Moscow, Russian Federation – Mobile TeleSystems OJSC (“MTS” or the “Company” – NYSE: MBT), the leading telecommunications provider in Russia and the CIS, announces that MTS Board of Directors has approved the acquisition by MTS subsidiaries of a 100% stake in Sistema Inventure which directly owns 29% of the voting stock of Moscow City Telephone Network (“MGTS”).

Under the proposed terms, subsidiaries of MTS would acquire for RUB 10.56 billion a 100% stake in wholly owned JSFC Sistema’s subsidiary Sistema Inventure, which in addition to its stake in MGTS has RUB 10.44 billion¹ of debt owed to Sistema. Upon completion of the transaction, MTS’s ownership stake in MGTS would rise to 99.1% of ordinary shares and 69.7% of preferred shares, which total 94.1% of MGTS charter capital.

Approval of the transaction by the MTS Board of Directors follows the recommendation of the Special Committee of three independent directors overseeing the transaction process. Citigroup Global Markets Limited is acting as financial advisor and has provided a fairness opinion to the Special Committee. Cleary Gottlieb Steen & Hamilton is acting as legal advisor to the Special Committee. Tax and financial due diligence was conducted by Ernst & Young.

The deal is still to be approved by Sistema’s Board of Directors. The acquisition has already been approved by the Federal Antimonopoly Service (FAS). The transaction is subject to documentation and is expected to be completed by the end of the year.