Investor Presentation November 2005

Investor Presentation November 2005 Disclaimer Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of Sistema Joint Stock Financial Corporation (“Sistema”). You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might,” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations. 2 Introduction to Sistema  The largest private sector consumer-services company in Russia and the CIS – Revenue of $5.7bn and $3.4bn, and OIBDA of $2.5bn and $1.4bn for 2004 and 1H 2005 – Over 50m customers across all business lines  “Strategic trust” relationships with Russian and international players – International blue chip names – Deutsche Telekom, Allianz AG, Siemens, etc. – Leading Russian business groups and financial institutions  Proven “know how” of business development in Russia / CIS – Operating since 1993 with significant greenfield successes – Restructuring skills successfully applied to acquired businesses – Ability to efficiently source and execute M&A transactions going forward  Committed to best practices in corporate governance – US GAAP financials since 1997 – Formalised and highly disciplined approach to decision-making – Ron Sommer recently joined the Board of Directors as an independent director Positioned to capture growth in disposable income in Russia/CIS 3 Leadership in Service-Based Industries Technology Telecommunications Insurance Real Estate Wireless Mobile TeleSystems Fixed Line Comstar UTS Media SkyLink MTT Banking Retail Control and consolidation of high-growth service-based businesses 4 Beneficiary of Russia’s Convergence Russia (1995) Goods 82% Russia (2005) Goods 74% The Future?* Services 60% $5,539 Services 18% $9,810 Services 26% Goods 40% >$30,000 Consumer spending on goods Consumer spending on services Pie chart demonstrates the structure of consumer spending; the number refers to the PPP-based estimate of GDP/capita Source: Euromonitor * - UK in 2005 used as proxy Spending patterns of Russian consumers increasingly mirror those of consumers in CEE and Western Europe 5 The Business of Growing Businesses Attractive Opportunities DIRECT INVESTMENTS PRIVATISATIONS MGTS Retail Business Technology Business Business Level Value Added MANAGING GROWTH • Properly engineered from the start • Import know-how and technology • Acquisitions of under-developed businesses: management as a partner • Capital for growth • • • • RESTRUCTURING Business process re-engineering Market-based motivation systems Introducing viable private sector models Management integration Group Strategy     Well-informed, return-focused investment approach Focus on the existing business segments Privatization and consolidation opportunities in telecoms Organic and M&A growth in other service industries - insurance, real estate, banking, etc. 6 Successful Business Model M&A Support Financial Control & Targets (KPI) Access to Capital Government & Regulatory Support Strategic Partnerships Management Talent 7 Consolidation of Leadership Position in Telecoms Consumers Mobile Voice Corporate / Government Carriers Mobile Data Fixed Access & Local Calls Data / IP Services “MGTS” Internet / Broadband “MGTS” Long Distance Pay TV / Content Services Potential to become Russia’s integrated operator 8 MTS: Leading Wireless Operator in EMEA  Operating Highlights – Consolidated subscriber base has reached 50.4m by 30 September 2005 – #1 position retained in Russia, Ukraine, Belarus and Uzbekistan – Acquisition of Barash, the leading mobile operator in Turkmenistan – Focus on value-added services: i-mode launched in September 2005  Financial Highlights – 1H 2005 revenues up 31% yoy to $2.3bn – OIBDA up 24% to 1.2bn, OIBDA margin of 51.8% – Continued strengthening of operating cashflows  Sistema remains a long-term shareholder of MTS, believing in its further growth potential – Exploiting pockets of growth in Russia – Continued expansion into the CIS – Exploring opportunities to expand outside of home markets MTS’ Key Financials (US$m)(1) Revenues OIBDA 24% CAPEX 2 293 1 747 962 1 188 767 435 1H 2004 1H 2005 1H 2004 1H 2005 1H 2004 1H 2005 MTS’ Consolidated Subscriber Base (m) 45 40 35 30 25 20 15 10 5 0,1 0 1998 1999 2000 2001 2002 2003 2004 1H 2005 0,3 1,2 2,7 6,6 13.4 16,7 3.3 Russia Ukraine Uzbekistan 34,2 0.3 44.0 0.4 7.4 9.5 7,4 5.9 3.3 7.4 26.5 34.1 26,5 21.6 3,3 26.5 13.4 13,4 Unique story of value creation by Sistema (1) Sistema consolidated financials (differs marginally from MTS reported due to consolidation differences) 9 Comstar UTS and MGTS: Consolidation Story  Comstar UTS to consolidate a 56% stake in MGTS  Creating a leading Russian fixed-line operator – Leadership in voice and data in Moscow – Continued regional expansion (acquired 45% in Metrocom and 89.4% in Tyumenneftegazsvyaz in 2H 2005) – Opportunity to become Russia’s first triple-play operator Comstar UTS US$m Revenue Growth Operating income Margin Сapex 1H 2004 105 1H 2005 114 9% 26 25% 12 (2) 29 26% 12 (14) Net Debt MGTS US$m Comstar 79.3% 100% 100% 1H 2004 226 46 21% 76 133 1H 2005 308 36% 104 34% 76 148 Revenue Growth Operating income Margin Capex Net Debt Telmos 99% 56% 100% 20.7% MTU-Inform US$m MTU-Intel 1H 2004 38 3 9% 1H 2005 51 36% 5 10% 10 Revenue Growth Operating income MGTS MTU-Intel 100% Golden Line Margin Creation of an undisputed market leader in the fixed-line segment Technology: Continued Strong Growth   Telecom Equipment and Software  “Kvazar-Micro” 320% revenue growth to $166m, OIBDA growth 568% to $96m Increase in the share of software sales US$m Revenue Financial Performance (US$m)(1) 1H 2004 83 14 17% 13 16% 3 70 1H 2005 427 414% 115 27% 110 26% 15 73 Growth % OIBDA Margin % Operating income Margin % Capex Net Debt   Hardware Distribution and Systems Integration Revenues of $178.4m, OIBDA of $2.8m Successful entry into the Russian market Strategy focused on increasing the share of systems integration Revenues of $27.3m, OIBDA increased to $12.8m Preparing a move to more advanced technologies 1H 2005 Revenue Breakdown  NIIME & Mikron VZPPMikron Telecom Equipment and Sof tware 39%  Semiconductor Design & Manufacturing   Electronic Devices  & Consumer Electronics IT and Sy stems Integration 41% Revenue growth of 271% to $59m, OIBDA growth to $4m. Further expansion of product line Well positioned to become the leading OEM manufacturer in Russia Consumer Electronics 14% Semiconduct ors 6% Growth driven by restructuring, telecom equipment, consumer electronics (1) Based on Technology accounts as consolidated within Sistema 11 Insurance: Success of Strategic Initiatives  Progress along the path towards creating a market leader – Further organic growth in premiums – Offering full range of insurance products – Power of the brand and customer confidence as a basis for growth – Using the holding’s synergy opportunities  Financial highlights – GPW growth of 57% 1H 2005 GPW by Product Other; 10% OMTPL; 9% Property; 41% Auto; 14% Total GPW Growth Reinsurance outwards Change in provisions Net premiums earned Operating income ($47) ($8) Financial Performance (US$m)(1) US$m 2003 $218 2004 $368 68,5% ($40) ($50) $278 $30 ($19) ($71) $112 $5 1H 2004 1H 2005 $202 $318 57% ($71) ($64) $183 $14 $163 $17 – NPE growth by 64% – Increase in operating profitability  Operating highlights – Expansion into Ukraine (rep office opened in May 2005) VMI; 26% Focus on growth and development of a balanced and profitable insurance portfolio (1) Based on Rosno accounts as consolidated within Sistema 12 Building a Platform for Further Growth  Moscow Bank for Reconstruction and Development (MBRD) – Revenue growth of 68% to US$ 45.8m, decrease in operating income of 55% to US$ 3.1m – Plans to initiate retail rollout in 2006  Retail – Detsky Mir – Revenue growth of 50% to US$ 45.2m, increase in operating income of 75% to US$ 3.8m – Rapid expansion of the retail chain – from 13 stores at YE 2004 to 36 as of today  Real Estate – Sistema Hals – Significant revenue decrease of 54% to US$ 10.9m due to business cyclicality, operating income at US$ 3.2m – An updated independent appraisal of the company’s projects by Cushman & Wakefield will be available in Q4 2005 Media business – Growth in revenue of 108% to US$ 42.2m, operating loss of US$ 4.6m – Successful launch of Stream-TV (ADSL-based pay-TV offering in Russia) – Acquisition of Esta, a regional cable operator with 217,000 customers in 3 large regions of Russia  Solid performance in all existing business lines 13 Effective Use of Surplus Medium Term Funds  In 2H 2005, Sistema acquired minority stakes in six energy companies in the Republic of Bashkortostan Company Bashneft UNPZ Novoil Ufaneftekhim Ufaorgsintez Bashnefteproduct Voting stake 25.00% 25.52% 28.17% 22.43% 24.87% 18.57% Market price at acquisition, US$ 7.18 0.81 0.58 1.96 1.95 4.75 Market price at 14.11.05, US$ 10.88 1.45 0.9 2.5 2.8 9.45 % increase 51.5% 79% 55.2% 27.6% 43.6% 98.9%  We remain committed to our core consumer services operations  Short-medium term opportunistic acquisition  Opportunity to effectively invest shareholder funds on the medium term whilst awaiting developments with the strategic target, Svyazinvest  Opportunity to use business restructuring expertise and experience to increase value  Refinancing is currently under discussion Sistema’s entry led to a massive re-rating of the stocks, with the market value of the investment now exceeding $1.1 billion 14 Highlights of Sistema’s Consolidated Financials US GAAP, US$m 1H 2005 1H 2004 FY 2004 Profit & Loss Revenue Depreciation and amortisation Operating Income(1) Margin Net Income Margin OIBDA (2) Margin 3 355 (481) 941 28% 228 7% 1 422 42% 2 428 (348) 772 32% 171 7% 1 120 46% 5 711 (800) 1 665 29% 411 7% 2 465 43% Balance Sheet Total Assets Cash and Equivalents Total Debt Minority Interest Shareholders’ Equity 11 575 1 086 3 562 1 995 2 927 585 (1 767) 1 764 7 349 436 2 484 1 494 1 171 948 (644) (151) 8 779 504 3 065 1 851 1 436 1991 (2 062) 381 Cash Flow Cash flow from Operations Cash flow from Investments Cash flow from Financing (1) (1) Operating Income is calculated as revenues less operating costs, plus income from equity investees and net gain or loss on sale of subsidiaries (2) OIBDA represents the sum of operating income, depreciation and amortisation 15 Strong Financial Position of Sistema  Sistema has a strong liquidity position – – – Bolstered by net IPO proceeds of $1.3bn in February 2005 High and growing dividend from MTS ($207m in 2005) compared with c. $70m of annual interest costs To B+ by Fitch in Feb-05 and to BB- by S&P in Mar-05  Solid credit profile confirmed by recent rating upgrades  Maturity profile does not imply significant repayments until 2007 or 2008 Consolidated Total Debt/OIBDA 4,00 3,50 3,00 2,50 2,00 1,50 1,00 0,50 0,00 2001 2002 2003 2004 1 п. 2005 1,85x B- / NR / B B- / NR / B B / B1 / B BB- / B1 / B+ Corporate Level Debt Maturity Profile 400 351,1 350 300 250 200 351,2 351,5 (1) 1,64x 1,67x 1,20x 1,25x 150 100 50 0,2 0 2005 2006 2007 2008 2009 2010 2011 1,1 1,1 1,3 1,4 Strong financial position confirmed by recent upgrades from the agencies (1) $350m 2011 bond has a put option for bondholders in 2007 16 Capital Allocation Strategy USES OF CASH Business Segment SOURCES OF CASH Operating FCF Access to Third Party Capital Capex High Tariff Driven Moderate Moderate Moderate High High High High Acquisitions SISTEMA’S Holdco Cash Impact + MTS Continued +++ Established MGTS Comstar UTS Technology Insurance Real Estate Banking Retail Media None Possible Yes Yes Yes Possible Possible Possible + ++ Break-even Break-even Established Established Possible Possible Established Established Established None + + + - ++ Break-even Negative Negative - 17 Contact us: Alexei Kurach Head of Investor Relations Tel.: +7 095 229 2741 Fax: +7 095 232 3391 Email: kurach@sistema.ru