#1MTS a step ahead Group financial results for the second quarter 2012 Investor conference call - August 28, 2012 Mr. Andrei Dubovskov, President, Chief Executive Officer Mr. Alexey Kornya, Vice President, Chief Financial Officer#2MTS a step ahead Safe harbor Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as "expect," "believe," "anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might,” and the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Company's most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks. 2#3MTS a step ahead Contents Financial and corporate highlights Key financial and operating results Appendix ■ News summary and recent events Group financial highlights Group balance sheet and Free Cash Flow Group capital expenditures Group debt Subscriber base dynamics Re-launch of operations in Turkmenistan ■ 3i Strategy 3#4MTS a step ahead Group news summary for Q2 2012 and recent events Q2 2012 highlights ◉ Acquired a 100% stake in Tascom CJSC, a market leader in providing telecommunication services to corporate clients in Moscow and the Moscow region, for $38.3 mln* Agreed to a memorandum of understanding with other telecommunications operators to jointly lay and operate an underwater fiber-optic cable Sakhalin-Magadan-Kamchatka. Total length of the cable is approximately 2,000 km Signed a shareholders agreement with AFK Sistema to jointly develop and manage the multimedia content portal Stream.ru (formerly Omlet.ru), resulting in the reduction of MTS's stake in LLC Stream from 100% to 45% and subsequent deconsolidation of the asset Thereafter ■ ■ ■ ◉ Obtained license and frequencies to provide LTE telecommunication services in Russia in the FDD (frequency division duplexing) standard Announced the withdrawal of operating licenses of Uzdunrobita FE LLC ("MTS-Uzbekistan"), MTS's wholly owned subsidiary in Uzbekistan Completed the dividend payment of RUB 14.71 per ordinary MTS for the 2011 fiscal year, amounting to a total of RUB 30.4 bln Received licenses and agreed upon legal and technical conditions to resume operations in Turkmenistan Repurchased the series 05 ruble-denominated bond in the amount of approximately RUB 13.2 bln and changed the bond's coupon rate from an annual rate of 14.25% to 8.75% Acquired a 100% stake in Elf group of companies, a fixed broadband and pay-TV services provider in Belgorod and the Belgorod region, for RUB 220 mln Acquired a 100% stake in LLC "Intercom", a broadband and cable TV provider in the Mari El Republic, for RUB 90 mln *Acquisition through MTS' subsidiary MGTS. Additional payment of $6.9 mln is deferred for 12 months and is contingent upon fulfillment of certain agreed requirements. MGTS also assumed net debt of Tascom in the amount of $9.7 mln 4#5MTS a step ahead Total Group Revenue Group financial highlights: Revenue and OIBDA +7% stable +4% +1% 6 062.2 6 136.0 3 274.7 3 128.3 3 122.2 2 934.0 2 981.7 3 013.8 (USD mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Total Group Adjusted OIBDA* (USD mln) +16% +5% +9% +8% 2 428.5 2 632.7 1 302.7 1 439.9 1 125.8 1 275.6 1 259.1 1 373.6 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Adjusted OIBDA margin 38.4% 41.6% 44.0% 42.8% 41.8% 44.0% 40.1% 42.9% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 ■ Quarter-over-quarter revenue growth due to positive seasonality and overall increased consumption of voice and data products ■ Year-over-year revenue dynamics impacted by negative local currency volatility vs. US dollar in all markets of operation ■ Strong year-over-year OIBDA improvement as a result of operating expenses optimization, improvement in interconnect balance and growth in high-margin data revenues *Adjusted OIBDA represents operating income before depreciation and amortization, impairment of long-lived and other assets and tax and antimonopoly claims in Uzbekistan. For further information, please see the Appendix for definitions and reconciliations 5#6MTS a step ahead Total Group +14% ୮ n/a n/a ך Group financial highlights: Net Income 688.7 n/a Net Income 511.7 367.0 321.6 361.8 393.5 (681.8) (170.0) (USD mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 777. Q2 2012 H1 2011 HI 2012 Net income margin 11.0% 11.7% 11.1% 13.2% 17.0% n/a 11.4% n/a Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Adjusted Net Income (USD mln) (681.8) Q2 2012 Net Loss attributable to the Group 500.0 (39.7) 579.0 Impairment of Provision for tax Deferred income goodwill and long- and antimonopoly tax lived assets claims Non-cash impairment for goodwill and long-lived assets of $579 mln and provision for tax and antimonopoly claims of $500 mln recorded in the second quarter resulting from the suspension of operations in Uzbekistan in July 2012 357.5 Negative impact from the currency fluctuations during the quarter with a non-cash foreign currency loss of $198.9 mln in Q2 2012 Adjusted Net Income in Q2 2012 6#7MTS a step ahead Free Cash Flow +34% 1 133.7 1 092.3 847.5 (YTD) 212.2 (USD mln) H1 2009 H1 2010 H1 2011 H1 2012 Group balance sheet and Free Cash Flow Balance sheet (USD mln unless noted) As of Dec 31, 2011 As of Jun 30, 2012 Cash and cash equivalents $1 850.8 $881.0 Short-term investments $86.2 $837.9 Total debt $8 715.2 $7 345.1 Long-term debt $7 559.5 $6 240.6 Short-term debt $1 155.7 $1 104.5 Net debt* $6 778.2 $5 626.2 LTM Adjusted OIBDA* $5 144.1 $5 348.3 Net debt/LTM Adjusted OIBDA 1.3x 1.1x Free cash flow* of $1.1 bln for the first half of 2012 ■ Decline in cash on hand due to increase in short-term investments in preparation for debt repayments ☐ Rise in short-term investments due to preparation for FY2011 dividend payout ■ Decline in net debt/LTM OIBDA due to improving operating performance *See reconciliations of net debt, LTM OIBDA and free cash flow to consolidated financial statements in the appendix; certain figures, like Free Cash Flow, are subject to currency volatility between the US dollar and currencies of those markets where MTS operates. 7#8MTS a step ahead 2 612.8 2 647.1 2 584.5 2 328.3 FY2008 FY2009 FY2010 FY2011 =2 700 or 20-22% of revenue* 1 124.9 H1 2012 Russia 1 784.7 1 389.7 2 260.0 2 245.7 1 000.5 Ukraine 595.6 377.4 154.9 148.0 40.2 Uzbekistan 139.7 460.3 157.9 145.7 80.8 Turkmenistan 58.2 52.4 44.4 n/a n/a Armenia 34.6 48.5 29.9 45.0 3.4 Group 2 612.8 2 328.3 2 647.1 2 584.5 1 124.9 - as % of revenue 22.0% 23.7% 23.4% 21.0% 18.3% (in USD mln) 2008 2009 2010 2011 H1 2012 * Estimated CAPEX spend for 2012E Group capital expenditures ■ Capital expenditures for the first half of 2012 came in at $1 124.9 mln Continuation of 3G network build-out in Russia with a total of 25 000 3G base stations at the end of Q2 2012 Modernization of regional fixed-line networks GPON project in Moscow 00 8#9MTS a step ahead Debt repayment schedule (USD mln) Total Group Debt = $7.3 bln 568 699 609 1 854 Group debt at the end of Q2 2012 1 164 1 430 914 ■ Debt optimization initiatives created a portfolio with manageable principal repayment schedules in the short- and medium- term 97 Q3 2012 Q4 2012 2013 2014 2015 2016 2017 Thereafter MTS Series 03, 05, 08 ruble bonds contain put options that can be exercised in June 2013, in July 2012 and in November 2015 respectively. MTS expects the options to be exercised. In July 2012, MTS repurchased the series 05 ruble-denominated bond in the amount of approximately RUB 13.2 bln Debt composition by currency Q2 2012* Debt composition by type Q2 2012 ■ Debt composition reflective of the Credit facilities EUR RUB 3% 78% 59% 41% 19% Company's internal target of maintaining 70% of its portfolio in ruble- denominated instruments USD Bonds *Debt composition by currency includes FOREX hedging in the amount of $300 mln as of Q2 2012 6#10MTS a step ahead Group subscriber base dynamics during the quarter MTS subscribers (mln unless noted) Q1 2012 Q2 2012 % change Total mobile 105.49 105.56 stable Russia: - mobile 69.38 69.59 stable - households passed, 000s 11 448 11 507 stable - broadband Internet, 000s 2 238 2 285 2.1% - pay TV, 000s 2 971 2 937 -1.1% Ukraine* 19.39 19.64 1.3% Uzbekistan** 9.53 9.00 -5.6% Armenia 2.23 2.31 3.6% Belarus*** 4.96 5.02 1.2% *Including CDMA subscribers **Starting October 2011 MTS switched from 6 months to 3 months subscriber accounting policy in Uzbekistan ***MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated In Russia, MTS continues to focus on mobile subscriber quality and churn optimization by focusing on sales through its own channels and motivating third-party dealers to drive top-offs Increase in a number of broadband subscribers due to modernization of fixed-line networks in the regions Number of pay TV subscribers impacted by reconciliation of acquired companies' subscriber definitions with those of MTS 10 10#11MTS a step ahead Re-launch of operations in Turkmenistan MTS reached an agreement with Turkmenistan authorities to relaunch its network in September 2012 ■ Key figures: CAPEX to restart network: $1.5 mln CAPEX required 2012-2015: <$40 mln ■ Key targets: No. of subscribers 2012: 440,000 Est revenue 2012: 9.4 mln manat ($3.3 mln) Ashgabat *Source: IMF, July 2012 Key facts about Turkmenistan* Population: 5.4 mln Population density: 11 per km² GDP real growth 2012-2013: 8.0% 11 14#12MTS a step ahead Strategic direction Integration New pipelines and customer touch-points Tactics ■ Seamless user experience for all segments Rapid broadband infrastructure (fixed/3G/LTE) deployment Integrated sales channels Internet Smarter pipelines to capture additional value ■ Enhanced connectivity ☐ Compelling Internet user experience ■ Best-in-class content apps and services Innovation Differentiation through product and service mix ☐ Delivery of exclusive devices Cutting-edge products and services for all customer segments ■ End-to-end user experience at home, at work and on the move 3i: MTS strategy Key benefits Increasing customer lifetime value Generating shareholder returns 12#13MTS a step ahead Financial and corporate highlights Key financial and operating results Appendix Russia Ukraine Uzbekistan Armenia 13 الله Contents#14MTS a step ahead Russia financial highlights +2% +9% +5% +7% Total 150.4 161.5 82.8 81.7 Russia 79.8 78.7 76.1 Revenue 74.3 (RUB bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 +12% +14% +9% Total Russia OIBDA 61.5 36.9 29.0 32.5 34.4 33.9 36.9 +15% 70.8 (RUB bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 OIBDA margin 39.1% Q1 2011 42.7% 45.1% 43.2% 43.1% 44.6% 40.9% 43.9% Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 ■ Year-over-year revenue growth as a result of increased voice and data usage OIBDA margin year-over- year improvement attributable to on-going cost optimization, decrease in churn and an increase in the share of high-margin data revenues 14 44#15MTS a step ahead Mobile Russia Revenue Russia revenue breakdown +3% +10% +6% +8% 124.5 134.7 69.0 69.3 66.3 65.4 63.1 61.3 (RUB bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 H1 2011 H1 2012 Mobile service revenue year-over-year growth as a result of sequential increase in voice and data usage, as well as greater contribution from sales of handsets with a growing share of higher-priced smartphones in the sales mix ■ Year-over-year decline in fixed revenue impacted by a decrease of both residential and corporate ARPUS on the back of increased competition and the addition of lower value customers Incl. sales of handsets & accessories 6.7 5.6 7.3 6.0 6.0 6.5 12.3 12.5 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Fixed Russia Revenue +11% -3% stable- +2% 29.7 15.6 30.4 15.2 15.2 14.7 14.0 13.9 (RUB bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 15 15#16MTS a step ahead +5% +12% Russia mobile operating indicators +6% Q1 2012 Q2 2012 " Strong year-on-year ARPU growth driven by the Company's focus on higher-quality subscriber acquisition and retention, as well as reflective of efforts aimed at voice and data consumption increase ARPU (RUB) 297 288 284 281 265 252 Q1 2011 Q2 2011 Q3 2011 Q4 2011 +8% +15% +10% MOU (min) 249 269 272 283 282 309 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 MOU growth in line with ARPU developments and retention efforts aimed at mass-market subscribers Continuous churn improvement as a result of change in dealer relations to focus more on top-offs rather than attraction of a low- quality subscribers through a massive SIM- card sales Subs, mln Churn rate, % 71.5 12.0% 71.1 70.1 70.0 69.4 69.6 11.3% 11.9% 12.3% VAS ARPU 67.4 64.4 69.7 72.8 11.3% 81.7 10.5% 77.5 - as % of ARPU 26.7% 24.3% 24.2% APPM 1.01 0.98 1.06 25.7% 1.00 29.1% 26.1% 0.99 0.96 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 16#17MTS a step ahead Russia mobile operating indicators* -9% +10% -4% +7% Messaging 8 248 8 821 4 315 4 494 4 316 Revenue (RUB mln) 4 165 4 326 3 932 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 +5% +35% +6% +34% Data Traffic 15 179 11 286 Revenue 5 513 5 773 6 598 6 829 7 365 7 814 (RUB mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 -17% +41% -16% +40% Data Content 10 936 7 789 Revenue 5 134 5 957 4 262 4 980 3 527 3 983 (RUB mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Total VAS (RUB mln)* 14 365 13 616 15 290 16 578 18 264 17 613 27 981 35 876 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 *Does not include revenue from SMS and data bundles, which is included in airtime revenue Key initiatives included: - Launch of "Unlimited Internet for a day" service to stimulate data usage Decrease in content revenues in Q2 2012 due to seasonality, the discontinuation of SMS - promotions and intensification of anti- fraud activities 17 17#18MTS a step ahead -2% -3% ARPU stable Residential 301 295 (RUB) 288 283 284 285 ARPU Corporate Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 -5% -3% +2% 7734 7742 (RUB) 7383 7281 7194 7031 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Total households 9 985 10 079 10 415 11 433 11 448 11 507 passed, 000s Total BB subs, 000s 1 892 1957 2 032 2 152 2 231 2 285 Total pay-TV subs, 000s* 2 637 2 635 2 741 2 987 2 971 2 937 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 *Figures retrospectively adjusted in line with MTS definitions; does not include collective access subscribers Russia fixed operating indicators " Residential ARPU year-on-year decline due to the overall decrease of prices on the Internet and pay-TV market ■ Corporate ARPU year-on-year decrease indicative of the competitive pressures on the corporate market, convergent offers aimed at optimization of customers expenses, as well as a low share of value- added services 18#19☐ MTS a step ahead MTS retail network development MTS continues to expand its retail chain with a focus on smaller markets to drive sales of higher-margin data products and services At the end of Q2 2012, MTS retail network comprised 4,156 stores, including 1,560 franchised outlets. MTS plans to increase its retail footprint by up to 500 stores till the end of the year, of which 60 will be flagship locations Expansion of the MTS retail network, 2010 – 2012 4588 4 156 3 343 3 373 1 655 1 560 1 134 1 130 2933 2596 2209 2243 Q2 2010 Q2 2011 Q2 2012 Franchise stores Q4 2012E Own stores Smartphones* sales and penetration, 2010 – 2012 35% 30% 25% Sales increased by 8% quarter- 30.0% 27.0% 23.3% 17.4% 20% over-quarter in terms of units sold in Q2 2012 >20% 15% 12.4% 17.2% 8.4% 10% 14.0% 11.6% 10.4% 5% ☐ Sales of smartphones in the 6.3% 0% sales mix advanced by 10pp year-over-year in terms of units sold in H1 2012 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012E sales of smartphones through MTS retail network as % of total handsets sold in units smartphones penetration as % of all registered mobile phones on MTS network *MTS defines a smartphone as a handset with one of the following operating systems: iOS, Android, Windows, Blackberry OS, Symbian, Linux or Bada 19#20MTS a step ahead +9% +7% +8% +7% Ukraine financial highlights Total 4 294 4 616 Ukraine 2 057 2 237 2 498 2 312 2 218 2 398 Revenue (UAH mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 H1 2012 49.9% H1 2012 ■ Year-over-year revenue performance reflective of usage increase and greater contribution from guest roaming revenues due to Euro 2012 football championship held in Ukraine OIBDA growth outpaces revenue dynamic due to cost discipline and rational competition OIBDA margin growth in Q2 2012 impacted by a one-off reserve correction related to interconnect settlements in the amount of UAH 48.1 mln +18% Total +15% +17% +15% 2 303 Ukraine 2002 1 221 1 083 1 147 1 243 1 060 OIBDA 919 (UAH mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 OIBDA margin 44.7% 48.4% 48.9% 49.6% Q1 2011 Q2 2011 Q3 2011 Q4 2011 47.8% Q1 2012 51.9% 46.6% Q2 2012 H1 2011 20#21MTS a step ahead +8% +3% +8% ARPU (UAH) 36 39 42 39 37 40 40 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 +4% +4% +2% MOU (min) 564 586 586 592 601 611 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Subs, mln* 18.5 18.8 19.3 19.5 19.4 19.6 Churn rate, % 7.6% 7.0% 8.1% 8.1% 8.5% 7.7% VAS ARPU 11.2 11.0 11.5 11.8 11.8 11.1 - as % of ARPU 31.0% 28.3% 27.1% 30.5% 31.9% 27.6% SAC 73.0 64.7 64.5 60.4 64.7 61.7 APPM 0.064 0.066 0.072 0.065 0.062 0.066 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 *Including CDMA subscribers starting Q1 2011 Ukraine operating indicators ■ Quarter-over-quarter ARPU growth reflects positive seasonality ☐ Usage growth due to seasonal increase in subscriber activity ■ Reduction in churn as a result of continuous focus on subscriber loyalty despite increased competitive pressures 21 21#22MTS a step ahead -2% stable -11% Ukraine operating indicators +6% Messaging Revenue 452 478 253 245 238 228 223 225 (UAH mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 +1% +9% -4% H1 2011 H1 2012 +11% Data Traffic 363 326 185 Revenue 177 179 178 162 164 (UAH mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 -4% -2% -9% 7 stable Data Content Revenue (UAH mln) 271 270 162 138 132 136 141 129 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Total VAS (UAH mln) 619 614 654 687 691 648 1 233 1 339 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2011 H1 2011 H1 2012 *Messaging revenue in Q1 2012 included recognition of the revenues from the services ordered in 2011, normalized for this one-off, messaging revenue is in line with the seasonal trends ■ Decline in messaging attributable to seasonality* Data traffic growth driven year-over-year by sales of CDMA-based modems Content revenues lower due to pull-back on promotions Key initiatives in Q2 2012: - Launch of EuroGOOD'OK 2012 service for the period of Euro 2012 football championship - Launch of a new Internet bundle - 300 Mb for UAH 50 for 30 days 22 22#23MTS a step ahead +4% +22% +15% Uzbekistan financial highlights +16% Total 248 Uzbekistan 133 213 105 109 113 115 116 Revenue (USD mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 +2% +24% +41% +8% Total Uzbekistan 72 115 124 57 58 56 61 51 Adjusted OIBDA (USD mln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Adjusted OIBDA margin 54.1% 53.5% 49.6% 52.8% 44.3% 54.4% 53.8% 49.7% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Quarterly revenue growth reflective of positive seasonality and an overall increase in voice and data usage ■ Quarter-over-quarter OIBDA dynamics impacted by operating and sales and marketing cost saving initiatives 23#24MTS a step ahead stable +21% +15% ARPU (USD) 4.7 3.9 3.9 3.8 3.9 4.1 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 +3% +33% +18% MOU (min) 553 402 416 421 440 468 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Subs, mln 9.1 9.4 10.0 9.3 9.5 9.0 Churn rate, % 9.2% 6.9% 9.3% 20.2% 11.9% 19.1% SAC 7.4 7.7 6.5 5.6 6.1 4.7 APPM 0.01 0.01 0.01 0.01 0.01 0.01 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Uzbekistan operating indicators ■ Year-over-year ARPU dynamics reflective of an increase in data revenues, introduction of fixed monthly subscriber fees and an overall increase in voice usage ■ Strong year-over-year MOU growth as a result of activities to stimulate on-net calling 24 24#25MTS a step ahead +15% +2% +14% Total 35.0 Armenia 18.7 20.7 18.9 19.1 16.3 16.7 Revenue Armenia financial highlights +2% 35.8 (AMD bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 Total +22% -2% -12% Armenia 11.9 18.4 10.1 11.3 8.3 9.6 9.9 OIBDA +16% 21.3 (AMD bln) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 OIBDA margin 51.0% 54.2% 57.3% 50.5% 68.0% 52.1% 52.7% 59.5% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 H1 2011 H1 2012 *One-off effect from equipment swap resulting in the recognition of an additional AMD 3.52 bln of OIBDA in Q1 2012 Quarterly revenue growth impacted by positive seasonal factors and improving competitive environment ■ Quarter-over-quarter OIBDA dynamics inline with revenue and seasonal trends when adjusted for a one-off in Q1 2012* 25 25#26MTS a step ahead +14% +13% +15% ARPU (AMD) 2 751 2 433 2 577 2 739 2 141 2 380 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 ୮ -7% +26% +9% MOU (min) 294 272 293 300 315 342 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Subs, mln 2 549.7 2 509.8 2 461.8 2 377.8 2 230.3 2 314.4 Churn rate, % 6.7% 8.5% 10.0% 13.0% 13.2% 8.7% SAC 6 005.4 8 237.3 7 625.3 6 595.9 7 248.3 4 572.7 APPM 7.3 8.9 9.4 8.6 7.6 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 8.0 Q2 2012 Armenia operating indicators " Quarterly ARPU growth reflective of positive seasonal trends and Company's efforts to retain and attract higher-value subscribers Rise in MOU indicative of on-net usage stimulation to improve customer loyalty 26#27MTS a step ahead Financial and corporate highlights Key financial and operating results Appendix Definitions and reconciliations Contents 27#28MTS a step ahead Appendix - Definitions and Reconciliations Non-GAAP financial measures. This presentation includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP. Due to the rounding and translation practices, US dollar and functional currency margins, as well as other non-GAAP financial measures, may differ. Operating Income Before Depreciation, and Amortization (OIBDA). OIBDA represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of our net revenues. OIBDA may not be similar to OIBDA measures of other companies, is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of mobile operators and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA can be reconciled to our consolidated statements of operations as follows: USD mln Operating income Add: D&A Add: Impairment Add: Tax and antimonopoly claims Adjusted OIBDA Operating margin Add: D&A Add: Impairment Add: Tax and antimonopoly claims Adjusted OIBDA margin Q2 2011 Q1 2012 Group RUS UKR UZB ARM Group RUS UKR UZB 672.2 676.9 49.2 21.3 4.2 649.7 660.2 49.3 6.6 ARM Group RUS 11.6 (284.4) 745.3 630.5 484.0 86.6 36.8 22.9 609.5 463.7 83.3 44.7 17.7 579.0 442.8 75.8 Q2 2012 UKR 79.8 (1,050.7) 8.3 44.0 16.4 UZB ARM 579.0 579.0 500.0 500.0 1,302.7 1,160.9 135.9 58.1 27.1 1,259.1 1,123.9 132.6 51.3 29.2 1,373.6 1,188.1 155.6 72.3 24.7 Group RUS 21.5% 24.9% 17.5% 19.6% 8.4% 20.1% 17.8% 30.9% 33.9% 45.8% Q2 2011 UKR UZB ARM 17.8% Group RUS 21.6% 25.3% 17.8% 5.7% 20.2% 30.0% Q1 2012 UKR UZB ARM Group RUS 26.9% (9.1%) 27.9% Q2 2012 UKR UZB ARM 38.6% 41.1% 18.6% 16.6% 25.3% 26.6% (790.9)% 17.6% 33.1% 34.4% 18.5% 435.8% 16.0% 376.4% 41.6% 42.7% 48.4% 53.5% 54.2% 41.8% 43.2% 47.8% 44.3% 68.0% 44.0% 44.5% 51.9% 54.4% 52.0% 28#29MTS a step ahead Appendix - Definitions and Reconciliations Net debt represents total debt less cash and cash equivalents and short-term investments. Our net debt calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare our periodic and future liquidity within the wireless telecommunications industry. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP. USD mln Current portion of LT debt and of capital lease obligations LT debt As of Dec 31, 2011 1,155.7 As of Jun 30, 2012 1,104.5 7,554.0 6,237.1 Capital lease obligations Total debt Less: 5.5 3.5 8,715.2 7,345.1 Cash and cash equivalents ST investments Net debt 1,850.8 86.2 6,778.2 881.0 837.9 5,626.2 Free cash flow is represented by net cash from operating activities less cash used for certain investing activities. Free cash flow is commonly used by investors, analysts and credit rating agencies to assess and evaluate our performance over time and within the wireless telecommunications industry. Because free cash flow is not based in US GAAP and excludes certain sources and uses of cash, the calculation should not be looked upon as an alternative to our Consolidated statement of cash flows or other information prepared in accordance with US GAAP. USD mln Net cash provided by operating activities Less: For six months ended Jun 30, 2011 For six months ended Jun 30, 2012 1,669.2 2,274.3 Purchases of property, plant and equipment (660.6) (1,021.0) Purchases of intangible assets (145.6) (103.8) Proceeds from sale of property, plant and equipment 8.3 2.2 Proceeds from sale of other investments 7.0 14.7 Investments in and advances to associates 3.0 Acquisition of subsidiaries, net of cash acquired (33.8) (32.7) Free cash flow 847.5 1,133.7 29#30MTS a step ahead Appendix - Definitions and Reconciliations LTM OIBDA can be reconciled to our consolidated statements of operations as follows: USD mln Net operating income Add: D&A Add: Impairment Add: Tax and antimonopoly claims Adjusted OIBDA Six months ended Dec 31, 2011 Six months ended Jun 30, 2012 Twelve months ended Jun 30, 2012 A B C = A + B 1,572.8 365.3 1,938.1 1,142.8 1,188.4 579.0 2,331.2 579.0 500.0 500.0 2,715.6 2,632.7 5,348.3 30#31MTS a step ahead Appendix - Definitions and Reconciliations Average monthly service revenue per subscriber (ARPU). We calculate our ARPU by dividing our service revenues for a given period, including interconnect, guest roaming fees and connection 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 in that period. Subscriber. We define a "subscriber" as an individual or organization whose account shows chargeable activity within sixty one days in the case of post-paid tariffs, or one hundred and eighty three days in the case of our pre-paid tariffs, or whose account does not have a negative balance for more than this period. 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 and handset subsidies for a given period. Sales and marketing expenses include advertising expenses and commissions to dealers. 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. 31#32MTS a step ahead Appendix - Adjusted OIBDA definition According to the SEC definition Sec. 103 EBIT and EBITDA, measures that are calculated differently than those described as EBIT and EBITDA in the materials should not be characterized as "EBIT" or "EBIDTA." Instead, the titles of these measures should clearly identify the earnings measure being used and all adjustments. MTS reports adjusted OIBDA due to its treatment of the impairment of long-lived and other assets that relates to Q4 2010. 32#33MTS a step ahead For further information MTS Investor Relations +7 495 223 20 25 [email protected] www.mtsgsm.com Contact information 33 33