MTS : Data Business Experience

May 08, 2012

1 MTS India is a joint venture between Sistema and Shyam Group of India

SSTL

SSTL – A joint venture between Sistema (LSE:SSA) and Shyam Group

• Sistema (LSE : SSA) SSTL Ownership –Largest public diversified corporation in Russia and CIS countries –Manages fast growing companies operating in the consumer services sector and has over 100 million Russian Others customers FdFederati on

• Shyam Group 56.68% 24.00% 17.14% 2.18% –Has diversified interests in telecom, manufacturing, services and fertilizers –Essel Shyam Communications Ltd, a joint venture between Essel and Shyam group, is a leading pan- Indi a VSAT serv ice company

2 Data market has a huge potential in India with only 10% user penetration; 30%+ broadband growth in last 3 years

India’s internet usage lowest amongst BRIC Internet connections by type nations… Internet users % of population MM CAGR 100 (2008-2011) 22 20% Internet usage Others Broadband driven via multiple 19 77 75 devices (~2.5) per 9 7% 75 75 connection and 15 71 8 multiple users (~ 5) 13 per connection 7 7 13 34% 11 8 50 6

38 20082009 2010 2011 32

25 24 23 Key growth drivers of wireless broadband 10 8 • Severe under penetration of broadband and significant latent demand – Less than 1% penetration

0 • Fall in PC and laptop prices and introduction of cheaper devices like net books

• Increased awareness levels and the desire to get connected and

Note: India Population 2011: 1.2B stay connected on the move Source: TRAI EV - DO a dominant technology in the market today with 80% share of WDS subscribers; likely to account for ~30% of market by 2015

2011 HSPA 20% EV-DO EV-DO 80%

3G

LTE

Source: Team Analysis, Telecom customer survey 2012 (n=~85) In line with market opportunity, MTS India adopted a data centric: voice enabled strategy in 2009

Vision

Differentiated top 3 player in the data market Profitable top 5 player in high priority voice markets

Data Voice Costs

• Focus on subscriber • Participate in select high • Variable cost model acquisition potential circles –Intra-circle roaming •Target ~30% market share • Focus on ARPU –Outsourcinggg / Managed by 2014 improvement services • Differentiated top 3 player • Move to open market • Aggressively manage handsets handset costs

Best in class execution

High performance organization MTS India’s EV-DO coverage today stands at 248 cities; First operator to provide HSD services on national highway KGKey Grow thEblth Enablers

Jammu Total 248* cities Coverage and Kashmir across India • MTS In di a h as alr eady l aun ch ed Hig h Speed Chandigarh Himachal Pradesh Punjab Data (HSD) services in 248 cities Uttaranchal Haryana ԟ Captures 83% of total notional MPV Delhi (11) Arunachal Pradesh (5) Sikkim • MTS India is the first operator to provide HSD Assam Uttar Nagaland Pradesh (23) services on National Higgy(hway 08 (Delhi to Jai p)pur) (23) Bihar Manipur and National Highway 04 (Chennai to Bengaluru) (7) Meghalaya Jharkhand Madhya Pradesh Mizoram Tripura (27) Customers Orissa Daman & • 1. 3M da ta su bscr ibers a t en d o f Decem ber 2011 Diu Maharashtra Dadra & Nagar (29) (17) Haveli • 27% net additions share of HSD subscribers in Andhra (1) Mumbai Pradesh Q4 2011 (1) (22) Goa “Own” network • 1X subscribers account for ~10% of the ICR network (30) aggregate d a ta sub scrib ers b y D ecem ber 2011 ( ) # of HSD cities Pondicherry (38) (14) Key HSD Facts • 10 of Top 10 cities • 19 of Top 20 cities • 86 of Top 100 cities

Note: 45 cities approved under Phase V of EV-DO coverage Source: Staretegy team 6 MTS India has a compelling data product portfolio to support its data centric strategy KGKey Grow thEblth Enablers

MTS range of high-speed data products in the last 24 months

20,000 ) RR

Pulse 15,000 16K

ting Price (IN ting Price Blackberry aa 9.5K 10,000 Ivory 10K

Market Oper Alive 5,000 6.3K 2K Mi-Fi mTag Buzz 4.5K Livewire 1.5K 5.5K 3.5K 4.0K

Sep’09 Dec’09 Mar’10 Jun’10 Sep’10 Dec’10 Mar’11 Jun’11 Sep’11 Dec’11 Launch Date

Sources: MTS India Devices team 7 Data business growth has been enabled by several innovative products and partnerships (1 of 2) KGKey Grow thEblth Enablers • 1st in market to launch prepaid product for data ԟMTS has >50% share in prepaid high-speed data

• Sachet products: Offered sachet products to suit customer needs and higher realized rates • DPI based innovations ԟProducts specially designed for users base inclined towards surfing a set of URLs – A SNS pack STV provided giving unlimited access to a set of URLs

• Dialer innovations ԟThe Smith Micro dialer used uniformly across all our data devices for a consistent “connect” Products experience for all data card ԟLeverages MTS portfolio of applications and provide us IP-focused advertisement opportunities to augment revenue ԟDialer V2.0 integrates HTML5 programming for intelligent offline and online usage which magnifies consumer experience many times over • Landing page innovations ԟEach time a MBlaze user connects, they are presented with an Unique personalized “My MTS” page with useful content of their interest ԟDisplay of product related information – Account balance in Rs / MB, product validity ԟMost innovative customer convenience – Customer can do a STV deduction from main account balance and thus have more flexibility of recharge and we have lesser dependency on retailer balance Data business growth has been enabled by several innovative products and partnerships (2 of 2) KGKey Grow thEblth Enablers • MyMTS Mblaze Portal ԟWith this initiative we would be empowering our data Customers to choose the right product at any given point of time 24*7 Products ԟPro duc t commun ica tion w ill be super ior an d targe te d, as this is very cus tomer spec ific an d personalized ԟThis platform will help us in offering customized / segmented Usage and Revenue enhancement product • Unlimited data: 1st in market to launch unlimited HSD • Differential charging: Offer 5 product for a flat fee of INR 999 per month websites of choice free of charge ԟData activations increased by ~25% within 30 days of Pricing launch of product

• Consumer brands: A • IT OEMs: Offer • Content • Distribution partnership paifRbkhir of Reebok shoes discoun t on HP aggregators: MTS- with oth er operat ors: free on purchase of a PCs along with a Yahoo customized Vodafone selling MTS MTS data card MTS data card landing page for powered dongles in India Partners subscribers hips

9 MTS India has customized its branding efforts based on usage depth KGKey Grow thEblth Enablers Data Card – Branding Market Renewed Thrust in 2011 Context Platform 1: Continue to position in speed as • Market dominated by EV-DO Speed the central benefit brands: Tata , Reliance, MTS Pricing led strategy with Platform 2: • Growing threat from 3G aggressively discounted product - Value players: Airtel, Vodafone, acquisition oriented Idea Move out of generic speed/value • Brands primarily positioned Until 2010 MTS Platf orm 3 : bfitbenefits on speed, with cues of MBlaze Usage Depth Segmented offering to address specific power, instant-ness, Was built on speed, need from a usage perspective excitement value platforms and ԟ Speed = numeric mbps value Alliances and • Rationale partnerships – Need gap identified through usage behavior analysis ԟ Reliance Netconnect: Building on pure rational – Decline in usage towards month end, especially in student driver community – Recharge balance gets exhausted towards month end ԟ Tata Photon: benefits of speed – Disposable income constraints prevent full recharges • Relatively low differentiation, • Product Solution highly price and discount led • Innovative daily unlimited use product • Until 2010 , Mblaze was built • Campaign proposition on speed, value platforms – The power of the internet: Change your life in one day and Alliances and 9Departure from generic undifferentiated speed platform partnerships 10 – Leverages the opportunities and possibilities of the internet As a result, MTS is one of the top 3 data operators, has the highest data coverage in top 100 cities and has the highest data revenue % of total revenue

HSD Market (MTS active circles of operations) Relative placement vs. competition

In ‘000 HSD coverage in top 100 cities 6,000 86 81 5,175K 21% 53 5,000 growth 4,282K

4,000

4,006 3,000 3,356 Data revenue as % of total revenue (Q4 2011) 24 2,000 27% net 26% adds share 14 14 1,000 growth in Q4’11 926 1,168 0 Q3' 11 Q4' 11

Others MTS

Note: RCOM subscriber base for EV-DO estimated based on intelligence inputs and past performance Source : Business Intelligence; MTS estimates 11 Overall subscriber base has grown by 1.6x and quarterly revenue by 1.5x in the last 12 months

Quarter on Quarter subscriber growth Quarter on Quarter revenue growth

In Millions In US$ M 18. 0 90. 0

16.0 80.0 15.8 81.1 14.0 15.1 74. 9 70.0 13.4 71.7 12.0 11.7 60.0 10.0 62.3 10.0

8.0 50.0 52.3

6.0 40.0 404.0 30.0 2.0

0.0 20.0 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12

Note: 1) Total subscribers in Millions (Wireline, Wireless Voice and Wireless Data); 2) Total revenue from MTS India operations (Converted to US$ using average exchange rates for respective quarters; 3) Average INR to USD exchange rate in Q3’11 was at 45.79, Q4’11 was at 50.81 and Q1’12 at 50.24 Source: MTS Finance Talent and organization structure key internal challenges; Weak CDMA eco-system and regulatory support key external challenges

Internal factors External factors

• LkflLack of talent espec illfdially for data • Wk&hikiWeak & shrinking eco-system business ԟDevices

• LkfLack of exper ience ilin launc hi&hing & • Vendor management complexities selling data products ԟDistribution • Poor perception of CDMA operators ԟPricing ԟTesting • Speedy development of advanced technology for voice and data • Oitiltt&fOrganizational structure & focus businesses ԟInability to turn focus fast enough to data • Lack of regulatory support

13 Long term strategic framework focused on achieving leadership in high growth data market and smart voice play

Business as usual Transformational Leadership in data led wireless market & smart voice play B C D WDS1 2.0 Targeted MDS2 Managed services play in select • Strong customer lifecycle • Accelerate smartphone market areas management (CLM) share by SME excellence M-enablement • Ramp-up acquisition via – Launching quality Android • Bu ndled ser v ices to • m-HlthHealth: Clou d – improving connect rate handsets SMEs based managed with OEMs – Compelling pricing plans • GTM model to service coupled – Focus on enterprise – High quality experience address sales & with OEM device channel – Expanding distribution service partnerships – targeted retail initiatives channels • m-Commerce: – WiFi based tablet play P2P remittances, – Fixed wireless solutions bill payments and merchant tie-ups

A Smart Voice • Get to required scale in "Win" circles – target 4-6% end of period SIM share • ICR led play in low "Option" circles – focus on ramping up sales and distribution in micro markets • 2 carrier data strategy in selected metros (if operationally feasible) – offer smartphones with voice on ICR

High performance org Best in class execution Delivering a high quality With a culture of w/ lean cost/capex (including alliances) customer experience Innovation

1. Widescreen data services (WDS) 2. Mobile Data Services (MDS) 14