Moscow, Russian Federation – Mobile TeleSystems OJSC (“MTS” or the “Company” – NYSE: MBT), the leading telecommunications provider in Russia and the CIS, announces that MTS has presented an indicative offer to Sistema JSFC (“Sistema” – LSE: SSA), the largest public diversified financial corporation in Russia and the CIS, for the acquisition of Sistema Inventure CJSC (“Sistema Inventure”), which directly owns 29% of the voting stock of Moscow City Telephone Network (“MGTS”). The transaction would increase MTS’s ownership of MGTS to 94.1%.

Under the proposed terms, subsidiaries of MTS would acquire a 100% stake in Sistema Inventure for RUB 10.56 billion in equity and, by doing so assume RUB 10.44 billion¹ of debt entirely owed to Sistema held by Sistema Inventure. 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.

MTS believes the transaction, when completed, is fully in line with its 3i Strategy, will enhance its leadership position in the Moscow telecommunications market, the most lucrative in Russia. At this time, MTS intends to eventually merge it fully into MTS. Such a merger would ultimately allow MTS to develop new products and services, more rapidly implement its investment programs to enhance MGTS’s fixed-line networks and potentially realize full synergies within the Group in excess of RUB 14 billion.

The completion of the transaction is contingent upon the recommendation of the Special Committee of Independent Directors of MTS’s Board of Directions, approval by the MTS Board of Directors and a resolution by Sistema’s Board of Directors. MTS has already received approval for the acquisition from the Federal Antimonopoly Service (FAS). The acquisition is expected to be completed by year’s end.

Mr. Andrei Dubovskov, the President and CEO of MTS, highlighted: “Control of our assets enhances both our operational and financial capabilities, while providing a better experience for our customers. This acquisition will allow us to more quickly execute on our regional investment projects, which will greatly enhance the capabilities and performance of our networks and make the Moscow market among the best-served Internet markets in the world. Meanwhile, greater ownership will allow us to better realize synergies and generate more value for our shareholders.”