Mobile TeleSystems Announces Financial Results for the Second Quarter Ended June 30, 2010

MOSCOW, August 26, 2010 /PRNewswire-FirstCall/ -- Mobile TeleSystems OJSC ("MTS" -NYSE: MBT), the leading telecommunications provider in Russia and the CIS, today announces its unaudited US GAAP financial results for the three months ended June 30, 2010.

    Key Financial Highlights of Q2 2010[1]

    - Consolidated revenues up 16.6% y-o-y to $2,772 million

    - Consolidated OIBDA[2] up 11.7% y-o-y to $1,235 million with
      a 44.5% OIBDA margin

    - Consolidated net income of $354 million

    - Free cash-flow[3] positive with $1.0 billion for the six
      months ended June 30, 2010

    Key Corporate and Industry Highlights

    - Approval of the merger of MTS and Comstar-UTS by the
      respective Boards of Directors and launch of the Voluntary Tender Offer
      to acquire up to 9% of Comstar-UTS' ordinary shares

    - Issuance of USD-denominated Loan Participation Notes in the
      amount of $750 million

    - Securing of financing from the Bank of Moscow in the amount
      of RUB 22 billion in April and further reduction of its annual interest
      rate from 10.25% to 8.99% in June

    - American Depositary Receipt (ADR) ratio change from 1 ADR
      per 5 common shares to 1 ADR per 2 common shares effective May 3, 2010

    - Repurchase of the series 01 ruble-denominated bond in the
      amount of RUB 7.1 billion, the series 02 ruble-denominated bond in the
      amount of RUB 6.3 billion and the series 03 ruble-denominated bond in
      the amount of RUB 179.5 million

    - Approval of agreements signed in May by Comstar-UTS, MGTS
      Finance S.A., a company controlled by Comstar-UTS, and OAO Rostelecom
      involving the sale of the 25%+1[4] share of OAO Svyazinvest to OAO
      Rostelecom for RUB 26 billion

    - Acquisition of a 100% stake in CJSC Multiregion
      ("Multiregion"), one of the leading groups of broadband and cable TV
      providers in the Russian regions

    - Securing of vendor financing in the amount of EUR 300
      million backed by Finnvera

    - Approval of recommended dividend for FY 2009 of RUB 30.70
      billion ($999.3 million) or RUB 15.40 per ordinary share ($1.00 per
      ADR[5]) by the Company's Annual General Meeting of Shareholders

Commentary

Mr. Mikhail Shamolin, President and CEO of MTS, commented, "We demonstrated solid growth during the quarter as we continue to execute on our 3i Strategy. We saw strong seasonal drivers improve our quarterly results. For the Group, revenue in the second quarter increased more than 17% year over year to reach $2.8 billion dollars. We see good seasonal trends in rising voice and data usage, the healthy contribution from the sale of handsets and consumption of higher-value products like voice and data roaming and long distance."

Mr. Alexey Kornya, Vice President and CFO of MTS, added: "For the period, Group OIBDA grew close to 12% year-over-year to reach $1.23 billion USD driven by top-line growth. Though we continue to see downward margin pressure from our retail operations in Russia, we are making good progress in developing our distribution channels, and our retail business will reach our profitability goals by the end of year. Our fixed business in Russia delivered a healthy OIBDA margin of 40.1%."

Mr. Shamolin continued: "Given our growth in the first half of 2010 and more positive economic sentiment, we feel confident to raise our guidance for MTS Group to roughly 10% for 2010. This is predicated on:

    - Continued macroeconomic improvement;

    - The impact of retail on our top-line revenue growth;

    - Sustained increases in usage across all product lines and
      segments in our Russian business;

    - The impact of our recent acquisitions of Eurotel and
      Multiregion on our business;

    - Modest growth in Ukraine; and

    - The further development of our networks in our foreign
      subsidiaries.

Our guidance on Group OIBDA margin of 43 - 45% remains unchanged, while we expect CAPEX to remain 22-24% of sales."

This press release provides a summary of some of the key financial and operating indicators for the period ended June 30, 2010. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

Learn more about MTS. Visit the official blog of the Investor Relations Department at http://www.mtsgsm.com/blog/

Mobile TeleSystems OJSC ("MTS") is the leading telecommunications group in Russia, Eastern Europe and Central Asia, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services in one of the world's fastest growing regions. Including its subsidiaries, the Group services over 103.8 million mobile subscribers in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus, a region that boasts a total population of more than 230 million. Since June 2000, MTS' Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT). Additional information about the MTS Group can be found at www.mtsgsm.com.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," and the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Company's most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, including Comstar-UTS, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks.

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[1] Because Comstar-UTS and TS Retail were acquired from JSC Sistema, the majority owner of MTS, Comstar and TS Retail, the acquisitions were accounted for as transactions between entities under common control. Similar to a pooling of interest, whereby the assets and liabilities of Comstar and TS Retail were recorded at Sistema's carrying value, MTS' historical financial information was recast to include the acquired entities for all periods presented.

[2] See Attachment A for definitions and reconciliation of OIBDA and OIBDA margin to their most directly comparable US GAAP financial measures.

[3] See Attachment B for reconciliation of free cash-flow to net cash provided by operating activity.

[4] 17.31% is owned by Comstar directly with another 7.69% owned by MGTS Finance S.A., which is controlled by Comstar.

[5] According to the Russian Central Bank exchange rate of 30.7193 RUB/USD as of May 11, 2010. The dividend amount is set in Russian rubles by the Board of Directors; U.S. dollar amounts provided for reference using the foreign exchange rates as of May 11, 2010.

    For further information, please contact in Moscow:

    Joshua B. Tulgan
    Director, Investor Relations
    Acting Director, Corporate Finance
    Department of Investor Relations
    Mobile TeleSystems OJSC
    Tel: +7-495-223-2025
    E-mail: [email protected]

SOURCE Mobile TeleSystems OJSC