Telecommunication Market in Ukraine in 2009-2011

Current State of Telecom in Ukraine

3

Total Telecom Revenues, USD, 2009-2015(forecast)

In 2011 Telecommunication revenues in Ukraine made up 3,8% of GDP.

5,56,1

4,9

6,4

4,85,2

5,7

01234567

2009 2010 2011 2012 2013F 2014F 2015F-35%

-25%

-15%

-5%

5%

15%

volume,bn USD year-to-year growth rate,%

F O R E C A S T

+ 30% growth

4

Timeline. Telecommunication Events in Ukraine

Fixed Telephony

Mobile Telephony

Broadband

Television

Other segments (data transfer, satellite, etc)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sharp decline of dial-up

subscribers share

By 2015 Ukraine is expected to shift to 100% digital broadcasting

Growing of 3G networks

Growing of “smart” devices

Expect sharp downturn in DLD/ILD revenues in 2012-2015

IPTV and OTT growing

COGENT, RETN entered the data transfer market

Extensive growing of fiber

networks

Orbiting the first Ukraine geostationerysatellite “Lybid” is expected by2013-2014

Mobile penetration

reached 105%

Rise of xDSL subscribers In may 2010 Vympelcom merged

with Kyivstar to form VimpelComLtd., the largest telecom operator in

the CIS

Austria's EPIC bought Ukraine's

Ukrtelecom

Austria's EPIC bought Ukraine's

Ukrtelecom

MTS got license for CDMA-450

Decline of Long-distance/international long-

distance telephony subscribers Launch of Utel

brand by Ukrtelecom

Active growth of mobile internet traffic&revenue

Launch of mobWimax services

802.16e

Expect more companies get license for 3G (today under military) and LTE launch

Expect broadband penetration by 2015 to reach 50% of households

SigmaBleyzer fund started to purchase

local cable providers

SigmaBleyzer fund created Volia

Limited, largest cable provider

Satellite operators

expand business

5

Telecommunication revenues

01234567

2009 2010 2011 2012 2013F 2014F 2015FMobile Telephony Internet TV Other

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013F 2014F 2015FMobile Telephony Internet TV Other

Telecommunications revenues in absolute

numbers, split by segments,bn USD

Telecommunication Segments in shares, %

6

Average Monthly Bill per User

2009 2011

Internet45%

TV14%

Mobile 17%

Fixed Voice24%

Internet37%

TV20%

Fixed Voice23%

Mobile 20%

-3,2%

207 UAH = 26 USD 200 UAH = 25 USD

7

Telecommunication Revenue Shares by Companies, 2011

Other18%

MTS24%

Astelit8%

Kyivstar33%

Ukrtelecom17%

*Kyivstar is operator in mobilecommunications, mobile internet, fixed internet, fixed voice, data transfer, etc. In 2010 two Ukrainiantelecommunication operators —Kyivstar PJSC and Beeline-Ukraine(Ukrainian Radio Systems PJSC andGolden Telecom LLC) — went intounited Kyivstar, Ukrainian businessunit VimpelCom Ltd.

*MTS(previously UMC brand) isoperator in mobile communications,mobile internet, fixed voice, data transfer, etc. In 2007 – an operator ofmobile communication UMC, 100% subcompany JSC "MTS" (NYSE: MBT), officially announces of turninginto the new brand – MTS.

* Ukrtelecom JSC wasUkraine’s monopolistgovernment-ownedtelephone company, alsoactive in Internet service providing and mobilemarkets. In 2012 Austrianinvestment firm EPIC boughta 92.79 percent stake inUkraine's main fixed-lineoperator Ukrtelecom.

* Astelit (TM life:)) is operator in mobilecommunications, mobileinternet, and data transfer, etc. The company has beenin Ukrainian market since 24 January 2005. It is 44.96% owned by SCM Group and54.8% owned by TurkishGSM operator Turkcell.

Current State of Telecom Segments

9

Mobile Voice Communications: Saturation

Mobile voice market has reached saturation at this stage.

In case Ukrainian government finds a way to unlock third-generation UMTS frequencies (currently under military) and issue more licenses to the main market players, revenue growth rates in the mobile telephony segment could advance slightly.

Mobile subscribers and penetration, mn, 2005-2011

30,4

49,2

55,6 55,9 55,3 54,1 53,7

64,0%

117,6%

118,1%120,3%121,1%119,8%

105,1%

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 20110%

20%

40%

60%

80%

100%

120%

140%

10

Broadband Internet: Stable Growth of Private Subscribers

16% 18% 20%22% 25% 26% 28% 30% 31% 33%

1Q 2010 3Q 2010 1Q 2011 3Q 2011 1Q2012

Broadband penetration in households raises with 7 per cent points per year

24,8

15,413,0

9,3 8,56,4

2,10,2

Europe

The Americ

as

Ukraine CIS*

WorldAsia

& Pacific

Arab State

s

Africa

Fixed (wired)- broadband subscriptions per 100 inhabitants, 2011

11

ТОР 1052%

Other48%

FISED BROADBAND SUBSCRIBERS «ТОР 10» - «Other» SCORE 52:48

Broadband Internet: Consolidation Process are Underway

Over 500 service

providers, over 1100

service operators

12

Fixed/Mobile Internet Trends

In 2011 Ukraine has entered list of top 10 countries with highest broadband speed (source –Pando Networks)

16th place of the world most developed FTTH networks (source FTTH Council Europe)

Consolidation process are being at the place on fixed broadband market

Tough Competition between operators

Unequal regional penetration of broadband services

FTTx is main technology (70% of new subscribers prefer FTTx)

Mobile broadband market (CDMA Rev A,B) is is growing slowly due to blocking third-generation frequencies (UMTS) and not issuing licenses to the main market players

MobWiMAX services are provided by two operators, still quite modest growth

13

Fixed-line Telephony

Decline of local and DLD/ILD revenues

Expect the decline of the number of telephone lines

11,512,1 12,5 12,4 12,3 12,1

2006 2007 2008 2009 2010 2011Telephone lines, mln

14

TV: Still Majority of Free-to-air TV Consumers

Subscribers Breakdown of Ukraine’s TV market in terms of technology(including paid and free access), 2011

Free-to-air TV

45%

Cable TV

35%

Satellite TV

19,5%

IPTV 0,5%

15

TV: Digitalization Trend

Digitalization of TV. Total digitalization is expected to become in 2015

The role of revenue driver on the pay TV market of Ukraine has gradually been shifting to paid satellite access operators

In April, 2012 the National Council for TV and Radio Transmission of Ukraine has resolved the issue of blocking the IPTV licenses. Therefore 4 providers have received IPTV licenses

16

Ukraine Telecom Forecasts 2013-2015

Positive broadband growth tendency due to cities 50K+.

Wave of mergers and acquisitions of small regional broadband providers

Broadband ARPU expected to stop declining and rise gradually Internet providers will focus on solving two parallel tasks: extensive growth of the subscriber base and rolling out quality value-added service options.

Growth rates of the number of subscribers connected via GPRS/EDGE and via 3G mobile services

Growth of set top box market, complementary to TV revenues growth and digitalization goals

Virtualization of IT resources, development of cloud technologies

Dynamic growth of Ukrainian internet entrepreneurship, rising of startup projects (e-commerce revenue rise 80% in year-on-year terms, etc)

17

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