Moscow, Russian Federation – Mobile TeleSystems OJSC (“MTS” – NYSE: MBT), the leading telecommunications provider in Russia and the CIS, announces that the MTS Board of Directors has approved the transaction to acquire 100% of Sistema Telecom LLC (“Sistema Telecom”), a non-operating subsidiary of JSFC Sistema (“Sistema” – LSE: SSA), based on the recommendation received from the Special Committee of Independent Directors to the Board (“Special Committee”). Earlier, the Company received the necessary approvals from the Federal Antimonopoly Service.

The valuation of Sistema Telecom was conducted by ING Bank, an independent financial advisor to the Special Committee. Based on the results of the valuation, ING Bank provided a fairness opinion to the Special Committee. Ernst & Young was charged by MTS to provide due diligence services, while Latham & Watkins served as legal counsel to the Special Committee.

The transaction will be completed following approval by Sistema’s Extraordinary General Shareholder Meeting. The acquisition is expected to close by year’s end.

The acquisition price is RUB 11.59 billion ($379.01 million¹). In addition, MTS will assume debt considerations totaling RUB 1.80 billion ($58.93 million), which include the settlement of RUB 1.35 billion ($44.04 million) in debts between MTS subsidiaries and Sistema Telecom.

Sistema Telecom’s key assets at the time of the acquisition will consist of: a 45% stake in TS-Retail, where MTS previously held a controlling 55% interest; certain promissory notes previously issued by MTS² in the amount of RUB 2.00 billion ($65.50 million); and property rights in respect of the group of trademarks, including the distinctive “egg” trademarks of MTS, Comstar-UTS and MGTS³.

¹According to the average exchange rate of 30.57 RUB/USD for the 60-day period from September 4, 2010 to November 4, 2010. All U.S. dollar amounts in the press release provided for reference using the 30.57 RUB/USD exchange rate.
² The promissory notes were issued by MTS and partly by its subsidiary Rosico CJSC to finance the development of the Company’s GSM network in Russia back in 2001. Rosico was consolidated into MTS in 2001.
³ Public Joint Stock Company Moscow City Telephone Network (“MGTS”).