Sistema JSFC Telecom Assets BU Capital Markets Day London, 25 May 2010 Ron SOMMER First Vice-President, Head of Telecom Assets Business Unit Disclaimer Certain statements in this presentation may contain assumptions or forecasts in respect to forthcoming events within Sistema JSFC. The words “expect”, “estimate”, “intend”, “will”, “could” and similar expressions identify forward-looking statements. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not commit to update these statements to reflect events and circumstances occurring after the above-mentioned date or to reflect the occurrence of unanticipated events. Many factors could cause the actual Sistema’s results to differ materially from those contained in our projections or forward-looking statements, including, among others, deteriorating economic and credit conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as risks specifically related to Sistema and its operations. 2 Agenda 1. Introduction 2. MTS/Comstar UTS 3. SSTL 3 1.1. BU Telecommunication assets snapshot Telecommunication Assets Business Unit 55%* 74% 50% 75% SSTL • Leading integrated • CDMA operator with pan- • Sole national wireless • Leading media company operator in Russia & CIS India license in 22 circles data and voice services operating in the pay TV • Operations in Russia, • Total subscriber base provider operating using business Ukraine, Uzbekistan, exceeds 4 mln subscribers CDMA 2000 technology • Areas of expertise include Company Turkmenistan, Armenia • Operates under the MTS in Russia network operation, media description and Belarus brand content production and • Serves over 100 mln advertising mobile subscribers • Listed on the NYSE since July 2000 Revenues: 9,824 Revenues: 36 Private company Revenues: 87 Key 2009 OIBDA: 4,474 OIBDA: (223) OIBDA: (14) metrics % margin: 45.5% (US$ mln) Net income: 1,005 Net income: (191) Net income: (52) % margin: 10.2% * Including indirect ownership as of December 31, 2009 BU is streamlining its portfolio structure in order to increase overall efficiency 4 1.2. BU Telecommunication assets key financials India US GAAP, $ mln Revenue OIBDA Net Income +23.9% -17.6% +17.0% -32.2% -26.3% 14000 7000 1400 12082 5723 1180 12000 6000 1200 -56.9% 9749 9956 4893 10000 5000 1000 869 3880 8000 4000 800 6000 3000 600 375 4000 2000 400 2000 1000 200 0 0 0 2007 2008 2009 2007 2008 2009 2007 2008 2009 OIBDA Net income 50.2% 47.4% 39.0% 12.1% 7.2% 3.8 % margin margin RUB, bln +13.6% +5.1% -26.7% +20.5% -13.5% -44.9% 350 145 142 35 300 316 30 300 140 30 249 250 135 25 22 200 130 20 125 150 125 123 15 12 100 120 10 50 115 5 0 110 0 2007 2008 2009 2007 2008 2009 2007 2008 2009 Despite the market turmoil BU continues to demonstrate solid financial results 5 1.3. BU Telecommunication assets strategic priorities • Short-term: continue the growth story in Telecoms • Long-term: positioning Sistema’s Telecom assets to compete in the global arena •Capitalize on the macro economic recovery •Maintain #1 position in Russian mobile market and build a successful BB and PayTV Competing in the operator with the leading position in the alternative fixed line segment domestic market •Capture extra growth across segments and products through integrated offering •Deliver efficiencies from integration of Comstar UTS into MTS Expanding •Transfer management expertise and best practices to the Indian venture emerging •Differentiated strategy: primary focus on data rather than voice markets: SSTL •Uniform brand name: MTS •Continuous screening and assessment of new opportunities Assessing new •Disciplined approach to acquisition opportunities opportunities Portfolio rotation •Flexibility around disposal of non-core assets Utilizing domestic experience, expanding in emerging markets and assessing new opportunities enable BU to reach its long-term goals 6 Agenda 1. Introduction 2. MTS/Comstar UTS 3. SSTL 7 2.1. MTS 2009 key achievements February • MTS started the acquisition of retail outlet chains, as part of its own retail project Mono- brand. By year-end, MTS operated over 2,000 own stores March • SSTL began to provide services under the MTS™ brand April • MTS recognised as the most valuable brand in Russia May • MTS continued restructuring its debt portfolio by issuing several RUB denominated bonds (last bond in July) June • Ron Sommer appointed Chairman of MTS’s Board of Directors September • Commercial launch of MTS’s interactive content shop Omlet.ru. By October the site was among the top-3 best web-sites of the year October • MTS completed the acquisition of a 50.91% stake in Comstar-UTS December • MTS increased its stake in Comstar-UTS to 61.97% • MTS acquired a 100% stake in Eurotel • MTS launched 3G services in Moscow 8 2.2. MTS is positioning itself to deliver despite maturing markets Key developments MTS response/approach • Strengthen leadership position in existing markets • Shift focus towards retention as markets mature – higher subscriber loyalty Russian mobile achieved through own retail chain Mono-brand market maturing • Capitalize on 3G leadership • Find pockets of growth in other segments: fixed BB, PayTV, MTS branded handsets etc. Competitors • Acquisition of Comstar UTS / Eurotel offering • Capture growth and gain share in Russian telecommunications market integrated • Focus on offering the best convergent services to our existing customers solutions • Deliver expected synergies from the integration of Comstar UTS Approach to • Rapid deployment of pan-Russian access networks through acquisitions inorganic • Continue to explore potential domestic and international M&A opportunities expansion MTS proactively responds on all market changes 9 2.3. Data and content are expected to be the growth engine in the Russian market in the next 3 years Russia (in Bn. RUB) CAGR +7,7% 2010-2013 +7,7% 1.737 +8,2% 1.613 Highest absolute growth (> 50% from Data & Content) 1.497 1.384 1.308 845 Mobile 7% 795 747 667 696 Corporate (Fixed) 12% 233 208 2% 186 Fixed voice 157 167 166 20% 163 Fixed BB 155 159 92 109 14856 75 4% 63 138 143 Operators’ business 120 126 133 31% 15 35 46 Pay TV 20 27 7% 170 182 195 Handsets 145 158 Highest 2009 2010 2011 2012 2013 growth rate Source: Various institutional, commercial and internal sources compiled by MTS & CS Blocks for Strategy & Corporate Development Still there is enough space to grow on Russian mobile market 10 2.4. MTS has established a clear path to capitalise on the convergence opportunity by implementing its «3i» strategy “3i” strategy Tactics Delivery Key benefits •Comstar UTS acquisition and further re- Integration •Seamless user experience for branding all segments •Fixed-mobile bundles offerings developed •Rapid broadband New pipelines and •Cable TV network STREAM integrated into infrastructure (fixed/3G/LTE) customer touch- Comstar UTS deployment •Set up of Joint Sales Models for corporate points •Integrated sales channels market Increasing customer lifetime Internet •64 cities in Russia (incl. Moscow) covered with value •Enhanced connectivity 3G + Armenia •Compelling Internet user •LD fiber operator Eurotel is acquired Smarter pipelines to experience •Further Roll-out of fixed BB and Pay-TV capture additional •Best-in-class content apps and services in regions through selective M&A services value •Omler.ru portal is launched Generating Innovation •Delivery of exclusive devices •Retail Mono-brand network reached 3260 shareholder returns •Cutting-edge products and outlets by the end of 2009 Differentiation services for all customer •MTS branded handsets share of sales is through product and segments substantial •End-to-user experience at •Efficiency drive by Shared Service Centers and services mix home, at work and on the move centralized functions build-up Clear and straightforward strategy helps MTS to maintain its market leadership and to create additional value 11 2.5. MTS continues to deliver strong results despite a challenging environment US GAAP, $ mln Revenue OIBDA +44.2% -17.5% +38.5% -23.5% 14000 7000 11901 5848 12000 6000 9824 4474 10000 8252 5000 4223 8000 4000 6000 3000 4000 2000 2000 1000 0 0 2007* 2008 2009 2007 2008 2009 OIBDA 51.2% 49.1% 45.5% * 2007 financials does not include Comstar UTS results margin Net Income Debt +104.4% -6.9% 2500 -40.0% 9000 8330 2072 1930 8000 2000 7000 +19.9% 6000 1500 1164 5000 4075 4000 3400 1000 3000 500 2000 1000 0 0 2007 2008 2009 2007 2008 2009 Net income 25.1% 16.2% 11.8% margin MTS performed sound financial results in 2007-2009 12 Agenda 1. Introduction 2. MTS/Comstar UTS 3. SSTL 13 3.1. SSTL 2009 key achievements India • MTS brand launched on the Indian telecommunications market • Launch of operations in 10 new circles in 2009: Tamil Nadu (incl. Chennai), Kerala, West Bengal, Kolkata, Bihar (incl. Jharkhand), Delhi, Haryana, Mumbai, Maharashtra, Karnataka. SSTL operates in 12 circles today, having launched Andhra Pradesh in May 2010. • Launch of mobile broadband in 33 largest cities (2009), in 61 cities as of May 2010, with 5 of Top-5 metros covered • Number of subscribers increased to more than 3.1 mln in 2009 from 0.5 mln in 2008. In April 2010 number of subscribers exceeded 4 mln. • Revenue growth by 64% in 2009 vs. 2008. SSTL significantly improved its operational results in 2009 14 3.2. Our approach to India rests on three key strategy pillars India Vision Differentiated quality-data-player Profitable player in high priority voice markets Data Voice Costs • Use high-speed • Focus on select • Variable cost data opportunity high potential model • Position as data circles • Prioritize own provider of choice • Focus on ARPU infrastructure • Plug and play improvement investments customer • Move to open • Aggressively experience market handsets manage handset costs World class execution Sales Marketing High performance organization Updated SSTL strategy was adopted in Autumn 2009 15 3.3.