Report plan

1.OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district

2.Financial and economic indices of the OJSC FETEC (Dalsvyaz)

3.Technical and technological indices and opportunities of the OJSC FETEC (Dalsvyaz)

4.Plans for Company development

5.OJSC FETEC (Dalsvyaz) is a member of national and international financial market

OJSC FETEC is the telecommunications leader of the Far Eastern federal district

Region description

•Territory of the Far Eastern Federal district covers 36.4% (6.2 mln. Sq. km.) of All-Russian and plays key geopolitical role in Asian Pacific Rim. The region has land frontiers with China, North Korea and maritime boundary with USA and Japan.

•Sea ports provide export flows of Russian goods to world markets and supplies of import products from APR to Russia. Far eastern Coast has 32 sea ports where 22 are commercial ports and 10 are fishing ports.

•Main railway lines pass along central and southern part of the Far East. These are eastern sections of Trans-Siberian and Baikal-Amur Railway. Trans-Siberian railway is the largest. Final pieces of Trans-Siberian and Baikal-Amur lines end in sea ports and some pieces are connected with North eastern provinces of China.

•The region has significant resources of minerals, nonferrous and noble metals, iron ore, coal (20 bln. tons), oil (9,6 bln. tons), natural gas (14 trillion cub. m.), timber as well as water-power resources. According to forecast Far Eastern sea shelf has 30 bln. Tons of hydrocarbon. Over 60% of Russian fish and seafood is obtained here.

•The Far East has economically favorable zones providing tax and customs benefits (Magadan, Sakhalin, Kamchatka, Primorsky and Khabarovsk region)

Far Eastern Telecommunications Market – forecasted growth of 3.8

Regional telecommunications market and share of the OJSC FETEC from 2000 to 2006, USD mln.

х3.8

2000

630.0

2001 2002 2003 2004F 2005F 2006F

192.5

254.0

340.5

428.0

557.0

738.0

135.8115.3

175.0240.0

312.0340.0

406.0

Telecommunications sector, total

OJSC FETEC

Telecommunications market growth from 2000 to 2006 - 3,8 times up to USD 738 mln. From 2003 to 2006 by 72%;

Main market growth factors:

- Unsatisfied demand for traditional communication services;

- Growth of the regional economy;

- Increased demand for alternative telecommunication services;

Forecasted market share of the OJSC FETEC in 2006 is 55% (USD365 mln.);

Increase of the OJSC FETEC services at the expense of both traditional and new services.

OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district

OJSC FETEC (Dalsvyaz) Mission:

Formation and full satisfaction of clients’ needs in modern communication within far Eastern Federal District.

Key factors of Company success: Marketing policy aimed at providing all categories of consumers with full

complex of telecommunication services Implementation of modern technological solutions Highly skilled personnel Company Information openness Long-term open cooperation

FETEC (Dalsvyaz) today is:

The largest company of the Russian Far East and one of the biggest Russian communication operators.

Reliable partner, the biggest communication operator of the Russian Far East providing all modern high-quality services available to all categories of consumers

Company telephone network is a public network including alternative and cellular communication operators

International level of business organization and service provision

OJSC FETEC is the telecommunications leader of the Far Eastern federal district

OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district

Main licenses:

Local, long-distance and International telephone communication

Wired sound program translation

Telegraph communication

Cellular radiotelephone communication 900 MHz (Kamchatka and Magadan region)

Data transmission services

Local and intrazone telephone communication

Leasing of communication channels (local, long-distance channels and routes, transmission of television, sound broadcasting channels, physical lines for telecommunication signals)

Telematic services (e-mail, fax, information access, inquiry service, voice communication, audio conference, video conference)

OJSC FETEC (Dalsvyaz) is the telecommunications leader of the Far Eastern federal district

Services:

Local, International and long-distance telephone communication, Internet, Corporate network arrangement, Videoconference communication Cellular communication (Magadan and Kamchatka region), Network development, Equipment installation and setup, Arrangement of specialized data transmission networks for financial and banking

services, Paging communication, Data transmission, IP-telephony, Trunk communication, Wireless radio access

Financial and economic indices of 2003 according to Russian Standards of Accounting

Index 2003

Proceeds from sales of goods, works and services 6 846 740

Proceeds from communication services 6 726 356

Volume of communication services for individuals 3 916 378

Expenses on general activity 5 865 449

Sales profit 981 291

Before-tax profit 379 553

Net profit 232 041

Profitability

Sales profitBefore-tax profitNet profit

16,7%6,5%4,0%

Realization of OJSC FETEC (Dalsvyaz) Strategy – profit rise and service quality improvement

OJSC FETEC Marketing strategy provides:- Retaining dominating position on the regional market;- Creating conditions for communication service development in the region;- Full complex of modern communication services;- Significant influence on market development.

Strategy implementation will enable the OJSC FETEC (Dalsvyaz):- To gain at least 55% share of regional communication market;- Efficient development of regional branches;- Service structure optimization and twofold profit increase by 2006;- Strengthening its positions on cellular market;- Expansion and retention of client base in segment of individuals and

profit organizations.

Proceeds rise by 82% for 4 years

4.25.3

12.2

8.96.7

10.2

2001 2002 2003 2004П 2005П 2006П

Billion rublesCompany main tasks:- Increasing range of

telecommunication services;- Creating image of reliable operator

being the leader of high quality services for all categories of consumers;

- Complex development of services based on modern technologies;

- Increase of share of new communication services in total proceeds;

- Creating conditions for employee self-actualization;

- Company Profit and capitalization rise;

- Favorable conditions for investment attraction.

OJSC FETEC (Dalsvyaz) Proceeds Structure for 2003

Proceeds in 2003, thousand rubles

Ratio to 2002, % Specific weight, %

Proceeds from communication services, total

6 726 356 129,8 100

International and long-distance telephone communication

2 911 912 119,3 43,3

Local telephone communication 2 421 314 126,2 36,0

Documentary telecommunications (without Internet)

177 441 91,2 2,6

Coin-box telephones (all types) 169 824 116,6 2,5

TV, radio broadcast 37 288 97,7 0,6

Wired radio 151 749 168,1 2,3

Mobile telecommunications 223 943 133,4 3,4

Including cellular communication 191 087 145,4 2,84

Internet 303 930 142,6 4,5

Connection and traffic transmission 325 822 Х 4,8

Telephone network capacity 2001to 2004

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2001 2002 2003 2004(plan)

2005 2006

assembled capacity of local network (numbers)equipped capacity of local network (numbers)

Quantity of numbers

Capital investments 2001-2004

0

20000

40000

60000

80000

100000

120000

140000

160000

2001 г. 2002 г. 2003 г. 2004(plan)

capital investments

Thousand $

Index name 2001 2002 2003 Comparison of 2003 and 2002

Capital investments 14 467 thousand $

23 144 thousand $

66 825 thousand $

289 %

Investments (structure)2001 – 2004

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

2001

2002

2003

2004 (plan)

Depreciation Profit Credits obtained Leasing Loans other

Technical indices of the OJSC FETEC (Dalsvyaz) are constantly improving

At present the OJSC FETEC (Dalsvyaz) has:- 80% of local wire communication of the Far East;- 87% or International regional communication;- 59% of regional Internet market;- 51% of proceeds from Far Eastern

communication market;- Communication services in over 46 cities;- Assembles capacity of over 1.3 mln. numbers;- 1372 automated telephone exchanges;

Plan till 2006:- Increase of assembled capacity by 1,4;- Increase of equipped capacity ratio up to 93%;- Digitalization rise up to 74%;- Increase of telephone capacity by 35%;- Growth of local telephone network capacity is

280-290 thousand numbers annually;- Construction of 3809 km of additional

transmission lines (line cable structures, relay transmission lines, optical fiber communication line).

Assembled capacity (mln. lines) and equipped capacity ratio

2000

1.09

2001 2002 2003 2004F 2005F 2006F

1.121.19

1.32 1.52 1.691.86

+41%

digitalization, % 48% 44% 56,6% 66,3% 74%

Telephones per 100 19.4 19.7 22.2 23.7 26.2

Free capacity

Equipped capacity

89% 92%91% 86%

87%91%

93%

Technological potential of the OJSC FETEC (Dalsvyaz)

Extension of optical fiber communication lines

Extension of optical fiber communication lines Trunk and intrazone transmission lines – 505,4 km CTX – 805 km VTX – 1 km

Number transmission line channels formed under Optical Fiber Communication Line:

Assembled capacity Utilized capacity Free capacity

Trunk and intrazone lines

38 646 20817 17829

CTX 110675 110675 -

VTX 82 82 -

Technical performance of the OJSC FETEC (Dalsvyaz)

Assembled capacity – 1 330 698 numbers

City Telephone Exchange – 1 138 765

Village Telephone Exchange – 191 933

Equipped capacity – 1 142 461 numbers

CTX – 986 442

VTX – 156 019

Free capacity – 188 237 numbers

number of ATXs – 1372

CTX – 381

VTX – 991

where digital – 150 (81 – CTX, 61 – VTX)

line digitalization – 48,3 % (CTX – 54,1%, VTX – 14,1%)

Telephones per 100 residents – 19,7 pcs

Company development plans for 2004

Network digitalization

Putting into operation new lines, extension of Optical Fiber Communication Lines

Access to services

Putting into operation local telephone network capacity

309 820 numbers

Including replacement 154 121 numbers

Telephone set growth 151878 telephone sets

Digitalization of the local telephone network 61,3 %

Telephone density per a hundred of residents 22,2 Units

Medium and long-term plan of the Company development

New Services

- Implementation of Intellectual Network Services

- Cards covering the whole region. Roaming card.

- Unified card. (Payment of all communication services.)

- NGN network.

- Call-Center services.

- Audio and videoconference communication.

- Payment.

- Data storage services. (Outsourcing of data storage systems.)

All services save the last are planned for 2004.

Medium and long-term plan of the Company development

Network digitalization

Measurement unit 2004 2005 2006 2007 2008 2009 2010

Putting into operation local telephone network

Thousand numbers 290 280 280 290 295 310 320

Including replacement Thousand numbers 90 115 110 100 100 107 120

Telephone set growth Thousand sets 150 132 136 152 156 162 160

Digitalization of local telephone network % 56,6 66,3 74,0 80,1 85,0 89,5 93,7

Telephone set density per 100 residents units 22,2 23,7 26,2 28,9 31,7 34,6 37,4

Medium and long-term plan of the Company development

Optical Fiber Communication line

Mesurement unit

2003 2004 2005 2006 2007 2008 2009 2010

Growth of international/long-distance telephone channels extension

Thousand channel

km

45,1 413,1 290,2 155,5 191,2 212,0 212,7 263,8

Formed by digital transmission systems

Thousand channel

km45,17 421,61 305,36 468,46 191,2 335,6 212,7 263,8

Growth of transmission lines’ extension (construction of new line cable structures, relay lines and optical fiber lines)

km 186 1199 1199 1411 1377 489 482 706

Optical Fiber Communication Line

km 186 1184 1054 1386 1206 454 442 561

Digital relay lines km 0 15 30 25 171 35 40 145

OJSC FETEC (Dalsvyaz) is an active member of International Financial Market

Russian Exchange market:

Company shares have listing of RTS exchange and are included in list of shares for RTS index. Company shares also circulate on Moscow Interbank Currency Exchange and Saint Petersburg Exchange

Company capitalization as of the end of March 2004 is over $150 mln. USD

The Company placed a 3-year issue of bonds for amount of $1 billion. Bonds were registered by Federal Securities Committee on July 18, 2003 and they circulate on MIBCE. Bond yield subject to retirement in March 2004 was 7-8% per annum.

Distribution of the OJSC FETEC authorized capital

Khabarovsk region Ministry of

Property1%

JP Morgan Chase Bank

2%

Stotter Limited5%

Red Hand Investments

Limited5%

Lindsell Enterprises Ltd

2%

OJSC Svyazinvest

38%Other

shareholders43%

RCL Investment Inc.2%

Fenway Services Limited

2%

Distribution of OJSC FETEC voting shares

Khabarovsk region Ministry of Property

2%

JP Morgan Chase Bank2%

Stotter Limited2%

Red Hand Investments Limited

4%

Lindsell Enterprises Ltd3%

OJSC Svyazinvest51%

Other shareholders32%

RCL Investments Inc.2%Fenway Services

Limited2%

56

12 9

46 42

85

133

157

-

20

40

60

80

100

120

140

160

180

1997 1998 1999 2000 2001 2002 2003 2004(March)

mln. USD

OJSC FETEC (Dalsvyaz) Capitalization (mln. $)

Dynamics of OJSC FETEC (Dalsvyaz) shares quotations

Dynamics of preferred shares quotations Dynamics of ordinary shares quotations

Trade volume, USD Weighted average price, USD

0

15000

30000

45000

60000

75000

90000

0,0

0,2

0,4

0,6

0,8

1,0

1,2

0

30000

60000

90000

120000

150000

180000

210000

240000

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

OJSC FETEC capitalization in comparison with capitalization of the far East Companies, mln. $ (data as of March 31, 2004)

406

157

148

79

490

131

179

142

0 40 80 120 160 200 240 280 320 360 400 440 480 520

Sakhalinmorneftegas

FETEC

Khabarovskenergo

Sakhaneftegas

FESCO

Dalenergo

PSC

Zeya Hydroelectric Power Plant

OJSC FETEC (Dalsvyaz) is a member of International Financial Market

International exchange market:

OJSC FETEC (Dalsvyaz) realizes the program of American Depository Receipts of the 1st level. J.P. Morgan is Depository Bank of ADR issue service

Russian Federal Securities Committee made Order No., 703-p dated August 16, 2001 permitting circulation of OJSC FETEC (Dalsvyaz) ordinary registered non-documentary shares as depository securities beyond Russian Federation. US Securities and Exchange Commission gave its permission in September of 2001.

Federal Securities Committee permitted circulation beyond Russia of shares of additional issues placed by conversion of affiliated companies’ shares to FETEC (Dalsvyaz) shares (order No., 1041/р dated August 16, 2002)

FETEC (Dalsvyaz) ADRs are traded on American OTC.

OJSC FETEC Ratings

OJSC FETEC (Dalsvyaz) Ratings on International Financial Markets

In March of 2004 Fitch Ratings International Rating Agency rose main unsecured rating of the OJSC FETEC (Dalsvyaz) in foreign currency up to В (rating forecast is positive) and confirmed В short-term rating

In July of 2003 the Board of Standard & Poor’s Rating Company decided to rate the OJSC FETEC (Dalsvyaz) 5,3 Corporate Management rating (10-point scale) including component points as follows:

ownership structure and shareholders’ influence is 5,5 (10 maximum);

rights of persons with financial interest and relations with them are 6,3 (10 maximum);

Financial transparency and information disclosure is 4,7 (10 maximum);

Membership and activity of the Board of Directors is 4,9 (10 maximum);

OJSC FETEC (Dalsvyaz)

Website: www.dsv.ru

E-mail: pr@dsv.ru

Address: 57 Svetlanskaya St., Vladivostok 690950

Tel.: (4232) 222384,

Fax: (4232) 408030