The one millionth active subscriber was registered at one of MTS’s new customer service centres on November 13th 2000. 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), Stet Hellas GSM 900 (Greece), Telenor Mobil GSM 900/1800 (Norway). Since the beginning of the year 2000 MTS’s customer base has more than tripled compared to 307,000 active subscribers in December of 1999. MTS’s regional subscriber base, beyond the Moscow license area, reached 66,000 net subscribers as of November 13th 2000, an increase of 725% compared to December 1999.

Explosive growth of customer base, which started in the second quarter of the year 2000, continued in the third quarter, during which time MTS’s network was joined by 249,000 net subscribers. At the end of the third quarter (on September 30th 2000), the number of active subscribers was 889,000.

Customer base growth in the third quarter took place against a drop in churn, which decreased to 5.1% over 6.4% in the second quarter. This decline is a reflection of the growing loyalty among MTS customers, who appreciate the high level of MTS’ network and the quality of service.

During the period between the beginning of the third quarter and November 13th 2000, MTS:

• launched 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 two new independent regional networks in the Far East (the Amur region) and in the Central Urals (the republic of Udmurtia), thus becoming the first GSM provider in these regions;
• became the first Russian mobile operator whose active subscriber base reached 1 million

MTS’s revenues in the first nine months of this year increased by 42% compared to the same period last year. MTS’s net income in the first nine months increased by 21% over the first nine months of 1999. This is a reflection of strong demand for mobile services, MTS’s successful marketing strategy and an upward trend in the Russian economy on the whole.

Commenting on the results, Mr Mikhail Smirnov, President and Chief Executive Officer of Mobile TeleSystems OJSC, said:

“We are delighted with the progress we have made during the year 2000. This progress continues and as of November 13th we have over 1 million active subscribers, which is comparable to some domestic fixed line operators and some European mobile service providers. The number of base stations within MTS network exceeded 1000.

“We are now operating in 21 of our 34 license areas. The MTS network launch in the Far East and in the Central Urals has demonstrated MTS’s ability to build networks far removed from its own operating networks, a pre-requisite for increasing national presence and becoming a federal mobile services provider. Today we are already building networks in three new regions (Ivanovo, Nizhniy Novgorod and Kirov regions) and are carrying out feasibility studies to start the construction in two more regions — those of Perm and Chelyabinsk.”

Financial highlights

• Revenue for the nine months of 2000 rose to US$368 million over US$259 million for the 9 months of 1999, up 42%. Revenue in the third quarter reached US$146 million, a 22% increase over the second quarter of 2000.
• EBITDA for the nine months of 2000 reached US$171 million, an increase of 38% over the nine months of 1999. Long term focus on managing the cost base ensured the positive trend in operating margin set. EBITDA margin comprised 47% for the nine months of 2000. In the third quarter of 2000, EBITDA margin was 42%.
• Net income for the nine months of 2000 was US$ 76 million, an increase of 21% over the nine months of 1999.

Operational Highlights

• 1 million active subscribers as of November 13th (889,000 active subscribers at the end of 3Q2000).
• First ever in Russia GPRS network was launched in August 2000, only a month after the same service had been offered by such high ranking cellular operators as BT Cellnet in the UK and T-Mobil in Germany
• Number of base stations increased to 731 in the Moscow license area and to 311 in the regions.
• Churn rate is down to 5.1% in the third quarter of 2000 from 6.4% in the second quarter of 2000.
• ARPU in the third quarter decreased to US$58 over US$67 in the second quarter of 2000. This reflects a general trend for a company entering the mass market. MTS’s ARPU is higher than the corresponding figures of European operators.
• The increase in MOU in the third quarter of 2000 is due not only to the increase in the customer base but also to a higher usage of additional services, including the increase in data traffic.

MTS condensed consolidated balance sheets per september 30, 2000, per december 31, 1999 and september 30, 1999

Amounts in thousands of U.S. dollars

MTS condensed profit loss account in usd x 000, comparing 9 months 2000 against 9 months 1999 and the 3rd quarter 2000 against the 2nd quarter 2000 (consolidated)

Amounts in thousands of U.S. dollars

MTS operational highlights, comparing 9 months 2000 against 9 months 1999 and the 3rd quarter 2000 against the 2nd quarter 2000