Investor Day

Kcell JSC 20 June 2017

2

Disclaimer

Statements made in this document relating to future status or circumstances, including future

performance and other trend projections are forward-looking statements. By their nature,

forward-looking statements involve risk and uncertainty because they relate to events and

depend on circumstances that will occur in the future. There can be no assurance that actual

results will not differ materially from those expressed or implied by these forward-looking

statements due to many factors, many of which are outside the control of Kcell.

3

Kcell team (1/2) Jan Rudberg

The Chairman of Kcell BoD,

Independent Director

• Joined Kcell in Nov 2012

• From 1994 to 2003, held various managerial

positions within Telia AB. Peviously served as the

CEO of Tele2 AB, Executive Vice President of

Nordbanken AB, and CEO of Enator AB

• The Chairman of the BoD at Hogia AB, an

independent director and Chairman of the Audit

Committee at PJSC MegaFon. A member of the

BoD at Turkcell Iletisim Hizmetleri A.S. and the

Chairman of the Board of Directors at CJSC

Belarusian Telecommunications Network.

Irina Shol

Investor Relations

• Joined Kcell in July 2006

• 16 years of experience in finance

• Previously worked as a senior auditor in Deloitte

Kazakhstan and in finance department of KLM

Arti Ots

Chief Executive Officer

• Joined Kcell in Dec 2014

• 16 years of experience in telecommunications

• Previously worked as VP for Commercial and

Business Development in TeliaSonera Eurasia;

CEO in Elion and Marketing Director, Elion

Trond Moe

Chief Financial Officer

• Joined Kcell in Jan 2015

• 24 years experience in telecommunications in

Eastern Europe and Asia for Telenor. Has served

as CEO, COO, CFO as well as Chairman and

Member of Board of Directors

Sasa Lekovic

Director, Technology

• Joined Kcell in Sep 2015

• 23 years of experience in telecommunications

• Previously served as Member of Board of

Directors and worked as CTO in Telecom

Serbia, in different years worked for T-Mobile

and as a lecturer in Montenegro University

Irina Savina

Director, Consumer

• Joined Kcell in March 2016

• More than 16 years of experience in marketing

and sales

• Previously worked as CCO at Altel JSC, as Chief

Marketing Officer in ASBIS Group (Cyprus), in

different years worked for Velcom (Telecom

Austria Group), P&G, MTS Belarus and for many

years in AVIS Rent A Car as COO

Vadim Lyu

Director, Enterprise

• Joined Kcell in March 2017

• 14 years of experience in IT and

business consulting

• Previously worked as Senior Consultant in

Deloitte Belgium and Kazakhstan, Founder of

iBEC Systems company

Kcell Investor Day

4

Kcell team (2/2)

Kazbek Shaimov

Director, Customer Channels

• Joined Kcell in Nov 2008

• 11 years of experience in telecommunications

• Previously worked as Executive Director for JTI

Company (FMCG segment) in Pavlodar region

Damir Zhanbakiyev

Director, Legal Affairs and

Government Relations

• Joined Kcell in May 2014

• 11 years of experience in jurisprudence

• Previously worked as a Chief Expert of ATFBank,

and Head of legal support unit in Qazkom Bank,

Head of litigation in law firm

Alexander Prokopovich

Director,

Centralized Procurement

• Joined Kcell in Aug 2014

• 11 years of experience in procurement

• Previously worked as Head of Procurement in

Velcom, a member of Telecom Austria Group

(Belarus)

Assya Kalinkina

Director, HR

• Joined Kcell in Jan 2016

• 17 years of experience in human resources

• Previously worked as HR Director in Sandoz CIS,

Danone Kazakhstan and Central Asia,

Halyk Bank and Carlsberg Kazakhstan

Kcell Investor Day

Country and market overview

6

Source: EIU

17.117.4

17.617.9

18.8

2013 2014 2015 2016 2020

Macroeconomic environment (1/2)

…with attractive population

demographics…

…provides large addressable base

due to low unemployment

Growing population…

The second highest per capita income

relative to regional peers…

…with a track record of growth

Source: EIU

Source: EIU Source: EIU

Source: EIU

real GDP (KZT bn)

2016 unemployment rate (%) (m)

GDP / capita 2017E (US$)

age distribution (%)

Source: EIU

…providing real economic

wealth to citizens… PPP 2017E (US$)

0.9

5.0 5.5 6.37.0

9.5

11.8

18.1

BLR KAZ RUS MDA AZE UKR GEO ARM

Average: 8.0

12,356 12,887 13,016 13,18114,992

2013 2014 2015 2016 2020

59

41

Population aged <35 Population aged ≥35

Stabilized macro-economic indicators

5,6

90

7,1

62

6,5

20

8,6

90

9,0

00

9,8

50

16,9

50

18,4

30 2

5,4

50

26,4

80

MDA UZB UKR ARM GEO AZE BLR KAZ RUS

1,901 2,3643,482 3,527 4,100

6,185 6,520

8,235

10,446

MDA UKR GEO ARM AZE BLR UZB KAZ RUS

Average: 5,196

Adjusted PPP to Moldova's real population (2.8m)

Kcell Investor Day

7

30%

11%

7% 6% 6%

5%

4%

4%

27%

Netherlands

US

Switzerland

China

France

UK

Russia

BVI

Others

Macroeconomic environment (2/2)

FX correlates with Russian Rouble,

as Russia is an important trade

partner

…from a diversified range of

countries

Kazakhstan has attracted more

than US$280bn of FDI…

Growth to pick up driven by higher oil

prices and increased oil production

Exchange rate strengthened and is

now ~50% below 10-year average

Source: FactSet

Source: National Bank of Kazakhstan Source: National Bank of Kazakhstan

Source: EIU, FactSet

Confidence in decreasing inflation

demonstrated by cut in base rates

exchange rate (US$/KZT and US$/RUB)

Source: FactSet

US$/KZT vs. Brent price (2007-2017)

FDI by country (2016) gross inflows of FDI (US$m)

10

11

12

13

14

15

16

17

18

Sep-15 Mar-16 Sep-16 Mar-17

Monetary stimulus to

boost domestic

growth

base rate (%)

Source: National Bank of Kazakhstan

GDP growth vs. Brent price (2007-2017)

0

20

40

60

80

100

120

0

2

4

6

8

10

12

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

GDP growth (%) Brent oil (US$pb)

30

40

50

60

70

80

90

150

200

250

300

350

400

450

Jan-15 Aug-15 Mar-16 Oct-16 May-17

US$/KZT US$/RUB

Stabilisation

at a 1:5 ratio

Oil prices hit

record lows

Shift to free float on

20th August 2015

8

12

1921 21 22

2629

24 24

15

21

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

0

50

100

150

200

250

300

350

400

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

20

40

60

80

100

120

140

160

US$/KZT Brent oil (US$pb)

Kcell Investor Day

8

National Security

Committee &

SORM

The new Technical Regulations for the Special Operational-Investigative Measures (SORM)

On 7 February 2017, the new TU SORM was published. From 8 February 2018, the new Technical Regulations for

SORM (TU SORM), which additionally provides new requirements for "blocking" and "traffic management" by SORM

will come into effect

Thus, it is supposed that SORM will switch from the passive use of SORM into an active intervention to the

management of telecommunications networks. The TU SORM will demand larger capacity from the operator. It can

also require the building of additional data centers, which in turn can lead to additional financial costs

Mobile Number

Portability

Introduced in 1st January 2016, MNP offers the opportunity to migrate to another operator with the same number. To

March 31st, on the Kcell network ~100,000 have departed and ~50,000 arrived

Kcell Investor Day

Regulatory environment

MTR and MVNOs

• In 2015, all mobile operators signed agreements to drop MTR from KZT 8 in 2015 to KZT 5 in 2016

• There are no ongoing discussions to change MTRs. MTRs are now in line with neighbouring countries

• There are currently no mobile virtual network operators (MVNOs) licensed in Kazakhstan

Liberalisation of

telecom market

• After Kazakhstan became a member of the WTO, the Government has to eliminate foreign ownership limits in the

domestic telecoms sector by April 2018

both international and fiber ownership will be liberalized, allowing to rent/lease the infrastructure from foreign

partners

9

1.6

2.4

3.6 3.9 4

.4

4.5 4.8 5.0

5.7

UKR GEO KAZ AZE BLR ARM MDA RUS UZB

Average: 4

42,1% 40,4% 40,0% 38,6% 38,9% 38,2% 38,6% 39,2%

37,2% 36,5% 36,2% 35,4% 36,2% 36,7% 36,6% 35,5%

6,2% 7,3% 7,6% 9.7%

14,5% 15,8% 16,2% 16,4%

24,9% 25,1% 24,9% 25,3%

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16

Kcell Beeline Altel Tele2

31

41

51

75

2014 2015 2016 2019

24.3 24.3 25.4

2014 2015 2016

...and lower average fixed broadband penetration

than peers

Given significant 4G coverage and rising smartphone penetration,

most internet usage to be over mobile

After Tele2/Altel merge, Kcell is slowly

recovering market share

Strong market fundamentals

Source: WCIS Source: Official mobile operators report, BMI

Population penetration (%)

Mobile subscribers (m) Smartphone penetration (%)

Offering potential upside from lower average

ARPU than country peers… ARPU, 2016 (US$)

Sources: WCIS

MoU per month per subscriber

Dec-16 (%)

Subscriber market share (%)

Source: Official mobile operators reports

Source: GlobalComms (Dec-16)

9

33 35 4

1 48

56 57 6

3

88

UZB UKR KAZ GEO RUS MDA¹ AZE ARM BLR

Average: 48

Kcell Investor Day

10

Main strategic business directions

MOBILE SOLUTIONS PARTNER

FOR ENTERPRISES MOBILE FMCG OPERATOR MOBILE URBAN OPERATOR

Strengthened product portfolio with fast and

efficient integration of new products and services

Solution oriented approach supported with clearly

defined delivery and maintenance processes

Focused on business solutions such as IoT, M2M

and Mobile Marketing

Bra

nd

Reliable partner for largest organizations by

utilizing mobile technologies to meet

customer needs

Tailored or boxed solutions for clients from

different business segments and industries

1 B2C B2B 2

Dedicated account managers

Partners

Ro

le

Building long-term and deep customer

relationships

Inviting newcomers, strengthening the

retention and identifying drivers of a relevant

customer’s migration to Kcell

Allows competing in the lower price customer

segments with continuous promotions

Sa

les

ch

an

ne

l

Exclusive retail and non-exclusive POS

Third party service providers,

independent dealers, distributors and retailers

Exclusive retail, franchised mono-brands

The internet is a key channel to promote and

sell Kcell’s products and services

CUSTOMER CENTRICITY

Prevalence of client needs —

“one-to-one client treatment”

Integrated system of sales and customer care

Focus on Customer retention

EFFICIENCY

Efficiency versus volume

Selective channel mix

Str

ate

gy

CUSTOMER-ACQUIRING

Promote consumption of the data, by selling the

appropriate range of demanded smartphones

(including at minimum prices for the ultimate

decrease of the entry threshold for subscribers)

Kcell Investor Day

11

Two well defined B2C segments…

Belongers (40%)

Age: 35-60

Value: low

Conscious

achievers (7%)

Age: 30-55

Value : high

Emulators/

Wanna be (15%)

Age: 20-35

Value: low

Social

trendsetters (10%)

Age: 20-30

Value: high

Young

Explorers (19.7%)

Age: 16-25

Value: high

Life

Builders (24.5%)

Age: 25-40

Value: average

Leadership provider Connection enabler

1

MOBILE FMCG OPERATOR MOBILE URBAN OPERATOR

• Providing customers with easy, user friendly products

with an accessible way to manage their accounts

• An emotional communication stressed on

simplicity and values

Brand value • Delivering a superior and differentiated customer

experience with solutions that meet their changing

needs

Communication

strategy

• Focus on delivering the promise of “helping

customers stay/become a leader”

Advertising

channels

• Big or image formats of OOH, TV, Internet,

PR, sponsorship of a variety of national

events

• Dedicated OOH, Radio, Internet,

sponsorship of a variety of industrial local

events and promotions

Positioning

Target audience

Kcell Investor Day

12

Wide product portfolio to satisfy customers needs…

MOBILE FMCG OPERATOR

1

MOBILE URBAN OPERATOR

Single-SIM bundle with voice,

text and data allowing customers

to benefit from the Kcell’ network

Voice, Messages

Data

Bundles

Contract phones

OTT Entertainment

Mobile Finance

Bundled Stand alone

Kcell Investor Day

Innovative products and

services offered to an

individual and community

13

1,4

2,5

4,7 5,2

20152016 20152016

…combined with the best contract phones, which are a great

differentiation tool and revenue generator…

Most

attractive

smartphone

portfolio

Direct contracts with the

best sellers to ensure

the best market offer

Iconic device pre-order

campaigns followed by

official launches

Life-circle promo-

campaigns in

cooperation with vendors

1

2

3

to drive smartphone penetration

1

Annual

upgrade

Trade-in

program

Bundles

enlarge

Operational

leasing

…and share in KZ smartphone market

in units

in revenue

DEC'15

DEC'16

41%

50%

2015 2016

… with focus

on

contract

offers

6, 12, 18 and 24 month

instalment based on

efficient scoring

system

Wide range of

integrated voice, text

and data offers

1

2

In 2016, the share of contract

phones among all the phones

sold at Kcell retail stores

amounted to 90%.

4G-smartphone share reached

85% of all the smartphones sold

4G 4G smartphone share among

all smartphones in Kcell’

network in 2016 increased

from 23.8% to 38.4%

compared to 2015

Kcell Investor Day

14

…and drive data usage

Data revenues have large upside after the elimination of unlimited 4G offers in the cheapest bundles

Pricing pressure subsided in 2H2016

• The market is saturated by the high amount of data being incorporated in

subscription bundles

• In 2016, data was used as a competitive tool as more data capacity became

available, with the introduction of 4G

• Competitors started offering “unlimited free 4G” traffic in 2016, making it very

difficult to grow data revenues under such competitive pressure

• Offers started to readjust in 2017, and the “unlimited free 4G” offers have

been withdrawn from the market in the beginning of 2017

Average revenue per MB (KZT)

1

…enabling high growth in revenue

25.327.7

30.6

37.9

43.2

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

…driving data traffic… Growing bundle penetration…

Kcell' data traffic (millions of GB) Kcell' data revenue growth, YoY (%)

The 4G launch and

focus on contract

phones sales have led

to the increasing

number of bundle

users

Q1’16

~32%

Q1’17

~65%

Bundle subs’ share in revenue

Q1’16

~ 40%

Q1’17

~ 45%

Bundle subs as % of smartphone users

Q2’16 Q3’16 Q4’16 Q1’17 -1.0

3.8

6.9

11.1

15.9

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Kcell Investor Day

0,4 0,4

0,3 0,3 0,3

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

15

…while promote strategic adjacencies…

OTT services have a great brand equity in the market…

1

…and appreciation among Kcell subscribers

Online

commerce

Connected

devices Mobile

marketing Big Data

2.3M musical

compositions

(LLP "Center")

850K e-books on

13 languages

(“Enaza Dev” Ltd.)

~120 TV-channels

(“Terraline”

“Silk Way Media”)

2016

2017

>70 most

popular

magazines

(Zero Gravity)

~100K movies

and TV-shows

(Megogo,

Amediateka)

~60 various

services (‘Prime

Source’,’Wooppay’)

Q3’16 Q1’16 Q4’16 Q2’16

OTT users, ‘000

29 35 50

122

Kcell Investor Day

16

Convenient and flexible omnichannel ecosystem

Physical &

remote

channels

Digital

channels

Exclu

siv

e

PO

S

30

Non-

exclu

siv

e

PO

S

~1

6,0

00

La

rge

reta

ilers

~2

00

Call

ce

nte

rs

3

Intensive sales channels mix Efficient sales channels mix

Cen

ters

of

exp

erie

nce

Se

lecte

d

reta

ilers

Fre

ela

nce

rs

Inte

gra

ted

ca

ll ce

nte

r

Str

ee

t sa

les

Kcell’ website activ’ website

Informational websites Sales oriented digital channels

E-commerce Mobile

commerce

Social

media

The traditional footprint The transforming footprint

1

Kcell develops an omnichannel strategy to improve customer reach and add flexibility in communication with a customer

1 All operators have seen reduction in their ability to capture new subscribers

2 Consumers evolved by becoming more sophisticated and demanding with products and price aware due to

Internet access

3 Kcell develops the sales channels to address different segments of the client base according to their demand,

preferences and habits

Kcell Investor Day

17

9,4 10,2

11,9

2014 2015 2016

Delivering vision…

Customer-centric digital partner Long-term, reliable partnership with single point for all digital needs for Enterprise and SME segments

…via strong distribution and service strategy…

> 80 key account managers and delivery experts with

personal approach to all larger enterprises

> 25 SME accounts selling via telesales, key partners

and online channels

Kcell self-service and cross-sales systems

1

2

3

Exceptional and proactive service with comprehensive

CRM system in place and in-house call centre 4

…resulting in…

#1 in the market — the best positioned of the

three operators to develop business solutions for

enterprises (around 61% market share)

Best solutions partner for enterprises… 2

B2B revenues (KZT bn)

Focus on up-sale of mobile solutions such as IoT, M2M

and Mobile Marketing 5

Kcell Investor Day

18

…with large variety of products to satisfy the demanding client's needs…

Covering needs of customers at all organisational levels

Organizational sector Enterprise SME & SOHO

Mobile Core

Marketing

Operations

Service

Contract phones, Tariffs, Bundles Co

re

Bulk SMS, Big Data

InfoPort

Business telephony, IoT, Software sales, Mobile Scoring

Kcell Cloud (IaaS), Security systems Virtual PBX, Mobile Office

e-Commerce Platform

Short number (4 digits) Short number (5 digits)

Business Pulse CRM for sale

2

Bu

sin

ess s

olu

tio

ns

Kcell Investor Day

19

…and objective to retain the leading position in B2B

Key strategic moves cement the core and…

High quality of all business solutions

Contract phone sales with lock-in periods

Long subscription contracts

1

2

3

Unite billing system 4 51% of sales via Business Solutions

…upsell additional business solutions

Innovative telecom and IT services

Dedicated customer care

Account management

1

2

3

Shifting from product to customer centricity

• Commercial proposals

• Meetings

• Business behavior

Interested

• Speed of delivery

• Seamless delivery

Become a customer

• Self-service

• Everything works

• Buy more

Be a customer

• Exceptional service

• Proactive service

Don’t want to leave

…with clear customer journey

Cost Saving

M2M

Mobile Core

KcellCloud

Office365

Efficiency Improvement

Mobile

PBX

Mobile Employee

Revolver

Marketing and Sales

BulkSMS

Big Data

InfoPort

CRM

Business Sustainability

KcellCloud

DDosprotection

Software

Goal

Provide a solution to client’s pains and needs rather than just sell a product…

2

Kcell Investor Day

20

B2B case study — key client example 2

Q1 Q2 Q3 Q4 TOTAL

2014 2015 2016

Local Bank Revenue growth —key client example

Marketing and

Sales

• Short number with single contract (including off-net calls)

• Dynamic pool and random change of CallCenter “Caller’s ID”

• New Geo-Targeted SMS

Improve

efficiency

• Customized PBX (new SIP codes developed)

• Single SMS contracts and Unique SMS Sending Platform (SMSGW 2.0)

Sustainable

business

• One time SMS passwords

• 24/7 SLA on SMS + High capacity connection

Customer needs Kcell solutions

Kcell Investor Day

21

Commercial strategy focused on Customer Centricity and Customer Value

1 Maintaining leadership position in both consumer and enterprise segment

2 Three main business directions moving towards a more balanced customer base across urban, B2B and

mass market users

3 Focus on contract phones sales increases the smartphone penetration among the customer base and drives

mobile data consumption

4 OTT services have a great brand equity in the market and growing appreciation among the customer base

5 Kcell develops an omnichannel strategy to improve customer reach and add flexibility in communication with

a customer

Kcell Investor Day

6 Become customer-centric digital and IT partner for enterprises

Network and IT

23

1

2

3

Today Plans

TRANSMISSION

CORE & IT

RADIO ACCESS NETWORK

• Largest network with best coverage

• Different technologies used in radio

access network

• Single RAN network

• Shared network where possible with

unilateral options

• Scattered IT systems with dedicated

post and prepaid billing

• Modernized Packet Core and fully

redundant Voice Core

• One convergent billing system

• Consolidation of Data Center facilities

• Build Cloud infrastructure for own and

customers need

• Virtualization of core network

elements

• Leased inter-city and international

capacity

• Owned or long-term leased inter-city

and international transmission

network

Technology snapshot

Kcell Investor Day

24

6.6

The largest network with fast deployment of nationwide 4G network

4G 3G 2G

40.0

73.1 96.1

Beeline 70.0 ~95.0

Tele2/Altel 55.0 na 92.0

Population coverage

Spectrum position relative to peers Allocated frequencies (MHz)

1

3

Current population network coverage (%)

• Since 2014, 900 MHz frequency has technology neutrality.

However, Kcell has a limited and scattered spectrum not

allowing usage of 3G and LTE

• 2.6GHz frequencies are not allowed for cellular use. However,

they are expected to be allowed for use in the mid-term 10.0 10.0 20.0 10.0 40.0

20.0 10.0 5.0 15.0

20.0 10.0 15.0 25.0 6.6

800 900 1,800 2,100 2,600

Network map

Kcell Investor Day

Tele2/Altel

Beeline

25

Intercity transmission

Kazakhstan transmission networks

to Russia

(Samara)

to Russia

(Astrakhan)

to Kyrgyzstan

(Bishkek)

to China

Bautino to China

to Uzbekistan

(Tashkent)

to Russia

(Ozinki)

to Uzbekistan

(Kungrad)

Aktau

Astana

Karaganda

Pavlodar

Oskemen

Kyzylorda

Kokshetau

Zhezkazgan

Semey

Balkhash

Kalamkas

Kumkol

Almaty

Aktogay Atyrau

Uralsk

Kulsary

Kostanay

Shymkent

Zhanazhol

Petropavl.

Ekibastuz

Taldykurgan

Chu

Taraz

Zhem

Aktobe

Aksay

Tengiz

North West

South

East

Km provided for each company

1

2

3

Options on further transmission leasing…

Rent from other providers

Build own transmission network

Continue to rent capacity from Kazakhtelecom

Kazakhtelecom 15,000 km

TNS+ (KaR-TeL) 13,000 km

Transtelecom 9,000 km

KazTransCom 5,000 km

Combination of own build, share and lease from another

provider 4

Kcell Investor Day

26

IT snapshot

• Two Billing Systems

– ORGA for prepaid subscribers

– AMDOCS for postpaid subscribers

• Two different product catalogues

• Two CRM systems

• In-house developed integration layer

• Different in-house developed applications

• Complex integration

• Long time to market

• High OPEX cost

• Central workflow engine for handling of all

processes

• Convergent billing system

• Information centric view

– Information defined according to a TMF standard

– Standardization of data model

• Integration layer

– Flexible integration of different applications and systems

– Double data transformation

• Processes and rules

– Business processes are defined without coded rules (through configurations)

– Rules defined and executed in separate rule engines

TODAY TARGET

Implementation of convergent billing system is ongoing (Phase I is finished)

Kcell Investor Day

27

Modernizing network/IT and planning for transmission independence

1 Fast deployment of nationwide 4G network

2 Implementing convergent billing system

3 Currently leasing intercity transmission mainly from Kazakhtelecom. Planning alternatives including self-built

and long-term lease from other providers

Kcell Investor Day

Financial performance

29

Improving revenue and interconnect trends

(15,7) (15,1)

(11,6)

(8,1)

(1,5)

9,9 9,7

9,9 10,0 10,0

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

y-o-y change Subscribers

(1,0)

3,8

6,9

11,1

15,9

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

(18,5) (19,7)

(18,0)

(14,6)

(9,6)

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Service revenue growth Data revenue growth

Voice revenue growth Quarterly local interconnect balance

(45,0)

(101,0)

(133,0)

(92,0)

191.0

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

(YoY %) (YoY %)

(YoY %) (KZTm)

Kcell Investor Day

30

Q1 2017 trading update – cost trends

EBITDA

Net income CAPEX-to-sales ratio

(KZT bn)

14,8 14,4 14,2 14,5 13,1

42,1

39,4 38,6 37,9

37,0

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

EBITDA % margin

6,5

4,7 4,4

1,0

3,9

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

12,2 11,2 11,0

17,0 16,7

FY 2013 FY 2014 FY 2015 FY 2016 Q1 2017

(KZT bn) (%)

Main cost drivers

(KZT bn)

• The acquisition of KazNetMedia in Q1-16

resulted in a small decrease of EBITDA.

• Q4 2016 net income was impacted negatively

by a tax provision of KZT3.9bn as a result of an

ongoing tax audit

• Capex-to-sales ratio has remained broadly

constant but is subject to FX movements, since

the Government's decision to allow a freely

floating exchange rate

Kcell Investor Day

5,6 6,4 6,8 6,9 5,9

3,7 3,9 3,9 3,6

4,2

2,3 2,4 2,6 2,7 2,6 1,0 1,1 1,1 1,1 1,2 2,7 2,8 2,9 2,8 2,7

-

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Personnel cost

Frequency usage

Transmission rent

Network maintenance

Interconnect cost

31

7 clear, measurable and structured initiatives to increase efficiency

in the near future (1/2)

Distribution

network

development

• Expanding the exclusive shop concept by franchising

• Scoring system development for a higher acceptance

rate

• Switch current dealers' fixed bonus scheme to unified

based on revenue sharing

• Development of Kcell franchised shops

1 • Increase customer flow, convenience and willingness

for the purchase – shop efficiency boosting

• Increase device’s turnover – assortment

efficiency boosting

• Optimise non exclusive channel cost

• Optimise sales channel enlargement

Description Expected outcome

Kcell Investor Day

Convergent

billing

• Chose Amdocs to design, implement and deliver a

“Convergent Charging and Billing System”

• Will allow the use of one billing system for multiple

business, products, technologies and billing methods

• Transformation of Kcell’s existing billing systems, full

system integration to Kcell’s network components and

implementation using unified next generation Amdocs

billing system

• Replacing existing legacy systems

• Full compliance to anti-monopoly regulations

and requests

2

Digital

transformation

program

• Improving processes and organization

• Customer interaction

3 • Improve organizational effectiveness

• Digitize customer interactions to improve sales and

customer retention

32

7 clear, measurable and structured initiatives to increase efficiency

in the near future (2/2)

Network sharing

• 4G network sharing based on geographic split between

Kcell and KaR-TeL (Beeline Kazakhstan)

• May be extended to 2G/3G sharing

• 3-party rural network sharing

7 • Faster roll out of 4G services

• Capex savings

• Site maintenance cost savings

Description Expected outcome

Kcell Investor Day

Modernization

project

4 • New database structure by Oracle Super Cluster

• SWAP of radio access network supplier, ZTE, with

Ericsson in West Kazakhstan

• Modernization programs (DWDM, CUDB, IP, MPLS)

• Improvement of customer management and support for

future services

• OPEX decrease and data base consolidation

• Network quality improvement in west of Kazakhstan

• Improvement of network capacity and redundancy on

city level

FLM restructuring

• Replacing outsourced, non-optimal field line

maintenance (FLM) provider by more efficient and

modern insourced capabilities

• OPEX decrease

• Improvement of network quality

• Transparent cost control, process oriented structure,

service control, one culture team

5

Transmission

project

• Evaluate all possible alternatives for transmission,

including lease from other providers and self-build • Low cost transport of capacity and traffic

• Control over both future capacity and costs

• Reduce risk of lack of capacity and price increases

from current backbone providers

• Satisfy long-term data transmission needs

6

33

The main drivers influencing financial results

Driver Implications

Ongoing process of changing of regulatory rules for

tariff changes

Will make it easier to increase tariffs

Increasing contract phone sales Service margins on contract phones are significantly higher, but

will require more exclusive stores and increase of working capital.

Developing the urban mobile segment Leadership in premium segments by advanced adjacent/OTT

services to facilitate price premium

Expanding B2B solutions services Expanding service offerings to become a one stop digital provider

requires human resources and advanced delivery platforms

Inter-city transmission Securing long term capacity and cost of transmission is a high

priority, and may require up-front investments.

Network maintenance and site costs Controlling costs by in-sourcing and taking control of network

maintenance and expanding network sharing opportunities where

possible

Kcell Investor Day

Q&A