september 4, 2003
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September 4, 2003
Inter-Regional Telecommunication Company VolgaTelecomInter-Regional Telecommunication Company VolgaTelecom
Share in total Russian industrial production
Automotive 85%Aircraft Construction 65%Petrochemicals 40%Agricultural 25%
Total 24%
Territory – 665,000 sq.km
Population – 21 million
Population density – 31.6 people per sq. km
Urban population – 70%
GDP per Capita – US$2,270
Disposable income – US$105 per month
VolgaTelecom offers:VolgaTelecom offers:
Traditional telecommunication services:• Local (city and rural) telephony• DLD, ILD• Document transmission (fax)• Broadcasting
New telecommunication services:• Internet and data transmission• ISDN• IP-telephony• Intelligent communications network services • Mobile communication• Paging
20,6%
19,5%
18,6%
2001 20032002
Fixed line penetration in Volga
8.6%
Average cost of fixed line telecom services as % of
disposable income
Urban penetration 2003 - 24.7%
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JSC “VolgaTelecom” was created by merging 11 regional operators JSC “VolgaTelecom” was created by merging 11 regional operators of Volga macro-region on 30 Novemberof Volga macro-region on 30 November 200 20022
Increase in Market Cap.
Increase of investment attractiveness
Since the merger was completed and the stocks begin trading on RTS (end of March, 2003) the market cap. of the consolidated company increased by more than 40%
Improvements inMarketing The ability to offer a full range of telecom services in the Volga macro-region
The ability to undertake large scale network modernization and development of new services investment projects, due to more favorable conditions for raising funds
Cost cuttingIncreasing efficiency of cost management via the introduction of a single accounting policy, unified investment and marketing strategy, separate cost accounting, and better corporate governance and strategy
Improvements in corporate governance
& transparency
IAS financial results, improvements in IR- and PR, increasing management efficiency. The work on increasing Corporate Governance Rating – currently rated as 5.8 by Standard and Poor’s
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VolgaTelecom – the combined company today isVolgaTelecom – the combined company today is::
The largest fixed line network in Volga macro – region
The largest fixed line operator (89% market share) and Internet - provider (70% market share)
Modern telecommunication technologies
Stable growth of revenues, and room for more efficient cost management
Effective management technologies
The parent company (100% consolidation) of “N. Novgorod Cellular Communications”- the number one mobile operator in Nizhny Novgorod and the seventh largest in Russia
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Charter capital – US$51,590,245 or327,952,994 sharesNominal value per share – US$ 0.16
common shares245,969,590
75%
Preferred Shares81,983,404
25%
Including common shares underlying
ADRs9,231,838
(2.8 %)
Charter capitalCharter capitalMajor shareholders
Shareholders
Holdings in Charter Capital
01.01.2003
Holdings in voting shares
01.01.2003
PJSC "Svyazinvest" 38.0% 50,7%
CJSC "ING Bank (Eurasia)" 14.8% 15,6%
CJSC "DKK" 9.7% 7,0%
CJSC "Brunswick UBS Warburg Nominees"
4.6% 3,0%
CJSC KB "J.P. Morgan Amro Bank International"
3.7% 3,7%
CJSC "ABN Amro Bank A.O." 2.2% 0,9%
LINDSELL ENTERPRISES LIMITED
2.1% 1,7%
WAKEMAN ENTERPRISES LIMITED
2.1% 2,8%
TELERUS LIMITED 1.4% 0,9%
PJSC "RTK-Lizing" 1.1% 1,4%
Other stockholders 20.3% 12.3%
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$0,00
$0,50
$1,00
$1,50
$2,00
$2,50
average price, common average price, preffered
VolgaTelecom Share Price dynamicsVolgaTelecom Share Price dynamics VolgaTelecom Historical Market CapVolgaTelecom Historical Market Cap. .
0,0230,010,0090,005
0,058
0,0310,036
0,0200,20,40,60,8
1999 2000 2001 2002
Common shares Preferred shares
Dividend History, USD Dividend History, USD
• 2002 dividend yields - 4% for prefs and 1% for commons**
• We will pay 10% of net profit for common shares and 10% for preferred shares going forward
Volga Telecom Dividend PolicyVolga Telecom Dividend Policy
The announcement of the swap ratios
The consolidation of regional operators in
Volga region is finalized
$
$85
$455
$648
01.04.200301.10. 2002 01.09.2003
*
* - USD85 mln Market Cap is capitalization of NizhegorodSvyazinform prior to consolidation
** - calculated based on share prices as of 03.09.2003
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RAS,
US$ mln
IAS
US$ mln
Change, %
Revenues 349,9 421.1 20.3
Operating Expenses 248,7 347.7 39.7
Operating Profit 101,1 73.5 -27.4
Profit Before Tax 63,4 72.3 14.0
Net Income 46,9 29.2 -37.8
EBITDA 133,2 134. 3 0.8
EBITDA Margin, % 38% 32%
Property, Plant & Equipment 390 525,6 545 161.6 39.6
Long- & Short-term Debt (excluding liabilities)
41 350,6 80 247.3 94.1
Cash Flows From Operating Activity 126 016.6
Cash Flows From Investment Activity (110 311.4)
Cash Flows From Financial Activity (8 909.6)
VolgaTelecom 2002 IAS Financial Results & VolgaTelecom 2002 IAS Financial Results & RAS ComparisonRAS Comparison
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The increase in revenues will be a result of:
- An increase in local monthly tariffs by 25-30%
- DLD and ILD tariff rebalancing
- Growth in demand for phone installations (in 2003 we expect subscriber additions of 221,000)
- Growth in DLD and ILD traffic (yearly growth in traffic is 20%)
- An increasing share of revenues from new services in total revenues (including mobile, internet, IP-Telephony, Intellectual network)
Revenues BreakdownRevenues Breakdown
37%
36%
11%
16%
Revenues from long distance services
Revenues from local services and lines intallation
Mobile sevices
Other revenues
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Room to increase profitability via:
- Optimization of personal numbers
- An increase in the level of digitalization will allow us to decrease maintenance costs
- A decrease in SG&A expenses due to ongoing corporate restructuring
Operating costsOperating costs
37%
14%13%4%
18%
1%
2%11%
Wages, salaries, other benefits expenses and payroll taxes
Interconnection charges
Materials, repairs and maintenance, utilities
Taxes other than on income
Depreciation and amortization
Loss on disposal of property, plant and equipment
Bad debt expense
Other operating expenses
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Long- distance traffic Long- distance traffic trendstrends
2001 2002 2003
DLD ILD
Th. minutes
1 355 0761 640 278
1 917 417
2001 2002 2003
Unsatisfied application Unsatisfied application forfor installation of phone setsinstallation of phone sets
913.8
764.7
545.7
2001 2002 2003
The basic telephone setsThe basic telephone sets
166.5
200.3 221.7
Investments per line installation $ 250
Investments on upgrade of analogue line to digital $ 170
E
E
E
Th. Th.
11
Network expanNetwork expanssionion
39993688
388341044242 4455
91.592.4 92.1
46.2
40.833.8
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2001 2002 2003
'000
0
10
20
30
40
50
60
70
80
90
100 %
Lines installed Lines in use Usage rate Digitalisation
E
12
Affiliated and dependent enterprises of telecommunications branchesAffiliated and dependent enterprises of telecommunications branches at least partially ownedat least partially owned by OJSC by OJSC ««VolgaTelecomVolgaTelecom» »
((holds more than 10% of the ownershipholds more than 10% of the ownership capitalcapital))
Company Standard District NNSI SubscribersNCC GSM Nizhny Novgorod 100% 248,000Ulyanovsk GSM Ulyanovsk region 51% 48,000Udmurtia GSM Udmurtia Republic 49% 44,000Orenburg GSM Orenburg region 51% 24,000
364,00042,000
458,000Total consolidated cellular subscribers
Total consolidated GSM subscribersTotal consolidated NMT subscribers
VolgaTelecom mobile exposure
Activity CompaniesCellular Communication Services 13Paging Services 3Services of Telegraph, Data Transmission Networks, Internet, New Technologies 6Local Telephony Services 4TV, Radio Broadcasting Services 2Wireless communication Services 2
13
15 743
23 913
36 470
9 14211 542
16 953
2001 2002 2003
Revenue EBITDA
Nizhnii Novgorod MobileNizhnii Novgorod Mobile
ARPU, SAC, $ARPU, SAC, $
31
22
1416 16
13
2001 2002 2003
APRU SAC
RevenueRevenue,, $ th $ th
GSМ900\1800 Standard
50% of the mobile market in Nizhniy Novgorod region
One of largest mobile operators in Russia( 7th place according to AC&M Consulting)
Number of cellular subscribers, thNumber of cellular subscribers, th
I
EE
84
156
400
65111
300
2001 2002 2003
Total subscribers Active subscribers
E
14
Development of means of communications within the Development of means of communications within the overall plan of technical upgrade of the networkoverall plan of technical upgrade of the network
Increase of the installed capacity of the network:2002 – 4 237 000 numbers; 2003 – 4 455 000 numbers
Increase utilization level of the network2002 – 91,5%; 2003 – 92,1%.
Increase network digitalization 2002 – 40,8%; 2003 – 46,2% through installation of the new lines 2002 – 400 thousand; 2003 – 420 thousand.
Increase digitalization level of the intra-regional network through building fiber optic lines, RRL, SDH.
The company is building its future relaying on:The company is building its future relaying on:
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Development of new profitable services
Development of the mobile business. The mobile assets are been evaluated currently and we are considering re-organisation of the business including possibility of creating a united Volga region mobile operator.
Enlarging the Internet related services (access, dedicated channels, xDSL), with the aim of increasing market share through the complex of marketing events.
Creation of the inter-regional multiservice network using the existing networks of the regional subsidiaries.
Creation and development of the intelligent networks (already working in Nizhniy Novgorod). Focus will be on informational services and the IP-telephony.
The company is building its future relaying on:The company is building its future relaying on:
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Realizing Marketing Potential
Marketing plans and actions are carried through the framework of united marketing concept of the company.
Preserving leadership in the local and long-distance communications market in the Volga region
Increasing the share in the profitable segments of the market through packaging services for the business-users in the whole Volga region
Improving the quality of services for the mass market. Personalized services to the business-users. The company already operates service-centers and VIP-centers developing complex packaged services in the traditional fixed-line and new hi-tech areas.
The company is building its future relaying on:The company is building its future relaying on:
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Increasing the investment attractiveness
Joint PR and IR programs aimed at increasing the informational transparency of the company
Improvement of the free float and liquidity of shares. Listing of shares at different bourses
Increase of the credit ratings (rated currently «B», with “Stable” forecast*) and
corporate governance ratings (5,8 points *)•(according to «Standard and Poor’s»)
Introduction of the norms/codex of corporate governance
The company is building its future relaying on:The company is building its future relaying on:
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The company is building its future relaying on:The company is building its future relaying on:
Investment Policies
Introduction of investment planning.
Focus on priority tasks and directions (upgrade of the telephone lines, introduction of new services).
Lowering the cost of investments through common purchasing schemes.
Personnel Policies
Optimization of headcount through corporate restructuring and modernization of the telephone lines
Creating a pool of reliable personnel cadre through upgrading the professional level of employees
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