Moscow, Russian Federation (28 August 2002) — Mobile TeleSystems OJSC (NYSE:MBT), Russia’s largest mobile cellular operator, today announces its results for the second quarter and six months ended June 30, 2002.

• Net revenue in the second quarter 2002 was $316.3 million, an increase of 54% from $205.9 million reported for the same period last year and an increase of 28% from $247.6 million reported for the first quarter of 2002.
• EBITDA in the second quarter 2002 was $162.0 million, an increase of 96% from the $82.7 million reported for the same period last year and an increase of 31% from the $123.5 million in the first quarter of 2002. (Please, see an important note below regarding changes in MTS definition of EBITDA¹).
• EBITDA margin for the second quarter 2002 was 51.2% compared to 40.2% for the second quarter 2001 and 49.9% for the first quarter of 2002.
• Net income for second quarter 2002 was $66.8 million an increase of 91% from the $35.0 million reported for the second quarter 2001 and an increase of 52% from the $43.9 million reported for the first quarter of 2002.

Financial highlights

Note: MTS’ EBITDA for Q2 2001 and H1 2001 was affected by one time write-off in the amount of $27.6 million of previously capitalised subscriber acquisition costs. MTS’ net income for Q2 2001 and H1 2001 was affected by the amount of $17.9 million, which represents an above mentioned write-off net of income tax. ¹ MTS has changed its method of calculation of earnings before provision for income tax, interest, depreciation and amortisation (EBITDA). Previously, MTS calculated EBITDA as: net income plus provision for income tax plus interest expense minus interest income plus depreciation and amortisation. However, MTS approach appeared to be different from the common market practice. To bring MTS EBITDA calculation in line with the peer group practice, going forward MTS will define EBITDA as operating income plus depreciation and amortisation. Under the previously adopted approach, MTS EBITDA for Q2 and H1 2002 would be $155.2 million and $272.4 million, accordingly. Today MTS announces that its subscriber base has reached five million active subscribers of which approximately 2.43 million live in the regions outside the Moscow licence area. MTS has become the first mobile phone company in Eastern Europe whose subscriber base has exceeded five million users. As at June 30, 2002, MTS had 4.37 million active subscribers of which 2.02 million were in the regions outside the Moscow license area. MTS has also experienced strong operational growth in the Moscow market as a result of its successful marketing policy. During the second quarter 2002 MTS added 266,545 new customers in the Moscow licence area, which represents around 34% of the market’s net additions over the period. MTS’ ARPU decreased from $26.7 in the first quarter of 2002 to $25 in the second quarter of 2002. The decrease is primarily attributed to an expected diluting impact of Kuban GSM that reports ARPU of $13 in the second quarter of 2002 as well as MTS’ ARPU in St Petersburg of $15. The Company’s MOU increased from 142 minutes in the first quarter of 2002 to 167 minutes in the second quarter of the year. MTS’ monthly average revenue per user (ARPU) in the Moscow market increased from $29 in the first quarter 2002 to $31 in the second quarter of the year. The increase is attributed to MTS’ successful tariff policy and is also partially due to seasonal effect. Average monthly minutes of usage per user (MOU) in the Moscow market increased from 141 minutes in the first quarter of 2002 to 164 minutes in the second quarter of the year. MTS’ subscriber churn rate in the second quarter 2002 was 7.7%, a decrease from 9.8% in the first quarter of the year. The Company believes that this improvement over the last quarter was due to increased loyalty of the Company’s subscribers and implementation of a comprehensive set of measures to enhance the Company’s brand.

Operational highlights

Despite incremental costs associated with expanding into regional markets, MTS maintains a superior EBITDA margin level. The increase in MTS’ interest expenses in the second quarter of 2002 compared to the same period last year is largely attributed to interest payment on MTS’ $300 million bond outstanding. MTS capital expenditures in the second quarter of 2002 amounted to approximately $107 million of which approximately $64 million were in the Moscow licence area. Regional Expansion Strategy Significant growth in MTS’ revenues in the second quarter of 2002 is attributed to a combination of strong organic growth of the Company’s business and the acquisition and consolidation of two profitable regional mobile operators, Kuban GSM and BM-Telecom. MTS’ acquisition of BM-Telecom strengthened its presence in the important Volga macro— region and also added 116,809 to MTS’ regional subscriber base. BM-Telecom was consolidated into the Company’s accounts from May 13, 2002. The newly acquired regional mobile operators, Kuban GSM and BM Telecom, contributed $19.7 million and $4.7 million respectively to MTS’ revenues in the second quarter. In July 2002 MTS also acquired Mobicom-Barnaul a GSM 900 mobile operator in the Altay region located in the southeast of Russia, thereby expanding its footprint in the Siberian part of Russia. MTS launched its network in Belarus during the second quarter 2002. The network is operational through a Belarus-Russian Joint Venture LLC “Mobile TeleSystems” (LLC MTS), of which MTS controls 49%. The launch of the network in Belarus represents a breakthrough for the Company as it is the first step that the Company has made in expanding beyond the borders of Russia. Today the joint venture provides services to approximately 10,500 subscribers. As MTS holds a non-controlling stake in the Belarus venture, its financials are not consolidated into the Company’s accounts. The launch of MTS’ network in the second largest market of the country after Moscow, St Petersburg, has also been extremely successful. After eight and a half months of operations in St Petersburg, the Company now holds a market share of approximately 29% (according to independent sources) with approximately 500,000 subscribers. MTS is pleased to report that the Company’s operations in the region have broken even at EBITDA level. During the second quarter 2002, MTS also launched operations in Perm (3.0 million inhabitants), Chelyabinsk (3.7 million), Arkhangelsk (1.5 million), Karelia (0.8 million), Tambov (1.3 million) and the Altai Republic (0.2 million). MTS is also happy to announce that the Russian Communications Ministry has recently granted the Company a licence to provide GSM 900 services in the Saratov region. The Saratov region, which has a population of 2.7 million people, is one of the key regions of the Volga area of Russia and therefore is an important addition to the Company’s licence portfolio. The mobile penetration rate in the region is only 5.3%, which provides MTS with an opportunity to benefit from the growth of the market. Commenting on the second quarter result Mikhail Smirnov, President of MTS said: “MTS’ second quarter results demonstrate that the Company has resumed revenue growth, has excellent margins and has experienced a strong subscriber growth. During this period MTS has continued its aggressive expansion into the regions while also enhancing its position in the Moscow market. We are proud of the fact that over five million people in this country have chosen MTS as its service provider.”

Mobile TeleSystems consolidated balance sheets at December 31, 2001 and June 30, 2002

Mobile TeleSystems unaudited consolidated statements of operations for the three months ended June 30, 2001 and 2002