MTS today announced strong full year results, with revenue up 50% from last year, and a subscriber base close to 1.2 million.

MTS’ revenues in the year 2000 rose to US$536 million over US$358 million for 1999, up 50%. EBITDA for the year 2000 reached US$233 million, an increase of 37% over the year 1999. This is a reflection of the exceptionally strong demand for mobile services, effective management, MTS’ successful marketing strategy and an upward trend in the Russian economy as a whole.

Falling direct costs per client and the emergence of economy of scale ensured the positive trend in operating income. EBITDA margin, an indicator of business efficiency, comprised 43% in the year 2000, which is exceptionally high for the European telecommunications industry.

Fourth quarter results were also strong. Revenue in the fourth quarter reached US$168 million, a 68% increase over the same period of 1999, evidencing a sustainable level in MTS’ revenue growth. EBITDA for the fourth quarter of the year 2000 reached US$61 million, an increase of 35% over the fourth quarter of 1999. EBITDA margin comprised 37% for the fourth quarter of the year 2000.

ARPU in the year 2000 decreased to US$54 over US$124 in the year 1999. This reflects a general trend for a company entering the mass market. MTS’ ARPU remains higher than most corresponding figures of European operators.

Owing to the improvement of services and customer care provision churn rate reached 21.6% at the year end. Churn rate in the fourth quarter 2000 was 5.7%

MTS’ cumulative capital investment in the network development by the end 2000 reached US$484 million.

During 2000, 414 new base stations were added to the MTS network, while current base stations were upgraded. As at 31 December 2000, MTS had a total number of 1,123 base stations, of which 766 base stations were installed within the Moscow licence area and 357 in the regions.

Two new switches were installed in Moscow in the year 2000, which brought the total number of switches in the Moscow licence area to five. By the end 2000 the switching capacity in Moscow reached about 1.5 million subscribers. Two regional switches in the Amursk region and the Republic of Udmurtia were also made operational in 2000. The total number of switches integrated into MTS network at the end 2000 reached 13.

Explosive growth of customer base, which started in the second quarter of the year 2000, continued throughout the year. MTS’ overall active subscriber base has almost quadrupled during the year 2000 to 1.2 million as of 31st December 2000 (compared to 307,000 active subscribers on 31st December 1999). An unprecedented 887,000 net subscribers joined the MTS network during 2000. MTS’ regional subscriber base, beyond the Moscow license area, reached 87,000 net subscribers as of 31st December 2000, a ten-fold increase compared to December 1999.

Having exceeded the one million mark, MTS has joined the league of leading European cellular providers, such as TeleDenmark Mobil GSM 900 (Denmark), Eircell GSM 900 (Ireland), Max.Mobil (Austria), Stet Hellas GSM 900 (Greece), Telenor Mobil GSM 900/1800 (Norway).

During 2000, MTS concentrated its efforts on customer care provision through the rapid development of customer care infrastructure. Eight all-in-one customer care centres were opened in Moscow, while 13 sales centres were opened in the regions. MTS also made its own, 310 operators strong, call centre operational during 2000. The centre, which handels directory inquiries and information services functions, is now working around the clock. Call centre operators are currently servicing up to 25,000 calls a day.

Year 2000 has been an exceptional year for MTS. MTS is the first Russian company to have entered the international capital markets since the 1998 financial crisis with ADRs of the highest level. Its initial public offering in June 2000 was six and half times oversubscribed, and raised $353 million for financing further development and regional expansion. Priced at $21.50 per ADS at the time of the offering, MTS shares have been growing steadily, reaching a high of $32.00 per ADS.

During the year 2000, MTS:

• became a publicly listed company on New York Stock Exchange, raising over $353 million for further development and regional expansion;
• commercially launched WAP services and carried out a technical launch of the first ever General Packet Radio Service network (GPRS) in Russia, keeping in line with its strategy of being the first to offer new technologies;
• launched and integrated into the single network four new independent regional networks in the Far East (the Amur region), the Central Urals (the republic of Udmurtia), in Siberia (the Omsk region) and Central Russia (the Yaroslav region). As of 31st December 2000, MTS was actively working in 21 of Russia’s regions, with the total population of 41 million;
• became the first Russian mobile operator whose active subscriber base exceeds one million.

Commenting on the results, Mr Mikhail Smirnov, President of Mobile TeleSystems OJSC, said:

“We are delighted with the progress we have made during the year 2000. First and foremost, we became a publicly listed company. The fact that MTS was the first initial public offering on the international equity markets by a Russian company with ADRs of the highest level since the 1998 financial crisis was both a great honour and the result of hard work for us.

“In addition to raising capital to help fund our development, this IPO enhanced business transparency and demonstrated our commitment to becoming an international player in the global telecommunications market. The fact that our subscriber base has grown so drastically over the year 2000 also goes to prove it. The active subscriber base of 1.2 million subscribers is comparable to some domestic fixed line operators and some European mobile service providers.

“We are now operating in 21 of our 34 license areas. In line with our strategy of becoming a federal mobile services provider, we are steadily expanding into new regional markets. We feel we have a huge growth potential, both in Moscow and in the regions.”

MTS condensed profit loss account, comparing year 2000 against year 1999 and the 4th quarter 2000 against the 4th quarter 2000 (consolidated)

Amounts in thousands of U.S. dollars

MTS condensed consolidated balance sheets per December, 2000, per December 31, 1999

Amounts in thousands of U.S. dollars