Experience of Innovative Business Building in India: Key Lessons & Prospects

1. Experience of Innovative Business Building in India:Key Lessons & Prospects III Russian-Indian Forum on Trade and Investments Vsevolod ROZANOV President and CEO SISTEMA Shyam Teleservices Ltd.

2. Perspectives of India’s Economy • In FY10 India’s government expect a 6.25% to 7.75% GDP growth. It declined from average 8-9% to average 7.2% due to worldwide recession • In next few years India will pip China in GDP growth with 9% vs 8% (By Oxus survey) ) India’s real GDP growth rate % Growth Source: Economic Survey, E-Government estimate FY11E-FY12E: Global Insight update, June 2009

3. GDP growth forecast Brazil US Euro area Japan Russia % Change, YoY India China Recession Effect to Worldwide Economies India and China are only countries to show positive GDP growth among both BRIC and mature economies in 2009Y * Forecasted, Source: the Economist

4. Trends in Consumption Consumption is growing in India both in Urban and rural areas. Approximately 60% of consumption are made in urban areas Monthly per-capita consumption expenditures (Rs) Source: Deutsche Bank, NSSO

5. Indian Telecom Market • India is the only emerging market in the world attractive for investments in telecom and especially in wireless • Among BRIC countries only Indian telecom market both demonstrates unbelievable growth rate and is open for foreign investors • SIMs level of penetration is about 30,1%, real penetration is about 15-20% by experts • Teledensity in India increases faster than per capita GDP. It is expected to grow at approximately 1.4 times of the growth rate of per capita GDP. That means that telecom industry became one of the main pushers of Indian GDP growth (By Partial Adjustment Model in Telecommunication Sector) India subscribers base growth trends (in mlns) Source: TRAI

6. Mexico Austria Japan Malaysia Canada Chile Russia Brasil Argentina Uruguay India Indonesia Pakistan Nigeria Poland China Norway Finland Turkey Denmark USA Hungary Portugal Hong Kong Taiwan, China New Zealand Germany Italy Venezuela Australia Netherlands Singapore Israel Oman Spain Belgium France Market of low ARPU? • While Indian tariffs are low, its ARPU is high relative to GDP per capita Per capita GDP vs ARPU (US$) UK Rep of Korea Saudi Arabia ARPU (US$) Sweden South Africa Columbia Peru Egypt Thailand Philippines Sri Lanka Source: ITU, World Bank, Deutsche Bank, data pertains to 2007 Nominal GDP/Capita (US$, log scale)

7. Indian Telecom Market Trends • Indian telecom market is centered around metros and urban areas • 72% of mobile subscribers are living in urban areas • SIMs penetration level for urban population (appr. 390M) is 72,3%, real penetration is appr. 45-50% • Current Indian GSM operators encounter serious problems with quality • High growth rate of subscribers base brought to GSM operators serious challenge concerning capacity of their infrastructures what causes significant loss of quality (poor voice quality and non-availability and drop calls) • Indian subscribers are not tied up to mobile standard • Average subscribers base growth rate (M-to-M) for GSM operators is 10,39% for last year, the same figure for CDMA operators is 8,44% • Even with ARPU declining trend both in CDMA and GSM market volume are attractive • CDMA market volume is appr. ~$750M annually • India is a country of mobile Internet • 117,82M wireless data Internet subscribers (by the end of March’09) vs 13,54M of fixed ones • Broadband growth rate just for Q1’09 was 12,68% and the broadband penetration level is below 0,5% Based on TRAI figures for QE Mar’09

8. MTS India – Sistema Shyam TeleServices Ltd Jammu & Kashmir HP Punjab UP(W) Haryana Delhi Haryana Assam Rajasthan Rajasthan Delhi UP(E) Bihar W Bengal Gujarat Bihar & Jharkand Madhya Pradesh Kolkata Orissa Maharashtra Mumbai Andhra Pradesh 255 NW is launched Karnataka Chennai Chennai Launch Schedule Population, mln. 1 158 Tamil Nadu Tamil Nadu Kerala Kerala 591 Q4 2009 2010 SSTL – A JV between Sistema (LSE:SSA) and Shyam Group • Sistema (LSE : SSA) is the largest public diversified corporation in Russia and the • CIS, which manages fast growing companies operating in the consumer services sector • and has over 100 million customers. • Shyam Group has diversified interests in telecom, manufacturing, services and fertilizer. Essel Shyam Communications Ltd, a joint venture between Essel and Shyam group, is a leading pan-India VSAT Service Company . Jammu & Kashmir UP(W) Assam UP(E) WB Gujarat Madhya Pradesh Kolkata Orissa Mumbai Maharashtra Mumbai Andhra Pradesh Equity Structure Sistema (LSE : SSA) – 73.71% Shyam Group – 23.79% Other – 2.5% Karnataka Karnataka Kerala 1 ________________________________________________ Source – Company Data ________________________________________________ Source – Company Data

9. Subscribers Base Dynamic of SSTL * * Actual on September 24, 2009 7

10. Key Lessons of the First Year • Indian market demonstrates immense capacity and booming growth • It’s relevant not just to telecom market, but to developers business, FMCG, retail etc. • India is a country looking into future • Half of Indians are under 25 years old what is nearly 20% of this segment worldwide • There are reasons to go in fast, there is no reason to go in haste • Indian market is highly competitive and a strong business model should be developed before going in it • Due to high capacity business is valuable for new comers • Even with one digit market share the value of business is of high interest • There is a room for mistakes • High growth rate and capacity allows to gain experience and make necessary changes in strategy • Always there are CAPEX effective models even at start-up • Indian market is of highest interest to vendors what are ready to support new entrants • The market is not strongly segmented • There are a lot of segments to be occupied for new comers • Local partnership is needed to support the business • Predictable regulations, vendor cooperation