OREANDA-NEWS. November 20, 2007. Mobile TeleSystems OJSC (MTS), the largest mobile phone operator in Russia and the CIS, announced its third quarter 2007 financial and operating results, MTS' press service informs.

Key Financial Highlights: Consolidated revenues - $2,216 million. Consolidated OIBDA - $1,175 million (OIBDA margin of 53.0%) . Consolidated net income - $655 million . Free cash-flow - positive with $1,009 million for the nine months of 2007.
Key Corporate and Industry Highlights: Launch of MTS brand in Ukraine. Entry into Armenia through acquisition of leading operator K-Telecom (VivaCell). Allocation of 3G frequencies in Armenia. Launch of BlackBerry service in Ukraine. Moody's credit rating upgraded to Ba2 from Ba3; outlook positive.

Awarded top TMT Investor Relations in Russia (Thomson/Extel Survey) Leonid Melamed, President and Chief Executive Officer, commented, "We are pleased to announce strong third quarter financial results reflecting profitable growth throughout the Group as we continue to pursue our 3+2 strategy. Strong usage growth in Russia has been a key revenue driver for the Group, while in Ukraine the full rebranding of our operations will strengthen our long-term position in this key market. Our deployment continues in Uzbekistan and Turkmenistan, two low-penetrated markets which will provide greater contribution to Group revenues in the coming years. Recently, we expanded our footprint into Armenia through the acquisition of an 80% stake in the number one operator K-Telecom. In all, MTS is ideally situated to capture further growth in the expanding economies of the CIS.

Operating Overview. Market Growth Mobile penetration increased from 110% to 114% in Russia and from 108% to 115% in Ukraine during the third quarter of 2007. During the quarter mobile penetration in Uzbekistan increased from 13% to 16% and from 4% to 6% in Turkmenistan. In Belarus, mobile penetration increased from 67% to 69% for the same period.

Subscriber Development. The Company added approximately 3.3 million new customers during the third quarter of 2007 on a consolidated basis of which 2.4 were added organically. MTS' operations in Russia accounted for 1.7 million; 0.1 million were added in Ukraine, approximately 347 thousand were added in Uzbekistan and 54 thousand in Turkmenistan. Our operations in Armenia had a total of 1.1 million subscribers at the end of September 2007. In the third quarter of 2007, the Company's churn rates in Russia increased from 5.2% to 7.1% and in Ukraine fell from 14.1% to 12.5%. In Uzbekistan, churn decreased from 17.9% to 14.3%, in Turkmenistan from 8.6% to 6.3% and in Belarus from 6.0% to 5.3%. Since the end of the third quarter to October 31, 2007, MTS has organically added a further 1.2 million users, expanding its consolidated subscriber base to 79.1 million.

Market Share. In Russia, MTS had a leading market share in subscribers of approximately 33%. In Ukraine, the Company's market share was 37%. MTS' market share in Uzbekistan and Turkmenistan was at 54% and 86% respectively at the end of the third quarter of 2007. In Belarus, the market share was 54%.

Customer Segmentation Subscriptions to MTS. Pre-paid tariff plans accounted for 90% of gross additions in Russia and 95% in Ukraine in the third quarter. At the end of the third quarter 2007, 89% of MTS' customers in Russia were signed up to pre-paid tariff plans. In Ukraine, the share of customers signed to pre-paid tariff plans was 92%.

Russia. Third quarter revenues up 26% year-on-year to $1,667 million. Third quarter OIBDA up 27% year-on-year to $881 million; OIBDA margin of 52.8% . Third quarter net income up 47% year-on-year to $508 million. MTS' average monthly minutes of usage per subscriber (MOU) in Russia increased sequentially from 151 to 167 minutes in the third quarter of 2007. Post-paid subscribers. MOU again continued to increase and reached 518 minutes from 510 minutes in the previous quarter. The average monthly service revenue per subscriber (ARPU) in Russia increased sequentially from $9.2 to $10.0. Subscriber acquisition costs (SAC) in the third quarter of 2007 decreased sequentially from $28.9 to $24.3.

Ukraine. Third quarter revenues up 6% year-on-year to $439 million. Third quarter OIBDA down 6% year-on-year to $220 million; OIBDA margin of 50.1%. Third quarter net income down 24% year-on-year to $95 million. MOU increased sequentially in the third quarter from 152 minutes to 162 minutes. ARPU increased sequentially from $6.4 to $7.3 in the third quarter. SAC decreased sequentially from $13.7 to $10.9 in the third quarter.

Uzbekistan. Third quarter revenues up 77% year-on-year to $66 million. Third quarter OIBDA up 85% year-on-year to $41 million; OIBDA margin of 62.5%. Third quarter net income up 143% year-on-year to $25 million. MOU increased sequentially in the third quarter from 549 minutes to 565 minutes. ARPU decreased sequentially from $10.4 to $10.3 in the third quarter. SAC increased sequentially from $3.7 to $4.4 in the third quarter.

Turkmenistan. Third quarter revenues up 36% year-on-year to $45 million. Third quarter OIBDA up 86% year-on-year to $28 million; OIBDA margin of 62.0% . Third quarter net income up 381% year-on-year to $27 million. MOU increased sequentially in the third quarter from 264 minutes to 299 minutes. ARPU decreased sequentially from $63.4 to $57.4 in the third quarter. SAC decreased sequentially from $26.9 to $20.8 in the third quarter.

Armenia. Armenia contributed $8 million to the Company's consolidated revenues and $5 million to its consolidated OIBDA with an OIBDA margin of 59..8% in the third quarter of 2007. Third quarter ARPU was at $15.7.

Financial Position. MTS' expenditure on property, plant and equipment in the third quarter totaled $303 million, of which $172 million was invested in Russia, $126 million in Ukraine, $4 million in Uzbekistan and $1 million in Turkmenistan. MTS spent $36 million on the purchase of intangible assets during the third quarter ($35 million in Russia, $0.1 million in Ukraine and $0.4 million in Uzbekistan). As of September 30, 2007, MTS' total debt was at $3.1 billion, resulting in a ratio of total debt to LTM OIBDA of 0.8 times. Net debt amounted to $2.4 billion at the end of the quarter and the net debt to LTM OIBDA ratio is 0.6 times.