SSA: JSFC Sistema: 3rd Quarter Results

  SSA: JSFC Sistema: 3rd Quarter Results

UK Regulatory Announcement

MOSCOW

              SISTEMA ANNOUNCES UNAUDITED FINANCIAL RESULTS FOR

                  THE THIRD QUARTER ENDED SEPTEMBER 30, 2012

Moscow, Russia – November 21, 2012 – Sistema JSFC (“Sistema” or the “Company”,
together with its subsidiaries, “the Group”) (LSE: SSA), the largest
publicly-traded diversified holding company in Russia and the CIS, today
announces its unaudited consolidated US GAAP financial results for the third
quarter ended September 30, 2012.

The Group’s consolidated results for the third quarter of 2012 were impacted
by a 10.2% year-on-year rouble depreciation against the US dollar. A non-cash
one-off loss (“one-off”) of US$ 213.3 million was also recognised relating to
the impairment of long-lived assets in SSTL’s operations in India.

KEY FINANCIAL HIGHLIGHTS FOR THE THIRD QUARTER

  *Consolidated revenues of US$ 8.8 billion, up 1.0% YoY (underlying revenues
    up 11.3% YoY in rouble terms)
  *Adjusted OIBDA^1 up 10.4% YoY to US$ 2.4 billion, with an adjusted OIBDA
    margin of 27.6%
  *Net income attributable to the Group without one-offs^2 doubled YoY to US$
    653.2 million
  *Net cash position^3 at the Corporate Holding level amounted to US$ 152.0
    million as of September 30, 2012, compared to net debt of US$ 433.2
    million as of September 30, 2011

KEY CORPORATE HIGHLIGHTS FOR THE THIRD QUARTER

  *Sistema participated in the privatisation tender for a 100% ownership
    stake in SG-trans OJSC, Russia’s largest independent provider of
    specialised railcars for transportation of liquefied petroleum gas, and
    submitted the leading bid of RUB 22.77 billion.
  *The Board of Directors approved a placement of a new bond issue by public
    subscription, comprising series 01, 02 and 03 three-year unconvertible
    interest-bearing bonds.
  *The Board of Directors approved a new composition for Sistema's Management
    Board in line with its development strategy.
  *MTS resumed its operations in Turkmenistan, having received the licences
    it requires to operate in the country having satisfied legal and technical
    conditions.
  *RTI Group completed the acquisition of NVision Group.
  *Sistema continued its buyback programme targeting the purchase of
    Sistema’s GDRs and ordinary shares.

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

“In the third quarter all of our investments demonstrated significant growth
resulting in excellent revenue and OIBDA growth for the Group. In particular
our oil, telecom and high-tech investments had an excellent period
characterised by improved operational performance and the completion of
certain M&A transactions.

During the reporting period and in recent weeks, Sistema has continued to
progress several transactions announcing its entry into the transportation
sector, the possible acquisition of an oil trader, the completion of the
Bashkirenergo divestment and MTS' participation in MTS Bank. These deals
pursue a fundamental objective of diversifying the Group's portfolio,
strengthening our return and securing long term growth opportunities.
Importantly, with a substantial cash position of US$ 1.7 billion at the
Corporate level, the proceeds from divestment and numerous other tools at our
disposal, Sistema is well positioned to execute the aforementioned
opportunities.

We have also made a number of changes at the holding level by structuring our
investments into eight portfolios and attracting significant investment and
industry expertise to different parts of the business. These changes are
designed to enhance our investment approach and to allow Sistema to manage its
assets more actively. As we look forward into 2013, Sistema is on track to
deliver on its strategy, add exciting value accretive projects to its
portfolio and reward shareholders through a progressive dividend story.”

Conference call information

Sistema’s management will host an analyst conference call today at 9 am (New
York time) / 2 pm (London time) / 3 pm (CET) / 6 pm (Moscow Time) to present
and discuss the third quarter results.

The dial-in numbers for the conference call are:

UK/ International:   + 44 20 8515 2303
US:                    +1 480 629 9645

And quote the conference call title: “Sistema 3Q 2012 Financial Results”.

A replay of the conference call will be available on the Company’s website
www.sistema.com for 7 days after the event.

For further information, please visit www.sistema.com or contact:

Investor Relations         Public Relations
Evgeniy Chuikov               Vsevolod Sementsov
Tel: +7 (495) 692 11 00       Tel: +7 (495) 730 1705
ir@sistema.ru                 pr@sistema.ru

FINANCIAL SUMMARY^4
                                               Year on             Quarter on
                         3Q 2012  3Q 2011  Year     2Q 2012  Quarter
                                               Change              Change
(US$ millions, except
per share amounts)
Revenues                   8,813.1   8,724.0   1.0%      8,083.9   9.0%
Adjusted OIBDA^5           2,430.5   2,200.7   10.4%     2,021.7   20.2%
Operating income           1,428.4   1,394.3   2.4%      144.7     886.8%
Net income/ (loss)         532.2     319.0     66.8%     (167.3)   -
attributable to Sistema
Net income attributable
to Sistema without         653.2     319.0     104.8%    402.5     62.3%
one-off^6
Basic and diluted
earnings per share (US     5.7       3.4       66.7%     (1.8)     -
cents)

GROUP OPERATING REVIEW

In the reporting quarter the Group’s consolidated revenues increased by 1.0%
year-on-year. The increase in revenue was impacted by a 10.2% year-on-year
rouble depreciation against the US dollar. The Group’s revenue in rouble terms
was up 11.3% year-on-year due to a strong operating growth at Bashneft, an
expansion of retail space at Detsky mir and an increase in revenue at MTS
Bank. The Group’s revenues increased by 9.0% and by 12.5% quarter-on-quarter
in US dollar and rouble terms, respectively, reflecting increased sales of oil
products at Bashneft, the recent consolidation of NVision and expansion of
Detsky mir’s retail chain.

Selling, general and administrative (SG&A) expenses decreased by 2.1%
year-on-year to US$ 944.0 million, but were up 4.3% quarter-on-quarter, mainly
due to an increase in administrative expenses in Bashneft.

The operating income for the third quarter of 2012 was impacted by a
recognised non-cash one-off loss of US$ 213.3 million relating to the
impairment of long-lived assets with regard to SSTL’s operations in India. The
Group’s adjusted OIBDA increased by 10.4% year-on-year and by 20.2%
quarter-on-quarter in the third quarter of 2012, largely as a result of
high-margin sales of oil products at Bashneft. The Group’s adjusted OIBDA
margin was 27.6% in the reporting quarter, compared to 25.2% in the
corresponding period of 2011 and 25.0% in the second quarter of 2012.

Consolidated net income attributable to Sistema without the one-off doubled
year-on-year in the third quarter of 2012, as a result of an increase in net
income in MTS and Bashneft.

OPERATING REVIEW^7

MTS

                                              Year on              Quarter on
(US$ millions)           3Q 2012  3Q 2011  Year      2Q 2012  Quarter
                                              Change               Change
Revenues                  3,132.1   3,274.7   (4.4 %)    3,122.2   0.3%
OIBDA                     1,384.2   1,451.7   (4.7%)     299.2     362.7%
Operating income/         829.6     864.6     (4.0%)     (279.9)   -
(loss)
Net income/ (loss)        332.6     191.1     74.1%      (360.0)   -
attributable to Sistema

MTS’ revenues in rouble terms were up 5.4% year-on-year due to an increase in
ARPU levels and grew by 3.5% quarter-on-quarter as a result of positive
seasonal roaming effects. MTS’ revenues in US dollar terms were down by 4.4%
year-on-year in the third quarter of 2012, reflecting the depreciation of
local currencies against the US dollar, while the company’s revenues
quarter-on-quarter were largely stable.

In the third quarter of 2012, MTS’ OIBDA declined by 4.7% year-on-year on the
back of rouble depreciation; significant growth quarter-on-quarter was due to
a non-cash one-off loss of US$ 1,079.0 million recognised in the second
quarter relating to impairments and provisions with regard to MTS’ operations
in Uzbekistan. The OIBDA margin was 44.2% in the reporting period, broadly in
line with the third quarter of 2011.

MTS’ total subscriber base (including Belarus subscribers) amounted to 99.2
million customers as at September 30, 2012, showing a 6.8% year-on-year
decline following the suspension of operations in Uzbekistan.

The average monthly service revenue per subscriber (ARPU) in Russia increased
by 8.7% year-on-year to RUB 313 in the third quarter of 2012, compared to RUB
288 in the corresponding period of 2011. Russian subscribers’ monthly minutes
of use (MOU) increased by 14.3% to 311 minutes in the reporting quarter,
compared to 272 minutes in the third quarter of 2011.

In the fixed broadband segment, the number of households passed increased by
13.5% year-on-year to 11.8 million in the third quarter of 2012. The Pay-TV
customer base totalled 2.9 million subscribers in the reporting quarter,
compared to 2.7 million customers in the third quarter of 2011. The number of
broadband Internet subscribers increased by 10.0% year-on-year to 2.2 million.

In September 2012, MTS launched Russia’s first TDD (Time Division Duplexing)
LTE network in Moscow and the Moscow region.

In August 2012, MTS signed an agreement with Scartel LLC (Yota Networks) to
launch an LTE MVNO on Scartel’s network in Kazan.

In July 2012, MTS announced that it is resuming its operations in
Turkmenistan, having received the licences it requires to operate in the
country and having satisfied legal and technical conditions. In August 2012,
MTS Turkmenistan re-launched commercial services in the country.

In July 2012, the Federal Service for Supervision in the Sphere of
Communications, Information Technologies and Mass Media (Roskomnadzor)
allocated MTS the necessary licence and frequencies to provide LTE
telecommunication services in Russia.

In August 2012, the Tashkent Commercial Court granted a petition by the State
Agency for Communications and Information of Uzbekistan (SACI) to withdraw all
operating licences of Uzdunrobita FE LLC (“Uzdunrobita”), MTS’ wholly owned
subsidiary in Uzbekistan. Uzdunrobita intends to appeal the decision within
the timeframe set forth by the laws of the Republic of Uzbekistan.

Bashneft

                                               Year on             Quarter on
(US$ millions)            3Q 2012  3Q 2011  Year     2Q 2012  Quarter
                                               Change              Change
Revenues                   4,622.3   4,458.1   3.7%      4,081.3   13.3 %
OIBDA                      962.3     790.5     21.7%     704.3     36.6%
Operating income           813.6     645.7     26.0%     545.9     49.0%
Net income attributable    408.1     287.9     41.7%     278.8     46.4%
to Sistema

Bashneft’s revenues increased by 3.7% year-on-year and by 13.3%
quarter-on-quarter, due to higher prices for oil and oil products and
increased sales volumes in the domestic market.

Bashneft’s OIBDA was up 21.7% year-on-year and 36.6% quarter-on-quarter in the
third quarter of 2012, primarily due to growth in high-margin sales of oil
products.

In the reporting quarter, Bashneft’s oil production increased by 1.8%
quarter-on-quarter and reached 3.9 million tonnes mainly due to improved
efficiency of the production drilling. The company sold 5.3 million tonnes of
oil products in the reporting period, a 12.8% quarter-on-quarter increase,
with exports amounting to 1.1 million tonnes of crude oil and 2.3 million
tonnes of oil products.

Refining volumes from the company’s refinery increased by 0.5% year-on-year
and by 7.4% quarter-on-quarter in the third quarter of 2012 and amounted to
5.3 million tonnes of crude oil following the completion of planned repairs to
the Ufimsky refinery plant. Capacity utilisation increasedto 88.0% in the
third quarter from 82.8% in the second quarter. The average refining depth was
85.5% and light-product yield amounted to 61.4%.

As at September 30, 2012, Bashneft operated a total of 485 petrol stations.

In September 2012, the Boards of Directors of Bashneft’s subsidiaries (OJSC
Ufimsky refinery plant, OJSC Novoil and OJSC Ufaneftekhim) participating in
the reorganisation process, approved the purchase of their preferred treasury
shares by Sistema for a total of RUB 1.92 billion. The prices for the
preferred treasury shares of Bashneft’s subsidiaries were set bythe Boards of
Directors based on the valuations prepared by independent appraisers.

In August 2012, the Iraqi Ministry of Oil and the Consortium comprised of
Bashneft (70%) and Premier Oil (30%) initialled the contract for geological
exploration, development, and production at Block 12. The contract has been
submitted for approval by the Council of Ministers of the Republic of Iraq. In
November, the contract was signed.

In July 2012, the Board of Directors of Bashneft approved the new structure of
its oilfield service holding company, which has been established on the basis
of Bashneft’s subsidiary LLC Bashneft-Service Assets.

In July 2012, Bashneft’s retail network completed its transition to full
compliance with the Euro-5 standard regarding the sales of petrol and diesel
fuel.

Bashkirenergo (Bashkirian Power Grid Company)^8

                                            Year on Year   2Q      Quarter on
(US$ millions)         3Q 2012  3Q 2011  Change        2012   Quarter
                                                                   Change
Revenues                98.5      92.3      6.8%           88.2    11.8%
OIBDA                   52.1      38.9      33.9%          38.9    34.0%
Operating income        41.4      28.2      46.9%          28.0    47.7%
Net income
attributable to         25.0      60.4      (58.6%)        3.8     557.0%
Sistema

Bashkirenergo’s revenues increased by 6.8% year-on-year and by 11.8%
quarter-on-quarter in the third quarter of 2012, mainly due to tariff
increases for electricity transmission and growth in electricity productive
supply.

Bashkirenergo’s OIBDA increased by 33.9% year-on-year and by 34.0%
quarter-on-quarter in the reporting period, mainly due to revenue growth, a
reduction in the company’s expenses and reversed provisions for legal
proceedings. The OIBDA margin expanded to 52.9% in the third quarter of 2012,
compared to 42.2% in the corresponding period of 2011.

In the third quarter of 2012, distribution grid losses increased by 0.23 p.p.
year-on-year as a result of a 2.5% increase in grid output, while transmission
grid losses decreased year-on-year by 7,023 million KWt*h, mainly due to a
reduction in the cross-flow of transmission lines caused by regime factors.

The effective transmission grid output reduced by 12% year-on-year in the
reporting quarter due to regime factors and customers’ demand. The effective
distribution power output was up 2.3% year-on-year however, as a result of
continued implementation of the investment project to install electricity
meters.

In July 2012, the Extraordinary General Meeting (“EGM”) of Bashkirenergo’s
shareholders approved a decision concerning the company’s reorganisation in
the form of a spin-off resulting in two companies: a generating company OJSC
Bashenergoactiv, and a power grid company JSC Bashkirian Power Grid Company.
As a result of the reorganisation Sistema-Invest obtained^9 a 92.48% voting
stake in Bashkirian Power Grid Company, as well as a consideration of RUB 11.2
billion in cash and promissory notes from INTER RAO, payable in instalments by
September 29, 2013.

Sistema Shyam TeleServices Ltd. (SSTL)

                                               Year on             Quarter on
(US$ millions)            3Q 2012  3Q 2011  Year     2Q 2012  Quarter
                                               Change              Change
Revenues                   72.9      71.9      1.4%      77.2      (5.5%)
OIBDA                      (276.8)   (100.2)   -         (83.8)    -
Operating loss             (295.2)   (125.6)   -         (102.2)   -
Net loss attributable to   (166.7)   (125.5)   -         (125.1)   -
Sistema

SSTL’s revenues increased by 1.4% year-on-year in the third quarter of 2012,
due to a 25.3% expansion of its mobile subscriber base. The revenue growth
however was limited by local currency depreciation against the US dollar.
Revenues were down 5.5% quarter-on-quarter due to changes in local industry
regulations (“Telecom Consumer Protection Regulation” issued by the Telecom
Regulatory Authority of India on March 22, 2012), a depreciation of the local
currency against the US dollar and a decline in MOU in the market.

SSTL reported a higher OIBDA loss in the third quarter, due to the recognition
of a US$ 213.3 million loss from the impairment of long-lived assets. OIBDA
loss without one-off narrowed to US$ 63.5 million.

SSTL’s total wireless (voice and data) subscriber base was up 0.2%
quarter-on-quarter and reached 16.6 million customers. Blended mobile ARPU in
the third quarter of 2012 declined by 7.8% to US$ 1.50 due to local currency
depreciation against the US dollar and changes in industry regulations.

The data card subscriber base increased by 5.9% quarter-on-quarter and
amounted to 1.82 million subscribers.

Non-voice revenues from both data and mobile value-added services (VAS) for
the third quarter decreased to US$ 26.8 million due to local currency
depreciation against the US dollar. The share of non-voice revenue as a
percentage of total revenue stood at 36.7% in the reporting quarter.

In August 2012, India's Supreme Court extended the government’s deadline for
completion of the telecommunications bandwidth auction and authorised those
telecom companies affected by February’s cancellation order (including SSTL)
to continue their operations until January 18, 2013.

Sistema Mass Media^10

                                           Year on                 Quarter on
(US$ millions)        3Q 2012  3Q 2011  Year Change  2Q 2012  Quarter
                                                                   Change
Revenues               13.0      29.8      (56.3%)       20.0      (34.7 %)
OIBDA                  0.1       9.7       (98.8%)       1.6       (92.5%)
Operating (loss) /     (4.7)     2.8       -             (8.2)     -
income
Net income/ (loss)
attributable to        10.2      (1.9)     -             (9.9)     -
Sistema

Sistema Mass Media’s revenues declined by 56.3% year-on-year and by 34.7%
quarter-on-quarter in the third quarter of 2012 as a result of reduced sales
of the TV-series at Russian World Studios (RWS).

Sistema Mass Media’s OIBDA demonstrated a year-on-year and quarter-on-quarter
decline mainly due to the decrease in revenues, as well as a result of
recognised losses following the closure of a film studio in Moscow. SMM’s net
income significantly grew due to recognised gain from sale of Moscovia
channel.

The Stream-TV subscriber base increased by 22.0% year-on-year in the third
quarter to 7.2 million customers, while share of revenue from advertising on
Stream-TV as a percentage of total revenue grew by 5.4 p.p. year-on-year and
amounted to 15.9%. In the third quarter of 2012, RWS’ content library grew by
25.4% year-on-year to 1,712 hours.

In the third quarter of 2012, Sistema Mass Media continued its business
restructuring and closed its film studio in Moscow. This will enable the
company to increase production capacity at St. Petersburg film studio and
therefore avoid potential operating losses.

RTI^11

                                           Year on                 Quarter on
(US$ millions)        3Q 2012  3Q 2011  Year Change  2Q 2012  Quarter
                                                                   Change
Revenues               465.1     464.1     0.2%          365.7     27.2%
OIBDA                  34.3      43.8      (21.6%)       6.6       422.6%
Operating income/      7.3       24.0      (69.6%)       (12.8)    -
(loss)
Net loss
attributable to        (13.6)    (5.1)     -             (16.0)    -
Sistema

RTI consolidates SITRONICS, Concern “RTI Systems” and NVision Group and is
comprised of five principal business units (“BU”) – Defence Solutions BU,
Comprehensive Security Systems BU, Telecom Solutions BU, Microelectronics
Solutions BU and System Integration BU.

RTI’s revenues remained stable year-on-year and increased by 27.2%
quarter-on-quarter, mainly as a result of the recent consolidation of NVision
Group, as of September 14, 2012, and the partial completion of defence
contracts in the reporting period instead of the fourth quarter of 2012.
Excluding the deconsolidation of INTRACOM TELECOM, RTI’s revenues increased by
23% year-on-year. Notably, NVision accounted for 18% of the segment’s revenue,
despite having been consolidated for just two weeks of the quarter.

RTI’s OIBDA was down 21.6% year-on-year in the third quarter mainly as a
result of the completion of high-margin contracts for MTS in the comparable
quarter last year, as well as the deconsolidation of INTRACOM TELECOM. The
OIBDA increased by more than five times quarter-on-quarter due to the earlier
than expected completion of work for government contracts in the reporting
quarter instead of the fourth quarter of 2012 and as a result of the
consolidation of NVision Group.

In August 2012, SITRONICS IT Ukraine, a subsidiary of SITRONICS in Ukraine,
won a tender to provide video surveillance services to monitor the
parliamentary elections in Ukraine in October 2012. The contract amounted to
US$ 122.6 million (approximately UAH 993.6 million).

In September 2012, RTI Group and NVision Group Managing Company LLC completed
the strategic combination of RTI Group’s and CJSC NVision Group’s information
and communication technologies assets. RTI Group (including assets of RTI and
SITRONICS) now owns a controlling stake of 50%+0.5 of a share in CJSC NVision
Group. NVision Group’s shareholders retain a stake of 50%-0.5 of a share in
the company. RTI Group paid a total cash consideration of RUB 3 billion and
contributed certain assets which are now part of SITRONICS Information
Technologies and SITRONICS Telecommunication Solutions (excluding INTRACOM
TELECOM).

Binnopharm

                                           Year on                 Quarter on
(US$ millions)        3Q 2012  3Q 2011  Year Change  2Q 2012  Quarter
                                                                   Change
Revenues               24.0      15.1      58.3 %        15.6      53.6%
OIBDA                  14.7      1.4       942.0%        3.5       315.4%
Operating income/      13.5      (0.4)     -             2.4       460.9%
(loss)
Net income / (loss)
attributable to        9.8       (0.2)     -             0.7       1289.7%
Sistema

Binnopharm’s revenues were up 58.3% year-on-year and grew by 53.6%
quarter-on-quarter in the third quarter of 2012, mainly due to sales growth in
its distribution segment. The OIBDA demonstrated significant growth
year-on-year and quarter-on-quarter and the OIBDA margin grew to 61.2% in the
reporting period, reflecting an increase in Regevac B vaccine supplies for
government contracts.

In July 2012, Binnopharm signed a cooperation agreement with Panacea Biotech
to produce a vaccine against Haemophilus influenza (HIB infection) at
Binnopharm facilities.

In July 2012, Binnopharm resumed production of aerosol products, including
production of Salbutamol aerosol for inhalation.

MTS Bank

                                           Year on                 Quarter on
(US$ millions)        3Q 2012  3Q 2011  Year Change  2Q 2012  Quarter
                                                                   Change
Revenues               174.0     132.1     31.7 %        170.1     2.3%
OIBDA                  (8.0)     (21.1)    -             (6.6)     -
Operating loss         (12.9)    (25.8)    -             (11.4)    -
Net loss
attributable to        (26.3)    (20.0)    -             (7.7)     -
Sistema

MTS Bank’s revenues increased by 31.7% year-on-year and by 2.3%
quarter-on-quarter driven by growth in the Bank’s consumer loan portfolio and
the MTS-Money project. In the reporting period, the loan portfolio from joint
projects with MTS increased by 69% quarter-on-quarter and reached US$ 149
million. MTS Bank reported an OIBDA loss in the third quarter of 2012 due to
increased interest expenses on individual deposits and higher loan provisions.

MTS Bank’s loan portfolio, excluding leases, increased by 11.4% to US$ 5,968
million in the reporting quarter, compared to US$ 4,832 million in the
corresponding period of 2011. The interest income from retail and corporate
client transactions grew by 7.5% quarter-on-quarter and amounted to US$ 146.3
million.

In September 2012, MTS Bank completed the consolidation of Dalcombank and
opened two new branches: Far Eastern branch and Irkutsk branch.

Detsky mir

                                               Year on             Quarter on
(US$ millions)            3Q 2012  3Q 2011  Year     2Q 2012  Quarter
                                               Change              Change
Revenues                   231.2     208.7     10.7%     173.7     33.1%
OIBDA                      20.3      14.7      37.9%     (0.9)     -
Operating income/ (loss)   15.6      10.0      56.6%     (5.4)     -
Net income/ (loss)         8.9       (1.4)     -         (5.8)     -
attributable to Sistema

Detsky mir’s revenues increased by 10.7% year-on-year and by 33.1%
quarter-on-quarter in the third quarter of 2012, largely as a result of the
expansion of retail space. The company generated a 20.0% year-on-year revenue
increase in rouble terms. Detsky mir’s OIBDA increased by 37.9% year-on-year
in the third quarter of 2012, mainly due to the sales growth and increased
gross margins.

By the end of the quarter, the network of retail outlets included 193 stores
located in 86 cities of Russia and Kazakhstan. Aggregate retail space totalled
266,000 sq.m. as of September 30, 2012. In the reporting quarter, Detsky mir
opened 29 new stores, including 19 ELC franchised stores.

In July 2012, Detsky mir acquired the British chain of children's early
learning goods Early Learning Centre (ELC) franchise in Russia.

Intourist

                                           Year on                 Quarter on
(US$ millions)        3Q 2012  3Q 2011  Year Change  2Q 2012  Quarter
                                                                   Change
Revenues               24.4      61.2      (60.1 %)      23.0      6.3%
OIBDA                  5.4       50.6      (89.3%)       1.8       195.8%
Operating income/      3.2       48.6      (93.3%)       (0.4)     -
(loss)
Net income/ (loss)
attributable to        0.8       26.2      (96.8%)       (6.9)     -
Sistema

Intourist’s revenues declined by 60.1% year-on-year as a result of the change
in accounting for the company’s tour operating and retail sales businesses
following the transaction with Thomas Cook in the third quarter of 2011.
Revenues were up 6.3% quarter-on-quarter due to a seasonal increase in hotel
sales, as well as the company’s active marketing campaign. Intourist’s OIBDA
improved quarter-on-quarter in the reporting period as a result of increased
income from Joint Venture with Thomas Cook and growth in sales.

The hotel group’s total number of rooms owned, managed and rented remained at
2,690 in the third quarter. The number of customers served by the tour
operating and retail sales businesses in the third quarter of 2012 decreased
year-on-year, reflecting the shift in the company’s focus to high-margin and
less risky European destinations, however it was up 43.3% quarter-on-quarter,
mainly due to seasonality factors.

Medsi

                                               Year on             Quarter on
(US$ millions)            3Q 2012  3Q 2011  Year     2Q 2012  Quarter
                                               Change              Change
Revenues                   46.2      46.6      (0.7%)    46.9      (1.4%)
OIBDA                      8.4       7.4       13.4%     5.6       50.2%
Operating income           0.6       4.1       85.2%     2.1       (71.4%)
Net income/ (loss)         0.03      (3.2)     -         (0.9)     -
attributable to Sistema

Medsi’s revenues decreased slightly year-on-year and quarter-on-quarter in the
third quarter of 2012, mainly as a result of rouble depreciation against the
US dollar. Revenues in rouble terms were up 9.4% year-on-year in the reporting
quarter. Medsi’s OIBDA was up 13.4% year-on-year and 50.2% quarter-on-quarter
in the third quarter of 2012 due to a decrease in the operating expenses to
revenue ratio.

In the third quarter of 2012, the number of patient visits and services
provided (excluding Moscow’s State Unitary Enterprise Medical Centre assets
(“SUE”)) decreased by 3.0% and 4.9% year-on-year, respectively, due to changes
in insurance companies’ policies whereby their list of services were reduced,
while the average fee in rouble terms increased by 12.8% year-on-year.

As of September 30, 2012, Medsi’s network consisted of 34 medical clinics and
79 first aid stations with a total floor space of healthcare facilities of
over 80,000 sq.m.

In the third quarter of 2012, Medsi continued the integration process of SUE
assets. SUE transferred the management of its four medical clinics to Medsi
during the reporting period.

CORPORATE AND OTHER

(US$ millions)   3Q 2012  3Q 2011  Year on      2Q 2012  Quarter on
                                      Year Change             Quarter Change
OIBDA^12          10.7      (61.8)    -             (31.6)    -
Net (loss)/       (46.6)    (49.8)    -             106.4     -
income
Indebtedness      1,541.5   1,308.0   17.9%         1,640.0   (6.0%)

The Corporate and Other category comprises the companies that control and
manage the Company’s interests in its subsidiaries.

In September 2012, the Board of Directors approved a new composition of
Sistema’s Management Board. Furthermore, the Board approved a decision to
place a new bond issue by public subscription, comprising series 01, 02 and 03
three-year unconvertible interest-bearing bonds. Each series will consist of
10 million bonds with a face value of RUB 1,000 per bond. The proceeds from
the bond issue, and possibly an additional share issue if such a decision is
taken, are expected to be used for general corporate purposes and also to
finance potential acquisitions in different sectors, such as transportation,
petrochemicals, agriculture, natural resources and consumer. Later EGM
approved the amendments to the Company's Charter in order to allow the Company
to increase share capital by issuing additional 386 million ordinary shares
with a par value of RUB 0.09 per share.

In August 2012, Sistema fully paid annual dividends of RUB 0.28 per ordinary
share for 2011, amounting to a total of RUB 2.7 billion.

In July 2012, in line with the remuneration structure for the members of
Sistema’s Board of Directors, shareholdings in the Company of seven members
have been increased by 122,191 shares and by 127,808 shares for each of three
other board members (one of whom is receiving shares for the first time). Each
allocation represents approximately 0.0013% of the 9,650,000,000 total shares
issued.

FINANCIAL REVIEW

Net cash provided by operations in the third quarter of 2012 declined by 19.0%
year-on-year and by 5.0% quarter-on-quarter to US$ 1,598.5 million due to
changes in working capital.

Net cash used in investing activities totalled US$ 64.7 million in the
reporting quarter, compared to US$ 1,757.6 million in the corresponding period
of 2011.

The Group spent US$ 1,004.5 million on capital expenditure in the third
quarter of 2012, broadly in line with the corresponding period of 2011. The
Group paid US$ 121.1 million for the acquisition of businesses, net of cash
received, in the third quarter of 2012 including the cash consideration for
the completion of the transaction with CJSC NVision (US$ 84.6 million) paid by
RTI, the acquisition the Russian franchise of the Early Learning Centre by
Detsky mir (US$ 16.0 million) and also purchases made by MTS. The Group also
received inflow of US$ 97.8 million from a decrease in banking assets and used
US$ 962.8 million to increase short-term and long-term investments. In
addition, the Group also received inflow of US$ 1,899.4 million from sale of
long-term and short-term investments.

Net cash outflow from financing activities amounted to US$ 1,321.4 million in
the reporting quarter, compared to US$ 75.5 million in the third quarter of
2011. The Group’s proceeds from borrowings in the reporting quarter totalled
US$ 584.2 million, whereas the principal payments on long-term and short-term
borrowings amounted to US$ 870.8 million. In addition, cash outflow from
financial activities in the third quarter resulted in the payments to
shareholders of subsidiaries of US$ 575.8 million and dividends paid by
Sistema of US$ 81.4 million compared to US$ 767.9 million and US$ 89.4 million
dividends paid by Sistema and subsidiaries in the third quarter 2011. Cash
outflow to decrease the liabilities in banking activities amounted to US$
217.0 million.

The Group’s cash balances of continuing operations stood at US$ 1,471.6
million as of September 30, 2012 (excluding an amount of US$ 998.2 million
which comprises the Group’s banking activities and cash and equivalents of
discontinued operations of US$ 189.8 million) compared to US$ 1,318.1 million
as of June 30, 2012 (excluding an amount of US$ 885.2 million which comprises
the Group’s banking activities and cash and equivalents of discontinued
operations of US$ 86.6 million). The Group’s net debt (short-term and
long-term debt less cash and cash equivalents and highly liquid deposits)
amounted to US$ 13,320.1 million as of September 30, 2012, compared to US$
12,970.0 million as of June 30, 2012.

SIGNIFICANT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

MTS

In November 2012, the Appeals Court of the Tashkent City Criminal Court has
granted the appeal of FE LLC “Uzdunrobita” to challenge a decision, dated
September 17, 2012, by the Tashkent City Criminal Court, which ruled to
confiscate all assets of MTS-Uzbekistan in relation to a criminal case against
four employees of MTS Uzbekistan. The court determined that the total amount
of fines and penalties to be paid by MTS-Uzbekistan to be approximately US$
600 million. The sum can be paid to the state budget in a number of
instalments during the period of eight months. The Appeals court also ruled to
bring in MTS-Uzbekistan as a civil defendant in the criminal case against
MTS-Uzbekistan employees and to unfreeze the assets of MTS-Uzbekistan arrested
pursuant to the decision of the court of the first instance from September 17,
2012. The verdict against the employees of MTS-Uzbekistan has not been
overturned.

In November 2012, MTS announced a strategic initiative with Microsoft, the
global IT leader, to promote innovative mobile solutions by launching Windows
8 “Ecosystem Demo Zones” in MTS retail stores.

Bashneft

In November 2012, the Consortium comprising Bashneft (70%) and Premier Oil
(30%) signed the exploration, development and production service contract
(EDPSC) with South Oil Company acting on behalf of the Republic of Iraq for
Block 12 in Baghdad. In accordance with the signed contract, the Consortium
will conduct obligatory geological exploration programme at Block 12 for 2D
seismic survey totalling 2,000 linear kilometres and drilling one exploration
well. In addition, the Consortium will invest US$ 120 million in geological
exploration within a five-year period.

In October 2012, Bashneft completed areorganisation through consolidation
ofits subsidiaries (OJSC Ufimsky refinery plant, OJSC Novoil, OJSC
Ufaneftekhim, OJSC Bashkirnefteprodukt and OJSC Orenburgnefteprodukt),
resulting in the transition to a single share. Later, the Board of Directors
of Bashneft also approved the results of the additional share placements,
which were exchanged for the common and preferred shares of Bashneft’s
subsidiaries as part of the reorganisation process.

In October 2012, the Board of Directors of Bashneft made a decision to create
the Health, Safety and Environment Committee. The Board also set a date for
the Extraordinary General Meeting of Bashneft’s shareholders to be held of
January 17, 2013.

SSTL

In October 2012, Indian mobile operators were due to submit their applications
to bid in the country's upcoming 2G spectrum auction. SSTL did not submit an
application to participate in the auction.

Corporate

In November 2012, Sistema acquired 3,751,844 Bashneft’s ordinary shares and
2,131,226 Bashneft’s preferred shares, which represents approximately 2.6% of
the Bashneft’s charter capital, for a total amount of approximately US$ 300
million. As a result, Sistema’s direct ownership in Bashneft has increased by
2.6% to 50.1%, while Sistema Group’s ownership^13 has increased by 1.7% to
77.8%.

In November 2012, the Board of Directors of Sistema approved a new
organisational structure with assets to be split into eight portfolios.
Portfolios are shaped depending on origination and experience and will be led
by the following eight Vice Presidents and Executive Vice Presidents: Anton
Abugov, First Vice President; Felix Evtushenkov, First Vice President;
Christopher Baxter, Senior Vice President; Ali Uzdenov, Vice President; David
Khidasheli, Vice President; Alexey Shavrov, Executive Vice President; Kirill
Tyurdenev, Executive Vice President; and Leonid Monosov, Executive Vice
President.

In November 2012, Sistema announced the completion of the reorganisation of
its subsidiary OJSC Bashkirenergo. Upon completion of the reorganisation
process, Sistema-Invest obtained a 92.48%^14 voting stake in Bashkirian Power
Grid Company and received RUB 11.2 billion in cash and promissory notes from
INTER RAO, payable in instalments by September 29, 2013. Sistema no longer has
any interest in the power generation assets.

In October 2012, Sistema signed a non-binding term sheet regarding the
acquisition of 100% of the issued and outstanding shares in the share capital
of Argos Group Holding B.V., the largest independent group in the Western
European downstream oil market, combining storage and distribution with the
international trade in and sale of mineral oils and biofuels. The contemplated
transaction is subject to (i) completion of due diligence and the execution of
legally binding transaction documents, (ii) corporate approval by Sistema, and
(iii) clearance from the European Commission pursuant to Council Regulation
(EC) No. 139/2004 as well as the possible clearance from competition
authorities in other countries in which Sistema is active.

In October 2012, Sistema signed a non-binding indicative offer with MTS and
MTS Bank. Under the terms of the indicative offer, MTS would acquire up to
25.095% stake in MTS Bank through an additional share issue by MTS Bank for up
to RUB 5.09 billion. The proceeds from the transaction will be added to MTS
Bank’s charter capital. Once the transaction is completed, MTS will become the
second largest shareholder in MTS Bank, while Sistema’s direct stake in MTS
Bank will be 65.3%.

In October 2012, Sistema announced the completion of its buyback programme. In
aggregate Sistema has bought back 6,452,619 of GDRs at an average price of US$
19.96 per GDR and 19,784,700 of ordinary shares at an average price of RUB
25.96 per share since the start of the share repurchase programme on June 6,
2012 to its completion on October 15, 2012.

In October 2012, Sistema replaced Deutsche Bank Trust Company Americas with
Deutsche Bank Aktiengesellschaft as the depositary for its GDR programme,
effective from October 22, 2012.

                                     ***

For further information, please visit www.sistema.com or contact:

Investor Relations       Public Relations
Evgeniy Chuikov            Vsevolod Sementsov
Tel: +7 (495) 692 1100     Tel: +7 (495) 730 1705
ir@sistema.ru              pr@sistema.ru

Sistema is the largest publicly-traded diversified holding company in Russia
and the CIS, which invests in and is a major shareholder of companies serving
over 100 million customers in the sectors of telecommunications, high
technology, oil and energy, radars and aerospace, banking, retail, mass-media,
tourism and healthcare services. Founded in 1993, the company reported
revenues of US$ 8.8 billion for the third quarter of 2012, and total assets of
US$ 46.3 billion as at September 30, 2012. Sistema’s global depository
receipts are listed under the symbol “SSA” on the London Stock Exchange.
Sistema’s ordinary shares are listed under the symbol “AFKS” on the MICEX-RTS
Stock Exchange, and under the symbol “SIST” on the Moscow Stock Exchange
(MSE). Sistema was ranked number 315 in the 2011 edition of the Fortune Global
500 list. Website: www.sistema.com

The Company is not an investment company, and is not and will not be
registered as such, under the U.S. Investment Company Act of 1940.

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 Sistema. You can identify forward looking statements by terms
such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,”
“could,” “may” or “might” 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. In addition, there is
no assurance that the new contracts entered into by our subsidiaries
referenced above will be completed on the terms contained therein or at all.
We do not intend to update these statements to reflect events and
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events. Many factors could cause the actual results to differ
materially from those contained in our projections or forward-looking
statements, including, among others, general economic conditions, our
competitive environment, risks associated with operating in Russia, rapid
technological and market change in our industries, as well as many other risks
specifically related to Sistema and its operations.

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Amounts in thousands of U.S. dollars except per share amounts)

                  Nine months ended                 Three months ended September
                   September 30,                       30,
                   2012            2011              2012            2011
                                                                                     
Sales          $   24,337,252    $   24,212,212    $   8,645,854     $   8,599,025
Revenues from
banking            479,099           391,096           167,262           125,006
activities
                                                                      
TOTAL REVENUES     24,816,351        24,603,308        8,813,116         8,724,031
                                                                                     
Cost of sales,
exclusive of
depreciation
and                (9,461,566)       (9,638,862)       (3,311,807)       (3,360,816)
amortization
shown
separately
below
Cost related
to banking
activities,
exclusive of
depreciation       (276,451)         (257,386)         (107,030)         (91,238)
and
amortization
shown
separately
below
Selling,
general and        (2,751,531)       (2,929,163)       (943,984)         (964,444)
administrative
expenses
Depreciation,
depletion and      (2,417,251)       (2,469,025)       (788,784)         (806,388)
amortization
Transportation     (639,309)         (602,328)         (252,232)         (232,554)
costs
Provision for
doubtful           (73,753)          (91,585)          (7,632)           (23,851)
accounts
Loss from
impairment and     (864,082)         (60,935)          (259,157)         (19,996)
provisions of
other assets
Provision for
tax and
antimonopoly       (500,000)         -                 -                 -
claims in
Uzbekistan
Taxes other
than income        (4,977,503)       (4,711,070)       (1,691,034)       (1,741,608)
tax
Other
operating          (55,190)          (364,402)         (28,724)          (176,411)
expenses, net
Equity in
results of         (26,758)          111,548           11,476            32,358
affiliates
(Loss)/gain on
disposal of
interests in       (9,326)           55,260            (5,814)           55,260
subsidiaries
and affiliates
                                                                      
OPERATING          2,763,631         3,645,360         1,428,394         1,394,343
INCOME
                                                                                     
Interest           232,846           130,508           83,293            44,668
income
Change in fair
value of           (1,849)           (1,681)           (631)             (574)
derivative
instruments
Interest
expense, net       (1,024,877)       (1,322,229)       (317,406)         (439,116)
of amounts
capitalized
Foreign
currency           79,937            (227,627)         91,807            (218,976)
transactions
gains/(losses)
                                                                      
Income from
continuing
operations         2,049,688         2,224,331         1,285,457         780,345
before income
tax
                                                                                     
Income tax         (865,381)         (799,543)         (383,206)         (265,967)
expense
                                                                      
Income from
continuing         1,184,307         1,424,788         902,251           514,378
operations
                                                                                     
Income/(loss)
from
discontinued       45,836            72,432            27,243            (19,327)
operations,
net of income
tax effect
Income from
disposal of
discontinued       13,812            149,480           13,812            149,480
operations,
net of income
tax effect
                                                                      
NET INCOME     $   1,243,955     $   1,646,700     $   943,306       $   644,531
                                                                                     
Noncontrolling     (498,079)         (898,466)         (411,079)         (325,530)
interest
                                                                      
NET INCOME
attributable   $   745,876       $   748,234       $   532,227       $   319,001
to Sistema
JSFC
                                                                                     
Income per
share, basic       8.00              8.07              5.73              3.44
and diluted,
U.S. cent

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(Amounts in thousands of U.S. dollars, except share amounts)

                                          September 30,     December 31,
                                            2012                2011
                                                                             
ASSETS
                                                                             
CURRENT ASSETS:
Cash and cash equivalents               $   1,471,568       $   2,921,672
Short-term investments                      2,011,968           763,631
Assets from banking activities,
current portion (including cash and         4,649,304           4,204,961
cash equivalents of $998,175 and
$1,315,075)
Accounts receivable, net                    2,615,510           1,756,200
VAT receivable                              600,223             709,099
Inventories and spare parts                 1,924,321           1,659,565
Deferred tax assets, current portion        341,849             311,891
Disposal group held for sale                1,538,588           1,466,071
Other current assets                        1,688,478           1,722,844
                                                               
Total current assets                        16,841,809          15,515,934
                                                                             
NON-CURRENT ASSETS:
Property, plant and equipment, net          19,494,036          18,360,826
Advance payments for non-current            248,435             264,709
assets
Goodwill                                    1,580,641           1,546,808
Other intangible assets, net                2,337,312           2,251,160
Investments in affiliates                   1,492,482           1,553,651
Assets from banking activities, net         2,252,396           2,303,120
of current portion
Debt issuance costs, net                    163,503             171,951
Deferred tax assets, net of current         394,710             348,491
portion
Long-term investments                       974,835             1,123,687
Other non-current assets                    509,539             461,684
                                                               
Total non-current assets                    29,447,889          28,386,087
                                                               
TOTAL ASSETS                            $   46,289,698      $   43,902,021

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011 (CONTINUED)

(Amounts in thousands of U.S. dollars, except share amounts)

                                          September 30,     December 31,
                                            2012                2011
                                                                             
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                             
CURRENT LIABILITIES:
Accounts payable                        $   2,691,793       $   2,188,448
Liabilities from banking activities,        3,821,199           3,152,989
current portion
Taxes payable                               972,541             794,117
Deferred tax liabilities, current           95,280              168,545
portion
Subscriber prepayments, current             523,070             605,545
portion
Accrued expenses and other current          2,360,793           1,991,081
liabilities
Short-term loans payable                    612,772             290,927
Current portion of long-term debt           3,978,531           4,097,076
Provision for tax and antimonopoly          500,000             -
claims in Uzbekistan
Disposal group held for sale                301,434             266,691
                                                               
Total current liabilities                   15,857,413          13,555,419
                                                                             
LONG-TERM LIABILITIES:
Long-term debt, net of current              11,560,682          12,006,322
portion
Subscriber prepayments, net of              109,268             106,586
current portion
Liabilities from banking activities,        1,502,557           1,644,478
net of current portion
Deferred tax liabilities, net of            1,788,979           1,412,174
current portion
Asset retirement obligation                 246,008             214,121
Postretirement benefits obligation          63,635              77,591
Property, plant and equipment               87,485              86,081
contributions
Other long-term liabilities                 239,154             369,467
                                                               
Total long-term liabilities                 15,597,768          15,916,820
                                                               
TOTAL LIABILITIES                           31,455,181          29,472,239
                                                                             
Commitments and contingencies               -                   -
                                                                             
Redeemable non-controlling interests        747,819             723,819
                                                                             
SHAREHOLDERS’ EQUITY:
Share capital (9,650,000,000 shares
issued; 9,230,433,342 and
9,267,985,025 shares outstanding with       30,057              30,057
par value of 0.09 Russian Rubles,
respectively)
Treasury stock (419,566,658 and
382,014,975 shares with par value of        (480,566)           (467,198)
0.09 Russian Rubles, respectively)
Additional paid-in capital                  2,707,443           2,575,601
Retained earnings                           6,953,704           6,418,649
Accumulated other comprehensive loss        (376,485)           (518,354)
                                                               
Total Sistema JSFC shareholders’            8,834,153           8,038,755
equity
                                                                             
Non-redeemable noncontrolling               5,252,545           5,667,208
interests
                                                                             
TOTAL EQUITY                                14,086,698          13,705,963
                                                               
TOTAL LIABILITIES AND EQUITY            $   46,289,698      $   43,902,021

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Amounts in thousands of U.S. dollars)

                                           Nine months ended September 30,
                                             2012               2011
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                             
Net income                               $   1,243,955      $     1,646,700
                                                                             
Income from discontinued operations          (45,836)             (72,432)
                                                                             
Income from continuing operations            1,198,119            1,574,268
                                                                             
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation, depletion and                  2,417,251            2,469,025
amortization
Income from disposal of discontinued         (13,812)             (149,480)
operations
Equity in results of affiliates              26,758               (111,548)
Deferred income tax benefit                  (22,012)             (168,796)
Foreign currency transactions                (79,937)             227,627
(gains)/losses
Loss from impairment and provisions of       864,082              60,350
other assets
Provision for tax and antimonopoly           500,000              -
claims in Uzbekistan
Loss on disposal of property, plant          9,006                (2,500)
and equipment
Dividend income                              (42,155)             -
Amortization of connection fees              (22,090)             (27,833)
Provision for doubtful accounts              73,753               103,097
Allowance for loan losses                    49,624               37,846
Dividends received from affiliates           77,360               34,702
Other non-cash items                         44,200               72,678
                                                                             
Changes in operating assets and
liabilities, net of effects from
purchase of businesses:
Trading securities                           (16,073)             (77,863)
Accounts receivable                          (823,146)            (385,186)
VAT receivable                               99,646               (114,517)
Inventories and spare parts                  (336,991)            (82,018)
Other current assets                         125,239              7,120
Accounts payable                             415,449              280,304
Subscriber prepayments                       (58,037)             (22,776)
Taxes payable                                163,940              111,888
Accrued expenses and other liabilities       (215,029)            (418,788)
                                                                             
Net cash provided by operating               4,435,145            3,417,600
activities of continuing operations
Net cash provided by operating               96,859               70,034
activities of discontinued operations
                                                                             
Net cash provided by operating           $   4,532,004      $     3,487,634
activities

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (CONTINUED)

(Amounts in thousands of U.S. dollars)

                                           Nine months ended September 30,
                                             2012              2011
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:
                                                                             
Payments for purchases of property,          (2,550,367)         (2,278,464)
plant and equipment
Payments for purchases of intangible         (230,709)           (251,639)
assets
Payments for purchases of businesses,        (181,641)           (191,270)
net of cash acquired
Purchase of investments in affiliated        (107,250)           -
companies
Payments for purchases of long-term          (479,222)           (474,930)
investments
Payments for purchases of short-term         (2,878,704)         (609,960)
investments
Payments for purchases of other              (161,794)           (82,737)
non-current assets
Decrease/(increase) in restricted cash       68,793              (77,206)
Cash disposed on loss of control less        (49,238)            -
consideration received
Proceeds from sale of subsidiaries,          67,951              184,596
net of cash disposed
Proceeds from sale of property, plant        54,380              131,650
and equipment
Proceeds from sale of long-term              365,910             37,496
investments
Proceeds from sale of other                  23,783              12,390
non-current assets
Proceeds from sale of short-term             1,961,040           817,308
investments
Net increase in loans to customers and       (531,843)           (199,513)
banks
                                                                             
Net cash used in investing activities    $   (4,628,911)     $   (2,982,279)
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:
                                                                             
Proceeds/(principal payments on) from        215,263             (172,191)
short-term borrowings, net
Net increase/(decrease) in deposits          314,263             (686,664)
from customers of the banking division
Proceeds from sale of treasure stock         73,083              -
Proceeds from long-term borrowings,          2,171,958           2,673,309
net of debt issuance costs
Debt issuance costs                          (8,448)             (1,321)
Principal payments on long-term              (3,025,650)         (2,428,530)
borrowings
Acquisition of non-controlling               (700,792)           (201,198)
interests in existing subsidiaries
Dividends paid                               (657,241)           (960,486)
Proceeds from capital transactions           73,987              153,710
with shares of existing subsidiaries
Purchases of treasury shares                 (122,658)           (15,953)
                                                                             
Net cash used in financing activities    $   (1,666,235)     $   (1,639,324)
                                                                             
Effect of foreign currency translation   $   102,241         $   (95,424)
on cash and cash equivalents
                                                                             
Net decrease in cash and cash            $   (1,660,901)     $   (1,229,393)
equivalents
                                                                             
Cash and cash equivalents at the
beginning of the period (including           4,320,423           4,570,583
cash of discontinued operations)
                                                                             
Cash and cash equivalents at the end
of the period (including cash of             2,659,523           3,341,190
discontinued operations)
Cash and cash equivalents of
discontinued operations at the end of        (189,780)           (44,530)
the period
                                                                             
Cash and cash equivalents of
continuing operations at end of the      $   2,469,743       $   3,296,660
period *
                                                                             
CASH PAID DURING THE PERIOD FOR:
Interest paid, net of amounts            $   (1,007,131)     $   (1,331,668)
capitalized
Income taxes paid                            (501,161)           (887,041)
                                                                             
* Cash and cash equivalents at the end
of the period comprised of the
following:
Non-banking activities                   $   1,471,568       $   2,159,626
Banking activity                             998,175             1,137,034
                                         $   2,469,743       $   3,296,660

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED SEGMENTAL BREAKDOWN FOR THE  NINE MONTHS ENDED SEPTEMBER 30, 2012
AND 2011

(Amounts in thousands of U.S. dollars)

For the nine
months ended       MTS         Bashneft    SSTL       MTS Bank   RTI        Other      Corporate  Total
September 30,                                                                                 and other
2012
                                                                                                                     
Net sales to
external            9,257,441    12,617,609   231,029     479,099     961,008     1,240,341   29,824      24,816,351
customers ^(a)
Intersegment        10,626       9,002        -           22,061      347,034     20,925      23,496      433,144
sales
Equity in results   16,413       (40,557)     -           -           (5,459)     (1,576)     -           (31,179)
of affiliates
Net interest        -            -            -           (10,682)    -           -           -           (10,682)
expense ^(b)
Depreciation,
depletion and       1,701,380    454,957      56,045      14,488      70,552      111,094     8,735       2,417,251
amortization
Operating           1,229,452    2,046,744    (488,725)   (17,138)    (8,252)     62,507      (59,255)    2,765,333
income/(loss)
Interest income     71,217       135,013      5,465       -           5,767       77,427      112,853     407,742
Interest expense    424,826      264,455      134,702     -           53,537      82,061      120,866     1,080,447
Income tax          434,192      425,323      -           14,127      9,932       18,802      (36,995)    865,381
expense/(benefit)
Segment assets      15,141,968   15,246,993   674,042     7,409,352   3,265,005   4,824,849   3,759,803   50,322,012
Indebtedness ^(c)   7,294,584    4,076,792    1,537,418   -           1,318,894   382,797     1,541,500   16,151,985
Capital             1,814,570    650,338      35,500      24,016      85,259      159,742     11,651      2,781,076
expenditures ^(d)

For the nine
months ended       MTS         Bashneft    SSTL       MTS Bank   RTI        Other      Corporate  Total
September 30,                                                                                 and other
2011
                                                                                                                     
Net sales to
external            9,332,526    12,465,234   186,210     391,096     831,370     1,373,728   23,144      24,603,308
customers ^(a)
Intersegment        4,427        864          -           18,913      495,855     21,541      25,331      566,931
sales
Equity in results   48,109       62,979       -           -           -           460         67,264      178,812
of affiliates
Net interest        -            -            -           (28,720)    -           -           -           (28,720)
expense ^(b)
Depreciation,
depletion and       1,751,055    460,040      72,334      12,746      71,181      94,955      6,714       2,469,025
amortization
Operating           2,148,869    2,041,114    (364,874)   (44,617)    19,840      88,442      (96,183)    3,792,591
income/(loss)
Interest income     40,249       52,897       27,679      -           10,839      43,122      83,008      257,794
Interest expense    489,566      413,399      115,943     -           63,061      37,030      244,635     1,363,634
Income tax          396,124      346,257      -           (8,117)     4,814       23,489      36,976      799,543
expense/(benefit)
Segment assets      14,853,564   13,055,143   2,073,616   6,745,905   2,450,667   4,104,433   2,838,430   46,121,758
Indebtedness ^(c)   7,232,884    3,383,728    1,399,923   -           1,093,455   389,007     1,308,043   14,807,040
Capital             1,510,512    556,667      145,061     16,091      84,776      211,161     5,835       2,530,103
expenditures ^(d)

a. Interest income and expenses of the MTS Bank are presented as revenues from
financial services and cost of financial services, correspondingly, in the
Group’s consolidated financial statements.

b. Represents the net interest result of banking activities. In reviewing the
performance of MTS Bank, the chief operating decision maker reviews the net
interest result, rather than the gross interest amounts.

c. Represents the sum of short-term and long-term debt.

d. Represents purchases of property, plant and equipment and intangible
assets.

Attachment A

Non-GAAP financial measures. This press release includes financial information
prepared in accordance with accounting principles generally accepted in the
United States of America, or US GAAP, as well as other financial measures
referred to as non-GAAP. The non-GAAP financial measures should be considered
in addition to, but not as a substitute for, the information prepared in
accordance with US GAAP.

Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA
margin. OIBDA represents operating income before depreciation and
amortization. OIBDA margin is defined as OIBDA as a percentage of our net
revenues. Our OIBDA may not be similar to OIBDA measures of other companies;
is not a measurement under accounting principles generally accepted in the
United States and should be considered in addition to, but not as a substitute
for, the information contained in our consolidated statement of operations. We
believe that OIBDA provides useful information to investors because it is an
indicator of the strength and performance of our ongoing business operations,
including our ability to fund discretionary spending such as capital
expenditures, acquisitions of businesses and other investments and our ability
to incur and service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles, these expenses
primarily represent the non-cash current period allocation of costs associated
with long-lived assets acquired or constructed in prior periods. Our OIBDA
calculation is commonly used as one of the bases for investors, analysts and
credit rating agencies to evaluate and compare the periodic and future
operating performance and value of companies. OIBDA can be reconciled to our
consolidated statements of operations as follows:

                                                3Q 2012  3Q 2011  2Q 2012
Operating Income                                  1,428.4   1,394.3   144.7
Depreciation, depletion
                                                  788.8     806.4     797.9
and amortisation
Impairments and provisions with regard to MTS’    -         -         1,079.0
operations in Uzbekistan
Impairment of long-lived assets in SSTL           213.3     -         -
Adjusted OIBDA                                    2,430.5   2,200.7   2,021.7
                                                 3Q 2012   3Q 2011   2Q 2012
Net Income attributable to Sistema                532.2     319.0     (167.3)
Impairments and provisions with regard to MTS’    -         -         569.8
operations in Uzbekistan
Impairment of long-lived assets in SSTL           121.0     -         -
Net Income attributable to Sistema without        653.2     319.0     402.5
one-offs

^1 See Attachment A for definitions and reconciliation of adjusted OIBDA to
GAAP financial measures.

^2 See Attachment A for definitions and reconciliation of net income
attributable to the Group without one-offs to GAAP financial measures.

^3 Including highly liquid deposits.

^4 Financials for 3Q 2011 were restated to show the effect of discontinued
operations.

^5 See Attachment A for definitions and reconciliation of adjusted OIBDA to
GAAP financial measures.

^6 See Attachment A for definitions and reconciliation of net income
attributable to the Group without one-offs to GAAP financial measures.

^7 Here and from hereon, the comparison of period to period revenues are
presented on an aggregated basis, excluding revenues from intra-segment
(between entities in the same segment) transactions, but before inter-segment
(between entities in different segments) eliminations, unless accompanied by
the word “consolidated”. Amounts attributable to individual companies, where
appropriate, are shown prior to both intra-segment and inter-segment
eliminations and may differ from respective standalone results due to certain
reclassifications and adjustments.

^8 On November 7, 2012, Bashkirenergo has been split into JSC Bashkirian Power
Grid Company, which combines transmission and distribution grids, and OJSC
Bashenergoactiv, which integrates power generation assets. Sistema-Invest
obtained a 92.48% voting stake in Bashkirian Power Grid Company. In accordance
with US GAAP requirements all operations of the power generation segment were
excluded from continuing operations and reflected in the line “Income/loss
from discontinued operations”. Accordingly, Bashkirenergo’s results presented
include operations from transmission and distribution grids only.

^9 Sistema and Bashneft have 50.6% and 49.4% ownership respectively in
Sistema-Invest.

^10 Financial results of Stream.ru are included into SMM segment for all
periods presented.

^11 Financial results of OJSC “Concern “RTI Systems” and OJSC SITRONICS are
included into RTI segment for all periods presented.

^12 Here and further, OIBDA and net income (loss) of the Corporate & Other
category are shown without an effect of intragroup dividends.

^13 Including Bashneft’s treasury shares

^14 Sistema and Bashneft have 50.6% and 49.4% ownership respectively in
Sistema-Invest

Contact:

JSFC Sistema
 
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