Moscow, Russian Federation — Erevan, Armenia — Mobile TeleSystems OJSC («MTS» — NYSE: MBT), the largest mobile phone operator in Russia and the CIS, announces the acquisition of a 80% stake in International Cell Holding Ltd, 100% indirect owner of K-Telecom CJSC, Armenia’s largest mobile phone operator, as well as signing of a call and put option agreement for the remaining 20% stake to be exercised no earlier than July 2010.

K-Telecom CJSC operates under the VivaCell brand in the GSM-900/1800 standard covering the entire territory of Armenia. As of July 1, 2007, it provided services to over 986,000 subscribers and had a 66% market share¹. The license is valid until the end of 2019.

The sale and purchase agreement stipulates that MTS will pay ?310 million for 80% of K-Telecom of which ?50 million will be paid out to the sellers in the course of three years from 2008 to 2010 provided certain agreed financial targets are met by K-Telecom. At the same time, MTS will extend a ?140 million technical loan to the company to refinance existing loan facilities and for further investments. The price for the remaining 20% option stake will be determined by an independent investment bank. The option is valid until 2012.

K-Telecom was founded and has been operated by the Fattouche family, a prominent Lebanese investment group.

«This acquisition fully complies with our strategy to capture growth opportunities in the fast growing CIS markets. Armenia becomes our sixth country of operations in the CIS. We are pleased to gain entry into this exciting market by partnering with the market’s leading mobile operator. VivaCell’s high-quality organization, professional management team and exceptional network quality coupled with MTS’ experience in the CIS will create synergy allowing us to fully utilize the market’s potential in the best interests of our subscribers and shareholders,» commented President and CEO of MTS, Mr. Leonid Melamed.

«Management has built a solid business in a short period of time, as well as established foundations for future growth of K-Telecom, and we are pleased to enter into this partnership. We would also like to welcome K-Telecom’s employees in our ranks. Together we will continue our proud traditions of being one of the top wireless operators in the world,» added Mr. Melamed.

«We remain committed to Armenia’s potential and to K-Telecom’s development and the consolidation of its leading position in the market. Looking ahead, we see great growth prospects, enhanced through our partnership with a leading wireless operator such as MTS,» highlighted Mr. Pierre Fattouche.

K-Telecom’s General Manager, Mr. Ralph Yirikian, stated, «We are pleased to join forces with MTS and to integrate our team within MTS regional workforce. We will be better positioned to offer our subscribers more choices, more innovative services and solutions, addressing their needs and requirements.»

The financial results of K-Telecom will be consolidated in MTS’ financial statements starting from September 13, 2007.

K-Telecom

K-Telecom, operating under the VivaCell brand, is the largest wireless operator in Armenia. The country has more than 3 million inhabitants. As of July 1, 2007, K-Telecom had more than 986,000 subscribers and a market share of 66%. In 2006, revenues of K-Telecom amounted to $104.1 million, OIBDA of $57.8 million (54.4% margin), ARPU of $15.6². The company has 54 service centers, more than 3,000 points of sale and 750 employees.

Mobile penetration in the country is around 39%³. There are two GSM operators in the country.

¹ MTS estimates.
² MTS estimates.
³ According to Informa Database, information as of Q1 2007.