APRIL, 2004 Investor Presentation.

APRIL, 2004 WWW.CENTERTELECOM.RU

Investor Presentation

APRIL, 2004 WWW.CENTERTELECOM.RU 2

This presentation contains forward-looking statements. Such statements are not statements of historical fact, and reflect the beliefs and expectations of the Company's management. The words "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "predicts," "projects" and "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties. Accordingly, the actual results of operations of the Company may be different from the Company's current expectations, and the reader should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them in light of new information or future developments.


OVERVIEW

KEY PRODUCTION INDICATORS

STRATEGY

FINANCIAL HIGHLIGHTS


CenterTelecom is a leading fixed-line provider of telecommunication services to Russia’s central region, which is Russia’s most densely populated region, covering about 20% of the total population. The Company currently offers traditional telephone services, Internet, IP telephony, data transmission, wave and cable television, wired and VHF radio broadcasting and plans to implement fiber optic lines, SDH networks, and advanced wireless access systems. CenterTelecom is led by a new and shareholder oriented management team with many years of telecom experience that has leveraged the Company’s inherent stability and achieved sales growth of 116.9%, net profit margin grew by 5.8% , while installing over 571,000 numbers over the same period.

CENTERTELECOM


ATTRACTIVE REGION

Central Region: covers 3.8% of Russia’s territory 26.2% of total population of 38 mln

people (most densely populated) 12.8% of GDP of RUR 1,703 bln

One of the highest monthly income per

capita in Russia - RUR 5,732.2

Fixed-line penetration level is 17.3 %

6.4 mln lines installed by end of 2003

Borders with Ukraine and Byelorussia

Tver

YaroslavlKostroma

Ivanovo

Vladimir

SmolenskKaluga

Ryazan

Tula

BryanskOrel

Lipetsk Tambov

VoronezhKursk

Belgorod

Moscow


Founded in 1890

Privatized in 1994

Came to existence as a united company in 2002 upon merger of 17 regional telecom companies of central region of Russia

2003 is the first year as a united company

COMPANY HISTORY


SHAREHOLDER STRUCTURE

38.01

37.19

10.447.19 6.14 1.03

Svyazinvest

Nominalshareholders

Individuals

Federal PropertyFund

Foreign legalentities

Russian legalentities


ORGANIZATIONAL STRUCTURE

PRESIDENT

Carla Cico

Shareholders meeting

PRESIDENT

Carla Cico

Board of Directors

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

General Director

Compensation & Benefits Committee

Corporate GovernanceCommittee

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

Budget & Investment planning

Committee

Audit Committee

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

PRESIDENT

Carla Cico

Financial Director

Commercial Director

Technical Director

ITDirector

Security Director

HR Director


STRONG MANAGEMENT TEAM

New and shareholder friendly management team

Management accomplishments during the last 3 years:

developed and implemented business strategy

unified tariffs policy

centralized Internet-traffic

centralized work with multinationals

achieved all business targets

efficient staff management

CenterTelecom Service company

Ability to find non-standard efficient solutions


STOCK PRICE DYNAMICS

$800 Mln Market Cap. Stock price dynamics (RTS: ESMO, ESMOP).

Common stock Preferred stock


OVERVIEW


STRATEGY




6.4 mln access lines installed

27 long distance connection stations

3,9 mln wire broadcasting points

125 000 cable TV subscribers

1 700 Internet-hosts


MARKET SHARE IN MAJOR SEGMENTS

Long-distance 91%

Local 92%

Documentary 58%

Mobile 4%

New services (based on IP,

VPN,INS,ISDN) 65%

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


OVERVIEW


STRATEGY



OPPORTUNITIES IN THE SECTOR

Intellectual network services, packet and integrated services, IP-telephony

Introduction of innovations: Intelligent Network Service, IP-telephony, service package offering.

Call-center has strong potential and may be used for own needs: telemarketing, Help Desk, Card platform support.

Internet services

Broadband access through regular radio network.Introduction of Ethernet as a physical and channel level technology will

allow to use inexpensive equipment, which brings significant cost reduction for end- users.


OPPORTUNITIES IN THE SECTOR

Long-distance telecommunication services

Telephone cards.Expanding IP-telephony services to public and business segments

Local telecommunication services

Wireless access to general purpose telephone network through DECT and WLL technologies for high net worth customer segments.


STRATEGY

Increase share of value-added services in profit structure

Achieve revenue market share in telecommunication services in Central region of 62% by 2006

Average annual income growth of 25%

Increase non-regulated services market share to 75%

Achieve share of non-regulated services in profits of at least 30%

Increase profit share from corporate sector to 52%


VALUE-ADDED SERVICES

INS based services

Call-centers

Multi-service network around Moscow


BROADENING OF CORPORATE CLIENT BASE

Acquisition of ROSNETLarge corporate client base, including Central Bank of Russia2003 Revenue - $30 mn, EBITDA - $4.8 mnLicenses as alternative telecom operator in 31 regionLicenses for data services in 51 region

Significant resource allocation to acquire alternative operators in 2004

Development of multi-service network


GROWTH DRIVERS

Traffic growth

Tariffs increase

Time billing

Change of business relationship with Rostelecom


CHALLENGES IN THE SECTOR. SOLUTIONS

Long-distance traffic fees

Competition with wireless operators

Competition with alternative providers


OVERVIEW


STRATEGY



KEY FINANCIALS (RAS)

2002 2003 2004E

Revenues 16,400 20,890 27,010

Operating expenses 12,132 15,649 19,856

EBITDA 3,337 4,853 6,613

Net profit 1,084 1,503 1,661

CAPEX 4,791 7,563 9,418

RUR Mln


REVENUE

In 2003 gross revenue reached RUR 20.1 mln, 27,5% growth to

2002

Traff ic transition

6%IP-telephony, Internet, ISDN,Intelligent netw ork

3%

Wire broadcast3%

Pay phone2%

Wirelesscommunication

2%

Country telephonecommunication

5%

Long-distance telephone communication

41%

Documentarytelecommunication

2%

City telephone communication

36%


REVENUE & COST DYNAMICS

16 389

20 890

27 011

12 132

15 649

19 856

2002 2003 2004E

Operating costs

Revenues

RUR Mln


REVENUE STRUCTURE

16 389

20 890

27 011

0

5 000

10 000

15 000

20 000

25 000

30 000

2002 2003 2004E

30%

7%

63%

31.6%

7.1%

31.2%

60.3%

62.1%

7.6%

Budgetorganization

Private sector

Commercial organization

RUR Mln


OPERATING COSTS AND EXPENSES

Energy

3%

Materials

& spare parts

8%

Repair work

4%

Rostelecom service

payment

14%

Leasing

2%

Other

telecommunication

service payment

3%

Corporate

spendings

1%

Other

costs

11%

Amortisation

11%

Social tax

11%

Wages

32%

In 2003 operating costs and expenses totaled RUR 15.7 mln, 29% increase 2002


DEBT FINANCING

2 000

600600

2001 2002 2003

RUR Mln

Volume Placed, RUR mln

Placement Date

YTM Period

600 16.11.2001 23,4 2 years600 23.7.2002 18,89 2 3/4 years

2 000 17.9.2003 12,73 3 years


CAPITAL INVESTMENTS

In 2003 RUR 7.6 bln were invested (57.8% growth to 2002)

Network expansion51%

Technical service & upgrade

6%

Digitalization19%

New building18%

Fixed assets acquisition6%


CAPITAL INVESTMENTS

4 791

7 562

9 418

2002 2003 2004E

Raised funds

Company ownfunds


OPERATING HIGHLIGHTS

Lines installed

5 164 368

944 118 973 150

5 464 096

Urban Rural

93,50%

86,60%

93,40%

87,20%

Urban Rural

Lines in service

2002 2003 200220022002 2003 20032003


OPERATING HIGHLIGHTS

Utilization rate

2 963

3 528

2002 2003

ARPU

0,866

0,935 0,934

0,872

Urban Rural20022002 20032003


CORPORATE GOVERNANCE AND TRANSPARENCY

The best Corporate Governance Code in industry

4 functioning Committees

Published financial statements according to IAS for 2002

S&P Corporate Governance Rating – 5.3


CONTACTS

Andrey KalinchenkoInvestor relations managerTel: +7 095 793 23 19Fax: +7 095 209 28 29E-mail: [email protected]

Alexei MironovCapitalLogica-McBrideTel: +7 916 503 70 90Fax: +7 095 755 69 71E-mail: [email protected]

CenterTelecom at RUSTOCKS: www.rustocks.com/centertelecom


CENTERTELECOM-THE CENTER OF POTENTIAL

APRIL, 2004 Investor Presentation.

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Transcript of APRIL, 2004 Investor Presentation.