Moscow, Russian Federation – Mobile TeleSystems OJSC (“MTS” – NYSE: MBT), the leading telecommunications provider in Russia and the CIS, announces its plans to acquire 100% of Sistema Telecom LLC (“Sistema Telecom”), a non-operating subsidiary of JSFC Sistema (“Sistema” – LSE: SSA) following the signing of a non-binding indicative offer. The acquisition price is RUB 11.59 billion ($379.01 million¹). In addition, MTS will assume debt considerations totaling RUB 1.80 billion ($58.93 million), which include the settlement of RUB 1.35 billion ($44.04 million) in debts between MTS subsidiaries and Sistema Telecom.

The completion of the transaction is contingent upon the recommendation of the Special Committee of Independent Directors of MTS’ Board of Directors, approval by the MTS Board of Directors and additional approvals from Sistema’s Extraordinary General Shareholder Meeting and the Federal Antimonopoly Service (FAS). The acquisition is expected to be completed by year’s end. Earlier, MTS filed an application with FAS seeking permission to acquire Sistema Telecom.

Sistema Telecom’s key assets at the time of the acquisition will consist of: a 45% stake in TS-Retail, where presently MTS holds a controlling 55% interest; certain promissory notes previously issued by MTS² in the amount of RUB 2.00 billion ($65.50 million); and property rights in respect of the group of trademarks, including the distinctive “egg” trademarks of MTS, Comstar-UTS and MGTS³. Currently, MTS pays a royalty fee to Sistema Telecom of 0.16% of the annual revenues by reference to the Company’s Russian operations for the use of the “egg” logo. According to MTS’ FY 2009 Form 20-F filed with the US Securities and Exchange Commission in 2010, MTS paid aggregate royalties in excess of $41.00 million to Sistema Telecom during financial years 2007, 2008 and 2009. Certain other MTS subsidiaries including Comstar-UTS and MGTS have similar agreements with Sistema Telecom for use of the distinctive “egg” logo.

Mr. Mikhail Shamolin, President and CEO of MTS, commented, “As our markets continue to develop, we feel it is critically important to control the key assets we use to serve our customers. As MTS’ brand is extended every day through new and innovative services, we feel it is only logical to acquire full control of our logos and trademarks to ensure that all shareholders benefit equally in our brand’s further development.”

The valuation of Sistema Telecom is being conducted by ING Bank, an independent financial advisor to the MTS Special Committee. ING Bank will provide a fairness opinion. Ernst & Young is charged by MTS to provide due diligence services, while Latham & Watkins is serving as legal counsel to the Special Committee.

The “egg” family of trademarks was first introduced by Sistema Telecom in May 2006 as part of the rebranding program of telecommunications assets controlled by Sistema. In April 2010, MTS was ranked No.72 in the BRANDZ™ Top 100 Most Powerful Brands, an independent ranking published by the Financial Times and Millward Brown, a leading global market research and consulting firm. MTS was the first Russian company to join the ranks of the most powerful brands in the world in 2008 and remains the highest ranked brand in Russia.

¹ According to the average exchange rate of 30.57 RUB/USD for the 60-day period from September 4, 2010 to November 4, 2010. All U.S. dollar amounts in the press release provided for reference using the 30.57 RUB/USD exchange rate.
² The promissory notes were issued by MTS and partly by its subsidiary Rosico CJSC to finance the development of the Company’s GSM network in Russia back in 2001. Rosico was consolidated into MTS in 2001.
³ Public Joint Stock Company Moscow City Telephone Network (“MGTS”).