URALSVYAZINFORM Strategic investment priorities - potential for growth#153 DLD/ILD telephony... DLD/ILD traffic, bln minutes 2,7 2,3 2 1,9 1,6 1,2 1 0 2001 2002 2003E 2004E 2005E Healthy DLD/ILD traffic is backed by sustainable growth of foreign direct investment, and development of small and middle-scope businesses. Our revised long-distance tariff policy is another contributor to the traffic growth. URALSVYAZINFORM Strategic investment priorities - potential for growth#16... and mobile telephony... 90 60 30 Mobile telephone penetration as of January 1, 2003, % 78 0 UK 48 44 Moscow Europe 13 9 Russia Ural We benefit from strong market potential in Urals region. The subscriber growth rate attained 89% since the beginning of the year, driven by competitive pricing, rising incomes and growing business activity. *According to ACM Consulting URALSVYAZINFORM Strategic investment priorities - potential for growth#17... determine investment priorities ☐ ☐ ☐ • • Capacity extension and network upgrade Packet switching network Optical broadband access networks Intrazone optical and microwave transport networks Wireless local loop Mobile telephony of GSM-900/1800 standard Internet Intelligent network ☐ Cable TV Strategic investment priorities - potential for growth URALSVYAZINFORM#18Rapid growth 2001 CAGR 2002-05 Implemented 2002 2003 F 2004F 2005F 2002-05 Plan Wire-line Thous. Lines 3 112 +338 +356 +380 +360 10% +1 434 Mobile/GSM Thous. Lines 261 +275 +804 +280 +280 63% +1 639 Intrazone fiber optical links Thous. Km 1,4 +1,5 +2,1 +2,5 +2,1 64% +8,2 Intrazone radio microwave links Thous. Km 2,0 +0,07 +1,1 +1,8 +1,3 33% +4,3 Investment structure'2002: DLD/ILD telephony - 15 % Mobile telephony - 20% Local telephony - 56 % New services - 8% Other -1% URALSVYAZINFORM Strategic investment priorities - potential for growth#19Capex 250 200 ■ 150 Capex volume, USD mn 100 88 50 0 2001 159 2002 242 227 231 2003F 2004F 2005F Priority investment regions - Sverdlovsk region, Tyumen region including Khanty-Mansyisk-Yogra and Yamalo-Nenetski autonomous districts. URALSVYAZINFORM Strategic investment priorities - potential for growth#20Digital transport network 2002 2003 2004-05 Implemented Plan Plan Intrazone fiber optical links Thous km 2,9 +2,1 +4,6 Intrazone radio microwave links Thous km 2,07 +1,1 +3,1 Salekhard Regions with the highest ratio of investment into intrazone lines Sverdlovsk and Tyumen regions (including Perm Khanty-Mansyisk-Yogra AD and Yamalo-Nenetski AD) URALSVYAZINFORM Chelyabinsk O Q о Khanty-Mansyisk Ekaterinburg Tyumen Existing lines Kurgan Planned for 2003 Projected Company tomorrow#21Digitalization 100 ☐ 75 Digitalization of switches, % Digitalization of intrazone lines, % 90 49 50 25 57 67 41 32 0 2001 2002 55 2003F 75 72 70 2004F 2005F We expect high rate of digitalization of intrazone lines URALSVYAZINFORM Company tomorrow#22Development: GSM 900/1800 Istalled capacity, thous. ARPU, $ (South Urals Cellular Phone, Uralsvyazinform) 1900 40 2000 1620 1500- 1340 25 20 1000 18 16 536 500 261 0 2001 2002 2003E 30 20 15 H 2004E 0 2005E 10 The company plans to protect and expand its market share in mobile business through aggressive marketing and highly competitive pricing URALSVYAZINFORM Company tomorrow#23Multiservice network Corporate Virtual Private Networks Management Sub-Systems Corportion A Office 1 Service Selection Gateway Internet Content- Providers Corportion A Office 1 X LLL X Corportion B Office 2 X IP Backbone X OLT X PSTN Exchange Optical Access Network High-speed Internet Access Small office 品 XxX Corportion B Office 2 bbb தது BE ES Internet Access Virtual Private Network Further network development is based on optical access technology URALSVYAZINFORM Company tomorrow#24Development strategy ◉ ■ ◉ Total Consumer Satisfaction policy Broadening of services array Enhancement of existing networks Prioritizing on highly profitable services Reduction of costs through introduction of up-to-date technologies, optimization of management structure and number of employees Elaboration of economically feasible tariff policy based on activity based costing Providing for capitalization growth and shares' liquidity URALSVYAZINFORM Overview#25Stock performance Shares are traded on: URSI dynamics as compared to RTS Index January'02 October'03 Russian Trading System (RTS) - RTS A1-Level Quotation List Moscow Interbank Currency Exchange- +307% MICEX A1-Level Quotation List 300 Level 1 ADR program for common and preference shares 200 MAP affirms ADR are traded on: consolidation Berlin Stock Exchange Frankfurt Stock Exchange 100 Share swap AGM and dividend announcement 2002 preliminary results disclosed NewEX Burse AG Credit ratings: Standard&Poors - "B", Stable Fitch Ratings -"B+", Positive ☐ Corporate governance score: Standard&Poors - "6,1" State owned shares sale: The state owned shares of the Company (4,7%) are expected to be sold in 2004 Jan'02 URSI Индекс РТС MSCI Indices: June'02 Jan'03 June'03 Oct'03 Since May 30, 2003 shares are included in MSCI Russia and MSCI Telecommunications indices URALSVYAZINFORM#26Why Uralsvyazinform ☐ Vigorous business activity and solvent demand for telecommunications services in the region 18% of Russia's overall industrial output Total consumer satisfaction policy Over 4,0 mln. Subscribers Own mobile business and promotion of HVA-services 1,0 mln. Mobile subscribers Aggressive investment policy targeted at highly profitable technologies Approximately USD200 mln. Annually (2003-05) High economic efficiency and financial stability Operating profit'02 growth - 81% Effective management Corporate governance score: "6,1" (Standard&Poors) Company is striving to meet world standards of information transparency and corporate governance URALSVYAZINFORM Company tomorrow#27Contact details Investor relations 68, Lenina st., Perm, 614096 Russia phone: +7 3422 136 598 fax: +7 3422 343 336 e-mail: [email protected] Ticker symbols Russian Trading System - URSI ADR - UVYZY, UVYPY You may find additional information and updates on our corporate web-site at www.uralsviazinform.com, or at company's page URSI_RU at Bloomberg