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Comstar-UTS
Presentation at UBS 2007 Annual Investment Conference
Moscow, Russia
November 15, 2007
UBS conference November 15, 2007
Combined Telecom Operator
Comstar-UTS
ILEC in
Moscow
3.6 million
residential
subscribers
More than 90%
of lines are
ADSL
compatible
CLEC in
Moscow
CLECs in Moscow
and regions
#1 broadband
provider
0.6 mln active lines
in Moscow
33% market
share
0.9 million
subscribers outside
Moscow
0.4 million
residential
subscribers
Multi-service
solutions to
corporate &
developers
Sister companies
STATE HOLDING
Comstar owns
25%+1 share
7 ILECs,
Rostelecom,
Central Telegraph
32 million installed
lines covering
90% of Russia
MOBILE
OPERATOR
ILD/DLD
OPERATOR
Cooperation
with Comstar:
Cooperation
with Comstar:
joint use of
network
infrastructure,
DLD/ILD services
to Comstar
clients
convergent
projects,
2
joint sales efforts
UBS conference November 15, 2007
Value drivers
STRUCTURE
BROADBAND
MGTS
REGIONS
SVYAZINVEST
 Simplifying Organizational Structure
 Unlocking Operational Potential
 Increasing Broadband Market Share & ARPU
 Selective Modernisation of the “Last Mile”
 Regulated tariff rebalancing
 Cost optimization
 Increase in efficiency
 Driving Regional Expansion
Capitalising on Svyazinvest stake
as a financial investment and through participation in privatization
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STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Simplifying Organizational Structure
Now
Objective
Free float
35%
Regional
branches
51%
48%
52%
56%
• Elimination of cross ownership
between MGTS and Comstar
• Integration of Comstar Direct
• Turning regional subsidiaries into
14%
affiliates
17.3%
7.7%
23%
21%
Other
4
STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Unlocking Operational Potential
● Management by processes
● Comstar focus:
►
Strategy
►
Regions (M&A, Greenfield)
►
SvyazInvest
Lines / Employees
● MGTS focus :
►
Network modernization &
maintenance
►
Mass market sales
● Comstar – Direct focus:
►
High-value broadband sales
● Outsourcing of non-core functions
●Potential for Significant headcount reduction
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Source: Analysts reports
STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Increasing Broadband Market Share
Objective of >50% market share in Moscow by
2011 from current 33%*
Moscow Residential BB Market, 2Q’07
Revised broadband strategy
• Direct sales using MGTS technicians and
Others; 32%
Comstar UTS; 33%
brand
426 thousand subs
• Unique Post-paid tariffs, One Bill for all
telecom services for residentials
• Selective Modernization of the “Last Mile”
►
Fiber to the Curb (FTTC)- started Sep. ’07
►
CAPEX of up to $100 million
►
70-80% of the “last mile” is to be “Speed
Qwerty (Centel);
8%
AKADO; 10%
Golden Telecom;
17%
Total: 1.3 mn subs
Up” to 20-25 Mbps by 2010
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Source: Company data, Direct INFO, Pyramid Research. Penetration calculated as % of households, 1H2007
STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Modernization of the “Last mile”
35 000 apartment blocks
1. Fiber to the curb
2. Moving DSLAM closer to the
customer- to the curb
3. Selective installation of
fiber to the home
Services
Speed
Apartment
Fiber
Settop-box
250 switching centers
1 Gbps
• HDTV
• Internet (100+ Mbps)
• Smart home
• Video monitoring
• etc
Modem
20-25 Mbps
Box
• HDTV (2-3 TV sets)
• Internet (10-20 Mbps)
~300 м.
DSLAM
Curb
Fiber
6 Mbps
Copper
Copper
Curb
Fiber
~1,5 км
backbone
11 000 curbs
• IPTV (1 TV set)
• Internet (up to 2 Mbps)
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STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Regulated tariff rebalancing
Growth in Regulated Tariffs (US$)
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Residential Subscriber Mix
10,2
June 30, 2007
10
7,6 7,6
8
6,5
6
4
2
4,2 4,8
2,3
1,1 1,9
2,7
5,3
3,0
Time-based tariff plan
(RU 125 + RU 0.28 per minute)
26%
Combined tariff plan
(RU 229 for 370 minutes then RU
0.23 per minute)
22%
Unlimited time tariff plan
(RU 380 per month)
52%
0
'99
'00
'01
'01
'02
'02
'03
'03
'04
'05
'06 1H07
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STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Driving Regional Expansion
100%
Russian Fixed Line Market (2007E) - $17,8 BN
$4,4 BN
DLD/ILD/Transit
3
80%
60%
$1,3 BN
ILEC
40%
20%
$3,4 BN
CLEC
0%
Moscow
*Source: Сomstar-UTS estimates
- Comstar presence (Current)
- Comstar target (Future)
$1,3 BN
ILEC
$1,2 BN
Strategy
• Increasing market
share in the regions
of presence
$1,6 BN
ILEC
$1,2 BN
1 CLEC
Regions of
presence
•Tyumen
•Saratov
•Volga
•South
•Saint Petersburg
2 CLEC
Target
regions
•South
•Volga
•Ural
•Siberia
$2,3 BN
ILEC
$1 BN CLEC
Other
regions
• Expansion into the
target regions
• Entering the DLD/ILD
segment
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STRUCTURE BROADBAND
MGTS
REGIONS
SVYAZINVEST
UBS conference November 15, 2007
Capitalizing on Svyazinvest Investment
Russian regional market, US$, 2006
•
25% +1 share acquired for US$ 1.3
billion in December 2006
•
Call (by December 2007) and put (2
year) option agreement with Seller for
11% of Comstar shares currently held
by MGTS Finance
•
•
•
MTT, 4%
Golden telecom,
3%
Comstar, 0.4%
2 seats on the Board of Directors
Successful financial investment
Upside option as Strategic Player in
privatization process
Svyazinvest*,
78%
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* Including Rostelecom 16%
UBS conference November 15, 2007
The Unique Investment Opportunity
USD 1.92
billion
USD 3.66
billion
USD 5.17
billion
USD 3.26
billion
Comstar
Market Cap
21.6% of
Svyazinvest
Comstar
Market Cap ex
Svyazinvest
USD 5.18
billion
USD 5.36
billion
USD 3.93
billion
EV/EBITDA
20071
6.5x
Comstar
EV
EV/EBITDA EV/EBITDA EV/EBITDA
2007
2007
2007
8.8x
6.0x
8.5x
Valuation at
ILEC
Multiples
Valuation at
Altnet
Multiples
Valuation at
Broadband
Multiples
¹Source: Consensus (Morgan Stanley, URALSIB, Goldman Sachs, Deutsche UFG, Troika Dialog, Aton Capital, Alfa Bank, ING,
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Renaissance Capital, UBS, Merrill Lynch, Veles capital, Credit Suisse, FIM, MDM Bank, JPMorgan). All data as at 29 October 2007
UBS conference November 15, 2007
Contacts
For additional information please visit
www.comstar-uts.com
or contact Masha Eliseeva
Head of Investor Relations
Phone: +7 985 997 08 52
E-mail: [email protected]
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UBS conference November 15, 2007
Appendix
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UBS conference November 15, 2007
Combining Growth & Profitability
2006 EBITDA Margin
50%
45%
Telenet
40%
Eesti Telecom
Comcast
35%
Comstar
Fastweb
Liberty Global
30%
25%
20%
15%
Golden Telecom
Telefonica O2 CZ Magyar
OTE
TP
Cable & Wireless
Tele2
10%
5%
0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2006 Sales Growth
Source: Company reports
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UBS conference November 15, 2007
Income Statement
(US$ Million)
2004
2005
2006
1H2006
1H2007
Revenues
Y-o-Y Growth
695,1
18,0%
907,6
30,6%
1 120,2
23,4%
536,4
27,9%
708,0
32,0%
OIBDA (excl. Stock Bonus Awards)
Margin
249,9
35,9%
358,8
39,5%
428,6
38,3%
217,3
40,5%
303,6
42,9%
Operating Income (excl. Stock Bonus Awards)
Margin
173,7
25,0%
268,4
29,6%
297,7
26,6%
163,5
30,5%
228,5
32,3%
76,1
105,9
178,1
97,4
75,3
Margin
11,0%
11,7%
15,9%
18,2%
10,6%
Capex
% of Revenues
228,5
32,9%
232,3
25,6%
316,1
28,2%
135,0
25,2%
148,1
20,9%
Net Income (excl. Stock Bonus Awards and change in fair
value of call and put option less minority share)
Half Year Highlights
● 32% year on year revenue growth
● 42.9% OIBDA margin
● US$ 14.5 million change in fair value of call and put option
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UBS conference November 15, 2007
Segmental Breakdown
Revenue (US$ Million)
Q1 2006
Q2 2006
Q3 2006
Q4 2006*
FY 2006
Q1 2007
Q2 2007
175,6
209,7
208,4
208,4
802,2
247,3
291,4
Comstar Moscow
62,4
67,9
68,6
64,6
263,4
65,0
70,1
Comstar Direct
30,4
32,4
32,9
34,3
130,0
37,2
38,9
7,5
7,0
8,2
16,6
39,2
11,6
11,6
Intersegment Sales
-26,1
-30,4
-26,3
-31,8
-114,6
-32,2
-32,8
Total Revenue, net of intersegment
transactions
249,8
286,6
291,8
292,1
1120,2
328,9
379,2
MGTS
82,9
101,8
87,3
84,1
356,0
114,4
151,1
Comstar - Moscow
14,2
13,0
19,1
9,2
55,5
12,5
13,5
Comstar - Direct
4,9
1,0
6,8
6,5
19,2
4,6
9,0
Comstar - Regions & International
Effect of eliminations and other
consolidations adjustments
Total OIBDA
1,3
1,4
1,7
-0,4
4,0
0,7
1,4
-1,0
-2,1
-1,0
-2,0
-6,1
-1,8
-1,8
102,3
115,0
113,9
97,4
428,6
130,4
173,2
MGTS
Comstar Regions & International
OIBDA (US$ Million)
* Excluding US$ 62.1 million Stock Bonus Awards
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UBS conference November 15, 2007
Cash Flow Statement
(US$ Million)
2004
2005
2006
1H2007
Net cash provided by operations
225,2
271,2
288,7
201,5
-187,2
-255,2
-1 767,0
-165,6
-19,5
-20,3
1 550,9
-24,9
2,0
-1,0
2,0
0,6
Cash and cash equivalents at the beginning of the period
47,0
67,4
62,0
136,6
Cash and cash equivalents at the end of the period
67,4
62,0
136,6
148,2
Net cash used in investing activities
Net cash provided by / (used in) financing activities
Effects of foreign currency translation of cash and cash
equivalents
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UBS conference November 15, 2007
Balance Sheet
(US$ Million)
2004
2005
2006
1H2007
1 418,4
1 641,4
3 537,6
3 762,5
335,6
405,2
445,1
574,2
1 082,8
1 236,2
3 092,5
3 188,3
Liabilities
586,4
645,8
1 470,6
1 573,1
Current Liabilities
223,2
274,4
1 140,9
543,6
Long-term liabilities
363,2
371,4
329,7
1 029,5
Minority Interests
450,6
516,1
496,7
530,0
Shareholder's equity
381,4
479,5
1 570,2
1 659,5
Assets
Current Assets
Long-term assets
Half Year Highlights
●
●
●
●
US$ 675 million 6 month loan facility arranged in December 2006 with ABN AMRO Bank N.V.
Refinanced in June 2007 with 5 year RUR 26 billion credit facility from Sberbank
Total debt of US$ 823.5 million
Net debt of US$ 675.3 million
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