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Mobile TeleSystems

July 17, 2006

MTS acquires Dagtelecom

MOSCOW, RUSSIAN FEDERATION — JULY 17, 2006 — MOBILE TELESYSTEMS OJSC («MTS» — NYSE: MBT), THE LARGEST MOBILE PHONE OPERATOR IN RUSSIA AND THE CIS, ANNOUNCES THAT IT HAS ACQUIRED A CONTROLLING STAKE IN DAGTELECOM, A MOBILE PHONE OPERATOR IN THE SOUTH OF RUSSIA.

MTS acquired a 74.99% controlling stake in Dagtelecom from Glaxen Corp., a company legally established and existing under the laws of the British Virgin Islands, for $14.7 million with an option to buy the remaining stake.

«The acquisition of Dagtelecom is fully in line with the Company’s development strategy in the North Caucasus. Dagtelecom provides services using the GSM-900 standard in the Republic of Dagestan, where MTS holds a GSM-900/1800 license. Therefore, this acquisition allows us to quickly begin offering mobile phone services without network construction using two standards, which will improve the quality of service for the existing subscribers, decrease the entry costs and expand MTS’ intranetwork roaming,» highlighted Leonid Melamed, President and CEO of MTS.

Dagtelecom is the GSM-900 mobile services provider in the Republic of Dagestan, a region in the south of Russia with a population of 2.6 million. The company provides services to around 1701 thousand subscribers, which constitutes approximately 11%2 of the market. Mobile penetration in the region is at 59.1%3.

According to Russian Accounting Standards (RAS), Dagtelecom’s revenues for 2005 totaled $9.5 million and net income $0.5 million. The company’s average monthly revenue per user (ARPU) was $8.9 in 2005. As of December 31, 2005, its net debt was $10.4 million4.

1 As of June 2006, according to the company.

2 As of June 2006, according to AC&M-Consulting.

3 As of June 2006, according to AC&M-Consulting.

4 All the financials are according to the company’s unaudited financial statements.

 

 

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