WIXLIB

TMT Business Model in Changing andEconomically Volatile Markets(The Russian Perspective)July 8, 20091

Economic Backdrop

Russian Boom Economy Until Q4‟08. Now Lockstepwith Global Recession, Deficit, High UnemploymentSource: Bloomberg consensus estimates

Because Oil Collapsed from July‟08 High of 146to Dec Low of 34. Now Bounces At 60-70?4

USD-Ruble Rate Fell From July‟s R23.2 to FebLow of R36.4. Today Stabilizing At R31-32?5

Euro-Ruble Rate Fell Fom Oct High of R34.2 toFeb Low R46.9. Today Stabilizing At R43-45?6

Russian Credit and Liquidity Dried Up FromQ4‟08. Still Tight But Improving Selectively7

But Retail Banks‟ Cost of Funds Still Levitating.Hence, Almost No Consumer Credit Available8

For Select Telecoms Risk, FundingStill High But Now Available9

Russia Mobile Background

Rapid Mobile Growth, - But Maturing! FixedLine Turtle. BB Next Star?Historical Penetration 1999200020012002Fixed Line penetration2003Mobile penetration20062007BB as % of HHSource: Based on Rencap Research and ACM11

Big 3 of Russian Mobile Accounts For Over 80%of Subs and About 90% of RevenueStart of Operations1994/20021993199383827843.7 million92.2 million62.5 million- Moscow6.5 million14.9 million10.2 million- St Petersburg3.5 million3.4 million2.1 million33.5 million46.8 million37.0 millionQ1‟09 Russian Mobile Subs43.5 M65.1 M49.4 M- Foreign countries0.2 million27.1 million13.1 million22.8%34.1%25.9%315.7 RUR or 9.3233.5 RUR or 6.9306.6 RUR or 9.0 7,045 M 7,840 M 7,371 M 3,530 M 3,924 M 3,872 M50.1%50.1%52.5%TeliaSonera ,Usmanov GrpAlfa GroupAFK SistemaTelenor, Altimo# of Regions Licensed (Russia)(not updated)Total Subscribers (Q1‟09)- Regions158.0MRussian Market Share (Q1 09)ARPU (Russia, Q1‟09) 22.3 B2008 Mobile Revenue (Rus)2008 Russian EBITDA2008 Russian EBITDA, MarginMajor ShareholdersVIP and MTS Scale Still Larger Than Us Due to Their Global Business12

Big 3 Quite Similar. Although We Grew theFastest To Achieve Relative Parity in RussiaBig 3 Russian Revenue Share %Big 3 Russian EBITDA Share %Russian Subscribers Market Share** Source: Companies’ reports13

We Grew Rapidly to Relative Parity!EBITDA ( M)26x18x Revenue ( M)Net Income ( M)69x14** Q3’05, Q4’05, Q1’06, Q2’06 net income include 39M, 12M, 13M, and 15M C-loan expense.C-loan is treated as derivative instrument under US GAAP accounting.C-Loan was paid off in July 2006.

We Grew to A Solid Balance Sheet. AndContinue to Improve Our Debt to EBITDATotal Debt (1) ( M) /EBITDA (3) 2 0001,705 1 750 1 5002,0x 1 250 5002,8 1 5001,404 1,363 2,4 1 2502,0 1 0001,6 7501,2 5000,8 2501,5x 1 0002,0x 7501,710 1,732 1,7661,2261,5xNet Debt (ex sub debt) (2) / EBITDA (3)5520,9x0,6x0,4x2770,4x0,4 2500,0 0200220032004shareholders loans20052006Debt20072008Q1'09Total Debt/EBITDA 1 3401,9x 1 3141,91,71,2x1,3x 8021,51,2x1,3 5571,10,7x 4350,9 2610,70,2x 02002200320042005200620072008- 250- 88- 5000,5-0,0xQ1'090,3-0,1x0,1- 443Net Debt-0,1Net Debt/ EBITDANote : (1) Total Debt includes short- and long-term debt, capital lease obligations and shareholders loans but excludes derivative instruments for all period except Q2’06. Also includes A/P to equipment suppliers.(2) Net Debt is total debt less cash and short term investments and subordinated shareholders loans of original principal and capitalized interest of 92.6M.(3) Quarterly Total Debt/ EBITDA and Net Debt/EBITDA figures are based on trailing quarter financials.15

And Continue to Improve Our InterestCover with All Unsecured DebtEBITDA /Gross Interest Expense(1) 160 135 140 13433,1x35,1x 10730,0x 10026,0x 76 8022,0x21,8x 6018,0x 40 20 0 189,1x8,2x 34,0x 123 120 40EBITDA /Net Interest Expense(2)6,0x20072008Q1'09Secured vs. Unsecured DebtNote : (1) Gross Interest Expense is reported interest expense plus capitalized interest on a rolling four quarter basis.(2) Net Interest Expense is reported interest expense less interest income for rolling four quarters.16

Growing MOU and ARPU, High Churn, LowSAC - Prepaid and Indirect Distribution ModelMOUARPU 17,0265 15,0244250194200 14,1 15211 12,7 11,0165150100 20289300 15,0 11,8 9,3 1012593 5500 200620072008Q1'09* Includes phone sales. ARPUs ex phone sales is 14.9 full year 2008,ChurnAll-in SAC** 2%20%10%0%2002200520062007200817Q1'09** Includes commercial expenses ex payroll

Business Model Dynamics(Competitive Forces)

Suppliers - Currently A More BenignMobile Industry Competitive ForceSUPPLIERS Decreased Demand, Weaker BargainingPosition, Must Provide Value, More Willing to NegotiateCAPEX SUPPLIERSOPEX SUPPLIERS Imported Equipment Suppliers/ technicalsupport providers (NSN, Huawei, etc ) Affect30% capex cost May link to technical supportagreement which makes up significantpart of opex CAN GIVE YOU SPECIALS ANDFINANCING Billing Providers (Amdocs, Peterservice) Maylink to software maintenanceagreement which is significant opex CRM Providers (Siebel, etc) Local construction companies/contractor About14-16% of opex Employees About21-23% of opex Lessors or landlords (basestations, premises) About14-15% of Opex Technical and Software SupportProviders (capex suppliers usually) ) About7-8% of opex Leased channel providers Interconnect partners – usuallyregulated tariffs, difficult to change Other 60-70%of capex today IT and OtherMedia and Advertising Companies19

Substitutes and New Entrants – More BenignDue to Own Liquidity and Credit ConcernsSubstitutes Less Active Due toLiquidity and Financing Issues Some Internet based services (e.gSkype) which can compete forprofitable voice and data traffic dueto technology/cost structure Fixed line/cable player with BBoffering Competing new BB wireline orwireless technology like Wimax oreven Skylink Regular fixed line although mobileadvantages seem to have won thisfight Computers/new mobile devicespromoting internet/email in lieu ofSMS with flat rate schemesNew Entrants Less Active Due toLiquidity and Financing Issues Internet Technology Google and Apple with open source i& g-Phones Providingcontent which competeswith some of our VAS opportunities May compete against operators‟wall-garden approach to sellingcontent Smart phones, however, not sellinghere as well as in the West New Wimax players(Summa/Comstar/Yota) Other Cable and FMC/BB players MVNO from retailers? Foreign Operators?20

Buyers – “Tighten Belt”, Drop MOU, SeekValue, Slow Handset Cycle, - But MobileEssential?Buyers – “Tighten Belt” RichMOU Recent Drop ButRelatively Resilientand middle income individuals- - Multiple SIM cards users Heavilycompeted segment Declining Disposable Income Mass market (lower income/APRU) Regionalsand Tele2 niche Big and SME BusinessAPPM ( ,815,114,914,513,95,65,515,86,76,06,05,06,6ARPU ( 4,03,53,513,612,513,213,4 8Q3'08Q4'08Q1'09

Rivals – More Benign on Core Business ButMajor Strategic Changes in the WindRivals Dealing with TheirAttendant Credit and Liquidity Issues BigThree (VIP, MTS,MF) : Almostequal in most competitive factors, hard to differentiate whencompeting on mobile only. However, our stronger financial wherewithalallows us greater operational and financial flexibility VIP 2007 purchase of Golden Telecom and MTS contemplated purchase ofComstar change the business model in the direction of the integratedtelco player with triple, four play offerings VIP purchase of Euroset in Q4 2008 also started the scramble to createdirect instead of prior indirect distribution Big regionals (Uralsyaizinform, SMARTs, Tele2) : Morebenign because of credit and liquidity issues Sviazinvestthe 4th Major mobile player ? Competitor and Consolidator as national champion ? Wimax players/other data player likeSkylink in data segment Creating OtherCable and alternative BB players in convergent space?22

Some Complementors - In “Sea Change”Complementors In Major Transition OutsourcedDistributors – Federal and regional dealers. Alternative retail, etc BigSea Change due to Bankruptcy of ½ of major federal dealers and VIPpurchase of the largest federal dealer, - Euroset Banks - Provide consumer credit to stimulate handset sales and also collectpayments. Also provide loans to fund operators. Very Limited Role Now Regulators/government? Todaymay be Only Source of Major Financing for some Can create barriers to entry for new entrant with rules favoring Russianplayers or even support increased Russian asset ownership May also promote competitors, however, like policies on Sviazinvest Device or Handset/Smartphone suppliers – catalyst of mobile data and internettakeup slow. But Modems take off! Electronic Payment Systems – facilitate sub payment (e.g., Kiberplat, RIC). iPhone/Smartphones Content providers for VAS and mobile data Consolidationalso? Usmanov group a major player Content Consolidator and Aggregators like Apple with apps and content to promote data23

Watch Out for the “Black Swans” Mobile Market Maturing Global Economic Slowdown and Credit Crunch VIP acquisition of Golden Telecom in end of 2007 VIP Acquisition of Euroset and Collapse of Retail Sviazinvest Future Consolidation? Telenor Fairmex Dispute Outcome?24

Business Model Dynamics(Operational and Financial Management)

Opportune to Reset with ”Suppliers”, ImproveOpex Cost Structure, But Invest in the Future Revenue Initiatives – Continue to Invest in Marketing Target new market segment - Prosto MVNO More loyalty program to lower churn Provide more value for subs – E.g., try not to raise prices Less price competition from Peers More marketing initiative instead of less Managing Opex - Focus on Operational Efficiency Freeze or decelerate salary increases, reduce or eliminatebonuses, upgrade staff Renegotiate advertising contracts More internet and focused/contextual advertising Reset rental contracts Reset technical support agreement (sometime bundled withequipment purchase contracts) Greater operational monitoring and tighter cost control Build backbone partly to lower channel lease26

Opportune To Reset with ”Suppliers”, LowerCapex, But Continue to Invest in the Future Managing Your Capex Lower capacity capex because of decelerating new adds andMOU Skew allocation of Capex to efficiency and developmentalcapex to build for the future: 3G, productdevelopment, infrastructure, and efficiency capex Renegotiating prices, term and conditions of equipmentpurchase Standardize frame equipment purchase agreements More freebies New Tenders Will spend about 1-1.2 Billion, - about half of 2008 level Other “Grand Merger” - Greater Centralization and ControlAnd, Invest in Distribution (More on This Later)M&A and Bus Development - “Not Scrimp on Growth/Future!”27

Big 3 Reduces Capex SignificantlyRussia CAPEX with Acquisitions2 000VIPMTSMF1 5001 00050002002200320042005200620072008'09 1QVIP5777231 3201 6011 0501 3861 93850MTS7181 0921 3181 5891 2121 0491 501433MF3085239661 2271 2441 5622 170252 Targeting about 1-1.2 Billion capex this year (about half of last year) focusingon infrastructure, 3G, new products, and efficiency projects. Peers also plan major scaledown. MTS 1.5 total capex guidance includinginternational. VIP major focus is on debt repayment and committedprojects, and Nemsic recently quoted a range of 12-15% of revenue vs 26% lastyear.28

”Hard to Raise Money Or HedgeWhen You Really Have To” Financing Options: Get money from the Government (VEB, VTB, Sberbank) Get ECAs, development banks’ money - Cheaper, more attractive tointernational banks than straight Russian credits Reschedule or restructure debt Get money from Shareholders: REDUCE OR CUT DIVIDEND!Always be ready with flexible instrumentsFor Some, Get money Wherever and WheneverFor Some, Be ready to pay up (Availability More Important Than Cost)Don’t give banks any reason or circumstance to pull the money“Hard to Get When You Need it! Easier When You Don‟t !” Hedging Options: Swaps, collars, etc. Matching assets vs liabilities Fund with functional currency (more ruble money – synthetic or real)“Hard to Hedge When You Need it! Easier When You Don‟t!” FORWARD PLANNING!29