New Challenges for Carriers in Caspian Region 28th April 2011, Istanbul, Turkey Alexander Stolyarov Deputy of Head, Wholesale Department

22 Agenda ITelecom market perspectives 3-4 Major wholesale segments II TTK & new challenges III

3 Economy Perspectives Fast economic development creates the positive future for telecom carriers  CIS & Caspian regions survived the strong impact of economic turbulence in  Russian GDP dropped on - 7.0% in 2009, while it grew on +4.9% in 2010  All countries will continue stable growth in next five years Economy Growth in CIS & Caspian Regions, GDP in $billion Source: International Monetary Fund

4 Telecom Markets  Impact of economic crisis was indirect for telecom industry in  Development rate of telecom markets decreased, but not stopped in many countries  Russian telecom market increased about 10% in 2010 Telecom Markets in CIS & Caspian Regions, $billion Telecom markets continued the growth in Caspian region in 2010 Sources: Business Monitor, Telecom Administrations

Major Market Segments Source: RosBusiness Consulting 5 Telecom Revenue Structure in Russia  Actual change of market structure is not so fast in many countries  Voice is still the “King”, including fixed and mobile ones  While revenue from fixed voice services is declining  Data communications are the fastest growing segment Voice, data & wholesale transit cover 95% of market revenue

International Wholesale Segments Source: TeleGeography & TTK estimations 6 I. IP Capacity in CIS & Caspian Regions  IP is the major driver for capacity demand  Revenue grew 4 times to over $200 million in CIS & Caspian regions  Major markets: Russia, Turkey, Ukraine, Kazakhstan  Capacity increased 20 times to 1,9 Tbps, while average bandwidth prices decreased 5 times for past 5 years max. $ per Mbps

International Wholesale Segments 7 II. Voice in CIS & Caspian Regions  Large customer base (2010):  main telephone lines > 120 millions  mobile subscribers > 470 millions  Region absorbs ~ 12 billion minutes of international traffic  Incoming traffic essentially prevails outgoing one  ~ 30% of outgoing traffic is VoIP Source: TeleGeography, RCC & TTK estimations International Telecom Traffic, billion minutes

Market Challenges 8  Rapid growth of international bandwidth due to increasing demand for IP capacity  Relative price per Mbps is still decreasing dramatically  Lack of infrastructure and needs for network development in some countries  VoIP traffic growth TTK approach: Development through technological innovations

9 TTK Regional Focus  Major CIS interconnections:  Ukraine – 35 Gbps  Belorussia – 25 Gbps  Kazakhstan – 25 Gbps  Azerbaijan – 10 Gbps  European IP up-streams 230 Gbps

10 Further growth of transit capabilities will be provided by:  10G to 40G migration at main backbone routes  Shift of 10G systems to SDH routes with rapidly growing demand  Implementation of WDM systems  Development 10GE IP MPLS Growing Capabilities > 1 Tbps

11 TTK Services DWDM 10G&40G IP MPLS 10GE SDH NGN IP 10GE Long-Distance Telephony IP VPN EPL IP Access NPL & IPL

8 Testovskaya Str., Moscow, Russia, T: +7 (495) F: +7 (495) E: Thank you for attention!