• MTS reports record revenues of $1.36 billion for full year 2002, up 52.5% year on year.
• EBITDA increase of 47.4% to $674.1 million; EBITDA margin was 49.5%.
• Net income rose by 34.6% to $277.1 million.
• Subscriber numbers increased by approximately four million users in 2002 to 6.64 million at December 31, 2002.
• As of May 19, 2003, MTS’ consolidated subscriber base was over 10.42 million customers.

Moscow, Russian Federation — May 20, 2003 — Mobile TeleSystems OJSC (“MTS” — NYSE: MBT), the largest mobile phone operator in Russia and Central and Eastern Europe¹, today announced its financial results for the fourth quarter and the year ended December 31, 2002.

Revenues for the year ended December 31, 2002 were $1.36 billion, a year-on-year increase of 52.5%. Fourth quarter revenues were $409.3 million, a 58.3% increase on the same quarter in 2001, and a 5.4% increase on the previous quarter.

In 2002, EBITDA (see Attachments B and C) was up 47.4% compared to the previous year to $674.1 million, giving an EBITDA margin of 49.5%. Fourth quarter EBITDA was $182.7 million, a 45.6% increase on the same quarter in 2001, and an 11.3% drop on the previous quarter. EBITDA margin in the fourth quarter was 44.6%.

Net income for the full year 2002 was $277.1 million, up 34.6% on the previous year. Fourth quarter net income was $85.2 million, a 39.2% increase on the same quarter in 2001, and up 1.1% compared to the previous quarter.

Financial Highlights (Unaudited)

US$ million	Q4 2002	Q4 2001	Change	Full-year ended Dec 31, 2002	Full-year ended Dec 31, 2001	Change
Net revenues	$409.3	$258.5	58.3%	$1,361.8	$893.2	52.5%
Operating income	$123.7	$85.7	44.3%	$464.4	$324.1	43.3%
Net income	$85.2	$61.2	39.2%	$277.1	$205.8	34.6%
EBITDA	$182.7	$125.5	45.6%	$674.1	$457.4	47.4%
EBITDA margin	44.6%	48.5%	—	49.5%	51.2%	—

Note: See Attachment B and C for definitions of EBITDA and EBITDA margin and a reconciliation of both financial measures.

As of December 31, 2002, MTS together with its subsidiaries serviced 6.64 million subscribers. During 2002, the Company’s subscriber base increased by approximately four million subscribers, of which 3.35 million were added through the organic growth of the Company’s business, and 640 000 were added via acquisitions of local mobile operators in Russia’s regions. In addition, MTS’ unconsolidated subsidiary in Belarus, Mobile TeleSystems LLC, serviced approximately 43 000 users as of December 31, 2002.

As of May 19, 2003, MTS’ consolidated subscriber base comprised of 10.42 million customers, of which 8.54 million were in Russia and 1.88 million in Ukraine². In addition, Mobile TeleSystems LLC serviced 125 000 subscribers in Belarus as of May 19, 2003.

Commenting on the results, Mikhail Smirnov, President of MTS, said: “During the past year our Company continued to demonstrate strong performance both in terms of subscribers and earnings growth. We attribute MTS’ achievements to the successful implementation of the Company’s strategy — expansion into new regions while strengthening our positions in our existing markets. At the same time, cost control and a balanced capital investment policy remained a prime focus of the management.”

Operational Highlights

	Q1 2002	Q2 2002	Q3 2002	Q4 2002	FY 2002	FY 2001
Total subscribers, end of period (mln)	3.53	4.37	5.43	6.64	6.64	2.65
ARPU (US$)	$26.7	$25.0	$25.2	$21.2	$22.9	$36.0
MOU (minutes)	142	167	175	175	159	157
Churn rate (%)	9.8	7.7	6.5	10.1	33.9	26.8
SAC per gross additional sub (US$)	$36	$39	$32	$34	$35	$55

Note: See Attachment A for definitions of ARPU, MOU, Churn and SAC.

The Company s stable financial position and strong balance sheet allow the Board of Directors to recommend that the Annual General Meeting of Shareholders, which will take place June 30, approve a dividend for the year 2002 of RUR 1.70 per share or approximately $1.10 per ADS. The record date for the dividend payment was May 19, 2003.

The Company’s average monthly revenue per user (ARPU) was $21.2 in the fourth quarter, and $22.9 for the full year 2002. The decline in ARPU is largely attributable to the rapid expansion of the Company’s subscriber base and hence a dilution of our subscriber mix by the mass-market subscribers. In particular, during the last quarter of 2002, MTS experienced an accelerated subscriber growth with 1.22 million new customers added on a net basis. However, as the bulk of new subscriber additions took place towards the end of the quarter the subscriber growth during the quarter did not significantly affect revenues.

Average monthly minutes of usage per subscriber (MOU) continued to increase during 2002 to 159 minutes for the year. Management believes that the trend of growing usage is largely attributed to the increased traffic between our own customers. An incoming call originated by a MTS customer is typically free of charge, while an outgoing call from one MTS customer to another is typically charged with a discount. Therefore, an increase in MOU does not necessarily translate into increased ARPU.

Churn rate in the fourth quarter of 2002 was at 10.1% and at 33.9% for the full year. Management believes that the increase in the Company’s churn rate in 2002 is consistent with the general market trend. Nevertheless, the Company continues to implement programs to encourage customer loyalty.

The Company’s subscriber acquisition cost (SAC) per gross subscriber addition continued to decline in 2002 reflecting the lower cost of attracting mass-market subscribers and increase economies of scale. An increase in SAC per gross subscriber addition in Q4 2002 compared to the previous quarter is largely attributed to the promotion of MTS new brand Jeans.

MTS’ capital expenditures on property, plant and equipment during 2002 amounted to $502.1 million, in line with the management guidelines for the past year. Of the above amount $150.2 million was spent in the fourth quarter of the year. In addition, MTS spent $72.2 million on purchases of intangible assets during 2002.

MTS’ regional expansion in Russia has continued in line with the Company’s stated aims. This expansion is carried out both through the launch of MTS’ own operations and the acquisition of existing operators. The Company spent (net of cash acquired) $143.4 million on acquisitions of local mobile operators in the regions of Russia during 2002.

In addition, during 2002 MTS commenced operations in thirteen regions of Russia for which the Company held GSM licences.

MTS also took important steps in its expansion strategy outside of the Russian Federation during 2002, starting with the announcement in June 2002 of the launch of a network in Belarus operated by Mobile TeleSystems LLC, a joint venture between MTS and the Belarus government. Additionally, in November 2002, MTS entered into agreements to purchase a majority stake in Ukrainian mobile operator Ukrainian Mobile Communications (UMC) and subsequently acquired a 57.7% stake in UMC in March 2003.

The past year was also marked by the Company’s new marketing initiatives. In November 2002, MTS launched a new brand, Jeans, aimed at the mass market. The unique feature of this new brand is the absence of a monthly subscription fee and it is likely to attract new, lower usage, subscribers that account for the bulk of new additions on the Russian cellular market. As of December’31, 2002, MTS had 215 000 Jeans subscribers or approximately 3% of the total subscriber base in Russia. As of May’19, 2003, MTS serviced 949 000 Jeans subscribers, which represented around 11.1% of MTS’ total subscriber base in Russia.

Unlike the Jeans brand, the MTS brand will continue to be geared towards higher usage and business subscribers. This is a further step in segmenting the Russian market with the objective of maximising value. Amongst MTS other recent marketing initiatives was the introduction of a unified set of tariff plans across its Russian network in February of 2003. Today, in addition to the Jeans brand?s pre-paid tariffs, MTS subscribers across Russia can sign up for various tariff plans grouped into one of four categories targeted at different subscriber groups: “MTS.VIP”, “MTS.Business”, “MTS.Optima”, and “MTS.Corporation”.

For further information contact:

Mobile TeleSystems, Moscow
Investor and Public Relations
Andrey Braginski
tel.: +7095 911-6553
e-mail: ir@mts.ru

Press Secretary
Eva Prokofieva
tel.: +7095 737-4530
e-mail: evp@mts.ru

Gavin Anderson & Company, London
Halldor Larusson
tel: +44 (0) 20 7554 1400

Attachments to The Fourth Quarter and Full-Year 2002 Earnings Press Release

Attachment A

Definitions

Subscriber. We define a “subscriber” as an individual or organization whose account does not have a negative balance for more than sixty-one days, or one hundred and eighty two days in the case of our Jeans brand tariff launched in November 2002.

Average monthly service revenue per subscriber (ARPU). We calculate our average monthly service revenue per subscriber by dividing our service revenues for a given period, including guest roaming fees, by the average number of our subscribers during that period and dividing by the number of months in that period.

Average monthly minutes of usage per subscriber (MOU). MOU is calculated by dividing the total number of minutes of usage during a given period by the average number of our subscribers during the period and dividing by the number of months.

Churn. We define our “churn” as the total number of subscribers who cease to be a “subscriber” as defined above during the period (whether involuntarily due to non-payment or voluntarily, at such subscriber’s request), expressed as a percentage of the average number of our subscribers during that period.

Subscriber acquisition cost (SAC). We define SAC as total sales and marketing expenses for a given period. Sales and marketing expenses are comprised of advertising expenses, commissions to dealers, and handset subsidies. SAC per gross additional subscriber is calculated by dividing SAC during a given period by the total number of gross subscribers added by us during the period.

Attachment B

EBITDA should not be considered in isolation as an alternative to net income, operating income, net cash provided by operating activity or any other measure of performance under U. S. GAAP. We believe that EBITDA is viewed as a relevant supplemental measure of performance in the wireless telecommunications industry and we define EBITDA as operating income excluding depreciation and amortization. EBITDA margin is defined as EBITDA as a percentage of our net revenues. We believe EBITDA and EBITDA margin to be relevant and useful information as these are important measurements used by our management to measure the operating profits or losses of our business. EBITDA is also one of many factors used by the credit rating agencies to determine our credit ratings. EBITDA and EBITDA margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America. EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of EBITDA to operating income:

Financial Highlights (Unaudited)

US$ million	Q4 2002	Q4 2001	Full-year ended Dec 31, 2002	Full-year ended Dec 31, 2001
EBITDA	$182.7	$125.5	$674.1	$457.4
Less: depreciation and amortisation	($58.9)	($39.8)	($209.7)	($133.3)
Operating income	$123.7	$85.7	$464.4	$324.1

Attachment C

EBITDA margin is defined as EBITDA as a percentage of net revenues.

The following table provides a reconciliation of EBITDA margin to operating income as a percentage of net revenues:

US$ million	Q4 2002	Q4 2001	Full-year ended Dec 31, 2002	Full-year ended Dec 31, 2001
EBITDA margin	44.6%	48.5%	49.5%	51.2%
Less: depreciation and amortisation as’a’% of’net revenues	(14.4%)	(15.4%)	(15.4%)	(14.9%)
Operating income as a % of net revenues	30.2%	33.2%	34.1%	36.3%

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

Amounts in thousands of U.S. dollars, except share amounts
	December 31 2001	December 31 2002
CURRENT ASSETS:
Cash and cash equivalents	$219,629	$34,661
Short-term investments	85,304	30,000
Trade receivables, net	24,258	40,501
Accounts receivable, related parties	2,377	3,569
Inventory, net	26,184	41,386
Prepaid expenses	22,712	26,537
Deferred tax asset	5,802	12,223
VAT receivable	82,216	154,061
Other current assets	8,374	15,392
Total current assets	476,856	358,330
PROPERTY, PLANT AND EQUIPMENT, net	856,056	1,344,633
LICENSES, net	299,360	386,919
OTHER INTANGIBLE ASSETS, net	84,245	138,090
DEBT ISSUANCE COSTS, net	3,997	2,957
INVESTMENTS IN AND ADVANCES TO AFFILIATES	740	34,034
DEFERRED TAX ASSET	6,238	18,333
Total assets	$1,727,492	$2,283,296

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

Amounts in thousands of U.S. dollars, except share amounts
	December 31 2001	December 31 2002
CURRENT LIABILITIES:
Accounts payable, related parties	$6,142	$4,968
Trade accounts payable	106,068	117,623
Deferred connection fees	21,419	22,210
Subscriber prepayments and deposits	63,741	110,950
Debt, current portion	18,825	67,098
Capital lease obligation, current portion	14,401	21,232
Income tax payable	23,078	3,987
Accrued liabilities	51,626	73,919
Other payables	3,357	2,226
Total current liabilities	308,657	424,213
LONG-TERM LIABILITIES:
Notes payable	248,976	300,638
Debt, net of current portion	35,942	58,276
Capital lease obligation, net of current portion	7,696	7,241
Deferred connection fees, net of current portion	25,993	19,694
Deferred taxes	67,505	105,818
Total long-term liabilities	386,112	491,667
Total liabilities	694,769	915,880
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST	14,444	65,373
SHAREHOLDERS’ EQUITY:
Common stock: (2 096 975 792 shares with a par value of 0.1 rubles authorized and 1 993 326 138 shares issued as of December 31, 2001 and 2002, 345 244 080 of which are in the form of ADS)	50,558	50,558
Treasury stock (9 966 631 common shares at cost)	(10,206)	(10,206)
Additional paid-in capital	555,794	558,102
Unearned compensation	—	(212)
Shareholder receivable	(38,958)	(34,412)
Retained earnings	461,091	738,213
Total shareholders’ equity	1,018,279	1,302,043
Total liabilities and shareholders’ equity	$1,727,492	$2,283,296

Mobile TeleSystems unaudited consolidated statements of operations for the years and three months ended december 31, 2001 and 2002

Amounts in thousands of U.S. dollars, except share amounts
	For the year ended		Three months ended
	December 31		December 31
	2001	2002	2001	2002
NET REVENUES:
Service revenues	$830,308	$1,274,287	$238,284	$383,101
Connection fees	21,066	24,854	6,040	6,134
Equipment sales	41,873	62,615	14,167	20,071
	893,247	1,361,756	258,491	409,306
COST OF SERVICES AND PRODUCTS:
Interconnection and line rental	75,278	113,052	17,908	21,374
Roaming expenses	68,387	83,393	17,821	30,847
Cost of equipment	39,828	90,227	13,514	29,781
	183,493	286,672	49,243	82,002
OPERATING EXPENSES	134,598	229,056	46,610	82,088
SALES AND MARKETING EXPENSES	107,729	171,977	27,149	62,553
DEPRECIATION AND AMORTIZATION	133,318	209,680	39,771	58,930
IMPAIRMENT OF INVESTMENT	10,000	—	10,000	—
Net operating income	324,109	464,371	85,718	123,733
CURRENCY EXCHANGE AND TRANSLATION LOSSES	2,264	3,474	1,083	1,027
OTHER EXPENSES (INCOME):
Interest income	(11,829)	(8,289)	(1,363)	(1,500)
Interest expense, net of amounts capitalized	6,944	44,389	985	13,067
Other expense (income)	108	(2,454)	(3,130)	(5,188)
Total other expenses (income), net	(4,777)	33,646	(3,508)	6,379
Income before provision for income taxes and minority interest	326,622	427,251	88,143	116,327
PROVISION FOR INCOME TAXES	97,461	110,417	22,842	16,317
MINORITY INTEREST	7,536	39,711	6,207	14,831
NET INCOME before cumulative effect	221,625	277,123	59,094	85,179
Cumulative effect of a change in accounting principle	(17,909)	—	—	—
Extraordinary gain on debt repayment, net of income tax	2,113	—	2,113	—
NET INCOME before cumulative effect of a change in accounting principles	205,829	277,123	61,207	85,179
Weighted average number of common shares outstanding	1,983,359,507	1,983,359,507	1,983,359,507	1,983,359,507
Per common share — basic and diluted:	0.104	0.140	0.0309	0.0429

Mobile telesystems unaudited consolidated statements of cash flows for the years ended december 31, 2001 and 2002

Amounts in thousands of U.S. dollars, except share amounts
	2001	2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income:	$205,829	$277,123
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest	7,536	39,475
Depreciation and amortization	133,318	209,680
Amortization of deferred connection fees	(20,027)	24,768
Deferred subscriber acquisition cost	—	—
Amortization of deferred subscriber acquisition costs	—	—
Cumulative effect of a change in accounting principle	17,909	—
Gain on debt extinguishments	(2,113)	—
Provision for obsolete inventory	2,543	5,614
Provision for doubtful accounts	3,219	7,047
Interest accrued	5,845	44,388
Interest paid	(4,068)	(43,438)
Deferred taxes	(49,302)	(18,989)
Non-cash expenses associated with stock bonus plan and stock option plan	—	23
Impairment of investment	10,000	—
Changes in operating assets and liabilities:	—	—
Decrease/(Increase) in trade receivables	(7,181)	(18,945)
Decrease/(Increase) in accounts receivable, related parties	(3,091)	(1,360)
Increase in inventory	(4,129)	(18,186)
Increase in prepaid expenses	(8,552)	(2,634)
Increase in VAT receivable	(59,618)	(64,154)
(Increase)/Decrease in other current assets	1,613	(7,422)
Increase/(Decrease) in accounts payable, related parties	1,049	81
(Decrease)/Increase in trade accounts payable	20,470	(16,058)
Increase in subscriber prepayments and deposits	49,980	(3,558)
Increase/(Decrease) in income tax payable	19,424	(19,778)
Increase in accrued liabilities and other payables	17,547	19,095
Net cash provided by operating activities	338,201	412,772
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of subsidiaries, net of cash acquired	(75,858)	(143,396)
Purchase of property, plant and equipment	(396,667)	(502,054)
Purchase of intangible assets	(44,533)	(72,218)
Purchases of short term investments	(110,000)	—
Proceeds from sale of short term investments	195,602	55,304
Investments in and advances to affiliates	(10,067)	(35,557)
Net cash used in investing activities	(441,523)	(697,921)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital stock, net of direct expenses	—	—
Proceeds from issuance of notes	248,135	50,808
Notes issuance cost	(3,856)	(649)
Capital lease obligation principal paid	(7,947)	(1,804)
Dividends paid	(2,959)	—
Proceeds from loans	13,577	52,851
Loan principal paid	(13,683)	(7,008)
Payments from Sistema	14,325	6,619
Net cash provided by financing activities	247,592	100,817
Effect of exchange rate changes on cash and cash equivalents	(469)	(636)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:	143,801	(184,968)
CASH AND CASH EQUIVALENTS, at beginning of year	75,828	219,629
CASH AND CASH EQUIVALENTS, at end of year	$219,629	$34,661
SUPPLEMENTAL INFORMATION:
Income taxes paid	$129,418	$147,346