Mobile TeleSystems Announces Financial Results for the Third Quarter Ended September 30, 2012

  Mobile TeleSystems Announces Financial Results for the Third Quarter Ended
                              September 30, 2012

PR Newswire

MOSCOW, November 14, 2012

MOSCOW, November 14, 2012 /PRNewswire/ --

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 September 30, 2012.

Key Financial Highlights of Q3 2012

  oConsolidated revenues of $3,132 million stable q-o-q
  oConsolidated adjusted OIBDA^[1] of $1,379 million stable q-o-q with 44.0%
    OIBDA margin
  oConsolidated net income^[2] of $630 million
  oFree cash-flow^[3] positive with $1.6 billion for the nine months ended
    September 30, 2012

Key Corporate and Industry Highlights

  oObtained license and frequencies to provide LTE telecommunication services
    in Russia in the FDD (frequency division duplexing) standard
  oAnnounced the withdrawal of operating licenses of Uzdunrobita FE LLC
    ("MTS-Uzbekistan"), MTS's wholly owned subsidiary in Uzbekistan
  oCompleted the dividend payment of RUB 14.71 per ordinary MTS for the 2011
    fiscal year, amounting to a total of RUB 30.4 billion
  oResumed operations in Turkmenistan
  oRepurchased the series 05 ruble-denominated bond in the amount of
    approximately RUB 13.2 billion and changed the bond's coupon rate from an
    annual rate of 14.25% to 8.75%
  oLaunched MVNO LTE network in Kazan
  oLaunched Russia's first TDD (time division duplexing) LTE network in
    Moscow and the Moscow region
  oAcquired a 100% stake in Elf group of companies, a fixed broadband and
    pay-TV services provider in Belgorod and the Belgorod region, for RUB 220
  oAcquired a 100% stake in LLC "Intercom", a broadband and cable TV provider
    in the Mari El Republic, for RUB 90 million
  oSigned a non-binding indicative offer between MTS, MTS Bank and Sistema
    JSFC to purchase up to 25.095% stake in MTS Bank through a share issuance
    for up to RUB 5.09 billion
  oPursuant to the decision of the appeals court of the Tashkent City
    Criminal Court the amount of penalties to be paid by MTS-Uzbekistan was
    determined at approximately $600 million and the previously arrested
    assets of MTS-Uzbekistan were unfrozen 


1. See Attachment A for definitions and reconciliation of adjusted OIBDA and
adjusted OIBDA margin to their most directly comparable US GAAP financial

2. Attributable to the Group.

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


Mr. Andrei Dubovskov, President and CEO of MTS, commented, "Group revenue for
the quarter was stable quarter-on-quarter at just over $3.1 billion due to
negative ruble dynamics vs. US dollar during the period despite positive
seasonal factors and higher consumption of voice and data products. Group
revenue was also significantly impacted by loss of Uzbekistan revenue due to
the suspension of our operating license in July. We continue to witness steady
subscriber growth and signs of stability and moderate competitive pressures in
our markets of operation. For the period, total revenues in Russia increased
in ruble terms by 8% year-over-year to 88.3 billion rubles driven by steady
voice usage, continued adoption of data services and an increase in our
subscriber base and handset sales, including sales of higher-value smartphones
due to seasonal factors and expansion of the retail footprint."

Mr. Alexey Kornya, MTS Vice President and Chief Financial Officer, said, Group
OIBDA rose slightly to nearly $1.38 billion in line with our revenue
performance. Our adjusted OIBDA margin for the period reached 44.0%. Overall
we are seeing results of our efforts to increase profitability in our business
and realize greater efficiencies across the Group. In Russia, OIBDA rose 9%
year-over-year to 40.1 billion rubles. OIBDA margin in Russia increased from
44.6% in Q2 to 45.4% in Q3, an improvement which reflects seasonal trends and
cost efficiencies despite significantly higher retail costs. Still, our margin
is pressured by increase in labor costs, that have advanced 50 basis points
year-over-year as a percentage of revenue reflective of higher payroll taxes
and social contributions; increase in rent and maintenance costs on the back
the expansion of our mobile and fixed network; and continued expansion of the
retail footprint. However, we are confident despite these factors we will
deliver strong margins and are comfortable with raising our OIBDA margin
guidance to over 42% for 2012."

He continued, "Year-to-date CAPEX exceeded $1.81 billion. Investments are
largely being focused on expanding our 3G network and preparing for our 4G
roll-out: identifying new sites, connecting base stations to fiber, and
proceeding with the implementation of our GPON project in Moscow. Overall,
however, we feel it prudent to raise our CAPEX guidance for the year from
20-22% of sales to 23-24% of sales or roughly $2.9 billion. This increase is
due to the effects of currency on our equipment costs and services since we
first guided at the beginning of the year, as opposed to any dramatic change
in our investment plans."

Mr. Dubovskov added, "Over the past quarters, we have seen clear volatility in
our net income over currency fluctuations related to our debt composition and
other one-time factors, including developments in our Central Asia markets. In
this difficult currency environment, we have come to the conclusion that net
income is not the best metric to use as a basis for the calculation of our
dividend. We are currently devising a new policy that ties dividend amount to
free cash flow which, in our view, constitutes a clearer, more transparent
basis for determining our return to shareholders. We expect to propose the new
policy to our Board of Directors for adoption prior to the final determination
of our FY2012 dividend. For now, we can say that we intend to increase our
cumulative dividend payout over the next three years by at least 25% in
relation to the roughly 91 billion rubles we have paid out since fiscal year
2009. This implies a total cumulative dividend of at least 114 billion rubles
for the fiscal years 2012 to 2014 or a payout per share of at least 18 rubles
30 kopeks. We believe that this level, which should constitute a sizable
portion of our free cash flow, will allow us over the next three years to meet
our investment needs, maintain our relative debt levels and demonstrate our
commitment to shareholder value."

This press release provides a summary of some of the key financial and
operating indicators for the period ended September 30, 2012. For full
disclosure materials, please visit

Learn more about MTS. Visit the official blog of the Investor Relations
Department at and follow us on Twitter: JoshatMTS

* * *

Mobile TeleSystems OJSC ("MTS") is the leading telecommunications group in
Russia and the CIS, 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 nearly 100 million
mobile subscribers. The Group has been awarded GSM licenses in Russia,
Ukraine, Turkmenistan, Armenia and Belarus, a region that boasts a total
population of more than 200 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

* * *

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, 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.

* * *

SOURCE Mobile TeleSystems OJSC

Contact: 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:
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