Strategy

At Uralsvyazinform we have set ourselves ambitious tasks to increase value and improve competitive position inside the license territory. We plan to achieve this through the development of product portfolio, improvement of customer loyalty, better operational efficiencies and financial position.

In achieving these goals we have identified a number of strategic areas though in view of today’s economic instability we will measure our effort carefully and accordingly.

Transformation of sales and customer service

Our key targets here are operational efficiencies, ARPU and market share. The transformation plan is based on Sales and Customer Service Transformation Program approved by the Board of Directors, and involves

• implementation of segment-based organizational structure;
• transformation of service processes;
• transformation of planning and accounting individually per each sales channel;
• restructuring of proprietary retail network (removal or relocation of sales outlets, optimization of formats and processes, streamlined staff policies);
• implementation of KPI benchmarking in sales and mass-market service;
• implementation of QoS management system;
• launch of web portal with sales functionality, designed consistently in each regional division

Expected outcome of the initiative: 80% of mass market clients and 90% of corporate clients should perceive services as satisfactory by 2013. Share of sales to mass market clients should climb 15% by 2013 as a result of the web portal launch and internet sales.

Product portfolio upgrades

We aim to outperform in new services’ market and preserve market share and healthy EBITDA margin, thanks to

• implementation of IP-based platform for new and future VAS services;
• Internet TV platform;
• the launch of fixed-mobile convergent platform;
• implementation of virtual application platform for new services;
• service lifecycle and portfolio system

We expect new services to reach 22% in Uralsvyazinform revenues by 2013.

Transition toward NGN networks

Our goals include higher operating efficiencies, improved ROI, lines-per-employee and digitalization indicators. We will rely on NGN technologies, new operational models, complex IT solutions, including:

• migration to NGN architecture;
• centralization of network controls;
• automated resource accounting and management;
• automated active directory of equipment;
• complex IT solutions

We expect local digitalization to attain 100% by 2013, share of NGN market of about 65% by 2013.

Improvements in the purchase system

Our targets here include operational efficiencies and improved ROIs thanks to purchase economies. We are taking advantage of world’s best practice in purchasing including e-trading.

We expect the initiative to yield significant investment and operational economies.

Streamlined business processes and HR systems

We aim at higher operational efficiencies, average compensations and improved lines-per-employee ratio.

• Building up of centralized project management system;
• streamlining staff numbers thanks to optimization of business processes, elimination of non-core functions, improvement of organizational structure;
• development of compensation and motivation systems;
• sustained Urals average compensation policy due to higher work efficiency;
• consistent activities in assessment of professional qualifications and skills, personal competencies using up-to-date assessment methods;
• optimization of training systems through implementation of corporate educational programs.

We expect staff numbers to average 15.4 thousand by 2013, and yield important payroll economies by reducing salary expenditure from 22% in 2008 to 19% in 2013.

Optimization of asset management

Expected effects include better operational efficiency as a result of lower cost of maintenance, and additional gains from sale/lease of real estate; additional goal is to streamline repairs and maintenance costs for transportation means.

• implementation of asset management business processes;
• rent of premises;
• sale of real estate;
• limitation of vehicle park;
• optimized usage of vehicles.

Acquisition of regional operators and reorganization of subsidiary businesses

This initiative is aimed at operational efficiency and markets share.

We are considering possible acquisition of subscriber bases and network infrastructure from regional telecom operators (broadband Internet).

We expect that subscriber bases of fixed-line telephone services and broadband internet may increase by 21.8 thousand and 34.8 thousand, respectively by 2013.

With plans to put these projects into practice in 2008-2013s, we trust that Uralsvyazinform will maintain its leadership in the Urals telecom market through combined effort in retention of market share in its traditional segments, increased footprint in emerging VAS services market, quality growth of operational efficiencies, and competitive longevity thanks to robust investment into networks and new services.