JSC SVYAZINVESTON TELECOMMUNICATIONS MARKET
2
FORWARD-LOOKING STATEMENTS
_Certain statements in this presentation are not historical facts and represent “forward-looking” statements. Example of such forward-looking statements include, but are not limited to: _projections or expectations of revenues, profit (or loss), earnings (or loss) per share, dividends, capital structure, other financial indicators or ratios; _statements of our plans, objectives or goals, including those related to products or services; _statements of future economic indicators; _statements of prerequisites underlying such statements._Words such as “believes”, “expects”, “supposes”, “plans”, “is going to” and “intends”, as well as similar expressions, are intended to identify forward-looking statements but for all that are not the exclusive means of identifying such statements._By their very nature, forward-looking statements imply some inherent risks and uncertain points, both general and specific, and there is some risk that the plans, expectations, forecasts and other forward-looking statements will not be realized. You should remember that owing to a number of important factors, actual results might substantially differ from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements, including our ability to execute our restructuring and cost reduction programme ._When relying on forward-looking statements, you should carefully analyze the foregoing factors and other uncertainties and events which are not clear, especially in light of the political, economic, social and legal environment in which the Company operates . Such forward-looking statements are valid only as of the date on which they are published, and the Company does not undertake any obligation to update or revise any of them whether as a result of new information, new events or otherwise. The Company does not make any statement, does not provide any affirmation and does not publish any forecast that the results anticipated by such forward-looking statements will be achieved. Such forward-looking statements represent only one of many possible scenarios of situation and should not be considered as the most likely or standard course of events.
3
_SVYAZINVEST GROUP: PROFILE AND DEVELOPMENT INDICATORS
_IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY OF SVYAZINVEST GROUP
_UNREGULATED SERVICES – PRIMARY DEVELOPMENT TREND FOR SVYAZINVEST GROUP
_PROSPECTS FOR SVYAZINVEST GROUP
4
RUSSIA TODAY
1
2
3
4
5
6
7
Worls USA EU Russia
2005 2006 2007(e)
13
26
41
1
6
11
16
21
26
31
36
41
46
2005 2006 2007(e)
High and sustainable pace of growth of Russian economy
Pace of growth of Russian economy, % * Growth of Real Wage in Russia, % *
Direct foreign investment in Russian economy, USD bln *
12.6
13.312.8
10,0
10,5
11,0
11,5
12,0
12,5
13,0
13,5
14,0
14,5
15,0
2005 2006 2007(e)
Russian economy is becoming more attractive in the eyes of foreign partners
Growth of common welfare and consumer's demand
*- source: Ministry for Economic Development and Trade of the Russian Federation
55
SVYAZINVEST: STRUCTURE AND COVERAGE
Sibirtelecom4.7 mln lines in serviceMarket cap equals USD 1,815 mln*
Dalsvyaz1.5 mln lines in serviceMarket cap equals USD 684 mln*
State75% - 1 share
MGTS Finance7.69%
Svyazinvest
7 RTOs
Rostelecom MGTSOther
Controlling stake
Blocking stake
_Foundation of Svyazinvest – September 18, 1995 _Sale of the company’s blocking stake to Mustcom - July 1997_Corporate integration: 72 telecom companies were consolidated into 7 interregional companies throughout 2000-2002
South Telecom4.1 mln lines in serviceMarket cap equals USD 783 mln* VolgaTelecom
5.0 mln lines in serviceMarket cap equals USD 1,903 mln*
CenterTelecom6.7 mln lines in serviceMarket cap equals USD 1,796mln*
Uralsvyazinform8.3 mln lines in serviceMarket cap equals USD 2,522 mln*
North-West Telecom4.4 mln lines in serviceMarket cap equals USD 2,011mln*
* - market caps as of November 9, 2007
Comstar-UTS17.31% + 1 share
_Rostelecom owns a powerful backbone network spreading across almost all the territory of Russia. The Company’s network is around 200,000 km long. The level of Company’s market capitalization equals $7,746mln. _At present, the estimated capitalization of Svyazinvest is some $9.8 bln.
6
KEY PERFORMANCE INDICATORS OF SVYAZINVEST GROUP *
6.965.90
1.240.720.64
* - hereinafter (unless otherwise indicated) : a) aggregated indicators are given according to RAS; b) Svyazinvest Group includes the following companies:Rostelecom, 7 RTOs, Central Telegraph, Dagsvyazinform
Russian Accounting Standards
9.338.046.82
2007 F20062005
REVENUE[USD, bln]
17.9%7.726.55
EXPENSES[USD, bln]
OPERATING INCOME[USD, bln]
EBITDA[USD, bln]
NET PROFIT[USD, bln]
International Accounting Standards16.0%
3Q2006 3Q2007
17.9%
20062005
17.9%
0.70 0.89
6.835.84
1.701.37
5.264.53
3.212.271.97
1.961.611.55
7.376.435.27
0.330.25
2.321.862.471.89
1.040.70
2007 F20062005 3Q2006 3Q2007 20062005
2007 F20062005 3Q2006 3Q2007 20062005
2007 F20062005 3Q2006 3Q2007 20062005
2007 F20062005 3Q2006 3Q2007 20062005
15.9%21.9% 14.6%
4.1% 21.9% 24.4%
15.0% 41.4% 30.6%
13.6% 71.6% 47.7%
16.9%
26.9%
24.7%
32.1%
7
MARKET SHARE OF SVYAZINVEST GROUP OF COMPANIES *
17%
83%
LOCAL TELEPHONY MARKET
INTRA-ZONAL TELEPHONY MARKET
* - as of the end of 1H2007
** - on the licensed coverage area of 7 RTOs
4%
96%
MOBILE TELEPHONY MARKET
92%
8%
67%
33%
TELECOMMUNICATIONS MARKET
DATACOM MARKET
46%
54%LD / ILD MARKET
16%
84%**
- Share of Svyazinvest group (Rostelecom + 7 RTOs)
- Share of other providers
8
KEY INFRASTRUCTURE INDICATORS OF SVYAZINVEST GROUP
60.163.3
67.7
20
30
40
50
60
70
80
DIGITALIZATION
200520062007 (target)
31.331.7
32.3
15
19
23
27
31
35
INSTALLED CAPACITY
200520062007 (target)
-1% +5%
INSTALLED CAPACITY, mln lines DIGITALIZATION RATE, %
9
INVESTMENT POLICY: DYNAMICS AND STRUCTURE OF CAPITAL INVESTMENT
27%29%40%
39%
32%23%
22%
29%24%
12%
10%13%
0
0,5
1
1,5
2
2,5
2005 2006 2007 (forecast)
Traditional telephony Development of infrastructure
New services and IT-technologies
Other
1.53 1.40
1.93
INVESTMENT, USD, bln
10
89
102
124
144
0 50 100 150 200
2004
2005
2006
2007*
KEY OPERATIONAL INDICATORS OF SVYAZINVEST GROUP
LINES PER EMPLOYEE, unit REVENUE PER EMPLOYEE, USD thousand
29
23
19
38
0 10 20 30 40 50 60
2004
2005
2006
2007*
* - forecast
NUMBER OF EMPLOYEES, employees, thousand
+22%
+ 16%+ 30%
+ 23%
+ 30%
+15%
243
273
300
316
0 100 200 300 400 500
2004
2005
2006
2007*
-9.0%
- 10.9%
-5.0%
11
86 86 82
14 14 18
0
20
40
60
80
100
as of Jan 1, 2006 as of Jan 1, 2007 as of Jan 1, 2008 *
ruble-denom inated currency
49%45% 47%
29%
27%30%
22%
28%23%
0
3
6
9
12
15
as of Jan 1, 2006 as of Jan 1, 2008 as of Jan 1, 2008 *
equity capital long-term liabilities short-term liabilities
$ 10.4 bln.$ 12.2 bln.
$ 14.2 bln.
* - forecast
CAPITAL STRUCTURE, USD bln RATIO BETWEEN CURRENCY AND RUBLE-DENOMINATED LOANS
DEBT OVERVIEW
AVERAGE COST OF CREDIT RESOURCES, %
9.19.3
11.412.0
6
7
8
9
10
11
12
13
14
as of Jan 1, 2006 as of July 1, 2006 as of Jan 1, 2007 as of Jan 1, 2008 *
ruble-denominated loans
In 2006 – 2007, major changes were made to the structure,
cost and amount of the debt portfolio of the companies in
Svyazinvest Group. Changes in the cost of attracting credit
resources are due both to the upgrade of the RTOs’ credit
ratings and to the general market correction.
12
BOND ISSUES
Company SeriesDate of issue
Nominal value*Maturity
dateOffer / other conditions
Interest rate
Uralsvyazinform07 21.03.06 Rub 3 bln ($109 mln) 6 years In 3 years 8.4% for 3
years
Central Telegraph 03 05.04.06 Rub 700 mln ($25 mln) 3 years No offer 9.75%
Sibirtelecom 07 24.05.06 Rub 2 bln ($74 mln) 3 years No offer 8.65%
DalsvyazD2 07.06.06 Rub2 bln ($75 mln) 6 years In 4 years 8.85% for
4 years
Dalsvyaz D3 07.06.06 Rub 1.5 bln ($56 mln) 3 years No offer 8,6%
CenterTelecom05 05.09.06 Rub 3 bln ($112 mln) 5 years In 2 years 8.09% for
2 yearsVolgaTelecom VT-4 12.09.06 Rub 3 bln ($112 mln) 7 years In 3 years 7.99% for
3 yearsNorth-West Telecom 04 14.12.06 Rub 2 bln ($76 mln) 5 years Call option in 2 years at 102% 8.1%
South Telecom 05 06.06.07 Rub 2 bln ($77 mln) 5 years In 3 years 7.55% for 3 years
_Total volume of placement in 2006-2007 was Rub 19.2 bln (USD 716 mln)
* Estimated average USD rate was based on the exchange rate quoted by the CBR as of the placement date
13
SVYAZINVEST GROUP: DYNAMICS OF CAPITALIZATION CALCULATED COMPARED WITH THE RTS INDEX, 2006-2007
4 000
5 000
6 000
7 000
8 000
9 000
10 000
Jan-
06
Feb
-06
Mar
-06
Apr
-06
May
-06
Jun-
06
Jul-0
6
Aug
-06
Sep
-06
Oct
-06
Nov
-06
Dec
-06
Jan-
07
Feb
-07
Mar
-07
Apr
-07
May
-07
Jun-
07
Jul-0
7
Aug
-07
Sep
-07
Oct
-07
US
D, m
ln
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
poin
ts
Svyazinvest
RTS index
14
Residents (legal entities)Individuals
JSC Svyazinvest
Non-residents (legal entities)
RTOs AND ROSTELECOM SHAREHOLDER CAPITAL STRUCTURE
NORTH-WEST TELECOM
40%
11%
37%
CENTERTELECOM
9%
38% 42%
VOLGATELECOM
9%
39%38%
38% 38%
13%
SOUTH TELECOM
41% 25%
12%
URALSVYAZINFORM SIBIRTELECOM
10%
38% 39%
DALSVYAZ
12%
36%38%
ROSTELECOM
9%
17%38%
12% 11% 14%
11% 22% 13%
14% 36%
15
RTOs AND ROSTELECOM CREDIT RATINGS
Company Rating Outlook Agency
North-West Telecom BB-/ВВ- Stable / Stable S&P/Fitch
South Telecom В- Credit Watch Positive S&P
CenterTelecom B+/B Positive / Positive S&P/Fitch
VolgaTelecom BB- Stable S&P
Dalsvyaz В+ Stable Fitch
Uralsvyazinform BB-/B+ Stable / Stable S&P/Fitch
Sibirtelecom B+ Stable Fitch
Rostelecom BB- Stable S&P
16
_SVYAZINVEST GROUP: PROFILE AND DEVELOPMENT INDICATORS
_IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY OF SVYAZINVEST GROUP
_UNREGULATED SERVICES – PRIMARY DEVELOPMENT TREND FOR SVYAZINVEST GROUP
_PROSPECTS FOR SVYAZINVEST GROUP
17
IN 2007, THE RUSSIAN TELECOM MARKET HAS DEVELOPED ACCORDING TO GENERAL INTERNATIONAL TENDENCIES
HOWEVER, IT HAS ALSO BEEN CHARACTERIZED BY A NUMBER OF SPECIFIC FEATURES
GENERAL TENDENCIES SPECIFIC TENDENCIES
– Mobile traffic replacing fixed traffic1
– Development of broadband Internet access
2
– Liberalization of LD market3
– Switch to new system of tariff plans1
– Introduction of “Calling Party Pays“ principle
2
– Introduction of new interconnect rules3
– Convergence of telecom services4
ALL THESE FACTORS HAVE A DIFFERENT IMPACT
COMPANIES OF SVYAZINVEST GROUPKEEP THEIR MARKET POSITIONS
18
LIBERALIZATION OF LD MARKET
32 LICENCES HAVE BEEN ISSUED TO DATE
SEVERAL PROVIDERS ARE ACTUALLY OPERATING ON THE LD MARKET: ROSTELECOM, GOLDEN TELECOM, MTT, TRANSTELECOM
SINCE JANUARY 1, 2006 LD MARKET HAS BEEN LIBERALIZED
MARKET POSITION OF ROSTELECOM ON ILD MARKET, ESTIMATED TRAFFIC (1H 2007)
91%
Source: iKS-consulting, internal accounts of Svyazinvest
MARKET POSITION OF ROSTELECOM ON LD MARKET, ESTIMATED TRAFFIC (1H2007)
89%
- Share of Rostelecom
- Share of other operators
19
INTRODUCTION OF “СALLING PARTY PAYS” PRINCIPLE
74
223
active inactive inactive after introduction of fees
F2M REVENUE, [USD MLN]MOU F2M, [MIN / MONTH]
SUBSCRIBERS ACTIVITY FOR F2M CALLS AS OF JUNE, 2007, %
72
19
10
positive neutral
negative
SUBSCRIBERS ATTITUDE TO THE INTRODUCTION OF CPP, %
Source: Research by ROMIR, June 2007Source: Research by ComCon, March 2007
22
12
25
17
46
26
182427
14
28
20
41
2923 26
Center NWT Volga STC USI Sibir DSV RTOs
2H2006 1H2007
+19%
+24%
+12%
+14%
+9%+31%
+9%
-
11%
238 279
RTOs
11
42
52
26
40
17
50
14
47
58
32
47
20
62
Center NWT Volga STC USI Sibir DSV
2H2006 1H2007
+24%
+17%
+16%
+21%
+11%
+12%
+32% +17%
20
4.8 4.8 4.8
3.2
0
3
6
9
12
15
18
Subscriber Combined Time-based
11 *
16 *
0
3
6
9
12
15
18
Tariff limit Tariff offered by RTOs
¢ 0.7
¢ 0.9
11
368 min16*
8 *
SWITCH TO NEW SYSTEM OF TARIFF PLANS (1)
4.25.8 6.7
8.1
5.7
10.08.7
7.8
0
3
6
9
12
15
18
01.01.04 01.01.05 01.01.06 01.02.07
indiv iduals organisations
TARIFF PLANS (PSTN, average for RTOs), USD
CURRENT TARIFFS (PSTN as of date below, average for RTOs), USD
SUBSCRIBER TARIFF PLAN (PSTN, average for RTOs), USD
- 32%**
**
ACCORDING TO RF CIVIL CODE, THE CURRENT PAYMENT SYSTEM REMAINS EFFECTIVE FOR THOSE WHO FAIL TO
SELECT A TARIFF PLAN
FORMATION OF TRANSITIONAL PERIODMASS PR CAMPAIGN CONDUCTED
** - Tariff for regions where it is not technically possible to introduce tariff plans* - Total fee incl. line rental
-Cost per minute of connection- Payment for line
-Payment for base number of connections -Payment for maximum number of connections
21
SWITCH TO NEW SYSTEM OF TARIFF PLANS (2)
62%
34%43%31%
50%
8%7%17%
45%31%
63%
21%
19%
14%
8%
25%
30%25%
26%40%
26%
47%24%
19%11%14%
24%11% 18%
5%3%1%
DSV NWT USI Center Volga Sibir ST C RT Os
Combined TP
Time-based TP
Unlimited TP
Subscriber TP
BREAKDOWN OF INDIVIDUAL SUBSCRIBERS BY TARIFF PLAN (IN REGIONS WHERE IT IS TECHNICALLY POSSIBLE TO INTRODUCE TARIFF PLANS), AS OF OCTOBER 1, 2007
BREAKDOWN OF INDIVIDUAL SUBSCRIBERS BY TARIFF PLAN (TAKING INTO ACCOUNT THE REGIONS WHERE IT IS NOT TECHNICALLY POSSIBLE TO INTRODUCE TARIFF PLANS), AS OF OCTOBER 1, 2007
48%33%
76%
42%27% 24% 21%
37%
46%66%
45%
57%
52%51%26%
23%17%15%
25%16%
31%
12%6%1%
DSV NWT USI Center Volga Sibir STC RTOs
Combined TPTime-based TPUnlimited TP
22
_SVYAZINVEST GROUP: PROFILE AND DEVELOPMENT INDICATORS
_IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY OF SVYAZINVEST GROUP
_UNREGULATED SERVICES – PRIMARY DEVELOPMENT TREND FOR SVYAZINVEST GROUP
_PROSPECTS FOR SVYAZINVEST GROUP
23
GROWTH ON DATACOM MARKET
5 5 6 6 6 73 3 3 3 3 3
1315 17 19 20 2234
55 6
7
2006 07 08 09 10 2011
EARNINGS FORM DATACOM SERVICES, USD BLNGROWTH FORECAST FOR TELECOM MARKET, USD BLN
0%5%
10%15%20%25%30%
2005 2006 2007 2008 2009 2010 2011 2012 2013
BIA penetration, % Internet penetration, %
INTERNET PENETRATION AND BIA IN RUSSIA (SUBSCRIBERS), %
annual average
Local voice
LD services
Mobile communications
Internet and datacom
+ 11%
+ 8%
0%
+ 11%
+23%
СAGR%
1 2 2 2 3 31
23
33
4
2006 07 08 09 10 2011
Individuals
Organisations 17%
+30%
СAGR%
annual average + 23%
Source:McKinsey Source:McKinsey
Source:UralSib
_Datacom will be the fastest growing market segment. Most expansion will come from broadband Internet access.
_ The penetration of broadband Internet access (BIA) will grow in line with disposable income, computerization, network upgrades and cost reduction.
24
GROWTH POTENTIAL OF SVYAZINVEST GROUP IN THE NEW SERVICES SEGMENT, USD mln *
912
542
353212
9.8%
6.7%
5.2%
3.6%
0
300
600
900
1200
2004 2005 2006 2007(forecast)
0%
3%
6%
9%
12%
Revenue from unregulated servicesShare of revenue from unregulated services in total revenue
75%
14%
5%4% 2%
InternetDigital datacom networksTVIntelligent telecom networksIP telephony
DYNAMICS OF INVESTMENTS IN THE DEVELOPMENT OF NEW SERVICES AND IT TECHNOLOGIES, USD mln *
REVENUE FROM NEW SERVICES IN TOTAL REVENUE OF SVYAZINVEST GROUP, USD mln*
+ 70 %
BREAKDOWN OF REVENUE FROM UNREGULATED SERVICES IN 2007 (FORECAST)
140236
360447
753
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007(forecast)
* - not incl. cellular communication
_Based on our forecast, Internet and datacom will achieve revenue growth of 70% in 2007.
25
65%58%
46%
59%
43%
65%
54%55%
67%65%
37%
60%
48%53%
63%57%
Center NWT Volga STC USI Sibir DSV RTOs
2006 1H2007
BROADBAND ACCESS SERVICES
235214
255
132
238
152 133
0
50
100
150
200
250
300
CenterTelecom NWTVolgaTelecom South TelecomUralsvyazinform SibirtelecomDalsvyaz
Company ARPL, $ Brand
CenterTelecom 26 DomolinkNorth-West Telecom 22 Avangard
South Telecom 39 DISELVolgaTelecom 25 J
Uralsvyazinform 34 UtelSibirtelecom 31 Webstream
Dalsvyaz 35 Disly
KEY REGIONAL BRANDS AND ARPL (3Q2007)
24%40%
MARKET SHARE OF DATACOM SERVICES, % NUMBER OF xDSL ANF ETTH PORTS ENABLED AS OF OCTOBER 1, 2007, TH.
26
SVYAZINVEST GROUP ON THE MOBILE TELEPHONY MARKET
664
1, 202
1, 8872, 472
3,198
1,100
2,035
3,674
4,900
4,412
476
4,170
987
1,973
3,140
0
2000
4000
6000
2003 2004 2005 2006 2007 (target)
Volga Ural Sibir
LICENCE COVERAGE OF GSM OPERATORS OF SVYAZINVEST GROUP
MOBILE SUBSCRIBERS BASE, thousand
_In 2006, the Group’s mobile business policy was to increase the presence of RTOs on the cellular market and to consolidate assets._Svyazinvest Group companies offer mobile services in 27 regions of the Russian Federation.
27
FINANCIAL RESULTS OF CELLULAR OPERATORS OF SVYAZINVEST GROUP
206
155
98
69 81 79
564034 33
3625
1711110
50
100
150
200
250
2003 2004 2005 2006 2007 (forecast)
0
30
60
90
Revenue EBITDA Net Profit Capex
VOLGA, USD mln URAL, USD mln
SIBIR, USD mln
493422
315
162222 204
16912666
93
8272523828
0
100
200
300
400
500
600
2003 2004 2005 2006 2007 (forecast)
0
30
60
90
120
150
Revenue EBITDA Net Profit Capex
405
320229
76
145170
143116
4078
868671
5124
0
50
100
150
200
250
300
350
400
450
2003 2004 2005 2006 2007 (forecast)
0
30
60
90
120
150
180
210
Revenue EBITDA Net Profit Capex
28
TRENDLINES IN AVERAGE ARPU* AND MOU* OF MOBILE ASSETS OF SVYAZINVEST GROUP IN THE MAIN REGIONS
66710
14
18
1289
88
1113
16
20
0
5
10
15
20
25
2003 2004 2005 2006 2007 (forecast)
Volga Ural Sibir
175
198
175
120
186
220
124
151
98 98
217
144
211
275 283
80
120
160
200
240
280
320
2003 2004 2005 2006 2007 (forecast)
Volga Ural Sibir
AVERAGE ARPU TRENDLINE, USD AVERAGE MOU TRENDLINE, min.
*ARPU – average revenue per user**MOU – minutes of use per subscriber
29
_SVYAZINVEST GROUP: PROFILE AND DEVELOPMENT INDICATORS
_IMPACT OF TELECOM MARKET CHANGES ON THE ACTIVITY OF SVYAZINVEST GROUP
_UNREGULATED SERVICES – PRIMARY DEVELOPMENT TREND FOR SVYAZINVEST GROUP
_PROSPECTS FOR SVYAZINVEST GROUP
30
SVYAZINVEST GROUP: PRIMARY OBJECTIVES
To boost revenue by broadening the scope of services provided (employing modern technologies) and by raising tariffs for local voice services.
To maintain strong operating efficiency with a view to revised relations between operators, liberalization of the LD market and emergence of new competitive environment.
To roll out new generation networks (NGNs) and provide a technological framework so that the company can rapidly create and provide top-notch services throughout the Russian Federation.
To take further steps towards improving the efficiency of Svyazinvest Group’s management system (to phase in ERP, to introduce a unified billing system and OSS – Operations Support System; to implement a set of actions to use human resources more effectively, etc.)
31
DEVELOPMENT OF LOCAL TELEPHONY MARKET
1. Mobile traffic replacing fixed traffic
2. Alternative operators and players from other segments entering the market
3. Switching voice traffic to datacom networks
To increase the value of subscriber line:
1. Digitalization of networks
2. Introduction of service packages
3. New communication services
4. «Unlimited» tariffs
:
Market Tendencies
Svyazinvest Initiatives
Objectives for 2012
To keep leading positions in the local telephony segment
81%Market share of Svyazinvest Group in this segment
Svyazinvest’s position in 2007
1. MOU growth in the local connections segment, [MIN / MONTH]
312 373
RTOs
1Q20072Q2007
+20%
2. Revenue growth in the local connections segment, [USD MLN] *
1,605 1,894
RTOs
3Q20063Q2007
LOCAL TELEPHONY MARKET
+18%
* - line rental and connection services
32
DEVELOPMENT OF INTRA-ZONAL TELEPHONY MARKET
1. Mobile traffic replacing fixed traffic
2. Reduction of tariffs
3. New players entering the market
1. To provide package offers
2. To optimize tariffs
:
Market Tendencies
Svyazinvest Initiatives
Objectives for 2012
To keep leading positions in the intra-zonal telephony segment
Market share of Svyazinvest Group in this segment
Svyazinvest’s position in 2007
1. F2M revenue growth, [USD MLN]
2. F2F revenue decrease, [USD MLN]
INTRA-ZONAL TELEPHONY MARKET
92%
238 279
RTOs
2H20061H2007
+17%
225 198
RTOs
2H20061H2007
-12%
33
644 842 1,074
1,359
RTOs
DEVELOPMENT OF INTERNET AND DATACOM MARKET
340551
RTOs
3Q20063Q2007
1. Growth of demand for and speed of Internet access
2. Switching to unlimited offers
3. Competition between technologies (DSL, ETTH, Wi-Fi, Wi-Max, 3G)
4. Content becoming increasingly important
1. To develop DSL access on existing subscribers’ lines
2. To develop ETTH as soon as market saturation occurs
3. To establish partnerships with content aggregating agents
:
Market Tendencies
Svyazinvest Initiatives
Objectives for 2012
To increase market share in the Internet access and datacom segment
Market share of Svyazinvest Group in this segment
Svyazinvest’s position in 2007
1. Internet and datacom revenue growth, [USD MLN]
2. Rapid growth of subscriber database, [xDSL + ETTH, th. ports]
INTERNET AND DATACOM MARKET
59%As of Apr 1As of Jul 1
As of Jan 1+28%
+31%
+62%
+27%
As of Oct 1
34
DEVELOPMENT OF LD MARKET
1. New players entering the market and competition increasing
2. Voice traffic switching to datacom networks
3. Mobile traffic replacing fixed traffic
4. Development of intelligent telecom networks
1. To protect company’s positions on the retail market
2. To develop intelligent telecom networks
3. To strengthen positions on the corporate clients market, incl. at the federal level
:
Market Tendencies
Svyazinvest Initiatives
Objectives for 2012
To keep leading positions in the LD communications segment
Market share of Svyazinvest Group in this segment
Svyazinvest’s position in 2007
1. Prices for services rendered are lower than competitors’ [Average Income Rate, USD MIN]
2. Market share is decreasing as a result of liberalization
LD MARKET
60%
0.160.150.21
0.12
2006 1H2007
Rostelecom Competitors
94% 89%
2006
96% 91%
1H2007
2006 1H2007
DLD ILD
35
GROWTH OF OPERATING RESULTS
Income
1. To introduce outsourcing2. To develop e-auctions3. To optimize real estate assets4. To optimize business processes and
organizational structure5. To roll out New Generation Networks6. To optimize the number of employees
Between 2008 and 2012, the
expenses CAGR will
equal 7,2%*
Good FINANCIAL RESULTS, as the
company anticipates that income will grow more than expenses
Between 2008 and 2012, the
income CAGR will
equal 8,5%*
Svyazinvest Initiatives
Expenses
1. To increase the share of broadband services
2. To promote bundled services3. To increase customer loyalty4. To diversify distribution channels
and roll out a system for active agent sales
5. To increase the share of corporate clients
Svyazinvest Initiatives 2012
EBITDA margin
41,4%*
* - 7 RTOs
36
SVYAZINVEST GROUP: PROSPECTS OF KEY PERFORMANCE INDICATORS FOR 2008 *
9.22 9.97
2007 2008
REVENUE, USD bln OPERATING EXPENSES, USD bln
* - 7 RTOs + Rostelecom
7.807.28
2007 2008
OPERATING INCOME, USD bln
2.171.94
2007 2008
218
241
2007 2008
NUMBER OF EMPLOYEES, thousand
37
55 bld. 2 ulitsa Plyuschikha119121 Moscow RUSSIAPhone: +7 (495) 727 0473Fax: +7 (495) 727 0475 E-mail: [email protected] site: www.svyazinvest.ru