Raiffeisen Centrobank’s rating and risk classification system:
Risk ratings: indicators of potential price fluctuations are: low, medium, high.
Risk ratings take into account volatility. Fundamental criteria might lead to a change in the risk classification.
Also, the classification may change over the course of time.
Investment rating: Investment ratings are based on expected total return within a 12-month period from the
date of the initial rating.
Buy: Buy stocks are expected to have a total return of at least 15% (30% for shares with a high volatility risk)
and are the most attractive stocks in our coverage universe on a 12 month horizon.
Hold: Hold stocks are expected to deliver a positive total return of up to 15% (30% for shares with a high
volatility risk) within a 12-month period.
Reduce: Reduce stocks are expected to achieve a negative total return up to -10% within a 12-month period.
Sell: Sell stocks are expected to post a negative total return of more than -10% within a 12-month period.
Price targets are determined by the fair value derived from a peer group comparison and/or our DCF
model. Other fundamental factors (M&A activities, capital markets transactions, share buybacks, sector sentiment
etc.) are taken into account as well.
Upon the release of a research paper, investment ratings are determined by the ranges described above.
Interim deviations from the above mentioned ranges will not cause a change in the recommendation automatically
but will become subject to review.
Company Risk rating
Telefonica O2 CR medium
T-Hrvatski Telecom medium
TPSA medium
Magyar Telekom medium
Telekom Austria high
Comstar-UTS high
MTS high
Vimpelcom high
Please note also the disclaimer on the last page of this report.

Recommendation and valuation summary Page 4
Telefonica O2 CR Page 8
T-Hrvatski Telekom Page 18
TPSA Page 28
Magyar Telekom Page 38
Telekom Austria Page 50
Comstar-UTS Page 60
MTS Page 70
Vimpelcom Page 78
Pricing date: January 29, 2009

Recommendation and valuation summary
In our opinion, CEE integrated operators are preferable stocks for investors in the current
uncertain environment due to their defensive qualities. In general, CEE integrated operators are
attractive due to high dividend payments and low debt burdens. In addition, some of them are
even net cash positive (e.g. T-Hrvatski Telekom, Telefonica O2 CR). In other words, we do not
expect CEE integrated operators to have problems with financing due to their strong balance
sheets and shareholder links to major European players (DT, FT, Telefonica). Moreover, the
current economic environment might even be an advantage for financially healthy incumbents
because smaller operators might have problems with funding and telecommunication usage is
usually resilient to an economic deterioration (e.g. businesses tend to have more conference calls
and less frequent business flights).
On the regulatory side, the domestic regulators (except the Croatian one) have already
revealed their plans to reduce mobile termination rates. However, we expect a practically
neutral impact on EBITDA of the incumbents because we expect that lower interconnection
revenues will be offset by lower interconnection costs. In our view, the strictest regulator is in
Poland, where TPSA faces several potential penalties and the threat of a functional separation of
the company.
On the competition side it seems that UPC and the other cable operators with their triple play
offers (voice, IPTV, Internet) are the biggest challengers to CEE incumbents in the wire-line voice
and broadband area. Therefore the incumbents are sooner or later likely to introduce fibreto-
the-home (FTTH) networks with bandwidths of up to 100MBit/s, which enable videostreaming,
HDTV and internet access at the same time. For example Magyar Telekom (MT),
which in our view faces the biggest competition in the broadband area (about 63% household
TV penetration in Hungary) already announced a long-term plan for the FTTH rollout. Because
the CEE mobile markets have become almost saturated the aim of the mobile operators is to
migrate the prepaid customers to post-paid ones, generate higher traffic and thus increase
ARPU.
CEE incumbents also continue in their focus to improve operating efficiency. Both MT and
Telefonica O2 CR (TO2CR) have merged their wire-line and mobile units and thus have enjoyed
capex and opex synergies. Recently TPSA announced a restructuring plan (about 4,900
employees or about 17% of the group employees should leave the company by FY 2011), which
we expect to mitigate pressure on the company’s margins. We also expect T-Hrvatski Telekom
(T-HT) to continue with moderate layoffs this year.
CEE integrated operators are traded with discounts based on expected EV/EBITDA for this and
next year and with much higher expected dividend yields in comparison to their Western
European peers. In addition, all CEE operators (excluding the T-HT IPO in FY 2007) are traded
with lower EV/EBITDA multiples than in the past 4 years.
We continue to have a “buy” recommendation on T-HT stock due to its high operating
efficiency, appealing valuation multiples and the chance for the distribution of the excess cash to
shareholders via a share buyback or special dividend. We have mainly reduced our 12-month
cum-dividend price target from HRK 360 to HRK 327 due to assumed higher market risk and
thus higher WACC.
We also keep our “buy” recommendation on TO2CR shares due to their appealing expected
dividend yield in our opinion, which is more than 2 times higher than the 10 y government bond
yield, possible improvement of the mobile arm in Slovakia and defensive qualities of the stock
(only moderate debt). We have slightly adjusted our 12-month cum-dividend price target from
CZK 520 to CZK 517 per share due to moderate changes in earnings estimates.

Despite ongoing disputes with the regulator we keep our “buy” recommendation on the stock
with a 12-month price target at PLN 24.50 per share (from PLN 24.70). In relative comparison,
the Polish economy is expected to perform better than the Czech and Hungarian ones, which we
also see as an advantage.
We have changed our recommendation on Magyar Telekom (MT) shares from “buy” to “hold”
because the stock appreciated in its value and thus our expected total return is lower than 15%.
We have also marginally cut our 12-month price target from HUF 674 to HUF 655 per share
due to the worsening outlook on the economy and expected weaker domestic currency.
Finally we maintain our “hold” recommendation for Telekom Austria (TA) shares with a 12-month
price target of EUR 11.40 per share because in our view the unsolved civil servants issue limits
upside potential for the shares.
We continue to see Telefonica O2CR and T-Hrvatski Telekom as our preferred CEE incumbents.
Currently we see the development on the Russian telecommunication market as very different and
much more risky in comparison to the CEE countries. In our opinion, the external factors like
macroeconomic or country risk (e.g. low crude oil and raw material prices) coupled with
financing problems and significant RUB/USD exchange rate deterioration have to be taken into
account. Moreover the negative market sentiment is coupled with a high degree of Russian
investors’ leverage who pledge their stakes as collateral to the banks. In our opinion, any upward
movement might induce banks to sell these stakes previously used as collateral, which might
again increase pressure on the share prices. As a result of the above-mentioned risks (country,
currency, debt, negative market sentiment) we have changed our recommendation on
Vimpelcom and Comstar shares from “buy” to “hold”. Our preferable pick remains MTS, which
we consider as the less risky operator (lower leverage) and where we also expect a high
dividend yield for FY 2008. In comparison Vimpelcom is unlikely to pay a dividend for FY 2008
while the Comstar dividend is expected to be tiny - if any.