PLT Electro-Com, Ltd.

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25194
Company name	PLT Electro-Com, Ltd.
Country	Russian Federation
Sector	Information
Environmental category	C
Department	Global Inform. & Comm. Tech.
Status	Pending Disbursement

Date SPI disclosed	August 2, 2006
Projected board date	October 19, 2007
Date revised SPI disclosed	September 28, 2007
Previous Events	Signed: November 15, 2007 Approved: November 14, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

PLT Electro-Com, Ltd. (Cyprus) (PLT Electro-Com or the Company), through its wholly-controlled Russian subsidiary ZAO Electro-Com, provides broadband access, alternative telephone and television services to consumers and small businesses in Russia, through a mixture of optical fiber for the network backbone and power line communications (PLC) technology for the in-building distribution to the end user. The company has recently begun providing “triple play” (internet, telephone and IPTV) services in metropolitan Moscow and four regions in Russia. Electro-Com’s network currently covers more than 4,000 apartment buildings serving over 35,000 customers, and has targeted a full-coverage network in about 15 cities within two calendar years, with coverage of at least 20,000 buildings.

Electro-Com is seeking a C-round equity and debt investment to support its growth and expansion plans in current and new markets, to offer value-added services; and to implement an aggressive sales and marketing plan to ensure high new customer capture rates.

Anticipated development impact of the project

There continues to be significant unmet demand for communications services in Russia, particularly outside of the Moscow area. More than 70% of Russian households do not have access to fixed telephone services and telephone services in rural areas remain outdated, inadequate and of low density (Source: Maravedis Telecom Market Research and Analysis). Although internet usage in Russia has been slow to take off and is concentrated primarily in Moscow and St. Petersburg, the demand for internet access has doubled in the last two years and is expected to increase upwards of 25% per year for the next three years.

This Project has a high potential of improving the quality and availability of telecommunications services in Russia:

- Expand Access

Broadband penetration in Russia at 5% is well below the level of its Western counterparts, or even Central European countries. This project should increase the availability of reliable and affordable broadband communications services for both consumers and small businesses not just in Moscow but, most importantly, in the regions.

- Support Internet Growth

Internet access in Russia remains very limited. According to official reports, corporate users account for 2/3 of Internet usage (Source: EIU April 6, 2006 Main Report). Most analysts agree that a key driver of internet growth is the migration from dial-up to broadband technologies such as that provided by Electro-Com. This project should help to spur internet usage among individuals and small businesses.

- Spur Competition

Although progress has been made in privatizing Russia’s telecommunication sector, Svyazinvest, the state-controlled carrier, continues to control most wireline segments of Russia’s telecoms market. A similar situation persists in Moscow where MGTS, through its subsidiary Stream, controls the major share of the internet access market today through its ownership of the PSTN’s “last mile” telephone network. The entry of an operator with an experienced management such as Electro-Com should further support the liberalization effort and increase competition in the sector, leading to lower prices and higher service quality.

IFC's expected development contribution

IFC will play several important roles in this project. First, IFC will provide needed equity and debt financing to an early stage company in a new technology segment (power line communications). Second, IFC’s investment in this project will help an emerging competitive market to develop, increasing telecommunications usage nation-wide, improving the efficiency of the business sector and increasing connectivity between Russia and the global community. Third, IFC’s involvement will help to encourage other investors to participate in future funding rounds, as well as providing creditability to suppliers and local financial markets.

Environmental and social issues - Category C

This is a category C project based on the IFC’s environmental and social review procedure. Electro-Com should ensure that all operations comply with applicable environmental, health and safety laws and regulations of the Russian Federation.

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