20-F

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TABLE OF CONTENTS
Table of Contents
PART III

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 20-F

o	Registration Statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
or
ý	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2008
or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
or
o	Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of event requiring this shell company report
Commission file number 333-12032

MOBILE TELESYSTEMS OJSC

(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
RUSSIAN FEDERATION
(Jurisdiction of incorporation or organization)
4 Marksistskaya Street, Moscow 109147 Russian Federation
(Address of Principal Executive Offices)
Joshua B. Tulgan
Director, Investors Relations
Mobile Telesystems OJSC
5 Vorontskovskaya street, bldg 2, 109147 Moscow Russian Federation
Phone: +7 495 223 20 25, Fax: +7 495 911 65 67
E-mail: ir@mts.ru

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on which Registered
AMERICAN DEPOSITARY SHARES, EACH REPRESENTING 5 SHARES OF COMMON STOCK	NEW YORK STOCK EXCHANGE
COMMON STOCK, PAR VALUE 0.10 RUSSIAN RUBLES PER SHARE	NEW YORK STOCK EXCHANGE(1)

Securities registered or to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
NONE
(Title of Class)

           Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 1,885,052,800 ordinary shares, par value 0.10 Russian rubles each and 155,479,301 American Depositary Shares as of December 31, 2008.

           Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes o No

           If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes ý No

           Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

           Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: o No: o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer ý Accelerated Filer o Non-accelerated filer o

           Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ý International Financial Reporting Standards as issued by
the International Accounting Standards Board o Other o

           If "Other" has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. o Item 17        o Item 18

           If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes        ý No

(1)

Listed, not for trading or quotation purposes, but only in connection with the registration of ADSs pursuant to the requirements of the Securities and Exchange Commission.

Table of Contents

Cautionary Statement Regarding Forward Looking Statements			1
Item 1.		Identity of Directors, Senior Management and Advisors	3
Item 2.		Offer Statistics and Expected Timetable	3
Item 3.		Key Information	3
	A.	Selected Financial Data	3
	B.	Capitalization and Indebtedness	5
	C.	Reasons for the Offer and Use of Proceeds	5
	D.	Risk Factors	5
Item 4.		Information on Our Company	47
	A.	History and Development	47
	B.	Business Overview	51
	C.	Organizational Structure	85
	D.	Property, Plant and Equipment	85
Item 4A.		Unresolved Staff Comments	86
Item 5.		Operating and Financial Review and Prospects	86
Item 6.		Directors, Senior Management and Employees	125
	A.	Directors and Senior Management	125
	B.	Compensation of Directors and Senior Management	128
	C.	Board Practices	131
	D.	Employees	133
	E.	Share Ownership	134
Item 7.		Major Shareholders and Related Party Transactions	135
	A.	Major Shareholders	135
	B.	Related Party Transactions	136
	C.	Interests of Experts and Counsel	138
Item 8.		Financial Information	139
	A.	Consolidated Statements and Other Financial Information	139
	B.	Significant Changes	143
Item 9.		Offer and Listing Details	144
Item 10.		Additional Information	146
	A.	Share Capital	146
	B.	Charter and Certain Requirements of Russian Legislation	146
	C.	Material Contracts	161
	D.	Exchange Controls	164
	E.	Taxation	164
	F.	Dividends and Paying Agents	173
	G.	Statement by Experts	173
	H.	Documents on Display	173
	I.	Subsidiary Information	173
Item 11.		Quantitative and Qualitative Disclosures about Market Risk	173
Item 12.		Description of Securities Other Than Equity Securities	179
Item 13.		Defaults, Dividend Arrearages and Delinquencies	180
Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds	180
Item 15.		Controls and Procedures	180
Item 16A.		Audit Committee Financial Expert	181
Item 16B.		Code of Ethics	182
Item 16C.		Principal Accountant Fees and Services	182
Item 16D.		Exemption from the Listing Standards for Audit Committees	183
Item 16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers	183

i

Item 16F.	Change in Registrant's Certifying Accountant	184
Item 16G.	Corporate Governance	184
Item 17.	Financial Statements	186
Item 18.	Financial Statements	186
Item 19.	Exhibits	186

        Unless otherwise indicated or unless the context requires otherwise, references in this document to "MTS," "we," "us," or "our" refer to Mobile TeleSystems OJSC and its subsidiaries; "MTS-Ukraine" refers to Ukrainian Mobile Communications, or UMC, our Ukrainian subsidiary; "MTS-Uzbekistan" refers to Uzdunrobita, our Uzbekistan subsidiary; and "MTS-Turkmenistan" refers to BCTI, our Turkmenistan subsidiary. We refer to Mobile TeleSystems LLC, our 49% owned joint venture in Belarus as MTS Belarus. As MTS Belarus is an equity investee, our revenues and subscriber data do not include MTS Belarus. Our reporting currency is the U.S. dollar and we prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

        In this document, references to "U.S. dollars," "dollars," "$" or "USD" are to the lawful currency of the United States, "rubles" or "RUR" are to the lawful currency of the Russian Federation, "hryvnias" are to the lawful currency of Ukraine, "soms" are to the lawful currency of Uzbekistan, "manats" are to the lawful currency of Turkmenistan, "drams" are to the lawful currency of Armenia and "€," "euro" or "EUR" are to the lawful currency of the member states of the European Union that adopted a single currency in accordance with the Treaty of Rome establishing the European Economic Community, as amended by the treaty on the European Union, signed at Maastricht on February 7, 1992. References in this document to "shares" or "ordinary shares" refers to our ordinary shares, "ADSs" refers to our American depositary shares, each of which represents five ordinary shares, and "ADRs" refers to the American depositary receipts that evidence our ADSs. "CIS" refers to the Commonwealth of Independent States.

ii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        Matters discussed in this document may constitute forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, or the U.S. Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, or the U.S. Exchange Act. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their businesses. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

        Mobile TeleSystems OJSC, or MTS, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation and other relevant law. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "predict," "plan," "may," "should," "could" and similar expressions identify forward-looking statements. Forward-looking statements appear in a number of places including, without limitation, "Item 3. Key Information—D. Risk Factors," "Item 4. Information on Our Company—B. Business Overview," "Item 5. Operating and Financial Review and Prospects," and "Item 11. Quantitative and Qualitative Disclosures about Market Risk" and include statements regarding:

•

our strategies, future plans, economic outlook, industry trends and potential for future growth;

•

our liquidity, capital resources and capital expenditures;

•

our payment of dividends;

•

our capital structure, including our indebtedness amounts;

•

our ability to generate sufficient cash flow to meet our debt service obligations;

•

our ability to achieve the anticipated levels of profitability;

•

our ability to timely develop and introduce new products and services;

•

our ability to obtain and maintain interconnect agreements;

•

our ability to secure the necessary spectrum and network infrastructure equipment;

•

our ability to meet license requirements and to obtain and maintain licenses and regulatory approvals;

•

our ability to maintain adequate customer care and to manage our churn rate; and

•

our ability to manage our rapid growth and train additional personnel.

The forward looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. In addition to these important factors and matters discussed

1

elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

•

growth in demand for our services;

•

changes in consumer preferences or demand for our products;

•

availability of external financing on commercially acceptable terms;

•

the developments of our markets;

•

the highly competitive nature of our industry and changes to our business resulting from increased competition;

•

the impact of regulatory initiatives;

•

the rapid technological changes in our industry;

•

cost and synergy of our recent acquisitions;

•

the acceptance of new products and services by customers;

•

the condition of the economies of Russia, Ukraine and certain other countries of the CIS;

•

risks relating to legislation, regulation and taxation in Russia and certain other CIS, including laws, regulations, decrees and decisions governing each of the telecommunications industries in the countries where we operate, currency and exchange controls relating to entities in Russia and other countries where we operate and taxation legislation relating to entities in Russia and other countries where we operate, and their official interpretation by governmental and other regulatory bodies and by the courts of Russia and the CIS;

•

political stability in Russia, Ukraine and certain other CIS countries; and

•

the impact of general business and global economic conditions and other important factors described herein and from time to time in the reports filed by us with the U.S. Securities and Exchange Commission, or the SEC.

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. Except to the extent required by law, neither we, nor any of our respective agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained or incorporated by reference in this document.

2

PART I

Item 1.    Identity of Directors, Senior Management and Advisors

        Not applicable.

Item 2.    Offer Statistics and Expected Timetable

        Not applicable.

Item 3.    Key Information

A.    Selected Financial Data

        The selected consolidated financial data for the years ended December 31, 2006, 2007 and 2008, and as of December 31, 2007 and 2008, are derived from the audited consolidated financial statements, prepared in accordance with U.S. GAAP included elsewhere in this document. In addition, the following table presents selected consolidated financial data for the years ended December 31, 2004 and 2005, and as of December 31, 2004, 2005 and 2006, derived from our audited consolidated financial statements not included in this document. Our results of operations are affected by acquisitions. Results of operations of acquired businesses are included in our audited consolidated financial statements from their respective dates of acquisition. The summary financial data should be read in conjunction with our audited consolidated financial statements, included elsewhere in this document, "Item 3. Key Information—D. Risk Factors" and "Item 5. Operating and Financial Review and Prospects." Certain industry and operating data are also provided below.

		Years Ended December 31,
		2004			2005			2006			2007			2008
		(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Consolidated statements of operations data:
Net operating revenues:
Service revenues and connection fees		$	3,800,271		$	4,942,288		$	6,287,100		$	8,172,650		$	10,176,255
Sales of handsets and accessories			86,723			68,730			97,154			79,728			69,038
	Total net operating revenues		3,886,994			5,011,018			6,384,254			8,252,378			10,245,293
Operating expenses:
Cost of services, excluding depreciation and amortization shown separately below			481,097			732,867			1,223,715			1,727,365			2,247,948
Cost of handsets and accessories			218,590			254,606			209,260			158,580			169,615
Sales and marketing expenses			460,983			608,092			607,835			724,115			882,508
Depreciation and amortization expenses			675,729			907,113			1,095,981			1,489,548			1,936,837
Sundry operating expenses(1)			631,532			876,309			1,113,727			1,418,924			1,804,893
	Net operating income		1,419,063			1,632,031			2,133,736			2,733,846			3,203,492
Currency exchange and transaction gains			(6,529	)		(10,319	)		(24,051	)		(163,092	)		563,292
Other (income) expenses:
Interest income			(21,792	)		(24,828	)		(13,055	)		(38,100	)		(33,166	)
Interest expense, net of capitalized interest			107,956			132,474			177,145			134,581			153,341
Equity in net income of associates			(24,146	)		(42,361	)		(58,083	)		(72,665	)		(75,976	)
Bitel investment and write off			—			—			320,000			—			—
Other (expenses) income, net			(9,310	)		13,211			65,913			44,034			25,317
	Total other (income) expenses, net		52,708			78,496			491,920			67,850			69,516
	Income before provision for income taxes and minority interest		1,372,884			1,563,854			1,665,867			2,829,088			2,570,684
Provision for income taxes			354,664			410,590			576,103			738,270			630,621
Minority interest			30,342			26,859			14,026			19,314			9,644
	Net income	$	987,878		$	1,126,405		$	1,075,738		$	2,071,504		$	1,930,419

3

		Years Ended December 31,
		2004			2005			2006			2007			2008
		(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Dividends declared(2)		$	219,918		$	402,600		$	561,629		$	747,213		$	1,257,453
Net income per share, basic and diluted			0.50			0.57			0.54			1.05			1.00
Dividends declared per share			0.11			0.20			0.28			0.38			0.63
Dividends declared per share, rubles			3.20			5.75			7.60			9.67			14.84
Number of common shares outstanding			1,986,124,030			1,987,925,652			1,977,404,010			1,960,849,301			1,885,052,800
Weighted average number of common shares outstanding			1,984,497,348			1,986,819,999			1,987,610,121			1,973,354,348			1,921,934,091
Consolidated cash flow data:
Cash provided by operating activities		$	1,711,589		$	1,799,436		$	2,378,916		$	3,350,156		$	4,423,385
Cash used in investing activities			(1,543,201	)		(2,454,173	)		(1,779,562	)		(2,343,881	)		(2,335,185	)
	(of which capital expenditures)(3)		(1,358,944	)		(2,181,347	)		(1,721,968	)		(1,539,528	)		(2,227,290	)
Cash provided by/ (used in) financing activities			10,773			461,528			(464,066	)		(692,894	)		(1,374,294	)
Consolidated balance sheet data (end of period):
Cash, cash equivalents and short-term investments		$	347,510		$	106,343		$	276,036		$	650,274		$	1,104,520
Property, plant and equipment, net			3,234,318			4,482,679			5,297,669			6,607,315			5,900,129
Total assets			5,581,187			7,545,780			8,573,945			10,966,667			10,448,334
Total debt (long-term and short-term)(4)			1,937,148			2,850,557			3,078,452			3,401,667			4,075,234
Total shareholders' equity			2,523,323			3,294,089			3,751,781			5,442,930			4,054,896
	Including capital stock(5)		43,162			45,024			(64,220	)		(317,794	)		(1,376,195	)
Financial ratios (end of period):
Total debt/total capitalization(6)			43.4	%		46.4	%		45.1	%		38.5	%		50.1	%
Industry and operating data:(7)
Mobile penetration in Russia (end of period)			51	%		87	%		105	%		119	%		129	%
Mobile penetration in Ukraine (end of period)			29	%		64	%		105	%		120	%		121	%
Subscribers in Russia (end of period, thousands)(8)			26,540			44,219			51,222			57,426			64,628
Subscribers in Ukraine (end of period, thousands)(8)			7,374			13,327			20,003			20,004			18,115
Overall market share in Russia (end of period)			36	%		35	%		34	%		33	%		34	%
Overall market share in Ukraine (end of period)			53	%		44	%		41	%		36	%		32	%
Average monthly usage per subscriber in Russia (minutes)(9)			157			128			129			157			209
Average monthly usage per subscriber in Ukraine (minutes)(9)			114			117			142			154			279
Average monthly service revenue per subscriber in Russia(10)		$	12		$	9		$	8		$	9		$	11
Average monthly service revenue per subscriber in Ukraine(10)		$	13		$	10		$	7		$	7		$	7
Subscriber acquisition costs in Russia(11)		$	21		$	19		$	23		$	26		$	27
Subscriber acquisition costs in Ukraine(11)		$	19		$	14		$	10		$	12		$	11
Churn in Russia(12)			27.5	%		20.7	%		23.3	%		23.1	%		27.0	%
Churn in Ukraine(12)			15.8	%		21.8	%		29.9	%		49.0	%		47.3	%

(1)

"Sundry operating expenses" consist of general and administrative expenses, provision for doubtful accounts and other operating expenses (including charges incurred in connection with the "universal services reserve fund").

(2)

Dividends declared in each of the years ended December 31, 2004, 2005, 2006, 2007 and 2008 were, in each case, in respect of the prior fiscal year (i.e., in respect of each of the years ended December 31, 2003, 2004, 2005, 2006 and 2007, respectively). Includes dividends on treasury shares of $1.4 million, $1.5 million, $6.0 million and $36.5 million as of the years ended December 31, 2004, 2005, 2006 and 2007, respectively. The Board of Directors recommended that the annual general meeting of shareholders to be held on June 25, 2009 approve annual cash dividends in the amount of $1,158.3 million (including dividends on treasury shares of $62.9 million) for the year ended December 31, 2008, payable in 2009. See also "Item 10. Additional Information—B. Charter and Certain Requirements of Russian Legislation—Dividends."

(3)

Capital expenditures include purchases of property, plant and equipment and intangible assets.

4

(4)

Includes notes payable, bank loans, capital lease obligations and other debt.

(5)

Calculated as common stock less treasury stock.

(6)

Calculated as book value of total debt divided by the sum of the book values of total shareholders' equity and total debt at the end of the relevant period. See footnote 4 above for the definition of "total debt."

(7)

Source: AC&M-Consulting and our data. None of this data is derived from our audited consolidated financial statements.

(8)

We define a subscriber as an individual or organization whose account shows chargeable activity within 61 days (or 183 days in the case of prepaid tariffs) or whose account does not have a negative balance for more than this period. Prior to October 1, 2004, UMC used a 90-day period for such purposes with respect to its "Jeans" and "SIM-SIM," or prepaid, subscribers.

(9)

Average monthly minutes of usage per subscriber 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.

(10)

We calculate average monthly service revenue per subscriber 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. Prior to April 1, 2008, we excluded connection fees from service revenues. Average monthly service revenue per subscriber data for each of the years ended December 31, 2006, 2007 and 2008 presented in this table are based on our current calculation methodology.

(11)

Subscriber acquisition costs in Russia are calculated as total sales and marketing expenses for a given period divided by the total number of gross subscribers added during that period. In Ukraine, subscriber acquisition costs are calculated as total sales and marketing expenses, handset subsidies and cost of sim cards and vouchers for a given period divided by the total number of gross subscribers added during that period.

(12)

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.

B.    Capitalization and Indebtedness

        Not applicable.

C.    Reasons for the Offer and Use of Proceeds

        Not applicable.

D.    Risk Factors

An investment in our securities involves a certain degree of risk. You should carefully consider the following information about these risks, together with other information contained in this document, before you decide to buy our securities. If any of the following risks actually occur, our business, prospects, financial condition or results of operations could be materially adversely affected. In that case, the value of our securities could also decline and you could lose all or part of your investment. In addition, please read "Cautionary Statement Regarding Forward Looking Statements" where we describe additional uncertainties associated with our business and the forward looking statements included in this document.

Risks Relating to Business Operations in Emerging Markets

Emerging markets such as the Russian Federation, Ukraine and other CIS countries are subject to greater risks than more developed markets, including significant legal, economic, tax and political risks.

        Investors in emerging markets such as the Russian Federation, Ukraine and other CIS countries should be aware that these markets are subject to greater risk than more developed markets, including in some cases significant legal, economic, tax and political risks. Investors should also note that emerging economies such as the economies of the Russian Federation and Ukraine are subject to rapid change and that the information set out herein may become outdated relatively quickly. Furthermore,

5

in doing business in various countries of the CIS, we face risks similar to (and sometimes greater than) those that we face in Russia and Ukraine. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is suitable for sophisticated investors who fully appreciate the significance of the risks involved and investors are urged to consult with their own legal and financial advisors before making an investment in our securities.

Risks Relating to Our Business

If our purchase of UMC is found to have violated Ukrainian law or the purchase is unwound, our business, financial condition, results of operations and prospects would be materially adversely affected.

        On June 7, 2004, the Deputy General Prosecutor of Ukraine filed a claim against us and others in the Kiev Commercial Court seeking to unwind the sale by Joint Stock Company Ukrtelecom, or Ukrtelecom, of its 51% stake in UMC to us. The complaint also sought an order prohibiting us from alienating 51% of our stake in UMC until the claim was resolved on the merits. The claim was based on a provision of the Ukrainian privatization law that included Ukrtelecom among a list of "strategic" state holdings prohibited from alienating or encumbering its assets during the course of its privatization. While the Cabinet of Ministers of Ukraine in May 2001 issued a decree specifically authorizing the sale by Ukrtelecom of its entire stake in UMC, the Deputy General Prosecutor asserted that the decree contradicted the privatization law and that the sale by Ukrtelecom was therefore illegal and should be unwound. On August 12, 2004, the Kiev Commercial Court rejected the Deputy General Prosecutor's claim.

        On August 26, 2004, the General Prosecutor's Office requested the Constitutional Court of Ukraine to review whether certain provisions of the Ukrainian privatization law limiting the alienation of assets by privatized companies were applicable to the sale by Ukrtelecom of UMC shares to us. On January 13, 2005, the Constitutional Court of Ukraine refused to initiate the constitutional proceedings arising from the request of the General Prosecutor's Office on the grounds that the request was incompatible with the requirements of the Ukrainian constitutional law, and that the issue as it was raised in the request did not fall within the jurisdiction of the Constitutional Court of Ukraine. This, however, does not prevent other persons having the right to apply to the Constitutional Court of Ukraine from challenging the constitutionality of provisions of the Ukrainian privatization law applicable to the sale by Ukrtelecom of the UMC shares.

        If the Constitutional Court of Ukraine determines that the provisions of the Ukrainian privatization legislation applicable to Ukrtelecom's sale of its stake in UMC are unconstitutional, the Kiev Commercial Court could be requested to re-open the case based on new circumstances and could potentially include additional persons that were not parties to the original proceeding and/or additional claims.

        In addition, as UMC was formed during the time when Ukraine's legislative framework was developing in an uncertain legal environment, its formation and capital structure may also be subject to challenges. In the event that our purchase of UMC is found to have violated Ukrainian law or the purchase is unwound, in whole or in part, our business, financial condition, results of operations and prospects would be materially adversely affected.

Our controlling shareholder has the ability to take actions that may conflict with the interests of holders of the ADSs.

        We are controlled by Sistema Joint Stock Financial Corporation, or Sistema, which controls 52.8% of our total charter capital (55.7% excluding treasury shares). If not otherwise required by Russian law and/or our charter, resolutions at a shareholders' meeting will be adopted by a simple majority in a meeting at which shareholders holding more than half of the issued share capital are present or

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represented. Accordingly, Sistema has the power to control the outcome of most matters to be decided by vote at a shareholders' meeting and, as long as it holds, either directly or indirectly, a majority of our shares, will control the appointment of a majority of directors and removal of directors. Sistema is also able to control or significantly influence the outcome of any vote on matters which require three-quarters majority vote of a shareholders' meeting, such as amendments to the charter, proposed reorganizations and substantial asset sales and other major corporate transactions, among other things. Thus, Sistema can take actions that may conflict with the interests of other shareholders and holders of the ADSs. In addition, under certain circumstances, a disposition by Sistema of its controlling stake in our company could harm our business. See also "—Risks Relating to Our Financial Condition—A disposition by our controlling shareholder of its stake in our company could materially harm our business."

        Sistema has outstanding a significant amount of indebtedness, including consolidated indebtedness of approximately $1.47 billion of short-term debt, $2.23 billion comprising the short-term portion of its long-term debt, and $6.96 billion of long-term debt (net of the short-term portion). At the corporate level, Sistema has $513.6 million of short-term debt, $292.0 million comprising the short-term portion of its long-term debt, and $1,469.8 million of long-term debt (net of the short-term portion). Therefore, Sistema will require significant funds to meet its obligations, which may come in part from dividends paid by its subsidiaries, including us.

        Sistema voted in favor of declaring dividends of $402.6 million in 2005, $561.6 million in 2006, $747.2 million in 2007 and $1,257.5 million in 2008. The indentures relating to our outstanding notes and other debt do not restrict our ability to pay dividends. As a result of paying dividends, our reliance on external sources of financing may increase, our credit rating may decrease and our cash flow and ability to repay our debt obligations, or make capital expenditures, investments and acquisitions could be materially adversely affected.

        In addition, our credit ratings can be affected by Sistema's activity and credit ratings. For example, in April 2009, Standard & Poor's placed our 'BB' long-term corporate credit rating on CreditWatch with negative implications following a similar rating action on Sistema. In placing the rating on CreditWatch, Standard & Poor's stated that our "rating remains constrained by Sistema's credit profile and majority ownership."

        Sistema also owns a non-controlling interest in Sky Link CJSC, or Sky Link, which operates on a CDMA-2000 standard in a number of key regions, including Moscow and St. Petersburg. Sky Link may pursue business strategies that specifically target high-end businesses and residential customers, which could result in increased competition for us.

The reduction, consolidation or acquisition of independent dealers and our failure further develop our distribution network may lead to a decrease in our subscriber growth rate, market share and revenues.

        We have historically enrolled a vast majority of our subscribers through a network of independent dealers. In October 2008, Vimpelcom acquired a 49.9% stake in Morefront Holdings Ltd., a company that owns 100% of the Euroset Group, the largest mobile handset retailer and leading dealer for major mobile network operators in Russia. Although the Federal Antimonopoly Service, or FAS, approval relating to the sale of Euroset specifically prohibits Euroset from discriminating against or providing preferential treatment to any mobile operator following the acquisition, we believe that we faced discriminatory treatment following Vimpelcom's acquisition, including the promotion Vimpelcom's services over ours at Euroset outlets, notwithstanding these regulatory prohibitions. As a result, we ceased working with Euroset as of April 1, 2009, and we are currently involved in litigation with Euroset in Russia. See "Item 8. Financial Information—8.A.7. Litigation."

        Subscribers enrolled through Euroset accounted for around 20%-25% of our total new subscribers in 2008. However, following Vimpelcom's acquisition of its stake in Euroset and in view of the

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deteriorating financial condition of many nationwide dealer networks, we accelerated the development of our proprietary distribution network and have been working to increase our relationship with small regional dealers in an effort to mitigate the potential effects of these events. If we are not successful in expanding our proprietary network and developing new relationships with independent dealers effectively and expeditiously, our market share may decline and our business, financial condition, results of operations and prospects may be materially adversely affected.

        In addition, it has been reported in the press that virtually all of the large national and regional mobile handset retailers are facing liquidity issues or are on the verge of bankruptcy, and the share of our subscribers enrolled through these retailers dropped dramatically during the last quarter of 2008 and continues to decline. As a result, many large handset retailers are considering business combinations with other retailers or with mobile operators. Mergers among major retailers would likely increase their bargaining power when negotiating with mobile telecommunications operators, including us. Acquisitions of major handset retailers by competing mobile operators could result in the retailers' preferential treatment and promotion of the acquiring mobile operator.

        As the share of subscribers enrolled through large national and regional dealers has decreased, the share of our subscribers enrolled through small dealer and subdealer networks and our own distribution network is increasing, and we are continuing our efforts to grow our proprietary distribution network both organically and through acquisitions. See Item 4. Information on our company—B. Business overview—Sales and Marketing—Sales and Distribution.

        However, if we fail to rapidly expand our proprietary distribution network or to maintain and further develop our distribution network of national, regional and local retailers, or if our strategy to rapidly expand our proprietary distribution network is not successful, our subscriber growth rate, market share and revenues may decrease and have a material adverse effect on our business, financial condition, results of operations and prospects.

The telecommunications services market is characterized by rapid technological change, which could render our services obsolete or non-competitive and result in the loss of our market share and a decrease of our revenues.

        The telecommunications industry is subject to rapid and significant changes in technology and is characterized by the continuous introduction of new products and services. The mobile telecommunications industry in Russia is also experiencing significant technological change, as evidenced by the introduction in recent years of new standards for radio telecommunications, such as WiFi, Worldwide Inter-operability for Microwave Access, or WiMAX, Enhanced Data Rates for Global Evolution, or EDGE, and Universal Mobile Telecommunications System, or UMTS, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products and enhancements and changes in customer requirements and preferences. Such continuing technological advances make it difficult to predict the extent of the future competition we may face and it is possible that existing, proposed or as yet undeveloped technologies will become dominant in the future and render the technologies we use less profitable or even obsolete. New products and services that are more commercially effective than our products and services may also be developed. Furthermore, we may not be successful in responding in a timely and cost-effective way to keep up with these developments. Changing our products or services in response to market demand may require the adoption of new technologies that could render many of the technologies that we are currently implementing less competitive or obsolete. To respond successfully to technological advances and emerging industry standards, we may require substantial capital expenditures and access to related or enabling technologies in order to integrate the new technology with our existing technology.

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We face increasing competition in the markets where we operate, which may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies.

        The wireless telecommunications services markets in which we operate are highly competitive, particularly in Russia and Ukraine. Increased competition, including from the potential entry of new mobile operators and Mobile Virtual Network Operators in the markets where we operate, may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies.

        For example, competition in the Ukrainian wireless telecommunications market has significantly intensified over the last three years, and with the Ukrainian market reaching saturation, there was little growth in the overall number of subscribers and nationwide penetration in 2008 compared to 2007. At the same time, aggressive pricing in the market by Turkish operator Astelit and the entry of Vimpelcom into the market in 2006 has caused our subscriber numbers in Ukraine to decrease and the average monthly revenue per subscriber to remain flat over the past three years.

We are in the process of transferring to a new billing system, which could have a material adverse effect on our business and results of operations in the short term.

        We have substantially completed implementation of a new billing system in Russia and Belarus. The transition to the new billing system in the other countries where we operate will take longer to complete. Although we have already begun to experience increases in our overall efficiency and reductions in our expenses as a result of the new billing system, we are still required to run both the old and new billing systems simultaneously during the transition period, creating additional burdens on our technical support staff. We may also experience technical problems with the new billing system during the transition period. These factors may increase our operational risks and expenses and inconvenience for subscribers in the short term. The failure or breakdown of key components of our infrastructure in the future, including our billing system and its susceptibility to fraud, could have a material adverse effect on our business and results of operations.

The failure of our geographic expansion strategy could hamper our continued growth and profitability.

        Our continued growth depends, in part, on our ability to identify attractive opportunities in markets that will grow and on our ability to manage the operations of acquired or newly established businesses. Our strategy contemplates the acquisition of additional operations within the CIS as well as the exploration of other selective opportunities in growing markets outside the CIS, particularly in Africa. These countries would represent new operating environments for us and, in many instances, may be located a great distance from our corporate headquarters in Russia. We therefore may have less control over their activities. We may also face uncertainties with respect to the operational and financial needs of these businesses, and may, in the course of our acquisitions, incur additional debt to finance the acquisitions and/or take on substantial existing debt of the acquired companies. In addition, we anticipate that the countries into which we may expand will be emerging markets and, as with countries of our current presence, subject to greater political, economic, social and legal risks than more developed markets.

        Our failure to identify attractive opportunities for expansion into new markets and to manage the operations of acquired or newly established businesses in these markets could hamper our continued growth and profitability, and have a material adverse effect on our financial condition, results of operations and prospects.

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We may acquire, invest in or merge with other companies to expand our operations which may pose risks to our business.

        As part of our growth strategy, we will continue to evaluate opportunities to acquire, invest in or merge with other existing operators or license holders in the CIS and in growing markets outside the CIS, as well as other complementary businesses. For example, we are currently considering the potential acquisition of "Comstar—United Telesystems" Open Joint Stock Company, or Comstar UTS, and on May 22, 2009, we announced that we filed an application with FAS to receive approval for this acquisition. We have also acquired certain handset dealer chains in an effort to expand our distribution network. See "Item 8. Financial Information—B. Significant Changes."

        Business combinations that we may undertake in the future would entail a number of risks that could materially and adversely affect our business, financial condition, results of operations and prospects, including the following:

•

incorrect assessment of the value of any acquired target;

•

assumption of the acquired target's liabilities and contingencies;

•

failure to realize any of the anticipated benefits or synergies from any acquisitions or investments we complete;

•

problems integrating the acquired businesses, technologies or products into our operations;

•

incurrence of debt to finance acquisitions and higher debt service costs related thereto;

•

difficulties in retaining business relationships with suppliers and customers of the acquired company;

•

risks associated with markets in which we lack experience;

•

potential loss of key employees of the acquired company;

•

potential write-offs of acquired assets; and

•

lawsuits arising out of disputes over ownership of acquired assets and/or the enforcement of indemnities relating to the title to such assets.

        In addition, companies that we acquire may not have internal policies, including accounting policies and internal control procedures, that are compatible, compliant or easily integrated with ours.

        If any of our future business combinations, including in relation to Comstar UTS, is structured as a merger with another company, such a merger would be considered a corporate reorganization under Russian law, which would allow our creditors to accelerate our outstanding indebtedness. In addition, a corporate reorganization and any business combination that constitutes a "major transaction" under Russian law would trigger the right of our shareholders who abstain from voting on or vote against such transaction to sell, and our obligation to buy, their shares in an amount representing up to 10% of our net assets as calculated under Russian Accounting Standards. See "—Legal Risks and Uncertainties—Shareholder rights provisions under Russian law could impose additional obligations and costs on us."

If we cannot successfully develop our network or integrate our acquired businesses, we will be unable to expand our subscriber base and maintain our profitability.

        We plan to expand our network infrastructure by extending coverage and increasing the capacity of our existing network in the Moscow and regional license areas, as well as by further developing our operations in Ukraine, Uzbekistan, Turkmenistan and Armenia and making investments in MTS Belarus.

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        Our ability to increase our subscriber base depends upon the success of our network expansion. We have expended considerable amounts of resources to enable this expansion. Limited information regarding the markets into which we have or are considering expanding, either through acquisitions or new licenses, complicates accurate forecasts of future revenues from those regions, increasing the risk that we may overestimate these revenues.

        In addition, we have expanded our network through acquisitions and we may continue to engage in further acquisitions. We may not be able to integrate previous or future acquisitions successfully or operate them profitably. Such integration requires significant time and effort from our senior management, who are also responsible for managing our existing operations. Such integration may also be difficult as our technical systems may differ from those of the acquired businesses. In addition, unpopular cost cutting measures may be required and control of cash flow may be difficult to establish. Any difficulties encountered in the transition and integration process and in the operation of acquired companies could have a material adverse effect on our results of operations.

        We also may face risks during the course of our expansion into countries outside of the Russian Federation. Differing cultures and more uncertain business operating environments could lead to lower profitability and higher risks to our business. For example, see "—Legal Risks and Uncertainties—Our inability to gain operational control over Bitel has prevented us from realizing the expected benefits of our acquisition and resulted in our write off of the costs relating to the purchase of Bitel, and we may face significant liabilities to the seller and Bitel."

        The buildout of our network is also subject to risks and uncertainties, which could delay the introduction of service in some areas and increase the cost of network construction, including difficulty in obtaining base station sites on commercially attractive terms. In addition, telecommunications equipment used in Russia, Ukraine and other CIS countries is subject to governmental certification, and periodic renewals of the same. The failure of any equipment we use to receive timely certification or re-certification could also hinder our expansion plans. Furthermore, as a result of the current downturn in the global financial markets, certain banks have curtailed their lending programs, which may limit our ability to obtain external financing and, in turn, result in the reduction of our capital expenditure program. To the extent we fail to expand our network on a timely basis, we could experience difficulty in expanding our subscriber base.

Our inability to develop additional sources of revenue could have a material adverse effect on our business, financial condition, results of operations and prospects.

        Mobile penetration in Russia and Ukraine reached 129.4% and 120.8%, respectively, as of December 31, 2008, according to AC&M-Consulting. While customer growth has been, and we expect it will continue to be, a principal source of revenue growth, increasing competition and market saturation will likely cause the increase in subscribers to continue to slow in comparison to our historical growth rates. As a result, we will need to continue to develop new services, including value-added, 3G, Blackberry services, integrated telecommunications services and others, as well as consider vertical integration opportunities through the development or acquisition of dealers in order to provide us with sources of revenue in addition to standard voice services. Our inability to develop additional sources of revenue could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices and therefore lose market share and revenues.

        Our ability to provide commercially viable services depends on our ability to continue to interconnect cost-effectively with zonal, intercity and international fixed line and mobile operators in Russia, Ukraine and other countries in which we operate. Fees for interconnection are established by

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agreements with network operators and vary, depending on the network used, the nature of the call and the call destination.

        In Russia, the government in the past has expressed its intent to privatize SVYAZINVEST Telecommunications Investment Joint-Stock Company, or Svyazinvest, a holding company that controls Open Joint Stock Company Long-Distance and International Telecommunications Rostelecom, or Rostelecom, Russia's primary domestic and international long-distance operator, and certain multiregional fixed line operators controlling over 80% of all fixed line telecommunications services in Russia. In Ukraine, the government plans to privatize Ukrtelecom, which has a market share of over 80% of all fixed line telecommunications services in Ukraine. The timing of these privatizations is not yet known, and it is currently unclear how they will affect our interconnection arrangements and costs.

        Although Russian legislation requires that operators of public switched telephone networks that are deemed "substantial position" operators cannot refuse to provide interconnections or discriminate against one operator over another, we believe that, in practice, some operators attempt to impede wireless operators by delaying interconnection applications and establishing technical conditions for interconnection feasible only for certain operators. Any difficulties or delays in interconnecting cost-effectively with other networks could hinder our ability to provide services at competitive prices or at all, causing us to lose market share and revenues, which could have a material adverse effect on our business and results of operations. See also "—If we or any of our subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations.

        Under the Ukrainian Telecommunications Law, the National Commission for the Regulation on Communications, or the NCRC, is authorized to regulate the local tariffs for public telecommunications services rendered by fixed line operators within one geographical numbering zone. While mobile cellular operators (including MTS-Ukraine) are generally entitled to set their retail tariffs and negotiate interconnect rates with other operators, the NCRC is entitled to regulate the interconnect rates of any mobile cellular operator declared a "dominant market force" by the Antimonopoly Committee of Ukraine, or the AMC. Although MTS-Ukraine had a 32.5% market share of the wireless communications market in Ukraine as of December 31, 2008, it has not been declared a dominant market force by the AMC.

        However, over the course of 2007-2009, the AMC conducted a preliminary investigation of the telecommunications interconnection market among mobile operators in Ukraine and found that eight mobile operators, including MTS-Ukraine and its closest competitors, are monopolists in relation to the market for interconnecting to each of their respective networks. A final ruling has not yet been made. In the event that the AMC declares these operators to be monopolists in relation to the market for interconnecting to each of their respective networks, the interconnection fees charged by these operators for terminating calls connecting to their respective networks may be subject to regulation by the NCRC which, in turn, may cause a significant decrease in both the interconnect revenues we receive as well as the interconnect fees we pay to other mobile operators in Ukraine, which could have a material adverse effect on our results of operations. "Item 4. Information on Our Company—B. Business Overview—Regulation in Ukraine—Competition" for additional information.

        In addition, in February 2009, the NCRC adopted a decision to analyze certain telecommunication services markets to determine whether such markets should be subject to regulation. Among the markets to be reviewed are the market for accessing mobile networks and the market for terminating calls on mobile networks. This review by the NCRC may lead to additional regulation of our

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interconnect rates and/or influence the position of the AMC in connection with the investigation described above.

        In addition, we believe that the state owned fixed line operator monopoly, Ukrtelecom, is currently able to influence telecommunications policy and regulation and may cause substantial increases in interconnect rates for access to fixed line operators' networks by mobile cellular operators. In November 2008, Ukrtelecom announced its plans to increase the current interconnect rates for access to fixed line operators' networks by mobile cellular operators commencing January 1, 2009. The contract between MTS-Ukraine and Ukrtelecom terminated on December 31, 2008. Although a new contract has not been signed, Ukrtelecom and MTS-Ukraine continue to provide traffic transit services to each other in 2009. MTS-Ukraine filed a lawsuit against Ukrtelecom seeking to reinstate the 2008 interconnect rates, and the matter is currently pending.

        Similarly, Ukrtelecom may cause substantial decreases in interconnect rates for access to mobile cellular operators' networks by fixed line operators, which could cause our revenues to decrease and materially adversely affect our results of operations.

If frequencies currently assigned to us are reassigned to other users or if we fail to obtain renewals of our frequency allocations, our network capacity will be constrained and our ability to expand limited, resulting in a loss of market share and lower revenues.

        There is a limited number of frequencies available for wireless operators in each of the regions in which we operate or hold licenses to operate. We are dependent on access to adequate spectrum allocation in each market in which we operate in order to maintain and expand our subscriber base. If frequencies are not allocated to us in the future in the quantities, with the geographic span and for time periods that would allow us to provide wireless services on a commercially feasible basis throughout all of our license areas, our business, financial condition, results of operations and prospects may be materially adversely affected.

        A loss of allocated spectrum, which is not replaced by other adequate allocations, could also have a substantial adverse impact on our network capacity. In addition, frequency allocations are often issued for periods that are shorter than the terms of the licenses, and such allocations may not be renewed in a timely manner or at all. If our frequencies are revoked or we are unable to renew our frequency allocations, our network capacity would be constrained and our ability to expand limited, resulting in a loss of market share and lower revenues.

An increase in the fees for frequency spectrum usage could have a negative effect on our financial results.

        The terms of our licenses in Russia and the CIS require that we make payments for frequency spectrum usage. Any significant increase in the fees payable for the frequency channels that we use or additional frequency channels that we need in Russia or the CIS could have a negative effect on our financial results.

We may not realize the benefits we expect to receive from our investments in 3G wireless services, which could have a material adverse effect on our business and results of operations.

        In May 2007, the Federal Service for Supervision in the Area of Communications and Mass Media, awarded each of Open Joint Stock Company MegaFon, or MegaFon, Open Joint Stock Company "Vimpel-Communications," or Vimpelcom, and us a license to provide 3G services in the Russian Federation. The 3G license will allow us to provide mobile radio telephone services using the International Mobile Telecommunications-2000, or IMT-2000/UMTS standard. Historically, mobile operators that have developed 3G networks have experienced various difficulties and challenges, including a limited supply of 3G-compatible handsets, limited international roaming capabilities, as well as 3G software and network-related problems. We may experience similar problems or encounter new

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difficulties when developing our 3G network and may be unable to fully resolve them. For example, we cannot be certain that:

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our 3G network and services will deliver the quality and level of service that our customers demand or prefer;

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we will be able to provide all contemplated 3G services at reasonable prices and within a reasonable timeframe;

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manufacturers and content providers will develop and offer products and services for our 3G network on a timely basis;

•

there will be sufficient demand for 3G services in the markets where we operate;

•

our 3G network will be commercially viable in all of the locations we are required to operate pursuant to our 3G license;

•

our competitors will not offer similar services at lower prices; and

•

changes in governmental policies, rules, regulations or practices will not affect our network rollout or our business operations.

        In addition, Russian military authorities also use frequencies on the 3G spectrum, which may limit the availability of 3G frequencies for commercial use in certain areas. During the construction of our 3G network, there is also a risk that the frequencies assigned to us for commercial use may overlap with frequencies used by the Russian military. If this overlap were to occur, it could cause problems or delays in the development and operation of our 3G network in Russia.

        In addition, we may face competition from operators using second generation, or 2G, or other forms of 3G technology. For example, licenses for the use of code division multiple access, or CDMA, technology have already been granted for the provision of fixed wireless services in a number of regions throughout Russia. CDMA is a 2G digital cellular telephony technology that can be used for the provision of both wireless and fixed services. Currently, CDMA technology is offered by certain mobile operators in Russia who operate using the Nordic Mobile Telephone 450 MHz, or NMT-450, standard. If CDMA operators were able to develop widespread networks throughout Russia, we would face increased competition.

        In addition, the development of WiMAX networks will likely pose additional competition for 3G providers operating in the IMT-2000/UMTS standard.

        Potential competition from other 3G, CDMA or WiMAX providers, together with any substantial problem with the rollout of our 3G network and provision of 3G services in the future, could materially adversely affect our business, financial condition and results of operations.

Our inability to obtain a UMTS license in Ukraine on commercially reasonable terms or at all may hinder us from competing in Ukraine.

        It has been reported that the NCRC will issue through an auction one UMTS license by the end of 2009. The terms and procedures for issuing this license are not yet clear. The award of the UMTS license to one of our competitors would likely increase the competition we face in the provision of both GSM and 3G services in Ukraine. If we are successful in obtaining the UMTS license, the purchase price may be significant which, in turn, may negatively affect our financial condition and results of operations.

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Service disruptions on our network could lead to a loss of subscribers, damage to our reputation, violations of the terms of our licenses and subscriber contracts and penalties.

        We are able to deliver services only to the extent that we can protect our network systems against damage from communications failures, computer viruses, power failures, natural disasters and unauthorized access. Any system failure, accident or security breach that causes interruptions in our operations could impair our ability to provide services to our customers and materially adversely affect our business and results of operations. In addition, to the extent that any disruption or security breach results in a loss of or damage to customers' data or applications, or inappropriate disclosure of confidential information, we may incur liability as a result, including costs to remedy the damage caused by these disruptions or security breaches.

        While we maintain back-up systems for our telecommunications equipment, network management, operations and maintenance systems, these systems may not ensure recovery in the event of a network failure. In particular, in the event of extensive software and/or hardware failures, significant disruptions to our systems could occur, leading to our inability to provide services. Disruptions in our provision of services could lead to a loss of subscribers, damage to our reputation, violations of the terms of our licenses and subscriber contracts and penalties.

        Our computer and communications hardware is protected through physical and software safeguards. However, it is still vulnerable to fire, storm, flood, loss of power, telecommunications failures, interconnection failures, physical or software break-ins, viruses and similar events. Although our computer and communications hardware is insured against fires, storms and floods, we do not carry business interruption insurance to protect us in the event of a catastrophe, even though such an event could have a material adverse effect on our business.

Failure to fulfill the terms of our licenses could result in their suspension or termination, which could have a material adverse effect on our business and results of operations.

        Each of our licenses requires service to be offered by a specific date and some contain further requirements as to network capacity and territorial coverage to be reached by specified dates. In addition, all of our licenses require us to comply with various telecommunications regulations relating to the use of radio frequencies and numbering capacity allocated to us, network construction and interconnection rules, among others. If we fail to comply with the requirements of Russian, Ukrainian or other applicable legislation or we fail to meet any terms of our licenses, our licenses and other authorizations necessary for our operations may be suspended or terminated. A suspension or termination of our licenses or other necessary governmental authorizations could have a material adverse effect on our business and results of operations.

If we are unable to maintain our favorable brand image, we may be unable to attract new subscribers and retain existing subscribers, leading to loss of market share and revenues.

        Our ability to attract new subscribers and retain existing subscribers depends in part on our ability to maintain what we believe to be our favorable brand image. Negative publicity or rumors regarding our company, our shareholders and affiliates or our services could negatively affect this brand image, which could lead to loss of market share and revenues.

Our intellectual property rights are costly and difficult to protect.

        We regard our copyrights, trademarks, trade secrets and similar intellectual property, including our rights to certain domain names, as important to our continued success. We rely upon trademark and copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our proprietary rights. Nonetheless, intellectual property rights are especially difficult to protect in the markets where we operate. In these markets, the

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regulatory agencies charged to protect intellectual property rights are inadequately funded, legislation is underdeveloped, piracy is commonplace and enforcement of court decisions is difficult. For example, in Russia, legislation in the area of copyrights, trade marks and other types of intellectual property was significantly changed in 2008, and Russian courts have limited experience in applying and interpreting the new laws.

        In addition, litigation may be necessary to enforce our intellectual property rights, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement. Any such litigation may result in substantial costs and diversion of resources, and, if decided unfavorably to us, could have a material adverse effect on our business and results of operations. We also may incur substantial acquisition or settlement costs where doing so would strengthen or expand our intellectual property rights or limit our exposure to intellectual property claims of third parties.

Failure to renew our licenses or receive renewed licenses with similar terms to our existing licenses could have a material adverse effect on our business and results of operations.

        Our telecommunications licenses expire in various years from 2010 to 2021 and may be renewed upon application to the relevant governmental authorities. Government officials in Russia and the other CIS countries in which we operate have broad discretion in deciding whether to renew a license, and may not renew licenses after their expiration. If licenses are renewed, they may be renewed with additional obligations, including payment obligations. In addition, we may be subject to penalties or our licenses may be suspended or terminated for non-compliance with the new licenses requirements.

        Failure to renew our telecommunications licenses or receive renewed licenses with similar terms to existing licenses could significantly limit our operations, which could have a material adverse effect on our business and results of operations.

Our inability or failure to register our communications networks with the government may have a material adverse effect on our business, financial condition and results of operations.

        Amendments to the Communications Law enacted in 2008 require telecommunications operators in Russia to register their communications networks with Federal Supervision Service for Communication, Information Technologies and Mass Media.

        As articulated in the amendments, the primary goal of the new registration requirements is to keep the relevant regulatory and supervisory bodies informed about the state of communications networks in Russia. The amendments envisage a process whereby (i) an operator seeking to build a network will prepare and submit a detailed network deployment plan (referred to in the law as a "system project") to the registration authority and (ii) once the network is built, the operator would need to engage an accredited non-governmental third party to inspect and approve the network. Following this approval, the network should be registered. Existing networks are to undergo the same registration procedure as for new networks, and the amendments require that networks in existence prior to February 14, 2008 be registered by January 1, 2010.

        As of the date of this document, the network registration procedure has not been established, including the rules for accrediting the third party inspectors and the rules and parameters for carrying out the inspections. The ambiguity in the amendments and lack of any implementing regulations has led to uncertainty as to our ultimate obligations under these new requirements and the financial and managerial resources that will be required. Moreover, as there is no registration procedure currently in place, it is unclear whether it will be possible for us to register our existing networks by January 1, 2010. Failure to register any of our networks could result in their suspension by the authorities.

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        If the financial and managerial resources required to comply with the new registration requirements are substantial or if the operation of any of our networks is suspended, our business, financial condition and results of operations could be materially adversely affected.

We engage in transactions with related parties, which may present conflicts of interest, potentially resulting in the conclusion of transactions on terms not determined by market forces.

        We have purchased interests in various mobile telecommunications companies from Sistema and entered into arrangements with subsidiaries and affiliates of Sistema for the provision of advertising services (Open Joint Stock Company Advertising Agency Maxima, or Maxima, and Closed Joint Stock Company Mediaplanning, or Mediaplanning), interconnection services (Open Joint Stock Company Multiregional Transit Telecom, or MTT), interconnection and telephone numbering capacity (The Moscow City Telephone Network Public Open Joint Stock Company, or MGTS and Comstar UTS), IT services and hardware purchases (LLC Kvazar-Micro.RU, or Kvazar), banking services (Moscow Bank of Reconstruction and Development, or MBRD), office leases (MGTS) and the purchase of a new billing system (Open Joint Stock Company Sitronics), among others. Related party transactions with Sistema and other companies within the Sistema group may present conflicts of interest, potentially resulting in the conclusion of transactions on terms less favorable than could be obtained in arm's-length transactions. See "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions."

In the event that our minority shareholders or the minority shareholders of our subsidiaries were to successfully challenge past or future interested party transactions, or do not approve interested party transactions or other matters in the future, we could be limited in our operational flexibility and our business, financial condition, results of operations and prospects could be materially adversely affected.

        We own less than 100% of the equity interests in some of our subsidiaries. In addition, certain of our wholly owned subsidiaries have had other shareholders in the past. We and our subsidiaries in the past have carried out, and continue to carry out, transactions that may be considered to be "interested party transactions" under Russian law, requiring approval by disinterested directors, disinterested independent directors or disinterested shareholders depending on the nature of the transaction and parties involved. The provisions of Russian law defining which transactions must be approved as "interested party transactions" are subject to different interpretations and, as a result, it is possible that our and our subsidiaries' interpretation and application of these provisions could be subject to challenge. Any such challenges, if successful, could result in the invalidation of transactions, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

        In addition, Russian law requires a three-quarters majority vote of the holders of voting stock present at a shareholders' meeting to approve certain transactions and other matters, including, for example, charter amendments, major transactions involving assets in excess of 50% of the assets of the company, repurchase of shares by the company and certain share issuances. In some cases, minority shareholders may not approve interested party transactions requiring their approval or other matters requiring minority shareholder or supermajority approval. In the event that these minority shareholders were to successfully challenge past interested party transactions, or do not approve interested party transactions or other matters in the future, we could be limited in our operational flexibility and our business, financial condition, results of operations and prospects could be materially adversely affected.

Our competitive position and future prospects depend on our senior managers and other key personnel.

        Our ability to maintain our competitive position and to implement our business strategy is dependent to a large degree on the services of our senior management team and other key personnel. Moreover, competition in Russia and in the other countries where we operate for personnel with

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relevant expertise is intense due to the relatively small number of qualified individuals. As a result, we attempt to structure our compensation packages in a manner consistent with the evolving standards of the labor markets in these countries. We are not insured against the detrimental effects to our business resulting from the loss or dismissal of our key personnel. In addition, it is not common practice in Russia and the other countries where we operate to purchase key-man life insurance policies, and we do not carry such policies for our senior management and other key personnel. The loss or decline in services of members of our senior management team or an inability to attract, retain and motivate qualified key personnel could have a material adverse effect on our business, financial condition and results of operations.

If leaks of confidential information, including information relating to our subscribers, occur it may negatively impact our reputation and our brand image and lead to a loss of market share, which could materially adversely affect our business, financial condition, results of operations and prospects.

        Although we make efforts to protect confidential information, future breaches of security and leaks of confidential information, including information relating to our subscribers may negatively impact our reputation and our brand image and lead to a loss of market share, which could materially adversely affect our business, financial condition, results of operations and prospects.

        For example, in January 2003, we discovered that part of our database of subscribers, containing private subscriber information, was illegally copied and stolen. The database contained information such as the names, addresses, home phone numbers, passport details and other personal information of approximately five million of our subscribers. Following its theft, this database was available for sale in Russia. In addition, in May 2003, certain subscriber databases of several operators in the North-West region, including those of us, MegaFon, Delta Telecom and two other operators, were stolen and are currently being sold.

        In December 2003, we completed our internal investigation relating to the theft of our subscriber databases and found that these incidents were due to weaknesses in our internal security in relation to physical access to such information. We have taken measures that we believe will prevent such incidents from occurring in the future, but such incidents may nonetheless recur.

        In January 2003, lawsuits were filed by two of our subscribers seeking compensation for damages resulting from the leak of the subscribers' confidential information. While the subscribers subsequently withdrew their claims, if similar lawsuits are successful in the future, we might have to pay significant damages, including consequential damages, which could have a material adverse effect on our results of operations.

The entry of Mobile Virtual Network Operators into the Russian mobile communications market could increase competition and subscriber churn, resulting in a loss of our market share and decreased revenue.

        On December 29, 2008, the Ministry of Communications and Mass Media adopted an order establishing the requirements for Mobile Virtual Network Operators, or MVNOs. MVNOs are companies that provide mobile communications services but do not own the radio frequencies and, often, network infrastructure required to do so. According to the order, MVNOs in Russia must be licensed, and their use of frequencies and infrastructure and rendering of services will be done pursuant to agreements entered into between MVNOs and existing frequency holders. There is no requirement that existing frequency holders transact with the MVNOs, and agreements between them will be entered into at their option.

        The aim of the Ministry in establishing the legal framework for MVNOs to operate is to increase competition in the Russian mobile services market, which is currently dominated by us, Vimpelcom and Megafon. While existing frequency holders, including us, may receive revenues from MVNOs for the use of our frequencies and network infrastructure, we expect these revenues to be lower than the

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revenues we would receive if providing services directly to subscribers. In addition, in the event we lose subscribers to MVNOs that lease their frequencies and infrastructure from an operator other than us, we will be deprived of the revenue streams from both the subscribers and the MVNOs. The MVNOs may also establish aggressive tariffs, which could result in increased subscriber churn and/or driving down the tariffs of all mobile operators.

        While the impact of MVNOs' entry into the Russian mobile communications market is not yet clear, the emergence of any of the foregoing trends could have a material adverse effect on our business, financial condition, results of operations and prospects.

If the Federal Antimonopoly Service were to conclude that we acquired or created a new company in contravention of antimonopoly legislation, it could impose administrative sanctions and require the divestiture of this company or other assets.

        Our businesses have grown substantially through the acquisition and formation of companies, many of which required the prior approval of, or subsequent notification to FAS or its predecessor agencies. In part, relevant legislation in certain cases restricts the acquisition or formation of companies by groups of companies or individuals acting in concert without such prior approval or notification. While we believe that we have complied with the applicable legislation for our acquisitions and formation of new companies, this legislation is sometimes vague and subject to varying interpretations. If FAS were to conclude that our acquisition or formation of a new company was done in contravention of applicable legislation, it could impose administrative sanctions and require the divestiture of such company or other assets, which could have a material adverse effect on our business, financial condition and results of operations.

If we are found to have a dominant position in the markets where we operate, the government may regulate our subscriber tariffs and restrict our operations.

        Under Russian legislation, FAS may categorize a company controlling over 50% of a market or otherwise able to control the market conditions as a dominant force in such market. Companies controlling over 35% are listed by FAS in a special register and may become subject to monitoring and reporting requirements with respect to such markets. Current Russian legislation does not clearly define "market" in terms of the types of services or the geographic area. As of December 31, 2008, we were categorized by FAS as a company with a market share exceeding 35% in Moscow and the Moscow region, Ivanovo region, Arkhangelsk region and Nenets Autonomous District. In the event that we are found in the future to have a dominant position in any of our markets, FAS would have the right to regulate our tariffs and impose certain restrictions on our operations in such markets. See "Item 4. Information on Our Company—B. Business Overview—Regulation in the Russian Federation—Competition, Interconnection and Pricing" for additional information.

        Additionally, MTS-Ukraine, which according to AC&M-Consulting, had a 32.5% market share of the Ukrainian wireless communications market as of December 31, 2008, can be categorized as a company with a dominant position in the market and become subject to certain government-imposed restrictions. While MTS-Ukraine has not been categorized as a company with a dominant position in the market, it reduced certain of its tariffs at the recommendation of the AMC, in April 2004. See "Item 4. Information on Our Company—B. Business Overview—Regulation in Ukraine—Competition" for additional information.

        If we or any of our subsidiaries were to be classified by FAS (or the AMC with respect to our operations in Ukraine) as a dominant market force or as having a dominant position in the market, FAS (or the AMC, as the case may be) would have the power to impose certain restrictions on our or their businesses. In particular, the authorities may impose on us tariffs at levels that could be competitively disadvantageous and/or set interconnect rates between operators that may adversely affect

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our revenues. Moreover, our refusal to adjust our tariffs according to such government-determined rates could result in the withholding of all our revenues for the benefit of the state. Additionally, restrictions on our expansion or government-mandated withdrawal from regions or markets could reduce our subscriber base and prevent us from fully implementing our business strategy.

If we or any of our subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations.

        In addition to the regulation of dominant operators by FAS, the Federal Law on Communications provides for the special regulation of telecommunications operators occupying a "substantial position," i.e., operators which, together with their affiliates, have 25% or more of installed capacity or capacity to carry out transmission of not less than 25% of traffic in a geographically defined zone within in the Russian Federation. These regulations, provide for governmental regulation of the key terms of their interconnect agreements, including the interconnect tariffs. In addition, such operators are required to develop standard interconnect agreements and publish them as a public offer for all operators who intend to interconnect to the networks of those operators. For additional information, see "Item 4. Information on Our Company—B. Business Overview—Regulation in the Russian Federation."

        At present, the foregoing regulations apply only to fixed line operators in Russia. However, draft legislation was introduced in 2008 that would extend the law to apply to mobile operators. If the new legislation is adopted and we and any of our subsidiaries operating in Russia are identified as operators occupying a "substantial position," regulators may reduce our interconnection tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations.

The enactment of regulations allowing mobile network subscribers to select their long distance providers could have a material adverse effect on our financial condition and results of operations.

        We currently provide long distance services to our subscribers pursuant to our license for mobile services and route the long distance traffic through long distance transit operators. We receive revenue from our subscribers for these calls, and remit an interconnection fee to the long distance transit operators. In providing long distance services, we select the transit operators based on cost and quality considerations. Subscribers making long distance calls on their mobile phones do not have the option of selecting their long distance provider.

        In contrast, fixed line telephone users in Russia have the legal right to select their long distance operator, either by pre-selecting the operator for all of their future calls, or through a "hot choice" option, the latter of which allows callers to select their preferred long distance provider before each long distance call.

        The Ministry of Communications and Mass Media is currently considering whether to extend the right to select long distance providers to mobile network subscribers. In the event that this occurs, we will need to make substantial investments in our network infrastructure to support the "hot choice" feature. In addition, allowing our subscribers to select their long distance providers may result in their selection of higher cost providers, causing higher interconnect fees to be payable by us and, consequently, lower revenues. As a result, extending the right to select long distance providers to mobile subscribers could have a material adverse effect on our financial condition and results of operations.

Alleged medical risks of cellular technology may subject us to negative publicity or litigation, decrease our access to base station sites, diminish subscriber usage and hinder access to additional financing.

        Electromagnetic emissions from transmitter masts and mobile handsets may harm the health of individuals exposed for long periods of time to these emissions. The actual or perceived health risks of

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transmitter masts and mobile handsets could materially adversely affect us by reducing subscriber growth, reducing usage per subscriber, increasing the number of product liability lawsuits, increasing the difficulty in obtaining or maintaining sites for base stations and/or reducing the financing available to the wireless communications industry.

Risks Relating to Our Financial Condition

We may be adversely affected by the current economic environment.

        As a result of the credit market crisis (including uncertainties with respect to financial institutions and the global capital markets), decreased prices for major export commodities (including oil and metals) and other macro-economic challenges currently affecting many of the economies in which we operate, our subscribers' disposable incomes and our vendors' cash flows may be adversely impacted. Consequently, subscribers may modify or decrease their usage of our services or fail to pay the outstanding balances on their accounts, and vendors may significantly increase their prices, eliminate vendor financing or reduce their output.

        We may also experience increases in accounts receivable and bad debt among corporate subscribers, some of whom may face liquidity problems and potential bankruptcy, as well as the potential bankruptcy of our corporate partners. For example, in 2008, we extended a short-term loan to Beta Link, mobile handset retailer and MTS dealer, for $28.2 million. Beta Link subsequently filed for bankruptcy in March 2009, and we believe it is unlikely that we will be able to recover the loan amount or accounts receivable due from Beta Link. See Note 5 to our audited consolidated financial statements.

        A decline in subscriber usage, an increase in bad debts, material changes in equipment pricing or financing terms or the potential bankruptcy of our corporate subscribers or partners may have a material adverse effect on our business, financial condition, results of operations and prospects.

        In addition, a deterioration in macroeconomic conditions could require us to reassess the value of goodwill on certain of our assets, recorded as a difference between the fair value of the assets of business acquired and its purchase price. This goodwill is subject to impairment tests on an ongoing basis. The weakening macroeconomic conditions in the countries in which we operate and/or a significant difference between the performance of an acquired company and the business case assumed at the time of acquisition could require us to write down the value of the goodwill or portion of such value, which could have a material adverse effect on our financial condition and results of operations.

Continued turmoil in the credit markets could cause our business, financial condition, results of operations and the price of our shares and ADSs to suffer.

        Since the summer of 2007, turmoil in the international credit markets, the recession in the United States and several major European economies and the collapse or near collapse of several large banks and financial services companies in the United States and United Kingdom have resulted in increased volatility in the securities markets in the United States and across Europe, including Russia. In addition, many financial market indices in Russia and other emerging markets, as well as developed markets, have declined significantly since the summer of 2008, and continue to be depressed as of the date of this document. Continued volatility in the United States, European and/or Russian securities markets stemming from these or other factors may continue to adversely affect the price of our shares and ADSs.

        The current downturn in the global financial markets has also caused some companies to experience difficulties accessing their cash equivalents, trading investment securities, drawing on revolvers, issuing debt and raising capital generally. A continuation of this downturn may negatively impact our ability to obtain financing on commercially reasonable terms and the level and volatility of

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the trading price of our shares and ADSs, and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Servicing and refinancing our indebtedness will require a significant amount of cash. Our ability to generate cash or obtain financing depends on many factors beyond our control.

        We have a substantial amount of outstanding indebtedness, primarily consisting of the obligations we entered into in connection with our notes and bank loans. As of December 31, 2008, our consolidated total debt, including capital lease obligations, was $4,075.2 million. Our interest expense for the year ended December 31, 2008 was $153.3 million, net of amounts capitalized.

        Our ability to service, repay and refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, we may default under the terms of our indebtedness, and the holders of our indebtedness would be able to accelerate the maturity of such indebtedness, potentially causing cross-defaults under and acceleration of our other indebtedness. Furthermore, as of December 31, 2008, 50.2% of the debt we have incurred is at floating rates of interest linked to indices, such as LIBOR and EURIBOR, and we have hedged the interest rate risk only with respect to approximately 20% of our floating interest rate debt. As a result, our interest payment costs can increase if such indices rise.

        We may not be able to generate sufficient cash flow or access international capital markets or incur additional indebtedness to enable us to service or repay our indebtedness or to fund our other liquidity needs. We may be required to refinance all or a portion of our indebtedness on or before maturity, sell assets, reduce or delay capital expenditures or seek additional capital. Refinancing or additional financing may not be available on commercially reasonable terms or at all, and we may not be able to sell our assets or, if sold, the proceeds therefrom may not be sufficient to meet our debt service obligations. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance debt on commercially reasonable terms, would materially adversely affect our business, financial condition, results of operations and prospects. See "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources."

Ruble depreciation could increase our costs, decrease our cash reserves, or make it more difficult for us to comply with financial ratios and to repay our debts and will affect the value of dividends received by holders of ADSs.

        Over the past 15 years, the ruble has fluctuated, at times substantially over short periods of time, against the U.S. dollar and, in particular, it has significantly depreciated against the U.S. dollar in 2008 as a result of the ongoing global financial crisis. For example, on December 31, 2008, the official exchange rate published by the Central Bank of Russia, or CBR, was 29.38 rubles per one U.S. dollar, as compared to 24.55 rubles per one U.S. dollar on December 31, 2007. Furthermore, various press reports suggest that the ruble will continue to depreciate against the U.S. dollar through 2009, and as of April 30, 2009, the exchange rate was 33.25 rubles per one U.S. dollar. The ruble has also depreciated against the euro. On April 30, 2009, the official exchange rate was 43.84 rubles per one euro, as compared to 35.93 rubles per one euro on December 31, 2007.

        The CBR from time to time has imposed various currency-trading restrictions in attempts to support the ruble. The ability of the government and the CBR to maintain a stable ruble will depend on many political and economic factors. These include their ability to finance the budget without recourse to monetary emissions, to control inflation and to maintain sufficient foreign currency reserves to support the ruble.

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        A majority of our capital expenditure and liabilities and borrowings are either denominated in or tightly linked to the U.S. dollar. Conversely, a majority of our revenues are denominated in rubles. As a result, devaluation of the ruble against the U.S. dollar can adversely affect us by increasing our costs in rubles, both in absolute terms and relative to our revenues, and make it more difficult to comply with our financial ratios or timely fund cash payments on our indebtedness. A decline in the value of the ruble against the U.S. dollar will also result in a translation loss when we translate the ruble revenues into U.S. dollars for inclusion in our audited consolidated financial statements. It also reduces the U.S. dollar value of tax savings arising from tax incentives for capital investment and the depreciation of our property, plant and equipment, since their basis for tax purposes is denominated in rubles at the time of the investment. Increased tax liability would also increase total expenses.

        We also anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of the ADSs. Accordingly, the value of dividends received by holders of ADSs will be subject to fluctuations in the exchange rate between the ruble and the U.S. dollar. Depreciation of the ruble against the U.S. dollar could therefore materially adversely affect our financial condition, results of operations and prospects and the value of the ADSs. See also "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

Changes in the exchange rate of local currencies in the countries where we operate against the U.S. dollar and/or euro could adversely impact our revenues reported in U.S. dollars and costs in terms of local currencies.

        A significant portion of our expenditures and liabilities, including capital expenditures and borrowings (including our U.S. dollar denominated notes), are either denominated in, or closely linked to, the U.S. dollar and/or euro, while substantially all of our revenues are denominated in local currencies of the countries where we operate. As a result, the devaluation of local currencies against the U.S. dollar and/or euro can adversely affect our revenues reported in U.S. dollars and increase our costs in terms of local currencies. If local currencies decline against the U.S. dollar and/or euro and price increases cannot keep pace, we could have difficulty repaying or refinancing our U.S. dollar and/or euro-denominated indebtedness, including our U.S. dollar denominated notes. In addition, local regulatory restrictions on the sale of hard currency in Turkmenistan and Uzbekistan may delay our ability to purchase equipment and services necessary for network expansion which, in turn, may cause difficulty in expanding our subscriber base in those countries. Further, a portion of our cash balances is held in jurisdictions outside Russia, and as a result of exchange controls in those jurisdictions, these cash balances may not always be readily available for our use.

        The Ukrainian hryvnia has experienced significant volatility over the last quarter of 2008 and thus far in 2009, with the official exchange rate falling from 4.86 hryvnias per one U.S. dollar as of October 1, 2008 to 7.70 hryvnias per one U.S. dollar as of April 30, 2009. The steep decline of the hryvnia occurred notwithstanding the Ukrainian government's efforts to defend the national currency, for which it spent $11 billion. In November 2008, the International Monetary Fund agreed to extend a $16.4 billion loan to Ukraine to help stabilize the hryvnia and decelerate skyrocketing inflation. Notwithstanding this inflow of funds into Ukraine, the risk of further currency devaluation remains due to ongoing capital flight, the increasing national deficit and the possibility that the government will use new currency emissions to pay down the deficit, the weak state of the banking system, the decreased reserves of the National Bank of Ukraine and the continued public demand for foreign currency.

        The exchange rate volatility and continued devaluation of the Turkmenistan manat may also adversely affect our revenues from this market. From 1998 to 2007, the official Turkmenistan manat to U.S. dollar exchange rate was fixed at 5,200 manat per one U.S. dollar. In January 2008, a Presidential Decree was issued establishing a new official exchange rate at 6,250 manat per one U.S. dollar and a commercial exchange rate at which companies and banks can buy and sell currency of up to 20,000

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manat per one U.S. dollar. In May 2008, an additional Presidential Decree changed the official exchange rate to 14,250 manat per one U.S. dollar. As a result of the changes in the manat-to-U.S. dollar exchange rate, the revenues of MTS-Turkmenistan declined significantly in the year ended December 31, 2008, as we experienced a significant currency exchange loss when translating the manat revenue of MTS-Turkmenistan to U.S. dollars, our reporting currency.

        On December 31, 2008 the Central Bank of Turkmenistan announced the redenomination of the manat and the introduction of new banknotes and coins of national currency as of January 1, 2009. Under the new currency, 1 new manat equals 5,000 old manat. The Central Bank of Turkmenistan established the exchange rate at 2.85 new manat per one U.S. dollar. As conversion of local currency in Turkmenistan is subject to government regulations, it is difficult to predict the extent of further exchange rate fluctuations. While we continue to consider different financial instruments available to us in order to mitigate our exposure to exchange rate fluctuations, we have not entered into any significant currency hedging arrangements. See also "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

A disposition by our controlling shareholder of its stake in our company could materially harm our business.

        Under certain of our debt agreements, an event of default may be deemed to have occurred and/or we may be required to make a prepayment if Sistema disposes of its stake in our company or a third party takes a controlling position in our company. The occurrence of any such event of default or failure to make any required prepayment which leads to an event of default, could trigger cross default/cross acceleration provisions under certain of our other debt agreements. In such event, our obligations under one or more of these agreements could become immediately due and payable, which would have a material adverse effect on our business and our shareholders' equity. If Sistema were to dispose of its stake in us, our company may be deprived of the benefits and resources that it derives from Sistema, which could harm our business.

If we are unable to obtain adequate capital, we may have to limit our operations substantially, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

        We will need to make significant capital expenditures, particularly in connection with the development, construction and maintenance of, and the purchasing of software for our GSM network. We spent $1,722.0 million in 2006, $1,539.5 million in 2007 and $2,227.3 million in 2008 for the fulfillment of our capital spending plans. In addition, the acquisition of 3G licenses and frequency allocations and the buildout of a 3G network will require additional capital expenditures. However, future financings and cash flow from our operations may not be sufficient to meet our planned needs in the event of various unanticipated potential developments, including the following:

•

a lack of external financing sources;

•

changes in the terms of existing financing arrangements;

•

construction of the wireless networks at a faster rate or higher capital cost than anticipated;

•

pursuit of new business opportunities or investing in existing businesses that require significant investment;

•

acquisitions or development of any additional wireless licenses;

•

slower than anticipated subscriber growth;

•

slower than anticipated revenue growth;

•

regulatory developments;

•

changes in existing interconnect arrangements; or

•

a deterioration in the economies of the countries where we operate.

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        Also, currently we are not able to raise equity financing through newly issued depositary receipts such as ADSs, due to Russian securities regulations providing that no more than 30% of a Russian company's shares (and no more than 25% with respect to certain telecommunications operators) may be circulated abroad through sponsored depositary receipt programs. Prior to December 31, 2005 and at the time of our initial public offering, this threshold was 40% and our current ADSs program is near its full capacity. If we cannot obtain adequate funds to satisfy our capital requirements, we may need to limit our operations significantly, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Inflation could increase our costs and adversely affect our results of operations.

        The Russian and Ukrainian economies have been characterized by high rates of inflation. The World Bank forecasted inflation to reach between 11%-13% in Russia in 2009, and the International Monetary Fund forecasted inflation to reach 17% in Ukraine in 2009 (although it reached 22.3% in February 2009). As we tend to experience inflation-driven increases in certain of our costs, which are sensitive to rises in the general price level in Russia and Ukraine, our costs will rise. In addition, media inflation in Russia continues to be very high and shows little sign of slowing, which may lead to higher marketing expenditures by us in order to remain competitive. In this situation, due to competitive pressures, we may not be able to raise the prices we charge for our products and services sufficiently to preserve operating margins. Accordingly, high rates of inflation in Russia and Ukraine could increase our costs and decrease our operating margins. See also "Item 5. Operating and Financial Review and Prospects—Inflation."

Our failure to fulfill our iPhone handset purchase commitment under our agreement with Apple Sales International could have a material adverse effect on our financial condition and results of operations.

        In August 2008, we entered into an unconditional purchase agreement with Apple Sales International to buy certain quantities of iPhone handsets at list prices over a three-year period. The aggregate amount of our commitments under this agreement (based on list prices as of December 31, 2008) is $847.9 million for the years ended December 31, 2009, 2010 and 2011. The economic downturn in Russia has caused consumer spending to decrease, which has negatively affected iPhone sales in Russia. As a result, we did not fulfill our required purchase commitments under our agreement with Apple in the fourth quarter of 2008 and the first quarter of 2009. We are currently in discussions with Apple to adjust our required purchase commitments. However, in the event we are unable to reach an agreement, it is possible that Apple may bring a claim against us, which could have a material adverse effect on our financial condition and results of operations.

Indentures relating to our notes and our controlling shareholder Sistema's notes contain, and some of our loan agreements and Sistema's loan agreements contain, restrictive covenants, which limit our ability to incur debt and to engage in various activities.

        The indentures relating to our outstanding notes contain covenants limiting our ability to incur debt, create liens on our properties and enter into sale and lease-back transactions. The indentures also contain covenants limiting our ability to merge or consolidate with another person or convey our properties and assets to another person, as well as our ability to sell or transfer any of our or our subsidiaries' GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas. Some of our loan agreements contain similar and other covenants. Failure to comply with these covenants could cause a default and result in the debt becoming immediately due and payable, which would materially adversely affect our business, financial condition and results of operations.

        In addition, Sistema, which controls 52.8% of our total charter capital (55.7% excluding treasury shares) and consolidates our results in its financial statements, is subject to various covenants in the indentures related to its notes and in its credit facilities with VTB. These covenants impose restrictions

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on Sistema and its restricted subsidiaries (including us) with respect to, inter alia, incurrence of indebtedness, creation of liens and disposal of assets. In the indentures, Sistema undertakes that it will not, and will not permit its restricted subsidiaries (including us) to, incur indebtedness unless a certain debt/EBITDA (as defined therein) ratio is met. In addition to us, Sistema has various other businesses that require capital and, therefore, the consolidated Sistema group's capacity to incur indebtedness otherwise available to us could be diverted to its other businesses. Sistema may also enter into other agreements in the future that may further restrict it and its restricted subsidiaries (including us) from engaging in these and other activities. We expect Sistema to exercise its control over us in order for Sistema, as a consolidated group, to meet its obligations under its current and future financings and other agreements, which could materially limit our ability to obtain additional financing required for the implementation of our business strategy.

If a change in control occurs, our noteholders and other debt holders may require us to redeem notes or other debt, which could have a material adverse effect on our financial condition and results of operations.

        Under the terms of our outstanding notes, if a change in control occurs, our noteholders will have the right to require us to redeem notes not previously called for redemption. The price we will be required to pay upon such event will be 101% of the principal amount of the notes, plus accrued interest to the redemption date. A change in control will be deemed to have occurred in any of the following circumstances:

•

Any person acquires beneficial ownership of 50% or more of the total voting power of all shares of our common stock; provided that the following transactions would not be deemed to result in a change in control:

•

any acquisition by Sistema or its subsidiaries that results in the 50% threshold being exceeded; and

•

any acquisition by us, our subsidiary or our employee benefit plan.

•

We merge or consolidate with or into, or convey, sell, lease or otherwise dispose of all or substantially all of our assets to, another entity or another entity merges into us and, immediately following such transaction, Sistema does not beneficially own at least 50% of the total voting power of all shares of common stock of such entity.

•

We no longer beneficially own more than 50% of the issuer's share capital.

        If a change in control occurs, and our noteholders and other debt holders exercise their right to require us to redeem all of their notes or debt, such event could have a material adverse effect on our financial condition and results of operations.

Risks Relating to Our Countries of Operation

Economic Risks

Economic instability in the countries where we operate could adversely affect our business.

        Since the dissolution of the Soviet Union in 1991, the economies of Russia and other CIS countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns. Most notably, following the Russian government's default on its ruble denominated securities in August 1998, the CBR stopped its support of the ruble and a temporary moratorium was imposed on certain hard currency payments. These actions resulted in the immediate and severe devaluation of the ruble and a sharp increase in the rate of inflation, a substantial decline in the prices of Russian debt and equity securities, and an inability of Russian issuers to raise funds in the international capital markets. These problems were aggravated by the subsequent near collapse of the

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Russian banking sector, with the termination of banking licenses of a number of major Russian banks. This crisis had a severe impact on the economies of Russia and the other CIS countries.

        While the economies of Russia and the other CIS countries where we operate have experienced positive trends in recent years, such as increases in gross domestic product, relatively stable national currencies, strong domestic demand, rising real wages, increased disposable income, increased consumer spending and a relatively reduced rate of inflation, these positive trends have been supported, in part, by increases in global commodity prices, and may not continue or may abruptly reverse. The current financial crisis, as well as any future economic downturns or slowturns in Russia or the other CIS countries where we operate could lead to decreased demand for our services, decreased revenues and negatively affect our liquidity and ability to obtain debt financing, which would have a material adverse effect on our business, financial condition, results of operations and prospects.

The Russian banking system remains underdeveloped, and another banking crisis could place severe liquidity constraints on our business.

        Russia's banking and other financial systems are less developed or regulated as compared to other countries, and Russian legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent application. The August 1998 financial crisis resulted in the bankruptcy and liquidation of many Russian banks and almost entirely eliminated the developing market for commercial bank loans at that time. Many Russian banks currently do not meet international banking standards, and the transparency of the Russian banking sector in some respects still lags far behind internationally accepted norms. Aided by inadequate supervision by the regulators, certain banks do not follow existing CBR regulations with respect to lending criteria, credit quality, loan loss reserves or diversification of exposure. Furthermore, in Russia, bank deposits made by corporate entities generally are not insured.

        In recent years, there has been a rapid increase in lending by Russian banks, which many believe has been accompanied by a deterioration in the credit quality of the borrowers. In addition, a robust domestic corporate debt market is leading Russian banks to hold increasingly large amounts of Russian corporate ruble bonds in their portfolios, which is further deteriorating the risk profile of Russian bank assets. The serious deficiencies in the Russian banking sector, combined with the deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to market downturns or economic slowdowns, including due to Russian corporate defaults that may occur during any such market downturn or economic slowdown. In addition, the CBR has from time to time revoked the licenses of certain Russian banks, which resulted in market rumors about additional bank closures and many depositors withdrawing their savings. Recently a number of banks and credit institutions have lost their licenses due to deficiency of capital and failure to meet the CBR requirements. If a banking crisis were to occur, Russian companies would be subject to severe liquidity constraints due to the limited supply of domestic savings and the withdrawal of foreign funding sources that would occur during such a crisis.

        The recent disruptions in the global markets have generally led to reduced liquidity and increased cost of funding in Russia. Borrowers have generally experienced a reduction in available financing both in the inter-bank and short-term funding market, as well as in the longer term capital markets and bank finance instruments. The non-availability of funding to the banking sector in the Russian Federation has also negatively affected the anticipated growth rate of the Russian Federation. According to Standard & Poor's, which in October 2008 revised the outlook on its long-term sovereign credit rating for the Russian Federation from "stable" to "negative," Russia is at risk of recording a deficit by 2009. In addition to anticipated slower asset growth on the Russian banking market, the Russian Federation is facing significant inflation, a significant decline in stock prices and a substantial outflow of capital from the country. The Russian government and the CBR provide financial support only to a limited number of banks, which may result in the liquidation of other banks and financial

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institutions. A combination of these factors may result in a significant deterioration in the financial fundamentals of Russian banks, notably liquidity, asset quality and profitability.

        There is currently a limited number of sufficiently creditworthy Russian banks and few ruble-denominated financial instruments in which we can invest our excess ruble cash. We hold the bulk of our excess ruble and foreign currency cash in Russian banks, including subsidiaries of foreign banks. Another banking crisis or the bankruptcy or insolvency of the banks from which we receive or with which we hold our funds could result in the loss of our deposits or affect our ability to complete banking transactions in Russia, which could have a material adverse effect on our business, financial condition and results of operations.

The physical infrastructure in Russia and Ukraine is in poor condition, which could disrupt our normal business activities.

        The physical infrastructure in Russia and Ukraine largely dates back to Soviet times and has not been adequately funded and maintained over the past two decades. Particularly affected are the rail and road networks, power generation and transmission systems, communication systems and building stock. In May 2005, a fire and explosion in one of the Moscow power substations built in 1963 caused a major power outage in a large section of Moscow and some surrounding regions. The blackout disrupted ground electric transport, including the metro system, led to road traffic accidents and massive traffic congestion, disrupted electricity and water supply in office and residential buildings and affected mobile communications. The trading on exchanges and the operation of many banks, stores and markets were also halted. In addition, the road conditions throughout Russia and Ukraine are poor with many roads not meeting minimum quality standards, causing disruptions and delays in the transportation of goods to and within these countries. The Russian and Ukrainian governments are actively considering plans to reorganize the nations' rail, electricity and communications systems. Any such reorganization may result in increased charges and tariffs while failing to generate the anticipated capital investment needed to repair, maintain and improve these systems.

        The deterioration of the physical infrastructure in Russia and Ukraine harms the national economies, adds costs to doing business in these countries and generally disrupts normal business activities. These difficulties can impact us directly; for example, we keep portable electrical generators to help us maintain base station operations in the event of power outages. Further deterioration of the physical infrastructure in Russia and Ukraine, as well as the other countries where we operate, could have a material adverse effect on our business, financial condition and results of operations.

Fluctuations in the global economy may materially adversely affect the economies of the countries where we operate and our business in these countries.

        The economies of the countries where we operate are vulnerable to market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Russia, Ukraine and elsewhere in the CIS, and businesses in these countries could face severe liquidity constraints, further adversely affecting their economies. Additionally, because Russia and Turkmenistan produce and export large amounts of oil and gas, the Russian and Turkmen economies are especially vulnerable to the price of oil and gas on the world market and a decline in the price of oil and gas could slow or disrupt the Russian and Turkmen economies. Recent military conflicts and international terrorist activity have also significantly impacted oil and gas prices, and pose additional risks to the Russian economy. Russia and Ukraine are also major producers and exporters of metal products and their economies are vulnerable to world commodity prices and the imposition of tariffs and/or antidumping measures by the United States, the European Union or by other principal export markets.

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        The disruptions recently experienced in the international and domestic capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing. Companies located in emerging markets, including us, may be particularly susceptible to these disruptions and reductions in the availability of credit or increases in financing costs. To the extent that the current market downturn continues or worsens, it may lead to constraints on our liquidity and ability to obtain debt financing.

Political and Social Risks

Political and governmental instability in Russia and the CIS could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

        Since 1991, Russia has sought to transform from a one-party state with a centrally-planned economy to a democracy with a market economy. As a result of the sweeping nature of the reforms, and the failure of some of them, the Russian political system remains vulnerable to popular dissatisfaction, including dissatisfaction with the results of privatizations in the 1990s, as well as to demands for autonomy from particular regional and ethnic groups. Ukraine and the other CIS countries where we operate are similarly vulnerable.

        Current and future changes in the Russian and other CIS governments, major policy shifts or lack of consensus between various branches of the government and powerful economic groups could disrupt or reverse economic and regulatory reforms. Any disruption or reversal of reform policies could lead to political or governmental instability or the occurrence of conflicts among powerful economic groups, which could have a material adverse effect on our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

Potential conflict between central and regional authorities could create an uncertain operating environment hindering our long-term planning ability.

        The Russian Federation is a federation of 83 sub-federal political units, consisting of republics, territories, regions, cities of federal importance and autonomous regions and districts. The delineation of authority and jurisdiction among the members of the Russian Federation and the federal government is, in many instances, unclear and remains contested. Lack of consensus between the federal government and local or regional authorities could result in the enactment of conflicting legislation at various levels and may lead to political instability. In particular, conflicting laws have been enacted in the areas of privatization, land legislation and licensing. Some of these laws and governmental and administrative decisions implementing them, as well as certain transactions consummated pursuant to them, have in the past been challenged in the courts, and such challenges may occur in the future. This lack of consensus may hinder our long-term planning efforts and create uncertainties in our operating environment, both of which may prevent us from effectively and efficiently implementing our business strategy.

        Additionally, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases, military conflict, which can halt normal economic activity and disrupt the economies of neighboring regions. For example, violence and attacks relating to the Chechen conflict have spread to other parts of Russia and several terrorist attacks have been carried out in other parts of Russia, including Moscow. The further intensification of violence, including terrorist attacks and suicide bombings, or its spread to other parts of Russia, could have significant political consequences, including the imposition of a state of emergency in some or all of Russia. Moreover, any terrorist attacks and the resulting heightened security measures are likely to cause disruptions to domestic commerce and exports from Russia. These factors could materially adversely affect our business and the value of our shares and ADSs.

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        In Ukraine, tensions between certain regional authorities and the central government were ignited following the November 2004 presidential elections. Amid the mass demonstrations and strikes that took place throughout Ukraine to protest the election process and results, the regional authorities in three regions in eastern Ukraine threatened to conduct referendums on creating a separate, autonomous region within Ukraine. Though the regional authorities ultimately backed down from these threats, and tensions in Ukraine subsided, the reemergence of these tensions in Ukraine in the future may cause our long-term planning ability and operations in Ukraine to suffer.

A deterioration in relations between Russia and other former Soviet republics and/or the United States and the European Union could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

        Relations between Russia and certain other former Soviet republics are or have in the past been strained. For example, in August 2008, a significant armed conflict erupted between Russia and Georgia over the separatist regions of South Ossetia and Abkhazia, culminating in Russia's recognition of their independence from Georgia. The political and economic relationships between Ukraine and Russia have also been strained in recent years. The possible accession by Ukraine and Georgia to the North Atlantic Treaty Organization is also a significant source of tension between Russia and these countries. Although we currently do not have operations in Georgia, our operations in Ukraine are significant. If disputes with Ukraine were to disrupt or reduce the flow of Russia's trade with Ukraine, the Ukrainian economy could be materially adversely affected. Declines in the Ukrainian economy could have a material adverse effect on our operations in Ukraine and, consequently, on our financial condition, results of operations and prospects.

        The conflicts between Russia and these and other former Soviet republics have, in some instances, also strained Russia's relationship with the United States and the European Union which, at times, has negatively impacted Russia's financial markets.

        The emergence of new or escalated tensions between Russia and other former Soviet republics could further exacerbate tensions between Russia and the United States and the European Union, which may have a negative effect on the Russian economy, our ability to obtain financing on commercially reasonable terms, and the level and volatility of the trading price of the ADSs. Any of the foregoing circumstances could have a material adverse effect on our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

Recent political turmoil in Ukraine could have a material adverse effect on our operations in Ukraine and on our business, financial condition and results of operations.

        Changes to the Ukrainian Constitution that came into effect on January 1, 2006, shifted important powers from the president to the parliament, including the right to name the prime minister and form a government. With these new powers, there is a risk that an impasse between the president and the parliament could evolve into a protracted political struggle and cause Ukraine's economy to decline.

        Since January 2005, Victor Yushchenko has served as Ukraine's president. Yulia Tymoshenko served as the prime minister from February 2005 to September 2005. In November 2007, a coalition of the political blocks headed by Mr. Yushchenko and Ms. Tymoshenko received a majority of seats in the parliament at extraordinary parliamentary elections and appointed Ms. Tymoshenko as prime minister for the second time. Mr. Yushchenko and Ms. Tymoshenko's tenure in office has been characterized by tension between them and their respective political factions and, on September 16, 2008, the collapse of their coalition was formally declared by the Ukrainian parliament. On October 9, 2008, Mr. Yushchenko dissolved the parliament due to the failure of factions of the parliament to form a new coalition and scheduled new parliamentary elections for December 7, 2008. However, on October 20,

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2008, Mr. Yushchenko suspended his October 9, 2008 decree to dissolve the parliament and instead decided to postpone new parliamentary elections indefinitely because of the deteriorating economic conditions caused by the ongoing global financial crisis. On December 16, 2008, the political parties led by Mr. Yuschenko, Ms. Tymoshenko and the parliamentary speaker signed a three-party coalition agreement. Despite efforts by Ukrainian political parties to work together in the face of the ongoing economic challenges, greater political instability or further weakening of the government could cause further deterioration in the social and economic environment in Ukraine which, in turn, could have a material adverse effect on our operations in Ukraine and our business, financial condition and results of operations.

Crime and corruption could disrupt our ability to conduct our business.

        The political and economic changes in the countries where we operate in recent years have resulted in significant dislocations of authority. The local and international press have reported the existence of significant organized criminal activity, particularly in large metropolitan centers. Property crime in large cities has increased substantially. In addition, the local and international press have reported high levels of corruption, including the bribing of officials for the purpose of initiating investigations by government agencies. Press reports have also described instances in which government officials engaged in selective investigations and prosecutions to further the commercial interests of certain government officials or certain companies or individuals. Additionally, some members of the media in the countries we operate in regularly publish disparaging articles in return for payment. The depredations of organized or other crime, demands of corrupt officials or claims that we have been involved in official corruption could result in negative publicity, disrupt our ability to conduct our business and could thus materially adversely affect our business, financial condition, results of operations and prospects.

Social instability could increase support for renewed centralized authority, nationalism or violence and thus materially adversely affect our operations.

        Increased unemployment rates, the failure of the government and many private enterprises to pay full salaries on a regular basis and the failure of salaries and benefits generally to keep pace with the rapidly increasing cost of living have led in the past, and could lead in the future, to labor and social unrest. Labor and social unrest may have political, social and economic consequences, such as increased support for a renewal of centralized authority; increased nationalism, including restrictions on foreign involvement in the economies of the countries where we have operations; and increased violence. An occurrence of any of the foregoing events could restrict our operations and lead to the loss of revenues, materially adversely affecting our operations.

Legal Risks and Uncertainties

Weaknesses relating to the legal system and legislation in the countries where we operate create an uncertain environment for investment and business activity, which could have a material adverse effect on the value of our shares and ADSs.

        Each of the countries we operate in is still developing the legal framework required to support a market economy. The following risk factors relating to these legal systems create uncertainty with respect to the legal and business decisions that we make, many of which uncertainties do not exist in countries with more developed market economies:

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inconsistencies between and among the constitution, federal and regional laws, presidential decrees and governmental, ministerial and local orders, decisions, resolutions and other acts;

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conflicting local, regional and federal rules and regulations;

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the lack of judicial and administrative guidance on interpreting legislation;

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the relative inexperience of judges and courts in interpreting legislation;

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the lack of an independent judiciary;

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a high degree of discretion on the part of governmental authorities, which could result in arbitrary actions such as suspension or termination of our licenses; and

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poorly developed bankruptcy procedures that are subject to abuse.

        The recent nature of much of the legislation in the CIS countries, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of these legal systems in ways that may not always coincide with market developments place the enforceability and underlying constitutionality of laws in doubt and result in ambiguities, inconsistencies and anomalies. In addition, legislation in these countries often contemplates implementing regulations that have not yet been promulgated, leaving substantial gaps in the regulatory infrastructure. All of these weaknesses could affect our ability to enforce our rights under our licenses and contracts, or to defend ourselves against claims by others. Moreover, it is possible that regulators, judicial authorities or third parties may challenge our internal procedures and bylaws, as well as our compliance with applicable laws, decrees and regulations.

Russian and Ukrainian companies can be forced into liquidation on the basis of formal non-compliance with certain legal requirements.

        Certain provisions of Russian law may allow a court to order liquidation of a Russian legal entity on the basis of its formal non-compliance with certain requirements during formation, reorganization or during its operation. For example, in Russian corporate law, negative net assets calculated on the basis of Russian accounting standards as at the end of the second or any subsequent year of a company's operation can serve as a basis for a court to order the liquidation of the company upon a claim by governmental authorities. Many Russian companies have negative net assets due to very low historical asset values reflected on their Russian accounting standards balance sheets; however, their solvency, i.e., their ability to pay debts as they come due, is not otherwise adversely affected by such negative net assets. The amount of net assets of some of our subsidiaries is below the minimum legal requirements. Although we are currently taking steps to remedy this and these subsidiaries continue to meet all of their obligations to creditors, there is a minimal risk of their liquidation.

        There have also been cases in the past in which formal deficiencies in the establishment process of a Russian legal entity or non-compliance with provisions of Russian law have been used by Russian courts as a basis for liquidation of a legal entity. Weaknesses in the Russian legal system create an uncertain legal environment, which makes the decisions of a Russian court or a governmental authority difficult, if not impossible, to predict. If involuntary liquidation were to occur, such liquidation could lead to significant negative consequences for our group. Ukrainian law also contains provisions similar to Russian law, whereby a company's failure to comply with certain legal requirements concerning its formation or operation may be grounds for its liquidation.

The judiciary's lack of independence and overall inexperience, the difficulty of enforcing court decisions and governmental discretion in enforcing claims could prevent us or holders of our shares and ADSs from obtaining effective redress in a court proceeding.

        The judicial systems in the countries where we operate are not always independent or immune from economic, political and nationalistic influences, and are often understaffed and underfunded. Judges and courts are generally inexperienced in the area of business, corporate and industry (telecommunications) law. Judicial precedents generally have no binding effect on subsequent decisions, and not all court decisions are readily available to the public or organized in a manner that facilitates

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understanding. The judicial systems in these countries can also be slow or unjustifiably swift. Enforcement of court orders can, in practice, be very difficult to achieve. All of these factors make judicial decisions in these countries difficult to predict and effective redress uncertain. Additionally, court claims are often used in furtherance of political and commercial aims or infighting. We may be subject to such claims and may not be able to receive a fair hearing. Additionally, court orders are not always enforced or followed by law enforcement agencies, and the government may attempt to invalidate court decisions by backdating or retroactively applying relevant legislative changes.

        These uncertainties also extend to property rights. For example, during Russia and Ukraine's transformation from centrally-planned economies to market economies, legislation has been enacted in both countries to protect private property against expropriation and nationalization. However, it is possible that due to the lack of experience in enforcing these provisions and due to political factors, these protections would not be enforced in the event of an attempted expropriation or nationalization. Expropriation or nationalization of any of our entities, their assets or portions thereof, including UMC, potentially without adequate compensation, would have a material adverse effect on our business, financial condition, results of operations and prospects.

Our inability to gain operational control over Bitel has prevented us from realizing the expected benefits of our acquisition and resulted in our write off of the costs relating to the purchase of Bitel, and we may face significant liabilities to the seller and Bitel.

        In December 2005, our wholly owned subsidiary MTS Finance S.A., or MTS Finance, acquired a 51.0% stake in Tarino Limited, or Tarino, from Nomihold Securities Inc., or Nomihold, for $150.0 million in cash based on the belief that Tarino was at that time the indirect owner, through its wholly owned subsidiaries, of Bitel LLC, or Bitel, a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan.

        Following the purchase of the 51.0% stake, MTS Finance entered into a put and call option agreement with Nomihold for "Option Shares," representing the remaining 49.0% interest in Tarino shares and a proportional interest in Bitel shares. The call option was exercisable by MTS Finance from November 22, 2005 to November 17, 2006, and the put option was exercisable by Nomihold from November 18, 2006 to December 8, 2006. The call and put option price was $170.0 million.

        Following a decision of the Kyrgyz Supreme Court on December 15, 2005, Bitel's corporate offices were seized by a third party. As we did not regain operational control over Bitel's operations in 2005, we accounted for our 51.0% investment in Bitel at cost as at December 31, 2005. We appealed the decision of the Kyrgyz Supreme Court in 2006, but the court has not acted within the time period permitted for appeal. We subsequently sought the review of this dispute over the ownership of Bitel by the Prosecutor General of Kyrgyzstan to determine whether further investigation could be undertaken by the Kyrgyz authorities. In January 2007, the Prosecutor General informed us that there were no grounds for involvement by the Prosecutor General's office in the dispute and that no legal basis existed for us to appeal the decision of the Kyrgyz Supreme Court. Consequently, we decided to write off the costs relating to the purchase of the 51.0% stake in Bitel, which was reflected in our audited annual consolidated financial statements for the year ended December 31, 2006.

        In November 2006, MTS Finance received a letter from Nomihold purporting to exercise the put option and sell Option Shares for $170.0 million to MTS Finance. In January 2007, Nomihold commenced an arbitration proceeding against MTS Finance in the London Court of International Arbitration in order to compel MTS Finance to purchase Option Shares. Nomihold seeks specific performance of the put option, unspecified monetary damages, interest, and costs. The matter is currently pending. MTS Finance is vigorously contesting this action and has asked the arbitration tribunal to dismiss Nomihold's claim.

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        A group of individual shareholders of Sistema has agreed to compensate MTS Finance for any potential loss up to $170.0 million should the arbitration decision regarding exercise of the aforementioned put option prove unfavorable to MTS Finance. Notwithstanding this, in the event MTS Finance does not prevail in the arbitration, we could be liable to Nomihold for $170.0 million plus any additional amounts that the arbitration tribunal might award to Nomihold.

        In connection with the above mentioned put option exercise and the uncertainty as to the resolution of the dispute with Nomihold, we recognized a liability in the amount of $170.0 million in our audited annual consolidated financial statements with a corresponding charge to other non-operation expenses as of December 31, 2006 and for the year then ended.

        In addition, three Isle of Man companies affiliated with us, or the KFG Companies, have been named defendants in lawsuits filed by Bitel in the Isle of Man seeking the return of dividends received by these three companies in the first quarter of 2005 from Bitel in the amount of approximately $25.2 million plus compensatory damages, and to recover approximately $3.7 million in losses and accrued interest. In the event that the defendants do not prevail in these lawsuits, we may be liable to Bitel for such claims. The KFG Companies have also asserted counterclaims against Bitel, and claims against other defendants including Altimo LLC, or Altimo, and Altimo Holdings & Investments Limited, or Altimo Holding, for the wrongful appropriation and control of Bitel. In November 2007, the Isle of Man court set aside orders it had previously issued granting leave to serve the non-Manx defendants out of the jurisdiction as to the KFG Companies' counterclaims on the basis of a lack of jurisdiction. The KFG companies appealed that ruling to the Isle of Man Staff of Government, and in November 2008, the appellate court ruled in our favor, holding that the case should proceed under its jurisdiction. The defendants against whom the KFG Companies have brought the action attempted to appeal the Isle of Man Staff of Government decision by seeking leave to appeal to the Judicial Committee of the Privy Council, the court of final appeal for the Isle of Man. This request was denied and the defendants then sought permission to appeal from the Judicial Committee of the Privy Council itself, an application which remains pending. It is not possible at this time to predict the ultimate outcome or resolution of these claims.

        In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited, or KMIC, under the rules of the London Court of International Arbitration, the arbitration tribunal in its award found that the KFG Companies breached a transfer agreement dated May 31, 2003, or the Transfer Agreement, concerning the shares of Bitel. The Transfer Agreement was made between the KFG Companies and IPOC International Growth Fund Limited, or IPOC, although IPOC subsequently assigned its interest to KMIC, and KMIC was the claimant in the arbitration. The tribunal ruled that the KFG Companies breached the Transfer Agreement when they failed to establish a date on which the equity interests in Bitel were to be transferred to KMIC and by failing to take other steps to transfer the Bitel interests. This breach occurred prior to MTS Finance's acquisition of the KFG Companies. The arbitration tribunal ruled that KMIC is entitled only to damages in an amount to be determined in future proceedings. At the request of the parties, the tribunal agreed to stay the damages phase of the proceedings pending the resolution of the appeals process now before the second instance court in the Isle of Man, as described above. We are not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

Selective or arbitrary government action could have a material adverse effect on our business, financial condition, results of operations and prospects.

        Governmental authorities in the countries where we operate have a high degree of discretion and, at times, act selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner that is inconsistent with legislation or influenced by political or commercial considerations.

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        Selective or arbitrary governmental actions have reportedly included the denial or withdrawal of licenses, sudden and unexpected tax audits and claims, criminal prosecutions and civil actions. Federal and local government entities have also used ordinary defects in matters surrounding share issuances and registration as pretexts for court claims and other demands to invalidate such issuances and registrations or to void transactions. Moreover, the government also has the power in certain circumstances, by regulation or government acts, to interfere with the performance of, nullify or terminate contracts. Standard & Poor's has expressed concerns that "Russian companies and their investors can be subjected to government pressure through selective implementation of regulations and legislation that is either politically motivated or triggered by competing business groups." In this environment, our competitors may receive preferential treatment from the government, potentially giving them a competitive advantage over us.

        In addition, in recent years, the Russian tax authorities have aggressively brought tax evasion claims relating to Russian companies' use of tax-optimization schemes, and press reports have speculated that these enforcement actions have been selective and politically motivated. Selective or arbitrary government action, if directed at us, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Failure to comply with existing laws and regulations or to obtain all approvals, authorizations and permits required to operate telecommunications equipment, or the findings of government inspections or increased governmental regulation of our operations, could result in a disruption in our business and substantial additional compliance costs and sanctions.

        Our operations and properties are subject to regulation by various government entities and agencies in connection with obtaining and renewing various licenses, approvals, authorizations and permits, as well as with ongoing compliance with existing laws, regulations and standards. Regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses, approvals, authorizations and permits and in monitoring licensees' compliance with the terms thereof. Russian authorities have the right to, and frequently do, conduct periodic inspections of our operations and properties throughout the year. Any such future inspections may conclude that we or our subsidiaries have violated laws, decrees or regulations, and we may be unable to refute such conclusions or remedy the violations. See also "—The regulatory environment for telecommunications in Russia, Ukraine and other countries where we operate or may operate in the future is uncertain and subject to political influence or manipulation, which may result in negative and arbitrary regulatory and other decisions against us on the basis of other than legal considerations and in preferential treatment for our competitors."

        Due primarily to delays in the issuance of permits, approvals and authorizations by regulatory authorities, frequently it is not possible to procure all of the permits for each of our base stations or other aspects of our network before we put the base stations into commercial operation or to amend or maintain all of the permits when we make changes to the location or technical specifications of our base stations. At times, there can be a significant number of base stations or other communications facilities and other aspects of our networks for which we do not have final permits to operate and there can be delays in obtaining the final permits, approvals and authorizations for particular base stations or other communications facilities and other aspects of our networks.

        Our failure to comply with existing laws and regulations or to obtain all approvals, authorizations and permits required to operate telecommunications equipment or the findings of government inspections may also result in the imposition of fines or penalties or more severe sanctions including the suspension, amendment or termination of our licenses, approvals, authorizations and permits, or in requirements that we cease certain of our business activities, or in criminal and administrative penalties applicable to our officers. Moreover, an agreement or transaction entered into in violation of Russian law may be invalidated and/or unwound by a court decision. Any such decisions, requirements or

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sanctions, or any increase in governmental regulation of our operations, could result in a disruption of our business and substantial additional compliance costs and could materially adversely affect our business, financial condition, results of operations and prospects.

Developing corporate and securities laws and regulations in Russia could limit our ability to attract future investment.

        The regulation and supervision of the securities market, financial intermediaries and issuers are considerably less developed in Russia than, for example, in the United States and Western Europe. Securities laws, including those relating to corporate governance, disclosure and reporting requirements, are relatively new, while other laws concerning anti-fraud, insider trading and fiduciary duties of directors and officers remain underdeveloped. In addition, the Russian securities market is regulated by several different authorities, which are often in competition with each other. These include:

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the Federal Service for the Financial Markets;

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FAS;

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the CBR; and

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various professional self-regulatory organizations.

        The regulations of these various authorities are not always coordinated and may be contradictory.

        In addition, Russian corporate and securities rules and regulations can change rapidly, which may materially adversely affect our ability to conduct securities- related transactions. While some important areas are subject to virtually no oversight, the regulatory requirements imposed on Russian issuers in other areas result in delays in conducting securities offerings and in accessing the capital markets. It is often unclear whether or how regulations, decisions and letters issued by the various regulatory authorities apply to us. As a result, we may be subject to fines and/or other enforcement measures despite our best efforts at compliance, which could have a material adverse effect on our business, financial condition and results of operations.

There is little minority shareholder protection in Russia.

        Minority shareholder protection under Russian law principally derives from supermajority shareholder approval requirements for certain corporate actions, as well as from the ability of a shareholder to demand that the company purchase the shares held by that shareholder if that shareholder voted against or did not participate in voting on certain types of actions. Companies are also required by Russian law to obtain the approval of disinterested shareholders for certain transactions with interested parties. In practice, enforcement of these protections has been poor. Shareholders of some companies have also suffered as a result of fraudulent bankruptcies initiated by hostile creditors.

        The supermajority shareholder approval requirement is met by a vote of 75% of all voting shares that are present at a shareholders' meeting. Thus, controlling shareholders owning slightly less than 75% of outstanding shares of a company may have a 75% or more voting power if certain minority shareholders are not present at the meeting. In situations where controlling shareholders effectively have 75% or more of the voting power at a shareholders' meeting, they are in a position to approve amendments to the charter of the company or significant transactions including asset transfers, which could be prejudicial to the interests of minority shareholders. It is possible that our controlling shareholder in the future may not run us and our subsidiaries for the benefit of minority shareholders, and this could have a material adverse effect on the value of the shares and ADSs.

        While the Federal Law on Joint Stock Companies of December 26, 1995, or the Joint Stock Companies Law, provides that shareholders owning not less than 1% of the company's stock may bring

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an action for damages on behalf of the company, Russian courts to date do not have much experience with such lawsuits. Russian law does not contemplate class action litigation. Accordingly, your ability to pursue legal redress against us may be limited, reducing the protections available to you as a holder of the shares and ADSs.

Shareholder liability under Russian legislation could cause us to become liable for the obligations of our subsidiaries.

        The Civil Code of the Russian Federation, the Federal Law "On Joint Stock Companies," or the Joint Stock Companies Law, and the Federal Law "On Limited Liability Companies" generally provide that shareholders in a Russian joint stock company or members of a limited liability company are not liable for the obligations of the company and bear only the risk of loss of their investment. This may not be the case, however, when one entity is capable of determining decisions made by another entity. The entity capable of determining such decisions is deemed an "effective parent." The entity whose decisions are capable of being so determined is deemed an "effective subsidiary." The effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions if:

•

this decision-making capability is provided for in the charter of the effective subsidiary or in a contract between the companies; and

•

the effective parent gives obligatory directions to the effective subsidiary.

        In addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the action or inaction of an effective parent. This is the case no matter how the effective parent's ability to determine decisions of the effective subsidiary arises. For example, this liability could arise through ownership of voting securities or by contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the effective parent which caused the effective subsidiary to take action or fail to take action knowing that such action or failure to take action would result in losses. Accordingly, we could be liable in some cases for the debts of our subsidiaries. This liability could have a material adverse effect on our business, results of operations and financial condition.

Shareholder rights provisions under Russian law could impose additional obligations and costs on us.

        Russian law provides that shareholders that vote against or abstain from voting on certain matters have the right to sell their shares to the company at market value in accordance with Russian law. The decisions that trigger this right to sell shares include:

•

decisions with respect to a reorganization;

•

the approval by shareholders of a "major transaction," which, in general terms, is a transaction involving property worth more than 50% of the gross book value of our assets calculated according to Russian accounting standards, regardless of whether the transaction is actually consummated; and

•

the amendment of our charter in a manner that limits shareholder rights.

        For example, from 2004 through December 31, 2008, we merged 25 of our wholly owned subsidiaries into MTS. Following the approval of the merger of our two subsidiaries into MTS at the general shareholders meeting in June 2008, we repurchased shares from investors who voted against or abstained from voting on the merger in the amount of 11.1 billion rubles ($446.3 million as of the date of repurchase), or 10% of our net assets as of March 31, 2008 calculated according to Russian accounting standards.

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        Our obligation to purchase shares in these circumstances, which is limited to 10% of the company's net assets calculated in accordance with Russian accounting standards at the time the matter at issue is voted upon, could have a material adverse effect on our business, financial condition, results of operations and prospects.

        Under Russian law, if we are unable to sell the repurchased shares at a price equal to or exceeding the market price within one year after the date of repurchase, we have to reduce our charter capital accordingly.

It is not yet clear how the new Strategic Foreign Investment Law will affect us and our foreign shareholders.

        On May 7, 2008, the Federal Law "On the Procedure for Foreign Investment in Commercial Organizations of Strategic Importance for the Defense and Security of the State," or the Strategic Foreign Investment Law, came into force in Russia. This law sets forth certain restrictions relating to foreign investments in Russian companies of "strategic importance." Among others, companies with a dominant position in the Russian telecommunications market are considered to be strategically important and foreign investments in such companies are subject to regulations and restrictions to these companies set out by the Strategic Foreign Investment Law. For purposes of the Strategic Foreign Investment Law, a mobile telecommunications provider is deemed to be dominant if its market share in the Russian market exceeds 25%, as may be determined by FAS. In addition, a company may be considered to be strategically important due to our offering of services involving the use of cryptographic technologies.

        Starting from the effective date of the Strategic Foreign Investment Law, a foreign investor seeking to obtain direct or indirect control over a strategically important company is required to have the respective transaction pre-approved by an authorized governmental agency. In addition, foreign investors are required to notify this authorized governmental agency about any transactions undertaken by them resulting in the acquisition of 5% or more of the charter capital of strategically important companies. Within 180 days from the effective date of the Strategic Foreign Investment Law, foreign investors having 5% or more of the charter capital of strategically important companies are required to notify the authorized governmental agency about their current shareholding in such companies.

        On April 8, 2009, MTS OJSC and two of our subsidiaries, Dagtelecom LLC and Sibintertelecom CJSC, were added to the register of companies occupying a dominant position on the market with a market share exceeding 25% for the purpose of the Strategic Foreign Investment Law.

        As we are classified as a strategically important company, our current and future foreign investors are subject to the notification requirements described above and our current and potential investors may be limited in their ability to acquire a controlling stake in, or otherwise gain control over, us. Such increase in governmental control or limitation on foreign investment could impair the value of your investment and could hinder our access to additional capital. In addition, the Strategic Foreign Investment Law contemplates the adoption of a number of implementing regulations. It is currently unclear how these regulations will affect us and our foreign shareholders.

Reduction of the Calling Party Pays Settlement Rate and other regulatory changes in Russia may have a material adverse effect on our financial condition and results of operations.

        An amendment to the Federal Law on Communications, which became effective July 1, 2006, implemented the Calling Party Pays, or the CPP, principle prohibiting mobile operators from charging their subscribers for incoming calls. Prior to the implementation of the CPP, subscribers of fixed line operators could initiate calls to mobile phone users free of charge. Under the new system, fixed line operators began charging their subscribers for such calls and transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to mobile operators is established by the regulator and is known as the "settlement rate." Any reduction of the settlement rate by the

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regulator could have a negative impact on our average monthly service revenues per subscriber and margins.

        In addition, potential regulatory changes that may be enacted in the future, such as mobile numbering portability and the introduction of new rules regulating MVNOs could weaken our competitive position in the mobile telecommunications market and, as a result, materially adversely affect our financial condition and results of operations.

Our failure to comply with new personal data protection laws in Russia may have a material adverse effect on our business, financial condition and results of operations.

        The Federal Law on Personal Data and certain regulations enacted thereunder require us to bring our information storage, processing and protection practices in compliance with the statutory standards by January 1, 2010. The implementation of these standards involves significant technical, financial and managerial undertakings. For example, we will be required to treat subscribers' personal data with the level of protections afforded to state secrets, obtain state certification of our installed information protection facilities and ensure that our automated accounting systems do not have any undeclared capabilities. At the same time, the standards contain significant ambiguity, which may impede our ability to comply and creates the potential for Russian authorities to form differing views on compliance.

        If the resources required to develop and implement data protection systems meeting the new standards are greater than expected, or we fail to comply with the data protection laws despite our best efforts to do so, our business, financial condition and results of operations could be materially adversely affected.

Changes in Ukrainian telecommunications legislation have caused uncertainty in relation to the regulation of the Ukrainian telecommunications industry and may adversely affect our business, financial condition and results of operations.

        The new Ukrainian Law on Telecommunications came into force on December 23, 2003 (certain articles became effective in 2004 and 2005). However, certain regulatory bodies established by the new law were unable to duly exercise their regulatory functions for an extended period of time. For example, the NCRC was established in August 2004 by a Decree of the President of Ukraine. On January 1, 2005, it was vested with the powers of the central regulatory body in the sphere of communications by the Ukrainian Law on Telecommunications. The NCRC was considered formed and began to perform its regulatory activity in April 2005, when both the chairperson and its members were appointed as required by the Ukrainian Law on Telecommunications. However, in 2007 and 2008, the authority to appoint the NCRC chairperson and its members became the subject of a dispute between the President of Ukraine and the Cabinet of Ministers of Ukraine and the respective appointments were challenged in Ukrainian courts because of conflicting orders and regulations issued by the President of Ukraine and the Cabinet of Ministers. On October 8, 2008, the Constitutional Court of Ukraine passed a resolution pursuant to which the right of the Cabinet of Ministers to appoint the NCRC members and adopt its regulations was confirmed. Thus, the NCRC chairperson and its members are currently appointed by the Cabinet of Ministers. However, this uncertainty and any future challenges to the NCRC's authority or composition may have an adverse effect on our business, financial condition and results of operations.

        In addition, the new Ukrainian Law on Telecommunications, among other things, may require companies with a dominant position in the telecommunications market to develop public telecommunications services if directed to do so by the regulatory authorities. As, according to AC&M-Consulting, the market share of MTS-Ukraine in mobile telecommunications services in Ukraine was 32.5% as of December 31, 2008, implementation of this law may materially adversely

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affect our financial condition and results of operations. See "Item 4. Information on Our Company—B. Business Overview—Regulation in Ukraine—Legislation."

The lack of a developed share registration system in Russia may result in improper record ownership of our shares, including the shares underlying the ADSs.

        Ownership of Russian joint stock company shares (or, if the shares are held through a nominee or custodian, then the holding of such nominee or custodian) is determined by entries in a share register and is evidenced by extracts from that register. Currently, there is no central registration system in Russia. Share registers are maintained by the companies themselves or, if a company has more than 50 shareholders or so elects, by licensed registrars. Regulations have been issued regarding the licensing conditions for such registrars, as well as the procedures to be followed by both companies maintaining their own registers and licensed registrars when performing the functions of registrar. In practice, however, these regulations have not been strictly enforced, and registrars generally have relatively low levels of capitalization and inadequate insurance coverage. Moreover, registrars are not necessarily subject to effective governmental supervision. Due to the lack of a developed share registration system in Russia, transactions in respect of a company's shares could be improperly or inaccurately recorded, and share registration could be lost through fraud, negligence, official and unofficial governmental actions or oversight by registrars incapable of compensating shareholders for their misconduct. This creates risks of loss not normally associated with investments in other securities markets. Further, the depositary, under the terms of the deposit agreement, will not be liable for the unavailability of our shares or for the failure to make any distribution of cash or property with respect thereto due to the unavailability of the shares.

The Russian taxation system is underdeveloped and any imposition of significant additional tax liabilities could have a material adverse effect on our business, financial condition or results of operations.

        The discussion below provides general information regarding Russian taxes and is not intended to be inclusive of all issues. Investors should seek advice from their own tax advisors as to these tax matters before investing in the ADSs. See also "Item 10. Additional Information—E. Taxation."

        In general, taxes payable by Russian companies are substantial and numerous. These taxes include, among others, corporate income tax, value added tax, property taxes, excise duties, payroll-related taxes and other taxes.

        Russian tax laws, regulations and court practice are subject to frequent change, varying interpretation and inconsistent and selective enforcement. In some instances, although it may be viewed as contrary to Russian constitutional law, the Russian tax authorities have applied certain new taxes retroactively, issued tax claims for periods for which the statute of limitations had expired and reviewed the same tax period multiple times.

        On October 12, 2006, the Plenum of the High Arbitration Court of the Russian Federation issued Resolution No. 53 formulating the concept of "unjustified tax benefit," which is described in the Resolution by reference to circumstances, such as absence of business purpose or transactions where the form does not match the substance, and which could lead to the disallowance of tax benefits resulting from the transaction or the recharacterization of the transaction. There has been very little further guidance on the interpretation of this concept by the tax authorities or courts, but it is likely that the tax authorities will actively seek to apply this concept when challenging tax positions taken by taxpayers in Russian courts. While the intention of this Resolution might have been to combat abuse of tax laws, in practice, there is no assurance that the tax authorities will not seek to apply this concept in a broader sense.

        Generally, tax returns in Russia remain open and subject to tax audit by the tax authorities for a period of three calendar years immediately preceding the year in which the decision to conduct a tax

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audit is taken. The fact that a year has been reviewed by the tax authorities does not prevent further review of that year, or any tax return applicable to that year, during the eligible three-year period by a superior tax authority. In addition, on July 14, 2005, the Constitutional Court of the Russian Federation issued a decision that allows the statute of limitations for tax penalties to be extended beyond the three-year term set forth in the tax laws if a court determines that the taxpayer has obstructed or hindered a tax audit. Moreover, recent amendments to the Tax Code of the Russian Federation, effective January 1, 2007, provide for the extension of the three-year statute of limitations if the actions of the taxpayer created insurmountable obstacles for the tax audit. Because none of the relevant terms is defined, tax authorities may have broad discretion to argue that a taxpayer has "obstructed" or "hindered" or "created insurmountable obstacles" in respect of a tax audit and to ultimately seek review and possibly apply penalties beyond the three-year term. There is no guarantee that the tax authorities will not review our compliance with applicable tax law beyond the three-year limitation period. Any such review could, if it concluded that we had significant unpaid taxes relating to such periods, have a material adverse effect on our business, financial condition, results of operations and/or prospects.

        Moreover, the financial results of Russian companies cannot be consolidated for tax purposes. Therefore, each of our Russian subsidiaries pays its own Russian taxes and may not offset its profit or loss against the loss or profit of any of our other subsidiaries. In addition, intercompany dividends are subject to a withholding tax of 0% or 9% (depending on whether the recipient of dividends qualifies for Russian participation exemption rules), if being distributed to Russian companies, and 15% (or lower, subject to benefits provided by relevant double tax treaties), if being distributed to foreign companies. If the receiving company itself pays a dividend, it may offset tax withheld against its own withholding liability of the onward dividend although not against any withholding made on a distribution to a foreign company. These tax requirements impose additional burdens and costs on our operations, including management resources.

        Anti-crisis tax measures were recently adopted to help businesses. Such measures include, among others, the reduction of the corporate income tax rate from 24% to 20% starting from January 1, 2009, the acceleration of tax depreciation and the increase in interest expense deductibility thresholds.

        The Russian tax authorities may take more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in the past may nonetheless be subject to challenge in the future. The foregoing factors raise the risk of the imposition of arbitrary or onerous taxes on us, which could adversely affect the value of our shares and ADSs.

        Current Russian tax legislation is, in general, based upon the formal manner in which transactions are documented, looking to form rather than substance. However, the Russian tax authorities, in some cases, are increasingly taking a "substance over form" approach, which may cause additional tax exposures to arise in the future. Additional tax exposures could have a material adverse effect on our business, financial condition, results of operations and prospects.

        In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions. For example, tax laws are unclear with respect to deductibility of certain expenses. This uncertainty could possibly expose us to significant fines and penalties and to enforcement measures, despite our best efforts at compliance, and could result in a greater than expected tax burden.

        In 2008, the tax authorities completed a tax audit in respect of the years ended December 31, 2005 and 2006. As a result of the audit, the tax authorities imposed additional tax liability in the amount of 1,130.0 million rubles (approximately $38.5 million as of December 31, 2008), including taxes, fines and penalties, which amount we paid in full to the tax authorities as of December 31, 2008. See also "Item 8. Financial information—8.A.7. Litigation—Tax Audits and Claims."

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The implications of the tax system in Ukraine are uncertain and various tax laws are subject to different interpretations.

        Ukraine currently has a number of laws related to various taxes imposed by both central and regional authorities. Applicable taxes include value added tax, or VAT, corporate income tax (profits tax), customs duties, payroll (social) taxes and other taxes. These tax laws have not been in force for significant periods of time compared to more developed market economies and are constantly changed and amended. Accordingly, few precedents regarding tax issues are available.

        Although the Ukrainian Constitution prohibits retroactive enforcement of any newly enacted tax laws and the Law on Taxation System specifically requires legislation to adopt new tax laws at least six months prior to them becoming effective, such rules have largely been ignored. In addition, tax laws are often vaguely drafted, making it difficult for us to determine what actions are required for compliance. For example, MTS-Ukraine believes that the services rendered to its subscribers within the networks of foreign operators that serve as roaming partners for MTS-Ukraine, are not subject to VAT. However, due to the ambiguity of the Ukrainian tax legislation, the state tax authorities may conclude that VAT applies to these services. In such case, MTS-Ukraine will be obligated to pay the VAT sums and penalties.

        Differing opinions regarding the legal interpretation of tax laws often exist both among and within governmental ministries and organizations, including the tax administration, creating uncertainties and areas of conflict for taxpayers and investors. In practice, the Ukrainian tax authorities tend to interpret the tax laws in an arbitrary way that rarely favors taxpayers.

        Tax declarations/returns, together with other legal compliance areas (e.g., customs and currency control matters), may be subject to review and investigation by various administrative divisions of the tax authorities, which are authorized by law to impose severe fines, penalties and interest charges. These circumstances create tax risks in Ukraine substantially more significant than typically found in countries with more developed tax systems. Generally, tax declarations/returns in Ukraine remain open and subject to inspection for a three-year period. However, this term may not be observed or may be extended under certain circumstances, including in the context of a criminal investigation. While we believe that we are currently in compliance with the tax laws affecting our operations in Ukraine, it is possible that relevant authorities may take differing positions with regard to interpretative issues, which may result in a material adverse effect on our results of operations and financial condition.

Vaguely drafted Russian transfer pricing rules and lack of reliable pricing information may impact our business and results of operations.

        Russian transfer pricing legislation became effective in the Russian Federation on January 1, 1999. This legislation allows the tax authorities to make transfer pricing adjustments and impose additional tax liabilities with respect to all "controlled" transactions, provided that the transaction price differs from the market price by more than 20%. "Controlled" transactions include transactions with related parties, barter transactions, foreign trade transactions and transactions with unrelated parties with significant price fluctuations (i.e., if the price with respect to such transactions differs from the prices on similar transactions conducted within a short period of time by more than 20%). Special transfer pricing provisions are established for operations with securities and derivatives. Russian transfer pricing rules are vaguely drafted, generally leaving wide scope for interpretation by Russian tax authorities and courts. There has been very little guidance (although some court practice is available) as to how these rules should be applied. Moreover, the Ministry of Finance of the Russian Federation is in the process of finalizing amendments to the transfer pricing legislation, which may come into force in the near future. The implementation of these amendments are expected to considerably toughen the existing law, as the proposed changes are expected, among other things, to effectively shift the burden of proving market prices from the tax authorities to the taxpayer, cancel the existing permitted deviation

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threshold and introduce specific documentation requirements for proving market prices. If the tax authorities were to impose significant additional tax liabilities as a result of transfer pricing adjustments, it could have a material adverse impact on our business, financial condition and results of operations.

        Additionally, in the event that a transfer pricing adjustment is assessed by the Russian tax authorities, the Russian transfer pricing rules do not provide for an offsetting adjustment to the related counterparty in the transaction that is subject to adjustment. In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions.

The regulatory environment for telecommunications in Russia, Ukraine and other countries where we operate or may operate in the future is uncertain and subject to political influence or manipulation, which may result in negative and arbitrary regulatory and other decisions against us on the basis of other than legal considerations and in preferential treatment for our competitors.

        We operate in an uncertain regulatory environment. The legal framework with respect to the provision of telecommunications services in Russia and Ukraine and the other countries where we operate or may operate in the future is not well developed, and a number of conflicting laws, decrees and regulations apply to the telecommunications sector.

        Moreover, regulation is conducted largely through the issuance of licenses and instructions, and governmental officials have a high degree of discretion. In this environment, political influence or manipulation could be used to affect regulatory, tax and other decisions against us on the basis of other than legal considerations. For example, Russian government authorities investigated Vimpelcom in late 2003 on grounds that it was illegally operating in Moscow pursuant to a license issued to its wholly owned subsidiary rather than to Vimpelcom itself. In addition, some of our competitors may receive preferential treatment from the government, potentially giving them a substantial advantage over us. For example, according to press reports, MegaFon and Closed Joint Stock Company "KYIVSTAR" G.S.M., or Kyivstar, our competitors in Russia and Ukraine, respectively, received preferential treatment in regulatory matters in the past.

Risks Relating to the Shares and ADSs and the Trading Market

Government regulations may limit the ability of investors to deposit shares into our ADS facility.

        The ability of investors to deposit shares into our ADS facility may be affected by current or future governmental regulations. For example, under Russian securities regulations, no more than 30% of a Russian company's shares and no more than 25% with respect to strategically important companies may be circulated abroad through sponsored depositary receipt programs. Prior to December 31, 2005, and at the time of our initial public offering, this threshold was 40%. Although we believe that the new lower threshold does not apply to our ADSs, in the future, we may be required to reduce the size of our ADS program or amend the depositary agreement for the ADSs.

        Because our ADS program is regularly at or near capacity, purchasers of our shares may not be able to deposit these shares into our ADS facility, and ADS holders who withdraw the underlying shares from the facility may not be able to re-deposit their shares in the future. As a result, effective arbitrage between our ADSs and our shares may not always be possible. Our shares are listed and trade on the Moscow Interbank Currency Exchange. Due to the limited public free float of our common stock, the public market for our shares is significantly less active and liquid than for our ADSs. The cumulative effect of these factors is that our shares may from time to time, and for extended periods of time, trade at a significant discount to our ADSs.

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Because the depositary may be considered the owner of the shares underlying the ADSs, these shares may be arrested or seized in legal proceedings in Russia against the depositary.

        Many jurisdictions, such as the United Kingdom and the United States, recognize a distinction between legal owners of securities, such as the depositary, and the beneficial owners of securities, such as the ADS holders. In these jurisdictions, the shares held by the depositary on behalf of the ADS holders would not be subject to seizure in connection with legal proceedings against the depositary that are unconnected with the shares.

        Russian law may not, however, recognize a distinction between legal and beneficial ownership of securities. Russian law generally treats a depositary as the owner of shares underlying the ADSs and, accordingly, may not recognize ADS holders' beneficial ownership therein.

        Thus, in proceedings brought against a depositary, whether or not related to shares underlying the ADSs, Russian courts may treat those underlying shares as the assets of the depositary, open to seizure or arrest. In the past, a lawsuit was filed against a depositary seeking the seizure of various Russian companies' shares represented by ADSs issued by that depositary. In the event that this type of suit were to be successful in the future against our depositary, and the shares underlying our ADSs were to be seized or arrested, the ADS holders involved could lose their rights to such underlying shares and all of the money invested in them.

The market price of our ADSs has been and may continue to be volatile.

        The market price of our ADSs experienced, and may continue to experience, significant volatility. For the period from January 1, 2008 to December 31, 2008, the closing price of our ADSs on the New York Stock Exchange has ranged from a low of $21.67 per ADS to a high of $101.9 per ADS.

        Numerous factors, including many over which we have no control, may have a significant impact on the market price of our ADSs, including, among other things:

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periods of regional or global macroeconomic instability;

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announcements of technological or competitive developments;

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regulatory developments in our target markets affecting us, our customers or our competitors;

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actual or anticipated fluctuations in our quarterly operating results;

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changes in financial estimates or other material comments by securities analysts relating to us, our competitors or our industry in general;

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announcements by other companies in our industry relating to their operations, strategic initiatives, financial condition or financial performance or to our industry in general;

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announcements of acquisitions or consolidations involving industry competitors or industry suppliers;

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sales or perceived sales of additional ordinary shares or ADSs by us or our significant shareholders; and

•

impact and development of any lawsuit, currently pending or threatened, or that may be instituted in the future.

        In addition, the stock market in recent years has experienced extreme price and trading volume fluctuations that often have been unrelated or disproportionate to the operating performance of individual companies. These broad market fluctuations may adversely affect the price of our ADSs, regardless of our operating performance.

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Voting rights with respect to the shares represented by our ADSs are limited by the terms of the deposit agreement for our ADSs and relevant requirements of Russian law.

        ADS holders will have no direct voting rights with respect to the shares represented by the ADSs. They will be able to exercise voting rights with respect to the shares represented by ADSs only in accordance with the provisions of the deposit agreement relating to the ADSs and relevant requirements of Russian law. Therefore, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with them. For example, the Joint Stock Companies Law and our charter require us to notify shareholders no less than 30 days prior to the date of any meeting and at least 70 days prior to the date of an extraordinary meeting to elect our Board of Directors. Our ordinary shareholders will receive notice directly from us and will be able to exercise their voting rights by either attending the meeting in person or voting by power of attorney.

        ADS holders by comparison, will not receive notice directly from us. Rather, in accordance with the deposit agreement, we will provide the notice to the depositary. The depositary has undertaken, in turn, as soon as practicable thereafter, to mail to you the notice of such meeting, voting instruction forms and a statement as to the manner in which instructions may be given by ADS holders. To exercise their voting rights, ADS holders must then instruct the depositary how to vote the shares represented by the ADSs they hold. Because of this additional procedural step involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of the shares and we cannot assure ADS holders that they will receive voting materials in time to enable them to return voting instructions to the depositary in a timely manner. ADSs for which the depositary does not receive timely voting instructions will not be voted.

        In addition, although Russian securities regulations expressly permit the depositary to split the votes with respect to the shares underlying the ADSs in accordance with instructions from ADS holders, there is little court or regulatory guidance on the application of such regulations, and the depositary may choose to refrain from voting at all unless it receives instructions from all ADS holders to vote the shares in the same manner. ADS holders may thus have significant difficulty in exercising voting rights with respect to the shares underlying the ADSs. We cannot assure you that holders and beneficial owners of ADSs will (i) receive notice of shareholder meetings to enable the timely return of voting instructions to the depositary, (ii) receive notice to enable the timely cancellation of ADSs in respect of shareholder actions or (iii) be given the benefit of dissenting or minority shareholders' rights in respect of an event or action in which the holder or beneficial owner has voted against, abstained from voting or not given voting instructions.

ADS holders may be unable to repatriate distributions made on the shares and ADSs.

        We anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of ADSs, net of the depositary's fees and expenses. The ability to convert rubles into U.S. dollars is subject to the availability of U.S. dollars in Russia's currency markets. Although there is an existing, albeit limited by size, market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the further development of this market is uncertain. At present, there is a limited market for the conversion of rubles into foreign currencies outside of Russia and limited market in which to hedge ruble and ruble-denominated investments.

ADS holders may be unable to benefit from the United States–Russia income tax treaty.

        Under Russian law, dividends paid to a non-resident holder of the shares generally will be subject to Russian withholding tax at a rate of 15%. The domestic tax rate applicable to dividends payable by

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Russian companies to non-resident individuals has been reduced from 30% to 15% effective from January 1, 2008. This tax may potentially be reduced to 5% or 10% for legal entities and organizations and to 10% for individuals under the Convention between the United States of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital, or the United States–Russia income tax treaty, provided a number of conditions are satisfied. However, the Russian tax rules on the application of double tax treaty benefits to individuals are unclear and there is no certainty that advance clearance would be possible. The Russian tax rules applicable to ADS holders are characterized by significant uncertainties. In a number of clarifications, the Ministry of Finance of the Russian Federation expressed a view that ADS holders (rather than the depositary) should be treated as the beneficial owners of the underlying shares for the purposes of double tax treaty provisions applicable to taxation of dividend income from the underlying shares, provided that the tax residencies of the ADS holders are duly confirmed. However, in the absence of any specific provisions in the Russian tax legislation with respect to the concept of beneficial ownership and taxation of income of beneficial owners, it is unclear how the Russian tax authorities and courts will ultimately treat the ADS holders in this regard. Thus, we may be obliged to withhold tax at standard non-treaty rates when paying out dividends, and U.S. ADS holders may be unable to benefit from the United States–Russia income tax treaty. See also "Item 10. Additional Information—E. Taxation" for additional information.

Capital gain from the sale of shares and ADSs may be subject to Russian income tax.

        Under Russian tax legislation, gains realized by non-resident legal entities or organizations from the disposition of shares and securities of Russian organizations, as well as financial instruments derived from such shares, such as the ADSs, may be subject to Russian withholding income tax if immovable property located in Russia constitutes more than 50% of our assets. However, no procedural mechanism currently exists to withhold and remit this tax with respect to sales made to persons other than Russian companies and foreign companies with a registered permanent establishment in Russia. Gains arising from the disposition of the foregoing types of securities on foreign stock exchanges by non-resident holders who are legal entities or organizations are not subject to taxation in Russia.

        The taxation of income of non-resident individuals depends on whether this income is received from Russian or non-Russian sources. The Russian tax laws do not give a definition of how the "source of income" should be determined with respect to the sale of securities, other than that income from the sale of securities "in Russia" should be considered as Russian source income. As there is no further definition of what should be considered to be a sale "in Russia," the Russian tax authorities have a certain amount of freedom to conclude what transactions take place in or outside Russia, including looking at the place of the transaction, the place of the issuer of the shares or other similar criteria.

        Non-residents who are individuals are taxable on Russian-source income. Provided that gains arising from the disposition of the foregoing types of securities and derivatives outside of Russia by U.S. holders who are individuals not resident in Russia for tax purposes will not be considered Russian source income, then such income should not be taxable in Russia. However, gains arising from the disposition of the same securities and derivatives "in Russia" by U.S. holders who are individuals not resident in Russia for tax purposes may be subject to tax either at the source in Russia or based on an annual tax return, which they may be required to submit with the Russian tax authorities. See also "Item 10. Additional Information—E. Taxation."

Foreign judgments may not be enforceable against us.

        Our presence outside the United States may limit your legal recourse against us. We are incorporated under the laws of the Russian Federation. Substantially all of our directors and executive officers named in this document reside outside the United States. All or a substantial portion of our

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assets and the assets of our officers and directors are located outside the United States. As a result, you may not be able to effect service of process within the United States on us or on our officers and directors. Similarly, you may not be able to obtain or enforce U.S. court judgments against us, our officers and directors, including actions based on the civil liability provisions of the U.S. securities laws. In addition, it may be difficult for you to enforce, in original actions brought in courts in jurisdictions outside the United States, liabilities predicated upon U.S. securities laws.

        There is no treaty between the United States and the Russian Federation providing for reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters. These limitations may deprive you of effective legal recourse for claims related to your investment in the ADSs. The deposit agreement provides for actions brought by any party thereto against us to be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, provided that any action under the U.S. federal securities laws or the rules or regulations promulgated thereunder may, but need not, be submitted to arbitration. The Russian Federation is a party to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, but it may be difficult to enforce arbitral awards in the Russian Federation due to a number of factors, including the inexperience of Russian courts in international commercial transactions, official and unofficial political resistance to enforcement of awards against Russian companies in favor of foreign investors and Russian courts' inability to enforce such orders and corruption.

Other Risks

We have not independently verified information we have sourced from third parties.

        We have sourced certain information contained in this document from third parties, including private companies and Russian government agencies, and we have relied on the accuracy of this information without independent verification. The official data published by Russian federal, regional and local governments may be substantially less complete or researched than those of more developed countries. Official statistics may also be produced on different bases than those used in Western countries. Any discussion of matters relating to Russia in this document must, therefore, be subject to uncertainty due to concerns about the completeness or reliability of available official and public information. In addition, the veracity of some official data released by the Russian government may be questionable. In 1998, the Director of the Russian State Committee on Statistics and a number of his subordinates were arrested and subsequently sentenced by a court in 2004 in connection with their misuse of economic data.

Because no standard definition of a subscriber, average monthly service revenue per subscriber (ARPU), average monthly usage per subscriber (MOU) or churn exists in the mobile telecommunications industry, comparisons between certain operating data of different companies may be difficult to draw.

        The methodology for calculating subscriber numbers, ARPU, MOU and churn varies substantially in the mobile telecommunications industry, resulting in variances in reported numbers from that which would result from the use of a uniform methodology. Therefore, comparisons of certain operating data between different mobile cellular communications companies may be difficult to draw.

Item 4.    Information on Our Company

A.    History and Development

        Mobile TeleSystems CJSC, or MTS CJSC, our predecessor, was formed in 1993. The founding shareholders included MGTS and three other Russian telecommunications companies, which collectively held 53% of our original share capital, and two German companies, Siemens AG and T-Mobile Deutschland GmbH, an affiliate of Deutsche Telekom AG, which collectively held the

47

remaining 47%. JSFC Sistema, or Sistema, currently owns 52.8% of our share capital (55.7% excluding treasury shares). See "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders."

        MTS CJSC inaugurated service in the Moscow license area in 1994 and began expanding into nearby regions in 1997. Since that time, we have continued to grow by applying for GSM licenses in new regions, investing in new GSM licensees, increasing our ownership percentage in these licensees and acquiring existing GSM license holders and operators.

        Mobile TeleSystems OJSC was created on March 1, 2000, through the merger of MTS CJSC and RTC CJSC, a wholly-owned subsidiary. In accordance with Russian merger law, MTS CJSC and RTC CJSC ceased to exist and MTS OJSC was created with the assets and obligations of the predecessor companies. Our charter was registered with the State Registration Chamber on March 1, 2000, which is our date of incorporation, and with the Moscow Registration Chamber on March 22, 2000. Our initial share issuance was registered by the Russian Federal Commission on the Securities Market on April 28, 2000.

        We completed our initial public offering on July 6, 2000, and listed our shares of common stock, represented by ADSs on the New York Stock Exchange under the symbol "MBT." Each ADS represents five underlying shares of our common stock. Prior to January 1, 2005, each ADS represented 20 shares.

        In April 2003 and December 2004, T-Mobile completed offerings of approximately 5.0% and 15.1% of our shares, respectively, in the form of GDRs through an unsponsored GDR program. In September 2005, T-Mobile sold its remaining 10.1% interest in us on the open market.

        Our legal name is Mobile TeleSystems OJSC, and we are incorporated under the laws of the Russian Federation. Our head office is located at Vorontsovskaya Street 5, Bldg. 2, Moscow 109147, Russian Federation, and the telephone number of our investor relations department is +7 495 223-2025. We maintain a website at www.mtsgsm.com. The information on our website is not a part of this report. We have appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715 as our authorized agent for service of process for any suit or proceeding arising out of or relating to our shares, ADSs or the Deposit Agreement.

Expansion

Russia

        In furtherance of our goal to be a nationwide operator in Russia, we have extended our focus beyond our original market of Moscow and the Moscow region with a view towards developing our existing license areas in the regions, acquiring new regional licenses and acquiring regional operators. For a listing of our acquisitions in the last three years, see "Item 5. Operating and Financial Review and Prospects—Acquisitions" and Note 3 to our audited consolidated financial statements.

Belarus

        In September 2001, we won a tender held by the Telecommunications Ministry of the Belarus Republic to form a joint venture with a GSM 900/1800 license to operate in Belarus. Pursuant to the tender conditions:

•

we formed a company in Belarus, MTS Belarus, and contributed approximately $2.5 million in exchange for 49% of the share capital of the company (the other 51% of which is held by a state-owned enterprise);

•

we paid a lump sum of $10 million to the government of Belarus;

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•

MTS Belarus made a one-time payment of $5 million (which was funded by a $5 million loan from us to it); and

•

we paid a total of $6 million to the government of Belarus in five annual installments of $1.2 million from 2003 through 2007.

        On June 26, 2002, MTS Belarus received all of the governmental approvals and licenses required to commence operations in Belarus and it began operations on June 27, 2002. MTS Belarus is an equity investment, and its results are not consolidated in our financial statements.

        MTS Belarus operates under a license to carry out telecommunications activities issued by the Ministry for Communications and Information Technology of the Republic of Belarus, valid until August 23, 2017.

        Belarus had a population of approximately 9.8 million and a nationwide mobile penetration rate of approximately 86% as of December 31, 2008, according to AC&M-Consulting. We operate under the MTS brand in Belarus.

Ukraine

        In March 2003, we purchased a 57.7% stake in UMC for $199.0 million. We purchased a 16.33% stake from KPN, a 16.33% stake from Deutsche Telekom, and a 25.0% stake from Ukrtelecom. In June 2003, we purchased an additional 26.0% stake in UMC from Ukrtelecom for $87.6 million pursuant to a call option agreement, which increased our ownership in UMC to 83.7%. We purchased the remaining 16.33% stake in UMC from TDC for $91.7 million in July 2003 pursuant to a put and call option agreement. Since July 2007, we have operated under the MTS brand in Ukraine.

Uzbekistan

        In August 2004, we acquired a 74% stake in Uzdunrobita, the largest wireless operator in Uzbekistan, for $126.4 million in cash. We acquired the remaining 26% stake in June 2007 pursuant to a put option agreement for $250.0 million in cash. Since May 2006, we have operated under the MTS brand in Uzbekistan.

Turkmenistan

        In two separate purchases in June and November 2005, we acquired 100% of BCTI, the leading wireless operator in Turkmenistan, for $46.7 million in cash. Since October 2006, we have operated under the MTS brand in Turkmenistan.

Armenia

        In September 2007, we acquired an 80% stake in International Cell Holding Ltd., a 100% indirect owner of K-Telekom, the leading wireless operator in Armenia, for €260.0 million ($361.2 million as of the date of acquisition), and entered into call and put option agreement valid until 2012 for the remaining 20%. According to the sale and purchase agreement, an additional €50.0 million ($69.0 million as of the date of acquisition) will be paid to the sellers over the course of three years from 2008 to 2010 provided certain financial targets are met by K-Telekom. We also agreed to extend a €140.0 million ($194.5 million as of the date of acquisition) technical loan to the company to finance the repayment of payables for equipment and other liabilities due as of the date of acquisition.

        K-Telekom operates in the GSM-900/1800 standard, covering the entire territory of Armenia. It historically operated under the VivaCell brand, and was rebranded as VivaCell-MTS in September 2008.

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Capital Expenditures

        We spent in total $2,227.3 million in 2008 for network development in Russia and the other countries where we operate, which included $1,847.5 million in cash expenditures on property, plant and equipment, and $379.8 million for the purchase of intangible assets. We expect to spend approximately $1,500.0 million in 2009 for our current operations, including for GSM and 3G network development. We plan to finance our capital expenditures primarily through operating cash flows, and to the extent necessary, through additional external financing activities. The actual amount of our capital expenditures for 2009 may vary depending on subscriber growth and demand and network development as well as currency volatility, vendor terms and the availability of external financing. The capital expenditure estimate for 2009 excludes expenditures that may be made in connection with acquisitions of existing operators or new licenses. A breakdown of our capital expenditures in 2008 by country is set forth below. For the first quarter of 2009 and continuing into the second quarter, our principal capital expenditures have related to the buildout of our 3G network and other expenditures related to our GSM network maintenance and expansion which we have financed through operating cash flows.

        We spent in total $35.1 million in 2008 for acquisitions of subsidiaries, net of cash acquired. See also "Item 5. Operating and Financial Review and Prospects—Acquisitions."

Russia

        We spent $1,399.3 million in 2008 for network development in Russia, including $1,117.8 million in cash expenditures on property, plant and equipment, and $281.4 million for the purchase of intangible assets.

Belarus

        MTS Belarus spent $145.2 million in 2008 for network development in Belarus. We do not include the capital expenditures of MTS Belarus in our capital expenditures described above as MTS Belarus' results are not consolidated in our financial statements.

Ukraine

        We spent $595.6 million in 2008 for network development in Ukraine, including $534.2 million in cash expenditures on property, plant and equipment, and $61.4 million for the purchase of intangible assets.

Uzbekistan

        We spent $139.7 million in 2008 for network development in Uzbekistan, including $113.0 million in cash expenditures on property, plant and equipment, and $26.7 million for the purchase of intangible assets.

Turkmenistan

        We spent $58.2 million in 2008 for network development in Turkmenistan, including $55.4 million in cash expenditures on property, plant and equipment, and $2.8 million for the purchase of intangible assets.

Armenia

        We spent $34.6 million in 2008 for network development in Armenia, including $27.0 million in cash expenditures on property, plant and equipment, and $7.6 million for the purchase of intangible assets.

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B.    Business Overview

        We are the largest provider of mobile cellular communications services in Russia, Uzbekistan, Turkmenistan and Armenia and the second largest in Ukraine, in terms of subscribers, employing technology based primarily on GSM. In 2008, we generated net revenues of $10,245 million and had a subscriber base of 91.33 million (64.63 million in Russia, 18.12 million in Ukraine, 5.65 million in Uzbekistan, 0.93 million in Turkmenistan and 2.02 million in Armenia) at December 31, 2008.

        In addition to standard voice services, we offer our subscribers value added services, including voice mail, short message service, or SMS, general packet radio service, or GPRS, augmented by enhanced data rates for GSM evolution, or EDGE, high-speed downlink packet access, or HSDPA, and various SMS- and GPRS/EDGE/HSDPA-based information and entertainment services (including multi media message service, or MMS).We also offer our subscribers the ability to roam automatically throughout Europe and in much of the rest of the world, and as of December 31, 2008, we had bilateral roaming agreements with 530 wireless operators in 208 countries.

        We have grown rapidly since 1999 through organic growth, as well as acquisitions. The table below sets forth our total subscribers as of the end of, and net revenues for each of, the last five years:

Period	Subscribers(1)		Net revenues
	(in thousands)
2004		34,224	$	3,886,994
2005		58,194	$	5,011,018
2006		72,858	$	6,384,254
2007		81,970	$	8,252,378
2008		91,335	$	10,245,294

(1)

We define a subscriber as an individual or organization whose account shows chargeable activity within 61 days (or 183 days in the case of our prepaid brand tariffs) or whose account does not have a negative balance for more than this period.

        Russia is our principal market, both in terms of subscribers and revenues. At December 31, 2008, approximately 71% of our subscriber base was in Russia and approximately 20% was in Ukraine. According to AC&M-Consulting, we had a 34.4% market share of total wireless subscribers in Russia at December 31, 2008. In Ukraine, we had a 32.5% market share at December 31, 2008, according to AC&M-Consulting.

        For the years ended December 31, 2008, 2007 and 2006 approximately 76%, 75% and 73% of our revenues came from operations in Russia; approximately 16%, 20% and 23% of our revenues came from operations in Ukraine; and approximately 8%, 5% and 4% of our revenues came from operations in our other countries, respectively.

        Our subscriber base continued to grow in 2009. At April 30, 2009, we had approximately 93.03 million subscribers, including 65.68 million in Russia, 17.82 million in Ukraine, 6.30 million in Uzbekistan, 1.18 million in Turkmenistan and 2.06 million in Armenia.

        Overall mobile cellular penetration in Russia was at approximately 129% at December 31, 2008, according to AC&M-Consulting. Mobile cellular penetration in Ukraine was at approximately 121% at December 31, 2008, according to AC&M-Consulting. According to our estimates, mobile cellular penetration in Uzbekistan, Turkmenistan and Armenia was at approximately 44%, 19% and 80% at December 31, 2008, respectively.

        As of December 31, 2008, we had licenses to operate in 82 regions of Russia with a population of approximately 144 million people, or approximately 99% of the country's total population, for the entire territory of Ukraine with a population of approximately 46 million people, for the entire territory of Uzbekistan with a population of approximately 27 million people, for the entire territory of Turkmenistan with a population of approximately 6 million people and for the entire territory of

51

Armenia with a population of approximately 3 million people. As of December 31, 2008, we had commercial operations in 81 regions of Russia.

        To maintain and increase our market share and brand awareness, we use a combination of print media, radio, television, direct mail and outdoor advertising, focusing on brand and image advertising, as well as promotion of particular tariff plans. Supporting these efforts, we have developed an extensive distribution network comprised of approximately 1,700 MTS mono-brand points-of-sale and approximately 46,350 additional points-of-sale operated by our dealers, as of December 31, 2008. We are in the process of expanding our proprietary distribution network both organically and through acquisitions. In furtherance of this expansion effort, in the first quarter of 2009, we acquired 100% of handset retailer Telefon.Ru, which operates 512 stores in 180 cities in Russia, and 100% of the Eldorado handset retail chain, which operates 383 stores in 153 cities in Russia. Of the stores operated by Eldorado and Telefon.Ru, approximately 380 will be rebranded as MTS mono-brand outlets by the end of 2009, an additional 290 will be rebranded as MTS mono-brand outlets by the end of 2010, and 130 will be closed due to overlapping locations with other points-of-sale by the end of 2009.

        MTS Belarus had 4.32 million subscribers and a leading market share of 52% at December 31, 2008, according to AC&M-Consulting. The subscriber base of MTS Belarus grew to 4.41 million at April 30, 2009. Belarus, a country with a population of approximately 10 million, had a mobile cellular penetration rate of 86% at December 31, 2008, according to AC&M-Consulting.

Business Strategy

        Our primary strategic goal is to capture growth opportunities in the territories where we operate or are licensed to operate while at the same time increasing our efficiency and maintaining our overall profitability level. We strive to maintain and strengthen our market position by investing in network development, new technologies, product development and customer service. In addition, we intend to take advantage of opportunities to expand our network footprint and explore complementary businesses in the CIS, and other developing growth markets outside the CIS.

        In accordance with our "3+2" strategy, our strategic focus is centered around the following three key growth principles:

•

delivering the best possible customer experience to our subscribers to increase customer retention and further stimulate demand;

•

promoting increased use of data and content services by continuing to develop innovative services and attractive content while rapidly deploying a broad third-generation, or 3G, infrastructure; and

•

continuing to expand our footprint within the CIS and identifying attractive growth opportunities outside the CIS.

        In addition to the preceding three principles, our two other main strategic focus areas are:

•

cost efficiency; and

•

development of the MTS group.

        To achieve our goals and implement these principles, we plan to continue to undertake the following:

•

seek to increase customer lifetime value by providing subscribers with superior quality service at all touch points in all territories;

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•

expand and further develop our operations in the regions we currently service by focusing on increasing revenues in these markets and extending our network into areas where we are licensed to operate, but currently do not service;

•

provide new and varied tariff plans as well as value-added services that appeal to our various subscriber segments, aiming in particular at enhancing the MTS brand perception and increasing subscriber loyalty;

•

expand our operations and further develop our commercial services in CIS countries as attractive opportunities arise through acquisitions of existing operators or new licenses;

•

explore other selective opportunities in growing markets outside the CIS, particularly in Africa, focusing on strong players with attractive competitive positions;

•

enhance innovation and technology, especially in the more developed markets of Russia and Ukraine;

•

continue technical and commercial rollout of 3G in Russia, Ukraine, Uzbekistan and Armenia;

•

acquire 3G licenses in other CIS countries and prepare for further 3G network development;

•

continue to develop and offer attractive data services and content to stimulate greater usage of 3G services;

•

explore opportunities to develop stationary broadband services in the countries where we operate;

•

increase cost efficiency in the countries where we operate, including by taking advantage of synergies and economies of scale within the CIS by centralizing roaming and wholesale agreements, carrying more traffic on our proprietary networks, optimizing network services through centralized planning and the harmonization of equipment and platforms and reducing advertising and marketing expenses, office maintenance costs and other non-essential business expenses, as well as overhead expenses through headcount and salary freezes;

•

further develop distribution by growing our mono-brand network of company-owned retail outlets, engaging partners to increase the number of our franchisees, as well as through potential acquisitions of existing retail networks;

•

become a leader with respect to the quality of our management, employees and company culture; and

•

develop corporate and social responsibility activities.

        Over the past several years, we have rapidly expanded into the Russian regions and selected CIS countries by launching operations in territories for which we had licenses as well as through acquisitions of other mobile operators. Starting in 2003, we have been particularly focused on the integration of our existing businesses into a single company with a unified marketing approach and centralized network and operations management. In addition, we have consolidated and intend to continue to consolidate our ownership in regional subsidiaries by acquiring remaining minority stakes.

        Implementation of these strategies is subject to a number of risks. See "Item 3. Key Information—D. Risk Factors" for a description of these and other risks we face.

Current Operations

Subsidiaries

        For a list of our major subsidiaries and our ownership percentages in these subsidiaries, see Note 2 to our audited consolidated financial statements.

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        Consistent with our efforts to increase operating efficiencies and integrate our existing businesses into a single company, from 2004 up to the date of this document, we have merged 25 of our wholly- and majority-owned Russian subsidiaries into MTS OJSC. In each case, these mergers were undertaken following the requisite shareholder and regulatory approvals.

License Areas

        The following table shows, as of April 30, 2009, information with respect to the license areas in which we and our subsidiaries and affiliates provide or expect to provide GSM services:

	GSM 900		GSM 1800
License Region	Licensee	Expiry date	Licensee	Expiry date
Moscow License Area
Moscow	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Moscow region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
St. Petersburg License Area
St. Petersburg	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Leningrad region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Russian Regional License Areas
European Russia
Adygeya Republic	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Arkhangelsk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Astrakhan region	MTS OJSC	December 11, 2013	MTS OJSC	October 18, 2011
Bashkortostan Republic	—	—	MTS OJSC	February 07, 2012
Bashkortostan Republic	MTS OJSC	August 22, 2012	MTS OJSC	August 22, 2012
Belgorod region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Bryansk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Chuvashia Republic	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Chechen Republic(1)	—	—	MTS OJSC	April 28, 2011
Dagestan Republic	Dagtelecom LLC	June 05, 2013	—	—
Dagestan Republic	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Ivanovo region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Ingushetia Republic	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Kabardino-Balkar Republic	—	—	MTS OJSC	December 30, 2013
Kaliningrad region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Kalmykia Republic	MTS OJSC	January 25, 2011	MTS OJSC	December 30, 2013
Kaluga region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Karachaevo-Cherkesia Republic	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Karelia Republic	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Kirov region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Komi Republic	MTS OJSC	August 22, 2012	MTS OJSC	August 22, 2012
Kostroma region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Krasnodar Territory	MTS OJSC	May 30, 2012	MTS OJSC	May 30, 2012
Kursk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Lipetsk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Mari-El Republic	MTS OJSC	January 15, 2012	MTS OJSC	January 15, 2012
Mordovia Republic	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Murmansk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Nenetsk Autonomous District	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Nizhny Novgorod region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Novgorod region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Orel region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Orenburg region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Permsky Territory	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Rostov region	MTS OJSC	July 1, 2010	MTS OJSC	July 1, 2010
Pskov region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Ryazan region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013

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	GSM 900		GSM 1800
License Region	Licensee	Expiry date	Licensee	Expiry date
Samara region	MTS OJSC	December 30, 2012	MTS OJSC	December 30, 2012
Saratov region	MTS OJSC	July 11, 2012	MTS OJSC	July 11, 2012
Severnaya Osetia-Alania Republic	MTS OJSC	September 1, 2011	MTS OJSC	September 1, 2011
Smolensk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Stavropol Territory	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Tambov region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Tatarstan Republic	MTS OJSC	June 26, 2012	MTS OJSC	June 26, 2012
Tula region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Tver region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Udmurt Republic	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Ulyanovsk region	—	—	MTS OJSC	December 30, 2013
Vladimir region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Volgograd region	—	—	MTS OJSC	October 4, 2011
Vologda region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Voronezh region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Yaroslavl region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Asian Russia
Aginski-Buryatski Autonomous District	Sibintertelecom CJSC	October 31, 2010	Sibintertelecom CJSC	October 31, 2010
Altaisk Territory	MTS OJSC	September 8, 2010	MTS OJSC	September 8, 2010
Altai Republic	MTS OJSC	July 19, 2011	MTS OJSC	December 30, 2013
Amur region	MTS OJSC	January 10, 2012	MTS OJSC	January 10, 2012
Amur region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Buryatiya Republic	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Chelyabinsk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Chita region	Sibintertelecom CJSC	January 1, 2011	Sibintertelecom CJSC	January 1, 2011
Zabaykalsky Territory	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Chukotsk Autonomous District	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Jewish Autonomous region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Irkutsk region	MTS OJSC	December 30, 2013	—	—
Irkutsk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Kamchatka Territory	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Kemerov region	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Khabarovsk Territory	MTS OJSC	January 10, 2012	MTS OJSC	January 10, 2012
Khabarovsk Territory	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Khakassiya Republic	MTS OJSC	September 13, 2011	MTS OJSC	September 13, 2011
Khanty Mansiysk Autonomous District	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Krasnoyarsk Territory	MTS OJSC	May 07, 2013	MTS OJSC	May 07, 2013
Kurgan region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Magadan region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Novosibirsk region	MTS OJSC	February 21, 2012	MTS OJSC	February 21, 2012
Omsk region	MTS OJSC	December 20, 2011	MTS OJSC	December 20, 2011
Primorsky Territory	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Sakha Republic (Yakutia)	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Sakha Republic (Yakutia)	MTS OJSC	July 1, 2010	MTS OJSC	July 1, 2010
Sakhalin region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Sverdlovsk region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Tomsk region	MTS OJSC	June 5, 2013	MTS OJSC	June 5, 2013
Tyumen region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Tyva Republic	MTS OJSC	July 19, 2011	MTS OJSC	December 30, 2013
Yamalo-Nenetsk Autonomous District	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Ukraine
Ukraine	UMC	December 3, 2013	UMC	December 3, 2013

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	GSM 900		GSM 1800
License Region	Licensee	Expiry date	Licensee	Expiry date
Armenia
Armenia	K-Telekom	November 4, 2019	K-Telekom	November 4, 2019
Uzbekistan
Uzbekistan	Uzdunrobita	June 30, 2016	Uzdunrobita	June 30, 2016
Turkmenistan
Turkmenistan	BCTI	February 1, 2012	BCTI	February 1, 2012
Belarus
Belarus	MTS Belarus	April 30, 2012	MTS Belarus	April 30, 2012

	IMT-2000/UMTS/CDMA
License Region	Licensee	Expiry date
Russian Federation	MTS OJSC	May 21, 2017
Uzbekistan	Uzdunrobita	June 30, 2016
Armenia	K-Telekom	November 4, 2019
Ukraine	UMC	September 28, 2021

(1)

Our regional license areas in which we have not commenced commercial operations as of the date of this document.

        Each of our licenses requires service to be started by a specific date. We have met this target or received extensions to these dates in those regional license areas in which we have not commenced operations. Neither the government nor other parties have taken or attempted to take legal actions to suspend, terminate or challenge the legality of any of our licenses. We have not received any notice of violation of any of our licenses, and we believe that we are in compliance with all material terms of our licenses.

Services Offered

Network Access

        We primarily offer mobile cellular voice and data communication services to our subscribers on the basis of various tariff plans. In general, we offer tariff plans that do not require subscribers to pay a monthly subscription fee. However, certain tariff plans require subscribers to pay a monthly subscription fee and a per-minute charge for usage. See "Item 4. Information on Our Company—B. Business Overview—Tariffs."

Automatic Roaming

        Roaming allows our customers, both subscribers and guest roamers, to receive and make international, local and long-distance calls while traveling outside of their home network. Roaming is provided through individual agreements between us and other GSM operators. Unlike many non-GSM providers that require additional equipment or prior notification, our roaming service is instantaneous, automatic and requires no additional equipment.

        As of December 31, 2008, we had bilateral roaming contracts with 530 wireless operators in 208 countries, including with regional operators in Russia. We continually seek to expand our roaming capability and are currently in negotiations with additional operators. In Russia, as of December 31, 2008, in addition to our network coverage area in 81 of the 83 regions of Russia, GSM service is available to our subscribers in the regions of Russia where we do not currently operate through our roaming agreements with 15 regional operators.

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Value-Added Services

        We offer various value-added services to our customers. These services may be included in the tariff plan selected by the subscriber or subscribers may pay additional monthly charges and, in some cases, usage charges for them. Some basic value-added services that we offer include:

• Blackberry	• Call Barring	• Call Waiting
• Call Divert/Forwarding	• SMS	• MMS
• Caller ID Display and anti-Caller ID Display	• Mobile Office	• Melody Ring Tones
• Conference Calling	• Voicemail	• Missed Call Alert
• WiFi	• Mobile banking	• Itemization of Monthly Bills
• Location-Based Service (LBS)	• Wireless Application Protocol (WAP)	• Information and Directory Service
• GPRS	• MTS-Connect	• International Access Service
• Intelligent call assistant	• SIM-browser	• WEB and WAP portal
• APN remote access point	• Point-to-point transfer	• Real IP
• Fixed Mobile Convergence	• Unstructured Supplementary Services Data (USSD)	• Automatic Customer Care System and Customer Care System via the Internet
• Enhanced Data rates for GSM Evolution (EDGE)	• High-Speed Downlink Packet Access (HSDPA)	• Ring Back Tone

        We also provide many voice and SMS-based value-added services in cooperation with various content providers.

GPRS and Internet Access

        We offer GPRS services, enabling our subscribers to access the Internet, WAP and MMS in all of the countries where we operate. We also provide international GPRS roaming to our subscribers, enabling them to use various GPRS-based services while traveling abroad.

        In 2005, we commercially launched EDGE services in the Moscow metropolitan area and expanded EDGE services between 2006 and 2008 to cover the most developed markets where we operate. EDGE is a high-speed, high-quality data transfer application capable of transmitting streamline video and TV programs onto mobile phones. At present, EDGE services are available to our subscribers in Russia, Ukraine, Armenia, Uzbekistan, Turkmenistan and Belarus.

        We also offer the MTS-Connect service, which allows our subscribers to get mobile internet access through a GPRS/EDGE/3G connection, using a computer, PC-card and USB-modem. This service is available to our subscribers in Russia and Ukraine and in more than 144 countries where we have GPRS roaming.

        We signed an agreement with Research In Motion in September 2005 to offer BlackBerry services to our subscribers. Following our receipt of the required regulatory approvals, we began providing BlackBerry services to corporate users in Ukraine in October 2007 and began providing BlackBerry services to corporate users in Russia in June 2008. We have also started providing BlackBerry services for mass market subscribers in Ukraine and in Moscow and the Moscow region in Russia. We were the first mobile operator to offer BlackBerry services in the CIS.

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3G Technology

        The key benefit of a 3G network, using UMTS technology, is the ability to provide subscribers with faster data download speeds with top download capacity using high speed packet access technology up to 3.6 Mbit per second. This is over 10 times faster than the currently available 2G EDGE technology.

        In April 2007, the Russian Ministry of Communications and Mass Media announced the results of a tender for 3G licenses. We were one of three companies, along with Vimpelcom and MegaFon, who received a nationwide 3G/UMTS license in Russia. The license is valid through 2017 and covers the entire territory of Russia. In accordance with the conditions set forth in the tender documentation, we, Vimpelcom and MegaFon were required to begin undertaking the construction of a 3G network over a period of two years from the time the license was received. In 2008, we commercially launched our 3G network in 14 Russian cities, including St. Petersburg, Kazan, Sochi, Ekaterinburg, Nizhniy Novgorod, Novosibirsk, Norilsk and Vladivostok, among others. We have since launched the network in ten additional Russian cities. In May 2009, we, along with Vimpelcom and MegaFon, were allocated 3G/UMTS frequencies to begin testing our 3G network in Moscow and the Moscow region. Our 3G network uses 1950-1965 MHz, 2015-2020 MHz and 2140-2155 MHz frequencies and compliments our existing GSM network.

        In July 2006, MTS-Ukraine was licensed to provide telecommunications services using CDMA 450 technology. CDMA 450 is a 3G telecommunication standard ratified by the International Telecommunication Union. We commenced commercial services using CDMA 450 technology in Ukraine in November 2007 and currently offer high-speed mobile access to the Internet to our subscribers.

        In Uzbekistan, the Communications and Information Agency of Uzbekistan allocated a 3G/UMTS license to us in April 2007. The license is valid through 2016 and covers the entire territory of the country. In December 2008, we commercially launched our 3G network in Uzbekistan's two largest cities, Tashkent and Samarkand, followed by the launch in three additional cities in January 2009.

        In Armenia, our subsidiary K-Telekom is licensed to offer 3G services in the UMTS standard throughout Armenia pursuant to its wireless services license. In October 2007, K-Telecom was allocated frequencies to offer 3G services throughout the entire territory of Armenia. The frequencies were allocated for a 10-year period. In April 2009, we commercially launched our 3G network in Armenia's three largest cities: Yerevan, the capital, Guymri and Vanadzor. The network will be expanded to additional cities during 2009.

Other Services

        In addition to cellular communication services, we offer corporate clients a number of telecommunications services such as design, construction and installation of local voice and data networks capable of interconnecting with fixed line operators, installation and maintenance of cellular payphones, lease of digital communication channels, access to open computer databases and data networks, including the Internet, and provision of fixed, local and long-distance telecommunications services, as well as video conferencing.

Strategic Partnership with Vodafone

        In October 2008, we announced a strategic agreement with Vodafone aimed at drawing on Vodafone's expertise in building and developing 3G networks and mobile broadband products, working with leading global equipment providers and deploying innovative CRM practices to enhance quality and further improve the efficiency of our operations. In addition, the agreement allows us exclusive access to a range of products, services and devices from Vodafone for our markets of operation in Russia, Ukraine, Uzbekistan, Turkmenistan and Armenia.

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Sales and Marketing

Target Customers

        Our target customers historically included companies, professionals, high-income individuals, reporters, government organizations, businesspersons and diplomats. However, with mobile cellular penetration in these segments becoming saturated, we began to more aggressively promote our mobile cellular services to a much wider group of the population. Over time, we adjusted our service model to provide differentiated levels of service to meet the needs of distinctive customer segments as such segments have developed. In 2002, we launched a group of prepaid tariff plans with low connection and no monthly fees which appealed to mass-market subscribers. We also continue to actively target high-end customers who provide us with larger profit margins through high ARPU and MOU. For example, the "Profi" and "Exclusive" tariff plans offer a higher level of customer service, technical support and a wide range of services, including personalized service and support with minimum waiting time. Today, we are considered a mass-market mobile network operator with a wide range of subscribers in all customer segments.

        To promote subscriber loyalty, we offer discounts with respect to our tariff plans for customers willing to enter into extended contracts with us. This strategy also helps to mitigate churn rates among our subscribers in a highly competitive market.

Advertising and Marketing

        Our advertising and public relations initiatives include:

•

brand and image advertising and public relations to position us as the leading mobile cellular operator in Russia, Ukraine, Belarus, Uzbekistan, Turkmenistan and Armenia;

•

information advertising and promotion to inform potential customers of the advantages of the high quality and variety of our services and the extensive coverage we offer; and

•

product- and tariff-related advertising and promotion for specific marketing campaigns, new tariff plans for various target audiences and pricing discounts.

        We use a combination of newspaper, magazine, radio, television and outdoor advertising, including billboards and signs on buses and kiosks, and exhibitions to build brand awareness and stimulate demand. We also advertise on-line to market and promote our products and services to younger tech-savvy consumers. Our indirect advertising includes sponsorship of selected television programs, sporting events, concerts and other popular events. We also coordinate the advertising policies of our dealers to capitalize on the increased volume of joint advertising and preserve the integrity and high-quality image of the MTS brand. As we have expanded our network, we have concentrated a greater part of our advertising and marketing effort on positioning the MTS brands as national brands. In addition, we focus our advertising and marketing on the affordability and variety of our tariff plans, on the broad coverage of our network and the use and availability of national roaming.

Renewed Brand

        In May 2006, Sistema introduced a universal brand featuring a new egg-shaped logo for each of the telecommunications companies operating within the Sistema group, including us. We believe that our new brand symbolizes leadership and a dynamic and innovative approach to doing business. The re-branding reflects a shift in our marketing strategy with a renewed focus on the simplification of our communications to the general public. One of the goals of our re-branding efforts is to create a simple set of tariff plans with clear advantages over our competitors and easy-to-understand descriptions of the wide range of our services and product offerings. In addition, we aim to simplify the purchasing experience for our customers by creating a universal format for our sales offices, transforming them

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into visually appealing, practical and convenient venues where buyers can obtain product information and test our latest products and services.

        The changes relating to our brand renewal had an impact on each of our operational regions. We launched a federal advertising campaign with new advertising and informational materials, and revised our website with the new brand and logo. We redesigned each of our sales offices with new signs that reflect the service standards and philosophy of the new brand.

        Under this universal brand, our subscribers have access to a wide range of telecommunications products and services, including Internet access, mobile and fixed line telephones, single billing and a single interface for all of the subscriber's telecommunications needs. We believe that our re-branding efforts will increase our recognition among existing and potential clients, promote cross-sales of the companies using the brand and enhance subscriber loyalty.

        In July 2007, we launched the MTS brand in Ukraine. Prior to this date, we operated in Ukraine under the "UMC" brand. In connection with this re-branding effort, we have sought to retain our existing subscribers by continuing to provide high quality communications services, launching new services and introducing new tariff plans. We believe that the MTS brand is now well established in Ukraine. We also operate under the MTS brand in Uzbekistan, Turkmenistan, and Belarus. In Armenia, have operated under the VivaCell-MTS brand since September 2008.

        In April 2008 and April 2009, we were named as one of the BRANDZ™ Top 100 Most Powerful Brands, a ranking published by the Financial Times and Millward Brown, a leading global market research and consulting firm. We were the first Russian company to join the ranks of the most powerful brands in the world.

        In December 2008, we reached an agreement with Sistema Shyam TeleServices Limited, or Sistema Shyam, allowing Sistema Shyam to use the MTS brand in India. Sistema Shyam is a joint venture between Sistema and Shyam Group of India, with Sistema controlling a 73.71% stake in the venture. Sistema Shyam has licenses and spectrum to provide mobile telephony services across India.

        Under the terms of the agreement, Sistema Shyam has the right to use the MTS brand in India beginning March 2009, and we will receive 0.16% of Sistema Shyam's revenues commencing April 2009. The agreement is limited to Sistema Shyam using the MTS brand in India and does not contemplate our participation in Sistema Shyam's operations. The terms also stipulate that we will act as the brand guardian to ensure brand usage and marketing communications adhere to our brand guidelines.

Sales and Distribution

        We have historically enrolled a vast majority of our subscribers through a network of independent dealers that operate numerous points-of-sale in places with high consumer activity, such as supermarkets, shopping centers, air terminals and markets. During 2008, approximately 80% of our new subscribers in Russia and 93% in Ukraine enrolled through independent dealers, and we enrolled the remainder directly. However, the financial crisis and tightening of the credit markets has resulted in virtually all of the large national and regional mobile handset retailers facing liquidity issues or being on the verge of bankruptcy, according to press reports. As a result, the share of our subscribers enrolled through these retailers dropped dramatically during the last quarter of 2008 and continues to decline.

        In addition, in October 2008, Vimpelcom acquired a 49.9% stake in Morefront Holdings Ltd., a company that owns 100% of the Euroset Group, the largest mobile handset retailer and leading dealer for major mobile network operators in Russia. Although the FAS approval relating to the sale of Euroset specifically prohibits Euroset from discriminating against or providing preferential treatment to any mobile operator following the acquisition, we believe that we faced discriminatory treatment following Vimpelcom's acquisition, including the promotion Vimpelcom's services over ours at Euroset

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outlets, notwithstanding these regulatory prohibitions. As a result, we ceased working with Euroset as of April 1, 2009, and we are currently involved in litigation with Euroset in Russia. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—The reduction, consolidation or acquisition of independent dealers and our failure further develop our distribution network may lead to a decrease in our subscriber growth rate, market share and revenues."

        As the share of subscribers enrolled through large national and regional dealers has decreased, the share of our subscribers enrolled through small dealer and subdealer networks and our own distribution network is increasing, and we are working to expand our relationships with these small dealer networks while continuing our efforts to grow our proprietary distribution network.

        We are continuing to aggressively expand our network in 2009 both organically and through acquisitions. In furtherance of this expansion effort, in the first quarter of 2009, we acquired 100% of handset retailer Telefon.Ru, which operates 512 stores in 180 cities in Russia, and 100% of the Eldorado handset retail chain, which operates 383 stores in 153 cities in Russia. In addition, in March 2009, we entered into a three-year executive services agreement with the majority shareholder of the Svyaznoy group of companies, which operates a nationwide dealer network in Russia, whereby the Svyaznoy shareholder will provide operational and strategic consultancy services to us as well as procure that certain managers from the Svyaznoy group, as set forth in the agreement, cease to be employed by the Svyaznoy group and become our full time employees.

        Our proprietary distribution network consists of MTS-branded franchise points-of-sale (third-party dealers operating under the MTS brand), MTS-branded points-of-sale operated by TS-Retail, our equity investee, and MTS-branded points-of-sale owned by us.

        As of December 31, 2008, our proprietary distribution network in Russia consisted of approximately 1,500 points-of-sale, including approximately 800 franchise points-of-sale, approximately 300 points-of-sale operated by TS-Retail, and approximately 300 points-of-sale owned by us. In addition, third-party dealer network Beta Link, which filed for bankruptcy in March 2009, operated approximately 100 MTS-branded points-of-sale as of December 31, 2008.

        As of April 30, 2009, we increased our proprietary network in Russia to over 2,600 points-of-sale, including approximately 1,000 franchise points-of-sale, 500 points-of-sale operated by TS-Retail, approximately 300 points-of-sale owned by us and approximately 800 points-of-sale operated by Eldorado and Telefon.Ru, which we acquired in the first quarter of 2008. Of the stores operated by Eldorado and Telefon.Ru, approximately 380 will be rebranded as MTS mono-brand outlets by the end of 2009, an additional 290 will be rebranded as MTS mono-brand outlets by the end of 2010, and approximately 130 will be closed due to overlapping locations with other points-of-sale by the end of 2009.

        Our proprietary distribution network outside of Russia as of December 31, 2008 consisted of 47 points-of-sale in Ukraine, 29 points-of-sale in Uzbekistan, 30 points-of-sale in Turkmenistan and 95 points-of-sale in Armenia.

        We believe that our method for paying commissions to dealers provides dealers with greater incentives to add new subscribers, reduces the risk of dealer fraud and improves our cash-flow management.

        In Russia, we link commissions payable to a dealer on a monthly basis to the amount of revenues we receive. In the six-month period from the date a subscriber is activated by a dealer, the dealer receives the lesser of the full commission amount or 50% of the revenues received from the subscriber during the period. The dealer commissions in Russia currently range between $5 and $60 per subscription.

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        In Ukraine, starting from July 2007, we link dealer commissions to the tariff package sold, category of subscriber, city of subscription, and status of the dealer itself. We have different commission structures based on whether the subscriber is prepaid, postpaid or a CDMA-only subscriber (i.e., subscribers using only mobile internet services). For each new subscriber, a dealer typically receives a one-time commission payment at the time the contract is signed followed by monthly payments based on the revenue generated from the subscriber. The dealer commissions in Ukraine currently range between approximately $0.40 and $18 plus a certain percentage of subscriber revenue payable monthly for up to six months following a subscriber's account activation. We also pay extra fees to our exclusive dealers who sell only MTS-Ukraine subscriptions.

        Independent dealers have also begun servicing some aspects of our subscribers' accounts, such as activating international roaming, handling SIM card replacements and payment collection, as well as promoting our value added services.

Competition

The Russian wireless telecommunications market

        The Russian wireless telecommunications market is characterized by sustained growth in subscribers and revenues. As of December 31, 2008, overall wireless penetration in Russia was 129.4%, or approximately 187.8 million subscribers, according to AC&M-Consulting.

        Demand for wireless communications services in Russia has grown rapidly over the last 10 years due to rising disposable incomes, increased business activity and declining prices due to intensified competition among wireless communications providers. The Russian market has achieved high levels of penetration in Moscow and St. Petersburg, where penetration reached 185.1% and 166.5%, respectively, at December 31, 2008, according to AC&M-Consulting. The average penetration rate in regional markets reached 119.7% at December 31, 2008, according to AC&M-Consulting.

        The following table sets forth key data on Russia's wireless telecommunications market:

	As of December 31,
	2004			2005			2006			2007			2008
	(amounts in millions, except for percentages)
Subscribers(1)		74.4			125.8			151.9			172.9			187.8
Subscriber penetration		51	%		87	%		105	%		119	%		129	%

Source: AC&M-Consulting.

(1)

Based on registered subscribers (SIM cards only). There is no uniform definition of active subscribers in the Russian wireless market.

        According to AC&M-Consulting, we accounted for 44.9% and 47.4% of subscribers in Moscow, 29.1% and 30.8% of subscribers in St. Petersburg and 33.2% and 34.4% of total Russian subscribers as of December 31, 2007 and 2008, respectively.

        The competition has evolved in recent years to exist primarily between us, Vimpelcom and MegaFon, each of which has effective national coverage in Russia. Competition today is based largely on local tariff prices and secondarily on network coverage and quality, the level of customer service provided, roaming and international tariffs and the range of services offered. For a description of the risks we face from increasing competition, see "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—We face increasing competition in the markets where we operate, which may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies."

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        The following table illustrates the number of wireless subscribers for each network operator in Russia as of December 31, 2006, 2007 and 2008:

	As of December 31,
Operator	2006		2007		2008
	(Amounts in millions)
MTS		51.2		57.4		64.6
Vimpelcom		48.1		51.7		47.7
MegaFon		29.6		35.5		43.3
Others		23.0		28.4		32.2

Source: AC&M-Consulting.

Vimpelcom

        Vimpelcom, which operates GSM 900/1800/UMTS (3G) networks, is one of our primary competitors in Russia, and it is the second largest GSM wireless operator in Russia in terms of subscribers.

        According to AC&M-Consulting, it had approximately 47.7 million subscribers in Russia at December 31, 2008, including 9.6 million in the Moscow license area. At December 31, 2008, according to AC&M-Consulting, Vimpelcom had a 30.6% market share in Moscow, a 19.6% market share in St. Petersburg and a 25.4% market share of total wireless subscribers in Russia.

MegaFon

        In addition to Vimpelcom, we also compete with MegaFon, which is the third largest GSM wireless operator in Russia in terms of subscribers. The MegaFon group holds GSM 900/1800/UMTS (3G) licenses to operate in all 83 sub-federal political units of the Russian Federation.

        According to AC&M-Consulting, MegaFon had a subscriber base of 43.3 million in Russia at December 31, 2008, including 6.5 million subscribers in the Moscow license area. At December 31, 2008, according to AC&M-Consulting, MegaFon had a 20.6% market share in Moscow, a 33.4% market share in St. Petersburg and a 23.0% market share of total wireless subscribers in Russia.

Other Operators

        In addition to our principal competitors, Vimpelcom and MegaFon, we also compete with local GSM and D-AMPS operators in several Russian regions.

        In certain areas of Russia, we compete with Tele2, which had approximately 10.4 million subscribers as of December 31, 2008. In certain regions of the Urals part of Russia, our primary competitor is Uralsvyazinform, which had approximately 5.7 million subscribers as of December 31, 2008. In certain regions of the Volga part of Russia, we compete with Smarts, which had approximately 3.5 million customers as of December 31, 2008. In addition, in certain parts of Siberia, we compete with Sibirtelecom, which had approximately 4.9 million customers as of December 31, 2008. The preceding subscriber numbers, in each case, are according to AC&M-Consulting.

The Ukrainian wireless telecommunications market

        Since 2003, the Ukrainian wireless telecommunications market has enjoyed rapid growth, in part, due to broader economic recovery in Ukraine, changes in ownership of the two major operators, the introduction of CPP billing arrangements and the launch of the new Beeline brand in April 2006 by Ukrainian RadioSystems, or URS, a wholly owned subsidiary of Vimpelcom. The two largest wireless

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telecommunications providers in Ukraine are MTS-Ukraine and Kyivstar who share 74.7% of the market, with 32.5% and 42.2%, respectively, as of December 31, 2008. Competition between these two companies is based on the service and network quality, prices and brand perception. The remaining key competitors in Ukraine are Astelit, operating under the Life brand, and URS, operating under the Beeline brand. Astelit and URS compete with each other primarily by offering aggressive pricing plans.

        Competition in the Ukrainian wireless telecommunications market has significantly intensified over the last three years and there was little growth in the overall number of subscribers and nationwide penetration in 2008 compared to 2007. Astelit continued its campaign of aggressive pricing in the market, which has driven down the overall average price per minute levels significantly since 2006. In response to the increasingly competitive operating environment, MTS-Ukraine continued to focus on developing and marketing its network quality and coverage while improving the quality of its subscriber base and increasing usage levels to stimulate improved subscriber loyalty. As a result, overall minutes of use per subscriber increased more than 80% during 2008, offsetting a decline in average price per minute.

        As of December 31, 2008, overall wireless penetration in Ukraine was 120.8%, or approximately 55.8 million subscribers, according to AC&M-Consulting.

        The following table shows the number of subscribers of the top mobile operators in Ukraine as of the dates indicated and the coverage area of MTS-Ukraine and our competitors in Ukraine:

Operator	December 31, 2007		December 31, 2008		Coverage Area
	(amounts in thousands)
Kyivstar		23,604		23,530	Nationwide
MTS-Ukraine		20,004		18,115	Nationwide
Astelit		8,820		11,230	Nationwide
URS (Vimpelcom)		2,646		2,028	Nationwide

Source: Subscriber information based on AC&M-Consulting data.

        In Ukraine, we compete primarily with Kyivstar, a GSM operator with 23,530 million subscribers as of December 31, 2008. Kyivstar is owned by Telenor and Alfa Group. Kyivstar offers wireless services using GSM 900/1800 technologies. Kyivstar is also licensed to provide fixed line domestic long distance and international long distance services. Astelit is owned by System Capital Management and Turkcell Iletisim Hizmetleri A.S., or Turkcell, and 13.2% of Turkcell is owned by Alfa Group. Astelit offers services in GSM 900/1800 standards under the Life brand. URS is a wholly owned subsidiary of Vimpelcom, which is beneficially owned by Alfa Group and Telenor. It has a nationwide GSM 900 license and a GSM 1800 license for major regions of Ukraine and provides wireless mobile services under the Beeline brand.

        In July 2006, we received a license to provide telecommunications services on the entire territory of Ukraine using the CDMA-450 standard. Following our development strategy in Ukraine, we launched a broadband network using CDMA 2000, deployed in the 450 MHz spectrum band in November 2007. Our CDMA business in Ukraine faces competition from other operators, including People.net, Utel (the only UMTS license holder in Ukraine), fixed broadband operators and Wi-Max operators.

The Uzbekistan wireless telecommunications market

        The Uzbekistan wireless telecommunications market is characterized by low but rapidly increasing penetration rates. In 2008, overall wireless penetration in Uzbekistan increased from 22% to 44%, or approximately 12.3 million subscribers, according to our estimates and AC&M-Consulting data.

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        The following table shows the number of subscribers as of the dates indicated and the coverage area of MTS-Uzbekistan and our competitors in Uzbekistan:

Operator	December 31, 2007		December 31, 2008		Coverage Area
	(amounts in thousands)
MTS-Uzbekistan		2,802.0		5,646.9	Nationwide
Unitel (Vimpelcom)		2,197.7		3,636.2	Nationwide
Ucell (Coscom)		690.0		2,683.0	Nationwide
Others		191.8		302.1	Major cities

Source: Subscriber information based on our estimates and AC&M-Consulting data.

        MTS-Uzbekistan offers wireless services in Uzbekistan using GSM and UMTS technologies. As of December 31, 2008, it had 5.6 million subscribers and a 46.0% market share according to AC&M-Consulting and our estimates. In Uzbekistan, we compete primarily with Beeline (Unitel), a GSM operator owned by Vimpelcom with 3.6 million subscribers and a 29.6% market share as of December 31, 2008. We also compete with Ucell (Coscom), a GSM operator beneficially owned by TeliaSonera with 2.7 million subscribers and 21.9% market share as of December 31, 2008.

The Turkmenistan wireless telecommunications market

        The Turkmenistan wireless telecommunications market is characterized by low penetration rates. In 2008, overall wireless penetration in Turkmenistan increased from 7% to 19%, or approximately 1.1 million subscribers, according to our estimates.

        The following table shows the number of subscribers as of the dates indicated and the coverage area of MTS-Turkmenistan and our competitor in Turkmenistan:

Operator	December 31, 2007		December 31, 2008		Coverage Area
	(amounts in thousands)
MTS-Turkmenistan		356.3		927.4	Nationwide
Altyn Asyr		48.0		133.0	Nationwide

Source: Subscriber information based on our estimates.

        As of December 31, 2008, MTS-Turkmenistan had an 87.5% market share according to AC&M-Consulting and our estimates. MTS-Turkmenistan offers wireless services using GSM 900 and GSM 1800 technologies. In Turkmenistan, we compete only with a state-owned GSM operator Altyn Asyr with 133,000 subscribers as of December 31, 2008.

The Armenian wireless telecommunications market

        As of December 31, 2008, overall wireless penetration in Armenia was 80.0%, or approximately 2.6 million subscribers, according to our estimates.

        The following table shows the number of subscribers as of the dates indicated and the coverage area of Viva-Cell and our competitor in Armenia:

Operator	December 31, 2007		December 31, 2008		Coverage Area
	(amounts in thousands)
VivaCell-MTS		1,381.3		2,017.0	Nationwide
ArmenTel (Vimpelcom)		487.2		544.3	Nationwide

Source: Subscriber information based on our estimates.

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        As of December 31, 2008, VivaCell-MTS had 2.0 million subscribers and a 78.8% market share according to AC&M-Consulting and our estimates. In Armenia, we compete with ArmenTel, a fixed line and mobile operator wholly owned by Vimpelcom. ArmenTel holds a license in the GSM 900 standard for the entire territory of Armenia and a radio frequency permit for fixed line communications with CDMA equipment.

Tariffs

        We customize our marketing efforts and pricing policies in each region of Russia by considering such factors as average income levels, local currency exchange rates, the competitive environment and subscriber needs, all of which vary from region to region. Consistent with our marketing strategy, we have developed tariff plans to appeal to a broader market.

        Starting in June 2006, we launched a new set of prepaid tariff plans geared at mass-market subscribers in all regions of Russia, which include no monthly subscription fee, free incoming calls and special features for different segments of the mass-market subscribers. To offset losses for providing free incoming calls under CPP, we increased the price for the first minute of all outgoing calls made by our prepaid subscribers.

        The following table shows the mix between prepaid and other subscribers, such as contract and corporate customers, for Russia and Ukraine for the periods indicated:

	At December 31,
	2006			2007			2008
Russia
Prepaid		90	%		88	%		87	%
Other		10	%		12	%		13	%
Ukraine
Prepaid (including SIM-SIM)		93	%		92	%		92	%
Other		7	%		8	%		8	%

        We are actively seeking to migrate our customers from advance payment plans to credit payment plans in an effort to stimulate ARPU and reduce churn. We endeavor to mitigate the risk of bad debt through the implementation of credit scoring algorithms that assess and help manage the risk of potential bad debt.

        We currently have a unified system of tariff plans offered to subscribers throughout Russia. The unified system is aimed at achieving such benefits as clarity, simplicity and transparency for prospective subscribers by offering the same set of tariff categories throughout Russia. Under each tariff category, we offer different tariff plans with different connection fees, per minute call charges and a wide range of value added services. Although we offer the same categories of tariff plans throughout Russia, the prices of these plans differ from region to region taking into account such factors as the average income, competitive environment and subscriber needs in a particular region. Our tariff plans are more expensive in the Moscow license area than in other license areas.

        Prior to January 1, 2007, our tariffs in Russia were primarily denominated in "conventional units" based on the U.S. dollar converted to rubles at a certain exchange rate, except for some regions of Russia where tariffs were quoted in rubles. Due to the enactment of regulatory changes in Russia prohibiting companies from establishing prices in currencies other than rubles as well as the growth in the share of our ruble denominated expenditures, we began pricing our services and invoicing customers in Russia in rubles from January 1, 2007. All tariffs presented below are expressed in U.S. dollars converted from rubles using the exchange rate as of December 31, 2008.

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        By advertising on a national rather than regional or local level, we have been able to streamline and reduce our advertising and marketing expenses through unified advertising campaigns throughout Russia. Furthermore, we are able to convey to consumers a more uniform perception of our brand and services.

        Currently, each of our tariff plans in Russia combines per minute usage charges, value added services in packages and different monthly network access fees (with the exception of the prepaid tariff plans) designed for different market segments. Our tariff plans are designed to be simple and appeal to particular segments of the market taking into account such factors as customer needs and consumption levels. Our tariff plans are currently divided into four categories—"Prepaid", "Maxi/Profi", "Exclusive" and "Corporate"—with each category designed to target specific segments as follows:

•

Prepaid:  Prepaid tariff plans are geared towards consumers who use their mobile phones for personal communication. These plans do not have monthly subscription fees and the per-minute fee charges depend largely on the tariff plan chosen. For example, we offer a tariff plan geared towards students and youth, permitting inexpensive calls between subscribers of the same plan and a discounted price on SMS and MMS. We also offer a family-oriented tariff plan that permits family members to make calls among themselves at discounted prices. Subscribers to our prepaid plans can reduce the price of their calls by using tariff options which have a subscription fee. There are at least four prepaid plans available in each of the Russian regions where we operate. After our customers subscribe to a particular prepaid plan, they have the option of switching to a different prepaid plan by sending an SMS message to a designated number.

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Maxi/Profi:  "Maxi" and "Profi" tariff plans are geared toward mid- and heavy users who use their mobile phones for personal and business communications. These plans feature unlimited on-net calls as well as monthly fees for a certain pre-determined number of minutes and reduced fees for subscribers who exceed this limit. "Profi" subscribers choose between a local and federal number with the local number being more expensive, and from a wide range of value-added services, including caller ID, conference calling, call transferring and call waiting/holding. Regular subscribers of the "Profi" plans are provided an additional 15% discount on their local and mobile calls and a 15% increase of allotted minutes at no extra charge. In addition, subscribers of some of the "Profi" plans are offered access to our personal customer care service and credit payment system.

•

Exclusive:  "Exclusive" tariff plans are designed for heavy users who call primarily within their domestic region. "Exclusive" subscribers are provided an unlimited number of local minutes, an opportunity to pay through our credit payment system and access to personal customer care service. In the Moscow region, for those "Exclusive" subscribers issued a local number, monthly fees start from $244 and those using a federal number pay from $143 per month.

•

Corporate:  We offer up to five tariff plans in each region targeted to meet the demands of our corporate clients and allowing them to optimize their communication expenses in accordance with their individual consumption patterns. These plans feature specialized customer care, payment through our credit system and volume and tenure discounts. In addition, we provide customized pricing offers and technical solutions to our biggest clients.

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        Our tariffs vary from plan to plan. The following description of tariffs and charges are, in each case, exclusive of VAT. As of December 31, 2008, the per-minute tariff for local calls within the MTS network varied from $nil per minute to $0.29 per minute. Different rates apply to local calls to other networks and vary from $0.01 per minute to $0.29 per minute. Higher rates apply to domestic long distance calls and we assessed a surcharge for all international calls that ranged from $0.31 per minute for calls to MTS subscribers within the CIS to $2.38 per minute for calls to other parts of the world. Certain value added services, such as Caller ID and Call Forwarding, are included in all current tariff plans at no additional charge (other than for subscribers using old tariff plans that we no longer offer, some of which carry a charge of up to $2.45 per month for these services). Periodically, we run various promotional campaigns, either on the federal or regional level, in which we provide temporary discounts to our regular prices.

        We also offer unified tariff plans throughout Ukraine and, in connection with our re-branding efforts in Ukraine during 2007 and 2008, we developed new tariff plans that focus on the differing needs of subscribers in the various market segments. Our tariff plans in Ukraine consist of two post paid and two prepaid nationwide tariff plans and a set of regional and group-specific plans that are not offered nationwide.

•

MTS Postpaid Business:  A set of postpaid contract tariff plans designed to appeal to business segment subscribers, offering special prices, free minutes for calls among corporate subscribers and, within the MTS network, free GPRS traffic.

•

MTS Postpaid Private:  A set of postpaid tariff plans designed to appeal to mass-market subscribers, offering free calls within the MTS network.

•

MTS Prepaid Private:  A set of prepaid tariff plans designed to appeal to mass-market subscribers, offering special prices on calls within MTS network, no fee for the first minute and various loyalty offers.

•

MTS Prepaid Youth:  Special tariffs designed to appeal to youth-market subscribers based on low flat rates on voice calls bundled with free SMS traffic.

•

Regional and Micro Segment Tariffs:  These are more aggressive tariff plans tailored to the particular region where the plans are offered, which are typically regions where we have a relatively low market share. Also within this category are special tariffs designed for certain subscribers with unique usage patterns or specific needs, including, for example, children, roamers from Russia, customers in Western Ukraine with high levels of mobile traffic to and from Western Europe and heavy users of GPRS internet services.

        As of December 31, 2008, the standard per minute tariff for calls in Ukraine varied from $0.02 per minute to $0.29 per minute. The standard per minute tariff for calls made within the MTS-Ukraine network ranged from $0.001 per minute to $0.14 per minute. Higher rates applied to international calls ranging from $0.13 per minute to $9.3 per minute. All tariffs for MTS-Ukraine subscribers are quoted in hryvnias. The tariffs set forth above are translated from hryvnias to U.S. dollars using the exchange rate as of December 31, 2008.

Customer Payments and Billing

        We enroll new subscribers, except for certain corporate and exclusive clients, in an advance payment program, under which the subscriber prepays a specific amount of money to use our services. As of December 31, 2008, approximately 88% of our consolidated subscriber base was enrolled in the advance payment program and 12% used the credit system.

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        Our advance payment system monitors each subscriber account and sends an advance warning on the subscriber's mobile telephone when the balance on the subscriber's account decreases below a certain threshold.

        Under the credit payment system, customers are billed monthly in arrears for their network access and usage. If the invoice is not paid on time, the customer may be liable for a late payment charge of up to 0.3% of the amount due for each day payment is past due. We limit the amount of credit extended to customers based on the customer's payment history, type of account and past usage. As of December 31, 2008, subscribers using the credit system of payment had credit limits of up to $1,000 for individuals and $100,000 for key corporate customers in Russia. When the limit is reached, the subscriber receives an invoice, which must be paid within five days. If the subscriber fails to do so, we can block the telephone number until the invoice is settled.

        In 2007, we began to actively promote our credit payment system to our existing and new subscribers with the aim of migrating our subscriber base to the credit payment system from the existing advance payment system. In furtherance of this effort, during 2007, we introduced the new "Credit" service, which allows our prepaid customers who subscribe to this service to continue using services when the balance on the subscriber's account becomes negative. As of December 31, 2008, subscribers using the "Credit" service had a maximum credit limit of $17. When the limit is reached, we block the phone number until the balance is settled. Similarly to the credit payment system, the subscribers are billed monthly in arrears for the usage. The invoice is delivered via SMS and should be settled within 21 days. If the invoice is not paid seven days prior to the due date, the system sends an additional reminder. The telephone number is blocked after the 21st day, even if the credit limit is not reached at that time.

        We have substantially completed implementation of a new billing system in Russia and Belarus. The transition to the new billing system in the other countries where we operate will take longer to complete. The new billing system allows us to offer all of our subscribers a uniform and consistently high level of service and is also capable of monitoring account usage in real time and provides us with the ability to offer flexible tariff plans with various usage discounts and subscriber loyalty bonuses. In addition, we are able to provide our corporate subscribers with more sophisticated customized billing solutions. For example, our corporate subscribers who use multiple phone numbers in different regions of Russia now receive a single invoice, whereas our old billing system could not support such a service. Although we have already begun to experience increases in our overall efficiency and reductions in our expenses as a result of the new billing system, we are still required to run both the old and new billing systems simultaneously during the transition period, creating additional burdens on our technical support staff. We may also experience technical problems with the new billing system during the transition period.

        In Ukraine, our post-paid corporate and high-end subscribers receive an invoice which must be paid by a specified date. If the subscriber fails to pay, we block the phone number until the balance is settled. Our advance payment subscribers are able to continue using our services once they reach a zero balance until their accounts reach the credit limit specified in their individual service contracts. When the limit for a subscriber is reached, we block the phone number until the balance is settled. We determine account terms and credit limits for each subscriber based on the subscriber's age, payment history, tariff plan and usage history.

        In Russia and Ukraine, we offer our subscribers various ways to pay for our services, including by cash or credit card, wire transfer, on account, prepaid cards and express payment cards.

Customer Service

        We believe that to attract and retain customers, we must provide a high level of service in the key areas of customer assistance, care and billing. In each of the markets where we operate, we have a call

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center that provides customer service 24 hours a day, seven days a week. Customer service representatives answer inquiries regarding disconnection due to lack of payment, handset operation, roaming capabilities, service coverage and billing. A special group of customer service representatives handles customer claims and assists customers who wish to change their services.

        During 2006, we launched the call center performance management program to improve subscriber accessibility to customer services and establish higher standards of customer care through all of our call centers. Pursuant to this program, we successfully implemented the intellectual routing of calls designed to provide our most valuable and loyal customers with quicker access to customer support services when calling us. We are also continuing to transform our call centers into effective channels for client relationship management, or CRM. In 2008, we developed a new CRM system for our customer care processes in Russia. The system is currently being implemented in the Moscow region.

        We have established customer retention departments throughout the territory of Russia to develop and implement customer retention programs with respect to all key customer segments and each of our primary service offerings. Our customer retention personnel are responsible for training front line employees on handling customer claims and suggestions, as well as following up with those customers who disconnected from our network to understand the reasons for the disconnection and properly respond to the changing needs of our customers. Whereas we previously had back-offices (consisting of employees who process customer requests other than online requests) in various cities within each of our primary macro-regions, we now have one consolidated back-office in each macro-region, and the time for processing requests has been reduced to 24 hours for 95% of all requests processed.

        We additionally intend to expand our chain of exclusive mono-brand sales offices which, in addition to enrolling new subscribers and selling handsets and other equipment, will offer customer service assistance to existing subscribers.

        In Ukraine, we expanded our customer care "self-service" options in 2008, launching a web portal and providing free access at special terminals in our sales offices for contract customers. We also began to simplify and unify our customer care processes through our interactive voice response systems (IVRs), a process that is continuing in 2009.

Network Technology

        We believe that geographic coverage, capacity and reliability of the network are key competitive factors in the sale of mobile cellular telecommunications services. Our network is based primarily on GSM 900 infrastructure, augmented by GSM 1800 equipment. We use GSM 1800 equipment in high-use areas, because 1800 MHz base stations are more efficient in relieving capacity constraints in high traffic areas. Although there is no difference in quality between GSM 900 and GSM 1800 services, the higher frequency 1800 MHz signals do not propagate as far as 900 MHz signals. As a result, more 1800 MHz base stations are typically required to achieve the same geographic coverage. Accordingly, in regions where geographic coverage, rather than capacity, is a limiting factor, networks based on GSM 900 infrastructure are typically superior to those based on GSM 1800, because they require fewer base stations to achieve coverage and, therefore, cost less. In most markets, including Russia and Ukraine, the most efficient application of GSM technology is to combine GSM 900 and GSM 1800 infrastructure in a unified network, which is commonly referred to as a dual-band GSM network. During 2008, we implemented certain UMTS 2100 networks in Russia, Uzbekistan, Armenia. We actively used our current GSM infrastructure to roll out the UMTS network. We plan to combine our UMTS and GSM infrastructures in a unified network based on Single RAN technologies introduced by vendors. We are also moving towards LTE technology.

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Network Infrastructure

        We use switching and other network equipment supplied by Motorola, Nokia Siemens Network, Ericsson, Huawei, Alcatel-Lucent and other major network equipment manufacturers.

        In the Moscow license area, we have allocated frequencies spanning 2 × 11.4 MHz of spectrum in the GSM 900 frequency band and 2 × 24.6 MHz of spectrum in the GSM 1800 frequency band for operation of a dual GSM 900/1800 network.

        In St. Petersburg and the Leningrad region, we have allocated frequencies spanning 2 × 9.6 MHz of spectrum in the GSM 900 frequency band (including 2 × 1.6 MHz in the E-GSM band) and 2 × 18.2 MHz of spectrum in the GSM 1800 frequency band for operation of a dual GSM 900/1800 network.

        We have frequencies allocated to us for the operation of GSM 900 and GSM 1800 frequency bands in all regions of Ukraine. The radio frequencies allocated to us for the operation of GSM 900 span from 2 × 4.0 MHz of spectrum in the Crimea Autonomous Republic to 2 × 5.8 MHz in the Nikolaev, Lugansk, Chernovtsy and Kirovograd regions and in Kiev. We also have been allocated frequencies spanning from 2 × 20.0 MHz in the Kiev region to 2 × 26.6 MHz in the Dnepropetrovsk region for operation of GSM 1800 base stations.

        We believe that we have been allocated adequate spectrum in each of our license areas.

Base Station Site Procurement and Maintenance

        The process of obtaining appropriate sites requires that our personnel coordinate, among other things, site-specific requirements for engineering and design, leasing of the required space, obtaining all necessary governmental permits, construction of the facility and equipment installation. In Russia, we use site development software supplied mainly by Aircom International to assess new sites so that the network design and site development are coordinated. Our software in Russia and Ukraine can create digital cellular coverage maps of our license areas, taking into account the peculiarities of the urban landscape, including the reflection of radio waves from buildings and moving automobiles. Used together, these software tools enable us to plan base station sites without the need for numerous field trips and on-site testing, saving us considerable time and money in our network buildout.

        Base station site contracts are essentially cooperation agreements that allow us to use space for our base stations and other network equipment. The terms of these agreements range from one to 49 years, with the term of a majority of agreements being one to five years. Under these agreements, we have the right to use premises located in attics or on top floors of buildings for base stations and space on roofs for antennas. In areas where a suitable base station site is unavailable, we construct towers to accommodate base station antennae, mainly on leased plots of land. We anticipate that we will be able to continue to use our existing GSM 900 base station sites and to co-locate GSM 1800 and UMTS base stations at some of the same sites.

        To provide quality service to subscribers, our maintenance department, staffed 24 hours per day, performs daily network integrity checks and responds to reported problems. Our technicians inspect base stations and carry out preventative maintenance at least once every six months.

Interconnect Arrangements and Telephone Numbering Capacity

        Cellular operators must interconnect with fixed zonal, wireless, long distance and international telephony operators to obtain access to their networks and, via these operators, to the networks of other operators around the world. Cellular operators must also obtain telephone numbering capacity to allocate to their subscribers. There are two categories of telephone numbers: "federal" 11-digit numbers and "local" seven-digit numbers. We have entered into various agreements for the provision of

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local telephone numbering capacity with several local telecommunications operators in Moscow and in the other regions of Russia and in Ukraine, including MGTS and other companies within the Comstar UTS group, which are affiliated with Sistema and Golden Telecom, Ukrtelecom and other public switched telephone network operators in Ukraine. We have also built our own local networks in certain cities within Russia (including Moscow) to provide local telephone numbering capacity to our subscribers. We are allocated federal telephone numbering capacity by the government and we provide interconnection services to other operators on the zonal level in all regions of Russia. Zonal/local interconnection typically entails payment of a one-time connection fee, a monthly fee per point of interconnection and a usage charge based on minutes of traffic.

        To provide our subscribers in Russia with domestic and international long distance services, we have interconnection agreements with Rostelecom, MTT (an affiliate of Sistema until March 18, 2009), Golden Telecom (a subsidiary of Vimpelcom) and other national transit operators. Most interconnect fees payable for connecting users of other operators' fixed line and wireless networks to our network are based on a one-time connection fee, a monthly fee per point of interconnection and usage by minute which vary depending on the destination called.

        Russian legislation requires that fixed line operators with a substantial position in the market cannot refuse to provide interconnection or discriminate against one operator in comparison to another, and the interconnect rates of operators with a substantial position are regulated by the government. See "Item 4. Information on Our Company—B. Business Overview—Regulation in the Russian Federation—Competition, Interconnection and Pricing" and "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices and therefore lose market share and revenues."

        The Ministry of Communications and Mass Media has allocated special numbering codes for federal 11-digit telephone numbers on a non-geographical basis for all cellular operators. We believe that we have been allocated sufficient numbering capacity for the development of our network. However, a combination of regulatory, technological and financial factors has led to the limited availability of local 7-digit telephone numbering capacity in Moscow and the Moscow region. Moscow's "495" code and the Moscow region's "496" code have already reached numbering capacity limits. As a result, the new "499" code has been introduced in order to increase the Moscow numbering capacity. To meet subscriber demand and provide for an adequate inventory of numbering capacity, we used to enter into contracts with local fixed line providers for allocation of numbering capacity to us. However, the Russian regulator subsequently took the view that numbering capacity assigned to one operator could not be rented to other operators. Accordingly, we have entered into new arrangements whereby fixed line operators make their numbers available to our subscribers via agency contracts between the subscribers and us acting on behalf of such fixed line operators. Our right to use numbering capacity ranges from five years to an unlimited period of time. As of December 31, 2008, we had numbering capacity (federal and local) for over 22 million subscribers in the Moscow license area. For a description of how we amortize the acquisition costs of numbering capacity, see Note 2 to our audited consolidated financial statements.

        Interconnection and traffic transit between the networks of mobile operators in Russia occur through direct channels connecting the switches of the different mobile operators within the same city, or through the network of transit long distance operators, which connect the networks of different mobile operators in different cities. MTT is the primary transit long distance operator providing interconnection and traffic transit services between cellular operators, although we endeavor to diversify the routing of our subscriber traffic among several transit operators.

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        In Ukraine, mobile operators are allocated numbering capacity by the NCRC. We believe that we have been allocated sufficient numbering capacity in Ukraine for the development of our mobile network. However, the numbering capacity for fixed network development is insufficient.

Network Monitoring Equipment

        We have operation and maintenance centers in major cities throughout Russia. We constantly control and monitor the performance of our network, call completion rate and other major key technical performance indicators. We use monitoring systems to optimize our network and to locate and identify the cause of failures or problems, and also to analyze our network performance and obtain network statistics. We have agreements with different suppliers for technical support services that allow us to obtain their assistance in trouble shooting and correcting problems with our network within the warranty period.

        Our networks in Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus are monitored by our local operations and maintenance centers in each country. In addition to monitoring performance of the network, these operations and maintenance centers analyze network quality parameters and provide reports and recommendations to management.

Handsets

        Almost all of our handset sales in 2007 and 2008 consisted of dual-band GSM 900/GSM 1800 handsets. These dual-band handsets are currently in widespread use on networks in Western Europe and, because they send and receive communications on both GSM 900 and GSM 1800 frequencies, they can relieve possible congestion on our network and increase the ability of our customers to roam. We also offer our subscribers tri-band handsets. These handsets, which function in the GSM 900, GSM 1800 and PCS-1900 standards, provide users with greater automatic roaming possibilities in Russia, Europe, the United States and Canada. We generally do not offer handset subsidies in Russia but do offer them in Ukraine. For the years ended December 31, 2007 and 2008, we provided net handset subsidies of $21.0 million and $20.4 million, respectively, in Ukraine. These subsidies are expected to be compensated within two years of a subscriber's enrollment through the subscriber's usage of our services. However, in view of the experience and practice of mobile services providers in more mature markets, increased competition may compel us to more heavily subsidize handsets in the future.

        We have entered into arrangements with Sony Ericsson, Nokia, Motorola, Samsung, Siemens, Alcatel and others to purchase handsets. We are not dependent on any particular supplier for handsets. We and our dealers also offer an array of mobile telephone accessories.

        Starting in 2007, we decreased our selling activities in relation to dual-band and tri-band handsets and accessories and shifted our sales focus to a more limited line of equipment, including 3G compatible equipment, Blackberry and equipment designed for MTS-Connect services. In addition, from January 1, 2008, we reduced our purchases of handsets and accessories for resale and focused instead on commission sales whereby we receive handsets and accessories on consignment from third party equipment suppliers and sell them at our sales outlets for a commission. We also began renting sales office space to third party dealers who sell handsets and equipment under our brand name and are required to follow standards set by us relating to assortment, pricing, quality of goods and quality of customer service.

        In August 2008, we signed an agreement with Apple Sales International and launched iPhone 3G™ sales in October 2008. Under the agreement, we committed to purchasing a certain quantity of iPhone 3G™ headsets over 2009, 2010 and 2011. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—Our failure to fulfill our iPhone handset purchase commitment under our agreement with Apple Sales International could have a material adverse effect on our

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financial condition and results of operations" and Note 21 to our audited consolidated financial statements.

        Following our launch of iPhone 3G™ sales and in line with our strategy to expand our proprietary distribution network,, we expect to our handset sales to increase in 2009.

Regulation in the Russian Federation

        In the Russian Federation, the federal government regulates telecommunications services. The principal law regulating telecommunications in the Russian Federation is the Federal Law on Communications, which provides, among other elements, for the following:

•

licensing of telecommunications services;

•

requirements for obtaining a radio frequency allocation;

•

equipment certification;

•

equal rights for individuals and legal entities, including foreign individuals and legal entities, to offer telecommunications services;

•

fair competition;

•

freedom of pricing other than pricing by companies with a substantial position in public telecommunication networks; and

•

liability for violations of Russian legislation on telecommunications.

        The new Federal Law on Communications came into force on January 1, 2004 and replaced the law of 1995 regulating the same subject matter. The Federal Law on Communications creates a framework in which government authorities may enact specific regulations. Regulations enacted under the legislative framework in place prior to the enactment of the Federal Law on Communications continue to be applied to the extent they do not conflict with the Federal Law on Communications. The lack of interpretive guidance from the regulatory authorities regarding the new regulations and the uncertainty surrounding their compatibility with the regulations still in effect impedes our ability to assess effectively the full impact of the new regulations under the Federal Law on Communications on our business.

        The Federal Law on Communications, which confers broad powers to the state to regulate the communications industry, including the allocation of frequencies, the establishment of fees for frequency use and the allocation and revocation of numbering capacity, significantly modifies the system of government regulation of the provision of communications services in Russia. In particular, licenses to provide communications services in territories where frequency and numbering capacity are limited may be issued only on the basis of a tender. In addition, the Federal Law on Communications provides for the establishment of a "universal services reserve fund" which is funded by a levy imposed on all operators of public networks, including us.

Regulatory Authorities

        The Russian telecommunications industry is regulated by several governmental agencies. These agencies form a complex, multi-tier system of regulation that resulted, in part, from the implementation of the Federal Law on Communications, as well as from the large-scale restructuring of the Russian government in March 2004 and subsequent restructuring in May 2008. The system of regulation is still evolving and further changes are expected. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Countries of Operation—Political and Social Risks—Political and governmental instability in Russia and the CIS could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs."

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The Ministry of Communications and Mass Media is the federal executive body that develops and supervises the implementation of governmental policy in the area of communications and coordinates and controls the activities of its subordinate agencies. The Ministry may issue regulations in the area of communications if authorized to do so by federal legislation (including presidential and governmental decrees).

The Federal Service for Supervision in the Area of Communications and Mass Media is a federal executive body that supervises and controls certain areas of communications and information technologies, including:

•

the issuance of licenses and permissions in the area of communications and information technologies;

•

the registration of radio-electronic and high-frequency equipment;

•

the assignment of radio frequencies based on decisions taken by the State Radio Frequencies Commission and registration of such assignments;

•

the allocation of numbering capacity;

•

the technical supervision of networks and network equipment throughout Russia;

•

the monitoring of compliance by network operators with applicable regulations, terms of their licenses and terms of the use of frequencies allocated and assigned to them;

•

the enforcement of equipment certification requirements;

•

the examination of electromagnetic compatibility of equipment with existing civil radio-electronic equipment;

•

the organization of tenders with respect to licenses in the sphere of communications; and

•

the control of activity in processing of personal data.

The Federal Agency of Communications is a federal executive body that implements governmental policy, manages state property and provides public services in the area of communications, including the certification of equipment for compliance with technical requirements.

The State Radio Frequencies Commission is an inter-agency coordination body acting under the Ministry of Communications and Mass Media which is responsible for the regulation of radio frequency spectrum and develops a long-term policy for frequency allocation in the Russian Federation.

        Other regulatory authorities.    In addition, the Federal Antimonopoly Service supervises competition regulations and enforces the Federal Law on the Natural Monopolies and the regulations enacted thereunder. The Federal Tariffs Service regulates certain tariffs in the sphere of telecommunications, including the tariffs on the local and domestic long distance calls by subscribers of public switched telephone networks and installation and subscription fees. The Federal Service for Supervision in the Area of Consumer Rights Protection and Human Well-Being is responsible for the enforcement of sanitary regulations, including some authority over the location of telecommunications equipment, and supervises the compliance of companies with the regulations relating to the protection of consumer rights. The Federal Registration Service is responsible for registering certain telecommunications infrastructure that is considered real property in accordance with Government Decree No. 68 dated February 11, 2005.

Licensing of Telecommunications Services and Radio Frequency Allocation

        Telecommunications licenses are issued based on the Federal Law on Communications and Government Decree No. 8 dated January 12, 2006 on Approval of Regulations for Holding a

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Competitive Tender for Receipt of Telecommunication License. Under these regulations, licenses may be issued and renewed for periods ranging from three to twenty-five years. Several different licenses to conduct different communication services may be issued to one entity. Provided the licensee has conducted its activities in accordance with the applicable law and terms of the license, renewals may be obtained upon application to the Federal Service for Supervision in the Area of Communications and Mass Media. Officials of the Federal Service for Supervision in the Area of Communications and Mass Media have broad discretion with respect to both issuance and renewal procedures.

        A company must complete a multi-stage process before the commercial launch of its communications network. A company must:

•

receive a license from the Federal Service for Supervision in the Area of Communications and Mass Media to provide communications services;

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obtain approval to use specific frequencies within the specified band from the State Radio Frequencies Commission if providing wireless telecommunications services; and

•

obtain permission from the Federal Service for Supervision in the Area of Communications and Mass Media for network operations. To receive this permission, a wireless telecommunications services provider must develop a frequency assignment and site plan, which is then reviewed and certified by the Federal Service for Supervision in the Area of Communications and Mass Media for electromagnetic compatibility of the proposed cellular network with other radio equipment operating in the license area. The Federal Service for Supervision in the Area of Communications and Mass Media has discretion to modify this plan, if necessary, to ensure such compatibility.

        Effective January 1, 2004, licenses may be transferred in case of mergers or other reorganizations of the licensee upon application by a transferee as a new license holder. Additionally, the Ministry of Communications and Mass Media has declared that agreements on the provision of telecommunications services must be concluded and performed by the license holder.

        If the terms of a license are not fulfilled or the service provider violates applicable legislation, the license may be suspended or terminated. Licenses may be suspended for various reasons, including:

•

detection of violations which may cause damage to rights, interests, life or health of individuals or to interests of government administration including, but not limited to, presidential and government telecommunication networks, defense, security and protection of legal order in the Russian Federation;

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failure to comply with Russian law or the terms and conditions of the license;

•

failure to provide services for over three months from the start-of-service date set forth in the license; and

•

annulment of a frequency allocation if it results in the inability to render communications services.

        In addition, licenses may be terminated for various reasons by a court, including:

•

failure to remedy in a timely manner a violation that led to the suspension of the license;

•

provision of inaccurate information in documents on the basis of which a license was issued; and

•

failure to fulfill obligations undertaken in the process of a tender or auction.

        The license may also be terminated by the Federal Service for Supervision in the Area of Communications and Mass Media in a number of cases, including liquidation of a license holder or failure to pay a license fee on time. A suspension or termination of a license may be appealed in court.

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        Frequencies are allocated for a maximum term of ten years, which may be extended upon the application of a frequency user. Under the Federal Law on Communications, frequency allocations may be changed for purposes of state management, defense, security and protection of legal order in the Russian Federation with the license holder to be compensated for related losses. Further, frequency allocations may be suspended or terminated for a number of reasons, including failure to comply with the conditions on which frequency was allocated.

        The following one-time license fees are payable in respect of each region covered by the license: 15,000 rubles (equivalent to $511 as of December 31, 2008), for services involving use of a frequency spectrum, lease of communication channels running beyond one region of Russia as well as in number of other cases specified by law; and 1,000 rubles (equivalent to $34 as of December 31, 2008) in other cases. The license fee for a license received through a tender or auction is determined by the terms of such tender or auction.

        In addition to licensing fees, a government decree enacted on June 2, 1998, requires payment of fees for the use of radio frequencies for cellular telephone services. The payment procedure was established by a government decree enacted on August 6, 1998, which requires that all wireless telecommunications services operators pay an annual fee set by the State Radio Frequencies Commission and approved by the Federal Antimonopoly Service for the use of their frequency spectrums. Furthermore, the Federal Law on Communications provides for the establishment of a "universal services reserve fund" for the purpose of supporting communications companies operating in less developed regions of Russia through the financing, construction and maintenance of telecommunications networks in low-profit and unprofitable sectors. This reserve fund is aimed at eliminating the practice of cross-subsidies by compensating operators for certain mandatory, loss-making local services in rural and sparsely populated areas. It is funded by a levy imposed on all operators of public networks, including us, in the amount of 1.2% of revenues from telecommunications services less the amount of taxes paid by subscribers. The universal service fund concept has been used in some developed countries and in Eastern Europe.

        The Federal Law on Communications empowers the Russian government to determine and annually review the list of licensing requirements applicable to various communication services being licensed. The list of licensing requirements was enacted by Government Decree No. 87 dated February 18, 2005, as amended. Licenses also generally contain a number of other detailed conditions, including a date by which service must begin, technical standards and certain other terms and conditions. We have either commenced service by the applicable deadline or received an extension of the applicable deadline for all of our licenses.

Equipment Certification

        Government Decree No. 896 adopted on December 31, 2004, sets forth the types of communications equipment that is subject to mandatory certification. Communications equipment must be certified, or its compliance with the established requirements must be declared and proved in the interconnected communications network of the Russian Federation, which includes all fixed line and wireless networks open to the public. All our networks must be certified. The Federal Agency of Communications issues certificates of compliance with technical requirements to equipment suppliers based on the Agency's internal review. In addition, a Presidential decree requires that licenses and equipment certifications should be obtained from the Federal Security Service to design, produce, sell, use or import encryption devices. Some commonly used digital cellular telephones are designed with encryption capabilities and must be certified by the Federal Security Service.

        Further, certain high-frequency equipment, a list of which was approved by Government Decree No. 539 of October 12, 2004, as amended, manufactured or used in the Russian Federation requires special permission from the Federal Service for Supervision in the Area of Communications and Mass

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Media. These permissions are specific to the entity that receives them and do not allow the use of the equipment by other parties. Failure to receive such certification could result in the mandatory cessation of the use of such equipment.

Competition, Interconnection and Pricing

        The Federal Law on Communications requires federal regulatory agencies to encourage competition in the provision of communication services and prohibits the abuse of a dominant position to limit competition. The Federal Law on Communications provides that telecommunications tariffs may be regulated in cases provided for by legislation. Presidential Decree No. 221, enacted on February 28, 1995, as amended, on Measures for Streamlining State Regulation of Prices (Tariffs) allows for regulation of tariffs and other commercial activities of telecommunications companies that are "natural monopolies." Government Decree No. 637, dated October 24, 2005, authorized the Federal Tariffs Service to set the following tariffs for the natural monopolies in the communications market:

•

provision of access to a local telephone network;

•

permanent use of a subscriber's line; and

•

local, intra-zone and domestic long distance calls.

        Although these regulations apply only to fixed line operators, we are still subject to them when receiving telephone calls from fixed lines.

        In accordance with the Federal Law on Natural Monopolies, the Federal Tariffs Service maintains a Register of Natural Monopolies whose tariffs are controlled and regulated by the state. A telecommunications operator may be included in this register upon the decision of the Federal Tariffs Service based on the Service's analysis of the operator's activities and the market conditions. At present, none of our subsidiaries is included in the Register of Natural Monopolies.

        The Federal Antimonopoly Service is authorized by law to maintain a register of companies holding a market share in excess of 35%. Companies entered in this register may become subject to certain restrictions in conducting their business, including limitations in decisions relating to price formation, geographical expansion, associations and agreements with competitors. Acquisitions of assets or shares in or by other entities involving such companies are subject to particular scrutiny by the Federal Antimonopoly Service. We are categorized by the Federal Antimonopoly Service as a company with a market share exceeding 35% in Moscow and the Moscow region, Ivanovo Region, Arkhangelsk Region and Nenets Autonomous District. See also See also "Item 3. Key Information—Risk Factors—Risks Relating to Our Business—If we are found to have a dominant position in the markets where we operate, the government may regulate our subscriber tariffs and restrict our operations."

        The Federal Law on Communications provides for a special regulation of telecommunications operators occupying a "substantial position," i.e., operators which together with their affiliates have, in the Russian Federation generally or in a geographically defined specific numerical zone, 25% or more of installed capacity or capacity to carry out transmission of not less than 25% of traffic. In particular, the Federal Law on Communications and implementing rules adopted by Government Decrees No. 161, dated March 28, 2005, and No. 627, dated October 19, 2005, both effective from January 1, 2006, provide for government regulation of interconnection tariffs established by such operators. In addition, such operators are required to develop standard interconnection contracts and publish them as a public offer for all operators who intend to use such interconnection services. Notwithstanding the above, fixed line operators not considered to occupy a "substantial position" and not included in the Register of Natural Monopolies, as well as mobile operators, are free to set their own tariffs.

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        In March 2006, the Federal Law on Communications was amended to incorporate a "calling party pays" scheme effective as of July 1, 2006. Prior to the implementation of the "calling party pays" principle, subscribers of fixed line operators could initiate calls to mobile phone users free of charge. Under the new system, fixed line operators began charging their subscribers for such calls and transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to mobile operators is regulated by the Federal Service for Supervision in the Area of Communications and Mass Media and is known as the settlement rate. Any reduction of the settlement rate by the regulator could have a negative impact on our average monthly service revenues per subscriber and margins.

Regulation in Ukraine

Regulatory Authorities

The State Communications Administration, or SCA (formerly, the State Department on Communications and Informatization, or the SDCI, from September 2004 to July 2008, and the State Committee on Communications and Informatization, or the SCCI, from June 1999 to September 2004), was the main regulatory body in the sphere of communications until the establishment of the NCRC in January 2005. At present, the SCA is responsible mainly for establishing and overseeing technical policies and standards.

        The NCRC.    Established by a Decree of the President of Ukraine in August 2004, the NCRC was vested with the powers of the central regulatory body in the sphere of communications on January 1, 2005 pursuant to the new Telecommunications Law described below. It consists of seven members and a chairperson. The NCRC was considered formed and commenced its activity in April 2005 when the chairperson and its members were appointed as required by the Telecommunications Law. In 2007 and 2008, the authority to appoint the NCRC chairperson and its members became the subject of a dispute between the President of Ukraine and the Cabinet of Ministers of Ukraine and the respective appointments were challenged in Ukrainian courts because of conflicting orders and regulations issued by the President of Ukraine and the Cabinet of Ministers. On October 8, 2008, the Constitutional Court of Ukraine passed a resolution pursuant to which the right of the Cabinet of Ministers to appoint the NCRC members and adopt its regulations was confirmed. Thus, the members and the chairperson of the NCRC are appointed by the Cabinet of Ministers. The NCRC has been responsible for issuing licenses for telecommunications services commencing January 1, 2005, as well as various other responsibilities of the SCA from that date.

        The State Center for Radio Frequencies of Ukraine, or SCRF.    While licenses for radio frequencies for wireless communications are issued by the NCRC, SCRF is the authority responsible for all technical issues related to the use of radio frequency resources and, in such capacity, is also involved in the issuance of radio frequency licenses. In particular, the SCRF determines frequency availability and the technical aspects of frequency allocation, as well as provides the NCRC with an expert opinion in relation to each application for radio frequency. The SCRF also monitors use of the frequencies and will continue monitoring compliance with the license terms and physically inspecting operators and providers of telecommunications services until the establishment of the State Inspection of Communications, as described below. The SCRF also independently issues individual permissions for the use of radio-electronic and radio-emitting equipment, its development, import, sale and purchase.

The State Inspection of Communications, or SIC, established by the new Telecommunications Law, is a division of the NCRC. The SIC is responsible for the general supervision of the telecommunications market and the use of radio frequency resources. The SIC also monitors compliance with license terms, physically inspects operators and providers of telecommunications services and, together with the SCRF, reviews cases relating to administrative violations in the areas of telecommunications and radio frequencies.

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The Antimonopoly Committee of Ukraine, or the AMC, is charged with the administration of competition legislation and the protection and regulation of economic competition in Ukraine, including economic competition among industry participants in the telecommunications sector.

Legislation

        The principal legislation regulating the telecommunications industry consists of the Law on Telecommunications dated November 18, 2003, or the Telecommunications Law, and the Radio Frequencies Law dated June 1, 2000, or the Radio Frequencies Law.

        The Telecommunications Law provides for, among other things, equal rights for individuals and legal entities to offer telecommunications services, fair competition and freedom of pricing. The Telecommunications Law also sets forth the legal, economic and organizational framework for the operation of companies, associations and government bodies forming part of the telecommunications networks. The licensing of telecommunications services, the requirements for equipment certification and liability for violations of Ukrainian legislation on telecommunications are also determined by this legislation. The Telecommunications Law also governs the relations between the state and local governmental bodies, telecommunications operators and users of telecommunications services and radio frequencies.

        The Telecommunications Law addresses new areas of telecommunications services in Ukraine, including numbering requirements, tariff and settlement regulations, interconnection, public telecommunications services, market access rules and licensing issuance and renewal. The Telecommunications Law also significantly expands the definition of the telecommunications services market, including in its scope Internet Protocol telecommunications, transmission of data and facsimile communications.

        The Telecommunications Law also restructured the regulatory bodies governing the area of telecommunications. It provided for the creation of the NCRC, which, as of January 1, 2005, has been responsible for many of the functions formerly handled by the SCA. The NCRC is authorized, inter alia, to issue regulations for telecommunications services, issue telecommunications licenses to operators and providers, issue frequency licenses, request information from operators, providers and authorities, impose administrative penalties and maintain the register of the operators and providers. The NCRC is also authorized to conduct hearings and to resolve disputes among operators concerning the interconnection of telecommunications networks.

        Foreign investments in Ukrainian telecommunications operators are not limited; however, in order to provide telecommunications services in Ukraine an entity must be located on the territory of Ukraine and registered in accordance with Ukrainian legislation.

        The Radio Frequencies Law sets forth comprehensive rules regarding the allocation, assignment, interrelation and use of radio frequencies, the licensing of the users of radio frequencies and other relevant issues. The 2004 amendments to the Radio Frequencies Law introduced new procedures for the issuance, re-execution and termination of frequency licenses and operation permits.

Licensing of Telecommunications Services and Radio Frequency Allocation

        Commencing January 1, 2005, the NCRC has assumed responsibility for issuing telecommunications licenses and frequency licenses pursuant to the Telecommunications Law and the 2004 amendments to the Radio Frequencies Law.

        Telecommunications licenses are issued for the following specific types of telecommunications services:

•

fixed telephone (local, intercity, international) communication services;

•

mobile telecommunications services;

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•

technical maintenance and exploitation of telecommunications networks and the lease of electric communications channels; and

•

provision of electric communications channels (local, intercity and international).

        Other telecommunications services do not require licenses.

        An operator that is granted a telecommunications license may not commence the provision of wireless telecommunications services until it receives a frequency license. The issuance of a frequency license is, in turn, subject to the availability of radio frequencies in the respective regions of Ukraine. Frequency licenses are issued for specific bandwidths within certain frequency spectrums in specific regions. The GSM spectrum is presently considered to be the most commercially attractive for telecommunications operators. It is currently deemed to be virtually impossible to obtain a license for GSM frequencies in major Ukrainian cities because most of the GSM radio frequencies in such cities are already licensed to the existing GSM operators, including us.

        Under applicable legislation, licenses for telecommunications services may be issued and renewed for periods of not less than 5 years, with the actual period generally ranging from 10 to 15 years. Renewal of a license is made by an application submitted to the NCRC at least four months prior to the expiration of the license term. NCRC officials have broad discretion with respect to both the issuance and the renewal of licenses. The Telecommunications Law further provides that the NCRC must award licenses on a first come-first served basis within 30 days from submission of an application. If resources are limited or consumer interests so require, the NCRC may adopt a decision to limit the number of licenses. In this event, the law requires that such decision is made public along with the rationale and that the licenses be allocated through a tender.

        In accordance with the Radio Frequencies Law, the NCRC issues a frequency license concurrently with the issuance of the license for the type of telecommunications services requiring use of radio frequency resources. A telecommunications operator that has a respective telecommunications license may apply for licenses for additional radio frequency bands. Frequency licenses may not be issued for a period shorter than the term of the relevant telecommunications license.

        Under applicable legislation, a public tender or an auction for a radio frequency license must be held by the NCRC if demand for radio frequency resources exceeds available resources. Radio frequency licenses issued on the basis of a public tender or an auction for the same type of radio technology must include identical conditions regarding the radio frequency bands and development period.

        Applicable legislation prohibits the transfer of a license by the licensee, including by means of assignment or pledge of a license as collateral, and agreements regarding the provision of telecommunications services must be executed and performed by the actual licensee.

        Licenses generally contain a number of detailed conditions, including the date by which service must be commenced, the requirement to use only certified equipment, the technical standards which must be observed and the requirement to comply with all environmental regulations. Frequency licenses issued after January 1, 2005 will also contain the date by which the radio frequency resources must be fully utilized.

        Telecommunications operators are subject to strict regulations, especially regarding electromagnetic compatibility; construction and technical maintenance of a telecommunications network must be carried out in accordance with specific regulations applicable in Ukraine. Telecommunications operators must submit periodic reports to the NCRC on the amount and quality of services provided under the telecommunications license. We believe that we are in material compliance with the applicable laws and regulations related to our Ukrainian licenses.

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        Some licenses also provide that services for persons entitled to certain social benefits must be provided at or below maximum tariffs established by Ukrainian legislation in effect at that time.

        If the terms of a license are not fulfilled or the service provider violates legislation, the license may be suspended or terminated. Both telecommunications services licenses and radio frequency licenses may be terminated for various reasons, including:

•

provision of inaccurate information in the application for a license;

•

repeated refusal to allow the representatives of the NCRC or the SIC to make inspections;

•

failure to remedy in a timely manner the circumstances which resulted in a violation of the license terms;

•

repeated violation of the license terms;

•

transfer or assignment of the license to a third party; and

•

other grounds set forth by Ukrainian laws.

        Radio frequency licenses may also be terminated for the following reasons:

•

failure to commence using radio frequency resources within the time period specified in the license;

•

termination of use of radio frequency resources specified in the license for more than one year; and

•

failure to use radio frequency resources to the full extent within the time period specified in the license.

        Decisions of the NCRC on termination of licenses may be appealed in court.

Equipment Certification

        The Telecommunications Law requires that all technical devices and equipment to be used in interconnected communications networks in Ukraine, including fixed line and wireless networks, be certified. The Ministry of Transport and Communications of Ukraine sets the technical standards for equipment to be used in telecommunications networks in Ukraine. Companies that are approved by the NCRC issue the equipment compliance certificates. If the equipment a prospective operator intends to use is certified in Ukraine by either the manufacturer or the vendor, there is no need for the operator to go through the equipment certification process. However, if the equipment is not certified in Ukraine or if it is certified by a third party that is unwilling or unable to give the operator its permission to utilize its certification, then the operator will need to apply for the certification of the equipment in its own name.

        The Radio Frequencies Law provides that users of radio frequency resources must obtain permits for the operation of radio-electronic and radio-emitting equipment, except for equipment used on a permit-free basis in accordance with this law. In order to obtain such operation permit, a company is required to file an application with the SCRF. The Radio Frequencies Law also requires producers and importers of radio-electronic and radio-emitting equipment to be used on the territory of Ukraine to register such equipment with the NCRC.

Competition

        The Telecommunications Law provides that one of the purposes of the licensing of telecommunications services is to encourage competition and de-monopolization in the telecommunications industry.

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        The AMC is the state administrative body charged with the administration of competition legislation and the protection and regulation of economic competition in Ukraine, including economic competition among industry participants in the telecommunications sector.

        Ukrainian antimonopoly legislation prohibits a company operating in Ukraine from using its dominant position in its market to gain an unfair or anti-competitive advantage in the provision of its services or products. A legal entity is deemed to be in a dominant position if such entity has no competitor in the market or is not subject to substantial competition due to restricted access or entry barriers for other business entities. Moreover, Ukrainian antimonopoly legislation provides that a company having more than a 35% market share in a given product market may be deemed to be in the dominant position on such market, unless it proves that it is subject to substantial competition.

        A telecommunications operator which is found by the AMC to have a dominant position in the market, in particular, may specifically be required to:

•

annually submit to the NCRC irrevocable public offers regarding interconnection with the other operators' telecommunications networks;

•

comply with the regulations of the NCRC regarding the technical, organizational and commercial terms of interconnection with the other operators' telecommunications networks;

•

comply with the calculation factors set by the NCRC for access to the operator's own network; and

•

not discriminate against other players in telecommunications market.

        According to AC&M-Consulting, MTS-Ukraine has a 32.5% market share of the wireless communications market in Ukraine as of December 31, 2008. It has not been declared a dominant market force by the AMC.

        In September 2003, the AMC began a review of the telecommunications services market for the purpose of determining the status of competition and the existence of dominant market forces. In August 2004, the AMC notified MTS-Ukraine and its largest competitor, Kyivstar, that the preliminary results of its review of the wireless telecommunications industry indicated that each of MTS-Ukraine and Kyivstar qualified as having a dominant position in the market. The AMC offered MTS-Ukraine and Kyivstar the opportunity to submit their objections to these preliminary findings and indicated that it would issue a decision following its review thereof. In December 2004, the AMC announced its issuance of a decision in which it confirmed that neither MTS-Ukraine nor Kyivstar qualified as having a dominant position in the wireless communications market.

        In November 2005, the AMC recommended that MTS-Ukraine and Kyivstar abolish the connection fees both operators charge their subscribers. In April 2006, MTS-Ukraine responded by notifying the AMC that it had partially abolished the connection fees it charged to those subscribers participating in its monthly tariff plans, but would not alter the connection fees charged to subscribers of pre-paid tariff plans. The AMC has not taken any further actions relating to this matter.

        Over the course of 2007-2009, the AMC conducted a preliminary investigation of the telecommunications interconnection market among mobile operators in Ukraine and found that eight mobile operators, including MTS-Ukraine and its closest competitors, are monopolists in relation to the market for interconnecting to each of their respective networks. A final ruling has not yet been made. In the event that the AMC declares these operators to be monopolists in relation to the market for interconnecting to each of their respective networks, the interconnection fees charged by these operators for terminating calls connecting to their respective networks may be subject to regulation by the NCRC which, in turn, may cause a significant decrease in both the interconnect revenues we receive as well as the interconnect fees we pay to other mobile operators in Ukraine. A governmental working group was subsequently formed to establish a framework for regulating interconnect fees in a

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way that is economically sound and promotes competition. The group is also tasked with developing the necessary amendments to Ukrainian laws regarding the division of powers between the AMC and NCRC. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations."

Tariffs

        Telecommunications tariffs are regulated by the NCRC for:

•

"public telecommunication" services; and

•

provision of electric communications channels by operators with a dominant position on the market.

        The Telecommunications Law withdrew the authority of the Cabinet of Ministers of Ukraine to regulate the prices for telecommunications services.

        In February 2006, the NCRC established maximum tariffs for the provision of electric communications channels by operators having a dominant position in the market, and, in September 2008, it established maximum tariffs for fixed line public telecommunications services.

        Although there are no additional regulations limiting the rates at which tariffs may be set for wireless telecommunications services, the AMC, where competition laws are violated, can find tariffs unfair and injurious to competition. In such cases, the AMC may request the violating telecommunications operator to remedy the situation, in particular, by amending its tariff schedule.

        Subject to the above, wireless operators are free to set tariffs at levels they consider appropriate.

Interconnection

        As of January 1, 2005, interconnection activity is to be regulated by the NCRC. Operators may provide offers for interconnection to the NCRC, and the NCRC is required to publish on an annual or regular basis a catalog of such offers. Operators with a dominant market position on the market are obligated to submit interconnection offers to the NCRC for each catalog.

        Interconnection is made pursuant to interconnection agreements between network operators as prescribed by the regulatory authorities. Such agreements are required under the law to contain certain provisions. An operator with a dominant market position cannot refuse an offer to conclude an interconnection agreement with another operator, if the offeror has offered points of interconnection that were previously published by the NCRC in the catalog of interconnection proposals.

        The NCRC is authorized to conduct hearings and to resolve disputes among operators concerning the interconnection of telecommunications networks. The decision of NCRC is binding upon the parties in the dispute but a party to the dispute may appeal such decision in court.

        In 2009, the AMC made a preliminary determination that eight mobile operators, including MTS-Ukraine and its closest competitors, are monopolists in relation to the market for interconnecting to each of their respective networks. See "—Competition."

Seasonality

        Our results of operations are impacted by certain seasonal trends. Generally, revenue is higher during the second and third quarter due to increased mobile phone use by subscribers who travel in the summer from urban areas to more rural areas where fixed line penetration is relatively low, as well as an increase in roaming revenues and guest roaming revenues during these quarters. Quarterly trends

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can also be influenced by a number of factors, including new marketing campaigns and promotions, and may not be consistent from year to year.

C.    Organizational Structure

        The table below presents our significant operating and holding entities, the places of incorporation and our ownership interests therein as of December 31, 2008.

	Accounting Method	Ownership Interest			Place of Incorporation/ Organization
MTS Finance(1)	Consolidated		100.0	%	Luxembourg
MTS-Capital	Consolidated		100.0	%	Russia
UMC	Consolidated		100.0	%	Ukraine
MTS-Kostroma	Consolidated		100.0	%	Russia
Novitel	Consolidated		100.0	%	Russia
Uzdunrobita	Consolidated		100.0	%	Uzbekistan
Sibintertelecom	Consolidated		100.0	%	Russia
BCTI	Consolidated		100.0	%	USA
Sweet-Com	Consolidated		74.9	%	Russia
MTS-Bermuda(2)	Consolidated		100.0	%	Bermuda
Dagtelecom	Consolidated		74.9	%	Russia
K-Telekom	Consolidated		80.0	%	Armenia
MTS Belarus	Equity		49.0	%	Belarus
TS-Retail	Equity		25.0	%	Russia
Coral/Sistema Strategic Fund	Equity		35.0	%	USA

(1)

Represents beneficial ownership interest.

(2)

A wholly-owned subsidiary established to repurchase our ADSs.

D.    Property, Plant and Equipment

        We own and occupy premises in Moscow at 4 Marksistskaya Street Bldgs. 1-4, 34 Marksistskaya Street Bldg. 10, 1/3 Vorontsovskaya Street Bldg. 2, 5 Vorontsovskaya Street Bldg. 1, 5 Vorontsovskaya Street Bldg. 2, 13/14 Vorontsovskaya Street Bldg. 4, 8 Vorontsovskaya Street Bldg. 4, 12/12 Pankratievsky Pereulok, 2/10 Perviy Golutvinskiy Pereulok Bldg. 2, 4 Perviy Golutvinskiy Pereulok Bldg. 1, 9 Magnitogorskaya Street, 6 Vtoroy Vyazovskiy Proezd, 2A Konstantina Simonova Street and Sheremetyevo Airport, which we use for administration, sales and other service centers as well as operation of mobile switching centers. We also lease buildings in Moscow for similar purposes, including marketing and sales and other service centers. We also own office buildings in some of our regional license areas and in Ukraine, and we lease office space on an as-needed basis. We believe that our properties are adequate for our current needs and additional space is available to us if and when it is needed.

        The primary elements of our network are base stations, base station controllers, transcoders and mobile switching centers. GSM technology is based on an "open architecture," which means that equipment from one supplier can be combined with that of another supplier to expand the network. Thus, there are no technical limitations to using equipment from other suppliers. Several major suppliers currently offer GSM 900/1800 mobile cellular equipment and the market for suppliers is competitive.

        Of the 28,077 base stations comprising our network in Russia as of December 31, 2008, 17,064 operated in the 900 MHz band and 11,013 operated in the 1800 MHz band. We also operated 686 base

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station controllers, 156 switches and approximately 14 media gateways in Russia as of December 31, 2008. Our 3G network in Russia as of December 31, 2008 was comprised of 684 base stations, or Node Bs, 18 softswitches, 19 media gateways and 18 radio network controllers.

        Of the 13,515 base stations comprising our network in Ukraine as of December 31, 2008, 4,993 operated in the 900 MHz band, 8,008 operated in the 1800 MHz band and 514 operated in 450 MHz (UMTS). We also operated 366 base station controllers and 40 switches in Ukraine as of December 31, 2008.

        Of the 1,696 base stations comprising our network in Uzbekistan as of December 31, 2008, 631 operated in the 900 MHz band, 973 operated in the 1800 MHz band and 92 operated in 2100 MHz band (UMTS). We also operated 35 base station controllers and 13 switches in Uzbekistan as of December 31, 2008.

        Of the 471 base stations comprising our network in Turkmenistan as of December 31, 2008, 201 operated in the 900 MHz band, 97 operated in the 1800 MHz band and 173 operated in dual-band. We also operated 9 base station controllers and 2 switches in Turkmenistan as of December 31, 2008.

        Of the 716 base stations comprising our network in Armenia as of December 31, 2008, 583 operated in the 900 MHz band and 133 operated in the 1800 MHz band. We also operated 23 base station controllers and 3 switches in Armenia as of December 31, 2008.

Item 4A.Unresolved Staff Comments

        None.

Item 5.    Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is intended to help the reader understand our Company, our operations and our present business environment and should be read in conjunction with our consolidated financial statements, related notes and other information included elsewhere in this document. In particular, we refer you to the risks discussed in "Item 3. Key Information—D. Risk Factors" for information regarding governmental, economic, fiscal, monetary or political policies or factors that could materially adversely affect our operations or your investment in our shares and ADSs. In addition, this section contains forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements as a result of various factors, including those described under "Item 3. Key Information—D. Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." Our reporting currency is the U.S. dollar and our consolidated financial statements have been prepared in accordance with U.S. GAAP.

Overview

        We are the largest mobile operator in Russia, Uzbekistan, Turkmenistan and Armenia and the second largest in Ukraine in terms of subscribers and revenues, according to AC&M-Consulting. Revenues for the year ended December 31, 2008 were $10,245.3 million, an increase of 24.2% from the year ended December 31, 2007. Net income for the year ended December 31, 2008 was $1,930.4 million, a decrease of 6.8% from the year ended December 31, 2007. As of December 31, 2008, we had a subscriber base of approximately 91.33 million (64.63 million in Russia, 18.12 million in Ukraine, 5.65 million in Uzbekistan, 0.93 million in Turkmenistan and 2.02 million in Armenia), an increase of 11.4% compared to December 31, 2007.

        Our revenues historically have increased through organic growth, as well as through acquisitions. In 2003, we acquired 100% of UMC, a mobile operator in Ukraine. For the years ended December 31, 2007 and 2008, MTS-Ukraine had total revenues of $1,608.0 million and $1,662.0 million, respectively. We acquired a 74% stake in Uzdunrobita, a mobile operator in Uzbekistan, in August 2004 and the

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remaining 26% stake in June 2007. For the years ended December 31, 2007 and 2008, MTS-Uzbekistan had total revenues of $248.5 million and $391.4 million, respectively. In two separate purchases in June and November 2005, we acquired 100% of BCTI, a mobile operator in Turkmenistan. For the years ended December 31, 2007 and 2008, MTS-Turkmenistan had total revenues of $168.5 million and $131.4 million, respectively. In September 2007, we acquired 80% of K-Telekom, the largest mobile operator in Armenia. The results of operations of K-Telekom have been included in our consolidated financial statements since September 14, 2007 and it had total revenues of $66.5 million and $256.6 million for the period ending December 31, 2007 and for the year ended December 31, 2008, respectively. Each of UMC, Uzdunrobita, and BCTI operate under the MTS brand, and K-Telekom operates under the VivaCell-MTS brand. See also "—Acquisitions."

        We require significant funds to support our subscriber growth, primarily for increasing network capacity, improving quality and developing new generation networks. Our cash outlays for capital expenditures (consisting of purchases of property, plant and equipment and intangible assets) for the year ended December 31, 2006, 2007 and 2008 were $1,722.0, $1,539.5 million and $2,227.3 million, respectively. We have financed our cash requirements through our operating cash flows and borrowings. Net cash provided by operating activities in the years ended December 31, 2006, 2007 and 2008 was $2,378.9 million, $3,350.2 million and $4,423.4 million, respectively.

        Our borrowings consist of notes and bank loans. Since 2002, we have raised a total of $1.8 billion through six U.S. dollar-denominated unsecured bond offerings in the international capital markets, and in 2008, we issued three ruble-denominated bonds in the amount of 10 billion rubles each (equivalent in aggregate to $779.1 million as of December 31, 2008; RUR5 billion were purchased in the initial placement by our wholly-owned subsidiary). In April 2006, we entered into a syndicated $1.33 billion loan facility with several international financial institutions, including The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen Bank Oesterreich AG and Sumitomo Mitsui Banking Corporation Europe Limited. We also entered into euro- and U.S. dollar-denominated loan agreements with various banks in 2008 for aggregate borrowings equivalent to $1,010.9 million as of December 31, 2008. The total amount available to us under our credit facilities amounted to $111.3 million as of December 31, 2008; an additional $317.4 million became available to us from March 1, 2009. As of December 31, 2008, we had total indebtedness of approximately $4.1 billion, including capital lease obligations, compared to approximately $3.4 billion as of December 31, 2007. Our total interest expense for the years ended December 31, 2007 and 2008, was $134.6 million and $153.3 million, net of amounts capitalized, respectively.

        We hold a 49% equity investment in a mobile operator in Belarus, MTS Belarus, which had 4.3 million subscribers as of December 31, 2008 and total revenues of $477.7 million for the year ended December 31, 2008. MTS Belarus is an equity investment, and its results are not consolidated in our financial statements, but instead are accounted for in our equity in net income of associates. The remaining stake in MTS Belarus is owned by a Belarus state-owned enterprise.

        Prior to June 2006, we denominated our tariffs in "conventional" units linked to the U.S. dollar in most of the regions in which we operate, except for Ukraine, Turkmenistan and the Krasnodar region (South macro-region). Commencing June 2006, we began charging our subscribers in rubles by linking the ruble amount we charged to a fixed U.S. dollar exchange rate. In April 2007, an amendment to the Federal Law on the Protection of Consumer Rights was enacted prohibiting companies from establishing prices in currencies other than rubles. In view of this amendment, as well as the growth in the share of our ruble-denominated expenditures, we began pricing our services and invoicing customers in Russia in rubles from January 1, 2007. As a result of these changes, we reevaluated the functional currency criteria under SFAS No. 52, "Foreign Currency Translation," and determined that, beginning January 1, 2007, the functional currency of our subsidiaries domiciled in Russia was the ruble. The depreciation of the U.S. dollar against the ruble in 2007 resulted in an increase in our revenues and operating costs in our audited consolidated financial statements. Conversely, the U.S.

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dollar significantly appreciated against the ruble in the fourth quarter of 2008, which negatively affected our results of operations for the year ended December 31, 2008. Although the average exchange rate of the U.S. dollar for the year ended December 31, 2008 decreased by 2.8% against the ruble as compared to the year ended December 31, 2007, the period closing exchange rate of the U.S. dollar at December 31, 2008 increased by 19.7% as compared to December 31, 2007. See "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

        We commenced the reorganization of our operations in Russia in 2004 by merging many of our wholly-and majority-owned Russian subsidiaries into Mobile TeleSystems OJSC in order to consolidate our administrative functions and improve management efficiency. In connection with this reorganization program, we have merged 25 of our wholly-owned subsidiaries into Mobile TeleSystems OJSC since 2004 up to the date of this document.

Segments

        In 2006, we reorganized our corporate and management structure into a single corporate center and three business units, each of which is responsible for our operations in Russia, Ukraine and other foreign countries, respectively. The aim of the restructuring was to increase our efficiency and business focus through greater transparency and a clearer division of responsibilities between the corporate center and business units.

        Our operating segments correspond to our three business units: (1) Russia, which includes our operations in Russia; (2) Ukraine, which includes our operations in Ukraine; and (3) foreign subsidiaries, which includes our operations in Uzbekistan, Turkmenistan and Armenia and our equity affiliate in Belarus. We manage our operations and review each country separately due to the varying geographical, economic and regulatory environments which require different marketing and investment strategies. For reporting purposes, according to the criteria stated in SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information," we defined two operating reportable segments: Russia and Ukraine. See also Note 22 to our audited consolidated financial statements for segment information.

Subscriber Data

        The following table shows our subscribers by country as of the dates indicated:

		At December 31,
		2006		2007		2008
		(in thousands)
Subscribers(1)
Russia			51,222		57,426		64,628
Ukraine			20,003		20,004		18,115
Uzbekistan			1,450		2,802		5,647
Turkmenistan			184		356		927
Armenia			n/a		1,382		2,017
	Total consolidated		72,859		81,970		91,334
MTS Belarus (unconsolidated)			3,208		3,800		4,322

(1)

We define a subscriber as an individual or organization whose account shows chargeable activity within 61 days (or 183 days in the case of our pre-paid tariffs) or whose account does not have a negative balance for more than this period.

        We had approximately 64.63 million subscribers in Russia as of December 31, 2008 and a leading 34.4% market share of total mobile cellular subscribers in Russia, according to AC&M-Consulting. Overall penetration in Russia was at approximately 129.4%, according to AC&M-Consulting. We had

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approximately 18.12 million subscribers in Ukraine as of December 31, 2008, and, according to AC&M-Consulting, a 32.5% market share of total mobile cellular subscribers in Ukraine. In addition, as of December 31, 2008, we had approximately 5.65 million subscribers in Uzbekistan, 0.93 million subscribers in Turkmenistan and 2.02 million subscribers in Armenia, representing a 46.0%, 87.5% and 78.8% market share, respectively, according to AC&M-Consulting and our estimates.

        We define our churn as the total number of subscribers who cease to be a subscriber 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. We view the subscriber churn as a measure of market competition and customer dynamics. The following table shows our Russian and Ukrainian subscriber churn for the periods indicated.

	Year Ended December 31,
	2006			2007			2008
Subscriber Churn
Russia		23.3	%		23.1	%		27.0	%
Ukraine		29.9	%		49.0	%		47.3	%

        The churn rate is highly dependent on competition in our license areas and those subscribers who migrate as a result of such competition. We believe that the increase in our churn rate in Russia to 27.0% during the year ended December 31, 2008 as compared to 23.1% for the year ended December 31, 2007 is in line with regular fluctuations in subscriber numbers attributable to the strong competitive environment intensified by increased subscriptions during 2007 and 2008.

        Although the churn rate in Ukraine slightly decreased to 47.3% for the year ended December 31, 2008 from 49.0% for the year ended December 31, 2007, it significantly increased to 49.0% in 2007 as compared to 29.9% in 2006 and remains high. This increase is primarily represented by the churn of prepaid subscribers, which increased from 30% in 2006 to 51% in 2007. Churn of contract, or postpaid, subscribers increased from 25% in 2006 to 29% in 2007.

        The substantial increase in the churn of prepaid subscribers was primarily due to the competitive environment among mobile operators in Ukraine, which has significantly intensified in recent years as the market in Ukraine has become more saturated, and has lead to a decrease in our subscriber base in Ukraine as of December 31, 2008 as compared to December 31, 2007. At the same time, the proportion of mass-market subscribers, including youth and low-income segment subscribers whose preferences are largely driven by tariff levels and simplified subscription conditions, has grown. As a result, a higher number of mass-market subscribers have migrated over to other operators offering lower tariffs and minimal subscription conditions. A secondary factor impacting our churn is that our overall churn statistics include subscribers who moved from one tariff plan to another within MTS-Ukraine—i.e., subscribers that did not migrate to another mobile operator, but rather, switched to a different tariff plan within MTS-Ukraine.

        We calculate average monthly service revenue per subscriber 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. Prior to April 1, 2008, we excluded connection fees from service revenues. The following table shows our average monthly service revenue per Russian and Ukrainian subscriber based on our current calculation

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methodology and average monthly minutes of use per Russian and Ukrainian subscriber for the periods indicated.

	Year Ended December 31,
	2006		2007		2008
Average monthly service revenue per subscriber
Russia	$	7.9	$	9.3	$	10.5
Ukraine	$	7.3	$	6.6	$	7.2
Average monthly minutes of use per subscriber
Russia		129		157		208
Ukraine		142		154		279

        Average monthly service revenue per subscriber in Russia increased to $10.5 for the year ended December 31, 2008 from $9.3 for the year ended December 31, 2007 and $7.9 for the year ended December 31, 2006. We consider this growth to be in line with our sales and marketing efforts aimed at stimulating usage, including the introduction of various new tariff plans, and an increase in the use of value-added services. Average monthly minutes of use per subscriber in Russia increased from 129 minutes in 2006 to 157 minutes in 2007 and to 208 minutes in 2008 mainly due to marketing campaigns and tariff promotions aimed at stimulating increased traffic.

        In Ukraine, average monthly service revenue per subscriber increased to $7.2 for the year ended December 31, 2008 from $6.6 for the year ended December 31, 2007, and was $7.3 for the year ended December 31, 2006. The increase in the year ended December 31, 2008 compared to the year ended December 31, 2007 was primarily due to our sales and marketing efforts aimed at stimulating usage of services, which was partially offset by competitive pressures on tariff levels. The average monthly minutes of use per subscriber increased from 142 minutes in 2006 to 154 minutes in 2007 and to 279 in 2008 due to the introduction of a wide range of attractive tariffs aimed at stimulating traffic, such as inexpensive intra-network rates.

Revenues

        Our principal sources of revenue are:

•

service revenues, including usage and interconnect fees, value-added services fees, monthly subscription fees, roaming fees and connection fees; and

•

revenues from sales of handsets and accessories.

        Our subscriber tariffs in Russia and Ukraine are not currently regulated by any organization or governmental authority, although in 2004 we reduced certain tariffs in Ukraine at the recommendation of the AMC. The interconnection fees we charge to other operators for terminating calls interconnection to our network are not regulated in Russia, but will likely be regulated in Ukraine in the near future. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations," "—If we are found to have a dominant position in the markets where we operate, the government may regulate our tariffs and restrict our operations" and "—If we or any of our subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

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Service Revenues and Connection Fees

        Service revenues.    Usage fees include amounts charged directly to our subscribers, both for their usage of our network and for their usage of other operators' GSM networks when roaming outside of our service area. We generally bill our subscribers for all outgoing calls. In the past, we charged our subscribers in Russia for all incoming calls.

        An amendment to the Federal Law on Communications, which became effective July 1, 2006, implemented the CPP principle prohibiting mobile operators from charging their subscribers for incoming calls. Prior to the implementation of the CPP, subscribers of fixed line operators could initiate calls to mobile phone users free of charge. Under the new system, fixed line operators began charging their subscribers for such calls and transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to mobile operators is regulated by the Federal Service for Supervision in the Area of Communications and Mass Media and is known as the settlement rate. Due to the launch of free incoming calls, we have increased our rates through the introduction of a fee on the first minute of a call, which varies from $0.01 to $0.10 per first minute depending on the subscriber's home region. This new fee on the first minute takes into account the fact that incoming calls are free and the fees paid by subscribers should not exceed those paid prior to July 1, 2006 when CPP was introduced.

        The prices for outgoing calls to other cellular operators and to the public service telephone network are usually higher than charges for outgoing calls within our network. The usage fees charged for a call originating on our network depend on a number of factors, including the subscriber's tariff plan, call duration, the time of day when the call was placed and the call destination. Usage fees as a percentage of total revenues were 52.4% in 2006, 50.0% in 2007 and 47.6% in 2008, respectively. Usage fees as a percentage of total revenues have been decreasing largely due to the increase in interconnect fees as a percentage of total revenues. Interconnect fees are fees for connecting users of other operators' fixed line and wireless networks to our network. Interconnect fees comprised 10.4%, 13.0% and 13.9% of total revenues in 2006, 2007 and 2008, respectively. Notwithstanding the decrease of usage fees as a percentage of total revenues, we believe that the further development of our prepaid tariff plans, which have no monthly subscription fees, will support growth in the usage fees.

        We offer our subscribers an array of value-added services. These services as a percentage of our total revenues remained relatively stable in 2006 and 2007, at 12.7% and 12.4%, respectively, and increased to 13.5% in 2008. The increase in 2008 in revenue from value-added services was due to the introduction of new value-added services and a general increase in the usage of value-added services by our subscribers.

        Monthly subscription fees consist of fixed monthly charges for network access and access to additional services. Monthly subscription fees as a percentage of our total revenues represented 10.9% in 2006, 10.8% in 2007, and 11.5% in 2008, respectively. The fluctuations of the monthly subscription fees as a percentage of total revenues corresponds to the change in the share of subscribers with monthly subscription fees in the subscriber mix from year to year and the subscription-based services we offer. Many of our monthly subscription fee-based tariff plans also include a usage fee-based component for minutes used over a certain number of pre-paid minutes. The percentage of total revenues represented by usage fees as compared to monthly subscription fees will continue to be affected by changes in our tariff plans, as well as the relative product mix between usage fee-based tariff plans versus monthly subscription fee-based tariff plans.

        Roaming fees for guest subscribers include amounts charged to other cellular operators for their subscribers, i.e., guest roamers, utilizing our network while traveling in our service area. We bill other cellular operators for calls of guest roamers carried on our network. Roaming fees for guest subscribers as a percentage of our total revenues represented 1.7% in 2006, 1.3% in 2007 and 1.2% in 2008, respectively. We generally expect that roaming fees will continue to decline as a percentage of total

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revenues as we expect that an increase in our subscriber base, which will generally lead to the growth of usage fees, will continue to outpace the increase in guest roamers, causing a decrease in the proportion of roaming fees. In addition, roaming tariffs between mobile operators have a tendency to decrease relative to the increase in the total number of mobile users.

        Roaming fees for our own subscribers include amounts charged to our subscribers utilizing our roaming partners' network while traveling out of our service area. Roaming fees for own subscribers as a percentage of our total revenues represented 9.2% in 2006, 9.8% in 2007 and 10.3% in 2008, respectively.

        Connection fees.    Connection fees consist of charges incurred by subscribers for the initial connection to our network and sign-up for value-added services. We defer connection fees and recognize them as revenues over the estimated average subscriber life in our network as described in Note 2 to our audited consolidated financial statements. Connection fees represented 1.1% of our total revenues in 2006, 1.0% in 2007 and 0.6% in 2008, respectively. We expect connection fee revenues to remain at a low level as a percentage of total revenues.

Sales of Handsets and Accessories

        In 2007, we decreased our selling activities in our sales centers in relation to dual-band and tri-band handsets and accessories and shifted our sales focus to a more limited line of equipment, including 3G compatible equipment, Blackberry and equipment designed for MTS-Connect services. In 2008, we reduced our purchases of handsets and accessories for resale and focused instead on commission sales whereby we receive handsets and accessories on consignment from third-party equipment suppliers and sell at them at our sales offices for a commission. Revenue from the sale of handsets and accessories represented 1.5% of our total revenue in 2006, 1.0% in 2007 and 0.7% in 2008, respectively.

        In August 2008, we signed an agreement with Apple Sales International and launched iPhone 3G™ sales in October 2008. Under the agreement, we have committed to purchasing a certain quantity of iPhone 3G™ headsets over 2009, 2010 and 2011. See Note 21 to our audited consolidated financial statements.

        Following our launch of iPhone 3G™ sales and in line with our strategy to expand our proprietary distribution network, we expect that sales of handsets and accessories will start to increase as we expand our proprietary retail network and, consequently, will increase as a percentage of total revenue. We do not subsidize handset sales in Russia. In Ukraine, we subsidize handsets for contract subscribers. See "—Expenses—Cost of Handsets and Accessories" below.

Expenses

        Our principal expenses are:

•

cost of services, including interconnect, line rental and roaming expenses;

•

cost of handsets and accessories;

•

sales and marketing expenses;

•

general and administrative expenses, such as salaries, rent, repair and maintenance and other general and administrative expenses;

•

provision for doubtful accounts;

•

depreciation of property, network equipment and amortization of telephone numbering capacity, license costs and other intangible assets;

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•

interest expenses; and

•

provisions for income taxes.

Cost of Services

        Interconnect and Line Rental.    Interconnect and line rental charges include charges payable to other operators for access to, and use of their networks, which are necessary in the course of providing service to our subscribers as described under "Item 4. Information on Our Company—B. Business Overview—Interconnect Arrangements and Telephone Numbering Capacity." Interconnect charges as a percentage of our total revenues represented 10.6% in 2006, 13.1% in 2007 and 13.9% in 2008, respectively. Line rental charges as a percentage of our total revenues represented 2.2% in 2006, 1.3% in 2007 and 1.3% in 2008, respectively.

        With the introduction of CPP, our revenues and cost structure have changed. Whereas previously subscribers were charged for both incoming and outgoing calls, operators are now required to pay interconnect fees in order to terminate calls on other operators' networks. The resulting interconnect fees represent a significant cost in providing services to our customers. In addition, new tariff plans introduced by us have encouraged greater voice usage among our customers, which may further increase interconnect fees. Therefore, we expect that interconnect expenses payable by us to other operators for termination of traffic generated by our subscribers will continue to increase as our subscriber base and traffic volumes grow.

        We expect line rental costs to vary based on the number of base stations, base station controllers, the number and capacity of rented lines and competition among providers of rented lines, as well as availability and usability of substitutes such as microwave links owned by us.

        Roaming Expenses.    Roaming expenses consist of amounts charged by other cellular operators under agreements for roaming services provided to our subscribers while outside our service area. Roaming expenses as a percentage of our total revenues represented 2.9% in 2006, 2.9% in 2007 and 2.4% in 2008, respectively.

Cost of Handsets and Accessories

        This type of expense includes primarily the cost of handsets and accessories sold to subscribers, and the cost of SIM cards provided to our customers. Cost of handsets and accessories as a percentage of our total revenues represented 1.9% in 2006, 1.0% in 2007 and 0.9% in 2008, respectively. Due to our new retail network development strategy and our launch of iPhone 3G™ handset sales, we expect that the cost of handsets and accessories will increase as we expand our proprietary retail network increase our equipment sales.

        We do not subsidize handset sales other than in Ukraine, where we subsidize handsets on a limited basis to contract subscribers. In the years ended December 31, 2006, 2007 and 2008, we provided net handset subsidies in Ukraine totaling $30.4 million, $21.0 million and $20.4 million, respectively, which are reported as a loss on sales of handsets.

        Generally, we provide SIM cards to our customers free of charge. The cost of SIM cards amounted to $87.0 million in 2006, $74.9 million in 2007 and $82.1 million in 2008.

Sales and Marketing Expenses

        Our sales and marketing expenses primarily consist of:

•

expenses for advertising and promotion; and

•

dealer commissions on new connections and cash collected from subscribers.

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        Sales and marketing expenses reflect, among other things, advertising, promotions and other costs associated with the expansion of services in our license areas and are expected to increase as subscriber numbers and market competition increase. In addition, we expect these costs to increase as we further develop our brand and introduce value-added services.

        In 2006, we began linking commissions in Russia for newly acquired subscribers payable to a dealer on a monthly basis to the amount of revenues we receive during the six-month period from the date a subscriber is activated by such dealer. In addition, we have established caps or a maximum commission amount payable to our dealers. We believe that the new method for paying commissions to dealers provides dealers with greater incentives to renew subscriptions, reduces the risk of dealer fraud and improves our cash-flow management.

        In Ukraine, starting from July 2007, we link dealer commissions to the tariff package sold, category of subscriber, city of subscription, and status of the dealer itself. We have different commission structures based on whether the subscriber is prepaid, postpaid or a CDMA-only subscriber (i.e., subscribers using only mobile internet services). For each new subscriber, a dealer typically receives a one-time commission payment at the time the contract is signed followed by monthly payments based on the revenue generated from the subscriber.

        We measure subscriber acquisition costs, or SAC, to monitor the cost-effectiveness of our sales and marketing expenses. We define SAC as total sales and marketing expenses and handset subsidies for a given period. 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. The following table shows SAC in Russia and Ukraine for the periods indicated:

	Year Ended December 31,
	2006		2007		2008
Subscriber Acquisition Costs (SAC) per Gross New Subscriber
Russia	$	23	$	26	$	27
Ukraine	$	10	$	12	$	14

        SAC in Russia increased in each of 2007 and 2008 due to inflation and, in particular, a significant increase in the cost of media advertising.

        In Ukraine, if expressed in hryvnia, SAC actually decreased from 61.0 hryvnia for the year ended December 31, 2007 to 58.3 hryvnia, or by 4.4%, for the year ended December 31, 2008, primarily due to our effective use of marketing resources. The increased SAC in U.S. dollar terms was due to the currency translation effect when translating the hryvnia amount to the U.S. dollar amount for reporting purposes, as the hryvnia depreciated against the U.S. dollar in 2008.

General and Administrative Expenses

        Our general and administrative expenses consist primarily of:

•

employee salaries and bonuses;

•

social contributions payable to state funds;

•

taxes other than income taxes, e.g., property taxes;

•

office maintenance expenses;

•

network repair and maintenance;

•

rental of premises;

•

and other general and administrative expenses.

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        General and administrative expenses as a percentage of our total revenues represented 17.4% in 2006, 17.2% in 2007 and 17.6% in 2008, respectively. Total general and administrative expenses are expected to increase over time to reflect the increasing costs and staff required to service our growing subscriber base, but we expect they will decline on a per subscriber basis.

Provision for Doubtful Accounts

        Our expense for provision for doubtful accounts for the year ended December 31, 2008 increased to $147.4 million, or 1.4% of total revenues as compared to $58.9 million, or 0.7% of total revenues for the year ended December 31, 2007. This increase was mainly attributable to the write-off of loan issued to Beta Link, which filed for bankruptcy in March 2009. The increase was also in line with our expectations due to our launch of the new "Credit" service in May 2007, which allows our subscribers to continue using services notwithstanding a negative account balance and settle their debt thereafter. See also See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—We may be adversely affected by the current economic environment" and "Item 4. Information on Our Company—B. Business Overview—Customer Payments and Billing."

Depreciation of Property, Network Equipment and Amortization of Intangible Assets

        Our expense for depreciation of property, network equipment and amortization of intangible assets as a percentage of total revenues increased to 18.9% for the year ended December 31, 2008 as compared to 18.0% of total revenues for the year ended December 31, 2007. This increase was in line with our expectations, and we expect further increases in connection with our ongoing network development program and the buildout associated with our regional license areas. Correspondingly, we also expect amortization of telephone numbering capacity, license costs and other intangible assets to increase in line with our regional development programs. See also "—Trend Information" for further discussion of expected trends in the depreciation of property and network equipment in connection with the development of our 3G network.

Interest Expense

        We expect interest expense to continue to increase, which is principally associated with external debt incurred by us to finance our network development program and the buildout associated with our regional license areas as well as due to increased borrowing costs due to the current global market and economic conditions.

Provision for Income Taxes

        Taxation on income of Russian companies is regulated by a number of laws, government decrees and implementation instructions.

        The income tax base for Russian companies is defined as income received from sales of goods, works and services and property rights and income from non-sale operations, reduced by the amount of certain business expenses incurred in such operations. Certain expenses are deductible while others have limitations on their deductibility.

        Effective January 1, 2009, the statutory income tax rate in Russia was reduced from 24% to 20%. From January 1, 2004, the Ukrainian statutory income tax rate was established at 25%. The effective tax rate applicable to our consolidated group in the year ended December 31, 2008 was 24.5%. The effective tax rate differs from the statutory rate as a result of adjustments to the reserve for uncertain tax positions, adjustments to the deferred tax asset valuation allowance and other nondeductible items.

        Generally, tax declarations remain open and subject to inspection with respect to the three calendar years which immediately preceded the year in which the audit is carried out. We believe that

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we have adequately provided for tax liabilities in our consolidated financial statements; however, the risk remains that relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant.

Inflation

        Our financial position and results of operations as reflected in our audited consolidated financial statements included elsewhere in this document have been influenced by inflation.

        The Russian economy has been characterized by high rates of inflation:

Year	Inflation rate
2003		12.0	%
2004		11.7	%
2005		10.9	%
2006		9.0	%
2007		11.9	%
2008		13.3	%

        The Ukrainian economy has also been characterized by high rates of inflation:

Year	Inflation rate
2003		8.2	%
2004		12.3	%
2005		10.3	%
2006		9.1	%
2007		12.8	%
2008		25.2	%

        In addition, for the year ended December 31, 2008, inflation rates in Uzbekistan, Turkmenistan and Armenia were 7.8%, 8.9% and 5.5% respectively.

        Prior to June 20, 2006, we denominated our tariffs in units linked to the U.S. dollar in most of the regions in which we operate, except for Ukraine, Turkmenistan and the Krasnodar region (South macro-region). Commencing June 20, 2006, we began charging our subscribers in rubles by linking the ruble amount we charged to a fixed U.S. dollar exchange rate. Following amendments to the Federal Law on the Protection of Consumer Rights prohibiting companies from establishing prices in currencies other than rubles, and in view of the growth in the share of our ruble-denominated expenditures, we began pricing our services and invoicing customers in Russia in rubles from January 1, 2007.

        The World Bank forecasted inflation to reach between 11%-13% in Russia in 2009, and the International Monetary Fund forecasted inflation to reach 17% in Ukraine in 2009 (although it reached 22.3% in February 2009). We expect inflation-driven increases in costs to put pressure on our margins. While we could seek to raise our tariffs to compensate for such increase in costs, competitive pressures may not permit increases that are sufficient to preserve operating margins. For a detailed discussion of change in translation methodology, refer to Note 2 to our audited consolidated financial statements. "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—Inflation could increase our costs and adversely affect our results of operations."

Acquisitions

        Our results of operations for the periods presented are significantly affected by acquisitions. Results of operations of acquired businesses are included in our audited consolidated financial statements for the periods after their respective dates of acquisition.

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        Below is a list of our major acquisitions during 2006, 2007 and 2008.

Company	License area	Date of acquisition	Stake acquired			Purchase price* (in millions)
2006
Dagtelecom	Republic of Dagestan	July 2006		74.99	%		14.7
						$	14.7
2007
Uzdunrobita	Uzbekistan	June 2007		26.0	%	$	250.0
K-Telekom	Armenia	September 2007		80.0	%		402.6
Bashcell	Bashkortostan	December 2007		100.0	%		6.7
						$	659.3
2008
MSS	Omsk region	February 2008		9.0	%		16.0
						$	16.0

*

Excluding debt assumed.

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Results of Operations

        Starting from the year ended December 31, 2006, we separately report our financial information for Russia, Ukraine and other countries. See "—Segments" for additional information.

	Year Ended December 31,
	2006			2007			2008
Net operating revenues
Russia	$	4,665,530		$	6,181,023		$	7,840,225
Ukraine		1,490,278			1,608,021			1,661,951
Other		242,455			483,499			779,520
Eliminations(1)		(14,009	)		(20,165	)		(36,403	)
Net operating revenues as reported	$	6,384,254		$	8,252,378		$	10,245,293
Costs of services, excluding depreciation and amortization shown separately below, and cost of handsets and accessories
Russia	$	1,030,929		$	1,407,011		$	1,809,553
Ukraine		387,007			433,174			511,502
Other		29,048			65,925			131,497
Eliminations(1)		(14,009	)		(20,165	)		(34,989	)
Cost of services and cost of handsets and accessories as reported	$	1,432,975		$	1,885,945		$	2,417,563
Sundry operating expenses(2)
Russia	$	884,946		$	1,129,940		$	1,468,408
Ukraine		159,688			182,753			200,908
Other		69,093			106,231			135,577
Sundry operating expenses as reported	$	1,113,727		$	1,418,924		$	1,804,893
Sales and marketing expenses
Russia	$	419,463		$	491,404		$	646,061
Ukraine		179,317			210,341			190,225
Other		9,055			22,370			55,722
Eliminations(1)		—			—			(9,500	)
Sales and marketing expenses as reported	$	607,835		$	724,115		$	882,508
Depreciation and amortization expenses
Russia	$	819,316		$	1,076,586		$	1,312,406
Ukraine		233,744			324,976			437,988
Other		42,921			87,986			186,443
Depreciation and amortization as reported	$	1,095,981		$	1,489,548		$	1,936,837
Operating Income
Russia	$	1,510,876		$	2,076,083		$	2,611,882
Ukraine		530,522			456,777			321,328
Other		92,338			200,986			270,282
Operating income as reported	$	2,133,736		$	2,733,846		$	3,203,492

(1)

Represents the elimination of inter-company transaction results, primarily roaming arrangements.

(2)

For the purposes of this analysis "Sundry operating expenses" consist of general and administrative expenses, provision for doubtful accounts and other operating expenses.

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Year Ended December 31, 2008 compared to Year Ended December 31, 2007

Revenues and cost of services and cost of handsets and accessories

Consolidated revenues for the year ended December 31, 2008 increased by $1,992.9 million, or 24.2%, to $10,245.3 million from $8,252.4 million for the year ended December 31, 2007. This increase was primarily due to the growth in our subscriber base by 11.4% to 91.33 million as of December 31, 2008 from 81.97 million as of December 31, 2007. The growth in our subscriber base was mainly attributable to our sales and marketing efforts and the expansion of our network. A portion of the revenue growth was also due to the significant increase in the interconnect fees we received for the termination of incoming traffic from other operators, which increased to $1,422.5 million for the year ended December 31, 2008 from $1,069.3 million for the year ended December 31, 2007, mainly due to the increased usage of mobile services. In addition, revenue from value-added services increased to $1,379.0 million for the year ended December 31, 2008 from $1,026.3 million for the year ended December 31, 2007, or 34.4%, mainly due to our marketing efforts aimed at stimulating usage of value-added services and our increased value-added service offerings. Growth in subscription fees to $1,175.3 million for the year ended December 31, 2008 from $890.5 million for the year ended December 31, 2007 also impacted the total revenue growth and was mainly due to the expansion of services with subscription fees offered by us to subscribers. Revenue growth was also attributable to an increase in roaming revenues from our subscribers to $1,059.0 million for the year ended December 31, 2008 from $808.5 million for the year ended December 31, 2007, which was in line with the increase in both our subscriber base and overall usage. Our acquisition of K-Telekom in September 2007 contributed an additional $190.1 million to our total revenues for the year ended December 31, 2008 as compared to the year ended December 31, 2007. The depreciation of the average U.S. dollar versus ruble exchange rate for the year ended December 31, 2008 as compared to the year ended December 31, 2007 also contributed to the growth in our revenues.

        For the year ended December 31, 2008, service revenues and connection fees increased by $2,003.7 million, or 24.5%, to $10,176.3 million compared to $8,172.6 million for the year ended December 31, 2007 mainly due to the growth in the number of our subscribers and the increases in subscription and interconnect fees, as described above. Revenues from the sales of handsets and accessories decreased by $10.7 million, or 13.4%, to $69.0 million for the year ended December 31, 2008 compared to $79.7 million for the year ended December 31, 2007, mainly due to a change in our strategy for sales of handsets and accessories in the year ended December 31, 2008, as described above.

Consolidated cost of services and cost of handsets and accessories for the year ended December 31, 2008 increased by 28.2% to $2,417.6 million from $1,885.9 million for the year ended December 31, 2007. The increase in costs was primarily attributable to growth of our subscriber base and the consequent growth in traffic-related expenses, in particular interconnect costs and line rental expenses. For the year ended December 31, 2008, interconnect expenses grew to $1,424.4 million from $1,077.9 million for the year ended December 31, 2007 due to increased traffic volume. Line rental expenses grew to $134.1 million for the year ended December 31, 2008 from $103.8 million for the year ended December 31, 2007. Cost of value-added services also grew to $247.4 million for the year ended December 31, 2008 from $164.2 million for the year ended December 31, 2007 due to the increased usage of value-added services by our subscribers. The increase in cost of services for the year ended December 31, 2008 was also due to a growth in other direct costs to $192.0 million for the year ended December 31, 2008 from $140.5 million for the year ended December 31, 2007 due to higher fees payable for our use of radio frequencies and higher electricity costs.

        For the year ended December 31, 2008, the cost of handsets and accessories sold, including SIM cards provided to customers, slightly increased to $169.6 million from $158.6 million for the year ended December 31, 2007 mainly due to the launch of iPhone 3G™ sales in October 2008, which was partially

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offset by the decreased selling activity for handsets and accessories in the year ended December 31, 2008 as compared to 2007.

Russia revenues for the year ended December 31, 2008 increased by 26.9% to $7,840.2 million from $6,181.0 million for the year ended December 31, 2007. The increase in Russia revenues was primarily due to the growth of our subscriber base in Russia, which increased by 12.5% to 64.6 million as of December 31, 2008 from 57.4 million as of December 31, 2007, as well as growth in interconnect revenues and the adoption of new marketing initiatives aimed at stimulating higher usage of mobile and value-added services among our subscribers.

Russia cost of services and cost of handsets and accessories for the year ended December 31, 2008 increased by 28.6% to $1,809.6 million from $1,407.0 million for the year ended December 31, 2007. The increased costs were mainly the result of a $275.9 million increase in interconnect costs and $27.8 million increase in line rental costs due to increased traffic volume, and a $9.0 million increase in roaming expenses mainly due to an increase in both the number of subscribers and volume of network traffic. Interconnect expenses increased to $1,042.9 million, or 13.3% of segment total revenues, in the year ended December 31, 2008 from $767.0 million, or 12.4% of segment total revenues, in the year ended December 31, 2007 mainly due to the growth in outgoing network traffic. The cost of value-added services for the year ended December 31, 2008 increased by $58.3 million to $199.9 million, or 2.5% of segment total revenues, from $141.6 million, or 2.3% of segment total revenues, in the year ended December 31, 2007 mainly due to the increased usage of value-added services by subscribers, which resulted from our marketing efforts and the rising awareness and popularity of certain value-added services. Cost of handsets, accessories and SIM-cards increased slightly by $3.6 million to $105.6 million, or 1.3% of segment total revenues, for the year ended December 31, 2008 from $102.0 million, or 1.7% of segment total revenues, for the year ended December 31, 2007 due to the launch of iPhone 3G™ sales in October 2008.

Ukraine revenues increased by 3.4% to $1,662.0 million in the year ended December 31, 2008 from $1,608.0 million in the year ended December 31, 2007 primarily due to an increase in the usage of value-added services and interconnect revenues, partially offset by a decrease in usage fees due to lower tariffs caused by the highly competitive environment in Ukraine.

Ukraine cost of services and cost of handsets and accessories increased by 18.1% to $511.5 million in the year ended December 31, 2008 from $433.2 million in the year ended December 31, 2007. The growth occurred primarily due to a $43.3 million increase in interconnect expenses, $4.6 million increase in roaming expenses and $20.0 million increase in the cost of value-added services. Interconnect expenses increased to $327.2 million, or 19.7% of segment total revenues, in the year ended December 31, 2008 from $283.9 million, or 17.7% of segment total revenues, in the year ended December 31, 2007 mainly due to the growth in outgoing network traffic. Cost of value-added services increased to $37.5 million, or 2.3% of segment total revenues, in the year ended December 31, 2008 from $17.5 million, or 1.1% of segment total revenues, in the year ended December 31, 2007 mainly due to the growth in value-added services usage. Cost of handsets, accessories and SIM-cards remained stable at $49.6 million, or 3.0% of segment total revenues, in the year ended December 31, 2008 compared to $48.9 million, or 3.1% of segment total revenues, in the year ended December 31, 2007.

Other countries revenues for the year ended December 31, 2008 increased by 61.2% to $779.5 million from $483.5 million for the year ended December 31, 2007. This increase was due primarily to our acquisition of K-Telecom in September 2007, which contributed an additional $190.1 million of growth to other country revenues for the year ended December 31, 2008 as compared to the year ended December 31, 2007. The remaining portion of growth was primarily due to the growth in our subscriber base in Uzbekistan. The growth of revenues in Uzbekistan and Armenia was partially offset by the revenues of MTS-Turkmenistan, which declined significantly due to the change in the official exchange rate of the Turkmenistan manat to the U.S. dollar. On January 1, 2008, the

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Central Bank of Turkmenistan changed the official exchange rate of the Turkmenistan manat to the U.S. dollar from 5,200 to 6,250. On May 1, 2008, another decree was passed by the President of Turkmenistan establishing the official rate at 14,250 manat per one U.S. dollar. As a result, we experienced a significant currency exchange loss when translating the manat revenue of MTS-Turkmenistan to U.S. dollars, our reporting currency.

Other countries cost of services and cost of handsets and accessories for the year ended December 31, 2008 increased by 99.5% to $131.5 million from $65.9 million for the year ended December 31, 2007. The increase occurred primarily due to the acquisition of K-Telecom, which contributed $44.0 million of the increase, as well as a $21.7 million increase in other cost of services and cost of handsets and accessories in Uzbekistan partially offset by the decrease in Turkmenistan due to the reasons described above. The increase in cost of services and cost of handsets and accessories was mainly due to an increase in the number of subscribers and overall traffic growth in those countries' networks.

Sundry operating expenses

Consolidated sundry operating expenses for the year ended December 31, 2008 increased by 27.2% to $1,804.9 million from $1,418.9 million for the year ended December 31, 2007. The increase of $386.0 million in sundry operating expenses was primarily attributable to a general increase in expenses caused by the growth in our operations. In addition, the consolidation of K-Telekom's financial results in 2008 contributed an additional $31.5 million to the growth of consolidated sundry operating expenses for the year ended December 31, 2008. Salary expenses and related social contributions increased by $137.3 million to $700.2 million for the year ended December 31, 2008 from $562.9 million for the year ended December 31, 2007 due to an increase in personnel compensation levels and the number of employees. Rent expenses increased by $50.9 million to $230.3 million for the year ended December 31, 2008 from $179.4 million for the year ended December 31, 2007 due to the increased rent expenses for base station sites and the overall number of sites used. Provision for bad debt also increased by $88.5 million to $147.4 million for the year ended December 31, 2008 from $58.9 million for the year ended December 31, 2007 due to the write-off of a $28.2 million loan given by us to Beta Link, which filed for bankruptcy in March 2009, as well as write-off of certain advances given to dealers. Sundry operating expenses as a percentage of total revenues increased slightly to 17.6% for the year ended December 31, 2008 from 17.2% in the year ended December 31, 2007.

Russia sundry operating expenses for the year ended December 31, 2008 increased by 30.0% to $1,468.4 million from $1,129.9 million for the year ended December 31, 2007. Russia sundry operating expenses as a percentage of segment total revenues increased to 18.7% for the year ended December 31, 2008 from 18.3% for the year ended December 31, 2007. The increase of $338.5 million in absolute terms was mainly attributable to an increase in employee compensation and related social contributions of $112.6 million, an increase of provision for bad debt of $87.4 million due to the reasons described above, as well as a $32.4 million increase in rent expenses and a $49.4 million increase in taxes other than income tax mainly due to the write-off of non-recoverable VAT receivables. The growth in Russia sundry operating expenses was also attributable to a $49.1 million growth in other operating expenses mainly due to an increase in obligatory revenue-based Unified Services Fund contributions, as well as an increase in outsourcing expenses.

Ukraine sundry operating expenses for the year ended December 31, 2008 increased by 9.9% to $200.9 million from $182.8 million for the year ended December 31, 2007. Ukraine sundry operating expenses as a percentage of segment total revenues increased to 12.1% for the year ended December 31, 2008 from 11.4% for the year ended December 31, 2007. The increase in these expenses in absolute terms in the year ended December 31, 2008 was primarily due to a $14.6 million increase in rent expenses and a $15.9 million increase in other operating expenses, partially offset by a decrease of $12.8 million in repair and maintenance costs.

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Other countries sundry operating expenses for the year ended December 31, 2008 increased by 27.7% to $135.6 million from $106.2 million for the year ended December 31, 2007. Other countries sundry operating expenses as a percentage of other countries total revenues decreased to 17.4% for the year ended December 31, 2008 from 22.0% for the year ended December 31, 2007. The increase in these expenses in absolute terms in the year ended December 31, 2008 was primarily due to the consolidation of K-Telekom's financial results starting from September 14, 2007, which contributed an additional $31.5 million to the growth of sundry operating expenses for the year ended December 31, 2008, partially offset by generally lower sundry operating costs in Turkmenistan in 2008. However, the decrease in sundry operating expenses as a percentage of other countries total revenues to 17.4% for the year ended December 31, 2008 as compared to 22.0% for the same period in 2007 was primarily attributable to the relatively low level of taxes other than income tax and state fees contributed by K-Telekom to total sundry operating expenses due to favorable business development conditions in Armenia.

Sales and marketing expenses

Consolidated sales and marketing expenses for the year ended December 31, 2008 increased by 21.9%, or $158.4 million, to $882.5 million from $724.1 million for the year ended December 31, 2007. This growth was due to an increase in commissions payable to dealers and advertising and promotion expenses by $102.7 million and $55.7 million, respectively. The increase in dealer commissions was generally in line with the growth of our subscriber base. The increase in advertising and promotion expenses was primarily attributable to our increased marketing efforts, as well as growth in the cost of advertising on television. Sales and marketing expenses as a percentage of total revenues remained relatively stable at 8.6% for the year ended December 31, 2008 as compared to 8.8% for the year ended December 31, 2007.

Russia sales and marketing expenses for the year ended December 31, 2008 increased by 30.8% to $646.1 million from $494.0 million for the year ended December 31, 2007 due to increases in dealer commission payments and advertising and promotion expenses, as described above. Sales and marketing expenses as a percentage of segment total revenues increased to 8.2% for the year ended December 31, 2008 from 8.0% for the year ended December 31, 2007. Dealer commissions as a percentage of segment total revenues increased to 4.3% for the year ended December 31, 2008 from 3.8% for the year ended December 31, 2007 mainly due to our increased efforts aimed at stimulating the performance and sales of regional dealers. However, advertising and marketing expenses as a percentage of segment total revenues decreased to 3.9% for the year ended December 31, 2008 from 4.1% for the year ended December 31, 2007 due to effective marketing management.

Ukraine sales and marketing expenses for the year ended December 31, 2008 decreased to $190.2 million, or 11.4% of segment total revenues, from $210.3 million, or 13.1% of segment total revenues, for the year ended December 31, 2007. The decrease in sales and marketing expenses in absolute terms and as a percentage of segment total revenues was primarily the result of our effective use of marketing resources.

Other countries sales and marketing expenses for the year ended December 31, 2008 increased by 148.7% to $55.7 million from $22.4 million for the year ended December 31, 2007 due to the expansion of our operations in Uzbekistan and Turkmenistan. A portion of the growth was also attributable to the acquisition of K-Telekom in Armenia, which contributed $16.1 million to the abovementioned growth. In particular, we increased our advertising campaigns in these countries in order to promote our services and, consequently, incurred increased advertising expenses. Dealer commissions also increased due to the growth in our subscriber base in each of these countries. Sales and marketing expenses as a percentage of segment total revenues increased to 7.1% for the year ended December 31, 2008 from 4.6% for the year ended December 31, 2007 due to the foregoing reasons.

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Depreciation and amortization expenses

Consolidated depreciation and amortization of property, network equipment, telephone numbering capacity, license costs and other intangible assets for the year ended December 31, 2008 increased by 30.0% to $1,936.8 million from $1,489.5 million for the year ended December 31, 2007. The increase was mainly attributable to our increased asset base resulting from the continued expansion of our network through buildouts and acquisitions. Depreciation and amortization expenses as a percentage of total revenues increased to 18.9% for the year ended December 31, 2008 from 18.0% for the year ended December 31, 2007 due to reasons described below.

Russia depreciation and amortization for the year ended December 31, 2008 increased by 21.9% to $1,312.4 million from $1,076.6 million for the year ended December 31, 2007 mainly due to significant investments in our fixed and intangible assets related mainly to new telecommunication equipment. Depreciation and amortization expenses as a percentage of segment total revenues decreased to 16.7% for the year ended December 31, 2008 from 17.4% for the year ended December 31, 2007 mainly due to the decrease in license amortization expenses, which are now fully amortized.

Ukraine depreciation and amortization for the year ended December 31, 2008 was $438.0 million, or 26.4% of segment total revenues, and $325.0 million, or 20.2% of segment total revenues, for the year ended December 31, 2007. Growth in depreciation and amortization expense in absolute terms and as a percentage of segment total revenues was mainly due to the accelerated depreciation of certain equipment intended to be withdrawn from operations, as well as the continued buildout of our network in Ukraine.

Other countries depreciation and amortization for the year ended December 31, 2008 increased by 111.8% to $186.4 million from $88.0 million for the year ended December 31, 2007 and increased as a percentage of segment total revenues to 23.9% from 18.2%. Growth in depreciation and amortization expense as a percentage of segment total revenues was primarily attributable to the acquisition of K-Telekom, which contributed $82.9 million to growth in depreciation and amortization expense in 2008 mainly due to the accelerated depreciation of equipment intended to be withdrawn from operations.

Operating Income

Consolidated operating income increased by 17.2% to $3,203.5 million for the year ended December 31, 2008 from $2,733.8 million for the year ended December 31, 2007. Operating income as a percentage of total revenues decreased to 31.3% for the year ended December 31, 2008 compared to 33.1% for the year ended December 31, 2007. The growth of operating income in absolute terms was mainly driven by growth in revenues. The decrease in the operating income margin was primarily due to an increase in depreciation and amortization, provision for bad debt and interconnect expenses as a percentage of total revenues.

Russia operating income for the year ended December 31, 2008 increased by 25.6% to $2,603.8 million from $2,073.5 million for the year ended December 31, 2007. Russia operating income decreased as a percentage of segment revenues to 33.2% for the year ended December 31, 2008 from 33.5% for the year ended December 31, 2007, mainly due to an increase in interconnect and provision for bad debt expenses as a percentage of total revenues, which was partially offset by a decrease in depreciation and amortization expense as a percentage of total revenues.

Ukraine operating income for the year ended December 31, 2008 decreased by 29.7% to $321.3 million from $456.8 million for the year ended December 31, 2007. Ukraine operating income decreased as a percentage of segment revenues to 19.3% for the year ended December 31, 2008 from 28.4% for the year ended December 31, 2007. These decreases were largely due to the increase in depreciation and amortization expenses, the increase in interconnect expenses and cost of value-added services, as well as lower subscriber tariffs driven by the highly competitive environment in Ukraine.

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Other countries operating income for the year ended December 31, 2008 increased by 34.5% to $270.3 million from $201.0 million for the year ended December 31, 2007. The increase in operating income in absolute terms was primarily due to an increase in the number of subscribers in Uzbekistan and Turkmenistan, as well as to our entry into the Armenian market with the acquisition of K-Telecom. Other countries operating income decreased as a percentage of segment revenues to 34.7% for the year ended December 31, 2008 from 41.6% for the year ended December 31, 2007 mainly due to the historically lower gross margin level in Armenia, as discussed above.

Currency exchange and transaction losses

Consolidated currency exchange and transaction losses for the year ended December 31, 2008 were $563.3 million, compared to $163.1 million in gains for the year ended December 31, 2007. We conduct our operations primarily within the Russian Federation, Ukraine, Uzbekistan, Turkmenistan and Armenia, and we are therefore subject to currency fluctuations. Change in currency exchange and transaction losses was mainly attributable to the significant fluctuations of the U.S. dollar and euro versus ruble/hryvnia/som/manat/dram in year ending December 31, 2008 compared to the year 2007. The major portion of the loss was due to the translation effect of our U.S. dollar-denominated debt as of December 31, 2008 due to the significant depreciation of local currencies against the U.S. dollar during the fourth quarter of 2008.

Interest expense

Consolidated interest expense for the year ended December 31, 2008 increased by $18.7 million, or 13.9% to $153.3 million from $134.6 million for the year ended December 31, 2007, primarily as a result of the increase in our total indebtedness during the year 2008.

Equity in net income of associates

Consolidated equity in net income of associates for the year ended December 31, 2008 increased by $3.3 million, or 4.5% to a gain of $76.0 million, compared to a gain of $72.7 million for the year ended December 31, 2007 primarily due to the increase in profit of MTS Belarus for the year ended December 31, 2008 as compared to the year ended December 31, 2007.

Other expenses (income), net

Consolidated other expenses for the year ended December 31, 2008 decreased to $25.3 million, as compared to $44.0 million for the year ended December 31, 2007. The decrease was mainly due to a decrease in the conversion of Turkmenistan manats, which previously originated from the significant difference between the official and commercial exchange rate of the U.S. dollar to the Turkmenistan manat.

Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2008 decreased by 14.6% to $630.6 million from $738.3 million for the year ended December 31, 2007. The effective tax rate decreased to 24.5% in the year ended December 31, 2008 from 26.1% in the year ended December 31, 2007 mainly due to the revaluation of Ukraine tax base and due to the different tax rates in our foreign subsidiaries.

Minority interest

Minority interest for the year ended December 31, 2008 decreased by $9.7 million, or 50.3%, to $9.6 million from $19.3 million for the year ended December 31, 2007 as a result of the increase in our ownership stake in MTS-Uzbekistan in the second half of 2007.

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Net income

Net income for the year ended December 31, 2008 decreased by $141.1 million, or 6.8%, to $1,930.4 million, compared to $2,071.5 million for the year ended December 31, 2007. Net income as a percentage of revenues was 18.8% in the year ended December 31, 2008 and 25.1% in the year ended December 31, 2007. The main reason for the decrease in net income was the effect of foreign currency fluctuations.

Year Ended December 31, 2007 compared to Year Ended December 31, 2006

Revenues and cost of services and cost of handsets and accessories

Consolidated revenues for the year ended December 31, 2007 increased by $1,868.1 million, or 29.3%, to $8,252.4 million from $6,384.3 million for the year ended December 31, 2006. This increase was primarily due to the significant growth in our subscriber base to 81.97 million as of December 31, 2007 from 72.9 million as of December 31, 2006. The growth in our subscriber base was mainly attributable to our sales and marketing efforts and the expansion of our network and the general improvement in economic conditions and disposable income levels in Russia and Ukraine. A portion of revenue growth was also due to the significant increase of the interconnect fees we received for the termination of incoming traffic from other operators, which increased to $1,069.3 million for the year ended December 31, 2007 from $662.8 million for the year ended December 31, 2006. This increase was caused by both the growth of interconnect rates and increased usage of mobile services. The depreciation of the U.S. dollar against the ruble in 2007 also contributed to the growth in our revenues. Revenue growth was also impacted by our acquisition of K-Telekom in September 2007, which contributed $66.5 million to our total revenues for the year ended December 31, 2007.

        For the year ended December 31, 2007, service revenues and connection fees increased by $1,885.5 million, or 30.0%, to $8,172.6 million compared to $6,287.1 million for the year ended December 31, 2006 mainly due to the growth in the number of our subscribers and increase of interconnect fees, as explained above. Revenues from the sales of handsets and accessories decreased by $17.4 million, or 18%, to $79.7 million for the year ended December 31, 2007 compared to $97.2 million for the year ended December 31, 2006, mainly due to decreased selling activity for handsets and accessories for the year ended December 31, 2007.

Consolidated cost of services and cost of handsets and accessories for the year ended December 31, 2007 increased by 31.6% to $1,885.9 million from $1,433.0 million for the year ended December 31, 2006. The increase in costs was primarily attributable to growth of our subscriber base and the consequent growth in traffic related expenses, in particular interconnect costs. For the year ended December 31, 2007, interconnect and line rental expenses grew to $1,181.7 million from $820.0 million for the year ended December 31, 2006 due to increased traffic volume. Roaming expenses also grew to $241.0 million for the year ended December 31, 2007 from $186.5 million for the year ended December 31, 2006. The increase in cost of services for the year ended December 31, 2007 was also due to an increase in the cost of providing value-added services, which amounted to $164.2 million as compared to $120.5 million for the year ended December 31, 2006 due to the increased usage of value-added services by our subscribers. For the year ended December 31, 2007, the cost of handsets and accessories sold, including SIM cards provided to customers, decreased to $158.6 million from $209.3 million for the year ended December 31, 2006 due to a decrease in the number of new subscribers and decreased selling activity for handsets and accessories in 2007 as compared to 2006.

Russia revenues for the year ended December 31, 2007 increased by 32.5% to $6,181.0 million from $4,665.5 million for the year ended December 31, 2006. The increase in Russia revenues was primarily due to growth of our subscriber base in Russia, which increased by 12.1% to 57.4 million as of December 31, 2007 from 51.2 million as of December 31, 2006, as well as growth in interconnect

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revenues and the adoption of new marketing initiatives aimed at stimulating higher usage of mobile and value-added services among our subscribers.

Russia cost of services and cost of handsets and accessories for the year ended December 31, 2007 increased by 36.5% to $1,407.0 million from $1,030.9 million for the year ended December 31, 2006. The increased costs were mainly the result of a $299.1 million increase in interconnect and line rental costs due to increased traffic volume, and a $46.3 million increase in roaming expenses mainly due to an increase in the number of subscribers. The cost of value added services for the year ended December 31, 2007 increased by $34.7 million to $141.6 million from $106.9 million for the year ended December 31, 2006, mainly due to the increased usage of value-added services by subscribers, which resulted from our marketing efforts and the rising awareness and popularity of certain value-added services. Cost of handsets, accessories and SIM-cards decreased to $102.0 million, or 1.7% of segment total revenues, for the year ended December 31, 2007 from $135.7 million, or 2.9% of segment total revenues, for the year ended December 31, 2006 due to a decrease in the number of new subscribers and our decreased selling activity for handsets and accessories in 2007 as compared to 2006.

Ukraine revenues increased by 7.9% to $1,608.0 million in the year ended December 31, 2007 from $1,490.3 million in the year ended December 31, 2006 primarily due to an increase in usage.

Ukraine cost of services and cost of handsets and accessories for the years ended December 31, 2007 and 2006 amounted to $433.2 million and $387.0 million, respectively. The growth occurred primarily due to an increase of $39.8 million in interconnect and line rental expenses, which was partly offset by a $21.4 million decrease in cost of handsets and accessories. Interconnect and line rental expenses increased to $286.9 million, or 17.8% of segment total revenues, in the year ended December 31, 2007 from $247.0 million, or 16.6% of segment total revenues, in the year ended December 31, 2006 mainly due to an increase in the number of leased lines and overall growth in network traffic. Cost of handsets, accessories and SIM-cards decreased to $48.9 million, or 3.0% of segment total revenues, in the year ended December 31, 2007 from $70.3 million, or 4.7% of segment total revenues, in the year ended December 31, 2006 mainly due to a decrease in subsidies on the sales of handsets and accessories.

Other countries revenues for the year ended December 31, 2007 increased by 99.4% to $483.5 million from $242.5 million for the year ended December 31, 2006. This increase was primarily due to the growth of our subscriber base in Uzbekistan and Turkmenistan, which increased by 93.3% from 1.6 million as of December 31, 2006 to 3.2 million as of December 31, 2007 and resulted in a $174.5 million increase in revenues. The growth in other countries revenues was also due to our acquisition of K-Telecom in 2007, which contributed $66.5 million to other countries revenues.

Other countries cost of services and cost of handsets and accessories for the year ended December 31, 2007 increased by 127.0% to $65.9 million from $29.0 million for the year ended December 31, 2006. The increase occurred primarily due to the consolidation of K-Telecom's financial results as of September 14, 2007, which accounted for $13.3 million of the increase, as well as a $10.5 million increase in interconnect and line rental expenses and an $8.9 million increase in the cost of value added services and other costs in Turkmenistan and Uzbekistan. The increase in interconnect and line rental expenses was mainly due to an increase in the number of base stations in use and overall traffic growth in those countries' networks.

Sundry operating expenses

Consolidated sundry operating expenses for the year ended December 31, 2007 increased by 27.4% to $1,418.9 million from $1,113.7 million for the year ended December 31, 2006. The increase of $305.2 million in sundry operating expenses was primarily attributable to a general increase in expenses caused by growth in operations. In addition, the consolidation of K-Telekom's financial results from September 14, 2007 contributed $10.1 million to consolidated sundry operating expenses for the year

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ended December 31, 2007. In the year ended December 31, 2007, salary expenses and related social contributions increased by $132.5 million due to an increase in personnel compensation levels and the number of employees. Rent expenses increased by $56.1 million to $179.4 million for the year ended December 31, 2007 from $123.4 million for the year ended December 31, 2006 due to the increased rent expense for base station sites and the overall number of sites used. Similarly, repair and maintenance expenses increased by $48.7 million to $143.0 million for the year ended December 31, 2007 from $94.2 million for the year ended December 31, 2006 mainly due to an overall increase in the number of base station sites used. Sundry operating expenses as a percentage of total revenues decreased slightly to 17.2% for the year ended December 31, 2007 from 17.4% in the year ended December 31, 2006.

Russia sundry operating expenses for the year ended December 31, 2007 increased by 27.7% to $1,129.9 million from $884.9 million for the year ended December 31, 2006. Russia sundry operating expenses as a percentage of segment total revenues decreased slightly to 18.3% for the year ended December 31, 2007 from 19.0% for the year ended December 31, 2006. The increase of $245.0 million in absolute terms was mainly attributable to an increase in employee compensation and related social contributions of $112.2 million as well as an increase in rent expenses of $42.2 million and a $29.1 million increase in repair and maintenance costs due to the increased rental costs for base station sites and the number of sites used.

Ukraine sundry operating expenses for the year ended December 31, 2007 increased by 14.4% to $182.8 million from $159.7 million for the year ended December 31, 2006. Ukraine sundry operating expenses as a percentage of segment total revenues increased slightly to 11.4% for the year ended December 31, 2007 from 10.7% for the year ended December 31, 2006. The increase in these expenses in absolute terms during 2007 was primarily due to an overall increase in our operational activities in Ukraine as well as an increase in rent and maintenance expenses by $29.5 million resulting from growth in rent and maintenance fees for base station sites and the number of sites used. A portion the of increase was also attributable to a $10.0 million increase in salary expenses and related social contributions due to increased employee headcount in 2007 as compared to 2006.

Other countries sundry operating expenses for the year ended December 31, 2007 increased by 53.8% to $106.2 million from $69.1 million for the year ended December 31, 2006. Other country sundry operating expenses as a percentage of other countries total revenues decreased to 22.0% for the year ended December 31, 2007 from 28.5% for the year ended December 31, 2006. The increase in these expenses in absolute terms during 2007 was primarily due to the consolidation of K-Telekom's financial results starting from September 14, 2007, which contributed an additional $10.1 million to sundry operating expenses for the period ended December 31, 2007. However, the decrease in sundry operating expenses as a percentage of other countries total revenues for the year ended December 31, 2007 as compared to the year ended December 31, 2006 was mainly attributable to the relatively low level of taxes and state fees contributed by K-Telekom to total sundry operating expenses due to favorable business development conditions in Armenia.

Sales and marketing expenses

Consolidated sales and marketing expenses for the year ended December 31, 2007 increased by $116.3 million to $724.1 million from $607.8 million for the year ended December 31, 2006. This growth was due to an increase in commissions payable to dealers and advertising and promotion expenses by $62.8 million and $53.5 million, respectively. The increase in dealers' commissions was generally in line with the growth of our subscriber base. The increase in advertising and promotion expenses was primarily attributable our increased marketing efforts, as well as growth in the cost of advertising on television. Sales and marketing expenses as a percentage of total revenues decreased to 8.8% for the year ended December 31, 2007 from 9.5% for the year ended December 31, 2006, due to the higher level of expenditures in 2006 relating to our re-branding campaign in Russia. See also

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"Item 4. Information on Our Company—B. Business Overview—Sales and Marketing—Sales and Distribution."

Russia sales and marketing expenses for the year ended December 31, 2007 increased by 17.1% to $491.4 million from $419.5 million for the year ended December 31, 2006 due to increases in dealer commission payments and advertising and promotion expenses, as described above. Sales and marketing expenses as a percentage of segment total revenues decreased to 8.0% for the year ended December 31, 2007 from 9.0% for the year ended December 31, 2006 due to the reasons described above.

Ukraine sales and marketing expenses for the year ended December 31, 2007 amounted to $210.3 million, or 13.1% of segment total revenues, and $179.3 million, or 12.0% of segment total revenues, for the year ended December 31, 2006. The increase in sales and marketing expenses was primarily the result of our strategy to maintain our subscriber base notwithstanding an intensely competitive environment. The increase in sales and marketing expenses as a percentage of segment total revenues was caused by an increase in spending on advertising and promotional campaigns in 2007 due to higher media advertising costs as well as the costs incurred in connection with the launch of the MTS brand in Ukraine in 2007.

Other countries sales and marketing expenses for the year ended December 31, 2007 increased by 147.1% to $22.4 million from $9.1 million for the year ended December 31, 2006 due to the expansion of our operations in Uzbekistan and Turkmenistan and acquisition of K-Telekom in Armenia. In particular, we increased our advertising campaigns in these countries in order to promote our services and, consequently, incurred increased advertising expenses. Dealer commissions also increased due to the growth in our subscriber base in each of these countries. Sales and marketing expenses as a percentage of segment total revenues increased to 4.6% for the year ended December 31, 2007 from 3.7% for the year ended December 31, 2006 due to the foregoing reasons.

Depreciation and amortization expenses

Consolidated depreciation and amortization of property, network equipment, telephone numbering capacity, license costs and other intangible assets for the year ended December 31, 2007 increased by 35.9% to $1,489.6 million from $1,096.0 million for the year ended December 31, 2006. The increase was attributable to the increased asset base resulting from the continued expansion of our network through buildouts and acquisitions. Depreciation and amortization expenses as a percentage of total revenues slightly increased to 18.1% for the year ended December 31, 2007 from 17.2% for the year ended December 31, 2006 mainly due to our network expansion.

Russia depreciation and amortization for the year ended December 31, 2007 increased by 31.4% to $1,076.6 million from $819.3 million for the year ended December 31, 2006 mainly due to significant investments in our fixed and intangible assets related mainly to new telecommunication equipment. Depreciation and amortization expenses as a percentage of segment total revenues slightly decreased to 17.4% for the year ended December 31, 2007 from 17.6% for the year ended December 31, 2006.

Ukraine depreciation and amortization for the year ended December 31, 2007 was $325.0 million, or 20.2% of segment total revenues, and $233.7 million, or 15.7% of segment total revenues, for the year ended December 31, 2006. Growth in depreciation and amortization expense in absolute terms and as a percentage of segment total revenues was mainly due to the continued buildout of our network in Ukraine.

Other countries depreciation and amortization for the year ended December 31, 2007 increased by 105.0% to $88.0 million from $42.9 million for the year ended December 31, 2006 and increased as a percentage of segment total revenues to 18.2% from 17.7%. Growth in depreciation and amortization

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expense in absolute terms and as a percentage of segment total revenues was mainly due to the acquisition of K-Telekom.

Operating Income

Consolidated operating income for the year ended December 31, 2007 increased by 28.1% to $2,733.8 million for the year ended December 31, 2007, from $2,133.7 million for the year ended December 31, 2006. Operating income as a percentage of total revenues decreased slightly to 33.1% for the year ended December 31, 2007 compared to 33.4% for the year ended December 31, 2006. Growth of operating income in absolute terms was mainly driven by growth in revenues. The decrease in the operating income margin was primarily due to an increase in depreciation and amortization expenses, which was partially offset by the slight decrease in sales and marketing and sundry operating expenses as a percentage of total revenues.

Russia operating income for the year ended December 31, 2007 increased by 37.4% to $2,076.1 million from $1,510.9 million for the year ended December 31, 2006 and increased slightly as a percentage of segment revenues to 33.6% for the year ended December 31, 2007 from 32.4% for the year ended December 31, 2006, mainly due to a decrease in sales and marketing, depreciation and amortization and sundry operating expenses as a percentage of total revenues, which was partly offset by slight growth in cost of services and cost of handsets and accessories as a percentage of total revenues.

Ukraine operating income for the year ended December 31, 2007 was $456.8 million, or 28.4% of segment total revenues, and $530.5 million, or 35.6% of segment total revenues, for the year ended December 31, 2006. The decrease in operating margin was largely impacted by an increase in sales and marketing expenses due to intense competitive environment, including in connection with the launch of the MTS brand in Ukraine, as well as the increase in depreciation and amortization expenses as described above.

Other countries operating income for the year ended December 31, 2007 increased by 117.7% to $201.0 million, or 41.6% of segment total revenues, from $92.3 million, or 38.1% of segment revenues, for the year ended December 31, 2006. The increase in operating income was primarily due to an increase in the number of subscribers in Uzbekistan and Turkmenistan, as well our entry into the Armenian market with our acquisition of K-Telecom.

Currency exchange and transaction gains

Consolidated currency exchange and transaction gains for the year ended December 31, 2007 was $163.1 million, compared to $24.1 million for the year ended December 31, 2006. We conduct our operations primarily within the Russian Federation, Ukraine, Uzbekistan, Turkmenistan and Armenia. We are subject to currency fluctuations, including the U.S. dollar and euro versus ruble/hryvnia/som/manat/dram. As of January 1, 2007, we changed our functional currency in Russia from the U.S. dollar to Russian ruble. This change resulted in a significant gain from the revaluation of U.S. dollar-denominated bank loans and bonds issued, which constitute 98% of our total debt. See Note 2 to our audited consolidated financial statements for a detailed discussion of the change in our translation methodology. The U.S. dollar exchange rate vs. the ruble decreased by 6% for the period ending December 31, 2007. See also "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

Interest expense

Consolidated interest expense for the year ended December 31, 2007 decreased by $42.6 million, or 24.0% to $134.6 million from $177.1 million for the year ended December 31, 2006, primarily as the result of a decrease in the interest rates of our floating rate debt linked to LIBOR and EURIBOR.

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Equity in net income of associates

Consolidated equity in net income of associates for the year ended December 31, 2007 increased by $14.6 million, or 25.1% to a gain of $72.7 million, compared to a gain of $58.1 million for the year ended December 31, 2006 primarily due to the growth in profit of MTS Belarus.

Bitel investment and write off

        As of December 31, 2006, the investment in Bitel in the amount of $150.0 million was fully impaired. Furthermore, with the impairment of the underlying asset, a liability of $170.0 million for an expired put option was recorded with an associated charge to non-operating expenses. See Note 21 to our audited consolidated financial statements for details.

Other expenses (income), net

Consolidated other expenses for the year ended December 31, 2007 decreased to $44.0 million, as compared to $65.9 million for the year ended December 31, 2006. The decrease was attributable to a decrease in certain other expenses including expenses related to the Bitel investment and conversion of Turkmenistan manats, the latter of which originated due to the significant difference between the official and commercial exchange rate of U.S. dollar to Turkmenistan manat, and others.

Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2007 increased by 28.2% to $738.3 million from $576.1 million for the year ended December 31, 2006. The effective tax rate decreased to 26.1% in the year ended December 31, 2007 from 34.6% in the year ended December 31, 2006 mainly as a result of the Bitel investment write-off and accrual of additional Bitel liability in the year ended December 31, 2006, which would not be deductible for income tax purposes in the event that we would have to pay the amount, as well as an increase in various expenses taxable for purposes of our statutory accounts for the year ended December 31, 2007.

Minority interest

Minority interest for the year ended December 31, 2007 increased by $5.3 million, or 37.7% to $19.3 million from $14.0 million for the year ended December 31, 2006 as a result of the acquisition of K-Telekom, which has a 20% remaining minority as of December 31, 2007.

Net income

Net income for the year ended December 31, 2007 increased by $995.8 million, or 92.6%, to $2,071.5 million, compared to $1,075.7 million for the year ended December 31, 2006. Net income as a percentage of revenues was 25.1% in the year ended December 31, 2007 and 16.8% in the year ended December 31, 2006. The main reason for the increase in net income was overall growth in our operations and other factors discussed above, as well as the write off of the Bitel investment and accrual of additional liability, which impacted our net income in 2006.

Liquidity and Capital Resources

        In July 2000, we completed our initial public offering of American Depositary Shares on the New York Stock Exchange. The proceeds from the offering, net of underwriting discount, were $349 million. Since that time, we have accessed the international capital markets through the sale of unsecured notes six times in an aggregate principal amount of $1.8 billion. In addition, in April 2006, we entered into a syndicated $1.33 billion loan facility with several international financial institutions, including The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen

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Bank Oesterreich AG and Sumitomo Mitsui Banking Corporation Europe Limited. In 2008, we issued three ruble-denominated bonds in the amount of 10 billion rubles each (equivalent in aggregate to $779.1 million as of December 31, 2008; RUR5 billion were purchased in the initial placement by our wholly-owned subsidiary). We also entered into euro- and U.S. dollar-denominated loan agreements with various banks in 2008 for aggregate borrowings equivalent to $1,010.9 million as of December 31, 2008. The total amount available to us under our credit facilities amounted to $111.3 million as of December 31, 2008; an additional $317.4 million became available to us from March 1, 2009. As of December 31, 2008, we had total indebtedness of approximately $4.1 billion, including capital lease obligations. See Note 11 to our audited consolidated financial statements for a description of our indebtedness.

Global Economic Conditions

        Recent global market and economic conditions have been unprecedented and challenging, with tighter credit conditions and recession in most major economies continuing into 2009. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. These factors have lead to a decrease in spending by businesses and consumers alike. Continued turbulence in the Russian, U.S. and international markets and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs. See also Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—We may be adversely affected by the current economic environment" and "—Continued turmoil in the credit markets could cause our business, financial condition, results of operations and the price of our shares and ADSs to suffer."

Capital Requirements

        We need capital to finance the following:

•

capital expenditures, consisting of purchases of property, plant and equipment and intangible assets;

•

acquisitions;

•

repayment of debt;

•

changes in working capital; and

•

general corporate activities, including dividends.

        We anticipate that capital expenditures, acquisitions, repayment of long-term debt and dividends will represent the most significant uses of funds for several years to come.

        Our cash outlays for capital expenditures in 2006, 2007 and 2008 were $1,722.0 million, $1,539.5 million and $2,227.3 million, respectively. We expect to continue to finance most of our capital expenditure needs through our operating cash flows, and to the extent required, to incur additional indebtedness through borrowings or additional capital raising activities. Historically, a significant portion of our capital expenditures have been related to the installation and buildout of our network and expansion into new license areas. We expect that capital expenditures will remain a large portion of our cash outflows in connection with the continued installation and buildout of our network. We expect our total capital expenditures in 2009 to be approximately $1,500.0 million. These investments are required to support the growth in our subscriber base (i.e., to improve network capacity), to develop

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our network in the regions and to continue to buildout our 3G network. We expect to incur significant capital expenditures and devote considerable management resources in connection with the development of our 3G network. See "Item 4. Information on Our Company—B. Business Overview—Services Offered—3G Technology" for additional information. Our actual capital expenditures may vary significantly from our estimates.

        In addition to capital expenditures, we spent $38.2 million, $873.1 million and $35.1 million (net of cash acquired) in 2006, 2007 and 2008, respectively, to acquire businesses. We used cash provided by operating activities as well as external credit facilities to finance our capital expenditures and acquisitions. We plan to finance future acquisitions through operating cash flows and additional borrowings. We may continue to expand our business through acquisitions. Our cash requirements relating to potential acquisitions can vary significantly based on market opportunities.

        We expect to refinance our existing debt when it becomes due. Of our notes outstanding as of December 31, 2008, $1,179.1 million are due in 2010 and $399.5 million are due in 2012. Of our bank loans outstanding as of December 31, 2008, $1,181.0 million is due in 2009, $518.6 million is due in 2010 and $398.2 million is due in 2011. We generally use the proceeds from our financing activity for our corporate purposes and refinancing existing indebtedness.

        Sistema, which currently controls 52.8% of our total charter capital (55.7% excluding treasury shares) and consolidates our results in its financial statements, has a significant amount of outstanding debt and requires funds for debt service. These funds may come, in part, from dividends paid by its subsidiaries, including us. In June 2006, our shareholders approved annual cash dividends in the amount of $562.0 million (including dividends on treasury shares of $1.5 million) for the year 2005, which have been fully paid. On June 29, 2007, our shareholders approved cash dividends in the amount of $747.2 million (including dividends on treasury shares of $6.0 million) for the year 2006, which have been fully paid. On June 27, 2008, our shareholders approved cash dividends in the amount $1,257.5 million (including dividends on treasury shares of $36.5 million), of which $0.6 million remained payable as of December 31, 2008.

        We generally intend to finance our dividend requirements through operating cash flows, and accordingly, our payment of dividends may make us more reliant on external sources of capital to finance our capital expenditures and acquisitions.

Capital Resources

        We plan to finance our capital requirements through a mix of operating cash flows and financing activities, as described above. Our major sources of cash have been cash provided by operations and the proceeds of our U.S. dollar-denominated and ruble-denominated note issuances and loans. We expect that these sources will continue to be our principal sources of cash in the future.

        The availability of financing is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, contractual restrictions and market conditions. We cannot assure you that we will be able to continue to obtain large amounts of financing in the future through debt or equity offerings, bank financings or otherwise.

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        At December 31, 2008, our indebtedness was comprised of the following:

Indebtedness	Currency	Annual interest rate (actual rate at December 31, 2008)	Amount
			(in thousands)
8.38% notes due 2010	USD	8.38%		400,000
8.70% notes due 2018(1)	RUR	8.70%		268,533
14.01% notes due 2013(1)	RUR	14.01%		255,272
14.01% notes due 2015(1)	RUR	14.01%		255,272
8.00% notes due 2012	USD	8.00%		399,463
8.70% notes due 2009 classified as bank loan	RUR	8.70%		23,142
ING Bank N.V., The Bank of Tokyo-Mitsubishi, Bayerische Landesbank, HSBC, Raiffeisen, Sumitomo	USD	LIBOR 6m+0.8%-1.5% (2.55%-2.75%)		1,168,462
HSBC Bank plc and ING BHF-Bank AG	USD	LIBOR 6m+0.43% (2.05%)		110,727
Citibank International plc and ING Bank N.V.	USD	LIBOR 6m+0.30% (2.18%)		106,360
EBRD	USD	LIBOR 6m+1.51%-3.10% (3.26%-4.85%)		183,337
Skandinaviska Enskilda Banken AB	USD	LIBOR 6m+0.23% (1,98%)		159,048
Gazprombank	EUR	12% + 2% commission		423,150
Commerzbank AG, ING Bank AG and HSBC Bank plc	USD	LIBOR 6m+0.30% (2.05%)		81,345
ABN AMRO N.V.	USD/EUR	LIBOR 6m/EURIBOR 6m+0.35% (2.10 - 3.35%)		55,840
Barclays Bank plc	USD	LIBOR 6m+0.13-0.15 (1.88-1.90%)		72,358
HSBC Bank plc, ING Bank AG and Bayerische Landesbank	USD	LIBOR 6m+0.30% (4.28%)		92,787
ING BHF Bank and Commerzbank AG	EUR	EURIBOR 6m+0.65% (3.35%)		7,357
Commerzbank Belgium S.A./N.V.	USD	LIBOR 6m + 0.4% (2.15%)		7,017
Other debt	RUR	various		65
Total debt				4,069,535
Less current portion				1,181,039
Total long-term debt				2,888,496

(1)

MTS has an unconditional obligation to repurchase the notes at par value if claimed by the holders of the notes subsequent to the announcement of the sequential coupon on June 22, 2010. See also Note 11 to our audited consolidated financial statements for details.

        The following table presents aggregate scheduled maturities of debt principal outstanding as of December 31, 2008:

	Notes		Bank Loans
	(in thousands)
Payments due in the year ended December 31,
2009	$	—	$	1,181,039
2010		1,179,077		518,637
2011		—		398,163
2012		399,463		149,421
2013		—		146,786
Thereafter		—		96,949
Total	$	1,578,540	$	2,490,995

        In addition, we had capital lease obligations in the amount of $5.1 million and $5.7 million as of December 31, 2007 and December 31, 2008, respectively. The terms of our material debt obligations are described in Note 11 to our audited consolidated financial statements.

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        The indentures relating to our outstanding notes contain covenants limiting our ability to incur debt, create liens on our properties and enter into sale and lease-back transactions. The indentures also contain covenants limiting our ability to merge or consolidate with another person or convey our properties and assets to another person, as well as our ability to sell or transfer any of our or our subsidiaries' GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas. Some of our loan agreements contain similar and other covenants.

        In addition, Sistema, which currently controls 52.8% of our total charter capital (55.7% excluding treasury shares) and consolidates our results in its financial statements, is subject to various covenants in the indentures relating to its notes and in certain of its credit facilities which impose restrictions on Sistema and its restricted subsidiaries, including us, with respect to, among others, incurrence of indebtedness and liens. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—Indentures relating to our notes and our controlling shareholder Sistema's notes contain, and some of our loan agreements and Sistema's loan agreements contain, restrictive covenants, which limit our ability to incur debt and to engage in various activities."

        A summary of our cash flows and cash outlays for capital expenditures and acquisitions of subsidiaries follows:

	Years Ended December 31,
	2006			2007			2008
Cash flows:
Net cash provided by operating activities	$	2,378,916		$	3,350,156		$	4,423,385
Net cash used in investing activities		(1,779,562	)		(2,343,881	)		(2,335,185	)
Net cash provided by/(used in) financing activities		(464,066	)		(692,894	)		(1,374,294	)
Net increase in cash	$	141,705		$	414,509		$	424,304
Cash outlays for:
Capital expenditures(1)	$	(1,721,968	)	$	(1,539,528	)	$	(2,227,290	)
Acquisition of subsidiaries, net of cash acquired	$	(38,188	)	$	(873,071	)	$	(35,111	)

(1)

Includes acquisitions of property, plant and equipment and intangible assets.

        For the year ended December 31, 2008, net cash provided by operating activities was $4,423.4 million, an increase of 32.0% from the year ended December 31, 2007. This increase was primarily attributable to a growth in total revenues due to an increase in the volume of our operations, which was primarily the result of growth in our subscriber base and increased usage of mobile services by our subscribers. During the year ended December 31, 2008, we recorded a positive free cash flow of $2,147.7 million, which is calculated by us as net cash provided by operating activities less capital expenditures, investments and acquisition of subsidiaries.

        Net cash used in investing activities in the year ended December 31, 2008 was $2,335.2 million, a decrease of 0.4% from the year ended December 31, 2007. The decrease was mainly due to decreases in our acquisition activity and in our purchase of short-term investments, offset by an increase in cash spent on the acquisitions of property, plant and equipment and intangible assets, which increased to $2,227.3 million for the year ended December 31, 2008 from $1,539.5 million for the year ended December 31, 2007 due to the continued development of our mobile and 3G networks.

        Net cash used in financing activities in the year ended December 31, 2008 was $1,374.3 million, compared to $692.9 million used in the year ended December 31, 2007, an increase of 98.3%. The increase was mainly due to the repayment of note and loan principal, repurchase of our common stock and payment of dividends, which was partially offset by proceeds from loans and the issuance of notes.

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        For the year ended December 31, 2007, net cash provided by operating activities was $3,350.2 million, an increase of 40.8% from the year ended December 31, 2006. This increase was primarily attributable to a growth in total revenues and operating income due to an increase in our subscriber base. During the year ended December 31, 2007, we recorded a positive free cash flow of $964.4 million, which is calculated by us as net cash provided by operating activities less capital expenditures, investments and acquisition of subsidiaries.

        Net cash used in investing activities in the year ended December 31, 2007 was $2,343.9 million, an increase of 31.7% from the year ended December 31, 2006. This increase is mainly the result of an increase in cash spent on the acquisition of subsidiaries, from $38.2 million for the year ended December 31, 2006 to $873.1 million for the year ended December 31, 2007. Cash spent on the acquisitions of property, plant and equipment and intangible assets for the year ended December 31, 2007 decreased as compared to the year ended December 31, 2006 to $1,539.5 million from $1,722.0 million due to broader expansion of our operations and consequent network construction in the prior period.

        Net cash used in financing activities in the year ended December 31, 2007 was $692.9 million, compared to $464.1 million used in the year ended December 31, 2006. The main reason for the increase in cash used in financing activities is that we paid dividends in the total amount of $756.9 million in 2007 as compared to $558.8 million paid in 2006.

Liquidity

        As of December 31, 2008, we had total cash and cash equivalents of $1,058.8 million ($232.9 million in rubles, $95.8 million in U.S. dollars, $428.8 in euro, $3.4 million in Ukrainian hryvnias, $287.3 million in Uzbek soms, $1.5 million in Turkmenistan manat and $9.1 in Armenian dramas). In addition, as of December 31, 2008 and 2007, we had short-term investments of $45.7 million and $15.8 million, respectively, mostly in U.S. dollar-denominated instruments at the Moscow Bank of Reconstruction and Development (MBRD), a related party. As of December 31, 2008, we had $111.3 million available under an outstanding credit facility, an additional $317.4 million became available to us from March 1, 2009. For a description of our outstanding external financing, see Note 11 to our audited consolidated financial statements.

        As of December 31, 2008, we had a working capital deficit of $938.4 million compared to a deficit of $664.8 million as of December 31, 2007. The increase in working capital deficit was mainly attributable to an increase in the current portion of our debt, and an increase in trade payables, partially offset by an increase in our cash and cash equivalents balance as of December 31, 2008.

        We expect to repay all long-term debts as they become due from our operating cash flows or through re-financings. We believe that our working capital together with our plans for external financing will provide us with sufficient funds for our present requirements.

        As most of our operating subsidiaries are incorporated in Russia, their ability to pay dividends to us is limited by provisions of Russian law. For example, Russian law requires that, among other things, dividends can only be paid in an amount not exceeding net profits as determined under Russian accounting standards, denominated in rubles, after certain deductions. In addition, dividends may only be paid if the value of the company's net assets is not less than the sum of the company's charter capital, the company's reserve fund and the difference between the liquidation value and the par value of the issued and outstanding preferred stock of the company, if any, as determined under Russian accounting standards. Our net income under Russian accounting standards for the years ended December 31, 2006, 2007 and 2008 that was distributable under Russian legislation amounted to $1,181.0 million, $1,473.8 million and $1,631.6 million (unaudited), respectively.

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Credit Rating Discussion

        Our credit ratings impact our ability to obtain short- and long-term financing, and the cost of such financing. In determining our credit ratings, the rating agencies consider a number of factors, including our operating cash flows, total debt outstanding, commitments, interest requirements, liquidity needs and availability of liquidity. Other factors considered may include our business strategy, the condition of our industry and our position within the industry and the strategy, activity and/or credit rating of Sistema. Although we understand that these and other factors are among those considered by the rating agencies, each agency might calculate and weigh each factor differently. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Our controlling shareholder has the ability to take actions that may conflict with the interests of holders of the ADSs."

        Our credit ratings as of the date of this document are as follows:

Rating Agency	Long-Term Debt Rating	Outlook/Watch
Moody's(1)	Ba2	Stable
Standard & Poor's(2)	BB	Negative
Fitch(3)	BB+	Negative

(1)

Rated on April 2, 2009.



(2)

Rated on April 1, 2009, CreditWatch



(3)

Rated on March 31, 2009, RatingWatch

        As of December 31, 2008, none of our existing indebtedness had any triggers related to our credit ratings.

Critical Accounting Policies and Estimates

        Our significant accounting policies are disclosed in Note 2 to our audited consolidated financial statements. Critical accounting policies are those policies that require the application of management's most challenging, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions. We believe our most critical accounting policies and estimated are those discussed below.

Management estimates

        The preparation of our audited consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. Our significant estimates include the recoverability of intangible assets and other long-lived assets.

Useful Lives of Property Plant and Equipment

        We calculate depreciation expense for property, plant and equipment on a straight-line basis over their estimated useful lives. We establish useful lives for each category of property, plant and equipment based on our assessment of the use of the assets and anticipated technology evolution. We review and revise if appropriate the assumptions used in the determination of useful lives of property, plant and equipment at least on an annual basis. With regard to certain equipment, we cannot predict with certainty the how and when developing technology will require us to replace such equipment.

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Impairment of Long-lived Assets

        We periodically evaluate the recoverability of the carrying amount of our long-lived assets in accordance with Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable, we compare undiscounted net cash flows estimated to be generated by those assets to the carrying amount of those assets. When these undiscounted cash flows are less than the carrying amounts of the assets, we record impairment losses to write the asset down to fair value, measured by the estimated discounted net future cash flows expected to be generated from the use of the assets. Impairment of long-lived assets amounted to $1.3 million and $10.0 million for the years ended December 31, 2008 and 2007, respectively. See also Note 2 to our audited consolidated financial statements.

Impairment of Assets Held for Sale

        We account for our existing assets held for sale in accordance with the provisions of SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" and report the assets at the lower of its carrying amount or fair value less costs to sell. If the initial plan for sale of assets is reconsidered, we determine the fair value of assets held for sale using the discounted cash flow based on the expected timing of the sale. As a result of such reconsideration, the impairment loss on assets held for sale for the year ended December 31, 2007 was recognized in the amount of $6.8 million. No impairment loss was recorded during the year ended December 31, 2008. See also Note 2 to our audited consolidated financial statements.

Impairment of Goodwill

        Goodwill represents an excess of the cost of a business acquired over the fair market value of identifiable net assets at the date of acquisition. Goodwill is reviewed for impairment at least annually or whenever it is determined that one or more impairment indicators exist. We determine whether impairment has occurred by assigning goodwill to the reporting unit identified in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets," and comparing the carrying amount of the reporting unit to the fair value of the reporting unit. If an impairment of goodwill has occurred, we recognize a loss for the difference between the carrying amount and the implied fair value of goodwill. To date, no impairment of goodwill has occurred.

Taxation

        Generally, tax declarations remain open and subject to inspection for a period of three years following the tax year. While most of our tax declarations have been inspected without significant penalties, these inspections do not eliminate the possibility of re-inspection.

        We believe that we have adequately provided for tax liabilities in our financial statements; however, the risk remains that relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant. See Note 21 to our audited consolidated financial statements.

        We recognize deferred tax assets and liabilities for the expected future tax consequences of existing differences between financial reporting and tax reporting bases of assets and liabilities, and for the loss or tax credit carry-forwards using enacted tax rates expected to be in effect at the time these differences are realized. We record valuation allowances for deferred tax assets when it is likely that these assets will not be realized.

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New Accounting Pronouncements

        In September 2006, the FASB issued FASB Statement No. 157, "Fair value measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements of fair value measurement. SFAS No. 157 is applicable to other accounting pronouncements that require or permit fair value measurement, and accordingly, does not require any fair value measurement. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 as of January 1, 2008. The adoption of SFAS No. 157 did not have a material impact on our financial position, results of operations and cash flows.

        In February 2007, the FASB issued FASB Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities"—including an amendment of FASB Statement No. 115" ("SFAS No.159"), which permits an entity to measure certain financial assets and financial liabilities at fair value. SFAS No. 159 offers an irrevocable option to carry the vast majority of financial assets and liabilities at fair value, with changes in fair value recorded in earnings (the fair value option, or FVO). The Statement's objective is to improve financial reporting by allowing entities to mitigate volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting provisions. SFAS No.159 is effective as of the beginning of an entity's first fiscal year beginning after November 15, 2007. We do not expect that the adoption of SFAS No. 159 will have a material impact on the consolidated financial statements.

        In December 2007, the FASB issued FAS No. 141R, "Business Combinations" ("SFAS No. 141R"), and FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS No. 160"). These statements substantially elevate the role played by fair value and dramatically change the way companies account for business combinations and noncontrolling interests (minority interests in current GAAP). SFAS No. 141R and SFAS No.160 will require among other changes: (a) more assets acquired and liabilities assumed to be measured at fair value as of the acquisition date; (b) liabilities related to contingent consideration to be re-measured at fair value in each subsequent reporting period; (c) an acquirer to expense acquisition-related costs; and (d) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity. Both Statements are to be applied prospectively (with one exception related to income taxes) for fiscal years beginning on or after December 15, 2008. However, SFAS No.160 requires entities to apply the presentation and disclosure requirements retrospectively (e.g., by reclassifying noncontrolling interests to appear in equity) to comparative financial statements, if presented. Both standards prohibit early adoption. We are currently evaluating the impact the adoption of SFAS No. 141R and SFAS No. 160 may have on our financial position and results of operations.

        In connection with the issuance of SFAS No. 160, the SEC revised EITF Topic D-98 "Classification and Measurement of Redeemable Securities" ("Topic D-98") to include the SEC Staff's views regarding the interaction between Topic D-98 and SFAS No. 160. The revised Topic D-98 indicates that the classification, measurement, and earnings-per-share guidance required by Topic D-98 applies to noncontrolling interests (e.g., when the noncontrolling interest is redeemable at a fixed price by the holder or upon the occurrence of an event that is not solely within the control of the issuer). This includes noncontrolling interests redeemable at fair value. The revisions to Topic D-98 that are specific to accounting for noncontrolling interests should be applied no later than the effective date of SFAS No. 160. We are currently evaluating the impact that adoption of SFAS No. 160 and Topic D-98 will have on the accounting and disclosure of our minority interest.

        In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and

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cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 161 on our financial position, results of operations and cash flows.

        In April 2008, the FASB issued Staff Position (FSP) No. FAS 142-3, "Determination of the Useful Life of Intangible Assets." The FSP amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142 "Goodwill and Other Intangible Assets." The FSP affects entities with recognized intangible assets and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets and (2) both intangible assets acquired in business combinations and asset acquisitions. We are currently evaluating the impact that adoption of the FSP will have on our financial position, results of operations and cash flows.

        In November 2008, the FASB issued EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations" ("EITF Issue No. 08-6"). EITF Issue No. 08-6 considers the effects of the issuances of SFAS No. 141R and SFAS No. 160 on an entity's application of the equity method under Opinion 18, "The Equity Method of Accounting for Investments in Common Stock," i.e. determination of the initial carrying value of an equity-method investment, impairment assessment of an underlying indefinite-lived intangible asset of an equity-method investment, accounting for issuance of shares by an equity investee, and accounting for a change in an investment from the equity method to the cost method. EITF No. 08-6 is effective for transactions occurring in fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. Early adoption is not permitted. We do not expect the adoption of EITF No. 08-6 to have a significant impact on our financial position, results of operations and cash flows.

        In November 2008, the FASB issued EITF Issue No. 08-7, "Accounting for Defensive Intangible Assets" ("EITF Issue No. 08-7"). EITF Issue No. 08-7 applies to all acquired intangible assets in situations in which an entity does not intend to actively use the asset but intends to hold (lock up) the asset to prevent others from obtaining access to the asset (a defensive intangible asset), except for intangible assets that are used in research and development activities. The EITF reached a consensus that a defensive intangible asset should be accounted for as a separate unit of accounting and should be assigned a useful life that reflects the entity's consumption of the expected benefits related to the asset, noting that it would be rare for a defensive intangible asset to have an indefinite life. This EITF Issue No. 08-7 is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We expect EITF Issue No. 08-7 will have an impact on our accounting for future acquisitions of intangible assets once adopted, but the materiality of this impact will depend upon the type of acquisitions we make.

Trend Information

Sales

        In 2008, our consolidated revenues increased by 24.2% from $8,252.4 million to $10,425.3 million. Our subscriber base increased to 91.3 million subscribers as of December 31, 2008 from 82.0 million as of December 31, 2007, or by 11.4%. We expect our consolidated subscriber base to continue growing in 2009 as a result of attractive market offers and continued marketing and advertising campaigns, which may be partially offset by the overall decrease in economic activity in Russia due to the current macroeconomic environment. We expect our consolidate revenues to remain stable or decline in 2009 mainly due to significant depreciation of local currencies and the overall lower consumption.

        Average monthly service revenue per subscriber in Russia increased to $10.5 for the year ended December 31, 2008 from $9.3 for the year ended December 31, 2007. We consider this growth to be in line with our sales and marketing efforts aimed at stimulating usage, including the introduction of

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various new tariff plans, and an increase in the use of value added services. Average monthly minutes of use per subscriber in Russia increased from 157 minutes in 2007 and to 208 minutes in 2008 mainly due to marketing campaigns and tariff promotions aimed at stimulating increased traffic. We expect average monthly service revenue per subscriber in Russia to decrease in 2009 in ruble terms mainly due to the impact of the economic slowdown, which may result in subscribers' migration to cheaper tariffs and a decrease in usage of premium services. Average monthly service revenue per subscriber in Russia is also expected to decrease in U.S. dollar terms as a result of the depreciation of the ruble against the U.S. dollar. We also believe that the growth rate of average monthly minutes of use per subscriber could slow mainly due to the lower consumption by corporate, high-end and mass-market users.

        In Ukraine, our subscriber base decreased to 18.1 million subscribers as of December 31, 2008 from 20.0 million subscribers as of December 31, 2007 amidst an oversaturated Ukrainian market and an intensely competitive environment. In Ukraine, average monthly service revenue per subscriber increased to $7.2 for the year ended December 31, 2008 from $6.6 for the year ended December 31, 2007. The increase was primarily due to our sales and marketing efforts aimed at stimulating usage of services, which was partially offset by competitive pressures on tariff levels. The average monthly minutes of use per subscriber increased from 154 minutes in 2007 to 279 in 2008 due to the introduction of a wide range of attractive tariffs aimed at stimulating traffic, such as inexpensive intra network rates. In 2009, we expect average monthly service revenue per subscriber in Ukraine to slightly decrease both in hryvnia and U.S. dollar terms as a result of the weakening economy in Ukraine and currency devaluation. However, we expect the average monthly minutes of use per subscriber to increase mainly as a result of new tariffs stimulating on-net traffic. We also expect MTS Ukraine's subscriber base to continue to decrease slightly in 2009, reflecting our efforts to optimize our subscriber base within the context of the highly competitive market.

        Our subscriber base in Uzbekistan, Turkmenistan and Armenia grew by 4.1 million to 8.6 million subscribers in 2008, compared to 4.5 million subscribers in 2007. Of these countries, Uzbekistan had the largest subscriber base, with 5.6 million subscribers as of December 31, 2008, as well as the most significant growth, with a 2.8 million increase in its subscriber base in 2008 compared to 2007. We expect that our subscriber base will continue to grow in these countries, which have low penetration rates relative to Russia and Ukraine. However, the rate of growth may be impacted by current macroeconomic volatility and increasingly competitive operating environments. The average monthly service revenue per subscriber in these countries decreased from $9.7 in 2007 to $7.7 in 2008 for Uzbekistan and from $51.9 to $17.1 in Turkmenistan as rising penetration often leads to the addition of lower-value subscribers to the network. The decrease was mainly attributable to a decline in tariffs as well as the continued devaluation of the Turkmenistan manat. We expect the average monthly service revenue per subscriber in these countries to continue declining mainly as a result of devaluation of local currencies, mainly in Uzbekistan and Armenia, and as a result of declining macroeconomic conditions, which may lead to lower consumption, decreasing tariffs, the addition of lower-value mass market subscribers, as well as increasing market penetration and multiple SIM-card usage per person.

        Russia and Ukraine are the two largest markets for us, both in terms of subscribers and revenue. In 2008, the underlying developments within these markets remained generally positive and included high mobile penetration, strong demand for mobile services, generally positive usage trends and increased consumption of data services and VAS. However, these growth factors may be tempered by macroeconomic developments, which began to influence the mobile markets in both of these countries in the second half of the year. These trends included exchange rate volatility in our functional currencies, flat or negative GDP growth trends, higher unemployment and lower consumer spending. The Ukrainian wireless telecommunications market has grown rapidly in recent years, but was severely affected by the economic downturn toward the end of the year. In 2008, the market was characterized by intense competition between four national mobile operators, significant influence of the current economic downturn and drastic local currency depreciation in the fourth quarter of 2008.

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        We expect a challenging operating environment in 2009 due to the current macroeconomic situation, increasing competition and the restructuring of our relationships with independent dealers. The regions in which we operate have experienced a volatile market environment during the latter part of 2008 and continuing into 2009. We also experienced significant exchange rate volatility and depreciation of local currencies in the countries where we operate against the U.S. dollar. This depreciation continued during the first quarter of 2009. The devaluation of local currencies against the U.S. dollar and/or euro may adversely affect our revenues reported in U.S. dollars and increase our costs, including our non-cash foreign exchange loss due to the translation of our U.S. dollar- and euro- denominated debt. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Financial Condition—Ruble depreciation could increase our costs, decrease our cash reserves, or make it more difficult for us to comply with financial ratios and to repay our debts and will affect the value of dividends received by holders of ADSs" and "—Changes in the exchange rate of local currencies in the countries where we operate against the U.S. dollar and/or euro could adversely impact our revenues reported in U.S. dollars and costs in terms of local currencies."

        However, as the macroeconomic situation becomes more stable, our management believes that we will experience medium- and long-term growth and efficiency and that the investments we are making today will provide us with greater revenue growth and value-accretive opportunities in the future. Due to the fact that the Russian and the Ukrainian markets are highly penetrated, the next wave of revenue growth for the overall market is likely to come from customers' increasing use of data, content and other VAS.

Churn

        We define churn as the total number of subscribers who cease to be a subscriber during the period (whether involuntarily due to non-payment or voluntarily), expressed as a percentage of the average number of our subscribers during that period.

        A vast majority of our subscribers are pre-paid subscribers with no contractual commitment to us. As a result, these subscribers have unfettered freedom to migrate between operators at their convenience. This freedom, combined with the relative ease with which subscribers can obtain SIM-cards, contributes to churn and increasing penetration levels in the markets where we operate.

        The churn rate is highly dependent on competition in our license areas and those subscribers who migrate as a result of such competition. We believe that the increase in our churn rate in Russia to 27.0% during the year ended December 31, 2008 as compared to 23.1% for the year ended December 31, 2007 is in line with regular fluctuations in subscriber numbers attributable to the strong competitive environment intensified by increased subscriptions during 2007 and 2008. We do not expect significant fluctuations in our churn rate in Russia in 2009, although we may experience some measure of increased churn due to the ongoing restructuring of our relationships with independent dealers. In addition, due to the financial distress experienced by several handset dealers and dealer networks in Russia, many dealers engaged in higher than average sales efforts in the fourth quarter of 2008 in an effort to stimulate revenue. As a result, we may experience higher churn during the first half of 2009.

        Although the churn rate in Ukraine slightly decreased to 47.3% for the year ended December 31, 2008 from 49.0% for the year ended December 31, 2007, it significantly increased to 49.0% in 2007 as compared to 29.9% in 2006 and remains high. This increase is primarily represented by the churn of prepaid subscribers, which increased from 30% in 2006 to 51% in 2007.

        The substantial increase in the churn of prepaid subscribers was primarily due to the competitive environment among mobile operators in Ukraine, which has significantly intensified in recent years as the market in Ukraine has become more saturated, and has lead to a decrease in our subscriber base in Ukraine as of December 31, 2008 as compared to December 31, 2007. At the same time, the proportion of mass-market subscribers, including youth and low-income segment subscribers whose

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preferences are largely driven by tariff levels and simplified subscription conditions, has grown. As a result, a higher number of mass-market subscribers have migrated over to other operators offering lower tariffs and minimal subscription conditions. We expect churn rate in Ukraine to remain in line with current market competitive environment and our strategy to optimize our subscriber base as discussed above.

Off-balance Sheet Arrangements

        We believe that our existing off-balance sheet arrangements do not have and are not reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Obligations under guarantee contracts

        During the year ended December 31, 2008, we issued a guarantee to a third party bank for a loan taken by TS-Retail, our equity investee, for the total amount of $5.1 million. The amount of the guarantee is subject to vary in the event that any litigation costs or penalties are incurred by the lender in relation to the loan or guarantee. The guarantee expires in June 2012. The fair value of the guarantee was recorded as a liability in the accompanying consolidated balance sheet and amounted to $0.08 million as of December 31, 2008. No collateral was provided against this guarantee; however, a counter-guarantee provided by Sistema would enable us to recover any loss we may incur under the guarantee.

Obligations under derivative contracts

        In July 2006, we acquired a 74.99% controlling stake in Dagtelecom, GSM-900 mobile services provider in the Republic of Dagestan, a region in southern Russia. In conjunction with this acquisition, we entered into a put and call option agreement to buy the remaining stake at fair market value within an exercise period commencing from September 1, 2009 and ending in July 2021 for the put option, and from 2009 to 2010 for the call option. The fair values of the option was $nil at December 31, 2008. In January 2009, we received a put notice from the holder of the minority stake in Dagtelecom and, therefore, subsequently acquired the remaining stake. See Notes 3 and 23 to our audited consolidated financial statements.

        In September 2007, we acquired an 80% stake in International Cell Holding Ltd., a 100% indirect owner of K-Telecom CJSC, a wireless telecommunication operator in Armenia. In connection with this acquisition, we also entered into a call and put option agreement for the remaining 20% stake to be exercised not earlier than July 2010. The exercise price will be determined by an independent investment bank at the date the option is exercised. The option is valid until July 2012. The option was accounted for at fair value, which was $nil at December 31, 2008. See Note 3 to our audited consolidated financial statements.

        In January 2006, we entered into variable-to-fixed interest rate swap agreement with HSBC Bank plc to hedge our exposure to variability of future cash flows caused by the change in EURIBOR related to the syndicated loan. We agreed with HSBC Bank plc to pay a fixed rate of 3.29% and receive a variable interest of EURIBOR on EUR 26.0 million for the period from April 28, 2006 up to October 29, 2013.

        In December 2007, we entered into several variable-to-fixed interest rate swap agreements with HSBC Bank plc, Rabobank, Citibank N.A. and ING Bank N.V. to hedge our exposure to variability of future cash flows caused by the change in LIBOR related to our outstanding debt. We agreed with HSBC Bank plc to pay a fixed rate of 4.14% and receive a variable interest of LIBOR on $96.1 million for the period from March 31, 2008 to September 30, 2014. The agreement with Rabobank was to pay

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a fixed rate of 4.16% and receive a variable interest of LIBOR on $86.1 million for the period from April 9, 2008 to April 9, 2014. We agreed with Citibank N.A. to pay a fixed rate of 4.29% and receive a variable interest of LIBOR on $53.5 million for the period from September 28, 2007 September 30, 2013. Two agreements were signed with ING Bank N.V. Under the first agreement, we will pay to ING Bank N.V. a fixed rate of 4.19% and receive a variable interest of LIBOR on $92.6 million for the period from February 29, 2008 to February 28, 2014. According to the terms of the second agreement, we will pay ING Bank N.V. a fixed rate of 4.41% and receive a variable interest of LIBOR on $67.0 million for the period from July 16, 2007 to January 15, 2014.

        In October 2008, we entered into two interest rate swap agreements with HSBC Bank. We agreed to pay a variable interest of LIBOR and receive a fixed rate of 3.67% on $88.7 million for the period from September 30, 2008 to September 30, 2014. Additionally, we agreed to pay a fixed rate of 3.73% and receive a variable interest of LIBOR on $81.3 million for the period from November 24, 2008 to May 27, 2014.

        As of December 31, 2008, we recorded a liability of $20.9 million in relation to the above hedge contracts in the accompanying consolidated balance sheet and loss of $16.7 million, net of tax of $4.2 million, to other comprehensive income in the accompanying consolidated statement of changes in shareholders equity in relation to the change in fair value of these agreements.

        These instruments qualified as a cash flow hedges under the requirements of SFAS No. 133 as amended by SFAS No. 149. As of December 31, 2008, the outstanding hedges were effective. Approximately $4.3 million of net loss is expected to be reclassified in net income during the next twelve months. See also Note 11 to our audited consolidated financial statements.

        In December 2005, our wholly-owned subsidiary MTS Finance S.A. acquired a 51.0% stake in Tarino Limited (Tarino) from Nomihold Securities Inc. (Nomihold) for $150.0 million in cash based on the belief that Tarino was at that time the indirect owner, through its wholly-owned subsidiaries, of Bitel LLC, a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan. Following the purchase of the 51.0% stake, MTS Finance entered into a put and call option agreement with Nomihold for "Option Shares," representing the remaining 49.0% interest in Tarino shares and a proportional interest in Bitel shares. The call option was exercisable by MTS Finance from November 22, 2005 to November 17, 2006, and the put option was exercisable by Nomihold from November 18, 2006 to December 8, 2006. The call and put option price was $170.0 million. The put and call options were recorded at fair value, which approximated $nil at December 31, 2005 in the consolidated balance sheet. At December 31, 2007 and December 31, 2008, a liability of $170.0 million was recorded in our audited consolidated financial statements in connection with this option. See Note 21 to our audited consolidated financial statements.

Tabular Disclosure of Contractual Obligations

        We have various contractual obligations and commercial commitments to make future payments, including debt agreements, capital lease obligations (including interest) and certain committed

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obligations. The following table summarizes our future obligations under these contracts due by the periods indicated as of December 31, 2008:

	Payments due by period
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Contractual Obligations:(1)
Long-Term Principal Debt Obligations	$	1,181,039	$	2,095,877	$	695,670	$	96,949	$	4,069,535
Interest Payments(2)		310,258		264,976		34,440		2,419		612,093
Capital Lease Obligations		3,029		2,073		907		—		6,009
Operating Lease Obligations		221,865		78,040		28,759		50,898		379,562
Purchase Obligations(3)		433,810		884,220		1,238		—		1,319,268
Uncertain income tax position		8,000		—		—		—		8,000
Total		2,468,502		3,014,685		761,014		150,266		6,394,467

(1)

Debt payments could be accelerated upon violation of covenants in our debt agreements.

(2)

Interest payments are calculated based on indebtedness as of December 31, 2008, scheduled maturities for the debt and interest rates effective as of December 31, 2008.

(3)

Includes future payments under purchase agreements to acquire property, plant and equipment, costs related thereto, inventory and services. The amount also includes (a) our capital commitments of $400.7 million as of December 31, 2008 mainly for acquisition of property, plant and equipment, and intangible assets and (b) our commitments under the agreement with Apple Sales International to buy certain quantities of iPhone handsets over a three-year period (i.e., in the years ended December 31, 2009, 2010 and 2011) for the aggregate amount of $847.9 million (based on list prices as of December 31, 2008). We plan to finance our capital commitments through operating cash flow and additional borrowings.

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Item 6.    Directors, Senior Management and Employees

A.    Directors and Senior Management Key Biographies

        Our directors and executive officers, and their dates of birth and positions as of the date of this document were as follows:

Name	Year of Birth		Position
Vitaliy G. Saveliev		1954	Chairman of the Board, Non-Executive Director
Sergei A. Drozdov		1970	Vice Chairman of the Board, Non-Executive Director
Anton V. Abugov		1976	Non-Executive Director
Alexei N. Buyanov		1969	Non-Executive Director
Daniel E. Crawford(1)(2)		1939	Non-Executive Independent Director
Mohanbir S. Gyani(1)(2)		1951	Non-Executive Independent Director
Paul J. Ostling(1)(2)		1948	Non-Executive Independent Director
Tatiana V. Yevtoushenkova		1976	Non-Executive Director
Mikhail V. Shamolin(3)		1970	Executive Director, President and Chief Executive Officer
Alexey V. Kornya(3)(4)		1975	Acting Vice President—Chief Financial Officer
Dr. Yury A. Gromakov		1946	Vice President—Technology Development
Andrei E. Ushatsky(3)		1974	Vice President—Chief Technology Officer
Valery V. Shorzhin(3)		1963	Director—Information Technology
Andrei B. Terebenin(3)(4)		1962	Vice President—Corporate Communications
Pavel D. Belik(3)		1966	Vice President—Corporate Security
Mikhail Y. Gerchuk(3)		1972	Vice President—Chief Commercial Officer
Alexander V. Popovskiy(3)		1977	General Director—MTS-Russia
Andrey A. Dubovskov(3)		1966	General Director—MTS-Ukraine
Sergey B. Nikonov(3)		1960	Vice President—Human Resources and Administration
Oleg Y. Raspopov(3)		1966	Vice President—Director of MTS Foreign Subsidiaries Business Unit
Dr. Michael Hecker(3)		1970	Vice President—Strategy and Corporate Development
Ruslan S. Ibragimov(3)(4)		1963	Vice President—Chief Legal Officer, Corporate and Legal

(1)

Member of Audit Committee.

(2)

Member of the Remuneration and Appointments Committee.

(3)

Member of Management Board.

(4)

Member of Disclosure Committee.

Vitaliy G. Saveliev has served as Chairman of our Board of Directors since February 2008. Since 2007, Mr. Saveliev has served as First Vice President of Sistema, Head of the Telecommunication Assets Management Division. In addition, Mr. Saveliev serves as Chairman of the Boards of Directors of Comstar UTS, Sky Link, Sistema Mass Media and Shyam Telelink and on the Board of Directors of Scientific and Technical Enterprise Intellect-Telecom, Svyazinvest and MBRD, all of which are Sistema-affiliated companies. Mr. Saveliev served as Deputy Minister of Economic Development and Trade from 2004 to 2007. From 2002 to 2004, he was the Vice President of Gros and Finance and the IT-Technologies Advisor to the General Director of Svyazinvest.

Sergey A. Drozdov has served as Vice Chairman of our Board of Directors since October 3, 2008. He also served as one of our Directors from June 2007 to June 2008. Mr. Drozdov serves on the Board of Directors of Sistema and various Sistema-affiliated companies, including, among others, Reestr, MEDSI, Detsky Mir-Center, Sky Link, VAO Intourist and Sistema Hals. Since April 2005, Mr. Drozdov has served as Senior Vice President and Chief of the 112 Property Department at Sistema. From 2002 to 2005, Mr. Drozdov was a Director and First Vice President of Sistema and, from 1998 to 2002, he

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served as Vice President, Acting President and First Vice President of Sistema-Invest. He also managed the Department of Development and Investments at Sistema from 1995 to 1998.

Anton V. Abugov has served as one of our Directors since June 2008. In addition, Mr. Abugov serves as Chairman of the Boards of Directors of Detsky Mir-Center and RWS and on the boards of directors of other Sistema-affiliated companies, including, among others, Sky Link, VAO Intourist, Binnofarm, Sistema Mass-Media and Sistema-Hals. Since 2006, Mr. Abugov has served as First Vice President and Head of Strategy and Development at Sistema. Between 2003 and 2006, he was Managing Director of AKB Rosbank and head of its Corporate Finance Department. From 1995 to 2002, he worked for the United Financial Group (UFG) in different positions, including head of corporate finance from 1999 to 2002.

Alexei N. Buyanov has served as one of our Directors since June 2003 and served as Chairman of our Board of Directors from June 2007 until February 2008. Mr. Buyanov has served as Senior Vice President of Sistema and Chief of the Finance & Investments Department since April 2005. From 2002 to 2005, he served as First Vice President of Sistema. From 1998 to 2002, he served as our Vice President for Investments and Securities. He also serves on the Board of Directors of various other companies affiliated with Sistema, including Sistema-Telecom, AKB MBRR, Sistema-Hals, Detsky Mir-Center and others.

Daniel E. Crawford has served as one of our Directors since October 3, 2008. Mr. Crawford has served in senior level positions at various telecommunications companies for almost three decades. From 2004 to 2006, he served as International and Wholesale President at MCI. Between 1998 and 2004, Mr. Crawford was the Chairman of the Board of Directors at Embratel Participacoes, the holding company that controls Embratel, Brazil's premier national telecommunications company. He has previously served as the Chairman of the Board of Directors at Star One, Chief Operating Officer and member of the Board of Directors at Avantel, S.A. and President of various divisions at MCI.

Mohanbir S. Gyani has served as one of our Directors since June 2007. Mr. Gyani also serves on the board of directors of Keynote Systems, Safeway, Sirf Technology and Union Banc of California, and is a member of the board of directors of various private firms and not-for-profit organizations. From 2001 to 2003, Mr. Gyani served as a member of the board of directors of the GSM Association and from 2000 to 2003 of the Cellular Telecommunications and Internet Association. He also currently serves as the Vice Chairman of, and was the former Chief Executive Officer and Chairman of the Board of Directors of, Roamware, Inc., a services provider for wireless operators. From 2003 to 2005, Mr. Gyani served as the Senior Advisor to the Chairman and Chief Executive Officer responsible for strategy, business development and operations at AT&T Wireless Group. From 2000 to 2003, he served as the President and Chief Executive Officer of AT&T Wireless Mobile Services and has approximately 30 years of experience in the telecommunications and wireless industry.

Paul J. Ostling has served as one of our Directors since June 2007. Prior to joining us, Mr. Ostling served as the Global Chief Operating Officer at Ernst & Young from 2003 to 2007. From 1977 to 2007, he held a number of positions at Ernst & Young, including Global Executive Partner from 1994 to 2003; Vice Chairman and National Director of Human Resources from 1985 to 1994; and Associate and Assistant General Counsel from 1977 to 1985. Mr. Ostling is the Chief Executive Officer of KUNGUR Oilfield Equipment & Services. In addition, he serves as the Chairman of the Audit Committee of United Services Organization, the Chairman of the Business Council for International Understanding and the Deputy Chairman of the Board of Directors of Cool NRG.

Tatiana V. Yevtoushenkova has served as one of our Directors since June 2007. Ms. Yevtoushenkova currently serves as an Advisor to the President of Sberbank. From September 2007 to August 2008, she also served as an Advisor to our President, and from October 2002 to August 2007, she served as our Vice President—Strategy and Corporate Development. From December 1999 to October 2002, Ms. Yevtoushenkova served as the Director of the Investment Department at Sistema

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Telecom, a subsidiary of Sistema. Prior to joining Sistema Telecom, she worked in the investment banking division of Salomon Smith Barney. Ms. Yevtoushenkova is the daughter of Vladimir P. Yevtoushenkov, the controlling shareholder and Chairman of the Board of Sistema.

Mikhail V. Shamolin has served as our President and Chief Executive Officer since May 30, 2008 and as one of our Directors since October 2008. From August 2006 to May 2008, Mr. Shamolin served as our Vice President—Director of MTS Russia Business Unit. From July 2005 to August 2006, Mr. Shamolin served as our Vice President—Sales and Customer Service. From 2004 to 2005, Mr. Shamolin worked at Interpipe Corp. (Ukraine) as Managing Director of the Ferroalloys Division. From 1998 to 2004, he held various consulting positions at McKinsey & Co. Mr. Shamolin has served on the board of the GSM Association since July 2008.

Alexey V. Kornya has served as our Acting Vice President and Chief Financial Officer since August 21, 2008. From March 2007 he has served as our Chief Financial Controller. He served as our Business Planning Director from October 2004 to March 2007 and as Chief Financial Officer of our Urals macro-region from July 2004 to October 2004.

Dr. Yury A. Gromakov has served as our Vice President—Technology Development since March 2002, and served as our Vice President of Technology and Network Development from 1994 until February 2002. Dr. Gromakov has been involved in mobile communications for over 30 years and holds a doctorate degree in Technical Sciences, the highest scientific degree in Russia, and has been awarded a degree as an Honorable Radio Operator of Russia. He is also a member of the International Academy of the Science of Information and Information Processes and Technologies.

Andrei E. Ushatsky has served as our Vice President—Chief Technology Officer since April 2009. Mr. Ushatsky joined us in 1996 and has served in various technology-related positions, most recently as the Deputy Head of MTS Russia for Technology.

Valery V. Shorzhin has served as our Director—Information Technology since July 2008. Prior to joining us, Mr. Shorzhin held the positions of Technical Director and Director for IT and Information Management of Farlep-Invest in Ukraine from December 2006. From 2003 to 2006, he held various information technology management positions at Sovintel.

Andrei B. Terebenin has served as our Vice President—Corporate Communications since January 2006. Prior to joining us, Mr. Terebenin served as the General Director of R.I.M. Porter Novelli, a leading public relations network agency from 1999 to 2005. From 1991 to 1999, he held various management positions at AIG Russia, Dun & Bradstreet CIS and the financial magazine "Economica & Zhizn".

Pavel D. Belik has served as our Vice President—Corporate Security since October 2005. From February 2005 to October 2005, Mr. Belik served as our Director of Security in the Moscow macro-region. Prior to joining us, Mr. Belik served in the Federal Security Service of the Russian Federation for more than 20 years.

Mikhail Y. Gerchuk has served as our Vice President—Chief Commercial Officer since December 2008. Prior to joining MTS, Mr. Gerchuk was Chief Commercial Officer at Vodafone Malta from 2006 to 2007. He held senior marketing positions at Vodafone Group, UK between 2002 and 2006, including Head of Voice Propositions between 2004 and 2006 and Senior Global Marketing Manager between 2002 and 2004. Mr. Gerchuk also worked as an Associate at Booz Allen Hamilton in London from 1999 to 2002 and, prior to that, as Category Marketing Manager at Pepsi-Cola and Brand Manager at Mars Inc.

Aleksander V. Popovskiy has served as the Director of MTS Russia Business Unit since August 2008. From June 2007 to August 2008, Mr. Popovskiy served as the head of the South macro-region,

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and from July 2004 to June 2007, he served as the head of the Volga North-West macro-region. He joined us in April 2001 as director of operations in the town of Kirov.

Andrey A. Dubovskov has served as the General Director of MTS-Ukraine since January 2008. From March 2006 to December 2007, Mr. Dubovskov served as Director of Ural macro-region. From January 2005 to March 2006, he served as the Director of one of our subsidiaries in Nizhniy Novgorod. Prior to joining us, Mr. Dubovskov served as the General Director of various telecommunications companies from 1998 to 2005.

Sergey B. Nikonov has served as our Vice President—Human Resources and Administration since August 2006. From October 2005 to July 2006, Mr. Nikonov served as Deputy General Director and Administrative Director at Silovye Machiny OJSC. From October 2003 to September 2005, he served as Deputy General Director at ROSNO. Mr. Nikonov served as Deputy Manager of Staff Administration at GazpromBank CJSC from March 2003 to September 2003.

Oleg Y. Raspopov has served as our Vice President—Director of MTS Foreign Subsidiaries Business Unit since May 2007. From June 2006 to May 2007, Mr. Raspopov served as the Head of the Extra Input Management Department. In 2004, he founded and managed the insurance brokerage house Energoprotection. From 2002 to 2004, Mr. Raspopov served as an Advisor to the Chief Financial Officer of RAO UES of Russia and as member of the board of directors of several companies affiliated with RAO UES, such as Ren-TV and LEADER Insurance Co. From 2001 to 2002, he worked as a lawyer at Gazpromenergoservice.

Dr. Michael Hecker has served as our Vice President—Strategy and Corporate Development since April 2008. From January 2007 to April 2008, Dr. Hecker served as our Director for Strategy. From May 2006 to December 2006, he served as the Head of our Strategy Department and the Director for Strategic Projects. Prior to joining us, Dr. Hecker worked at A.T. Kearney Europe from 2000 to 2006 where he held several consulting positions.

Ruslan S. Ibragimov has served as our Vice President—Chief Legal Counsel since January 2008. From February 2007 to January 2008, Mr. Ibragimov served as our Director—Chief Legal Counsel. He joined us in June 2006 and initially served as the Director for legal matters, as well as headed our Legal Department. Prior to joining us, Mr. Ibragimov was a member of the law firm Ibragimov, Kagan and Partners from July 2002 to June 2006. From 1997 to 2002, he served as Deputy Director and Senior Partner at RSM Top-Audit, a tax and legal consulting firm. From 1992 to 1996, Mr. Ibragimov headed legal departments at various commercial banks.

        Our directors were elected at the extraordinary general shareholders' meeting on October 3, 2008 and will serve until their terms expire at the next annual shareholders' meeting, which will take place before June 30, 2009. The business address of each of our directors is 4 Marksistkaya Street, Moscow 109147, Russian Federation.

B.    Compensation of Directors and Senior Management

Executive Compensation

        Our officers and directors were paid during 2008 an aggregate amount of approximately $43.2 million for services in all capacities provided to us; this amount was comprised of $8.6 million in base salary and a $34.6 million bonus paid pursuant to a bonus plan for the management and directors whereby bonuses are awarded annually based on our financial performance.

        Members of the Board of Directors who are not independent directors receive annual compensation of $250,000 (or $275,000 in the case of a director who serves as Chairman of the Board of Directors), provided that we meet certain financial performance targets. In the event of early

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termination of a director who is not an independent director, such director receives a pro rata share of the annual compensation based on the amount of time the director served on our board.

        Members of the Board of Directors who are independent directors receive annual compensation of $250,000 (or $275,000 in the case of an independent director who serves as Chairman of the Board of Directors). Independent directors are also entitled to receive a bonus of up to $200,000 based on our financial performance. In the event of early termination of an independent director, such director may be entitled to receive a pro rata share of the annual compensation and bonus amount based on the amount of time the director served on our board.

        Members of the Audit Committee, Remuneration and Appointments Committee and Budget Committee receive additional annual compensation of $15,000, and a director serving as Chairman of the foregoing committees receives additional annual compensation of $25,000. Members of all other board committees receive additional annual compensation of $5,000 and a director serving as Chairman of any other board committee receives additional annual compensation of $10,000.

        The aggregate amount of compensation received by an independent director (including annual compensation, bonus and an additional compensation for serving as a board committee member) should not exceed $500,000. In the event of early termination of an independent director, the director's aggregate amount of compensation should not exceed the pro rata share of the amount of $500,000 based on the amount of time the director served on our board.

        We provide our directors with professional liability insurance and reimburse them for expenses incurred in connection with their attendance at Board meetings based on actual costs incurred, not to exceed $10,000 per month in the case of directors who are not independent directors. Our independent directors are entitled to full reimbursement of actual costs incurred, provided these are reasonable.

Stock Bonus Plan and Stock Option Plan Established in 2000

        On April 27, 2000, contingent on the closing of our initial public offering, we established a stock bonus plan and stock option plan for selected officers, key employees and key advisors. Under the plans, directors, key employees and key advisors received 3,587,987 shares of our common stock and participate in a stock option plan under which they may receive options to purchase up to an additional 9,966,631 shares of our common stock. At the time of the initial public offering, we issued 13,554,618 shares of common stock to our subsidiary Rosico pursuant to these plans at a price of $1.024 per share for the total amount of $13.9 million. Following the merger of Rosico into us in June 2003, these shares were transferred to our wholly-owned subsidiary, MTS LLC.

        Under the stock option plan, board members and key employees, upon being granted stock options, will have the right to purchase up to 9,966,631 shares of our common stock.

        In August 2005, pursuant to option agreements, we granted options in respect of 699,705 shares of our common stock to our board members and 1,078,989 shares of our common stock to our key employees. These options had an exercise price of $6.89 per share, which represented the 100-day average market price of the shares at the date of grant, and vested 23 months from the date of the grant. The stock option agreement for a board member would have terminated if the board member was terminated as a board member before our 2006 annual shareholders' meeting. The stock option agreement for a key employee terminated for those employees who left us before July 15, 2007.

        In July 2007, board members and key employees purchased a total of 848,126 shares pursuant to the August 2005 option agreements and 968,313 shares were cancelled pursuant to the termination provisions described above.

        In June 2007, pursuant to option agreements, we granted options in respect of 700,000 shares of our common stock to our board members and 1,078,694 shares of our common stock to our key

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employees. These options had an exercise price of $6.31 per share, which represented the 100-day average market price of the shares at the date of grant, and vested in 12 months from the date of the grant. The stock option agreement for a board member would have terminated if the board member was terminated as a board member before our 2008 annual shareholders' meeting. The stock option agreement for a key employee terminated if the employee left us before July 15, 2008.

        In July 2008, board members and key employees purchased a total of 1,397,256 shares pursuant to the June 2007 option agreements.

        Compensation costs under the above stock option plan of $3.1 million, $2.8 million and $1.7 million were recognized in our consolidated statements of operations during the years ended December 31, 2008, 2007 and 2006, respectively.

Employee Motivation and Retention Program Established in 2007

        In June 2007, our board of directors approved an employee motivation and retention program to provide deferred compensation to certain employees. The original program contemplated the award of phantom shares representing up to 3,600,000 ADSs for the program. The program was amended in April 2008 to increase the number of phantom shares available under the program from the initial 3,600,000 to 9,556,716 ADSs as well as to add a stock option component for up to 651,035 of our actual ADSs.

        As amended, the program provides that up to 420 top- and mid-level managers will be eligible to participate in the phantom share program. The phantom shares are expected to be awarded through 2011. Under the amended program, the phantom shares granted in 2008 and thereafter will vest only if, at the end of the vesting period we are among the top 20 mobile operators in the world and the top mobile operator in Russia and CIS, in each case in terms of revenue, and the cumulative percentage of our market capitalization growth since the grant date exceeds the pre-determined threshold of 15%. At the end of the vesting period, participants in the phantom share program will be entitled to a cash payment equal to the difference between the initial grant price and the price of phantom shares determined based on the average market share price during the hundred day period preceding the vesting date, multiplied by the number of phantom shares granted and adjusted by the ratio that reflects the actual market capitalization growth rate. The initial grant price is determined based on the average market ADS price during the hundred day period preceding the grant date.

        The amended program also contains a CEO stock option plan providing for the award to our chief executive officer of stock options for up to 651,035 of our ADSs. The award vesting period is up to two years from the grant date, contingent upon the continued employment of the chief executive officer with us. The award will vest only if, at the end of the vesting period, we are among the top 20 mobile operators in the world and the top mobile operator in Russia and CIS, in each case in terms of revenue, and the cumulative percentage of our market capitalization growth since the grant date exceeds the pre-determined threshold of 15%. The first tranch of 390,621 ADSs was granted in May 1, 2008 and then forfeited due to the resignation of the chief executive officer in May 29, 2008. The second tranch of 260,414 ADSs was granted in July 1, 2008 to our current chief executive officer. Stock options have an exercise price of $79.63 per ADS.

        Compensation costs under the CEO stock option plan of $0.4 million were recognized in our consolidated statements of operations during the year ended December 31, 2008.

        As of December 31, 2008, there is $1.8 million of total unrecognized compensation cost related to non-vested stock-based compensation awards under the CEO stock option plan. This amount is expected to be recognized over a weighted-average period of 1.5 years.

        In 2007, we granted phantom shares to key employees representing 720,000 ADSs. These phantom shares have an exercise price of $56.79 per ADS, which represents the 100-day average market price of

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the ADS at the date of grant and will vest in 24 months from the date of the grant. The phantom option agreement for a key employee will terminate if the employee leaves us before July 1, 2009.

        The reversal of compensation cost accrued in 2007 under the 2007 phantom share program in the amount of $8.9 million was recognized in the consolidated statements of operations for the year ended December 31, 2008. Related deferred tax expense amounted to $1.8 million.

        The compensation cost under the 2007 phantom share program recognized in the consolidated statement of operations for the year ended December 31, 2007 amounted to $7.6 million and the related deferred tax benefit amounted to $1.8 million.

        In May and July 2008, we granted phantom shares to key employees representing 4,562,830 ADSs and 2,113,886 ADSs, respectively. The awards will vest in 14 and 24 months after the grant date contingent upon continuing employment with us and have the exercise price of $75.25 and $79.63 per ADS, respectively.

        The compensation cost under the 2008 phantom share program recognized in the consolidated statements of operations for the year ended December 31, 2008 amounted to $1.3 million, and the related deferred tax benefit amounted to $0.3 million.

        The liability of $0.9 million under the 2007 and 2008 phantom share program was included in other long-term liabilities in the consolidated balance sheet as of December 31, 2008.

        As of December 31, 2008, there was $3.1 million of total unrecognized compensation cost related to non-vested phantom shares. This amount is expected to be recognized over a weighted average period of 1.4 years.

C.    Board Practices

Board of Directors

        Members of our Board of Directors are elected by a majority vote of shareholders at the annual shareholders' meeting using a cumulative voting system. Directors are typically elected by the annual meeting of shareholders for one year until the next annual meeting of shareholders and may be re-elected an unlimited number of times. The Joint Stock Companies Law requires that companies with more than 10,000 holders of voting shares have a board of directors consisting of not less than nine members. Our Board currently consists of nine members. The Board has the authority to make overall management decisions for us, except those matters reserved to the shareholders. It must meet at least once a month, though it may meet more often at its election. The members of our Board have entered into service contracts with us. Other than their entitlement to a pro rata share of their annual compensation and, in the case of independent directors, a pro rata share of their bonus, these contracts do not provide for benefits upon termination of their employment. See "—B. Compensation of Directors and Senior Management—Executive Compensation" for a description of the pro rata payments.

        In 2006, the Board of Directors approved the establishment of and guidelines for, two new Board Committees: Remuneration and Appointments Committee and the Committee for Corporate Conduct and Ethics. We established the Remuneration and Appointments Committee to develop proposals to be presented to the Board of Directors with respect to structuring remuneration and compensation levels for management executives. The Committee for Corporate Conduct and Ethics was established to maintain an effective corporate governance system and to further enhance the quality of corporate management.

        In 2007, the Board of Directors approved the establishment of, and guidelines for, the Strategy Committee. We established the Strategy Committee to improve the efficiency and performance of our

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Board of Directors by considering and making recommendations to the Board of Directors on matters relating to our strategy.

Audit Committee

        Our Audit Committee consists of three members appointed by the Board of Directors. The current members are Daniel Crawford, Mohanbir Gyani and Paul Ostling, all of whom are independent members of the Board of Directors. Mr. Ostling serves as Chairman of the Audit Committee. The Audit Committee is primarily responsible for the integrity of our financial statements; overseeing our internal control system; overseeing our accounting and financial reporting processes and the internal and external audits of our financial statements; recommending the appointment and compensation of the independent auditors to the Board of Directors; overseeing the performance of the auditors; reviewing issues raised by the auditors, management and/or Board of Directors and, as required, making recommendations to the Board of Directors; and resolving matters arising during the course of audits.

        According to the bylaws, the Audit Committee shall convene with our external auditors at least four times a year, but may convene more frequently if the Audit Committee chooses to do so.

Remuneration and Appointments Committee

        Our Remuneration and Appointments Committee consists of three members appointed by the Board of Directors. The current members are Mohanbir Gyani, Daniel Crawford and Paul Ostling, who serves as Chairman of the Remuneration and Appointments Committee. The Remuneration and Appointments Committee is primarily responsible for developing a remuneration structure and compensation levels for management executives.

        According to the bylaws, the Remuneration and Appointments Committee shall be convened by the Chairman of the Remuneration and Appointments Committee, at his sole discretion, or at the suggestion of any member of this committee, a member of the Board of Directors or our President.

President

        Our President is elected by the Board of Directors for a term of up to three years. The rights, obligations and the times and amounts of payment for the President's services are determined by a contract between him and us, as represented by our Chairman or by a person authorized by our Board of Directors. The President is responsible for day-to-day management of our activities, except for matters reserved to our shareholders or the Board of Directors and the Management Board. The President reports to the shareholders' meeting and to the Board of Directors and is responsible for carrying out decisions made by the shareholders and by the Board of Directors and the Management Board. Mikhail V. Shamolin was elected as our President and CEO on May 29, 2008 by the Board of Directors for a term of three years.

Management Board

        In October 2006, we revised our charter to establish a new governing body called the Management Board. The Management Board is an executive body which oversees certain aspects of our ongoing activities. The Management Board can consist of up to 15 members with each member being nominated by the President and approved by the Board of Directors. The Management Board is formed for a period of time determined by the Board of Directors, but the duration of the Management Board's term cannot exceed that of the President, who is elected by the Board of Directors for a term of up to three years. The Chairman of the Management Board is the President. Currently, our Management Board consists of 13 members. See "Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management."

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Disclosure Committee

        In April 2007, we established a new advisory body called the Disclosure Committee. The Disclosure Committee supervises our compliance with disclosure standards in connection with all public information regarding us. These disclosure standards are based on principles of timeliness, accuracy and completeness. The Disclosure Committee can consist of up to nine members with each member being nominated by the President on an annual basis. The Chairman of the Disclosure Committee is the Vice President—Chief Legal Officer. Currently, our Disclosure Committee consists of seven members, three of whom are officers of the company.

Review Commission

        Our Review Commission supervises our financial and operational activities. Members of the Review Commission are nominated and elected by our shareholders at annual meetings of shareholders. A director may not simultaneously be a member of the Review Commission. As of the date of this document, our Review Commission has three members:

•

Vassily V. Platoshin, who holds the position of Chief Accountant at Sistema;

•

Artem E. Popov, who holds the position of Executive Director of Financial Planning & Budget Department at Sistema; and

•

Mikhail V. Tokun, who holds the position of Head of Expertise and Methodology Division of Internal Control and Audit Department of Sistema.

        The members of our Review Commission serve until their terms expire at the next annual shareholders' meeting, which will take place in June 2009.

Corporate Governance

        We are required under the New York Stock Exchange listing rules to disclose any significant differences between the corporate governance practices that we follow under Russian law and applicable listing standards and those followed by U.S. domestic companies under New York Stock Exchange listing standards. This disclosure is posted on our website (http://www.mtsgsm.com/information/corporate_governance/). See also "Item 16G. Corporate Governance."

D.    Employees

        At December 31, 2008, we had 26,343 employees. Of our 20,470 employees in Russia, we estimate that 570 were executives (including the President and other officers); 4,435 were technical and maintenance employees; 10,316 were sales, marketing and customer service staff; and 5,149 were administration and finance staff. Approximately 21.5% of these employees, or 4,397, worked in Moscow (including employees of our corporate headquarters).

        As of December 31, 2008, 2,941 of our employees worked in Ukraine. Of these employees, we estimate that 15 were executives; 1,069 were technical and maintenance employees; 1,288 were sales, marketing and customer service staff; and 569 were administration and finance staff.

        As of December 31, 2008, 1,283 of our employees worked in Uzbekistan. Of these employees, we estimate that 28 were executives; 414 were technical and maintenance employees; 489 were sales, marketing and customer service staff; and 352 were administration and finance staff.

        As of December 31, 2008, 489 of our employees worked in Turkmenistan. Of these employees, we estimate that 13 were executives; 54 were technical and maintenance employees; 298 were sales, marketing and customer service staff; and 124 were administration and finance staff.

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        As of December 31, 2008, 1,160 of our employees worked in Armenia. Of these employees, we estimate that 9 were executives; 206 were technical and maintenance employees; 671 were sales, marketing and customer service staff; and 274 were administration and finance staff.

        The following chart sets forth the number of our employees at December 31, 2006, 2007 and 2008:

	At December 31,
	2006		2007		2008
Russia		20,210		19,369		20,470
Ukraine		2,771		3,066		2,941
Uzbekistan		967		1,071		1,283
Turkmenistan		177		297		489
Armenia		n/a		890		1,160
Total		24,125		24,693		26,343

        Our employees are not unionized. We have not experienced any work stoppages and we consider our relations with employees to be strong.

E.    Share Ownership

        We believe that our directors, senior management and employees as of December 31, 2008 owned less than 1% of our outstanding common stock.

        The following table sets forth information with respect to the beneficial ownership of our common stock as of April 30, 2009 by our current directors and executive officers.

	Beneficial ownership as of April 30, 2009
Directors and Executive officers	Number		%(1)
Mikhail V. Shamolin, Executive Director, President and Chief Executive Officer		174,890		0.00928	%
Andrei B. Terebenin, Vice President—Corporate Communications		29,735		0.00158	%
Alexander V. Popovskiy, General Director—MTS-Russia		20,717		0.00110	%
Sergey B. Nikonov, Vice President—Human Resources and Administration		19,982		0.00106	%
Ruslan S. Ibragimov, Vice President—Chief Legal Officer, Corporate and Legal		19,824		0.00105	%
Pavel D. Belik, Vice President—Corporate Security		13,916		0.00074	%
Andrey A. Dubovskov, General Director—MTS-Ukraine		11,650		0.00062	%
All Directors and Executive Officers as a Group		290,714		0.01542	%

(1)

Percentage of beneficial ownership of each named director and executive officer is based on 1,885,052,800 ordinary shares outstanding as of April 30, 2009.

        See also "—B. Compensation" for a description of our stock bonus, stock option and phantom share programs.

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Item 7.    Major Shareholders and Related Party Transactions

A.    Major Shareholders

        The following table sets forth, as of April 30, 2009, certain information regarding the beneficial ownership of our outstanding common stock. All shares of common stock have the same voting rights.

		Beneficial ownership as of April 30, 2009
Name		Number		Percentage
Sistema(1)			636,224,752		33.7	%
Sistema Holding Limited			193,750,980		10.3	%
Invest-Svyaz(2)			160,247,802		8.5	%
VAST(3)			60,219,432		3.2	%
ING Bank (Eurasia) ZAO(4)			790,525,036		41.9	%
Other Public Float (including our directors and executive officers)(5)			44,084,798		2.4	%
	Total(6)		1,885,052,800		100.0	%

(1)

Vladimir P. Yevtoushenkov has a controlling interest in Sistema, and would be considered under U.S. securities laws as the beneficial owner of our shares held by Sistema, Sistema Holding Limited, Invest-Svyaz and VAST. Mr. Yevtoushenkov is also the chairman of the board of directors of Sistema.

(2)

Invest-Svyaz is a Russian closed joint stock company wholly-owned by Sistema.

(3)

VAST is a limited partnership formed under the laws of Russia. Sistema owns 100% of VAST. An extract from our shareholders register dated June 14, 2006 contains an entry prohibiting any transfer of these shares.

(4)

ING Bank (Eurasia) is the local custodian for our sponsored ADS program and the unsponsored GDR programs.

(5)

We believe that our directors and executive officers as a group own less than 1% of our shares.

(6)

Our wholly-owned subsidiary, Mobile TeleSystems LLC, owns 2,515,747 of our shares in connection with our Management Stock Bonus and Stock Option Plan as of April 30, 2009. During the years ended December 31, 2006, 2007 and sixteen months period ended May 1 2009, our wholly-owned subsidiary MTS-Bermuda Ltd. repurchased 11,161,000, 17,402,835 and 39,431,500 of our shares in the form of ADSs, respectively, which resulted in a reduction of shareholders' equity in the annual consolidated financial statements. In addition, following the approval of the merger of our two subsidiaries into MTS at the general shareholders meeting in June 2008, we repurchased 37,762,257 of our ordinary shares from investors who voted against or abstained from voting on the merger for a total amount of 11.1 billion rubles ($446.3 million as of the date of repurchase). These shares are excluded from the total number of shares presented here.

        In April 2003, Sistema acquired directly and indirectly from T-Mobile 199,322,614 shares of common stock amounting, in aggregate, to an additional 10% of our outstanding common stock. This included 120,811,184 shares of common stock acquired directly from T-Mobile and the acquisition of all the shares in Invest-Svyaz-Holding previously held by T-Mobile, representing a beneficial interest in a further 78,521,430 shares of common stock.

        In April 2003 and December 2004, T-Mobile sold an additional 5.0% and 15.1% of our common stock, respectively, in the form of GDRs through an unsponsored GDR program. In September 2005, T-Mobile sold its remaining 10.1% interest in us on the open market.

        At December 31, 2004, Sistema owned a 51.0% equity interest in VAST, and the remaining 49.0% interest was held by ASVT, a Russian open joint-stock company. In December 2005, Sistema acquired the 49.0% stake in VAST bringing its total interest to 100.0%. In addition, Sistema acquired a 0.7% stake in us on the open market during 2005.

        During the years ended December 31, 2006, 2007 and 2008, we repurchased 11,161,000, 17,402,835 and 77,193,757 of our shares for total consideration of $110.0 million, $254.4 million and $1,059.8 million, respectively, which resulted in a reduction of shareholders' equity in the annual consolidated financial statements. As of April 30, 2009, we held a total of 108,273,338 shares, of which

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approximately 62.8% are held in form of ADSs. These transactions increased Sistema's effective ownership in us from 52.8% at December 31, 2005 to 53.1% at December 31, 2006, 53.6% at December 31, 2007 and 55.7% at December 31, 2008.

        As of April 30, 2009, the total number of ADSs outstanding (including ADSs held by our wholly owned subsidiary, MTS-Bermuda Ltd.) was 155,479,301, representing underlying ownership of 777,396,505 shares, or approximately 41.2% of our outstanding common stock. Of these ADSs, approximately 51.0% were held by U.S. investors as of April 30, 2009. The shares underlying the ADSs are deposited with JPMorgan Chase Bank, formerly known as Morgan Guaranty Trust Company of New York and the local custodian is ING Eurasia.

B.    Related Party Transactions

Transactions with Sistema and its Affiliates

Moscow Bank of Reconstruction and Development (MBRD)

        We maintain certain bank and deposit accounts with MBRD, a subsidiary of Sistema. As of December 31, 2008 and 2007, we had cash positions at MBRD in the amount of $211.5 million and $321.7 million in current accounts, respectively. Deposit accounts at MBRD amounted to $149.2 million and $265.0 million as of December 31, 2008 and 2007, respectively. Deposit accounts at MBRD included deposit accounts with original maturities in excess of three months but less than twelve months totaling $45.0 million and $15.0 million as of December 31, 2008 and 2007, respectively, which are classified as short-term investments in our audited consolidated financial statements. The interest accrued on the deposits for the years ended December 31, 2008, 2007 and 2006, amounted to $21.1 million, $18.9 million and $4.8 million, respectively, and was included as a component of interest income in our audited consolidated financial statements.

Maxima Advertising Agency (Maxima)

        We have contracts for advertising services with Maxima, a subsidiary of Sistema, pursuant to which we paid Maxima $135.8 million, $127.7 million and $117.8 million for services provided in the years ended December 31, 2008, 2007 and 2006, respectively.

Mediaplanning

        We have contracts for advertising services with Mediaplanning, a subsidiary of Sistema, pursuant to which we paid Mediaplanning $82.0 million, $48.8 million and $45.1 million for services provided in the years ended December 31, 2008, 2007 and 2006, respectively.

Kvazar-Micro.ru (Kvazar)

        We have several agreements for the supply of software, equipment and software implementation services, including integration services with respect to Oracle applications, with Kvazar, a subsidiary of Sistema. Pursuant to these agreements, Kvazar provided various software, IT equipment and related services to us in the years ended December 31, 2008, 2007 and 2006 for which we paid approximately $157.0 million, $120.2 million and $52.1 million, respectively. Commencing in 2009, Kvazar operates under the new brand name "Sitronics Information Technologies".

Moscow City Telephone Network (MGTS)

        We have interconnect and line rental agreements with MGTS, a subsidiary of Sistema, and rent a cable plant from MGTS for the installation of optic-fiber cable. We also rent buildings for administrative offices as well as premises for switchboard and base station equipment. Interconnect, line rental and technical premises rental expenses for the years ended December 31, 2008, 2007 and

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2006 amounted to $18.3 million, $16.3 million and $13.1 million, respectively. We received interconnect revenue from MGTS for the years ended December 31, 2008, 2007 and 2006 amounting to $32.5 million, $25.2 million and $7.9 million, respectively.

Comstar UTS

        We have interconnect, line and numbering capacity rental agreements with Comstar, Telmos and MTU-Inform, subsidiaries of Sistema. During the year ended December 31, 2007, Telmos and MTU-Inform merged with Comstar. Revenue under agreements with these entities for the years ended December 31, 2008, 2007 and 2006, amounted to $22.1 million, $10.0 million and $1.7 million, respectively. Interconnect and line rental expenses for the years ended December 31, 2008, 2007 and 2006 comprised $36.4 million, $34.8 million and $25.9 million, respectively.

Sitronics Telecom Solutions

        Sitronics Telecom Solutions Czech Republic and Sitronics Telecom Solutions Russia, formerly Strom Telecom and Mediatel, respectively, and Intracom Telecom are subsidiaries of Sistema. During the years ended December 31, 2008, 2007 and 2006, we purchased telecommunications equipment, billing systems (FORIS) and related services from these companies for approximately $142.8 million, $67.1 million and $231.2 million, respectively.

MTT

        During the years ended December 31, 2008, 2007 and 2006, we had interconnect and line rental agreements with MTT, a subsidiary of Sistema. Interconnect revenue for the years ended December 31, 2008, 2007 and 2006 amounted to $91.0 million, $62.0 million and $29.4 million, respectively. Interconnect expenses for the years ended December 31, 2008, 2007 and 2006 amounted to $176.3 million, $83.1 million and $69.3 million, respectively.

Sitronics Smart Technologies (formerly SmartCards)

        During the years ended December 31, 2008, 2007 and 2006, we purchased SIM cards and prepaid phone cards from Sitronics Smart Technologies, a subsidiary of Sistema, for approximately $39.6 million, $19.3 million and $37.0 million, respectively.

Sistema Telecom

        In May 2006, Sistema introduced a universal brand featuring a new egg-shaped logo for each of the telecommunication companies operating within the Sistema group, including us. The brand is owned by Sistema Telecom, a subsidiary of Sistema. The expenses related to the use of the brand name incurred by us and paid in the years ended December 31, 2008, 2007 and 2006, amounted to $14.7 million, $14.5 million and $9.7 million, respectively.

City Hals

        During the years ended December 31, 2008, 2007 and 2006, City Hals, a subsidiary of Sistema, provided rent, repair, maintenance and cleaning services to us amounting to approximately $13.8 million, $6.1 million and $5.2 million, respectively.

TS-Retail

        In November 2006, we established a wholly-owned subsidiary, TS-Retail, with a registered capital of $1.1 million for further expansion of our retail operations. In December 2007, our stake in this company decreased from 100% to 25% following an increase in the share capital of TS-Retail by

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$14.0 million, which was paid by us and certain other Sistema subsidiaries. As a result, we deconsolidated TS-Retail in December 2007 and account for this investment under the equity method. During the years ended December 31, 2008 and 2007, we granted loans to TS-Retail totaling $27.4 million at annual interest rates ranging from 11.0%-15.0% maturing in 2009-2010. The loans are guaranteed by Sistema.

        In addition, during the years ended December 31, 2008 and 2007, we entered into a number of agreements for the provision of dealer services and sale of handsets with TS-Retail. For the years ended December 31, 2008 and 2007, dealer commissions paid by us to TS Retail amounted to $4.4 million and $0.1 million, respectively, and sales of handsets by us to TS-Retail amounted to $1.5 million and $nil, respectively. As of December 31, 2008 and 2007, advances paid and accounts receivable from TS-Retail amounted to $12.2 million and $nil, respectively.

Sistema-Hals

        In October 2007, we entered into an agreement for the construction of an aerial system in the Moscow metro with Sistema-Hals, a subsidiary of Sistema. As of December 31, 2008, advances given to Sistema-Hals under this agreement amounted to $11.7 million, which was included into property, plant and equipment in our audited consolidated financial statements.

Coral/Sistema Strategic Fund

        In August 2007, we purchased an equity interest in a strategic fund organized by Sistema, as General Partner, in order to invest in various projects in the telecommunications and high-technology area. The fund is organized in the form of a limited partnership. As of December 31, 2008, we had $9.0 million invested in the fund and have committed to invest up to an additional to $26.3 million if called upon by the General Partner.

Other Transactions

Glaxen

        In April 2008, we granted a loan to Glaxen, a minority shareholder of our subsidiary Dagtelecom, at a 16.0% annual interest rate and maturing on August 1, 2009. As of December 31, 2008, the balance receivable under the loan agreement amounted to $12.2 million.

MTS Belarus

        In April 2008, we entered into a credit facility agreement with MTS Belarus. The facility, which terminated on March 15, 2009, allowed MTS Belarus to borrow up to $33.0 million at an interest rate of 10.0%. As of December 31, 2008, the balance outstanding under the facility was $2.1 million.

        We do not have the intent or ability to offset the outstanding accounts payable and accounts receivable with related parties under the terms of existing agreements with them. See also Note 15 to our audited consolidated financial statements.

C.    Interests of Experts and Counsel

        Not applicable.

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Item 8.    Financial Information

A.    Consolidated Statements and Other Financial Information

8.A.1-3. See Item 18.

8.A.4-5. Not applicable.

8.A.7. Litigation

UMC

        On June 7, 2004, the Deputy General Prosecutor of Ukraine filed a claim against us and others in the Kiev Commercial Court seeking to unwind the sale by Ukrtelecom of its 51% stake in UMC to us. The complaint also sought an order prohibiting us from alienating 51% of our stake in UMC until the claim was resolved on the merits. The claim was based on a provision of the Ukrainian privatization law that included Ukrtelecom among a list of "strategic" state holdings prohibited from alienating or encumbering its assets during the course of its privatization. While the Cabinet of Ministers of Ukraine in May 2001 issued a decree specifically authorizing the sale by Ukrtelecom of its entire stake in UMC, the Deputy General Prosecutor asserted that the decree contradicted the privatization law and that the sale by Ukrtelecom was therefore illegal and should be unwound. On August 12, 2004, the Kiev Commercial Court rejected the Deputy General Prosecutor's claim.

        On August 26, 2004, the General Prosecutor's Office requested the Constitutional Court of Ukraine to review whether certain provisions of the Ukrainian privatization law limiting the alienation of assets by privatized companies were applicable to the sale by Ukrtelecom of UMC shares to us. On January 13, 2005, the Constitutional Court of Ukraine refused to initiate the constitutional proceedings arising from the request of the General Prosecutor's Office on the grounds that the request was incompatible with the requirements of the Ukrainian constitutional law, and that the issue as it was raised in the request did not fall within the jurisdiction of the Constitutional Court of Ukraine. This, however, does not prevent other persons having the right to apply to the Constitutional Court of Ukraine from challenging the constitutionality of provisions of the Ukrainian privatization law applicable to the sale by Ukrtelecom of the UMC shares.

Bitel

        In December 2005, our wholly owned subsidiary MTS Finance S.A., or MTS Finance, acquired a 51.0% stake in Tarino Limited, or Tarino, from Nomihold Securities Inc., or Nomihold, for $150.0 million in cash based on the belief that Tarino was at that time the indirect owner, through its wholly owned subsidiaries, of Bitel LLC, or Bitel, a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan.

        Following the purchase of the 51.0% stake, MTS Finance entered into a put and call option agreement with Nomihold for "Option Shares," representing the remaining 49.0% interest in Tarino shares and a proportional interest in Bitel shares. The call option was exercisable by MTS Finance from November 22, 2005 to November 17, 2006, and the put option was exercisable by Nomihold from November 18, 2006 to December 8, 2006. The call and put option price was $170.0 million.

        Following a decision of the Kyrgyz Supreme Court on December 15, 2005, Bitel's corporate offices were seized by a third party. As we did not regain operational control over Bitel's operations in 2005, we accounted for our 51.0% investment in Bitel at cost as at December 31, 2005. We appealed the decision of the Kyrgyz Supreme Court in 2006, but the court has not acted within the time period permitted for appeal. We subsequently sought the review of this dispute over the ownership of Bitel by the Prosecutor General of Kyrgyzstan to determine whether further investigation could be undertaken by the Kyrgyz authorities. In January 2007, the Prosecutor General informed us that there were no

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grounds for involvement by the Prosecutor General's office in the dispute and that no legal basis existed for us to appeal the decision of the Kyrgyz Supreme Court. Consequently, we decided to write off the costs relating to the purchase of the 51.0% stake in Bitel, which was reflected in our audited annual consolidated financial statements for the year ended December 31, 2006.

        In November 2006, MTS Finance received a letter from Nomihold purporting to exercise the put option and sell Option Shares for $170.0 million to MTS Finance. In January 2007, Nomihold commenced an arbitration proceeding against MTS Finance in the London Court of International Arbitration in order to compel MTS Finance to purchase Option Shares. Nomihold seeks specific performance of the put option, unspecified monetary damages, interest, and costs. The matter is currently pending. MTS Finance is vigorously contesting this action and has asked the arbitration tribunal to dismiss Nomihold's claim.

        A group of individual shareholders of Sistema has agreed to compensate MTS Finance for any potential loss up to $170.0 million should the arbitration decision regarding exercise of the aforementioned put option prove unfavorable to MTS Finance. Notwithstanding this, in the event MTS Finance does not prevail in the arbitration, we could be liable to Nomihold for $170.0 million plus any additional amounts that the arbitration tribunal might award to Nomihold.

        In connection with the above mentioned put option exercise and the uncertainty as to the resolution of the dispute with Nomihold, we recognized a liability in the amount of $170.0 million in our audited annual consolidated financial statements with a corresponding charge to other non-operation expenses as of December 31, 2006 and for the year then ended.

        In addition, three Isle of Man companies affiliated with us, or the KFG Companies, have been named defendants in lawsuits filed by Bitel in the Isle of Man seeking the return of dividends received by these three companies in the first quarter of 2005 from Bitel in the amount of approximately $25.2 million plus compensatory damages, and to recover approximately $3.7 million in losses and accrued interest. In the event that the defendants do not prevail in these lawsuits, we may be liable to Bitel for such claims. The KFG Companies have also asserted counterclaims against Bitel, and claims against other defendants including Altimo LLC, or Altimo, and Altimo Holdings & Investments Limited, or Altimo Holding, for the wrongful appropriation and control of Bitel. In November 2007, the Isle of Man court set aside orders it had previously issued granting leave to serve the non-Manx defendants out of the jurisdiction as to the KFG Companies' counterclaims on the basis of a lack of jurisdiction. The KFG companies appealed that ruling to the Isle of Man Staff of Government and the appeal hearing took place in late July 2008. On November 28, 2008, the appellate court ruled that the case should proceed under its jurisdiction. The defendants against whom the KFG Companies have brought the action attempted to appeal the Isle of Man Staff of Government decision by seeking leave to appeal to the Judicial Committee of the Privy Council, the court of final appeal for the Isle of Man. This request was denied and the defendants then sought permission to appeal from the Judicial Committee of the Privy Council itself, an application which remains pending. It is not possible at this time to predict the ultimate outcome or resolution of these claims.

        In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited, or KMIC, under the rules of the London Court of International Arbitration, the arbitration tribunal in its award found that the KFG Companies breached a transfer agreement dated May 31, 2003, or the Transfer Agreement, concerning the shares of Bitel. The Transfer Agreement was made between the KFG Companies and IPOC International Growth Fund Limited, or IPOC, although IPOC subsequently assigned its interest to KMIC, and KMIC was the claimant in the arbitration. The tribunal ruled that the KFG Companies breached the Transfer Agreement when they failed to establish a date on which the equity interests in Bitel were to be transferred to KMIC and by failing to take other steps to transfer the Bitel interests. This breach occurred prior to MTS Finance's acquisition of the KFG Companies. The arbitration tribunal ruled that

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KMIC is entitled only to damages in an amount to be determined in future proceedings. At the request of the parties, the tribunal agreed to stay the damages phase of the proceedings pending the resolution of the appeals process now before the second instance court in the Isle of Man, as described above. We are not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

        For additional information, see Note 21 to our audited consolidated financial statements.

Euroset

        On April 20, 2009, we filed a lawsuit against Euroset Retail seeking RUR272.3 million ($8.2 million as of April 30, 2009) for breach of contract in relation to iPhone shipments. A preliminary hearing in this matter is scheduled for June 9, 2009. On April 24, 2009, we filed a lawsuit against Torgoviy Dom Euroset seeking recovery of RUR322.6 million ($9.7 million as of April 30, 2009) for collected subscriber payments not transferred to us in accordance with an agency contract. A preliminary hearing in this matter has not yet been scheduled.

        On April 21, 2009, Torgoviy Dom Euroset filed two claims against us, seeking (i) payment of RUR354.6 million ($10.7 million as of April 30, 2009) in dealer commission bonuses and (ii) payment of RUR144.5 million ($4.3 million as of April 30, 2009) in general dealer commissions. Preliminary hearings for these claims are scheduled for June 9, 2009 and July 7, 2009, respectively.

        All of the abovementioned claims were brought in the Moscow Arbitration Court.

        See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—The reduction, consolidation or acquisition of independent dealers and our failure further develop our distribution network may lead to a decrease in our subscriber growth rate, market share and revenues."

Beta Link

        On February 25, 2009, we filed a lawsuit against Beta Link seeking recovery RUR840.7 million ($25.3 million as of April 30, 2009) for breach of a loan agreement. A preliminary hearing is scheduled for May 26, 2009.

        In March and April 2009, we filed three additional lawsuits against Beta Link seeking damages amounting in aggregate to RUR95.7 million (US$2.9 million as of April 30, 2009) for breach of three contracts in relation to iPhone shipments. Hearings for two of the claims are scheduled for June 11 and 23, 2009, respectively, and a preliminary hearing for one of the claims is scheduled for June 1, 2009, respectively.

        All of the abovementioned claims were brought in the Moscow Arbitration Court.

Tax Audits and Claims

        In the ordinary course of business, we may be party to various tax proceedings, and subject to tax claims, some of which relate to the developing markets and evolving fiscal and regulatory environments in which we operate. In the opinion of management, our liability, if any, in all pending tax proceedings or tax claims will not have a material effect on our financial condition, results of operations or liquidity. We believe that we have adequately provided for tax liabilities in the accompanying consolidated financial statements; however, the risk remains that relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant. See also Note 21 to our audited consolidated financial statements.

Russia

        In September 2006, the Russian tax authorities audited our compliance with tax legislation for the years ended December 31, 2003 and 2004. Based on the results of this audit, the Russian tax authorities

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assessed 1,283.7 million rubles (approximately $43.7 million as of December 31, 2008) of additional taxes, penalties and fines. We challenged this assessment in the Moscow Arbitration Court. In February 2007, this court invalidated the largest part of the tax assessment in the amount of approximately 1,220.1 million rubles (approximately $41.5 million as of December 31, 2008). This ruling was upheld by higher courts, most recently, in May 2008 by the Federal Arbitration Court of the Moscow District. As of December 31, 2008, no provision in relation to the above tax audit was accrued in our audited consolidated financial statements or paid to tax authorities.

        In January 2008, the Russian tax authorities initiated an audit of our compliance with tax legislation for the years ended December 31, 2005 and 2006. Based on the results of this audit, the Russian tax authorities assessed an additional amount of 1,130.0 million rubles (approximately $38.5 million as of December 31, 2008), including taxes, fines and penalties. As of December 31, 2008, we paid to the tax authorities the full amount assessed. However, we also filed a petition with the Federal Arbitration Court of the Moscow District seeking to invalidate part of the assessment in the amount of 1,026.1 million rubles (approximately $34.9 million as of December 31, 2008). In December 2008, the court ruled to partially invalidate the assessment in the amount of 981.5 million rubles (approximately $33.4 million as of December 31, 2008).

        Generally, according to Russian tax legislation, tax declarations remain open and subject to inspection for a period of three years following the tax year. As of December 31, 2008, our and our Russian subsidiaries' tax declarations for the preceding three fiscal years were open for further review, assuming no resolution issued based on the results of tax audit of the years ended December 31, 2005 and 2006.

Ukraine

        There are regulatory uncertainties in Ukraine related to the treatment for VAT purposes of contributions payable to the Ukrainian State Pension Fund, or the Pension Fund, in respect of the cash paid for the consumption of telecommunication services by customers. The Ukrainian Law on VAT was amended in March 2005 and again in August 2005. Management believes that the version of the law that came in effect in August 2005 clearly exempts Pension Fund contributions from VAT. However, the wording of the law that was in effect from March 2005 to August 2005 may be interpreted by the tax authorities as requiring us to pay the VAT on such contributions.

        As a result of a state tax audit of UMC for the period from July 1, 2004 to April 1, 2007, the tax authorities assessed additional VAT charges (including penalties) calculated on the Pension Fund contributions in the amount of $7.5 million. UMC initiated a claim in respect of this assessment against the tax authorities and received a favorable ruling from the court, which was subsequently upheld on appeal by higher courts (most recently, by the Highest Administrative Court of Ukraine).

        Management believes that VAT was not applicable to the Pension Fund contributions and that UMC's position is consistent with industry practice. At December 31, 2008, no VAT charges in relation to the above litigation were accrued in our financial statements or paid to the tax authorities.

8.A.8. Dividend Distribution Policy

        On May 15, 2007, the Board of Directors approved a dividend policy, whereby we will aim to make dividend payments to our shareholders in the amount of at least 50% of our annual net income under U.S. GAAP. The dividend amount could vary depending on a number of factors, including the outlook for earnings growth, capital expenditure requirements, cash flow from operations, potential acquisition opportunities, availability of external financing or refinancing as well as our debt position.

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        On June 27, 2008, our shareholders approved cash dividends in the amount of $1,257.5 million (including dividends on treasury shares of $36.5 million). As of December 31, 2008, an amount of $0.6 million remained as dividends payable on our accounts.

        Annual dividend payments, if any, must be recommended by our Board of Directors and approved by the annual general meeting of shareholders. We anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of ADSs, net of the depositary's fees and expenses. Accordingly, the value of dividends received by holders of ADSs will be subject to fluctuations in the exchange rate between the ruble and the dollar.

B.    Significant Changes

Telefon.Ru

        In February 2009, we acquired a 100% stake in Narico Holdings Limited (Cyprus), the sole owner of Telefon.Ru, a large mobile retail chain in Russia, from Analog Holdings Limited and Delemont Investments Limited for cash consideration of $60.0 million. In accordance with sale and purchase agreement, an additional $25.0 million will be payable to the sellers within 12 to 18 months should Telefon.Ru satisfy certain performance criteria over this period.

Dagtelecom

        In February 2009, we purchased the remaining 25.01% stake in Dagtelecom from Glaxen for cash consideration of $41.6 million, increasing our ownership to 100%. The purchase was made following Glaxen's exercise of its put option. The purchase price was reduced by $12.2 million to offset the loan granted by MTS to Glaxen during the year ended December 31, 2008. In addition, following the review and assessment of Dagtelecom's performance during the period of joint ownership by MTS and Glaxen, we may potentially pay additional consideration to Glaxen of up to $10.0 million.

Eldorado

        In March 2009, we acquired a 100% stake in Eldorado Centr LLC and Eldorado Communications Store LLC for $22.85 million from Kilcherex Holdings Limited (Cyprus) and Tenteco Limited (Cyprus). Through these acquisitions, we acquired a 100% stake in the Eldorado mobile phone retail chain, which, as of January 1, 2009, operated 383 stores in 153 cities in Russia. Of the purchase price, $5.0 million will be paid 12 months after our acquisition should the retail chain satisfy certain performance criteria.

Refinancing

        On May 18, 2009, we signed a facility agreement to refinance the first tranche of our existing $1.33 billion syndicated loan facility in the amount of $630 million that was scheduled to mature in May 2009. We raised $295 million for facility A and €214.5 million for facility B to be followed by an additional tranche in the coming weeks as part of the new facility. The facility will mature in 2012 and will have an interest rate of LIBOR+6.5%.

Ruble bond

        On May 19, 2009, we completed an offering of a RUR 15 billion bond. The bond will mature in 2014. The interest rate was set at 16.75%, with coupons to be paid annually. Bond holders will have the right under a two-year put option to sell the bonds to us.

        See also Note 23 to our audited consolidated financial statements.

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FAS Application Filed for Acquisition of Comstar UTS

        On May 22, 2009, we announced that we filed an application with FAS to receive approval for the acquisition of up to 100% of Comstar UTS. Because a potential transaction would involve related parties, our Board of Directors has established a Special Committee comprised of our three independent Directors to oversee the transaction process and decide whether to recommend the acquisition of Comstar UTS to the full Board of Directors. No decision has yet been made with respect to the size or structure of any potential transaction.

Item 9.    Offer and Listing Details

        (Only Items 9.A.4 and 9.C are applicable.)

A.4. Market Price Information

        Our ADS, each representing five ordinary shares, have been listed on the NYSE since July 6, 2000 under the symbol "MBT." Our ordinary shares have been listed on the Moscow Interbank Currency Exchange, or MICEX, since December 2003. Set forth below, for the periods indicated, are the high

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and low closing prices per ADS as reported by the NYSE and the high and low closing prices per ordinary share as reported by the MICEX.

	ADS High		ADS Low		Ordinary Share High		Ordinary Share Low
Monthly High and Low
April 2009	$	37.80	$	31.71		176.4 RUR		148.2 RUR
March 2009	$	32.55	$	21.68		150.6 RUR		122.9 RUR
February 2009	$	26.42	$	18.60		139.0 RUR		106.5 RUR
January 2009	$	32.51	$	20.88		122.5 RUR		104.8 RUR
December 2008	$	32.74	$	25.96		126.0 RUR		107.9 RUR
November 2008	$	46.82	$	21.67		160.5 RUR		92.9 RUR
October 2008	$	53.96	$	21.74		234.5 RUR		92.9 RUR
September 2008	$	69.97	$	52.74		263.0 RUR		180.1 RUR
August 2008	$	73.19	$	64.23		286.7 RUR		241.6 RUR
July 2008	$	76.14	$	66.87		280.3 RUR		254.6 RUR
June 2008	$	88.11	$	76.61		301.9 RUR		273.2 RUR
Quarterly High and Low
First Quarter 2009	$	32.55	$	18.60		150.6 RUR		104.8 RUR
Fourth Quarter 2008	$	53.96	$	21.67		234.5 RUR		92.9 RUR
Third Quarter 2008	$	76.14	$	52.74		286.7 RUR		180.1 RUR
Second Quarter 2008	$	89.08	$	70.52		308.0 RUR		273.2 RUR
First Quarter 2008	$	101.90	$	74.74		379.8 RUR		297.5 RUR
Fourth Quarter 2007	$	102.12	$	68.53		378.0 RUR		282.7 RUR
Third Quarter 2007	$	71.90	$	56.04		289.6 RUR		246.8 RUR
Second Quarter 2007	$	61.22	$	52.90		263.3 RUR		233.5 RUR
First Quarter 2007	$	57.59	$	45.81		258.8 RUR		217.7 RUR
Fourth Quarter 2006	$	50.48	$	37.50		227.7 RUR		184.3 RUR
Third Quarter 2006	$	40.72	$	28.20		202.7 RUR		150.9 RUR
Second Quarter 2006	$	35.14	$	26.22		189.8 RUR		139.2 RUR
First Quarter 2006	$	38.96	$	33.03		209.5 RUR		184.5 RUR
Annual High and Low
2008	$	101.90	$	21.67		379.8 RUR		92.9 RUR
2007	$	102.12	$	45.81		378.0 RUR		217.7 RUR
2006	$	50.48	$	26.22		227.7 RUR		139.2 RUR
2005(1)	$	41.19	$	31.15		228.7 RUR		179.0 RUR
2004	$	155.90	$	83.00		—		—

(1)

Effective January 3, 2005, the ADS ratio was changed from 1 ADS per 20 ordinary shares to 1 ADS per 5 ordinary shares, a 1:4 ADS split.

C.    Markets

        Our common stock has been listed on the Moscow Interbank Currency Exchange since December 2003. ADSs, each representing five shares of our common stock, have been listed on the New York Stock Exchange under the symbol "MBT" since June 30, 2000. Our ADSs are also traded on the London Stock Exchange under the symbol "MBLD," and on the Frankfurt Stock Exchange under the symbol "MKY." Our U.S. dollar-denominated notes are listed on the Luxembourg Stock Exchange. Our ruble-denominated notes are listed on Moscow Interbank Currency Exchange.

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Item 10.    Additional Information

A.    Share Capital

        Not applicable.

B.    Charter and Certain Requirements of Russian Legislation

        We describe below material provisions of our charter and certain requirements of Russian legislation. In addition to this description, we urge you to review our charter to learn its complete terms.

Our Purpose

        Article 2.1 of our charter provides that our principal purpose is to obtain profits through the planning, marketing and operation of a radiotelephone mobile cellular network on our license territories.

        We are registered with the Ministry of Taxes and Duties of the Russian Federation under the state registration number 1027700149124.

General Matters

        Pursuant to our charter, we have the right to issue registered common stock, preferred stock and other securities provided for by legal acts of the Russian Federation with respect to securities. Our capital stock currently consists of 1,993,326,138 common shares, each with a nominal value of 0.10 rubles, all of which are issued and fully paid. Under Russian legislation, charter capital refers to the aggregate nominal value of the issued and outstanding shares. We are also authorized to issue an additional 103,649,654 common shares with a nominal value of 0.10 rubles each. No preferred shares are authorized or outstanding. Preferred stock may only be issued if corresponding amendments have been made to our charter pursuant to a resolution of the general meeting of shareholders. We have issued only common stock. The Joint Stock Companies Law requires us to dispose of any of our shares that we acquire within one year of their acquisition or, failing that, reduce our charter capital. We refer to such shares as treasury shares for the purposes hereof. Russian legislation does not allow for the voting of such treasury shares. As of December 31, 2008, we had 37,762,257 treasury shares. Any of our shares that are owned by our subsidiaries are not considered treasury shares under Russian law (i.e., they are considered outstanding shares), and our subsidiaries are able to vote such shares and dispose of such shares without any further corporate actions by our shareholders or board of directors. Our wholly owned subsidiary, Mobile TeleSystems LLC, owns 2,515,747 of our shares, which it purchased in connection with our Management Stock Bonus and Stock Option Plan as of December 31, 2008. During the years ended December 31, 2006, 2007 and 2008, our wholly-owned subsidiary MTS-Bermuda Ltd. repurchased 11,161,000, 17,402,835 and 39,431,500 of our shares in the form of ADSs, respectively, which resulted in a reduction of shareholders' equity in the annual consolidated financial statements. In our consolidated financial statements prepared under U.S. GAAP, these shares and shares held by all of our other subsidiaries are considered treasury shares (i.e., they are considered not outstanding).

        As of the date of this document, we had more than ten thousand shareholders for purposes of the Joint Stock Companies Law.

Rights Attaching to Shares

        Holders of our common stock have the right to vote at all shareholders' meetings. As required by the Joint Stock Companies Law and our charter, all shares of our common stock have the same

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nominal value and grant identical rights to their holders. Each fully paid share of common stock, except for treasury shares, gives its holder the right to:

•

freely transfer the shares without our consent and the consent of other shareholders;

•

receive dividends;

•

participate in shareholders' meetings and vote on all matters within shareholders' competence;

•

transfer voting rights to a representative on the basis of a power of attorney;

•

participate in the election and dismissal of members of the board of directors and review commission;

•

exercise its pre-emptive right in certain circumstances, as determined by the Joint Stock Companies Law;

•

if holding, alone or with other holders, 1% or more of the voting shares, file a lawsuit against a member of the Board of Directors or member of any executive body of the company (including the company's chief executive officer and/or the company's managing organization) to reimburse damages suffered by the company as the result of their fault;

•

if holding, alone or with other holders, 2% or more of the voting stock, within 100 days after the end of our fiscal year, make proposals for the agenda of the annual shareholders' meeting and nominate candidates to the board of directors, the counting commission, the review commission and for company president and management board;

•

if holding, alone or with other holders, 10% or more of the voting stock, demand from the board of directors the calling of an extraordinary shareholders' meeting or an unscheduled audit by the review commission or an independent auditor;

•

demand, under the following circumstances, the repurchase by us of all or some of the shares owned by it, as long as such holder voted against or did not participate in the voting on the decision approving the following:

•

any reorganization;

•

the conclusion of a major transaction, as defined under Russian law (i.e., involving assets having value of more than 50% of the balance sheet value of the assets calculated under Russian Accounting Standards, or RAS); and

•

any amendment of our charter or approval of a restated version of our charter in a manner that restricts the holder's rights;

•

upon liquidation, receive a proportionate amount of our property after our obligations are fulfilled;

•

have free access to certain company documents, receive copies for a reasonable fee and, if holding alone or with other holders, 25% or more of the voting stock, have access to accounting documents and minutes of the management board meetings; and

•

exercise other rights of a shareholder provided by our charter, Russian legislation and decisions of shareholders' meeting approved in accordance with its competence.

Preemptive Rights

        The Joint Stock Companies Law and our charter provide existing shareholders with a preemptive right to purchase shares or securities convertible into shares during an open subscription in the amount proportionate to their existing shareholdings. In addition, the Joint Stock Companies Law provides

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shareholders with a preemptive right to purchase shares or securities convertible into shares, in an amount proportionate to their existing shareholdings, during a closed subscription if the shareholders voted against or did not participate in the voting on the decision approving such subscription. The preemptive right does not apply to a closed subscription to the existing shareholders provided that such shareholders may each acquire a whole number of shares or securities convertible into shares being placed in an amount proportionate to their existing shareholdings. We must provide shareholders with written notice of their pre-emptive right to purchase shares and the period during which shareholders can exercise their pre-emptive rights. Such period may not be less than 20 or, under certain circumstances, 45 days. We cannot sell the shares or securities convertible into shares which are subject to the pre-emptive rights during this period.

Dividends

        The Joint Stock Companies Law and our charter set forth the procedure for determining the quarterly and annual dividends that we may distribute to our shareholders. We may declare dividends based on our first quarter, six month, nine month or annual results. Dividends are recommended to a shareholders' meeting by a majority vote of the board of directors and approved by the shareholders by a majority vote. A decision on quarterly, six month and nine month dividends must be taken within three months of the end of the respective quarter at the shareholders' meeting; and a decision on annual dividends must be taken at the annual general shareholders' meeting. The dividend approved at the shareholders' meeting may not be more than the amount recommended by the board of directors. Dividends shall be paid up until the end of the year in which the decision to make the payment has been adopted, unless the shareholders' decision provides for a lesser term. Dividends are distributed to holders of our shares as of the record date for the shareholders' meeting approving the dividends. See "—General Shareholders' Meetings—Notice and Participation" below.

        The Joint Stock Companies Law allows dividends to be declared only out of net profits calculated under RAS as long as the following conditions have been met:

•

the charter capital of the company has been paid in full;

•

the value of the company's net assets on the date of the adoption of the decision to pay dividends is not less (and would not become less as a result of the proposed dividend payment) than the sum of the company's charter capital, the company's reserve fund and the difference between the liquidation value and the par value of the issued and outstanding preferred stock of the company;

•

the company has repurchased all shares from shareholders having the right to demand repurchase; and

•

the company is not, and would not become, insolvent as the result of the proposed dividend payment.

Distributions to Shareholders on Liquidation

        Under Russian legislation, liquidation of a company results in its termination without the transfer of rights and obligations to other persons as legal successors. The Joint Stock Companies Law and our charter allows us to be liquidated:

•

by a three-quarters majority vote of a shareholders' meeting; or

•

by a court order.

        Following a decision to liquidate us, the right to manage our affairs would pass to a liquidation commission appointed by a shareholders' meeting. In the event of an involuntary liquidation, the court may assign the duty to liquidate the company to its shareholders. Creditors may file claims within a

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period to be determined by the liquidation commission, but such period must not be less than two months from the date of publication of notice of liquidation by the liquidation commission.

        The Civil Code of the Russian Federation gives creditors the following order of priority during liquidation:

•

individuals owed compensation for injuries, deaths or moral damages;

•

employees and authors of intellectual property;

•

federal and local governmental entities claiming taxes and similar payments to the federal and local budgets and to non-budgetary funds; and

•

other creditors in accordance with Russian legislation.

        Claims of creditors in obligations secured by a pledge of the company's property ("secured claims") are satisfied out of the proceeds of sale of the pledged property prior to claims of any other creditors except for the creditors of the first and second priorities described above, provided that claims of such creditors arose before the pledge agreements in respect of the company's property were made. To the extent that the proceeds of sale of the pledged property are not sufficient to satisfy secured claims, the latter are satisfied simultaneously with claims of the fourth priority creditors as described above.

        The Federal Law on Insolvency (Bankruptcy), however, provides for a different order of priority for creditors' claims in the event of bankruptcy.

        The remaining assets of a company are distributed among shareholders in the following order of priority:

•

payments to repurchase shares from shareholders having the right to demand repurchase;

•

payments of declared but unpaid dividends on preferred shares and the liquidation value of the preferred shares determined by the company's charter, if any; and

•

payments to holders of common and preferred shares.

Liability of Shareholders

        The Civil Code of the Russian Federation and the Joint Stock Companies Law generally provide that shareholders in a Russian joint stock company are not liable for the obligations of a joint stock company and bear only the risk of loss of their investments. This may not be the case, however, when one company is capable of determining decisions made by another company. The company capable of determining such decisions is called an "effective parent." The company whose decisions are capable of being so determined is called an "effective subsidiary." The effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions if:

•

this decision-making capability is provided for in the charter of the effective subsidiary or in a contract between such persons; and

•

the effective parent gives binding instructions to the effective subsidiary.

        Thus, a shareholder of an effective parent is not itself liable for the debts of the effective parent's effective subsidiary, unless that shareholder is itself an effective parent of the effective parent. Accordingly, a shareholder will not be personally liable for our debts or those of our effective subsidiaries unless such shareholder controls our business and the conditions set forth above are met.

        In addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the action or omission of an effective parent only when the effective parent has used the right to give binding instructions, knowing that the

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consequence of carrying out this action would be insolvency of this effective subsidiary. This is the case no matter how the effective parent's capability to determine decisions of the effective subsidiary arises, such as through ownership of voting securities or by contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the effective parent that caused the effective subsidiary to take any action or fail to take any action knowing that such action or failure to take action would result in losses.

Alteration of Capital

Charter Capital Increase

        We may increase our charter capital by:

•

issuing new shares; or

•

increasing the nominal value of previously issued shares.

        A decision on any issuance of shares or securities convertible into shares by closed subscription, or an issuance by open subscription of common shares or securities convertible into common shares constituting 25% or more of the number of issued common shares, requires a three-quarters majority vote of a shareholders' meeting. Otherwise, a decision to increase the charter capital by increasing the nominal value of issued shares requires a majority vote of a shareholders' meeting. In certain circumstances provided in our charter, a decision to increase the charter capital may be taken by our board of directors. In addition, the issuance of shares above the number provided in our charter necessitates a charter amendment, which requires a three-quarters affirmative vote of a shareholders' meeting.

        The Joint Stock Companies Law requires that the value of newly issued shares be determined by the board of directors based on their market value but not less than their nominal value. The price of newly issued shares for existing shareholders exercising their pre-emptive right to purchase shares could be less than the price paid by third parties, but not less than 90% of the price paid by third parties. Fees paid to intermediaries may not exceed 10% of the shares placement price. The board of directors shall value any in-kind contributions for new shares, based on the appraisal report of an independent appraiser.

        Russian securities regulations set out detailed procedures for the issuance and registration of shares of a joint stock company. These procedures require:

•

prior registration of a share issuance with the Federal Service for Financial Markets, or the FSFM;

•

public disclosure of information relating to the share issuance; and

•

following the placement of the shares, registration and public disclosure of the results of the placement of shares.

Charter Capital Decrease; Share Buy-Backs

        The Joint Stock Companies Law does not allow a company to reduce its charter capital below the minimum charter capital required by law, which is 100,000 rubles for an open joint stock company. The Joint Stock Companies Law and our charter require that any decision to reduce our charter capital through the repurchase and cancellation of shares, be made by a majority vote of a shareholders' meeting and through reduction of the nominal value of shares, by a three-quarter majority vote of a shareholders' meeting. Additionally, within 30 days of a decision to reduce our charter capital, we must issue a written notice to our creditors and publish this decision. Our creditors would then have the

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right to demand, within 30 days of such notice or publication or receipt of our notice, early termination or settlement of relevant obligations by us, as well as compensation for damages.

        The Joint Stock Companies Law and our charter allow our shareholders or the board of directors to authorize the repurchase of up to 10% of our shares in exchange for cash. The repurchased shares pursuant to a board decision must be resold at the market price within one year of their repurchase or, failing that, the shareholders must decide to cancel such shares and decrease the charter capital. Repurchased shares do not bear voting rights.

        Shares repurchased pursuant to a decision of our shareholders' meeting to decrease the overall number of shares are cancelled at their redemption.

        The Joint Stock Companies Law allows us to repurchase our shares only if, at the time of repurchase:

•

our charter capital is paid in full;

•

we are not and would not become, as a result of the repurchase, insolvent;

•

the value of our net assets at the time of repurchase of our shares is not less (and would not become less, as a result of the proposed repurchase) than the sum of our charter capital, the reserve fund and the difference between the liquidation value and par value of our issued and outstanding preferred shares; and

•

we have repurchased all shares from shareholders having the right to demand repurchase of their shares in accordance with Russian law, as described immediately below.

        Our subsidiaries are not restricted from purchasing our shares, and our subsidiaries can vote these shares.

        The Joint Stock Companies Law and our charter provide that our shareholders may demand repurchase of all or some of their shares as long as the shareholder demanding repurchase voted against or did not participate in the voting on the decision approving any of the following actions:

•

reorganization;

•

conclusion of a major transaction, as defined under Russian law (i.e., involving assets having value of more than 50% of the balance sheet value of the assets calculated under RAS); or

•

amendment of our charter or approval of a restated version of our charter in a manner which restricts shareholders' rights.

        We may spend up to 10% of our net assets calculated under RAS on the date of the adoption of the decision which gives rise to a share redemption demanded by the shareholders. If the value of shares in respect of which shareholders have exercised their right to demand repurchase exceeds 10% of our net assets, we will repurchase shares from each such shareholder on a pro-rata basis. Repurchase of the shares is at a price agreed on by the board of directors, but shall not be less than the market price.

Registration and Transfer of Shares

        Russian legislation requires that a joint stock company maintains a register of its shareholders. Ownership of our registered shares is evidenced solely by entries made in such register. Any of our shareholders may obtain an extract from our register certifying the number of shares that such shareholder holds. Since May 10, 2000, Registrar NIKoil OJSC has maintained our register of shareholders.

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        The purchase, sale or other transfer of shares is accomplished through the registration of the transfer in the shareholder register, or the registration of the transfer with a depositary if shares are held by a depositary. The registrar or depositary may not require any documents in addition to those required by Russian legislation in order to transfer shares in the register. Refusal to register the shares in the name of the transferee or, upon request of the beneficial holder, in the name of a nominee holder, is not allowed, except in certain instances provided for by Russian legislation, and may be challenged in court.

Reserve Fund

        Russian legislation requires that each joint stock company establish a reserve fund to be used only to cover the company's losses, redeem the company's bonds and repurchase the company's shares in cases when other funds are not available. Our charter provides for a reserve fund of 15% of our charter capital, funded through mandatory annual transfers of at least 5% of our net profits until the reserve fund has reached the 15% requirement.

Disclosure of Information

        Russian securities regulations require us to make the following periodic public disclosures and filings:

•

filing with the FSFM and posting on our website quarterly reports, containing information about us, our shareholders and depositary, the structure of our management bodies, the members of the board of directors, our branches and representative offices, our shares, bank accounts and auditors, important developments during the reporting quarter, and other information about our financial and business;

•

filing with the FSFM and publishing any information concerning material facts and changes in our financial and business activity, including our reorganization, certain changes in the amount of our assets, decisions on share issuances, certain changes in ownership and shareholding as well as shareholder and certain board of directors' resolutions;

•

disclosing information on various stages of share placement, issuance and registration through publication of certain data as required by the securities regulations;

•

disclosing our charter and internal corporate governance documents on our website;

•

disclosing our annual report and annual financial statements prepared in accordance with RAS;

•

filing with the FSFM and posting on our website on a quarterly basis a list of our affiliated companies and individuals; and

•

other information as required by applicable Russian securities legislation.

General Shareholders' Meetings

Procedure

        The powers of a shareholders' meeting are set forth in the Joint Stock Companies Law and in our charter. A shareholders' meeting may not decide on issues that are not included in the list of its competence by the Joint Stock Companies Law and our charter. Among the issues which the shareholders have the power to decide are:

•

charter amendments;

•

reorganization or liquidation;

•

election and removal of members of the board of directors;

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•

determination of the amount of compensation for members of the board of directors;

•

determination of the number, nominal value, class/type of authorized shares and the rights granted by such shares;

•

changes in our charter capital;

•

appointment and removal of our external auditor and of the members of our review commission and counting commission;

•

approval of certain interested party transactions and major transactions;

•

decision on our participation in holding companies, commercial or industrial groups, or other associations of commercial entities;

•

approval of certain internal documents and corporate records;

•

distribution of profits and losses, including approval of dividends;

•

redemption by the company of issued shares in cases provided by the Joint Stock Companies Law; and

•

other issues, as provided for by the Joint Stock Companies Law and our charter.

        Voting at a shareholders' meeting is generally based on the principle of one vote per share of common stock, with the exception of the election of the board of directors, which is done through cumulative voting. Decisions are generally passed by a majority vote of the voting shares present at a shareholders' meeting. However, Russian law requires a three-quarters majority vote of the voting shares present at a shareholders' meeting to approve the following:

•

charter amendments;

•

reorganization or liquidation;

•

major transactions involving assets in excess of 50% of the balance sheet value of the company's assets;

•

determination of the number, nominal value, and category (type) of authorized shares and the rights granted by such shares;

•

repurchase by the company of its issued shares;

•

any issuance of shares or securities convertible into shares of common stock by closed subscription;

•

issuance by open subscription of shares of common stock or securities convertible into common stock, in each case, constituting 25% or more of the number of issued and outstanding shares of common stock; or

•

reduction of the charter capital through reduction of the nominal value of shares.

        The quorum requirement for our shareholders' meetings is met if holders of shares (or their representatives) accounting for more than 50% of the issued voting shares are present. If the 50% quorum requirement is not met, another shareholders' meeting with the same agenda may (and, in case of an annual shareholders' meeting must) be scheduled and the quorum requirement is satisfied if holders of shares (or their representatives) accounting for at least 30% of the issued voting shares are present at that meeting.

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        The annual shareholders' meeting must be convened by the board of directors between March 1 and June 30 of each year, and the agenda must include the following items:

•

election of the members of the board of directors;

•

election of the counting commission;

•

approval of the annual report and the annual financial statements, including the balance sheet and profit and loss statement;

•

approval of distribution of profits, including approval of dividends, and losses, if any;

•

appointment of an independent auditor; and

•

appointment of the members of the review commission.

        A shareholder or group of shareholders owning in the aggregate at least 2% of the issued voting shares may introduce proposals for the agenda of the annual shareholders' meeting and may nominate candidates for the board of directors, counting commission and review commission. Any agenda proposals or nominations must be provided to the company no later than 100 calendar days after the preceding financial year end.

        Extraordinary shareholders' meetings may be called by the board of directors on its own initiative, or at the request of the review commission, the independent auditor or a shareholder or group of shareholders owning in the aggregate at least 10% of the issued voting shares as of the date of the request. The decision by the board of directors to call or reject the call for an extraordinary shareholders' meeting shall be sent to the party that requested the meeting within three days after such a decision was made.

        A general meeting of shareholders may be held in a form of a meeting or by absentee ballot. The form of a meeting contemplates the adoption of resolutions by the general meeting of shareholders through the attendance of the shareholders or their authorized representatives for the purpose of discussing and voting on issues of the agenda, provided that if a ballot is mailed to shareholders for participation at a meeting convened in such form, the shareholders may complete and mail the ballot back to the company without personally attending the meeting. A general meeting of the shareholders by absentee ballot contemplates the determination of collecting shareholders' opinions on issues of the agenda by means of a written poll.

        The following issues cannot be decided by a shareholders' meeting by absentee ballot:

•

election of the members of the board of directors;

•

election of the review commission;

•

approval of a company's independent auditor; and

•

approval of the annual report, the annual financial statements, including balance sheet, profit and loss statement, and any distribution of profits, including approval of annual dividends and losses, if any.

Notice and Participation

        All shareholders entitled to participate in a general shareholders' meeting must be notified of the meeting, whether the meeting is to be held in the form of a meeting or by absentee ballot, no less than 30 days prior to the date of the meeting, and such notification shall specify the agenda for the meeting. However, if it is an extraordinary shareholders' meeting to elect the board of directors, shareholders must be notified at least 70 days prior to the date of the meeting. Only those items that were set out in the agenda to shareholders may be voted upon at a general shareholders' meeting.

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        If a nominal holder of the shares registers in the register of shareholders, then a notification of the shareholders' meeting shall be sent to the nominal holder. The nominal holder must notify its clients in accordance with Russian legislation or an agreement with the client.

        The list of shareholders entitled to participate in a general shareholders' meeting is to be compiled on the basis of data in our shareholders register on the date established by the board of directors, which date may neither be earlier than the date of adoption of the board resolution to hold a general shareholders' meeting nor more than 50 days before the date of the meeting (or, in the case of an extraordinary shareholders' meeting to elect the board of directors, not later than 85 days before the date of the meeting).

        The right to participate in a general meeting of shareholders may be exercised by a shareholder as follows:

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by personally participating in the discussion of agenda items and voting thereon;

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by sending an authorized representative to participate in the discussion of agenda items and to vote thereon;

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by submitting a written ballot reflecting the shareholders' voting on the agenda items; or

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by delegating the right to submit such written ballot to an authorized representative.

Board of Directors

        Our charter provides that our entire board of directors is up for election at each annual general shareholders' meeting. Our board of directors is elected through cumulative voting. Under cumulative voting, each shareholder may cast an aggregate number of votes equal to the number of shares held by such shareholder multiplied by the number of persons to be elected to our board of directors, and the shareholder may give all such votes to one candidate or spread them between two or more candidates. Before the expiration of their term, the directors may be removed as a group at any time without cause by a majority vote of a shareholders' meeting.

        The Joint Stock Companies Law requires at least a five-member board of directors for all joint stock companies, at least a seven-member board of directors for a joint stock company with more than 1,000 holders of voting shares, and at least a nine-member board of directors for a joint stock company with more than 10,000 holders of voting shares. Only natural persons (as opposed to legal entities) are entitled to sit on the board. Members of the board of directors are not required to be shareholders of the company. The actual number of directors is determined by the company's charter or a decision of the shareholders' meeting. Our charter provides that our board of directors consists of at least seven members, which number may be increased pursuant to a decision of the general meeting of shareholders. Currently, our board of directors consists of nine members.

        The Joint Stock Companies Law prohibits a board of directors from acting on issues that fall within the competence of the general shareholders' meeting. Our board of directors has the power to perform the general management of the company, and to decide, among others, the following issues:

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determination of our business priorities;

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approval of our annual plans, including financial plans;

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convening annual and extraordinary shareholders' meetings, except in certain circumstances specified in the Joint Stock Companies Law;

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approval of the agenda for the shareholders' meeting and determination of the record date for shareholders entitled to participate in a shareholders' meeting;

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•

placement of our bonds and other securities in cases specified in the Joint Stock Companies Law;

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determination of the price of our property and of our securities to be placed or repurchased, as provided for by the Joint Stock Companies Law;

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repurchase of our shares, bonds and other securities in certain cases provided for by the Joint Stock Companies Law;

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appointment and removal of our President and the members of our management board;

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recommendations on the amount of the dividend and the payment procedure thereof;

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recommendations on the amount of remuneration and compensation to be paid to the members of our review commission and on the fees payable for the services of an independent auditor;

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the use of our reserve fund and other funds;

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approval of our internal documents, except for those documents whose approval falls within the competence of our shareholders or the president;

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the creation and liquidation of branches and representative offices;

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approval of major and interested party transactions in certain cases provided for by the Joint Stock Companies Law;

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increasing our charter capital by issuing additional shares within the limits of the authorized charter capital, except in certain circumstances specified in our charter;

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approval of our share registrar and the terms of the agreement with it; and

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other issues, as provided for by the Joint Stock Companies Law and our charter.

        Our charter generally requires a majority vote of the directors present for an action to pass, with the exception of actions for which Russian legislation requires a unanimous vote or a majority vote of the disinterested and independent directors, as described therein. A board meeting is considered duly assembled and legally competent to act when a majority of elected directors is present.

        Our internal regulation "On the Board of Directors of OJSC Mobile TeleSystems," or the Regulation, was approved by the annual shareholders' meeting on October 3, 2008. In accordance with clause 2.2 of the Regulation, the members of the board of directors have the right to:

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receive information regarding our operations;

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propose issues to be discussed by the board of directors;

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review the minutes of the board of directors meetings;

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request to include in the minutes of the meetings their personal opinion concerning issues on the agenda and decisions made with respect thereto; and

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receive a remuneration and/or compensation of expenses related to the execution of their duties as members of the board of directors in accordance with decisions of the general shareholders' meeting.

        In accordance with clause 2.3 of the Regulation, the members of the board of directors must:

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act in our interests;

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execute their duties in a confident and scrupulous manner;

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act within their rights and in accordance with the purposes of the board of directors;

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•

not distribute confidential information concerning us and protect such information from unlawful and improper use and publishing, and not use such confidential information in their own or third parties' commercial purposes;

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participate in the work of the board of directors;

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participate in the voting process during the board of directors meetings;

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complete the tasks assigned by the board of directors;

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evaluate the risks and consequences of the decisions made;

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inform us on a timely basis about their participation in the management of other companies and changes in such participation;

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restrain from voting on issues of personal interest;

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inform the board of directors about future deals in which they may have a personal interest;

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disclose information about the holding, disposal or acquisition of our shares and other securities;

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restrain from actions, which could lead to a conflict between their personal and our interests; and

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perform other responsibilities as provided by our charter and the Regulation.

Interested Party Transactions

        Under the Joint Stock Companies Law, certain transactions defined as "interested party transactions" require approval by disinterested directors or shareholders of the company. "Interested party transactions" include transactions involving a member of the board of directors or member of any executive body of the company (including the company's chief executive office and/or the company's managing organization), any person that owns, together with any affiliates, at least 20% of a company's issued voting shares or any person who is able to direct the actions of the company, if that person and/or that person's spouse, parents, children, adoptive parents or children, brothers or sisters and/or their affiliates, is/are:

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a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary;

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the owner of at least 20% of the issued shares of a legal entity that is a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary; or

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a member of the board of directors or a member of any management body of a company that is a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary, or a member of the board of directors or of any management body of a management organization of such a company.

        The Joint Stock Companies Law requires that an interested party transaction by a company with more than 1,000 shareholders be approved by a majority vote of the independent directors of the company who are not interested in the transaction. For purposes of this rule, an "independent director" is a person who is not, and within the year preceding the decision to approve the transaction was not, a general director/president, a member of any executive body or an affiliate of the company, or a member of the board of directors or any management body of the company's management organization. Additionally, such person's spouse, parents, children, adoptive parents or children, brothers or sisters may not, and within the year preceding the date of the decision to approve the transaction did not, occupy positions in the executive bodies of the company or positions on the board of directors or of any management body of the company's management organization. For companies

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with 1,000 or fewer shareholders, an interested party transaction must be adopted by a majority vote of the directors who are not interested in the transaction if the number of these directors is sufficient to constitute a quorum.

        Approval by a majority of shareholders who are not interested in the transaction is required if:

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the value of such transaction or a number of interrelated transactions is 2% or more of the balance sheet value of the company's assets determined under RAS;

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the transaction or a number of interrelated transactions involves the issuance, by subscription, of voting shares or securities convertible into voting shares, or a secondary market sale of such securities, in an amount exceeding 2% of the company's issued voting stock;

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the number of directors who are not interested in the transaction is not sufficient to constitute a quorum; or

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all the members of the board of directors of the company are interested parties, or none of them is an independent director.

        Approval by a majority of shareholders who are not interested in the transaction may not be required, until the next annual shareholders' meeting, for an interested party transaction if such transaction is substantially similar to transactions concluded by the company and the interested party in the ordinary course of business before such party became an interested party with respect to the transaction.

        The approval of interested party transactions is not required in the following instances:

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the company has only one shareholder that simultaneously performs the functions of the executive body of the company;

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all shareholders of the company are deemed interested in such transactions;

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the transactions arise from the shareholders executing their preemptive rights to purchase newly issued shares of the company;

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the transactions arise from the repurchase, whether mandatory or not, by the company of its issued shares;

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merger transactions; or

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the transactions that are mandatory for the company pursuant to Russian law and must be concluded on the basis of fixed prices and tariffs adopted by a competent state body.

Major Transactions

        The Joint Stock Companies Law defines a "major transaction" as a transaction, or a number of interrelated transactions, involving the acquisition or disposal, or a possibility of disposal (whether directly or indirectly) of property having a value of 25% or more of the balance sheet value of the assets of a company determined under RAS, with the exception of transactions conducted in the ordinary course of business or transactions involving the placement of common stock, or securities convertible into common stock. Major transactions involving assets having a value ranging from 25% to 50% of the balance sheet value of the assets of a company require unanimous approval by all members of the board of directors or, failing to receive such approval, a simple majority vote of a shareholders' meeting. Major transactions involving assets having a value in excess of 50% of the balance sheet value of the assets of a company require a three-quarters majority vote of a shareholders' meeting.

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Change in Control

Anti-takeover Protection

        Russian legislation requires the following:

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A person intending to acquire more than 30% of an open joint stock company's ordinary shares and voting preferred shares (including, for such purposes, shares already owned by such person and its affiliates), will be entitled to make a public tender offer to other holders of such shares or securities convertible into such shares.

•

A person that has acquired more than 30% of an open joint stock company's ordinary shares and voting preferred shares (including, for such purposes, shares already owned by such person and its affiliates) will, except in certain limited circumstances, be required to make, within 35 days of acquiring such shares, a public tender offer for other shares of the same class and for securities convertible into such shares, at the price which is not less than the price determined based on a weighted average market price of the shares over the six month period before the filing of the offer with the FSFM as described below, if the shares are publicly traded, or on a price supplied by an independent appraiser if the shares have no or insufficient trading history. The public tender offer price may not be less than the highest price at which the offeror or its affiliated persons purchased or undertook to purchase the relevant securities over the six month period before the offer was sent to the company. From the moment of acquisition of more than 30% (or 50% and 75% in cases referred to in the next sentence) of the shares until the date the offer was sent to the company, the person making the offer and its affiliates will be able to register for quorum purposes and vote only 30% of the company's ordinary shares and voting preferred shares (regardless of the size of their actual holdings). These rules also apply to acquisitions resulting in a person or a group of persons owning more than 50% and 75% of a company's issued ordinary shares and voting preferred shares.

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A person that as a result of an offer described in either of the preceding paragraphs becomes (individually or with its affiliates) the owner of more than 95% of the company's ordinary shares and voting preferred shares, must buy out the remaining shares of the company as well as other securities convertible into such shares upon request of the holders of such shares or other securities, and may require such holders to sell such shares and other securities, at the price determined in the manner described in the preceding paragraph but not less than the highest price of the preceding acquisitions by the offeror.

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An offer of the kind described in either of the preceding three paragraphs must be accompanied by a bank guarantee of payment. If the company is publicly traded, prior notice of the offer must be filed with the FSFM; otherwise, notice must be filed with the FSFM no later than the date of the offer. The FSFM may order amendments to the terms of the offer (including price) in order to bring them into compliance with the rules.

•

Once such an offer has been made, competing offers for the same securities can be made by third parties and, in certain circumstances, acceptance of the initial offer may be withdrawn by the security holders who choose to accept such competing offer. From the making of such an offer until 20 days after its expiry (which period may in certain cases exceed 100 days) the company's shareholders' meeting will have the sole power to make decisions on charter capital increase, issuance of securities, approval of certain major transactions, and on certain other significant matters.

        The above rules may be supplemented through FSFM rulemaking, which may result in a wider, narrower or more specific interpretation of these rules by the government and judicial authorities, as well as by market participants.

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Approval of the Federal Antimonopoly Service

        Pursuant to the Federal Law on Competition, the Federal Antimonopoly Service must approve in advance acquisitions of voting capital stock of a joint stock company involving (1) companies with a combined value of assets or combined annual revenues under RAS exceeding a certain threshold, or (2) companies registered as having more than a 35% share of a certain commodity market, and which would result in a shareholder (or a group of affiliated shareholders) holding more than 25%, 50% or 75% of the voting capital stock of such company, or in a transfer between such companies of assets or rights to assets, the value of which exceeds a certain amount.

Strategic Industries Law

        Pursuant to the Strategic Foreign Investment Law, investments resulting in a foreign entity or a group of entities receiving control over a company with strategic importance for the national defense and security of the Russian Federation, or a Strategic Company, require prior approval from the state authorities. The procedure for issuing such consent involves a special governmental commission on control of foreign investments, or the Governmental Commission, which was established by the Resolution of the Government of Russia dated July 6, 2008 as the body responsible for granting such consents, and the Federal Antimonopoly Service, which is authorized to process applications for consent from foreign investors. "Control" means an ability to determine, directly or indirectly, decisions taken by a Strategic Company, whether through voting at the general shareholders' (participants') meeting of the Strategic Company, participating in the board of directors or management bodies of the Strategic Company, or acting as the external management organization of the Strategic Company, or otherwise. As a result, "control" will generally be deemed to exist if an entity or a group of entities acquires more than 50% of the shares (or participation interest in share capital) of a Strategic Company, or if through contract or securities with voting rights it is able to appoint more than 50% of the members of the board of directors or of the management board of a Strategic Company.

        Furthermore, if a foreign entity or group of entities holding securities of a Strategic Company or other entity that exercises control over this company becomes a direct or indirect holder of voting shares in an amount that is considered to give it direct or indirect control over this company in accordance with the Strategic Foreign Investment Law due to a change in allocation of voting shares pursuant to the procedures provided by Russian law (e.g., as a result of a buy-back of its shares by the relevant company), then such entity or group of entities will have to apply for state approval of its control within three months after it received such control.

        In addition, foreign investors are required to notify this authorized governmental agency about any transactions undertaken by them resulting in the acquisition of 5% or more of the charter capital of strategically important companies.

        On April 8, 2009, MTS OJSC and two of our subsidiaries, Dagtelecom LLC and Sibintertelecom CJSC, were added to the register of companies occupying a dominant position on the market with a market share exceeding 25% for the purpose of the Strategic Foreign Investment Law.

        See also "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—It is not yet clear how the new Strategic Foreign Investment Law will affect us and our foreign shareholders."

Disclosure of Ownership

        Under Russian law, a holder of our common shares is required to publicly disclose an acquisition of 5% or more of the outstanding common shares of the company, as well any change in the amount of common shares held by such holder, if as a result of such change the percentage of common shares held by the holder becomes greater or lesser than 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the outstanding common shares of the company.

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Notification of Foreign Ownership

        Foreign persons registered as individual entrepreneurs in Russia who acquire shares in a Russian joint stock company and foreign companies that acquire shares in a Russian joint stock company may need to notify the Russian tax authorities within one month following such acquisition. However, the procedure for notifying the Russian tax authorities by foreign companies that are not registered with such tax authorities at the time of their share acquisition remains unclear.

C.    Material Contracts

        The following is a description of contracts that we and/or our subsidiaries are a party to and that are or may be material to our business:

Syndicated Loans and Credit Facilities

        On December 30, 2008 we entered into a credit agreement with Gazprombank for €300.0 million with an interest rate of 12.0% per annum. Under the agreement, we will also pay a commission of 2% per annum on the outstanding amount of the facility on a monthly basis. Gazprombank is entitled to revise the interest rate at any time during the term of the agreement. The loan is repayable in three equal installments in December 2009, December 2010 and June 2011, respectively. The loan is subject to certain covenants and restrictions including, inter alia, a prohibition on using the proceeds for refinancing or stock repurchases. We believe that as of December 31, 2008, we were in compliance with all existing covenants. As of December 31, 2008, the balance outstanding under the loan was $423.2 million.

        On December 23, 2008, we signed a credit facility agreement with European Bank for Reconstruction and Development, or EBRD, for €225.0 million. The funds will be used to finance our investing activities in Russia, Uzbekistan and Turkmenistan. The facility will be available to us in the period from March 1, 2009 to December 31, 2009 in two tranches of €115.0 million and €110.0 million bearing interest of EURIBOR +6.1% and EURIBOR +5.9%, respectively. The margin for the facility can be increased at the sole discretion of EBRD. Pursuant to the loan agreement, we will pay a commitment fee equal to 1.5% per annum on the amount of each tranche that has not been disbursed to us or cancelled, as well as an upfront fee in an amount equal to 1.65% of the aggregate principal amount of the first tranche and up to 1.65% of the aggregate principal amount of the second tranche. The first tranche of the facility will be repayable on a biannual basis in equal installments over seven years and the second tranche will be repayable on a biannual basis in equal installments over five years. The loan is subject to certain covenants, including, inter alia, covenants restricting our ability to convey or dispose of certain of our properties and assets to another person. As of December 31, 2008, the balance outstanding under the loan was $nil.

        On August 1, 2008, we entered into a credit facility agreement with Skandinaviska Enskilda Banken AB for up to $270.3 million. We used these funds to acquire telecommunication equipment from Ericsson AB. The facility bears interest of LIBOR +0.225% per annum. A management fee of $0.5 million was paid in accordance with the agreement and capitalized. The commitment fee is 0.0625%, calculated on a daily basis on such portion of the total commitments not yet distributed. The loan is subject to certain covenants, including, inter alia, covenants restricting our ability to convey or dispose of certain of our properties and assets to another person. We believe that as of December 31, 2008, we were in compliance with all existing covenants. The facility is repayable on a biannual basis in equal installments over nine years. As of December 31, 2008, the balance outstanding under the credit facility was $159.0 million.

        On April 21, 2006, we signed a syndicated loan facility with several international financial institutions, including: The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen Zentralbank Oesterreich AG, Sumitomo Mitsui Banking

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Corporation Europe Limited. The facility allows us to borrow up to $1,330.0 million and is available in two tranches of $630.0 million and $700.0 million. We used the proceeds for general corporate purposes, including acquisitions and refinancing of existing indebtedness. The first tranche bears interest of LIBOR+0.80% per annum and matures on May 20, 2009. The second tranche matures in April 2011, bears interest of LIBOR+1.00% per annum within the first three years and LIBOR+1.15% per annum thereafter and is repayable in 13 equal quarterly installments, commencing in April 2008. In addition, we paid an arrangement fee of 0.10% of the original loan facility amount and are obligated to pay an agency fee in the amount of $0.05 million each year for the term of the loan facility. We also pay a commitment fee each year for the duration of the loan facility in the amount of 0.40% on the undrawn portion. The debt issuance costs in the amount of $13.4 million were capitalized. As of December 31, 2008, the outstanding balance under the loan was $1,168.5 million. The syndicated loan facility is subject to certain restrictive covenants including, but not limited to, certain financial ratios. We believe that as of December 31, 2008, we were in compliance with all existing covenants.

Notes Indentures and Guarantees

Eurobonds

        We completed a $400.0 million notes offering through Mobile TeleSystems Finance S.A. on January 30, 2003. The 9.75% notes were issued under an indenture dated January 30, 2003. These notes were fully and unconditionally guaranteed by us and matured on January 30, 2008. Interest on the notes was payable in arrears on January 30 and July 30 of each year, commencing on July 30, 2003. The net proceeds from this offering of $396.1 million were used for general corporate purposes, including the acquisition of 57.7% and 26.0% stakes in UMC in March and June 2003, respectively, and other acquisitions of mobile operators in Russia. The notes were listed on the Luxembourg Stock Exchange. These notes were fully paid in January 2008.

        We completed a $400.0 million notes offering through Mobile TeleSystems Finance S.A. on October 14, 2003. The 8.375% notes were issued under an indenture dated October 14, 2003. Interest on the notes is payable in arrears on April 14 and October 14 of each year, commencing on April 14, 2003. These notes are guaranteed by us and mature on October 14, 2010. They are listed on the Luxembourg Stock Exchange. The net proceeds from this offering of $395.4 million were used for general corporate purposes, including dividend payments, capital expenditures and repayment of existing indebtedness incurred in connection with our acquisitions of mobile operators in Russia and Ukraine.

        We completed a $400.0 million notes offering through Mobile TeleSystems Finance S.A. on January 28, 2005. The 8.00% notes were issued under an indenture dated January 28, 2005. Interest on the notes is payable in arrears on January 28 and July 28 of each year, commencing on July 28, 2005. These notes are guaranteed by us and mature on January 28, 2012. They are listed on the Luxembourg Stock Exchange. The net proceeds from this offering of $398.9 million were used to repay a $140 million loan we received from Credit Suisse First Boston International in October 2004 for general corporate purposes. We used the remaining net proceeds from the offering for general corporate purposes, including acquisitions and increasing our interests in certain of our subsidiaries.

        Each of the indentures sets forth various occurrences, each of which would constitute an event of default. If an event of default, other than an event of default arising from events of bankruptcy, insolvency or bankruptcy-related reorganization, occurs and is continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding notes may accelerate the maturity of all of the notes. After acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of the outstanding notes may, under circumstances set forth in the indenture, rescind the acceleration if all events of default, other than the nonpayment of principal of the notes which have become due solely because of the acceleration, have been cured or waived as

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provided in the indenture. If an event of default arising from events of our bankruptcy, insolvency or bankruptcy-related reorganization occurs and is continuing, then the principal of, and accrued interest on, all of the notes will automatically become immediately due and payable without any declaration or other act on the part of the holders of notes or the trustee.

        Each of the indentures contains covenants limiting: (a) the ability of the issuer, us and our subsidiaries to incur debt; (b) the ability of the issuer, us and our subsidiaries to create liens; (c) the ability of the issuer, us and our subsidiaries to lease properties sold or transferred by us; (d) our ability to enter into loan facilities with affiliates; (e) our ability to merge or consolidate with another person or convey our properties and assets to another person; and (f) our ability to sell or transfer any of our or our subsidiaries' GSM licenses for the Moscow and St. Petersburg license areas, the GSM license for the Krasnodar license area, and UMC's licenses for Ukraine.

        In addition, if we experience certain types of mergers, consolidations or other changes in control, noteholders will have the right to require us to redeem the notes at 101% of their principal amount, plus accrued interest. We are also required to take all commercially reasonable steps necessary to maintain a rating of the notes from Moody's or Standard & Poor's. The notes also have cross default provisions with publicly traded debt issued by Sistema.

        If we fail to meet these covenants, after certain notice and cure periods, the noteholders can accelerate the debt to be immediately due and payable. We believe that we were in compliance with all restrictive covenant provisions as of December 31, 2008.

        Pursuant to the guarantees contained in each indenture, we fully and unconditionally guaranteed all payments of principal and interest on the notes. These guarantees are our general unsecured obligation, senior to all our existing and future subordinated obligations, equal to all our existing and future unsecured obligations, and effectively junior to all our existing and future secured obligations and all existing and future obligations of our subsidiaries.

Ruble Bonds

        In 2008, we undertook three ruble bond offerings pursuant to a prospectus and decision on issuance dated December 29, 2007.

        The first offering of RUR10.0 billion notes (equivalent to $423.9 million as of the date of the transaction) was completed on June 24, 2008. We are required to make interest payments on the notes semi-annually in arrears in December and June of each year, commencing on December 23, 2008. The notes carry a coupon of 8.70% per annum during the two years ending June 22, 2010. Sequential coupons will be set by us. The notes mature on June 12, 2018. As of December 31, 2008, the notes payable balance for this issue amounted to $291.6 million. In December 2008, we performed several transactions with respect to the notes, as described in Note 11 to our audited consolidated financial statements.

        The second offering of RUR10.0 billion notes (equivalent to $371.5 million as of the date of the transaction) was completed on October 23, 2008. Of the notes issued, RUR2.5 billion (equivalent to $92.8 million as of the date of transaction) were purchased in the initial placement by our wholly-owned subsidiary, Bastion LLC. We are required to make interest payments on the notes semi-annually in arrears in April and October of each year, commencing on April 23, 2009. The notes carry a coupon of 14.01% per annum during the eighteen month period ending April 22, 2010. Sequential coupons will be set by us. The notes mature on October 17, 2013. As of December 31, 2008, the notes payable balance for this issue amounted to $255.3 million.

        The third offering of RUR10.0 billion notes (equivalent to $365.6 million as of the date of the transaction) was completed on October 28, 2008. Of the notes issued, RUR2.5 billion (equivalent to $91.4 million as of the date of transaction) were purchased in the initial placement by our wholly-

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owned subsidiary, Bastion LLC. We are required to make interest payments on the notes semi-annually in arrears in April and October of each year, commencing on April 28, 2009. The notes carry a coupon of 14.01% per annum during the eighteen month period ending April 27, 2010. Sequential coupons will be set by us. The notes mature on October 20, 2015. As of December 31, 2008, the notes payable balance for this issue amounted to $255.3 million.

        Each of the three ruble-denominated bonds is listed on MICEX and is fully and unconditionally guaranteed by MTS-Capital LLC. In addition, each series of notes is subject to a put option in 2010 following the expiration of the initial coupon and the announcement by us of the new coupon. The proceeds from the three offerings were primarily used for general corporate purposes, including dividend payments, capital expenditures and repayment of existing indebtedness.

        The decision on issuance governing the notes contains certain covenants that, inter alia, limit our ability to delist the notes from MICEX and delay the coupon payments. If we fail to meet the covenants contained in the decision on issuance governing our ruble-denominated notes, after certain notice and cure periods, the noteholders can accelerate the debt to be immediately due and payable. We believe that we were in compliance with all restrictive covenant provisions as of December 31, 2008.

D.    Exchange Controls

        The Federal Law on Currency Regulation and Currency Control which came into effect on June 18, 2004 sets forth certain restrictions on settlements between residents of Russia with respect to operations involving foreign securities (including ADSs), including requirements for settlement in Russian rubles.

Repatriation of Export Proceeds

        Russian companies must repatriate 100% of their receivables from the export of goods and services (with a limited number of exceptions concerning, in particular, certain types of secured financing).

Restrictions on the remittance of dividends, interest or other payments to non-residents

        The Federal Law on Foreign Investments in the Russian Federation of July 9, 1999 specifically guarantees foreign investors the right to repatriate their earnings from Russian investments. However, the evolving Russian exchange control regime may materially affect your ability to do so.

        Currently, ruble dividends on common shares may be converted into U.S. dollars without restriction. However, the ability to convert rubles into U.S. dollars is also subject to the availability of U.S. dollars in Russia's currency markets. Although there is an existing market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the further development of this market is uncertain.

E.    Taxation

Certain Russian Tax Consequences

        The following discussion describes the material Russian corporate income tax and personal income tax consequences to you if you are a U.S. holder of ADSs and a resident of the United States for purposes of the United States–Russia income tax treaty and are fully eligible for benefits under the United States–Russia income tax treaty. Subject to certain provisions of the United States–Russia income tax treaty relating to limitations on benefits, a U.S. resident under the treaty is generally defined as a person liable, under the laws of the United States, to U.S. tax (other than taxes with respect to only of income from sources in the United States or capital situated therein) by reason of your domicile, residence, citizenship, place of incorporation, or any other similar criterion (and, for income derived by a partnership, trust or estate, residence is determined in accordance with the

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residence of the person liable to tax with respect to such income). The treaty provides for a procedure to resolve matters where a resident of the United States qualifies as a Russian tax resident under Russian domestic rules. The treaty also provides for the non-application of treaty benefits to certain types of entities.

        Additionally, the benefits under the United States–Russia income tax treaty discussed in this document generally are not available to U.S. persons who hold ADSs in connection with the conduct of a business in the Russian Federation through a permanent establishment as defined in the United States–Russia income tax treaty. Subject to certain exceptions, a U.S. person's permanent establishment under the United States–Russia income tax treaty is a fixed place of business through which such person carries on business activities in the Russian Federation (generally including, but not limited to, a place of management, a branch, an office and a factory). Under certain circumstances, a U.S. person may be deemed to have a permanent establishment in the Russian Federation as a result of activities carried on in the Russian Federation through agents of the U.S. person. This summary does not address the treatment of holders described in this paragraph.

        Treaty benefits may be potentially available to U.S. tax residents that are not subject to limitations on treaty benefits under the treaty, do not operate through a permanent establishment in Russia and are foreign legal entities (i.e., a legal entity or organization in each case not organized under Russian law) or individuals not considered Russian tax residents under Russian law. Under current Russian law, the Russian tax residency for individuals is generally determined based on the number of days a person spends in Russia in a 12-month period. While the current version of the law specifies that an individual present in Russia for an aggregate period of 183 days in any consecutive 12-month period will be considered as a tax resident, exactly how to apply the 12-month rule is the subject of debate and is not entirely clear. The Ministry of Finance of the Russian Federation has issued several letters implying that the final tax status of an individual taxpayer shall still be defined for a whole calendar year by counting the days spent in Russia within the relevant calendar year. Accordingly, the approach used, in practice, to determine the tax residence of an individual for a given tax year (calendar year) remains the same as under the previous legislation i.e., to be considered a Russian tax resident, the taxpayer should spend at least 183 days in Russia in a calendar year.

        The following discussion is based on:

•

Russian tax legislation; and

•

the United States–Russia income tax treaty (and judicial and administrative interpretations thereof by the Russian authorities);

all as in effect on the date of this document. All of the foregoing is subject to change, possibly on a retroactive basis, after the date of this document. This discussion is also based, in part, on representations of the depositary, and assumes that each obligation in the deposit agreement and any related agreements will be performed in accordance with its terms. The discussion with respect to Russian legislation is based on our understanding of current Russian law and Russian tax rules, which are subject to frequent change and varying interpretations.

        The following discussion is not intended as tax advice to any particular investor. It is also not a complete analysis or listing of all potential Russian corporate income and personal income tax consequences to you of ownership of ADSs. We urge you to consult your own tax adviser regarding the specific Russian tax consequences of the ownership and disposition of ADSs under your own particular factual circumstances.

Specific uncertainties associated with the tax treatment of ADS holders

        The Russian tax rules in relation to ADS holders (that would affect U.S. holders) are characterized by significant uncertainties and limited interpretive guidance. Russian tax authorities have provided

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limited guidance regarding the treatment of ADS arrangements, and there can be no certainty as to how the Russian tax authorities will ultimately treat those arrangements. In a number of clarifications, the Russian Ministry of Finance stated that ADS holders must be treated as the beneficial owners of income from the underlying shares for purposes of the double tax treaty provisions applicable to taxation of dividend income from the underlying shares. However, double tax treaty relief is available only if the tax treaty residence of the holder is duly confirmed. It is currently unclear whether depositories will be willing or able to provide residency certificates for ADS holders or implement procedures for holders to benefit from applicable tax treaties. Thus, while a U.S. holder may technically be entitled to benefit from the provisions of the United States–Russia income tax treaty, in practice such relief may be difficult or impossible to obtain.

        If the Russian tax authorities were not to treat U.S. holders as the beneficial owners of income from the underlying shares, then the benefits discussed below regarding the United States–Russia income tax treaty would not be available to U.S. holders. Russian tax law and procedures are also not well developed, and local tax inspectors have considerable autonomy and often interpret tax rules without regard to the rule of law. Both the substantive provisions of Russian tax law and the interpretation and application of those provisions by the Russian tax authorities may be subject to more rapid and unpredictable change than in jurisdictions with more developed capital markets.

Taxation of Dividends

        Dividends paid to U.S. holders generally will be subject to Russian withholding tax at a 15% rate. The tax burden may be reduced to 5% or 10% under the United States–Russia income tax treaty for eligible U.S. holders; a 5% rate may potentially apply for U.S. holders who are legal entities owning 10% or more of the company's voting shares, and a 10% rate applies to dividends paid to eligible U.S. holders in other cases, including dividend payments to individuals and legal entities owning less than 10% of the company's voting shares. See also "—United States–Russia Income Tax Treaty Procedures."

        Notwithstanding the foregoing, treaty relief may not be available to U.S. holders of ADSs. In a number of clarifications, the Ministry of Finance expressed an opinion that ADS holders (rather than the depositary) should be treated as the beneficial owners of dividends for the purposes of the double tax treaty provisions applicable to taxation of dividend income from the underlying ordinary shares, provided that the tax residencies of the ADS holders are duly confirmed and information on the number of shares and data on the beneficiaries is available in the appropriate form. However, in the absence of any specific provisions in the Russian tax legislation with respect to the concept of tax treaty beneficial ownership and taxation of income of beneficial owners, it is unclear how the Russian tax authorities and courts would ultimately treat the ADS holders in this regard. Moreover, from a practical perspective, it may not be possible for the depositary to collect residence confirmations from all ADS holders and submit such information to us and, in addition, we may be unaware of the exact amount of income payable to each holder.

        Therefore, with respect to legal entities or organizations who are U.S. holders, we may be obligated to withhold income tax at a rate of 15% from dividend payments made to the depositary, unless prior to making such dividend payments to the depositary, we are provided with confirmation that U.S. holders are beneficial owners of dividends within the meaning of the United States–Russia income tax treaty and all administrative requirements for claiming treaty benefits are met. Although non-resident holders of ADSs may apply for a refund of a portion of the tax withheld under an applicable tax treaty, the procedure to do so may be time consuming and no assurance can be given that the Russian tax authorities will grant a refund. See "—United States–Russia Income Tax Treaty Procedures."

        With respect to individuals who are U.S. holders of ADSs and who are Russian tax non-residents, we may also be obligated to withhold income tax at the rate of 15% from dividend payments made to

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the depositary. Where withholding of personal income tax is not performed, individuals who are U.S. holders of ADSs will then be required to submit an annual personal tax return to the Russian tax authorities and pay Russian income tax at a rate of 15% as under Russian law an individual should report on his or her tax liabilities in case the relevant tax was due but not withheld by a tax agent from the relevant payment. When submitting the tax return, individuals who are U.S. holders may claim an application of the reduced rates of withholding tax established by the relevant treaty, provided that the procedures described in "—United States–Russia Income Tax Treaty Procedures" are complied with. Obtaining the respective approvals from the tax authorities may be time-consuming and burdensome.

        If the appropriate documentation has not been provided to us before the start of the payment of dividends by us (i.e., before the second half of August) date, we will withhold tax at the full rate, and U.S. holders that are legal entities qualifying for a reduced rate under the United States–Russia income tax treaty then may file claims for refund within three years with the Russian tax authorities.

        For individuals claiming treaty relief, the documents substantiating the right for treaty benefits should be submitted to the Russian tax authorities within one year after the end of the year to which these benefits relate. In practice, where withholding is performed, the tax authorities may refuse to refund or credit the 15% tax withheld from payment of dividends to the depositary and, therefore, it is possible that individuals who are U.S. holders may be subject to up to a 30% effective tax rate (general tax rate for Russian tax non-residents) on their share of dividends.

Taxation of Capital Gains

Legal entities and Organizations

        Generally, capital gains arising from the sale, exchange or other disposition of securities by legal entities or organizations that are non-resident holders should not be subject to tax in Russia if immovable property located in Russia constitutes 50% or less of our assets. If more than 50% of our assets were to consist of immovable property located in Russia, legal entities or organizations that are non-resident holders of the securities should be subject to a 20% withholding tax on the gross proceeds from the sale, exchange or other disposition of securities or 24% withholding tax on the difference between the sales, exchange or other disposition price and the acquisition costs of the ADSs, determined in accordance with Russian tax deductibility rules. The corporate income tax should decrease from 24% to 20% starting from January 1, 2009.

        However, an exemption applies if immovable property located in Russia constitutes more than 50% of our assets and the securities are traded on a foreign stock exchange. In that case, the proceeds from the sale of securities on that foreign stock exchange shall not be deemed to be income from sources in Russia, and accordingly, will not be subject to taxation in Russia. The determination of whether more than 50% of our assets consist of immovable property located in Russia is inherently factual and is made on an on-going basis and the relevant Russian legislation and regulations in this respect are not entirely clear. Hence, there can be no assurance that immovable property owned by us and located in Russia does not currently and will not constitute more than 50% of our assets as at the date of the sale of ADSs by non-residents.

        Where the ADSs are sold by legal entities or organizations to persons other than a Russian company or a foreign company or an organization with a registered permanent establishment in Russia, even if the resulting capital gain is considered taxable in Russia, there is currently no mechanism under which the purchaser will be able to withhold the tax and remit it to the Russian budget.

        Under the United States–Russia income tax treaty, capital gains from the sale of shares and/or ADSs by eligible U.S. holders should be relieved from taxation in Russia, unless 50% or more of our assets (the term "fixed assets" is used in the Russian version of the treaty) were to consist of immovable property located in Russia.

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Individuals

        The taxation of the income of tax non-resident individuals depends on whether this income is received from Russian or non-Russian sources. Russian tax law considers the place of sale as an indicator of source. Accordingly, the sale of securities outside of Russia by individuals who are non-resident holders should not be considered Russian source income and, therefore, should not be taxable in Russia. However, Russian tax law gives no clear indication as to how the place of sale of securities should be defined in this respect. Therefore, the Russian tax authorities may have a certain amount of flexibility in concluding whether a transaction is in Russia or out of Russia.

        The sale, exchange or other disposal of the shares and ADSs by non-resident individual holders in Russia will be considered Russian source income and will be subject to tax at a rate of 30% on the difference between the sales price and the acquisition costs of such securities, as well as other documented expenses, such as depositary expenses and broker fees, among others, defined by the tax rules.

        Under Russian law, the acquisition costs and related expenses can be deducted at the source of payment if the sale was made by a non-resident holder through a licensed Russian broker, trust manager or other person that carries out operations under agency or commission agreements, or other agreements in favor of a taxpayer. Such party (as defined above) should also act as a tax agent and withhold the applicable tax. Such tax agent will be required to report to the Russian tax authorities the amount of income realized by the non-resident individual and tax withheld upon the sale of the securities.

        Otherwise, if the sale is made to individuals but not through a tax agent, generally no withholding needs to be made and the non-resident holder will have an obligation to file a tax return, report his income realized and apply for a deduction of acquisition expenses (which includes filing of support documentation). Although Russian tax law imposes tax agent responsibility only on professional trustees, brokers or dealers, in practice, the tax authorities may require Russian legal entities and organizations or foreign companies with any registered presence in Russia that are not professional trustees, dealers or brokers to act as tax agents and withhold the applicable tax when purchasing securities from non-resident individuals.

        Under the United States–Russia income tax treaty, capital gains from the sale of the ADSs by eligible U.S. holders should be relieved from taxation in Russia, unless 50% or more of our assets (the term "fixed assets" is used in the Russian version of the United States–Russia Tax Treaty) were to consist of immovable property located in Russia. If this 50% threshold is not met, individuals who are U.S. holders may seek to obtain the benefit of the United States–Russia income tax treaty in relation to capital gains resulting from the sale, exchange or other disposition of the ADSs.

        In order to apply the provisions of relevant double tax treaties, the individual holders should receive clearance from the Russian tax authorities as described below. See "—United States–Russia Income Tax Treaty Procedures "below.

United States–Russia Income Tax Treaty Procedures

        The Russian Tax Code does not contain a requirement that a non-resident holder that is a legal entity or organization must obtain tax treaty clearance from the Russian tax authorities prior to receiving any income in order to qualify for benefits under an applicable tax treaty. However, a non-resident legal entity or organization seeking to obtain relief from or reduction of Russian withholding tax under a tax treaty must provide to a Russian company or foreign company or organization acting through its Russian registered presence, which is a tax agent (i.e., the entity paying income to a non-resident) a confirmation of its tax treaty residence that complies with the applicable requirements and a notarized Russian translation attached to it in advance of receiving the relevant

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income. The tax residency confirmation needs to be renewed on an annual basis and provided to the payer of income before the first payment of income in each calendar year.

        A U.S. holder may obtain the appropriate certification by mailing completed forms, together with the holder's name, taxpayer identification number, the tax period for which certification is required, and other applicable information, to the United States Internal Revenue Service. The procedures for obtaining certification are described in greater detail in the instructions to Internal Revenue Service Form 8802. As obtaining the required certification from the Internal Revenue Service may take at least six to eight weeks, U.S. holders should apply for such certification as soon as possible.

        In accordance with the Russian Tax Code, to rely on tax treaty benefits, a non-resident holder who is an individual must present to the tax authorities an official document confirming his residency in the home country issued by the competent authorities in his/her country of residence and also other supporting documentation including a statement confirming the income received and the tax paid in the home country, also confirmed by the relevant foreign tax authorities, duly translated and apostiled. Technically, such a requirement means that an individual cannot rely on the tax treaty until he or she pays the tax in the jurisdiction of his or her residence. Therefore, advance relief from or reduction of withholding taxes for individuals will generally be impossible as it is very unlikely that the supporting documentation for the treaty relief can be provided to the tax authorities and approval from the latter obtained before any payments are made to individuals. A non-resident holder which is an individual may apply for treaty-based benefits within one year following the end of the tax period in which the relevant income was received and the tax was withheld.

        If a non-resident holder which is a legal entity or organization does not obtain double tax treaty relief at the time that income or gains are realized and tax is withheld by a Russian tax agent, the non-resident holder may apply for a refund within three years from the end of the tax period (a calendar year) in which the tax was withheld. To process a claim for a refund, the Russian tax authorities require (i) apostilled or legalized confirmation of the tax treaty residence of the non-resident at the time the income was paid, (ii) an application for the refund of the tax withheld in a format provided by the Russian tax authorities and (iii) copies of the relevant contracts under which the foreign entity received income, as well as payment documents confirming the payment of the tax withheld to the Russian budget (Form 1012DT for dividends and interest and Form 1011DT for other income are designed by the Russian tax authorities to combine requirements (i) and (ii) specified above). The Russian tax authorities may require a Russian translation of the above documents if they are prepared in a foreign language. The refund of the tax withheld should be granted within one month of the filing of the above set of documents with the Russian tax authorities. However, procedures for processing such claims have not been clearly established and there is significant uncertainty regarding the availability and timing of such refunds.

        The procedures referred to above may be more complicated with respect to ADSs and no assurance can be given that we will be able to apply the respective double tax treaties when paying dividends to non-resident holders or that ADS holders would be successful in receiving relevant tax refunds.

        Neither the depositary nor us has or will have any obligation to assist an ADS holder with the completion and filing of any tax forms.

Stamp Duties

        No Russian stamp duty will be payable by the holders of ADSs upon carrying out of transactions with the securities as discussed above (i.e., on a purchase of the securities, sale of the securities, etc.).

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Certain United States Federal Income Tax Consequences

        The following is a general description of certain material United States federal income tax consequences that apply to you if you are, for United States federal income tax purposes, a beneficial owner of ADSs that is an individual who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia, an estate the income of which is subject to U.S. federal income tax regardless of its source, or a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial trust decisions, or if the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person (in each case, a "U.S. Holder"). This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, all as in effect as of the date of this document. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of ADSs, or that any such contrary position would not be sustained by a court. If a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of ADSs, the United States federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, partnerships that hold ADSs and partners in such partnerships are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them. The following discussion does not deal with the tax consequences to any particular investor or to persons in special tax situations such as:

•

an insurance company;

•

a tax-exempt organization;

•

a financial institution;

•

a person subject to the alternative minimum tax;

•

a person who is a broker-dealer in securities or a trader subject to a mark-to-market election;

•

an S corporation;

•

a person holding ADSs through a partnership or other pass-through entity;

•

an expatriate subject to section 877 of the Code;

•

an owner of, directly, indirectly or by attribution, 10% or more of the outstanding shares of our common stock; or

•

an owner holding ADSs as part of a hedge, straddle, synthetic security or conversion transaction.

        In addition, this summary is limited to U.S. Holders holding ADSs as "capital assets" within the meaning of Section 1221 of the Code and whose functional currency is the U.S. dollar. The discussion below does not address the effect of any United States state or local tax law or foreign tax law. This discussion also does not address any tax consequences relating to the direct ownership of ordinary shares.

        The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. For purposes of applying United States federal income tax law, we believe, and the following discussion assumes, that a holder of an ADS should be treated as the owner of the

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underlying shares of common stock represented by that ADS, although this matter is not free from doubt.

        The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the shares underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying shares. Accordingly, the analysis of the creditability of Russian withholding taxes described below and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders (discussed below) could be affected by actions taken by intermediaries in the chain of ownership between the holder of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of underlying shares and future actions that may be taken by the U.S. Treasury. The remainder of this discussion assumes that a holder of an ADS will be treated as the beneficial owner of the underlying shares of common stock represented by such ADS for United States federal income tax purposes.

Taxation of Distributions on ADSs

        For United States federal income tax purposes, the gross amount of a distribution, including any Russian withholding taxes, paid by us with respect to ADSs will be treated as a taxable foreign source dividend on the date of actual or constructive receipt by the depositary to the extent of our current and accumulated earnings and profits, computed in accordance with United States federal income tax principles. For taxable years beginning before January 1, 2011, if you are a non-corporate U.S. Holder such dividends may be "qualified dividend income" that is taxed at the lower applicable capital gains rate provided that certain conditions are satisfied, including (1) certain holding period requirements are satisfied, (2) either (a) our ADSs continue to be listed on the New York Stock Exchange (or other national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934, as amended, or the Nasdaq Stock Market) or (b) we are eligible for the benefits of the United States–Russia income tax treaty, and (3) we are not, for the taxable year in which the dividend was paid, or in the preceding taxable year, a "passive foreign investment company" (as discussed below). Distributions with respect to ADSs in excess of our current and accumulated earnings and profits will be applied against and will reduce your tax basis in such ADSs and, to the extent in excess of such tax basis, will be treated as gain from a sale or exchange of such ADSs. You should be aware that we do not intend to calculate our earnings and profits for United States federal income tax purposes and, unless we make such calculations, you should assume that any distributions with respect to ADSs generally will be treated as a dividend, even if such distributions would otherwise be treated as a return of capital or as capital gain pursuant to the rules described above. If you are a corporation, you will not be allowed a deduction for dividends received in respect of distributions on ADSs, which is generally available for dividends paid by U.S. corporations. U.S. Holders are strongly urged to consult their tax advisors as to the U.S. federal income tax treatment of any distribution received with respect to ADSs.

        The amount of any distribution paid in rubles will equal the U.S. dollar value of such rubles, calculated using the exchange rate in effect on the date of receipt by the depositary, regardless of whether the payment is actually converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange rate fluctuations during the period from the date of receipt by the depositary to the date the rubles are converted into U.S. dollars will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes. Additionally, you may be required to recognize foreign currency gain or loss on the receipt of a refund of Russian withholding tax pursuant to the United States–Russia income tax treaty to the extent the United States dollar value of the refund differs from the dollar equivalent of that amount on the date of receipt of the underlying distribution.

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        Russian withholding tax at the rate applicable to you under the United States–Russia income tax treaty should be treated as a foreign income tax that, subject to generally applicable limitations and conditions, is eligible for credit against your U.S. federal income tax liability or, at your election, may be deducted in computing taxable income. If Russian tax is withheld at a rate in excess of the rate applicable to you under the United States–Russia income tax treaty, you may not be entitled to credits for the excess amount, even though the procedures for claiming refunds and the practical likelihood that refunds will be made available in a timely fashion are uncertain. If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will generally be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends.

        The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For United States foreign tax credit purposes, a dividend distribution with respect to the ADSs will be treated as foreign source "passive category income" but could, in the case of certain U.S. Holders, constitute "general category income." The rules relating to the determination of the foreign tax credit, or deduction in lieu of the foreign tax credit, are complex and you should consult your tax advisors with respect to those rules.

Taxation on Sale or Other Taxable Disposition of ADSs

        The sale or other taxable disposition of ADSs will generally result in the recognition of gain or loss in an amount equal to the difference between the amount realized on the sale or other taxable disposition and your adjusted basis in such ADSs. That gain or loss will be capital gain or loss and will be long-term capital gain or loss if the ADSs have been held for more than one year. If you are a non-corporate U.S. Holder, such realized long-term capital gain is generally subject to a reduced rate of United States federal income tax. Limitations may apply to your ability to offset capital losses against ordinary income.

        Gain or loss realized on the sale of ADSs will generally be treated as U.S. source income or loss for foreign tax credit purposes. The use of any foreign tax credits relating to any Russian taxes imposed upon such sale may be limited. You are strongly urged to consult your tax advisors as to the availability of tax credits for any Russian taxes withheld on the sale of ADSs.

Passive Foreign Investment Company Considerations

        A foreign corporation generally will be a passive foreign investment company, or a PFIC, in any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable "look-through" rules, either (i) at least 75% of its gross income is "passive income" or (ii) at least 50% of the average value of its assets is attributable to assets which produce passive income or are held for the production of passive income.

        We do not believe that we were a PFIC for the year ended December 31, 2008. However, our possible status as a PFIC must be determined annually and therefore may be subject to change. Thus there can be no assurance that we will not be treated as a PFIC in our current taxable year or in the future. If we were to be treated as a PFIC, U.S. Holders generally would be required to pay additional taxes on certain distributions and gains on sales or other dispositions (including pledges) of the ADSs, at tax rates that may be higher than those otherwise applicable. You should consult your tax advisors regarding the application of the PFIC rules to your investment in the ADSs.

Information Reporting and Backup Withholding

        Dividend payments with respect to ADSs and proceeds from the sale or exchange of ADSs may be subject to information reporting to the IRS and possible U.S. backup withholding at a current rate of

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28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

        Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

F.     Dividends and Paying Agents

        Not applicable.

G.    Statement by Experts

        Not applicable.

H.    Documents on Display

        The documents that are exhibits to or incorporated by reference in this document can be read at the U.S. Securities and Exchange Commission's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 or, from outside the United States, at 1-202-942-8090. Copies may also be obtained from the SEC website at www.sec.gov. Information about Mobile TeleSystems OJSC is also available on the Internet at www.mtsgsm.com. Information included in our website does not form part of this document.

I.     Subsidiary Information

        Not applicable.

Item 11.    Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risk from changes in interest rates and foreign currency exchange rates. We are subject to market risk deriving from changes in interest rates, which may affect the cost of our financing. Foreign exchange risks exist to the extent our revenues, costs and debt obligation are denominated in currencies other than the functional currency in the countries of our operations.

Interest Rate Risk

        We are exposed to variability in cash flow risk related to our variable interest rate debt and exposed to fair value risk related to our fixed-rate notes. As of December 31, 2008, $2,044.6 million, or 50.2% of our total indebtedness, including capital leases, was variable interest rate debt, while $2,030.5 million, or 49.8% of our total indebtedness, including capital leases, was fixed interest rate debt.

        The table below presents principal cash flows and related weighted average interest rates for indebtedness by contractual maturity dates as of December 31, 2008.

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Contractual Maturity Date as of December 31, 2008

Variable debt	Currency	2009			2010			2011			2012			2013			Thereafter			Total			Annual interest rate (Actual interest rate at December 31, 2008)
	(amounts in thousands of U.S. dollars)
ING Bank N.V., The Bank of Tokyo-Mitsubishi, Bayerische Landesbank, HSBC, Raiffeisen, Sumitomo	USD	$	630,000		$	—		$	—		$	—		$	—		$	—		$	630,000			2.55%
ING Bank N.V., The Bank of Tokyo-Mitsubishi, Bayerische Landesbank, HSBC, Raiffeisen, Sumitomo	USD		215,385			215,385			107,692			—			—			—			538,462			2.75%
Citibank International plc and ING Bank N.V	USD		19,741			19,741			19,741			19,741			19,741			12,022			110,727			2.05%
HSBC Bank plc and ING BHF—BANK AG	USD		21,799			21,799			21,799			21,799			19,164			—			106,360			2.18%
EBRD	USD		18,462			18,462			18,462			18,462			18,462			9,231			101,541			4.85%
Commerzbank AG, ING Bank AG and HSBC Bank plc	USD		14,790			14,790			14,790			14,790			14,790			7,395			81,345			2.05%
HSBC Bank plc, ING Bank AG and Bayerische Landesbank	USD		16,609			16,609			16,609			16,609			16,609			9,742			92,787			2.05%
EBRD	USD		14,872			14,872			14,872			14,872			14,872			7,436			81,796			3.26%
Barclays bank plc	USD		2,850			2,850			2,850			2,850			2,850			1,425			15,675			1.90%
ABN AMRO N.V.	USD		6,287			6,287			6,287			6,287			6,287			—			31,435			2.10%
ING BHF Bank and Commerzbank AG	EUR		7,357			—			—			—			—			—			7,357			3.35%
ABN AMRO N.V.	EUR		4,881			4,881			4,881			4,881			4,881			—			24,405			3.35%
Barclays bank plc	USD		10,306			10,306			10,306			10,306			10,306			5,153			56,683			1.88%
Commerzbank	USD		3,508			3,509			—			—			—			—			7,017			2.15%
Skandinaviska Enskilda Banken AB	USD		30,000			28,096			18,824			18,824			18,824			44,480			159,048			1.98%
Total variable debt			1,016,847			377,587			257,113			149,421			146,786			96,884			2,044,638
Weighted average interest rate			2.59	%		2.59	%		2.56	%		2.51	%		2.48	%		2.36	%		2.52	%
Fixed-rate notes
8.38% notes due 2010	USD		—			400,000			—			—			—			—			400,000			8.38%
8.00% notes due 2012	USD		—			—			—			399,463			—			—			399,463			8.00%
8.70% notes due 2010	RUR		—			268,533			—			—			—			—			268,533			8.70%
14.01% notes due 2010	RUR		—			255,272			—			—			—			—			255,272			14.01%
14.01% notes due 2010	RUR		—			255,272			—			—			—			—			255,272			14.01%
Fixed-rate bank loans
Gazprombank	EUR		141,050			141,050			141,050			—			—			—			423,150			12% +2% commission
8.70% notes due 2009 classified as bank loan	RUR		23,142			—			—			—			—			—			23,142			8.70%
Other	RUR		—			—			—			—			—			65			65			0.01%
Total fixed debt			164,192			1,320,127			141,050			399,463			—			65			2,024,897
Weighted average interest rate			10.95	%		10.74	%		9.57	%		8.00	%		—			0.01	%		6.54	%

        We would have experienced an additional interest expense of approximately $15.4 million on an annual basis as a result of a hypothetical increase in the LIBOR/EURIBOR by 1% over the current rate as of December 31, 2008. We would have experienced an additional interest expense of approximately $15.1 million on an annual basis as a result of a hypothetical increase in the LIBOR/EURIBOR by 1% over the current rate as of December 31, 2007. The increase by 0.3% in an additional interest expense is primarily attributable to the LIBOR/EURIBOR fluctuations and change in our debt structure during the year ended December 31, 2008. The fair value of our publicly traded

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fixed-rate long-term notes as of December 31, 2008, ranged from 80.0% to 99.3% of the notional amount. As of December 31, 2008, the difference between the carrying value and the fair value of other fixed rate debt, including capital lease obligations, was immaterial. For details of our fixed-rate debt, refer to Note 11 to our audited consolidated financial statements. The fair value of variable rate debt approximates its carrying value.

        We use derivative financial instruments to reduce our exposure to adverse fluctuations in interest rates. We primarily focus on reducing risk caused by the fluctuations in interest rates for our variable-rate long-term debt. According to our policy, we entered into several interest rate swap agreements for long-term debt with maturity of more than 3 years. The swap agreements are

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designated as cash flow hedges and the hedging relationship qualifies for hedge accounting. The table below presents a summary of our interest rate swap agreements.

Type of derivative	Period	Notional amount		Mark to Market Value as of December 31, 2008
		(amounts in millions of U.S. dollars)
Interest Rate Swap Agreements
Swap agreement with HSBC Bank Plc to pay a fixed rate of 3.73% and receive a variable interest rate of LIBOR	September 30, 2008 to May 27, 2014		81.3		(4.0	)
Swap agreement with HSBC Bank Plc to pay a floating rate of 3.67% and receive a fix interest rate of LIBOR	November 24, 2008 to September 30, 2014		88.7		4.2
Swap agreement with HSBC Bank Plc to pay a fixed rate of 3.29% and receive a variable interest rate of EURIBOR	April 28, 2006 to October 29, 2013		36.7		(0.02	)
Swap agreement with HSBC Bank Plc to pay a fixed rate of 4.14% and receive a variable interest rate of LIBOR	March 31, 2008 to September 30, 2014		96.1		(5.5	)
Swap agreement with Rabobank to pay a fixed rate of 4.16% and receive a variable interest rate of LIBOR	April 9, 2008 to April 9, 2014		86.1		(4.5	)
Swap agreement with Citibank N.A. to pay fixed rate of 4.29% and receive a variable interest rate of LIBOR	September 28, 2007 to September 30, 2013		53.5		(2.5	)
Swap agreement with ING Bank N.V. to pay fixed rate of 4.19% and receive a variable interest rate of LIBOR	February 29, 2008 to February 28, 2014		92.6		(4.9	)
Swap agreement with ING Bank N.V. to pay fixed rate of 4.41% and receive a variable interest rate of LIBOR	July 16, 2007 to January 15, 2014		67.0		(3.6	)

        As of December 31, 2008, approximately 20% of our variable interest rate debt was hedged against interest rate risks. We continue to consider other financial instruments available to us to mitigate exposure to interest rate fluctuations. We do not enter into derivative financial instruments for trading purposes.

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Foreign Currency Risk

        The following tables show, for the periods indicated, certain information regarding the exchange rate between the ruble and the U.S. dollar, based on data published by the Central Bank of Russia. These rates may differ from the actual rates used in preparation of our financial statements and other financial information provided herein.

	Rubles per U.S. dollar
Years ended December 31,	High		Low		Average(1)		Period End
2004		29.45		27.75		28.73		27.75
2005		29.00		27.46		28.31		28.78
2006		28.78		26.18		27.09		26.33
2007		26.58		24.27		25.49		24.55
2008		29.38		23.13		24.86		29.38

(1)

The average of the exchange rates on the last business day of each full month during the relevant period.

	Rubles per U.S. dollar
	High		Low
September 2008		25.78		24.67
October 2008		27.35		25.37
November 2008		27.67		26.91
December 2008		29.38		27.52
January 2009		35.41		29.39
February 2009		36.43		34.56
March 2009		36.23		33.27
April 2009		34.10		33.17

Source: Central Bank of Russia.

        The exchange rate between the ruble and the U.S. dollar quoted by the Central Bank of Russia for May 22, 2009 was 31.46 rubles per U.S. dollar.

        The following tables show, for the periods indicated, certain information regarding the exchange rate between the hryvnia and the U.S. dollar, based on data published by the National Bank of Ukraine. These rates may differ from the actual rates used in preparation of our financial statements and other financial information provided herein.

	Hryvnias per U.S. dollar
Years ended December 31,	High		Low		Average(1)		Period End
2004		5.33		5.31		5.32		5.31
2005		5.31		5.05		5.12		5.05
2006		5.05		5.05		5.05		5.05
2007		5.05		5.05		5.05		5.05
2008		7.88		4.84		5.27		7.70

(1)

The average of the exchange rates on the last business day of each full month during the relevant period.

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	Hryvnias per U.S. dollar
	High		Low
September 2008		4.86		4.85
October 2008		5.76		4.86
November 2008		6.74		5.78
December 2008		7.88		6.88
January 2009		7.70		7.70
February 2009		7.70		7.70
March 2009		7.70		7.70
April 2009		7.70		7.70

Source: National Bank of Ukraine.

        The exchange rate between the hryvnia and the U.S. dollar quoted by the National Bank of Ukraine for May 22, 2009 was 7.62 hryvnias per U.S. dollar.

        We have exposure to fluctuations in the value of the U.S. dollar, which is our reporting currency, relative to the Russian ruble, Ukrainian hryvnia, Turkmenistan manat and Armenian dram, which are the functional currencies in our countries of operation. As a result, we may face translation losses, increased debt service payments and increased capital expenditures and operating costs should these currencies depreciate against the U.S. dollar. We have not entered into any significant currency hedging arrangements, but we continue to consider different financial instruments available to us in order to mitigate our exposure to exchange rate fluctuations.

        The translation risk arises when we translate the functional currencies in our countries of operation into U.S. dollars for inclusion in our audited consolidated financial statements. A depreciation in the value these functional currencies against the U.S. dollar will result in a translation loss.

        A significant part of our capital expenditures, borrowings and certain operating costs (roaming expenses, cost of customer equipment and other) are either denominated in U.S. dollars or tightly linked to the U.S. dollar exchange rate, and our U.S. dollar-denominated debt represents our primary future risk of exchange loss in U.S. dollar terms. A decline in the value of the ruble, hryvnia, som, manat or dram versus the U.S. dollar would result in currency remeasurement losses as the amount of these currencies required to repay U.S. dollar-denominated debt increases. In addition, if any of the ruble, hryvnia, som, manat or dram declines against the U.S. dollar and tariffs cannot be maintained for competitive or other reasons, our revenues and operating margins could be materially adversely affected and we could have difficulty repaying or refinancing our U.S. dollar-denominated indebtedness and financing our capital expenditures and operating costs.

        A portion of our capital expenditures, borrowings and certain operating costs (roaming expenses, costs of customer equipment and other) are also denominated in euros. We currently do not hedge against the risk of decline in the ruble, hryvnia, som, manat or dram against the euro because settlements denominated in euros are not significant.

        In order to hedge against a risk of exchange rate currency fluctuations, we previously denominated a majority of our tariffs in Russia, which are payable in rubles, in "conventional" units linked to the U.S. dollar and required accounts to be settled at the official exchange rate of the CBR on the date of payment. However, in the middle of 2006, we introduced a fixed exchange rate for converting U.S. dollar-denominated tariffs and charges into Russian rubles in order to address anticipated regulatory changes and competitive pressures on the Russian market and starting from January 1, 2007, moved to ruble-denominated tariffs and invoicing. As a result of these changes, we reevaluated the functional currency criteria under SFAS No. 52, "Foreign Currency Translation," and determined that, beginning

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January 1, 2007, the functional currency of our subsidiaries domiciled in Russia was the ruble. The change was adopted prospectively beginning January 1, 2007 in accordance with SFAS No. 52. No restatement of comparative amounts will be made for the change in functional currency. Consequently, currency exchange gains and losses in Russia were the result of operations denominated in currencies other than the ruble in 2007, and will continue to be so in future years, assuming the ruble remains our functional currency. During 2006, the U.S. dollar was our functional currency and, therefore, currency exchange gains and losses for the year ended December 31, 2006 were the result of operations involving currencies other than the U.S. dollar.

        We would experience a currency exchange loss of $581.7 million on our U.S. dollar-denominated net monetary liabilities as a result of a hypothetical 20.0% increase in the ruble/hryvnia/som/manat/dram to U.S. dollar exchange rate at December 31, 2008. We would experience a currency exchange loss of $3.7 million in the fair value of our euro-denominated net monetary liabilities as a result of a hypothetical 20.0% increase in the ruble/hryvnia/som/manat/dram to euro exchange rate at December 31, 2008. The increase in a hypothetical loss in the fair value of our U.S. dollar and euro-denominated monetary liabilities is mainly the result of ruble to euro exchange rate fluctuations during the year ended December 31, 2008. We are unable to estimate future loss of earnings as a result of such changes.

Item 12.    Description of Securities Other Than Equity Securities

        Not applicable.

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PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

        None.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

A.-E. Not Applicable.

Item 15.    Controls and Procedures

(a)   Disclosure Controls and Procedures.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of December 31, 2008. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

(b)   Management's annual report on internal control over financial reporting.

        Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. With the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2008. There were no changes in our internal control over financial reporting during the year ended December 31, 2008 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

        The effectiveness of our internal control over financial reporting as of December 31, 2008, has been audited and assessed as effective by independent registered public accounting firm ZAO Deloitte & Touche CIS who has also audited and reported on our consolidated financial statements.

(c)   Attestation Report of Independent Registered Public Accounting Firm.

To the Shareholders of OJSC Mobile TeleSystems:

        We have audited the internal control over financial reporting of Mobile TeleSystems, a Russian Open Joint-Stock Company, and subsidiaries (the "Group") as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Group's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain

180

reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2008 of the Group and our report dated March 6, 2009 expressed an unqualified opinion on those financial statements.

/s/ ZAO Deloitte & Touche CIS
Moscow
March 6, 2009

(d)   Changes in internal control over financial reporting.

        Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during the period covered by this annual report have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.

Item 16A.Audit Committee Financial Expert

        Our Board of Directors has determined that Paul J. Ostling is an "audit committee financial expert" as defined in Item 16A of Form 20-F. Mr. Ostling is "independent" as defined in Rule 10A-3

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under the Exchange Act and current New York Stock Exchange listing rules applicable to us. For a description of Mr. Ostling's experience, please see "Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Key Biographies."

Item 16B.Code of Ethics

        We have adopted a Code of Ethics that applies to our senior officers, including our principal executive officer, principal financial officer and principal accounting officer. A copy of our Code of Ethics is available on our website at www.mtsgsm.com.

Item 16C.Principal Accountant Fees and Services

        ZAO Deloitte & Touche CIS has served as our Independent Registered Public Accounting Firm for each of the fiscal years in the three-year period ended December 31, 2008, for which audited financial statements appear in this Annual Report on Form 20-F. The following table presents the aggregate fees billed for professional services and other services to ZAO Deloitte & Touche CIS in 2007 and 2008.

	Year ended December 31,
	2007		2008
	(in thousands)
Audit Fees	$	1,505.0	$	1,467.5
Audit-Related Fees		1,455.0		1,162.7
Tax Fees		—		—
All Other Fees		82.3		322.0
Total	$	3,042.3	$	2,952.2

Audit Fees

        The Audit Fees for the years 2007 and 2008 were for services associated with the consolidated U.S. GAAP audits, the quarterly reviews and statutory audits.

Audit-Related Fees

        The Audit-related Fees paid in 2007 and 2008 mainly included fees for the testing of our internal control procedures and a review of projects related to our Sarbanes-Oxley Section 404 readiness.

Tax Fees

        We did not pay any Tax Fees for the years 2007 and 2008.

All Other Fees

        All other fees for the years 2007 and 2008 were for reporting on compliance with certain loan covenants, review of company prospectuses and advice on accounting standards application.

Audit Committee Pre-Approval Policies and Procedures

        The Sarbanes-Oxley Act of 2002 required us to implement a pre-approval process for all engagements with our independent public accountants. In compliance with Sarbanes-Oxley requirements pertaining to auditor independence, our Audit Committee pre-approves the engagement terms and fees of ZAO Deloitte & Touche CIS for all audit and non-audit services, including tax

182

services. Our Audit Committee pre-approved the engagement terms and fees of ZAO Deloitte & Touche CIS for all services performed for the fiscal year ended December 31, 2008.

Item 16D.Exemption from the Listing Standards for Audit Committees

        Not Applicable.

Item 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers

        On September 5, 2006, our Board of Directors authorized a share repurchase program, allowing our wholly-owned subsidiary MTS-Bermuda to repurchase ADSs representing up to 10% of our total outstanding shares over a period of twelve months ending August 31, 2007. On September 4, 2007, the Board of Directors extended the program through August 31, 2008, and on July 31, 2008, the Board of Directors further extended the program through September 1, 2009. The purchases may be made in the open market or through privately negotiated transactions under certain requirements set forth in SEC Rules 10b-18 and 10b5-1, as well as other applicable legal requirements and factors. The share repurchase program does not obligate us to acquire a particular number of ADSs, and the program may be suspended or discontinued at our sole discretion. The repurchases could be funded through our own cash flows, commercial paper program or potentially through existing credit facilities. The execution of the program will depend on an on-going assessment of market conditions, and the program may be extended at any time. During the years ended December 31, 2008, 2007 and 2006, we repurchased through MTS-Bermuda 39,431,500, 17,402,835 and 11,161,000 of our shares in the form of ADSs at an average prices of $78.5, $73.1 and $49.2 per ADS for a total amounts of $619.1 million, $254.4 million and $110.0 million, respectively.

        The following table sets forth, for each month in 2008 and for the year as a whole, the total number of our ADSs repurchased by MTS-Bermuda pursuant to the share repurchase plan described above, the average price paid per ADS, the number of ADSs that were purchased as part of the publicly announced share repurchase plan and the maximum number of ADSs that, at that date, remained eligible for purchases under such plan.

Period	Total Number of ADSs Purchased(1)		Average Price Paid per ADS		Total Number of ADSs Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of shares that May Yet Be Purchased Under the Plan
2008
January 1-31		2,706,400		85.9		8,419,167		194,731,730
February 1-28		1,975,500		80.2		10,394,667		193,743,980
March 1-31		404,400		79.2		10,799,067		193,541,780
April 1-30		—		—		10,799,067		193,541,780
May 1-31		—		—		10,799,067		193,541,780
June 1-30		—		—		10,799,067		193,541,780
July 1-31		2,068,300		70.2		12,867,367		192,647,356
August 1-31		731,700		69.7		13,599,067		192,281,506
September 1-30		—		—		13,599,067		189,114,417
October 1-31		—		—		13,599,067		188,505,280
November 1-30		—		—		13,599,067		188,505,280
December 1-31		—		—		13,599,067		188,505,280
Total		7,886,300		78.5		13,599,067		188,505,280

(1)

All purchases were made pursuant to the publicly announced share repurchase plan described above in the open market and privately negotiated transactions effected on the New York Stock Exchange.

183

        In addition, following the approval of the merger of our two subsidiaries into MTS at the general shareholders meeting in June 2008, we repurchased 37,762,257 of our ordinary shares from investors who voted against or abstained from voting on the merger for a total amount of 11.1 billion rubles ($446.3 million as of the date of repurchase), or 10% of our net assets as of March 31, 2008 calculated according to Russian accounting standards. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—Shareholder rights provisions under Russian law could impose additional obligations and costs on us."

Item 16F.Change in Registrant's Certifying Accountant

        Not applicable.

Item 16G.Corporate Governance

        We are a company organized under the laws of the Russian Federation and qualify as a foreign private issuer as such term is defined in Rule 3b-4 of the Exchange Act. In accordance with the NYSE corporate governance rules, listed companies that are foreign private issuers are permitted in some circumstances to follow home country practice in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Listed Company Manual that are applicable to U.S. companies. In addition, foreign private issuers listed on the NYSE must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. companies listed on the NYSE. With regard to our corporate governance practices, these differences can be summarized as follows:

•

For U.S. companies, the NYSE standards require that a majority of directors be independent, as determined by the board. Russian law does not require that a majority of our directors be independent. Of our nine directors, three have been determined by the board to be independent in accordance with the independence standards set forth in SEC Rule 10A-3 and Section 303A.02 of the NYSE Listed Company Manual.

•

For U.S. companies, the NYSE standards require that non-management directors meet at regularly scheduled executive sessions without management. Russian law does not contain such a requirement. However, our audit committee and remuneration and appointments committee are comprised of our three independent directors, who meet on a regular basis in connection with their work on these committees.

•

For U.S. companies, the NYSE standards require that listed companies have a nominating/corporate governance committee and a compensation committee, each composed entirely of independent directors and having a written charter specifying the committee's purpose and responsibilities, as well as annual performance evaluations of the committee.

We do not currently have a nominating/corporate governance committee. We have a corporate conduct and ethics committee comprised of directors and members of management that is responsible for developing and implementing standards for corporate governance and ethics and making recommendations to the Board of Directors on developing our strategy in the area of corporate governance and ethics. This committee is also responsible for conducting annual performance evaluations of the Board of Directors.

We have a remuneration and appointments committee comprised of three independent directors. This committee functions pursuant to bylaws approved by the Board of Directors specifying the committee's purpose, duties and responsibilities. The committee is primarily responsible for recommending appointments to key managerial posts, developing a set of requirements and criteria for directors and management executives and developing a remuneration structure and

184

compensation levels for the Board of Directors, the audit committee and management executives (including the CEO).

•

For U.S. companies, the NYSE standards require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions. Under Russian law, such approval from shareholders is not required, and our equity compensation plans and material revisions thereto are currently approved by the Board of Directors.

•

For U.S. companies, the NYSE standards require the adoption and disclosure of corporate governance guidelines addressing certain subjects. Our corporate governance guidelines are consistent with what is required under Russian law and are set forth in our Charter, in the bylaw on our Board of Directors and in the bylaws of our various committees.

•

For U.S. companies, the NYSE standards require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. We have adopted and post on our website a code of business conduct. We have also adopted a code of ethics for senior officers and employees, but only post on our website the code of ethics for senior officers.

        In accordance with the corporate governance rules of the NYSE applicable to foreign private issuers, we also disclose these differences between our corporate governance practices and those required by the NYSE of listed U.S. companies on our internet website at www.mtsgsm.com.

185

PART III

Item 17.    Financial Statements

        See instead Item 18.

Item 18.    Financial Statements

        The following financial statements, together with the report of ZAO Deloitte & Touche CIS, are filed as part of this annual report on Form 20-F.

		Page
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2008 AND 2007 AND FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006:
	Consolidated balance sheets as of December 31, 2008 and 2007	F-3
	Consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006	F-5
	Consolidated statements of changes in shareholders' equity for the years ended December 31, 2008, 2007 and 2006	F-6
	Consolidated statements of cash flows for the years ended December 31, 2008, 2007 and 2006	F-7
	Notes to the consolidated financial statements	F-9

Item 19.

Exhibits No.	Description
1.1	Charter of Mobile TeleSystems OJSC, restated version no. 6, as approved by the General Meeting of Shareholders of Mobile TeleSystems OJSC held on June 29, 2007 (English Translation) is incorporated herein by reference to Exhibit 1.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
2.1	Deposit Agreement, dated as of July 6, 2000, by and among, MTS, Morgan Guaranty Trust Company of New York (as depositary), and holders of ADRs is incorporated herein by reference to Exhibit 2.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000, on Form 20-F.
2.2	Amendment No. 1 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(2) to Form F-6 (Registration No 333-12008).
2.3	Amendment No. 2 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(3) to Form F-6 (Registration No. 333-121240).
2.4	Amendment No. 3 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(4) to Form F-6 (Registration No. 333-145190).
4.1	Indenture dated as of January 28, 2005 between Mobile TeleSystems Finance S.A., Mobile TeleSystems OJSC and JPMorgan Chase Bank is incorporated herein by reference to Exhibit 4.3 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2004, on Form 20-F.
4.2	Indenture dated as of October 14, 2003 between Mobile TeleSystems Finance S.A., Mobile TeleSystems OJSC and JPMorgan Chase Bank is incorporated herein by reference to Exhibit 4.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003, on Form 20-F.

186

Exhibits No.	Description
4.3	Indenture dated as of January 30, 2003 between Mobile TeleSystems Finance S.A., Mobile TeleSystems OJSC and JPMorgan Chase Bank is incorporated herein by reference to Exhibit 4.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2002, on Form 20-F.
4.4	Facility Agreement for Mobile TeleSystems Open Joint Stock Company arranged by The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen Bank Oesterreich AG and Sumitomo Mitsui Banking Corporation Europe Limited as Mandated Lead Arrangers and ING Bank N.V., London Branch acting as Agent dated April 21, 2006 is incorporated herein by reference to Exhibit 4.46 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2005, on Form 20-F.
4.5	Facility Agreement for Mobile TeleSystems Open Joint Stock Company arranged by ABN AMRO Bank N.V., Absolut Bank (ZAO), Banc of America Securities Limited, Bank of China (Eluosi), Bank of China (UK) Limited, Joint-Stock Company Banque Societe Generale Vostok, Bayerische Landesbank, BNP Paribas, Credit Suisse International, Export Development Canada, HSBC Bank PLC, ING Bank N.V., J.P. Morgan PLC, Societe Generale Corporate and Investment Banking Paris, Unicredit Bank Austria AG, WestLB AG London Branch and ZAO Unicredit Bank as Mandated Lead Arrangers and ING Bank N.V., London Branch acting as Agent dated May 18, 2009.
4.6	Loan Agreement No. 250/08-V between Gazprombank (Open Joint Stock Company) and Mobile TeleSystems Open Joint Stock Company dated December 30, 2008 (English translation).
4.7	Facility Agreement between Mobile TeleSystems Open Joint Stock Company and European Bank for Reconstruction and Development dated 23rd December 2008.
4.8	Export Credit Agreement between Mobile TeleSystems Open Joint Stock Company and Skandinaviska Enskilda Banken AB (PUBL) dated 1 August 2008.
4.8.1	Amendment Agreement No. 1 dated 28 October 2008 in relation to Export Credit Agreement dated 1 August 2008.
4.9	Open Joint Stock Company "Mobile TeleSystems" Series 01 Ruble Bond Certificate of Securities.
4.10	Open Joint Stock Company "Mobile TeleSystems" Series 02 Ruble Bond Certificate of Securities.
4.11	Open Joint Stock Company "Mobile TeleSystems" Series 03 Ruble Bond Certificate of Securities.
4.12	MTS License No. 61443 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the Republic of Buryatiya, Sakha (Yakutia), Khabarovsk, Primorsky, Kamchatka, Zabaykalsky, Chukotsk, Jewish Autonomous Region, Amur, Irkutsk, Magadan, Sakhalin (English translation).
4.13	MTS License No. 33911 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Rostov Region (English translation).
4.14	MTS License No. 58749 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of Krasnoyarsk region (English translation).
4.15	MTS License No. 50789 for provision of mobile radiotelephone communication services using IMT-2000/UMTS mobile radiotelephone networks in the Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.53 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2006, on Form 20-F.

187

Exhibits No.	Description
4.16	UMC License No. 720189 for provision of communication services using the NMT-450, GSM-900, PSN and DCS-1800 networks (English translation) is incorporated herein by reference to Exhibit 4.54 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2006, on Form 20-F.
4.17	UMC License No. 120375 for provision of communication services using the CDMA-450 network (English translation) is incorporated herein by reference to Exhibit 4.55 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2006, on Form 20-F.
4.18	MTS License No. 46008 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.42 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.19	MTS License No. 49808 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.43 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.20	MTS License No. 49809 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Bashkortostan Republic (English translation) is incorporated herein by reference to Exhibit 4.44 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.21	MTS License No. 49810 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Krasnodar region (English translation) is incorporated herein by reference to Exhibit 4.45 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.22	MTS License No. 56081 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territories of the Karelia Republic, the Nenets Autonomous District; the Arkhangelsk, Vologodsk, Kaliningrad, Leningrad, Murmansk, Novgorod, and Pskov regions and city of St. Petersburg (English translation) is incorporated herein by reference to Exhibit 4.46 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.23	MTS License No. 56082 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the city of Moscow and the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.47 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.24	MTS License No. 56112 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Belgorod, Bryansk, Vladimir, Voronezh, Ivanov, Kaluga, Kostroma, Kursk, Liptsk, Nizhny Novgorod, Orel, Ryazan, Smolensk, Tambov, Tver, Tula, and Yaroslavl regions (English translation) is incorporated herein by reference to Exhibit 4.48 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.

188

Exhibits No.	Description
4.25	MTS License No. 56113 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Udmurt Republic, Perm Territory; Khanty-Mansyisk-Ugra and Yamalo-Nenets Autonomous Districts, the Sverdlovsk, Kirov, Chelyabinsk, Kurgan, Orenburg, and Tyumen regions (English translation) is incorporated herein by reference to Exhibit 4.49 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
4.26	MTS License No. 765 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Armenia Republic (English translation) is incorporated herein by reference to Exhibit 4.50 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007, on Form 20-F.
8.1	List of Subsidiaries of Mobile TeleSystems OJSC.
12.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

189

SIGNATURES

        The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

		MOBILE TELESYSTEMS OJSC
Date: May 26, 2009
	By:	/s/ MIKHAIL V. SHAMOLIN
	Name:	Mikhail V. Shamolin
	Title:	President and Chief Executive Officer

190

TABLE OF CONTENTS

OJSC Mobile Telesystems and Subsidiaries

		Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2008 AND 2007 AND FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006:
	Consolidated balance sheets as of December 31, 2008 and 2007	F-3
	Consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006	F-5
	Consolidated statements of changes in shareholders' equity for the years ended December 31, 2008, 2007 and 2006	F-6
	Consolidated statements of cash flows for the years ended December 31, 2008, 2007 and 2006	F-7
	Notes to the consolidated financial statements	F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of OJSC Mobile TeleSystems:

        We have audited the accompanying consolidated balance sheets of Mobile TeleSystems, a Russian Open Joint-Stock Company, and subsidiaries ("the Group") as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group's internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2009 expressed an unqualified opinion on the Group's internal control over financial reporting.

/s/ ZAO Deloitte & Touche CIS

Moscow, Russia
March 6, 2009, except for Note 23,
as to which the date is May 19, 2009

F-2

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2007

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

		December 31,
		2008		2007
CURRENT ASSETS:
	Cash and cash equivalents (Note 4)	$	1,058,802	$	634,498
	Short-term investments, including related party amounts of $45,000 and $15,000 (Note 5)		45,718		15,776
	Trade receivables, net (Note 6)		320,559		386,608
	Accounts receivable, related parties (Note 15)		49,684		25,004
	Inventory and spare parts (Note 7)		110,490		140,932
	Prepaid expenses, including related party amounts of $12,561 and $nil		311,821		201,702
	Deferred tax assets (Note 13)		192,847		136,466
	VAT receivable		102,648		310,548
	Other current assets, including assets held for sale of $46,426 and $35,354 (Note 2)		176,165		95,123
	Total current assets		2,368,734		1,946,657
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $3,409,495 and $3,079,376, including advances given to related parties of $20,808 and $2,925 (Note 8)			5,900,129		6,607,315
LICENSES, net of accumulated amortization of $284,984 and $708,844 (Notes 3 and 20)			482,734		665,605
GOODWILL (Notes 3 and 9)			377,982		359,450
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $871,897 and $949,747 (Notes 3 and 9)			909,397		1,070,413
DEBT ISSUANCE COSTS, net of accumulated amortization of $83,360 and $77,725			37,259		59,279
INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Note 17)			247,358		195,908
OTHER INVESTMENTS, including related party amounts of $16,558 and $nil (Note 18)			39,076		1,355
OTHER NON-CURRENT ASSETS, including restricted cash of $23,572 and $28,618 (Note 19), assets held for sale of $nil and $32,067 (Note 2), and deferred tax assets of $62,093 and $nil (Note 13)			85,665		60,685
	Total assets	$	10,448,334	$	10,966,667

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-3

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

AS OF DECEMBER 31, 2008 AND 2007

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

		December 31,
		2008			2007
CURRENT LIABILITIES:
	Trade accounts payable	$	789,336		$	486,666
	Accounts payable, related parties (Note 15)		186,878			160,253
	Deferred connection fees, current portion (Note 10)		23,795			32,644
	Subscriber prepayments and deposits		395,364			470,302
	Debt, current portion (Note 11)		1,181,039			309,977
	Notes payable, current portion (Note 11)		—			400,000
	Capital lease obligation, current portion		2,690			3,305
	Income tax payable		12,784			51,958
	Accrued liabilities (Note 12)		476,264			464,505
	Bitel liability (Note 21)		170,000			170,000
	Other payables		68,991			61,824
	Total current liabilities		3,307,141			2,611,434
LONG-TERM LIABILITIES:
	Notes payable, net of current portion (Note 11)		1,578,540			799,314
	Debt, net of current portion (Note 11)		1,309,956			1,887,195
	Capital lease obligation, net of current portion		3,009			1,876
	Deferred connection fees, net of current portion (Note 10)		16,449			20,845
	Deferred taxes (Note 13)		69,473			114,171
	Other long-term liabilities		85,371			68,851
	Total long-term liabilities		3,062,798			2,892,252
	Total liabilities		6,369,939			5,503,686
COMMITMENTS AND CONTINGENCIES (Note 21)
MINORITY INTEREST			23,499			20,051
SHAREHOLDERS' EQUITY:
Common stock (2,096,975,792 shares with a par value of 0.1 rubles authorized and 1,993,326,138 shares issued as of December 31, 2008 and 2007, 777,396,505 of which are in the form of ADS as of December 31, 2008 and 2007) (Note 1)			50,558			50,558
Treasury stock (108,273,338 and 32,476,837 common shares at cost as of December 31, 2008 and 2007)			(1,426,753	)		(368,352	)
Additional paid-in capital			590,759			579,520
Accumulated other comprehensive (loss)/income			(346,178	)		704,189
Retained earnings			5,186,510			4,477,015
Total shareholders' equity			4,054,896			5,442,930
Total liabilities and shareholders' equity		$	10,448,334		$	10,966,667

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-4

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

	Years ended December 31,
	2008			2007			2006
NET OPERATING REVENUE
Services revenue and connection fees (including related party amounts of $149,784, $100,771 and $39,138, respectively)	$	10,176,255		$	8,172,650		$	6,287,100
Sales of handsets and accessories		69,038			79,728			97,154
		10,245,293			8,252,378			6,384,254
Cost of services, excluding depreciation and amortization shown separately below (including related party amounts of $229,426, $135,819 and $113,732, respectively)		2,247,948			1,727,365			1,223,715
Cost of handsets and accessories		169,615			158,580			209,260
General and administrative expenses (including related party amounts of $45,396, $40,599 and $13,301, respectively) (Note 16)		1,492,156			1,243,549			941,047
Provision for doubtful accounts		147,435			58,924			84,858
Other operating expenses (including related party amounts of $12,008, $8,349 and $4,769, respectively)		165,302			116,451			87,822
Sales and marketing expenses (including related party amounts of $238,856, $193,471 and $171,792, respectively)		882,508			724,115			607,835
Depreciation and amortization expenses		1,936,837			1,489,548			1,095,981
Net operating income		3,203,492			2,733,846			2,133,736
CURRENCY EXCHANGE AND TRANSACTION LOSS/(GAIN)		563,292			(163,092	)		(24,051	)
OTHER EXPENSES/(INCOME)
Interest income (including related party amounts of $21,138, $18,930 and $4,844)		(33,166	)		(38,100	)		(13,055	)
Interest expense, net of capitalized interest		153,341			134,581			177,145
Equity in net income of associates (Note 17)		(75,976	)		(72,665	)		(58,083	)
Write-off of investment in Bitel (Note 21)		—			—			320,000
Other expenses, net (including related party amounts of $nil, $nil and $2,460)		25,317			44,034			65,913
Total other expenses, net		69,516			67,850			491,920
Income before provision for income taxes and minority interest		2,570,684			2,829,088			1,665,867
PROVISION FOR INCOME TAXES (Note 13)		630,621			738,270			576,103
MINORITY INTEREST		9,644			19,314			14,026
NET INCOME	$	1,930,419		$	2,071,504		$	1,075,738
Weighted average number of common shares outstanding—basic		1,921,934,091			1,973,354,348			1,987,610,121
Weighted average number of common shares outstanding—diluted		1,921,934,091			1,974,074,908			1,987,646,015
Earnings per share, basic and diluted	$	1.00		$	1.05		$	0.54

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-5

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Amounts in thousands of U.S. Dollars, except share amounts)

	Common Stock				Treasury Stock									Accumulated Other Comprehensive Income
											Additional Paid-in Capital						Unearned Compensation			Shareholder Receivable			Retained Earnings
	Shares		Amount		Shares			Amount																		Total
BALANCES, December 31, 2005		1,993,326,138	$	50,558		(5,400,486	)	$	(5,534	)	$	568,104		$	50,614		$	(1,210	)	$	(7,182	)	$	2,638,739		$	3,294,089
Increases for interest		—		—		—			—			—			—			—			—			—			—
Payments from Sistema		—		—		—			—			—			—			—			7,182			—			7,182
Stock options exercised (Note 14)		—		—		639,358			655			3,149			—			—			—			—			3,804
Accrued compensation costs (Note 14)		—		—		—			—			1,675			—			—			—			—			1,675
Effect of adoption of SFAS No. 123R		—		—		—			—			(1,210	)		—			1,210			—			—			—
Dividends declared		—		—		—			—			—			—			—			—			(560,110	)		(560,110	)
Repurchase of common stock (Note 1)						(11,161,000	)		(109,899	)		—			—			—			—			—			(109,899	)
Currency translation adjustment		—		—		—			—			—			41,315			—			—			—			41,315
Change in fair value of interest rate swaps, net of tax (Note 11)		—		—		—			—			—			(2,013	)		—			—			—			(2,013	)
Net income		—		—		—			—			—			—			—			—			1,075,738			1,075,738
BALANCES, December 31, 2006		1,993,326,138	$	50,558		(15,922,128	)	$	(114,778	)	$	571,718		$	89,916		$	—		$	—		$	3,154,367		$	3,751,781
Effect of change in functional currency (Note 2)		—		—		—			—			—			358,997			—			—			—			358,997
Stock options exercised (Note 14)		—		—		848,126			869			5,188			—			—			—			—			6,057
Accrued compensation costs (Note 14)		—		—		—			—			2,828			—			—			—			—			2,828
Effect of FIN No. 48 implementation (Note 2)		—		—		—			—			—			—			—			—			(7,610	)		(7,610	)
Dividends declared		—		—		—			—			—			—			—			—			(741,246	)		(741,246	)
Repurchase of common stock (Note 1)		—		—		(17,402,835	)		(254,443	)		—			—			—			—			—			(254,443	)
Currency translation adjustment		—		—		—			—			(214	)		256,390			—			—			—			256,176
Change in fair value of interest rate swaps, net of tax (Note 11)		—		—		—			—			—			(1,114	)		—			—			—			(1,114	)
Net income		—		—		—			—			—			—			—			—			2,071,504			2,071,504
BALANCES, December 31, 2007		1,993,326,138	$	50,558		(32,476,837	)	$	(368,352	)	$	579,520		$	704,189		$	—		$	—		$	4,477,015		$	5,442,930
Stock options exercised (Note 14)		—		—		1,397,256			1,432			7,751			—			—			—			—			9,183
Accrued compensation costs (Note 14)		—		—		—			—			3,488			—			—			—			—			3,488
Dividends declared		—		—		—			—			—			—			—			—			(1,220,924	)		(1,220,924	)
Repurchase of common stock (Note 1)		—		—		(77,193,757	)		(1,059,833	)		—			—			—			—			—			(1,059,833	)
Currency translation adjustment		—		—		—			—			—			(1,034,008	)		—			—			—			(1,034,008	)
Change in fair value of interest rate swaps, net of tax (Note 11)		—		—		—			—			—			(16,359	)		—			—			—			(16,359	)
Net income		—		—		—			—			—			—			—			—			1,930,419			1,930,419
BALANCES, December 31, 2008		1,993,326,138	$	50,558		(108,273,338	)	$	(1,426,753	)	$	590,759		$	(346,178	)	$	—		$	—		$	5,186,510		$	4,054,896

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-6

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars)

		Years ended December 31,
		2008			2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	1,930,419		$	2,071,504		$	1,075,738
Adjustments to reconcile net income to net cash provided by operating activities:
	Minority interest		9,644			19,314			14,026
	Depreciation and amortization		1,936,837			1,489,548			1,095,981
	Debt issuance cost amortization		21,687			22,406			25,041
	Amortization of deferred connection fees		(55,705	)		(75,404	)		(54,486	)
	Equity in net income of associates		(75,976	)		(72,665	)		(58,083	)
	Inventory obsolescence expense		1,251			—			—
	Provision for doubtful accounts		147,435			58,924			84,858
	Deferred taxes		(209,338	)		(92,088	)		(133,027	)
	Write off of irrecoverable VAT receivable		48,374			17,516			—
	Gain from deconsolidation of a subsidiary		—			(8,874	)		—
	Foreign currency transaction loss/(gain)		563,292			(163,092	)		—
	Bitel liability and investment write off (Note 21)		—			—			320,000
	Impairment of property, plant and equipment, intangible assets and assets held for sale		1,333			18,556			—
	Non-cash expenses associated with asset retirement obligation		6,026			1,138			—
	Non-cash (gain)/expenses associated with stock bonus and stock options		(3,791	)		10,426			1,675
Changes in operating assets and liabilities:
	Increase in accounts receivable		(137,417	)		(137,880	)		(174,790	)
	Decrease/(increase) in inventory		4,565			76,950			(39,312	)
	(Increase)/decrease in prepaid expenses and other current assets		(269,629	)		35,132			21,094
	Decrease in VAT receivable		130,812			12,567			58,446
	Increase in trade accounts payable, accrued liabilities and other current liabilities		346,874			61,278			138,581
	Dividends received from associate		26,692			4,900			3,174
Net cash provided by operating activities			4,423,385			3,350,156			2,378,916

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-7

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars)

		Years ended December 31,
		2008			2007			2006
CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisitions of subsidiaries, net of cash acquired		(35,111	)		(873,071	)		(38,188	)
	Purchases of property, plant and equipment		(1,847,461	)		(1,316,662	)		(1,449,954	)
	Purchases of intangible assets		(379,829	)		(222,866	)		(272,014	)
	Proceeds from sale of property, plant and equipment and assets held for sale		29,763			22,020			10,987
	Purchases of short-term investments		(119,500	)		(221,753	)		(57,147	)
	Proceeds from disposal of short-term investments		54,965			267,517			29,159
	Purchases of other investments		(39,404	)		2,808			(3,856	)
	Net (outflows)/proceeds from investments in and advances to associates		(3,654	)		1,965			20,000
	Decrease/(increase) in restricted cash		5,046			(3,839	)		(18,549	)
Net cash used in investing activities			(2,335,185	)		(2,343,881	)		(1,779,562	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from stock options exercise		9,183			6,057			3,804
	Proceeds from issuance of notes		986,004			—			—
	Repurchase of common stock		(1,059,833	)		(254,443	)		(109,899	)
	Repayment of notes		(485,474	)		—			—
	Notes and debt issuance cost		(6,693	)		(371	)		(20,686	)
	Capital lease obligation principal paid		(5,511	)		(4,952	)		(5,815	)
	Dividends paid		(1,106,469	)		(756,920	)		(558,848	)
	Proceeds from loans		710,443			475,815			1,284,296
	Loan principal paid		(415,944	)		(158,080	)		(1,064,100	)
	Payments from Sistema		—			—			7,182
Net cash used in financing activities			(1,374,294	)		(692,894	)		(464,066	)
Effect of exchange rate changes on cash and cash equivalents			(289,602	)		101,128			6,417
NET INCREASE IN CASH AND CASH EQUIVALENTS			424,304			414,509			141,705
CASH AND CASH EQUIVALENTS, beginning of the year			634,498			219,989			78,284
CASH AND CASH EQUIVALENTS, end of the year			1,058,802			634,498			219,989
SUPPLEMENTAL INFORMATION:
	Income taxes paid	$	931,291		$	838,647		$	673,410
	Interest paid	$	201,052		$	216,997		$	201,352
Non-cash investing and financing activities:
	Additions to network equipment and software under capital lease	$	5,673		$	6,037		$	7,561
	Amounts owed for capital expenditures	$	544,533		$	363,004		$	214,835
	Payable related to business acquisition (Note 3)	$	28,219		$	14,639		$	—

The accompanying notes to the consolidated financial statements are an integral part of these statements.

F-8

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

1.     DESCRIPTION OF BUSINESS

Business of the Group—OJSC Mobile TeleSystems and its subsidiaries ("MTS" or "the Group") is the largest provider of mobile telecommunications services in the Russian Federation ("RF", or "Russia"), Uzbekistan, Turkmenistan and Armenia and the second largest in Ukraine in terms of the number of subscribers.

        The Open Joint-Stock Company Mobile TeleSystems ("MTS OJSC", or "the Company") was created on March 1, 2000, through the merger of MTS CJSC and RTC CJSC, its wholly-owned subsidiary. MTS CJSC started its operations in the Moscow license area in 1994 and began expanding into nearby regions in 1997. Since that time, MTS has continued to grow by applying for GSM ("Global System for Mobile Communication") licenses in new regions and acquiring existing GSM license holders and operators.

        MTS completed its initial public offering in 2000 and listed its shares of common stock, represented by American Depositary Shares, or ADSs, on the New York Stock Exchange under the symbol "MBT."

        The Group provides a wide range of voice and data mobile telecommunications services. Services are provided to both consumers and corporate customers, through a variety of both prepaid and contract tariff arrangements. The Group's mobile services are currently offered over a GSM and 3G network, on which a GPRS ("General Packet Radio Service") service and a HSPA ("High Speed Packet Access") are also provided.

        In July 2006, Ukrainian Mobile Communications ("UMC"), MTS' subsidiary in Ukraine, acquired a new CDMA ("Code Division Multiple Access") license, which is a 3G telecommunications standard, ratified by the International Telecommunication Union. In 2008, MTS launched commercial CDMA services in almost all district-cities in Ukraine.

        In April 2007, MTS received a federal license allowing it to provide 3G services in Russia. In accordance with the conditions set forth in the license, the winning companies are required to begin commercial exploitation of a 3G network within two years from the time they receive the license. In 2008, MTS launched 3G networks in a number of the largest cities of Russia. MTS also launched a number of services available only through the 3G infrastructure. Customers on the new network are now able to make video calls, access mobile TV and roaming on 3G networks. In addition, international roamers are able to access high speed and advanced services on MTS' 3G networks.

        In April 2007, the Communication and Information Agency of Uzbekistan allocated 2500-2700 MHz frequencies to Uzdunrobita, MTS subsidiary in Uzbekistan, thus allowing the Group to provide WiMAX ("Worldwide Interoperability for Microwave Access") services on the entire territory of the country. Additionally, in April 2007 Uzdunrobita received a 3G license valid until the end of 2016 for the entire territory of Uzbekistan. In 2008, MTS launched a 3G network in Tashkent and plans to start rendering 3G services through in a number of other cities by the end of 2009.

        In October 2007, the Public Services Regulatory Commission of the Republic of Armenia allocated 3G frequencies to CJSC K-Telecom ("K-Telecom"), MTS' subsidiary, thus allowing the Group to provide 3G services in Armenia. The allocation is valid for ten years. K-Telecom is licensed to offer 3G

F-9

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

UMTS ("Universal Mobile Telecommunications System technology") services by virtue of its general telecommunication license. MTS plans to launch 3G services in Armenia by the end of 2009.

        The Group is organized by geography of its operations. MTS' principal mobile operations are located in Russia, Ukraine and other CIS countries. In 2006, the Group established a new business unit "MTS Russia" which is responsible for the operational management of all Russian macro-regions, business unit "MTS Ukraine", and business unit "Foreign subsidiaries" that includes Uzdunrobita in Uzbekistan, Barash Communications Technologies, Inc. ("BCTI") in Turkmenistan, K-Telekom in Armenia and MTS Belarus, an equity accounted associate of MTS, in Belarus.

Ownership—As of December 31, 2008 and 2007, MTS shareholders of record and their respective percentage direct interests in outstanding shares were as follows:

	December 31,
	2008			2007
Joint-Stock Financial Corporation "Sistema" ("Sistema")		33.7	%		32.4	%
Sistema Holding Limited ("Sistema Holding")		10.3	%		9.9	%
Invest-Svyaz, Closed Joint-Stock Company ("Invest-Svyaz")		8.5	%		8.2	%
VAST, Limited Liability Company ("VAST")		3.2	%		3.1	%
ADS Holders		41.2	%		39.6	%
Free float, GDR Holders and others		3.1	%		6.8	%
		100.0	%		100.0	%

        MTS' share capital comprises 1,885,052,800 and 1,960,849,301 of outstanding common shares, net of treasury shares, as of December 31, 2008 and 2007, 777,396,505 of which are in the form of ADSs. MTS' wholly-owned subsidiary, Mobile TeleSystems LLC, owned 2,515,747 and 3,913,003 shares as of December 31, 2008 and 2007, respectively, in connection with the Group's management stock option plans. During the years ended December 31, 2008 and 2007, MTS repurchased 77,193,757 and 17,402,835 of its own common shares, respectively, that represent 15,438,751 and 3,480,567 ADSs, for $1,059.8 million and $254.4 million, respectively. The total shares in treasury stock of the Group comprised 108,273,338 and 32,476,837 as of December 31, 2008 and 2007, respectively.

        Sistema owned 100% of Sistema Holding, Invest-Svyaz, and VAST, which collectively resulted in Sistema's effective ownership in MTS of 55.7% and 53.6% (or 1,050,165,886 of common shares) as of December 31, 2008 and 2007, respectively.

        Each ADS initially represented 20 shares of common stock of the Company. Effective January 2005, the ratio was changed from 1 ADS per 20 ordinary shares to 1 ADS per 5 ordinary shares. The Company initially issued a total of 17,262,204 ADSs, representing 345,244,080 common shares. During 2008, 2007 and 2006 MTS repurchased 21,151,518 ADSs.

        Since 2003, common shares of MTS OJSC have been traded on the Moscow Interbank Currency Exchange ("MICEX").

        In 2007, the Board of Directors approved a dividend policy, whereby the Group shall aim to make dividend payments to shareholders in the amount of at least 50% of annual net income under accounting principles generally accepted in the United States ("U.S. GAAP"). The dividend can vary

F-10

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

depending on a number of factors, including the outlook for earnings growth, capital expenditure requirements, cash flow from operations, potential acquisition opportunities, as well as the Group's debt position.

        Annual dividend payments, if any, must be recommended by the Board of Directors and approved by the shareholders.

        In accordance with the Russian laws, earnings available for dividends are limited to profits determined in accordance with Russian statutory accounting regulations, denominated in rubles, after certain deductions. The net income of MTS OJSC for the years ended December 31, 2008, 2007 and 2006 that is distributable under Russian legislation totaled 40,554 million rubles ($1,631.6 million, unaudited), 37,696 million rubles ($1,473.8 million) and 32,094 million rubles ($1,181.0 million), respectively.

        The following table summarizes the Group's declared cash dividends for the years ended December 31, 2008, 2007 and 2006:

	December 31,
	2008		2007		2006
Dividends declared (including dividends on treasury shares of $36,529, $5,967 and $1,519, respectively)	$	1,257,453	$	747,213	$	561,629
Dividends, U.S. Dollars per ADS		3.2		1.9		1.4
Dividends, U.S. Dollars per share		0.631		0.375		0.282

        As of December 31, 2008 and 2007, dividends payable were $0.6 million and $0.8 million, respectively.

        Between July 2005 and December 31, 2008, the Company completed the merger of twenty-five of its subsidiaries in Russia into MTS OJSC. These subsidiaries were Telecom XXI, Kuban-GSM, Udmurtia Digital Network-900 ("UDN-900"), Dontelecom, MTS-Barnaul, MTS-Nizhniy Novgorod ("MTS-NN"), Telecom-900, Amur Cellular Communication ("ACC"), Gorizont-RT, TAIF Telcom, MTS-RTK, Sibchallenge, Tomsk Cellular Communications ("TSS"), BM Telecom, Far East Cellular Systems-900 ("FECS-900"), Siberia Cellular Systems-900 ("SCS-900"), Uraltel, ReCom, Telesot Alania, Astrakhan Mobile, Mar Mobile GSM, Primtelefon, Volgograd Mobile, Bashcell and Mobilnye Sistemy Svyazi ("MSS").

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

Accounting principles—MTS maintains its accounting books and records in Russian rubles for its subsidiaries located in the Russian Federation, in Ukrainian hryvnias for UMC, Uzbek som for Uzdunrobita, the United States dollars ("U.S. Dollars") for BCTI, Turkmenian manat for the branch of BCTI in Turkmenistan and Armenian drams for K-Telecom based on respective local accounting and tax legislations. The accompanying consolidated financial statements have been prepared in order to present MTS financial position and its results of operations and cash flows in accordance with U.S. GAAP and are expressed in terms of U.S. Dollars.

F-11

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The accompanying consolidated financial statements differ from the financial statements used for statutory purposes in that they reflect various adjustments, not recorded on the entities' books, which are appropriate to present the financial position, results of operations and cash flows in accordance with U.S. GAAP. The principal adjustments are related to revenue recognition, foreign currency translation, deferred taxation, consolidation, acquisition accounting, depreciation and valuation of property, plant and equipment, intangible assets and investments.

Basis of consolidation—Wholly-owned and majority-owned subsidiaries where the Group has operating and financial control are consolidated. Those ventures where the Group exercises significant influence, but does not have operating and financial control are accounted for using the equity method. All intercompany accounts and transactions are eliminated upon consolidation. Investments in which the Group does not have the ability to exercise significant influence over operating and financial policies are accounted for under the cost method and included in other investments in the consolidated balance sheets. The Group's share in the net income of unconsolidated associates is included in other income in the accompanying consolidated statements of operations and disclosed in Note 17. Results of operations of subsidiaries acquired are included in the consolidated statements of operations from the date of their acquisition.

F-12

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        As of December 31, 2008 and 2007, the Company had investments in the following significant legal entities:

		December 31,
	Accounting Method	2008			2007
Russia
Sibintertelecom	Consolidated		100.0	%		100.0	%
Novitel	Consolidated		100.0	%		100.0	%
MTS-Kostroma	Consolidated		100.0	%		100.0	%
MTS-Capital	Consolidated		100.0	%		100.0	%
Sweet-Com	Consolidated		74.9	%		74.9	%
Dagtelecom	Consolidated		74.9	%		74.9	%
Coral/Sistema Strategic Fund	Equity		35.0	%		35.0	%
TS-Retail	Equity		25.0	%		25.0	%
Volgograd Mobile(2)	Merged/Consolidated		—			100.0	%
Primtelefon(2)	Merged/Consolidated		—			100.0	%
Mar Mobile GSM(1)	Merged/Consolidated		—			100.0	%
Bashcell(3)	Merged/Consolidated		—			100.0	%
Astrakhan Mobile(1)	Merged/Consolidated		—			100.0	%
MSS(3)	Merged/Consolidated		—			91.0	%
Ukraine
UMC	Consolidated		100.0	%		100.0	%
Other countries
MTS Finance(4)	Consolidated		100.0	%		100.0	%
Uzdunrobita	Consolidated		100.0	%		100.0	%
BCTI	Consolidated		100.0	%		100.0	%
MTS Bermuda Ltd.(5)	Consolidated		100.0	%		100.0	%
K-Telekom	Consolidated		80.0	%		80.0	%
MTS Belarus	Equity		49.0	%		49.0	%

(1)

Represents wholly-owned subsidiaries merged with MTS OJSC on April 30, 2008.

(2)

Represents wholly-owned subsidiaries merged with MTS OJSC on July 1, 2008.

(3)

Represents wholly-owned subsidiaries merged with MTS OJSC on October 1, 2008.

(4)

Represents beneficial ownership.

(5)

A wholly-owned subsidiary established to repurchase the Group's ADSs.

Translation methodology—Until January 1, 2007, the functional currency for the majority of the Group's subsidiaries, excluding UMC, Kuban-GSM and BCTI where the functional currency was the local country currency, was U.S. Dollar as the majority of revenue, cost, property and equipment purchased, debt and trade liabilities were either priced, incurred, payable or otherwise measured in U.S. Dollars.

        In April 2007, an amendment to the Russian Federal law on protection of consumer's rights was enforced prohibiting companies to set up prices in currencies other than Russian ruble. Following the

F-13

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

expected changes in the regulatory environment and due to growth in the share of expenditures denominated or fixed in Russian rubles, the Group's subsidiaries in the Russian Federation began pricing its services and invoicing customers in Russian rubles from January 1, 2007. As a result of these changes, the Company reevaluated the functional currency criteria under SFAS No. 52, "Foreign Currency Translation" ("SFAS No. 52"), and determined that, starting January 1, 2007, the functional currency of the Company's subsidiaries domiciled in Russia was the Russian ruble. Pursuant to SFAS No. 52 provisions, the change was adopted prospectively beginning January 1, 2007, and no retroactive restatement of previously issued financial statements was made.

        The impact of the change in functional currency on the financial statements was an increase in the opening translated carrying values of the following non-monetary assets and liabilities and the related deferred taxes as of January 1, 2007:

	January 1, 2007
Property, plant and equipment, net		329,475
Intangible assets, net		66,235
Goodwill		9,961
Other non-current assets		6,501
Net deferred tax liability		(57,798	)
Other, net		4,623
Total increase		358,997

        This increase has been reflected in shareholders equity as a part of other comprehensive income as of January 1, 2007.

        MTS Belarus, the Group's equity investee, changed its functional currency from the U.S. Dollar to the Belarusian ruble prospectively from January 1, 2007. The impact of this change on MTS Belarus' statement of financial position was not material to the consolidated financial statements.

        As of December 31, 2008, the functional currencies of the Group entities were the following:

•

For entities incorporated in Russian Federation, MTS Bermuda Ltd. and MTS Finance— Russian ruble;

•

For UMC—Ukrainian hryvnia;

•

For Turkmen branch of BCTI—Turkmenian manat;

•

For K-Telecom—Armenian dram;

•

For MTS-Belarus—Belarusian ruble; and

•

For Uzdunrobita and other entities—U.S. Dollar.

        Each of the legal entities domiciled in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus maintains its records and prepares its financial statements in the local currency, either Russian ruble, Ukrainian hryvnia, Uzbek som, Turkmenian manat, Armenian dram or Belarusian ruble, in accordance with the requirements of local statutory accounting and tax legislation.

F-14

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The Group has retained the U.S. Dollar as its reporting currency. Remeasurement of financial statements into functional currencies where applicable and translation of financial statements into U.S. Dollars has been performed in accordance with the provisions of SFAS No. 52:

•

For entities whose records are not maintained in their functional currencies, monetary assets and liabilities have been remeasured at the period end exchange rates. Non-monetary assets and liabilities have been remeasured at historical rates. Revenues, expenses and cash flows have been remeasured at average rates. Remeasurement differences resulting from the use of these rates have been accounted for as currency exchange and transaction gains and losses in the accompanying consolidated statements of operations.

•

For Russian entities, MTS Bermuda Ltd., MTS Finance, UMC, K-Telecom, and for the Turkmen branch of BCTI where the functional currency is other than the reporting currency all year-end balance sheet items have been translated into U.S. Dollars at the period-end exchange rate. Revenues and expenses have been translated at average exchange rate for the period. Translation differences resulting from the use of these rates are reported as a component of other comprehensive income.

Management estimates—The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        Significant estimates include the allowance for doubtful accounts, allowance for inventory obsolescence, valuation of assets acquired and liabilities assumed in business combinations, FIN No. 48 estimates, the recoverability of intangible assets and other long-lived assets, certain accrued liabilities and valuation of financial instruments.

Cash and cash equivalents—Cash and cash equivalents represent cash on hand and in MTS bank accounts and short-term investments, including term deposits, having original maturities of less than three months.

Short-term investments—Short-term investments generally represent investments in time deposits, which have original maturities in excess of three months but less than twelve months. These investments are accounted for at cost.

Provision for doubtful accounts—MTS provides an allowance for doubtful accounts based on management's periodic review for recoverability of accounts receivable, advances given, loans and other receivables. For the years ended December 31, 2008, 2007 and 2006 the provision for doubtful advances given in the amount of $27.9 million, $3.8 million and $nil, respectively, was recorded as the provision for doubtful accounts in the accompanying consolidated statements of operations. For changes in the provision for doubtful loans and accounts receivable see Notes 5 and 6, respectively.

Prepaid expenses—Prepaid expenses primarily comprise advance payments made to vendors for inventory and services.

Inventory—Inventory mainly consists of handsets and accessories held for sale, spare parts to be used for equipment maintenance within the next twelve months and advertising materials. Inventory is

F-15

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

stated at the lower of cost or market value. Inventory cost is determined using the weighted average cost method.

        Handsets and accessories held for sale are expensed when sold. The Group periodically assesses its inventories for obsolete and slow-moving stock.

Value-added tax ("VAT")—Value-added tax related to sales is payable to the tax authorities on an accrual basis based upon invoices issued to the customer. VAT incurred for purchases may be reclaimed from the state, subject to certain restrictions, against VAT related to sales.

Assets held for sale—In 2006, the Group management decided to discontinue use of certain telecommunication equipment ("Lucent equipment") in MTS Russia in accordance with the Group's network development strategy. The Group accounts for Lucent equipment in accordance with the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), and reports Lucent equipment at the lower of its carrying amount or fair value less costs to sell. The equipment had a fair value less costs to sell of approximately $46.4 million and $67.4 million as of December 31, 2008 and 2007, respectively.

        The Group initially negotiated with a third party to sell this equipment during the year ended December 31, 2007. However, due to a wide range of geographical areas the equipment is located and its diversity, the Group reconsidered the time needed to sell the equipment in 2007 and, as a result, the original plan of sale was extended. The amount of Lucent equipment sold during 2008 equaled $12.8 million. The remaining part of Lucent equipment held for sale in the amount of $46.4 million is expected to be sold during 2009 and was classified as other current assets in the accompanying consolidated balance sheet as of December 31, 2008.

        Due to the fact that the initial plan of sale was reconsidered, the fair value of Lucent equipment was determined using the discounted cash flows based on updated expected timing of sale. As a result, an impairment loss on Lucent equipment in the amount of $6.8 million was recorded as other operating expenses in the Group's consolidated statement of operations for the year ended December 31, 2007. This loss is entirely attributable to "Russia" operating reportable segment. No impairment loss on Lucent equipment was recorded during the year ended December 31, 2008.

Property, plant and equipment—Property, plant and equipment, including improvements that extend useful lives, are stated at cost. Property, plant and equipment with a useful life of more than one year is capitalized at historical cost and depreciated on a straight-line basis over its expected useful life as follows:

Network and base station equipment	5-12 years
Leasehold improvements	shorter of 8-10 years or lease term
Office equipment and computers	5 years
Buildings	50 years
Vehicles	4 years

        Construction in progress and equipment held for installation is not depreciated until the constructed or installed asset is ready for its intended use. Maintenance and repair costs are expensed as incurred, while upgrades and improvements are capitalized. Interest expense incurred during the

F-16

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

construction phase of MTS' network is capitalized as part of property, plant and equipment until the relevant projects are completed and placed into service.

Asset retirement obligations—In accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations" and FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143" ("FIN No. 47"), the Group calculates an asset retirement obligation and an associated asset retirement cost when the Group has a legal or constructive obligation in connection with the retirement of tangible long-lived assets. The adoption of FIN No. 47 did not have material impact on the Group's financial position or results of operations. The Group's obligations under SFAS No. 143 relate primarily to the cost of removing its equipment from sites.

        As of December 31, 2008 and 2007, the estimated present value of the Group's asset retirement obligations and change in liabilities were as follows:

		2008			2007
Balance, beginning of the year		$	59,527		$	10,821
	Liabilities incurred in the current period		3,840			3,115
	Accretion expense		6,026			1,138
	Revisions in estimated cash flows		3,383			44,453
	Currency translation adjustment		(10,723	)		—
Balance, end of the year		$	62,053		$	59,527

        The Group recorded the present value of assets retirement obligations as other long-term liabilities in the consolidated balance sheets as of December 31, 2008 and 2007. Revisions in estimated cash flows are attributable to the increase in the expected dismantlement costs.

License costs—License costs are capitalized as a result of (a) the purchase price allocated to licenses acquired in business combinations and (b) licenses purchased directly from government organizations, which require license payments.

        The Group's operating licenses do not provide for automatic renewal. As of December 31, 2008, all licenses covering the territories of Russian Federation were renewed. The cost to renew the licenses was not significant. However, the Group has limited experience with the renewal of its existing licenses covering the territories of the Group's foreign subsidiaries. Management believes that licenses required for the Group's operations will be renewed upon expiration though there is no assurance of such renewals and the Group has limited experience in seeking renewal of its licenses.

        License costs are being amortized during the initial license period without consideration of possible future renewals, subject to periodic review for impairment, on a straight-line basis over the period of validity which is from three to fifteen years.

Other intangible assets and goodwill—Intangible assets represent various purchased software costs, telephone numbering capacity, acquired customer base, rights to use radio frequencies and rights to use premises. A part of the rights to use premises was contributed by shareholders to the Group's charter capital. Telephone numbering capacity with a finite contractual life is being amortized over the contract period which varies from two to ten years. The rights to use premises are being amortized over five to

F-17

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

fifteen years. Amortization of numbering capacity costs starts immediately upon the purchase of numbering capacity. Telephone numbering capacity with unlimited contractual life is not amortized, but is reviewed, at least annually, for impairment in accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").

        Software and other intangible assets are amortized over one to twenty years. Customer bases are amortized on a straight-line basis over their respective estimated average subscriber life, being from 20 to 60 months. Rights to use radio frequencies are amortized over the period of their contractual life, being from two to fifteen years. All finite-life intangible assets are amortized using the straight-line method.

        Goodwill represents an excess of the cost of business acquired over the fair market value of identifiable net assets at the date of acquisition. Goodwill is reviewed for impairment at least annually or whenever it is determined that one or more impairment indicators exist. The Group determines whether impairment has occurred by assigning goodwill to the reporting unit identified in accordance with SFAS No. 142, and comparing the carrying amount of the reporting unit to the fair value of the reporting unit. If an impairment of goodwill has occurred, the Group recognizes a loss for the difference between the carrying amount and the implied fair value of goodwill. To date, no impairment of goodwill has occurred.

Leasing arrangements—The Group accounts for leases based on the requirements of SFAS No. 13, "Accounting for Leases." Entities of the Group lease operating facilities which include switches, other cellular network equipment, vehicles, premises and sites to install base stations equipment and towers. Rentals payable under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease. For capital leases, the present value of future minimum lease payments at the inception of the lease is reflected as an asset and a liability in the balance sheet. Amounts due within one year are classified as short-term liabilities and the remaining balance as long-term liabilities.

Investments impairment—Management periodically assesses the recoverability of the carrying values of investments and, if necessary, records impairment losses to write the investments down to fair value. For the years ended December 31, 2008 and 2007, no impairment of investments occurred. In 2006, the Group's investment in Bitel LLC ("Bitel") in the amount of $150.0 million was written down to $nil (Note 21).

Impairment of long-lived assets—MTS periodically evaluates the recoverability of the carrying amount of its long-lived assets in accordance with SFAS No. 144. Whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable, MTS compares undiscounted net cash flows estimated to be generated by those assets to the carrying amount of those assets. When the undiscounted cash flows are less than the carrying amounts of the assets, MTS records impairment losses to write the asset down to fair value, measured by the estimated discounted net future cash flows expected to be generated from the use of the assets. Impairment of property, plant and equipment and intangible assets amounted to $1.3 million and $10.0 million for the years ended December 31, 2008 and 2007, respectively. No impairment loss occurred during the year ended December 31, 2006.

Subscriber prepayments—MTS requires the majority of its customers to pay in advance for telecommunication services. All amounts received in advance of services provided are recorded as a

F-18

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

subscriber prepayment liability and are not recorded as revenues until the related services have been provided to the subscriber.

Treasury stock—Shares of common stock repurchased by the Group are recorded at cost as treasury stock and reduce the shareholders' equity in the Group's consolidated financial statements.

Revenue recognition—The Group records its revenues net of VAT. Revenues are recognized only when all of the following conditions have been met: (i) there is persuasive evidence of an arrangement; (ii) delivery of goods and rendering of services has occurred; (iii) the fees are fixed and determinable; and (iv) collectibility of the fees is reasonably assured.

        MTS categorizes its revenue sources in the statements of operations as follows:

•

Service revenue and connection fees: (a) usage charges; (b) subscription fees; (c) value added service fees; (d) fees for connecting users of other operators' fixed line and wireless networks to MTS' network ("interconnect fees"); (e) roaming fees charged to other operators for guest roamers utilizing MTS network; (f) connection fees; and

•

Sales of handsets and accessories.

Usage charges—Usage charges consist of fees determined based on airtime used by a subscriber, the destination of the call and the service utilized, and access charges. MTS recognizes revenues related to usage charges and access charges in the period when services are rendered.

Subscription fees—MTS recognizes revenues related to the monthly network subscription fees in the month when the service is provided to the subscriber.

Value added service fees—Value added service fees are determined based on the usage of airtime or the volume of data transmitted for value added services, such as short message services ("SMS"), including content services via SMS, internet usage and data services. The Group evaluates the criteria outlined in Emerging Issues Task Force ("EITF") Issue No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent," in determining whether it is appropriate to record the gross amount of services provided and related costs or the net amount earned as commissions. Revenue is recorded gross when MTS is the primary obligor in a transaction, has latitude in establishing prices and selecting suppliers of services, or has several but not all of these indicators.

Roaming fees—MTS charges roaming per-minute fees to other wireless operators for non-MTS subscribers utilizing MTS network. MTS recognizes such revenues when the services are provided.

Interconnect fees—Effective July 1, 2006, an amendment to the RF Federal Law on Communications implemented the "calling party pays" ("CPP") principle prohibiting mobile operators from charging their subscribers for incoming calls. Previously, MTS charged subscribers in Russia for incoming calls. Under the new system, MTS charges the telecommunication operators of the calling party for incoming calls, and, in its turn, MTS pays other operators for the outgoing calls of its subscribers.

        MTS recognizes interconnect fees for incoming calls to customers from fixed line or wireless networks owned by other operators in the month when services to the customer are actually provided.

Connection fees—MTS defers the initial connection fees on its prepaid and postpaid tariff plans from the moment of initial signing of the contract with subscribers and activation of value added

F-19

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

services over the estimated average subscriber life. Based on management's analysis of the subscriber base in the regions where the Group operates the average expected subscriber life ranged from 14 to 60 months in 2008 and 2007.

Sales of handsets and accessories—MTS sells wireless handsets and accessories to customers who are entering into contracts for service and also as separate distinct transactions. The Group recognizes revenues from the sale of wireless handsets and accessories when the products are delivered to and accepted by the customer, as it is considered to be a separate earnings process from the sale of wireless services in accordance with EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables". The costs of wireless handsets and accessories, whether sold to subscribers through the distribution channel or as part of the service contract, are expensed when the associated revenue is recognized.

Customer incentives—Incentives provided to customers are usually offered on signing a new contract or as part of a promotional offering. Incentives, representing the reduction of the selling price of the service (free minutes and discounts) are recorded in the period to which they relate, when the respective revenue is recognized, as a reduction to both accounts receivable and revenue. However, if the sales incentive is a free product or service delivered at the time of sale, the cost of the free product or service is classified as an expense. In particular, MTS sells handsets at prices below cost to contract subscribers. Such subsidies are recognized in the cost of handsets and accessories when the sale is recorded.

Roaming discounts—During the years ended December 31, 2008 and 2007 the Group entered into a bilateral roaming discount agreements with a number of wireless operators. According to the terms of the agreements MTS is obliged to provide and entitled to receive a discount that is generally dependant on the volume of inter operator roaming traffic. The Group accounts for rebates received from and granted to roaming partners in accordance with EITF Issue 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor", and EITF Issue 00-22, "Accounting for "Points" and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future", respectively. The Group uses various estimates and assumptions, based on historical data and adjusted for known changes, to determine the amount of discount to be received or granted. Such estimates are adjusted monthly to reflect newly-available information. The Group accounts for discounts received as a reduction of roaming expenses and rebates granted as reduction of roaming revenue. The Group considers terms of the various roaming discount agreements in order to determine the appropriate presentation of the amounts receivable from and payable to its roaming partners in consolidated balance sheet.

Prepaid phone cards—MTS sells prepaid phone cards to subscribers, separately from the handset. These cards allow subscribers to make a predetermined allotment of wireless phone calls and/or take advantage of other services offered by the Group, such as short messages and value-added services. The Group recognizes revenue from the services in the month when the services were actually rendered. Revenue from the sale of prepaid cards is deferred until the service is rendered to the customer uses the airtime or the card expires.

F-20

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

Cost of services—Expenses incurred by MTS in connection with the provision of wireless communication services mainly relate to interconnect and line rental costs, roaming expenses and costs of handsets and accessories sold.

        Calls made by MTS subscribers from areas outside of the territories covered by the Group's licenses are subject to roaming fees charged by the wireless providers in those territories. These fees are recorded as roaming expenses, as MTS acts as the principal in the transaction with the subscriber, being a primary obligor in providing the services, bearing the credit risk and having latitude in establishing roaming prices. MTS charges its subscribers for roaming fees paid to other networks based on the Group's existing tariffs and records such roaming fees as service revenues at the time the services are rendered.

Taxation—Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial reporting and tax reporting bases of assets and liabilities, and for the loss or tax credit carry-forwards using enacted tax rates expected to be in effect at the time these differences are realized. Valuation allowances are recorded for deferred tax assets for which it is more likely than not that the assets will not be realized.

Accounting for uncertainty in income tax—On January 1, 2007, the Group adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of SFAS No. 109" ("FIN No. 48"). FIN No. 48 creates a single model to address uncertainty in tax position and clarifies the accounting for income taxes recognized by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statement. FIN No. 48 also provides guidance on recognition, measurement, classification, treatment of interest and penalties, disclosure and transition. The Group recognizes interests and penalties related to uncertain tax positions in income tax expense. The adoption of FIN No. 48 resulted in additional accruals for unrecognized tax benefits, potential penalties and interest in the total amount of $0.6 million, $5.7 million and $1.3 million, respectively, which were recorded as adjustments to retained earnings as of January 1, 2007 (see also Note 13).

Sales and marketing expenses—Sales and marketing expenses consist primarily of dealers' commissions and advertising costs. Dealers' commissions are linked to revenues received during the six-month period from the date a new subscriber is activated by a dealer. MTS expenses these costs as incurred. Advertising costs for the years ended December 31, 2008, 2007 and 2006, were $430.6 million, $374.9 million and $321.5 million, respectively.

Borrowing costs—Borrowing costs include interest incurred on existing indebtedness and debt issuance costs. Interest costs for assets that require a period of time to get them ready for their intended use are capitalized and amortized over the related assets' estimated useful lives. The capitalized interest costs for the years ended December 31, 2008, 2007 and 2006 were $69.1 million, $88.8 million and $70.3 million, respectively. Debt issuance costs are capitalized and amortized over the term of the respective borrowings using the effective interest method. Interest expense net of amounts capitalized and amortization of debt issuance costs, for the years ended December 31, 2008, 2007 and 2006, were $131.7 million, $129.9 million and $139.0 million, respectively.

Government Pension Fund—The Group contributes to the local state pension and social funds, on behalf of all its employees.

F-21

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        In Russia all social contributions are represented by a unified social tax ("UST") calculated by the application of a regressive rate from 26% to 2% of the annual gross remuneration of each employee. The UST is allocated to three social funds, including the pension fund, where the rate of contributions varies from 20% to 2%, depending on the annual gross salary of employee. These contributions are expensed as incurred. The amount of UST paid by the Group in Russia amounted to $62.5 million, $42.8 million and $35.8 million in 2008, 2007 and 2006, respectively.

        In Ukraine, Uzbekistan, Turkmenistan and Armenia the subsidiaries of the Group are required to contribute a specified percentage of each employee payroll up to a fixed limit to the local pension fund, unemployment and social security funds. Payments to the pension fund in the Ukraine amounted to $14.4 million, $11.7 million and $9.1 million for the years ended December 31, 2008, 2007 and 2006, respectively. Amounts contributed to the pension funds in Uzbekistan, Turkmenistan and Armenia were not significant.

        The Group does not participate in any pension funds other than described above.

Earnings per share—Basic earnings per share ("EPS") have been determined using the weighted average number of shares outstanding during the year. Diluted EPS reflect the potential dilutive effect of stock options granted to employees. There were 1,302,070, 1,397,256 and 1,435,001 stock options outstanding as at December 31, 2008, 2007 and 2006, respectively (see also Note 14).

        The following is the reconciliation of the share component for basic and diluted EPS with respect to the Group's net income:

	December 31,
	2008		2007		2006
Weighted average number of common shares outstanding, basic		1,921,934,091		1,973,354,348		1,987,610,121
Dilutive effect of stock options, as if exercised		—		720,560		35,894
Weighted average number of common shares and potential shares outstanding, diluted		1,921,934,091		1,974, 074,908		1,987,646,015

Financial instruments and hedging activities—From time to time in its acquisitions, the Group uses financial instruments, consisting of put and call options on all or part of the minority stakes of acquired companies, to defer payment of the purchase price and provide optimal acquisition structuring. These put and call options qualify as freestanding financial instruments and are accounted in accordance with the provisions of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," and EITF 00-6, "Accounting for Freestanding Derivative Financial Instruments Indexed to, and Potentially Settled in, the Stock of a Consolidated Subsidiary."

        From time to time the Group enters into variable-to-fixed interest rate swap agreements to manage its exposure to variability in expected future cash flows of its variable-rate long term debt, which is caused by interest rate fluctuations. The Group accounts for these swaps in accordance with the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." All derivatives are recorded as either assets or liabilities in the consolidated balance sheets and measured at their respective fair values.

F-22

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The Group's interest rate swap agreements are designated as cash flow hedges and the hedging relationship qualifies for hedge accounting. Accordingly, the effective portion of the change in the fair value of interest rate swap agreements is recorded in other comprehensive income and reclassified to interest expense in the same period that the related cash flows of the hedged transaction affect the interest expense. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.

        At the inception of a hedge, and on a quarterly basis, the Group performs an analysis to assess whether changes in the cash flows of its interest rate swap agreements are deemed highly effective in offsetting changes in the cash flows of the hedged debt. If at any time the correlation assessment indicates that the interest rate swap agreements are no longer highly effective as a hedge, the Group discontinues hedge accounting and all subsequent changes in fair value are recorded in net income (Note 11).

        The Group does not use financial instruments for trading purposes.

Fair value of financial instruments—The fair market value of financial instruments, consisting of cash and cash equivalents, short-term investments, accounts receivable and accounts payable, which are included in current assets and liabilities, approximates the carrying value of these items due to the short term nature of these amounts. Based on the Luxemburg stock exchange quotes as of December 31, 2008, the $400.0 million Notes due in 2010 had a fair value of 90.5% or $362.0 million, and the $400.0 million Notes due in 2012 had a fair value of 80.0% or $320.0 million. Based on the MICEX stock exchange quotes as of December 31, 2008 the $255.0 million ruble-denominated Notes due in 2013 had a fair value of 99.3% or $253.0 million, the $255.0 million ruble-denominated Notes due in 2015 had a fair value of 99.0% or $253.0 million and the $268.5 million ruble-denominated Notes due in 2018 had a fair value of 91.2% or $245.9 million. As of December 31, 2008, the fair value of other fixed rate debt including capital lease obligations approximated its carrying value. The fair value of variable rate debt approximates its carrying value.

Comprehensive income—Comprehensive income is defined as net income plus all other changes in net assets from non-owner sources. The following is the reconciliation of total comprehensive income, net of tax for the years ended December 31, 2008, 2007 and 2006:

	Year ended December 31,
	2008			2007			2006
Net income	$	1,930,419		$	2,071,504		$	1,075,738
Effect of change in functional currency		—			358,997			—
Currency translation adjustment		(1,034,008	)		256,390			41,315
Change in fair value of interest rate swaps, net of tax of $3,826, $352 and $794, respectively		(16,359	)		(1,114	)		(2,013	)
Total comprehensive income	$	880,052		$	2,685,777		$	1,115,040

Stock-based compensation—Effective from January 1, 2006, MTS adopted the provisions of FASB Statement No. 123R, "Share-based payment" ("SFAS No. 123R"), which is a revision of SFAS No. 123, "Accounting for stock-based compensation" ("SFAS No. 123"). Under SFAS No. 123R companies must calculate and record the cost of equity instruments, such as stock options awarded to employees for

F-23

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

services received, in the income statement. The cost of the equity instruments is to be measured based on the fair value of the instruments on the date they are granted (with certain exceptions) and recognized over the period during which the employees are required to provide services in exchange for equity instruments.

        The Group adopted SFAS No. 123R using the modified-prospective-application transition method. Under this transition method, compensation cost for all share-based awards granted prior to, but not yet vested as of December 31, 2006, was determined based on the grant date fair value estimated in accordance with the original requirements of SFAS No. 123, using the same assumptions and taking into account the estimated forfeitures.

New and recently adopted accounting pronouncements—In September 2006, the FASB issued FASB Statement No. 157, "Fair value measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements of fair value measurement. SFAS No. 157 is applicable to other accounting pronouncements that require or permit fair value measurement and does not itself require any fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Group adopted SFAS No. 157 as of January 1, 2008. The adoption of SFAS No. 157 did not have a material impact on the Group's financial position, results of operations or cash flows.

        SFAS No. 157 also established a hierarchy that classifies the inputs used to measure fair value. This hierarchy prioritizes the use of inputs used in valuation techniques into three levels based on observable and unobservable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Group. Unobservable inputs, which require more judgment, are those inputs described above that reflect management's views on the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs.

        The following fair value hierarchy table presents information regarding Group's assets and liabilities measured at fair value on a recurring basis as of December 31, 2008:

		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2008
Liabilities:
	Interest rate swap agreements		—		(20,892	)		—		(20,892	)

        The fair value of the Group's interest rate swap agreements is based on observable interest rate yield curves for similar instruments (Note 11).

        In February 2007, the FASB issued FASB Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115" ("SFAS No. 159"), which permits an entity to measure certain financial assets and financial liabilities at fair value. SFAS No. 159 offers an irrevocable option to carry the vast majority of financial assets and

F-24

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

liabilities at fair value, with changes in fair value recorded in earnings (the fair value option, or FVO). Effective January 1, 2008, the Group adopted SFAS No. 159. On adoption and as of December 31, 2008, the Group did not elect to measure any financial instruments and liabilities at fair value other than those required to be accounted for at fair value under other accounting standards. Therefore, the adoption of SFAS No. 159 did not have any impact on the Group's financial position, results of operations or cash flows.

        In December 2007, the FASB issued FASB Statement No. 141R, "Business Combinations" ("SFAS No. 141R"), and FASB Statement No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS No. 160"). These statements change the way companies account for business combinations and noncontrolling interests (minority interests in current GAAP). SFAS No. 141R and SFAS No. 160 will require, among other changes: (a) more assets acquired and liabilities assumed to be measured at fair value as of the acquisition date; (b) liabilities related to contingent consideration to be remeasured at fair value in each subsequent reporting period; (c) an acquirer to expense acquisition-related costs; and (d) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity. Both Statements are to be applied prospectively (with one exception related to income taxes) for fiscal years beginning on or after December 15, 2008. However, SFAS No.160 requires entities to apply the presentation and disclosure requirements retrospectively (e.g., by reclassifying noncontrolling interests to appear in equity) to comparative financial statements, if presented. Both standards prohibit early adoption. The Group expects SFAS No.141R will have an impact on its accounting for future business combinations once adopted, but the effect is dependent upon the acquisitions that are made in the future.

        In connection with the issuance of SFAS No. 160, EITF Topic D-98, "Classification and Measurement of Redeemable Securities" ("Topic D-98"), was revised to include the SEC Staff's views regarding the interaction between Topic D-98 and SFAS No. 160. The revised Topic D-98 indicates that the classification, measurement, and earnings-per-share guidance required by Topic D-98 applies to noncontrolling interests (e.g., when the noncontrolling interest is redeemable at a fixed price or fair value by the holder or upon the occurrence of an event that is not solely within the control of the issuer). The revisions to Topic D-98 that are specific to accounting for noncontrolling interests should be applied no later than the effective date of SFAS No. 160. The Group is currently evaluating the impact that adoption of SFAS No. 160 and Topic D-98 will have on the accounting and disclosure of the Group's minority interest in K-Telecom.

        In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Group does not expect significant impact of the adoption of SFAS No. 161 on its financial position, results of operations and cash flows.

        In April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP No. 142-3"). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. The objective of FSP No. 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected

F-25

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

cash flows used to measure the fair value of the asset under SFAS No. 141R and other U.S. GAAP. FSP No. 142-3 applies to all intangible assets, whether acquired in a business combination or otherwise, and shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and should be applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. The Group expects FSP No. 142-3 will have an impact on its accounting for future acquisitions of intangible assets once adopted, but the effect is dependent upon the acquisitions that are made in the future.

        In November 2008, the FASB issued EITF Issue No. 08-6, "Equity Method Investment Accounting Considerations" ("EITF Issue No. 08-6"). EITF Issue No. 08-6 considers the effects of the issuances of SFAS No. 141R and SFAS No. 160 on an entity's application of the equity method under Opinion 18, "The Equity Method of Accounting for Investments in Common Stock," i.e. determination of the initial carrying value of an equity-method investment, impairment assessment of an underlying indefinite-lived intangible asset of an equity-method investment, accounting for issuance of shares by an equity investee, and accounting for a change in an investment from the equity method to the cost method. EITF No. 08-6 is effective for transactions occurring in fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. Early adoption is not permitted. The Group does not expect the adoption of EITF No. 08-6 to have a significant impact on its financial position, results of operations and cash flows.

        In November 2008, the FASB issued EITF Issue No. 08-7, "Accounting for Defensive Intangible Assets" ("EITF Issue No. 08-7"). EITF Issue No. 08-7 applies to all acquired intangible assets in situations in which an entity does not intend to actively use the asset but intends to hold (lock up) the asset to prevent others from obtaining access to the asset (a defensive intangible asset), except for intangible assets that are used in research and development activities. The EITF reached a consensus that a defensive intangible asset should be accounted for as a separate unit of accounting and should be assigned a useful life that reflects the entity's consumption of the expected benefits related to the asset, noting that it would be rare for a defensive intangible asset to have an indefinite life. This EITF Issue No. 08-7 is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Group expects EITF Issue No. 08-7 will have an impact on its accounting for future acquisitions of intangible assets once adopted, but the effect is dependent upon the acquisitions that are made in the future.

3.     BUSINESSES ACQUIRED

MSS acquisition—In February 2008, MTS acquired an additional 9% stake in its Omsk subsidiary, Mobilnye Sistemy Svyazi, from a private investor for $16.0 million in cash. As a result of this transaction, MTS' ownership in the subsidiary increased to 100%. The transaction was accounted for using the purchase method. Preliminary allocation of the purchase price increased the recorded license cost by $8.8 million and customer base cost by $3.2 million. License costs are amortized over the remaining contractual terms of the license of approximately 3 years and the customer base is amortized on a straight-line basis over the estimated average subscriber's life of approximately 60 months.

Bashcell acquisition—In December 2007, MTS acquired 100% of Bashcell, the GSM-1800 mobile services provider in the Republic of Bashkortostan, situated in Russia's Volga region. Cash consideration paid amounted to $6.7 million. In connection to the purchase MTS assumed debt in the amount of $31.9 million due from Bashcell to its previous shareholder.

F-26

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        This acquisition was accounted for using the purchase method of accounting. The purchase price allocation for the acquisition was as follows:

Current assets	$	5,645
Non-current assets		13,156
Customer base cost		2,260
Goodwill		21,077
Current liabilities		(7,737	)
Non-current liabilities		(31,918	)
Deferred taxes		4,209
Purchase price	$	6,692

        Goodwill is mainly attributable to the synergy expected as a result of the acquisition and was assigned to the "Russia" operating segment. The amount of goodwill is not deductible for income tax purposes. The customer base is amortized on a straight-line basis over the estimated average subscriber's life of approximately 60 months.

K-Telecom acquisition—In September 2007, MTS acquired 80% stake in International Cell Holding Ltd, 100% indirect owner of K-Telecom CJSC, Armenia's wireless telecommunication operator. Along with acquisition, the Group entered into a call and put option agreement for the remaining 20% stake to be exercised not earlier than July 2010 and not later than July 2012. In accordance with put and call option agreement, the exercise price shall be fair value, as determined by an independent investment bank at the date the option is exercised subject to a cap of €200.0 million (equivalent of $281.9 million as of December 31, 2008). The option is valid until July 2012. The option was accounted for at fair value which was $nil at December 31, 2008.

        K-Telecom operates under the VivaCell brand in the GSM-900/1800 standard covering the entire territory of Armenia. The license is valid until the end of 2019.

        In accordance with sale and purchase agreement, MTS paid €260.0 million ($361.2 million as of the date of acquisition) for 80% of K-Telecom and €50.0 million ($69.0 million as of the date of acquisition) shall 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. Based on K-Telekom's financial results for the year ended December 31, 2007, €10.0 million ($14.7 million as of December 31, 2007) was recognized as a liability in the accompanying consolidated balance sheet as of December 31, 2007 and included in the purchase price of K-Telecom.In conjunction with the acquisition, MTS extended a €140.0 million ($194.5 million as of date of acquisition) loan to K-Telecom for repayment of payables for equipment and other liabilities due as of the date of acquisition to PMF Telecommunications, an entity affiliated to the sellers. As a result, K-Telekom's liabilities to the seller and its affiliates were settled. The loan is eliminated in consolidation and is not part of the purchase price. Finders and consultants fees paid in connection with the business combination and included in the purchase price were $26.7 million.

F-27

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        This acquisition was accounted for using the purchase method of accounting. The purchase price allocation for the acquisition was as follows:

Current assets	$	31,805
Non-current assets		198,984
License costs		217,354
Customer base cost		76,754
Trade mark		2,555
Goodwill		120,579
Current liabilities		(25,138	)
Non-current liabilities		(149,841	)
Deferred taxes		(59,722	)
Minority interest		(10,772	)
Purchase price	$	402,558

        In accordance with the terms of the sale and purchase agreement, based on K-Telekom's financial results for the year ended December 31, 2008, €20.0 million ($28.2 million as of December 31, 2008) was accounted for as the adjustment to purchase price and recoginized as as a liability in the accompanying consolidated balance sheet as of December 31, 2008. If and when future financial targets are met, additional adjustments to the purchase price will be made.

        Goodwill is mainly attributable to the economic potential of Armenia, given the low mobile penetration level of the market. Goodwill is not deductible for income tax purposes.

        The customer base is amortized on a straight-line basis over the estimated average subscriber's life of approximately 46 months.

Uzdunrobita acquisition—In June 2007, MTS purchased an additional 26% stake in Uzdunrobita, a mobile telecom operator in Uzbekistan, from a private investor for $250.0 million in cash. Previously MTS owned 74% of Uzdunrobita. As a result of this transaction, MTS' ownership increased to 100%. The transaction was accounted for using the purchase method. Allocation of the purchase price increased the recorded license cost by $155.7 million, customer base cost by $6.5 million, and property plant and equipment cost by $5.4 million. Additionally, $35.0 million was recognized as goodwill. Goodwill is not deductible for income tax purposes and is mainly attributable to the economic potential of the markets where Uzdunrobita operates.

        License costs are amortized over the remaining contractual terms of the licenses of approximately 9 years and the customer base is amortized over the estimated average subscriber's life of approximately 20 months.

Dagtelecom acquisition—In July 2006, MTS acquired a 74.99% controlling stake in Dagtelecom for a cash consideration of $14.7 million. Dagtelecom is a GSM-900 mobile services provider in the Republic of Dagestan, Russia. In conjunction with this acquisition, the Group entered into a put and call option agreement to buy the remaining stake at fair market value within an exercise period commencing from September 1, 2009 and ending in July 2021, for the put option, and from 2009 to 2010 for the call option. The fair value of the option was $nil at December 31, 2008 and 2007.

F-28

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        This acquisition was accounted for using the purchase method of accounting. The purchase price allocation for the acquisition was as follows:

Current assets	$	605
Non-current assets		12,747
Customer base cost		1,785
Goodwill		12,574
Current liabilities		(7,610	)
Non-current liabilities		(5,086	)
Deferred taxes		(392	)
Minority interest		77
Purchase price	$	14,700

        Goodwill is mainly attributable to the economic potential of the "Russia" operating segment. Goodwill is not deductible for income tax purposes.

        The customer base is amortized on a straight-line basis over the estimated average subscriber's life of approximately 60 months.

        In January 2009, the Group received a put notice from the holder of the minority stake in Dagtelecom and therefore subsequently acquired the remaining stake (Note 23).

4.     CASH AND CASH EQUIVALENTS

        Cash and cash equivalents as of December 31, 2008 and 2007 comprised the following:

	December 31,
	2008		2007
Ruble current accounts	$	106,605	$	71,457
Ruble deposit accounts		126,275		61,517
U.S. Dollar current accounts		95,747		15,143
U.S. Dollar deposit accounts		35		255,293
Euro current accounts		5,698		7,675
Euro deposit accounts		423,150		—
Hryvnia current accounts		1,462		3,550
Hryvnia deposit accounts		1,948		6,931
Uzbek som current accounts		229,904		121,719
Uzbek som deposit accounts		57,430		45,736
Turkmenian manat current accounts		1,496		22,154
Armenian dram current accounts		4,162		14,777
Armenian dram deposit accounts		4,890		8,546
Total cash and cash equivalents	$	1,058,802	$	634,498

F-29

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

5.     SHORT-TERM INVESTMENTS

        As of December 31, 2008 the Group's short-term investments comprised the following:

	Annual interest rate			Maturity Date		December 31, 2008
Deposit in OJSC Moscow Bank of Reconstruction and Development (Note 15)		10.3	%		July 2009	$	30,000
Deposit in OJSC Moscow Bank of Reconstruction and Development (Note 15)		7.5	%		June 2009		15,000
Other							718
Total short-term investments						$	45,718

Beta Link—During the year ended December 31, 2008 the Group granted a short-term loan in the amount of $28.2 million to Beta Link with a maturity date of December 2, 2009 and related interest of 9.0%. The Group had 49.0% of shares of Beta Link assigned as collateral pursuant to the loan agreement. As of December 31, 2008, the Group's management became aware of the deteriorated financial position of Beta Link. Further, in March 2009, Beta Link filed a bankruptcy petition to the Arbitration Court of Moscow. The Group's management believes that a probable risk exists that such loan may not be recovered. Accordingly, an allowance for the entire loan amount was recorded in the provision for doubtful accounts in the accompanying statement of operations for the year ended December 31, 2008.

        As of December 31, 2007 short-term investments comprised the following:

	Annual interest rate			Maturity Date		December 31, 2007
OJSC Moscow Bank of Reconstruction and Development (Note 15)		6.6	%		June 2008	$	15,000
Other							776
Total short-term investments						$	15,776

6.     TRADE RECEIVABLES, NET

        Trade receivables as of December 31, 2008 and 2007 comprised the following:

	December 31,
	2008			2007
Accounts receivable, subscribers	$	116,622		$	180,411
Accounts receivable, interconnect		93,967			148,902
Accounts receivable, dealers		86,821			16,660
Accounts receivable, roaming		33,958			44,525
Accounts receivable, other		36,882			39,590
Allowance for doubtful accounts		(47,691	)		(43,480	)
Trade receivables, net	$	320,559		$	386,608

F-30

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The following table summarizes the changes in the allowance for doubtful accounts receivable for the years ended December 31, 2008, 2007 and 2006:

	2008			2007			2006
Balance, beginning of the year	$	43,480		$	47,435		$	39,919
Provision for doubtful accounts receivable		90,112			55,170			84,858
Accounts receivable written off		(76,678	)		(62,276	)		(77,342	)
Currency translation adjustment		(9,223	)		3,151			—
Balance, end of the year	$	47,691		$	43,480		$	47,435

7.     INVENTORY AND SPARE PARTS

        Inventory and spare parts as of December 31, 2008 and 2007, comprised the following:

	December 31,
	2008		2007
Spare parts for base stations	$	45,406	$	52,069
SIM cards and prepaid phone cards		29,673		33,315
Handsets and accessories		24,026		18,263
Advertising materials		2,966		7,802
Other materials		8,419		29,483
Total inventory and spare parts	$	110,490	$	140,932

        Other materials mainly consist of stationery, fuel and auxiliary materials.

        Obsolescence expense for the years ended December 31, 2008, 2007 and 2006, amounted to $1.3 million, $nil and $nil, respectively, and was included in general and administrative expenses in the accompanying consolidated statements of operations. Spare parts for base stations included in inventory are expected to be utilized within the twelve months following the balance sheet date.

F-31

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

8.     PROPERTY, PLANT AND EQUIPMENT

        The net book value of property, plant and equipment as of December 31, 2008 and 2007, was as follows:

	December 31,
	2008			2007
Network, base station equipment (including leased network and base station equipment of $1,281 and $1,533, respectively) and related leasehold improvements	$	6,502,590		$	6,374,063
Office equipment, computers and other		634,850			641,095
Buildings and related leasehold improvements		354,761			352,313
Vehicles (including leased vehicles of $12,114 and $13,269, respectively)		45,553			40,973
Property, plant and equipment, at cost		7,537,754			7,408,444
Accumulated depreciation (including accumulated depreciation on leased equipment of $5,391 and $5,625)		(3,409,495	)		(3,079,376	)
Equipment for installation		450,605			748,447
Construction in progress		1,321,265			1,529,800
Property, plant and equipment, net	$	5,900,129		$	6,607,315

        Depreciation expenses during the years ended December 31, 2008, 2007 and 2006, amounted to $1,372.2 million, $999.0 million and $689.7 million, respectively, including depreciation expenses for leased property, plant and equipment in the amount of $3.3 million, $2.8 million and $2.3 million, respectively.

F-32

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

9.     OTHER INTANGIBLE ASSETS AND GOODWILL

        Intangible assets as of December 31, 2008 and 2007, comprised the following:

		December 31, 2008							December 31, 2007
	Useful lives	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Amortized intangible assets
Billing and telecommunication software	13 to 240 months	$	1,173,304	$	(638,691	)	$	534,613	$	1,280,614	$	(604,635	)	$	675,979
Acquired customer base	20 to 60 months		103,807		(41,932	)		61,875		205,510		(105,714	)		99,796
Rights to use radio frequencies	2 to 15 years		205,922		(48,622	)		157,300		199,981		(69,398	)		130,583
Accounting software	13 to 60 months		94,027		(41,140	)		52,887		130,968		(48,291	)		82,677
Numbering capacity with finite contractual life	2 to 10 years		88,517		(75,971	)		12,546		102,857		(82,701	)		20,156
Office software	13 to 60 months		57,833		(20,366	)		37,467		45,577		(27,471	)		18,106
Other	3 to 50 years		20,538		(5,175	)		15,363		18,593		(11,537	)		7,056
			1,743,948		(871,897	)		872,051		1,984,100		(949,747	)		1,034,353
Unamortized intangible assets
Goodwill			377,982		—			377,982		359,450		—			359,450
Numbering capacity with indefinite contractual life			37,346		—			37,346		36,060		—			36,060
Total other intangible assets		$	2,159,276	$	(871,897	)	$	1,287,379	$	2,379,610	$	(949,747	)	$	1,429,863

        As a result of the limited availability of local telephone numbering capacity in Moscow and the Moscow region, MTS has been required to enter into agreements for the use of telephone numbering capacity with several telecommunication operators in Moscow. The costs of acquired numbering capacity with a finite contractual life are amortized over a period of two to ten years in accordance with the terms of the contract to acquire such capacity. Numbering capacity with an indefinite contractual life is not amortized.

        Amortization expense for the years ended December 31, 2008, 2007 and 2006, amounted to $415.2 million, $294.8 million and $195.0 million, respectively. Based on the amortizable intangible assets existing at December 31, 2008, the estimated amortization expense is $293.5 million for 2009, $239.0 million for 2010, $159.5 million for 2011, $92.8 million for 2012, $22.8 million for 2013 and $64.5 million thereafter. The actual amortization expense reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives and other relevant factors.

F-33

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The change in the net carrying amount of goodwill for 2008 and 2007 by reportable segments was as follows:

	Russia			Ukraine			Other			Total
Balance as of December 31, 2006	$	110,992		$	8,000		$	46,470		$	165,462
Acquisitions (Note 3)		5,123			—			155,544			160,667
Currency translation adjustment		18,703			—			14,618			33,321
Balance as of December 31, 2007		134,818			8,000			216,632			359,450
Acquisitions (Note 3)		16,366			—			29,222			45,588
Currency translation adjustment		(23,873	)		(2,492	)		(691	)		(27,056	)
Balance as of December 31, 2008	$	127,311		$	5,508		$	245,163		$	377,982

10.   DEFERRED CONNECTION FEES

        Deferred connection fees for the years ended December 31, 2008 and 2007, were as follows:

	2008			2007
Balance at the beginning of the year	$	53,489		$	79,607
Payments received and deferred during the year		52,422			42,446
Amounts amortized and recognized as revenue during the year		(55,705	)		(75,404	)
Currency translation adjustment		(9,962	)		6,840
Balance at the end of the year		40,244			53,489
Less: current portion		(23,795	)		(32,644	)
Non-current portion	$	16,449		$	20,845

        MTS defers initial connection fees paid by subscribers for the activation of network service as well as one time activation fees received for connection to various value added services. These fees are recognized as revenue over the estimated average subscriber life (Note 2).

F-34

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

11.   BORROWINGS

        As of December 31, 2008 and 2007, the Group's borrowings comprised the following:

	December 31,
	2008			2007
Notes:
9.75% Notes due 2008	$	—		$	400,000
8.38% Notes due 2010		400,000			400,000
8.00% Notes due 2012		399,463			399,314
14.01% Notes due 2013		255,272			—
14.01% Notes due 2015		255,272			—
8.70% Notes due 2018		268,533			—
Less: current portion		—			(400,000	)
Total notes, long-term	$	1,578,540		$	799,314
Bank loans	$	2,490,995		$	2,197,172
Less: current portion		(1,181,039	)		(309,977	)
Total bank loans, long-term	$	1,309,956		$	1,887,195
Capital lease		5,699			5,181
Less: current portion		(2,690	)		(3,305	)
Total capital lease, long-term	$	3,009		$	1,876

Notes—On January 30, 2003, MTS Finance S.A. ("MTS Finance"), a 100% beneficially owned subsidiary of MTS, registered under the laws of Luxembourg, issued $400.0 million 9.75% notes at par value. Proceeds received from the notes issue were $400.0 million and related issuance costs of $3.9 million were capitalized. These notes were fully and unconditionally guaranteed by MTS OJSC and matured on January 30, 2008. MTS Finance was required to make interest payments on the notes semi-annually in arrears on January 30 and July 30, commencing on July 30, 2003. The notes were listed on the Luxembourg Stock Exchange. These notes were redeemed in January 2008.

        On October 14, 2003, MTS Finance issued $400.0 million notes bearing interest at 8.375% at par value. The cash proceeds from the notes were $395.4 million and related issuance costs of approximately $4.6 million were capitalized. These notes are fully and unconditionally guaranteed by MTS OJSC and will mature on October 14, 2010. MTS Finance is required to make interest payments on the notes semi-annually in arrears on April 14 and October 14 of each year, commencing on April 14, 2004. The notes are listed on the Luxembourg Stock Exchange.

        On January 27, 2005, MTS Finance issued $400.0 million 8.0% unsecured notes at 99.736%. These notes are fully and unconditionally guaranteed by MTS OJSC and mature on January 28, 2012. MTS Finance is required to make interest payments on the notes semi-annually in arrears on January 28 and July 28, commencing on July 28, 2005. The notes are listed on the Luxembourg Stock Exchange. Proceeds received from the notes were $398.9 million and related debt issuance costs of $2.5 million were capitalized.

F-35

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        Subject to certain exceptions and qualifications, the indentures governing the notes contain covenants limiting the Group's ability to:

•

Incur debt;

•

Create liens;

•

Lease properties sold or transferred by the Group;

•

Enter into loan transactions with affiliates;

•

Merge or consolidate with another person or convey its properties and assets to another person; and

•

Sell or transfer any of its GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas.

        In addition, if the Group experiences certain types of mergers, consolidations or other changes in control, noteholders will have the right to require the Group to redeem the notes at 101% of their principal amount, plus accrued interest. The Group is also required to take all commercially reasonable steps necessary to maintain a rating of the notes from Moody's or Standard & Poor's. The notes also have cross default provisions with publicly traded debt issued by Sistema, the shareholder of the Group.

        If the Group fails to meet these covenants, after certain notice and cure periods, the noteholders can accelerate the debt to be immediately due and payable.

        On June 24, 2008, the Group issued 10,000,000 Russian ruble-denominated notes with an aggregate face value of 10.0 billion rubles (equivalent of $423.9 million as of the date of transaction) at par value. Related issuance costs totaled $0.6 million and were capitalized. MTS is required to make interest payments on the notes semi-annually in arrears in December and June, commencing on December 23, 2008. The notes carry a coupon of 8.7% per annum during the two years ending June 22, 2010. Sequential coupons are set by the issuer. MTS has an unconditional obligation to repurchase the notes at par value if claimed by the holders of the notes subsequent to the announcement of the sequential coupon. The notes mature on June 12, 2018 and are fully and unconditionally guaranteed by MTS-Capital LLC, a subsidiary of MTS OJSC. The notes are listed on the MICEX.

        The following additional transactions in relation to these notes also took place:

•

On December 16, 2008, the Group repurchased 2,377,540 notes outstanding at par value of 2.4 billion rubles (equivalent of $85.5 million as of the date of transaction), 300,000 of which were subsequently resold to a third party bank for 266.9 million rubles (equivalent of $9.3 million as of the date of transaction) on December 26, 2008.

•

On December 25, 2008, the Group entered into a repurchase agreement with the Bank of Moscow. Under the terms of the agreement, the Bank of Moscow acquired 1,000,000 notes for 680.0 million rubles (equivalent of $23.7 million as of the date of transaction) subject to an obligation of the Group to repurchase, and the Bank of Moscow to resell, the notes for 679.9 million rubles (equivalent of $23.1 million as of December 31, 2008) on January 12, 2009. As of December 31, 2008, the balance outstanding under this arrangement equaled $23.1 million and was classified as debt in the accompanying balance sheet.

F-36

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        As of December 31, 2008 the Group recorded the notes payable balance related to this issue in the amount of $268.5 million.

        On October 23 and 28, 2008 MTS OJSC issued two Russian ruble-denominated notes (Issue I and Issue II) with an aggregate face value of 10.0 billion rubles each (equivalent of $371.5 million and $365.6 million, respectively, as of the dates of the transactions) at par value. Notes in the amount of 2.5 billion rubles (equivalent of $92.8 million as of the date of transaction) from Issue I and in the amount of 2.5 billion rubles from Issue II (equivalent of $91.4 million as of the date of transaction) were purchased at initial placement by Bastion LLC, a wholly-owned subsidiary of the Group. The notes under Issue I and Issue II mature on October 17, 2013 and on October 20, 2015, respectively. The notes carry a coupon of 14.01% per annum during the eighteen month periods ending April 22 and 27, 2010 for Issue I and Issue II, respectively. Coupons for subsequent periods will be determined by MTS. The notes are both subject to a put option in 2010 after the expiration of the above mentioned 18-month periods. MTS is required to make payments on the notes semi-annually in arrears in April and October, commencing on April 23, 2009 and April 28, 2009 respectively. The notes are fully and unconditionally guaranteed by MTS-Capital LLC, a subsidiary of MTS OJSC. The notes are listed on the MICEX. Related debt issuance costs in the amount of $5.8 million were capitalized. As of December 31, 2008 the notes payable balance under Issue I and Issue II amounted to $255.3 million each.

        The indenture governing the notes contains certain covenants which limit the Group's ability to delist the notes from the MICEX and delay the coupon payments.

        Management believes that the Group is in compliance with all restrictive note covenants as of December 31, 2008.

        As mentioned above, the ruble-denominated notes issued in 2008 are all subject to put option in 2010 and therefore can be defined as callable obligations under FASB Statement No. 78, "Classification of Obligations That Are Callable by the Creditor" ("SFAS No. 78"), as the holders have the unilateral right to demand repurchase of the notes at par value upon announcement of coupons for the coupon period starting on June 23, 2010 for the notes issued in June 2008 and on April 23 and 28, 2010 for the notes issued in October 2008. SFAS No. 78 requires callable obligations to be disclosed as maturing in the reporting period, when the demand for repurchase could be submitted disregarding the expectations of the Group about the intentions of the notes holders. The Group discloses the notes as maturing in 2010 in the aggregated maturities schedule represented below as 2010 represents the reporting period when the notes holders will first have the unilateral right to demand repurchase.

F-37

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

Bank loans—As of December 31, 2008 and 2007, the Group's loans from banking institutions were as follows:

			December 31,
		Annual interest rate (actual rate at December 31, 2008)
	Maturity		2008		2008
U.S. Dollar-denominated bank loans	2009-2015	LIBOR+0.13%-3.10% (1.88%-4.85%)	$	2,012,876	$	2,143,181
Euro-denominated loan from Gazprombank	2009-2011	12.00%+2.00% commision		423,150		—
Other Euro-denominated bank loans	2009-2014	EURIBOR+0.35%-0.65% (3.35%-3.65%)		31,762		53,299
RUR-denominated bank loans	2009	8.70%		23,142		—
Other loans	various	various		65		692
Total bank loans			$	2,490,995	$	2,197,172

        The Group's loans include the syndicated U.S. Dollar denominated bank loan facility agreement with a number of international financial institutions (The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen Zentralbank Oesterreich AG, and Sumitomo Mitsui Banking Corporation Europe Limited). This facility allows the Group to borrow up to $1,330.0 million which was available in two tranches of $630.0 million and $700.0 million. The proceeds were used by OJSC MTS for general corporate purposes, including acquisitions and refinancing of existing indebtedness. The first tranche bears interest of LIBOR+0.80% per annum and matures in 2009. The second tranche bears interest of LIBOR+1.00% per annum within the first three years and LIBOR + 1.15% per annum thereafter, matures in April 2011 and is repayable in 13 equal quarterly installments, commencing in April, 2008. An arrangement fee of 0.10% of the original facility amount and agency fee of $0.05 million per annum should be paid in accordance with the agreement. The commitment fee is 0.40% per annum on the undrawn facility in respect of second tranche. The debt issuance costs in respect of this loan of $13.4 million were capitalized. As of December 31, 2008 and 2007, the balances outstanding under the facility totaled $1,168.5 million and $1,330.0 million, respectively.

        In August 2008 the Group signed a loan facility agreement with Skandinaviska Enskilda Banken AB for $270.3 million. The facility is available in two parts—$255.0 million ("Equipment facility") and $15.3 million ("EKN Premium Facility"). These funds are to be used to acquire telecommunication equipment from Ericsson AB. The Equipment facility agreement is available in three tranches of $80.0 million, $80.0 million and $95.0 million. The EKN Premium Facility is available in three tranches of $4.8 million, $4.8 million and $5.7 million. The facility bears interest of LIBOR + 0.225%. As of December 31, 2008 the Group has drawn $79.5 million of the first tranche, $59.1 million of the second tranche and $20.4 million of the third tranche under the "Equipment facility". The tranches are repayable in seventeen equal semiannual installments, commencing January 15, 2009 for the first tranche, May 4, 2009 for the second tranche and February 2, 2009 for the third tranche. A management fee of $0.5 million was paid in accordance with the agreement and capitalized. The commitment fee is 0.0625%, calculated on a daily basis on such portion of the total commitments not yet disbursed.

        On December 23, 2008 MTS entered into a credit facility agreement with EBRD to finance its investing activities in Russia, Uzbekistan and Turkmenistan. The facility allows borrowing of up to €

F-38

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

225.0 million and will be available in two tranches of €115.0 million and €110.0 million bearing interest of EURIBOR + 6.1% and EURIBOR + 5.9%, respectively. The margin for the second tranche can be increased at the sole descretion of EBRD which will automatically result in an increase of margin for the first tranche as it is determined as the margin for the second tranche plus 0.2%. The availability period established for the facility is March 1, 2009 to December 31, 2009.

        On December 30, 2008 the Group entered into a credit agreement with Gazprombank for a total amount €300.0 million ($423.2 million as of December 31, 2008) with an interest rate of 12.0% per annum. In addition to the interest, MTS is to pay a commission of 2% per annum on the outstanding amount of the facility on a monthly basis. Gazprombank is entitled to revise the interest rate at any time during the term of the agreement. MTS is not allowed to use the received funds for refinancing or stocks acquisitions purposes. The loan is repayable in three equal installments in December 2009, December 2010 and June 2011 respectively.

        The loans are subject to certain restrictive covenants, including, but not limited to, certain financial ratios, limitations on dispositions of assets and limitations on transactions with associates. Management believes that as of December 31, 2008 the Group is in compliance with all existing bank loan covenants.

        As of December 31, 2008, the Group's total available credit facilities amounted to $111.3 million, which related solely to the loan facility agreement with Skandinavska Enskilda Banken AB.

        The following table presents the aggregated scheduled maturities of the notes and bank loans principal outstanding as of December 31, 2008:

	Notes		Bank loans
Payments due in the year ended December 31,
2009	$	—	$	1,181,039
2010		1,179,077		518,637
2011		—		398,163
2012		399,463		149,421
2013		—		146,786
Thereafter		—		96,949
Total	$	1,578,540	$	2,490,995

Hedges—In January 2006, the Group entered into a variable-to-fixed interest rate swap agreement with HSBC Bank to hedge MTS' exposure to variability of future cash flows caused by the change in EURIBOR related to the borrowed loan. MTS agreed with HSBC Bank to pay a fixed rate of 3.29% and receive a variable interest of EURIBOR on €26.0 million for the period from April 28, 2006, up to October 29, 2013.

        In December 2007, the Group entered into several variable-to-fixed interest rate swap agreements with HSBC Bank, Rabobank, Citibank N.A. and ING Bank N.V. to hedge MTS' exposure to variability of future cash flows caused by the change in LIBOR related to the borrowed loans.

        MTS agreed with HSBC Bank to pay a fixed rate of 4.14% and receive a variable interest of LIBOR on $96.1 million for the period from March 31, 2008, to September 30, 2014. MTS agreed with Rabobank to pay a fixed rate of 4.16% and receive a variable interest of LIBOR on $86.1 million for

F-39

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

the period from April 09, 2008, to April 09, 2014. MTS agreed with Citibank N.A. to pay a fixed rate of 4.29% and receive a variable interest of LIBOR on $53.5 million for the period from September 28, 2007, to September 30, 2013. Two agreements were signed with ING Bank N.V. Under the first agreement MTS pays to ING Bank N.V. a fixed rate of 4.19% and receive a variable interest of LIBOR on $92.6 million for the period from February 29, 2008, to February 28, 2014. Under the second agreement, MTS pays to ING Bank N.V. a fixed rate of 4.41% and receives a variable interest of LIBOR on $67.0 million for the period from July 16, 2007, to January 15, 2014.

        In October 2008, the Group entered into two interest rate swap agreements with HSBC Bank. MTS agreed to pay a variable interest of LIBOR and receive a fixed rate of 3.67% on $88.7 million for the period from September 30, 2008 to September 30, 2014. Additionally, MTS agreed to pay a fixed rate of 3.73% and receive a variable interest of LIBOR on $81.3 million for the period from November 24, 2008 to May 27, 2014.

        As of December 31, 2008, the Group recorded a liability of $20.9 million in relation to the above hedge contracts in the accompanying consolidated balance sheet and a loss of $16.7 million, net of tax of $4.2 million, to other comprehensive income in the accompanying consolidated statement of changes in shareholders equity in relation to the changes in fair value of these agreements.

        These instruments qualified as cash flow hedges under the requirements of SFAS No. 133 as amended by SFAS No. 149. As of December 31, 2008, the outstanding hedges were highly effective. Approximately $4.3 million of net loss is expected to be reclassified into net income during the next twelve months.

12.   ACCRUED LIABILITIES

        As of December 31, 2008 and 2007, accrued liabilities comprised the following:

	December 31,
	2008		2007
Accruals for services	$	192,205	$	187,062
Accrued payroll and vacation		104,448		101,901
Accruals for payments to social funds		34,211		53,109
Accruals for taxes		98,930		60,905
Interest payable on debt		46,470		61,528
Total accrued liabilities	$	476,264	$	464,505

F-40

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

13.   INCOME TAX

        MTS' provision for income taxes was as follows for the years ended December 31, 2008, 2007 and 2006:

	December 31,
	2008			2007			2006
Current provision for income taxes	$	839,959		$	830,358		$	709,130
Deferred income tax benefit		(209,338	)		(92,088	)		(133,027	)
Total provision for income taxes	$	630,621		$	738,270		$	576,103

        The statutory income tax rates in jurisdictions in which the Group operates for 2008 were as follows: Russia—24.0%, Ukraine—25.0%, Uzbekistan—3.4%, Turkmenistan—20.0%, and Armenia—20.0%.

        In 2008, the income tax rate of 20.0% was enacted in Russia for periods starting January 1, 2009. The Group adjusted deferred tax liabilities and assets as of December 31, 2008 for the effect of this change in the income tax rate. The effect is included in the consolidated statement of operations for the year ended December 31, 2008.

        The statutory income tax rate reconciled to MTS' effective income tax rate is as follows for the years ended December 31, 2008, 2007 and 2006:

		2008			2007			2006
Statutory income tax rate for year			24.0	%		24.0	%		24.0	%
Adjustments:
	Expenses not deductible for tax purposes		2.0			1.0			2.9
	Currency exchange and transaction loss		0.5			0.1			2.8
	Income tax provision under FIN No. 48		0.3			0.6			—
	Effect of change in the income tax rate in Russia		0.5			—			—
	Effect of revaluation of UMC tax base		(2.0	)		—			—
	Effect of different tax rate of foreign subsidiaries		(1.2	)		0.2			0.3
	Bitel investment and liability write off, not deductible for tax purposes		—			—			4.6
	Other		0.4			0.2			—
Effective income tax rate			24.5	%		26.1	%		34.6	%

F-41

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        Temporary differences between the tax and accounting bases of assets and liabilities gave rise to the following deferred tax assets and liabilities as of December 31, 2008 and 2007:

		December 31,
		2008			2007
Assets/(liabilities) arising from tax effect of:
Deferred tax assets
	Depreciation of property, plant and equipment	$	165,417		$	138,781
	Other intangible assets		8,967			—
	Deferred connection fees		8,596			12,908
	Subscriber prepayments		17,057			24,341
	Accrued expenses		146,928			95,636
	Allowance for doubtful accounts		12,417			1,220
	Inventory obsolescence		2,004			5,325
	Other		6,236			2,929
Total deferred tax assets			367,622			281,140
Deferred tax liabilities
	Licenses acquired	$	(85,542	)	$	(131,621	)
	Depreciation of property, plant and equipment		(36,853	)		(63,484	)
	Customer base		(1,211	)		(4,113	)
	Other intangible assets		(21,326	)		(18,807	)
	Debt issuance cost		(7,446	)		(14,184	)
	Other		(29,777	)		(26,636	)
Total deferred tax liabilities			(182,155	)		(258,845	)
Net deferred tax asset			185,467			22,295
	Net deferred tax asset, current	$	192,847		$	136,466
	Net deferred tax asset, non-current	$	62,093		$	—
	Net deferred tax liability, long-term	$	(69,473	)	$	(114,171	)

        The Group does not record a deferred tax liability related to the undistributed earnings of UMC, Uzdunrobita, K-Telekom and BCTI as it intends to permanently reinvest these earnings. The undistributed earnings of UMC in accordance with local statutory accounting regulations amounted to $1,268.7 million and $1,715.1 million for the years ended December 31, 2008 and 2007, respectively (unaudited). The undistributed earnings of Uzdunrobita, K-Telecom and BCTI in accordance with local statutory accounting regulations amounted to $401.6 million, $130.4 million and $ 42.7 million, respectively (unaudited).

        As of December 31, 2008 certain deferred tax assets totaling $114.8 million require filing of adjusted income tax returns for the years ended December 31, 2008, 2007 and 2006 with tax authorities to realize the tax benefits. Management intends to file the adjusted tax returns within the statutory time limitations for filing and therefore believe that these deferred tax assets are more likely than not to be realized.

F-42

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        As of December 31, 2008 and 2007, the Group included accruals for uncertain tax positions in the amount of $6.1 million and $29.2 million, respectively, as a component of income tax payable.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2008			2007
Balance, beginning of the year	$	29,213		$	7,610
Additions based on tax position related to the current year		17,632			20,643
Additions based on tax positions related to prior years		—			5,933
Reduction in tax positions related to prior years		(10,204	)		(1,345	)
Settlements with tax authorities		(31,456	)		(3,628	)
Currency translation adjustment		962			—
Balance, end of the year	$	6,147		$	29,213

        As of December 31, 2008, the Group also accrued interest and penalties related to unrecognized tax benefits of $0.6 million and $1.2 million, respectively (comparing to $2.5 million and $1.9 million as of December 31, 2007). The Group does not expect the unrecognized tax benefits to change significantly over the next twelve months.

14.   SHARE BASED COMPENSATION

The Stock Option Plan

        In 2000, MTS established a stock bonus plan and stock option plan ("the Stock Option Plan") for selected officers and key employees. During its initial public offering in 2000 MTS allotted 9,966,631 shares of its common stock to fund the Stock Option Plan. Since 2002, MTS has made several grants pursuant to its stock option plan to employees and directors of the Group. These options generally vest over a two year period from the date of the grant, contingent on continued employment of the grantee with MTS. The options are exercisable within two weeks after the vesting date, and, if not exercised, are forfeited. The exercise price of the options equaled the average market share price during the one hundred day period preceding the grant date.

        In April 2008, the Board of Directors allotted an additional 651,035 ADSs (or 3,255,175 shares) to fund a Stock Option award to MTS' chief executive officer. The award vesting period is up to two years contingent upon employment with MTS. The award will vest only if at the end of the vesting period MTS is among the top 20 mobile operators in the world and top mobile operator in Russia and CIS, in each case in terms of revenue, and cumulative percentage of MTS' market capitalization growth since the grant date exceeds the predetermined threshold of 15%.

F-43

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        A summary of the status of the Group's Stock Option Plan is presented below:

		Number of shares			Weighted average exercise price (per share), U.S. Dollars		Weighted average grant date fair value of options (per share), U.S. Dollars		Aggregate intrinsic value
Outstanding at December 31, 2005			3,187,240		$	6.47	$	2.02	$	2,455
	Granted		—			—		—		—
	Exercised		(639,357	)		5.95		2.36
	Forfeited		(1,112,882	)		6.23		2.17
Outstanding at December 31, 2006			1,435,001		$	6.89	$	1.74	$	743
	Granted		1,778,694			6.31		5.95
	Exercised		(848,126	)		6.89		1.74
	Forfeited		(968,313	)		6.66		2.65
Outstanding at December 31, 2007			1,397,256		$	6.31	$	4.05	$	5,236
	Granted		1,302,070			15.93		2.44
	Exercised		(1,397,256	)		6.31		4.05
	Forfeited		—			—		—
Outstanding at December 31, 2008			1,302,070		$	15.93	$	2.44	$	—

        The total intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006 was $7.4 million, $0.4 million and $0.7 million, respectively.

        Stock options outstanding as of December 31, 2008 will vest during the period ended July 1, 2010. None of the stock options outstanding as of December 31, 2008 were exercisable and therefore had a negative intrinsic value.

        Compensation cost under Stock Option Plan of $3.5 million, $2.8 million and $1.7 million was recognized in consolidated statements of operations during the years ended December 31, 2008, 2007 and 2006 respectively.

        The fair value of options granted during the year ended December 31, 2007 was estimated using the lattice model based on the following assumptions:

	2007
Risk free rate		3.1	%
Expected dividend yield		0.3	%
Expected volatility		40.3	%
Expected life, years		2
Fair value of options (per share), U.S. Dollar	$	5.95

F-44

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The fair value of options granted during the year ended December 31, 2008 was estimated using the Monte-Carlo simulation model based on the following assumptions:

	2008
Risk free rate		2.3	%
Present value of expected dividends, U.S. Dollars	$	4.17
Expected volatility		40.0	%
Expected life, years		2
Fair value of options (per share), U.S. Dollar	$	2.44

        The Group is required to estimate expected forfeiture rate, as well as the probability that performance conditions that affect the vesting of the Stock Option awards will be achieved and only recognize expense for those awards expected to vest. The effect of the estimated forfeitures on Group's operations was $2.3 million, $1.7 million and $1.0 million in 2008, 2007 and 2006, respectively.

        As of December 31, 2008, there was $1.8 million of total unrecognized compensation cost related to non-vested stock-based compensation awards under the Stock Option Plan. This amount will be recognized over the period through July 1, 2010.

The Phantom Stock Plan

        In June 2007, MTS' board of directors approved the Phantom Stock Plan to provide deferred compensation to certain key employees (the "Participants") of the Group during 2007-2011. The plan is based on units equivalent to MTS ADSs (the "Phantom ADSs"). Each Phantom ADS is the equivalent of five MTS common shares. Under the Phantom Stock Plan, the Participants are entitled to a cash payment equal to the difference between the initial grant price and the price of Phantom ADSs determined based on average market share price during the one hundred day period preceding the vesting date, multiplied by the number of Phantom ADSs granted, upon vesting of the award. The average vesting period is two years from the grant date, contingent upon the continuing employment of the Participants by the Group. Further, the award shall vest only if at the end of the vesting period the cumulative percentage of MTS market capitalization growth since the grant date exceeds the cumulative cost of equity determined by the Board of Directors for the same period.

        In April 2008, the Phantom Stock Plan was amended to increase the number of Phantom ADSs available under the plan from the initial 3,600,000 to 9,556,716 ADSs and to increase the number of Participants potentially eligible for the Plan to up to 420 top- and mid-level managers of the Group. Further, under the amended Plan, the Phantom ADSs granted in 2008 and thereafter will vest only if at the end of the vesting period MTS is among the top 20 mobile operators in the world and top mobile operator in Russia and CIS, in each case in terms of revenue, and the cumulative percentage of MTS' market capitalization growth since the grant date exceeds the predetermined threshold of 15%. At the end of the vesting period, participants are entitled to a cash payment equal to the difference between the initial grant price and the price of Phantom ADSs determined based on average market share price during the one hundred day period preceding the vesting date, multiplied by the number of Phantom ADSs granted and adjusted by the ratio that reflects actual market capitalization growth rate. During the year ended December 31, 2008, 6,676,716 ADSs were granted to the participants, 4,562,830 of which were granted on May 1, 2008 (Phantom Grant 2008 (I)) and 2,113,886 ADSs were granted on July 1, 2008 (Phantom Grant 2008 (II)). The award of Phantom Grant 2008 (I) and (II) will vest in

F-45

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

14 and 24 months, respectively, after the grant date, contingent upon the continuing employment of the Participants.

        A summary of the status of the Group's Phantom Stock Plan is presented below:

		Number of ADSs			Weighted average exercise price (per ADS), U.S. Dollar		Weighted average fair value of options (per ADS), U.S. Dollar		Aggregate intrinsic value
Outstanding at December 31, 2006			—			—		—		—
	Granted		720,000			56.79		44.00
	Exercised		—			—		—
	Forfeited		(36,664	)		56.79		44.00
Outstanding at December 31, 2007			683,336		$	56.79	$	44.0	$	30,750
	Granted		6,676,716			76.64		0.68
	Exercised		—			—		—
	Forfeited		(1,346,442	)		72.02		0.88
Outstanding at December 31, 2008			6,013,610		$	75.41	$	0.78	$	—

        All Phantom Shares outstanding as of December 31, 2008 are non-vested and will vest in 2009 and 2010. None of the Phantom Shares were exercisable as of December 31, 2008 and therefore had a negative intrinsic value.

        The fair value of the liability under the Phantom Stock Plan as of December 31, 2008, were estimated using the Monte-Carlo simulation technique based on the following assumptions:

	Phantom stock grant 2007			Phantom stock grant 2008 (I)			Phantom grant 2008 (II)
Risk free rate		0.2	%		0.4	%		0.4	%
Present value of expected dividends, U.S. Dollars		2.7			2.7			4.1
Expected volatility		135	%		90	%		90	%
Remaining vesting period, years		0.5			0.5			1.5
Fair value of phantom share award (per phantom share), U.S. Dollar		2.00			0.07			1.99

        The fair value of the liability under the Phantom Stock Plan as of December 31, 2007, were estimated using the Monte-Carlo simulation technique based on the following assumptions:

	Phantom stock grant 2007
Risk free rate		3.1	%
Present value of expected dividends, U.S. Dollars	$	5.3
Expected volatility		40.3	%
Remaining vesting period, years		1.5
Fair value of phantom share award (per share), U.S. Dollar	$	8.8

F-46

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        For the year ended December 31, 2008 a reversal of previously recorded expense in the amount of $8.9 million was recognized in the consolidated statements of operations as a result of underlying stock price decrease. Related deferred tax expense amounted to $1.8 million.

        The compensation cost under the Phantom Stock Grant 2008 (I) and (II) recognized in the consolidated statement of operations for the year ended December 31, 2008 amounted to $1.3 million and the related deferred tax benefit amounted to $0.3 million.

        The compensation cost under the Phantom Stock Plan recognized in consolidated statement of operations for the year ended December 31, 2007 amounted to $7.6 million and the related deferred tax benefit amounted to $1.8 million.

        As of December 31, 2008, there was $3.1 million of total unrecognized compensation cost related to non-vested Phantom ADSs. This amount is expected to be recognized over a weighted-average period of 1.4 years. The Group is required to estimate expected forfeiture rate, as well as the probability that performance conditions that affect the vesting of the Phantom ADSs awards will be achieved and only recognize expense for those awards expected to vest. The Group's estimated forfeiture rate was 5.1%. The effect of forfeitures amounted to $1.5 and $2.0 million for the years ended December 31, 2008 and 2007, respectively.

F-47

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

15.   RELATED PARTIES

        Related parties balances as of December 31, 2008 and 2007 comprised the following:

		December 31,
		2008		2007
Accounts receivable:
	TS-Retail	$	16,271	$	8,578
	Glaxen		12,215		—
	MGTS for interconnect		9,438		2,631
	MTT for interconnect		5,664		3,029
	Comstar UTS for interconnect		3,934		6,048
	Other		2,162		4,718
Total accounts receivable, related parties		$	49,684	$	25,004
Accounts payable:
	Sitronics	$	74,994	$	99,816
	Kvazar-Micro.ru		68,782		20,230
	Maxima for advertising		15,168		1,266
	MTT for interconnect		8,252		19,197
	Mediaplanning for advertising		6,118		2,609
	Comstar UTS for interconnect		4,254		6,825
	Sitronics Smart Technologies for SIM and prepaid phone cards		2,837		5,754
	Sistema Telecom		2,697		1,728
	MGTS for interconnect		1,556		1,833
	Other		2,220		995
Total accounts payable, related parties		$	186,878	$	160,253

        Transactions with major related parties are described below.

Moscow Bank of Reconstruction and Development ("MBRD")—MTS maintains certain bank and deposit accounts with MBRD, whose major shareholder is Sistema. As of December 31, 2008 and 2007, MTS cash position at MBRD amounted to $211.5 million and $321.7 million in current accounts, respectively. Deposit accounts at MBRD amounted to $149.2 million and $265.0 million as of December 31, 2008 and 2007, respectively. Deposit accounts in MBRD included deposit accounts with original maturities in excess of three months but less than twelve months totaling $45.0 million and $15.0 million as of December 31, 2008 and 2007, respectively, which are classified as short-term investments in the accompanying consolidated balance sheets. The interest accrued on the deposits for the years ended December 31, 2008, 2007 and 2006, amounted to $21.1 million, $18.9 million and $4.8 million, respectively, and was included as a component of interest income in the accompanying consolidated statements of operations.

Moscow City Telephone Network ("MGTS")—During the years ended December 31, 2008, 2007 and 2006, MTS had interconnect and line rental agreements with MGTS, a subsidiary of Sistema, and rented a cable plant from MGTS for the installation of optic-fiber cable. MTS also rented buildings for administrative offices as well as premises for switchboard and base station equipment. Interconnect,

F-48

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

line rental and technical premises rental expenses for the years ended December 31, 2008, 2007 and 2006 amounted to $18.3 million, $16.3 million and $13.1 million, respectively. Interconnect revenue for the years ended December 31, 2008, 2007 and 2006 amounted to $32.5 million, $25.2 million and $7.9 million, respectively.

MTT—During the years ended December 31, 2008, 2007 and 2006, MTS had interconnect and line rental agreements with MTT, a subsidiary of Sistema. Interconnect revenue for the years ended December 31, 2008, 2007 and 2006 amounted to $91.0 million, $62.0 million and $29.4 million, respectively. Interconnect expenses for the years ended December 31, 2008, 2007 and 2006 amounted to $176.3 million, $83.1 million and $69.3 million, respectively.

Comstar UTS ("Comstar")—MTS had interconnect, line and numbering capacity rental agreements with Comstar, Telmos and MTU-Inform, subsidiaries of Sistema. During the year ended December 31, 2007 Telmos and MTU-Inform merged with Comstar. Revenue under agreements with these entities for the years ended December 31, 2008, 2007 and 2006, amounted to $22.1 million, $10.0 million and $1.7 million, respectively. Interconnect and line rental expenses for the years ended December 31, 2008, 2007 and 2006 comprised $36.4 million, $34.8 million and $25.9 million.

Sitronics—Sitronics Telecom Solutions Czech Republic and Sitronics Telecom Solutions Russia, formerly Strom Telecom and Mediatel, respectively, and Intracom Telecom are subsidiaries of Sistema. During the years ended December 31, 2008, 2007 and 2006, MTS acquired from these companies telecommunications equipment, billing systems (FORIS) and related services for approximately $142.8 million, $67.1 million and $231.2 million, respectively.

Kvazar-Micro.ru ("Kvazar")—During the years ended December 31, 2008, 2007 and 2006, MTS signed agreements for supply of software, equipment and software implementation services, including integration services in respect to Oracle applications, with Kvazar, a subsidiary of Sistema. Pursuant to these agreements, Kvazar provided to MTS various software, IT equipment and related services in the years ended December 31, 2008, 2007 and 2006 of approximately $157.0 million, $120.2 million and $52.1 million, respectively. From the beginning of 2009 Kvazar has started providing its services under new brand name of Sitronics Information Technologies.

Maxima Advertising Agency ("Maxima")—During the years ended December 31, 2008, 2007 and 2006, MTS had agreements for advertising services with Maxima, a subsidiary of Sistema. Advertising costs related to Maxima for the years ended December 31, 2008, 2007 and 2006, amounted to $135.8 million, $127.7 million and $117.8 million, respectively.

Mediaplanning—During the years ended December 31, 2008, 2007 and 2006, MTS entered into a number of agreements to purchase advertising services with Mediaplanning, a subsidiary of Sistema. Related advertising costs recorded for the years ended December 31, 2008, 2007 and 2006 amounted to $82.0 million, $48.8 million and $45.1 million, respectively.

Sitronics Smart Technologies (former Smart Cards)—During the years ended December 31, 2008, 2007 and 2006, MTS purchased SIM cards and prepaid phone cards from Sitronics Smart Technologies, a subsidiary of Sistema, for approximately $39.6 million, $19.3 million and $37.0 million, respectively.

Sistema Telecom—In May 2006 Sistema introduced a universal brand featuring a new egg-shaped logo for each of the telecommunication companies operating within the Sistema group, including MTS. The brand is owned by Sistema Telecom, a subsidiary of Sistema. The expenses related to the use of

F-49

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

the brand name incurred by MTS and paid for in the years ended December 31, 2008, 2007 and 2006, amounted to $14.7 million, $14.5 million and $9.7 million, respectively.

City Hals—During the years ended December 31, 2008, 2007 and 2006, City Hals, a subsidiary of Sistema, provided rent, repair, maintenance and cleaning services to MTS of approximately $13.8 million, $6.1 million and $5.2 million, respectively.

TS-Retail—In November 2006, MTS established a wholly-owned subsidiary, TS-Retail, with a registered capital of $1.1 million for further expansion of Group's retail operations. In December 2007, MTS' stake in this company decreased from 100% to 25% following an increase of share capital by TS-Retail by $14.0 million, which was paid by MTS and certain other subsidiaries of Sistema. MTS deconsolidated TS-Retail in December 2007 and subsequently accounted for this investment under the equity method. During the years ended December 31, 2008 and 2007, the Group granted loans in total amount of $27.4 million at 11.0%-15.0% annual interest rates maturing in 2009-2010. The loans are guaranteed by Sistema. As of December 31, 2008, the long-term portion of amount receivable under these loan agreements totaling $11.2 million was included in other investments (Note 18) in the accompanying balance sheet. Further, during the years ended December 31, 2008 and 2007, the Group entered into a number of agreements for the provision of dealer services and sale of handsets with TS-Retail. For the years ended December 31, 2008 and 2007, dealer commission to TS Retail amounted to $4.4 million and $0.1 million, respectively, sales of handsets amounted to $1.5 million and $nil, respectively. As of December 31, 2008 and 2007, advances paid and accounts receivable from TS-Retail amounted to $12.2 million and $nil, respectively.

Sistema-Hals—In October 2007, MTS entered into an agreement for the construction of an aerial system in Moscow metro with Sistema-Hals, a subsidiary of Sistema. As of December 31, 2008, the advances given to Sistema-Hals under this agreement amounted to $11.7 million. This amount was included into property, plant and equipment in the accompanying consolidated balance sheet.

Glaxen—In April 2008, MTS granted a loan to Glaxen, a minority shareholder of Dagtelecom, a subsidiary of MTS, at a 16.0% annual interest rate and having a maturity date on August 1, 2009. As of December 31, 2008 the balance receivable under the agreement amounted to $12.2 million.

        The Group does not have the intent and ability to offset the outstanding accounts payable and accounts receivable with related parties under the terms of existing agreements with them.

F-50

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

16.   GENERAL AND ADMINISTRATIVE EXPENSES

        General and administrative expenses for the years ended December 31, 2008, 2007 and 2006, comprised the following:

	December 31,
	2008		2007		2006
Salaries and social contributions	$	700,234	$	562,924	$	430,443
Rent		230,345		179,436		123,378
Taxes other than income		178,265		141,254		88,089
General and administrative		153,806		145,109		125,934
Repair and maintenance		135,794		142,969		94,242
Billing and data processing		50,837		36,052		44,886
Consulting expenses		35,110		23,742		23,352
Insurance		6,514		12,063		10,723
Inventory obsolescence expense		1,251		—		—
General and administrative expenses	$	1,492,156	$	1,243,549	$	941,047

17.   INVESTMENTS IN AND ADVANCES TO ASSOCIATES

        At December 31, 2008 and 2007, the Group's investments in and advances to associates comprised the following:

	December 31,
	2008		2007
MTS Belarus—equity investment	$	237,427	$	188,622
MTS Belarus—loan receivable		2,050		—
Coral/Sistema Strategic Fund—equity investment		7,512		6,916
Receivables from other investee companies		369		370
Total investments in and advances to associates	$	247,358	$	195,908

MTS Belarus—In April 2008 the Group entered into a credit facility agreement with MTS Belarus valid till March 15, 2009. The facility allows MTS Belarus borrowing up to $33.0 million and bears an interest of 10.0%. As of December 31, 2008, the balance outstanding under the facility was $2.1 million.

Coral/Sistema Strategic Fund—In August 2007, the Group purchased an equity interest in a strategic fund organized by Sistema ("General Partner") in order to invest in various projects in the telecommunications and high-technology area. The fund is organized in the form of limited partnership. As of December 31, 2008, $9.0 million was invested in the fund. The Group has committed to invest up to $26.3 million if called upon by the General Partner.

TS-Retail—As discussed in Note 15, in December 2007 the Group invested in TS-Retail, an equity investee, $3.5 million. As of December 31, 2007 the investment was reduced to $nil.

F-51

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        The Group's share in net income of associates is included in other income in the accompanying consolidated statements of operations. For the years ended December 31, 2008, 2007 and 2006, this share amounted to $76.0 million, $72.7 million and $58.1 million, respectively.

18.   OTHER INVESTMENTS

        As of December 31, 2008, the Group's other investments comprised of the following:

	Annual interest rate			Maturity Date	December 31, 2008		December 31, 2007
Investment in Tammaron Ltd		—		on demand	$	21,230		—
Loan receivable from TS-Retail (Note 15)		15.0	%	January 2010		11,156		—
Loan receivable from Intellect Telecom		11.0	%	July 2012		5,402		—
Other						1,288		1,355
Total other investments					$	39,076	$	1,355

Tammaron Ltd—During the year ended December 31, 2008, the Group deposited in Tammaron Ltd, a company incorporated under the laws of the British Virgin Islands, an amount of $21.2 million for a potential business acquisition.

Intellect Telecom—During the year ended December 31, 2008, MTS granted a loan to Intellect Telecom, a subsidiary of Sistema, at an interest rate of 11.0%. The loan matures on July 1, 2012. The amount receivable under the loan agreement as of December 31, 2008 totalled $5.4 million.

19.   RESTRICTED CASH

        Restricted cash of $23.6 million and $28.6 million, as of December 31, 2008 and 2007, respectively, consists of cash deposited by Uzdunrobita in a special bank account, which was created to be in compliance with government regulation of local currency conversion into foreign currencies. The cash deposited will be converted from Uzbek som into U.S. Dollars and used for settlements with suppliers of equipment and software.

20.   OPERATING LICENSES

        In connection with providing telecommunication services, the Group has been issued various GSM operating licenses by the Russian Ministry of Information Technologies and Communications. In addition to the licenses received directly from the Russian Ministry of Information Technologies and Communications, the Group has been granted access to various telecommunication licenses through acquisitions. In foreign subsidiaries, the licenses are granted by the local communication authorities.

F-52

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        As of December 31, 2008 and 2007, the recorded values of the Group's telecommunication licenses were as follows:

	December 31,
	2008			2007
Russia	$	260,929		$	816,976
Armenia		241,710			246,917
Uzbekistan		196,517			196,517
Ukraine		49,877			63,535
Turkmenistan		18,685			50,504
Licenses, at cost		767,718			1,374,449
Accumulated amortization		(284,984	)		(708,844	)
Licenses, net	$	482,734		$	665,605

        Amortization expense for the years ended December 31, 2008, 2007 and 2006, amounted to $149.4 million, $195.7 million and $211.3 million, respectively.

        As of December 31, 2008, a number of operating licenses related to Russia were fully amortized and their respective cost and accumulated amortization were written off from the consolidated balance sheet.

        Based on the cost of amortizable operating licenses existing at December 31, 2008, the estimated future amortization expenses are $76.6 million during 2009, $70.8 million during 2010, $54.1 million during 2011, $38.6 million during 2012, $32.8 million during 2013 and $209.6 million thereafter. The actual amortization expense reported in future periods could differ from these estimates as a result of new intangible assets acquisitions, changes in useful lives and other relevant factors.

        Operating licenses contain a number of requirements and conditions specified by legislation. The requirements generally include the targets for start date of service, territorial coverage and expiration date. Management believes that the Group is in compliance with all material terms of its licenses.

        Licenses that expired during the year ended December 31, 2008 and 2007 were renewed, however their carrying value in accompanying consolidated balance sheets is immaterial due to low cost of renewal. Management does not presently assume renewals in its determination of the useful lives of its licenses as the Group has limited experience with renewal of licenses.

21.   COMMITMENTS AND CONTINGENCIES

Capital commitments—As of December 31, 2008, the Group had executed purchase agreements of approximately $400.7 million to acquire property, plant and equipment, and intangible assets and costs related thereto.

Agreement with Apple—In August 2008, the Group entered into an unconditional purchase agreement with Apple Sales International to buy certain quantities of iPhone handsets at list prices at the dates of respective purchases over the three year period. Pursuant to the agreement the Group shall also incur certain iPhone promotion costs. The aggregate amounts of the Group's commitments under this agreement at list prices as of December 31, 2008 are $847.9 million for the years ended

F-53

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

December 31, 2009, 2010 and 2011. The actual amounts paid in the future in connection with these purchases may vary due to changes in prices as well as due to the number of iPhones purchased by the Group. Total amount paid for handsets purchased under the agreement for the year ended December 31, 2008 amounted to $65.4 million.

Operating leases—The Group has entered into non-cancellable agreements to lease the space for telecommunication equipment, offices and transmission channels, which expire in various years up to 2057. Rental expenses under the operating leases of $230.3 million, $179.4 million and $123.4 million for the years ended December 31, 2008, 2007 and 2006, respectively, are included in operating expenses in the accompanying consolidated statements of operations. Rental expenses under the operating leases of $134.1 million, $103.8 million and $142.5 million for the years ended December 31, 2008, 2007 and 2006, respectively, are included in cost of services in the accompanying consolidated statements of operations. Future minimum lease payments due under these leases at December 31, 2008 are as follows:

Payments due in the years ended December 31,
2009	$	221,865
2010		48,436
2011		29,604
2012		18,865
2013		9,894
Thereafter		50,898
Total	$	379,562

Issued guarantees—During the year ended December 31, 2008, the Group issued a guarantee to a third party bank for the loan taken by TS-Retail, an equity investee, for the total amount of $5.1 million. However, the amount can vary due to any penalties or litigation costs, if occur. The guarantee expires in June 2012. The fair value of issued guarantee is recorded as a liability in the accompanying consolidated balance sheet and amounted to $0.08 million as of December 31, 2008. The Group holds no assets as collateral against this guarantee, however there is a counter-guarantee provided by Sistema which would enable the Group to recover potential loss under the guarantee. As of December 31, 2008, no event of default has occurred under the guarantee issued by the Group.

Recent volatility in global and Russian financial markets—In recent months a number of major economies around the world have experienced volatile capital and credit markets. A number of major global financial institutions have been placed into bankruptcy, taken over by other financial institutions and/or supported by government funding. As at the date these financial statements are authorized for issue as a consequence of the recent market turmoil in capital and credit markets both globally and in Russia, notwithstanding any potential economic stabilization measures that may be put into place by the Russian Government, there exists economic uncertainties surrounding the continual availability, and cost, of credit facilities, the potential for economic uncertainties to continue in the foreseeable future.

Operating environment—The Russian and Ukrainian economies, while deemed to be market economies, continue to display certain traits consistent with that of an emerging market. These characteristics have in the past included higher than normal inflation, insufficient liquidity of the capital markets, and the existence of currency controls. The further development of the Russian and Ukrainian

F-54

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

economies will be subject to their government's continued actions with regard to supervisory, legal and economic reforms.

        The Federal Law on Communications sets the legal basis for the telecommunications business in Russia and defines the status that state bodies have in the telecommunications sector. In addition, the law created a universal service fund ("USF") charge, which became effective May 3, 2005, calculated as 1.2% of revenue from services provided to customers, excluding interconnection and other operators' traffic routing revenue. For the years ended December 31, 2008, 2007 and 2006, the Group incurred approximately $82.9 million, $64.8 million and $54.2 million in USF charges, respectively, which are recorded in other operating expenses in the accompanying consolidated statements of operations.

        The Group's operations in Turkmenistan are subject to certain restrictions in accordance with the local regulatory environment including, but not limited to, the sale of hard currency on the local market and hard currency repatriation. The effect of those restrictions on the financial statements is represented by a loss from currency translation transactions in Turkmenistan of $9.2 million, $22.0 million and $24.3 million recognized as other non-operating expense in the Group's consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006, respectively.

Taxation—Russia and Ukraine currently have a number of laws related to various taxes imposed by both federal and regional governmental authorities. Applicable taxes include VAT, corporate income tax (profits tax), a number of turnover-based taxes, and payroll (social) taxes. Laws related to these taxes have not been in force for significant periods, in contrast to more developed market economies; therefore, the government's implementation of these regulations is often inconsistent or nonexistent. Accordingly, few precedents with regard to tax rulings have been established. Tax declarations, together with other legal compliance areas (for example, customs and currency control matters), are subject to review and investigation by a number of authorities, which are enabled by law to impose extremely severe fines, penalties and interest charges. These facts create tax risks in Russia that are more significant than typically found in countries with more developed tax systems.

        In September 2006, the Russian tax authorities audited MTS OJSC's compliance with tax legislation for the years ended December 31, 2003 and 2004. Based on the results of this audit, the Russian tax authorities assessed that 1,283,660 thousand rubles (approximately $43.7 million as of December 31, 2008) of additional taxes, penalties and fines were payable by the Group. The Group has prepared and filed a petition with the Arbitration Court of Moscow to recognize the tax authorities' resolution to be partially invalid. The amount of disputed taxes and fines equals 1,220,096 thousand rubles (approximately $41.5 million as of December 31, 2008). In 2007, a final court hearing considered this matter which resulted in a judgment in favour of the Group. Tax authorities prepared an appeal with Court of Appeal; however the judgment was not changed. No further appeals can be prepared by tax authorities due to expiration of the period for appeals. As of December 31, 2008, no provision in relation to the above tax audit was accrued in the Group's financial statements or paid to tax authorities.

        In January 2008, the Russian tax authorities started auditing MTS OJSC's compliance with tax legislation for the years ended December 31, 2005 and 2006. Based on the results of this audit, the Russian tax authorities assessed that 1,129,975 thousand rubles (approximately $38.5 million as of December 31, 2008) of additional taxes, penalties and fines were payable by the Group. As of December 31, 2008 the Group has settled the total amount payable to the Russian tax authorities.

F-55

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

However, the Group has prepared and filed a petition with the Arbitration Court of Moscow to recognize the tax authorities' resolution to be partially invalid. The amount of disputed taxes and related fines and penalties equaled to 1,026,164 thousand rubles (approximately $34.9 million as of December 31, 2008). As a result of the hearing on December 22, 2008, the Arbitration Court of Moscow ruled against the tax claims and related fines and penalties in an amount of 981,490 thousand rubles (approximately $33.4 million as of December 31, 2008).

        Generally, according to Russian tax legislation, tax declarations remain open and subject to inspection for a period of three years following the tax year. As of December 31, 2008, tax declarations of MTS OJSC and other subsidiaries in Russia for the preceding three fiscal years were open for further review.

        There are regulatory uncertainties in Ukraine related to the treatment for VAT purposes of contributions payable to the Ukrainian State Pension Fund ("Pension Fund") in respect of the cash paid for the consumption of telecommunication services by customers. Also it could have influence on income tax and other taxes paid by the Group.

        As a result of a tax audit of the period from July 1, 2004 to April 1, 2007, additional VAT charges (including penalties) calculated on the Pension Fund contributions could be up to $7.5 million. In 2005, UMC initiated a litigation case in respect of this issue against the tax authorities, and has received favorable rulings from the courts on three occasions (the most recent from the Highest Administrative Court of Ukraine). Management believes that VAT was not applicable to the Pension Fund contributions during the period under the tax authorities' review. Further, management believes that UMC is in line with industry practice and has previously defended its position in the courts. At December 31, 2008, no VAT charges in relation to the above litigation was accrued in the Group's financial statements or paid to the tax authorities.

        In 2008, tax authorities completed audit procedures for Uzdunrobita, BCTI and K-Telekom for the year ended December 31, 2006. The amount of additional taxes assessed as a result of these procedures is not significant. According to the local tax legislation of Uzbekistan, Turkmenistan and Armenia, tax declarations remain open for further inspection for five, six and three years, respectively.

        Further, MTS purchases supplemental software from foreign suppliers of telecommunication equipment in the ordinary course of business. The Group's management believes that custom duties are calculated in compliance with the applicable legislation. However there is a risk that the customs authorities may take a different view and impose additional custom duties. As of December 31, 2008 and 2007, no provision was recorded in the consolidated financial statements in respect of such additional duties.

        Pricing of revenue and expenses between each of the Group's subsidiaries and various discounts and bonuses to Group's subscribers in the course of performing its marketing activities might be a subject to transfer pricing rules. The Group's management believes that taxes payable are calculated in compliance with the applicable tax regulations relating to transfer pricing. However there is a risk that the tax authorities may take a different view and impose additional tax liabilities. As of December 31, 2008 and 2007, no provision was recorded in the consolidated financial statements in respect of such additional claims.

F-56

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        Management believes that it has adequately provided for tax and customs liabilities in the accompanying consolidated financial statements. As of December 31, 2008 and 2007, the provision accrued amounted to $27.6 million and $25.4 million, respectively. In addition, the accrual for unrecognized income tax benefits, potential penalties and interest recorded in accordance with FIN No. 48 totalled $8.0 million and $33.7 million as of December 31, 2008 and 2007, respectively. However, the risk remains that the relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant.

Bitel—In December 2005, MTS Finance S.A. ("MTS Finance") acquired a 51.0% stake in Tarino Limited ("Tarino"), from Nomihold Securities Inc. ("Nomihold"), for $150.0 million in cash based on the belief that Tarino was at that time the indirect owner, through its wholly owned subsidiaries, of Bitel LLC ("Bitel"), a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan.

        Following the purchase of the 51.0% stake, MTS Finance entered into a put and call option agreement with Nomihold for "Option Shares," representing the remaining 49.0% interest in Tarino shares and a proportional interest in Bitel shares. The call option was exercisable by MTS Finance from November 22, 2005 to November 17, 2006, and the put option was exercisable by Nomihold from November 18, 2006 to December 8, 2006. The call and put option price was $170.0 million.

        Following a decision of the Kyrgyz Supreme Court on December 15, 2005, Bitel's corporate offices were seized by a third party. As the Group did not regain operational control over Bitel's operations in 2005, it accounted for its 51.0% investment in Bitel at cost as at December 31, 2005. The Group appealed the decision of the Kyrgyz Supreme Court in 2006, but the court did not act within the time period permitted for appeal. The Group subsequently sought the review of this dispute over the ownership of Bitel by the Prosecutor General of Kyrgyzstan to determine whether further investigation could be undertaken by the Kyrgyz authorities.

        In January 2007, the Prosecutor General informed the Group that there were no grounds for involvement by the Prosecutor General's office in the dispute and that no legal basis existed for the Group to appeal the decision of the Kyrgyz Supreme Court. Consequently, the Group decided to write off the costs relating to the purchase of the 51.0% stake in Bitel, which was reflected in its audited annual consolidated financial statements for the year ended December 31, 2006. Furthermore, with the impairment of the underlying asset, a liability of $170.0 million was recorded with an associated charge to non-operating expenses.

        In November 2006, MTS Finance received a letter from Nomihold purporting to exercise the put option and sell the Option Shares for $170.0 million to MTS Finance. In January 2007, Nomihold commenced an arbitration proceeding against MTS Finance in the London Court of International Arbitration in order to compel MTS Finance to purchase the Option Shares. Nomihold seeks specific performance of the put option, unspecified monetary damages, interest, and costs. The matter is currently pending. MTS Finance is vigorously contesting this action and has asked the arbitration tribunal to dismiss Nomihold's claim.

        A group of individual shareholders of Sistema has agreed to compensate MTS Finance for any potential loss up to $170.0 million should the arbitration decision regarding exercise of the aforementioned put option prove unfavorable to MTS Finance. Notwithstanding this, in the event MTS

F-57

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

Finance does not prevail in the arbitration, the Group could be liable to Nomihold for $170.0 million plus any additional amounts that the arbitration tribunal might award to Nomihold.

        In connection with the above mentioned put option exercise and the uncertainty as to the resolution of the dispute with Nomihold, the Group recognized a liability in the amount of $170.0 million in its audited annual consolidated financial statements with a corresponding charge to other non-operating expenses as of December 31, 2006 and for the year then ended.

        In addition, three Isle of Man companies affiliated with the Group (the "KFG Companies"), have been named defendants in lawsuits filed by Bitel in the Isle of Man seeking the return of dividends received by these three companies in the first quarter of 2005 from Bitel in the amount of approximately $25.2 million plus compensatory damages, and to recover approximately $3.7 million in losses and accrued interest. In the event that the defendants do not prevail in these lawsuits, the Group may be liable to Bitel for such claims. The KFG Companies have also asserted counterclaims against Bitel, and claims against other defendants including Altimo LLC ("Altimo"), and Altimo Holdings & Investments Limited ("Altimo Holding"), for the wrongful appropriation and control of Bitel. On November 30, 2007 the High Court of Justice of the Isle of Man set aside orders it had previously issued granting leave to serve the non-Manx defendants out of the jurisdiction as to the KFG Companies' counterclaims on the basis of a lack of jurisdiction. The KFG Companies appealed that ruling to the Isle of Man Staff of Government and the appeal hearing took place in July 2008. On November 28, 2008, the Staff of Government reversed the High Court and ruled that the case should proceed in the Isle of Man. The defendants have sought leave to appeal from the Judicial Committee of the Privy Council of the House of Lords of the United Kingdom. It is not possible at this time to predict the ultimate outcome or resolution of these claims.

        In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited ("KMIC"), under the rules of the London Court of International Arbitration, the arbitration tribunal in its award found that the KFG Companies breached a transfer agreement dated May 31, 2003 (the "Transfer Agreement"), concerning the shares of Bitel. The Transfer Agreement was made between the KFG Companies and IPOC International Growth Fund Limited ("IPOC"), although IPOC subsequently assigned its interest to KMIC, and KMIC was the claimant in the arbitration. The tribunal ruled that the KFG Companies breached the Transfer Agreement when they failed to establish a date on which the equity interests in Bitel were to be transferred to KMIC and by failing to take other steps to transfer the Bitel interests. This breach occurred prior to MTS Finance's acquisition of the KFG Companies. The arbitration tribunal ruled that KMIC is entitled only to damages in an amount to be determined in future proceedings. At the request of the parties, the tribunal agreed to stay the damages phase of the proceedings pending the resolution of the appeals process now before the second instance court in the Isle of Man, as described above. The Group is not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

        In the ordinary course of business, MTS may be party to various legal, tax and customs proceedings, and subject to claims, certain of which relate to the developing markets and evolving fiscal and regulatory environments in which MTS operates. In the opinion of management, the Group's liability, if any, in all such pending litigation, other legal proceeding or other matters will not have a material effect upon its financial condition, results of operations or liquidity of MTS.

F-58

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

22.   SEGMENT INFORMATION

        SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the chief operating decision maker or group in deciding how to allocate resources and in assessing performance.

        The Group has three business units: business unit "MTS Russia", which is responsible for the centralized operational management of business in all Russian macro-regions, all of which operate in the same economic environment and possess similar economic characteristics; business unit "MTS Ukraine", MTS subsidiary in Ukraine; and business unit "Foreign subsidiaries" that include Uzdunrobita in Uzbekistan, Barash Communications Technologies, Inc. in Turkmenistan, K-Telekom in Armenia and MTS Belarus, an equity accounted associate of MTS in Belarus. Countries of operations are managed separately due to their different economic and regulatory environments which require separate marketing and investment strategies. The chief operating decision maker evaluates performance based on the operating income of each business unit.

        The Group's management has defined two operating reportable segments: Russia and Ukraine.

        Intercompany eliminations presented below consist primarily of sales transactions between segments conducted in the normal course of operations.

F-59

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

        Financial information by reportable segment is presented below:

		2008			2007			2006
Revenue:
	Russia	$	7,840,225		$	6,181,023		$	4,665,530
	Ukraine		1,661,951			1,608,021			1,490,278
	Other		779,520			483,499			242,455
Intercompany eliminations			(36,403	)		(20,165	)		(14,009	)
Total revenue		$	10,245,293		$	8,252,378		$	6,384,254
Depreciation and amortization:
	Russia	$	1,312,406		$	1,076,586		$	819,316
	Ukraine		437,988			324,976			233,744
	Other		186,443			87,986			42,921
Total depreciation and amortization		$	1,936,837		$	1,489,548		$	1,095,981
Operating income:
	Russia	$	2,611,882		$	2,076,083		$	1,510,875
	Ukraine		321,328			456,777			530,522
	Other		270,282			200,986			92,339
Total operating income		$	3,203,492		$	2,733,846		$	2,133,736
Total operating income		$	3,203,492		$	2,733,846		$	2,133,736
Currency exchange and transaction loss/(gain)			563,292			(163,092	)		(24,051	)
Interest income			(33,166	)		(38,100	)		(13,055	)
Interest expense, net of capitalized interest			153,341			134,581			177,145
Equity in net income of associates			(75,976	)		(72,665	)		(58,083	)
Write-off of investment in Bitel			—			—			320,000
Other expense, net			25,317			44,034			65,913
Income before provision for income taxes and minority interest		$	2,570,684		$	2,829,088		$	1,665,867

F-60

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

		2008		2007
Additions to long-lived assets:
	Russia	$	1,595,643	$	619,298
	Ukraine		405,127		581,720
	Other		313,002		189,294
Total additions to long-lived assets		$	2,313,772	$	1,390,312
Long-lived assets:
	Russia	$	4,840,847	$	5,378,043
	Ukraine		1,484,317		2,062,015
	Other		1,345,077		1,262,725
Total long-lived assets		$	7,670,241	$	8,702,783
Total assets:
	Russia	$	6,985,076	$	7,154,657
	Ukraine		1,669,995		2,243,328
	Other		1,793,263		1,568,683
Total assets		$	10,448,334	$	10,966,667

23.   SUBSEQUENT EVENTS

Telefon.Ru—In Febrary 2009, MTS acquired 100% of Telefon.Ru, a Russian mobile retailer. The Group paid cash consideration of $60.0 million. In accordance with sale and purchase agreement, an additional $25.0 million is payable to the sellers during the period from 12 to 18 months should Telefon.Ru satisfy certain performance criteria over this period.

Acquisition of the remaining stake in Dagtelecom—In February 2009, the Group purchased the remaining 25.01% stake in Dagtelecom and increased its ownership to 100% for cash consideration of $41.6 million as Glaxen exercised its put option. Purchase price shall be reduced by $12.2 million to offset the loan granted by MTS to Glaxen during the year ended December 31, 2008 (Note 15). In addition, following the review and assessment of the subsidiary's performance during the period of the joint shareholding of MTS and Glaxen in Dagtelecom, MTS may potentially pay an additional consideration not exceeding $10.0 million.

Eldorado—In March 2009, the Group acquired a 100% stake in Eldorado Centr LLC and Eldorado Communications Store LLC for $22.85 million from Kilcherex Holdings (Cyprus) and Tenteco Limited (Cyprus). Through these acquisitions, MTS acquired a 100% stake in the Eldorado mobile phone retail chain, which, as of January 1, 2009, operated 383 stores in 153 cities in Russia. Of the purchase price, $5.0 million will be paid 12 months after our acquisition should the retail chain satisfy certain performance criteria.

Refinancing—On May 18, 2009, MTS signed a facility agreement to refinance the first tranche of our existing $1.33 billion syndicated loan facility in the amount of $630 million that was scheduled to mature in May 2009. MTS raised $295 million for facility A and €214.5 million for facility B to be followed by an additional tranche in the coming weeks as part of the new facility. The facility will mature in 2012 and will have an interest rate of LIBOR+6.5%.

F-61

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(Amounts in thousands of U.S. Dollars, except share and per share amounts or if otherwise stated)

Ruble bond—On May 19, 2009, MTS completed an offering of a RUR 15 billion bond. The bond will mature in 2014. The interest rate was set at 16.75%, with coupons to be paid annually. Bond holders will have the right under a two-year put option to sell the bonds to us.

F-62

EX-4.5

Exhibit 4.5

CONFORMED COPY

FACILITY AGREEMENT

for

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

arranged by

ABN AMRO BANK N.V., ABSOLUT BANK (ZAO), BANC OF AMERICA
SECURITIES LIMITED, BANK OF CHINA (ELUOSI), BANK OF CHINA (UK)
LIMITED, JOINT-STOCK COMPANY BANQUE SOCIÉTÉ GÉNÉRALE VOSTOK,
BAYERISCHE LANDESBANK, BNP PARIBAS,
CREDIT SUISSE INTERNATIONAL,
EXPORT DEVELOPMENT CANADA, HSBC BANK PLC,
ING BANK N.V., J.P. MORGAN PLC,
SOCIÉTÉ GÉNÉRALE CORPORATE
AND INVESTMENT BANKING PARIS,
UNICREDIT BANK AUSTRIA AG,
WESTLB AG, LONDON BRANCH, and
ZAO UNICREDIT BANK

as Mandated Lead Arrangers

and

ING BANK N.V., LONDON BRANCH

acting as Agent

Linklaters LLP

Ref GDM/CWY

CONTENTS

CLAUSE		PAGE
SECTION 1 INTERPRETATION		1
1	DEFINITIONS AND INTERPRETATION	1
SECTION 2 THE FACILITIES		17
2	THE FACILITIES	17
3	PURPOSE	19
4	CONDITIONS OF UTILISATION	19
SECTION 3 UTILISATION		21
5	UTILISATION	21
SECTION 4 REPAYMENT, PREPAYMENT AND CANCELLATION		23
6	REPAYMENT	23
7	PREPAYMENT AND CANCELLATION	23
SECTION 5 COSTS OF UTILISATION		29
8	INTEREST	29
9	INTEREST PERIODS	30
10	CHANGES TO THE CALCULATION OF INTEREST	30
11	FEES	32
SECTION 6 ADDITIONAL PAYMENT OBLIGATIONS		33
12	TAX GROSS-UP AND INDEMNITIES	33
13	INCREASED COSTS	36
14	OTHER INDEMNITIES	37
15	MITIGATION BY THE LENDERS	38
16	COSTS AND EXPENSES	38
SECTION 7 REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT		40
17	REPRESENTATIONS	40
18	INFORMATION UNDERTAKINGS	44
19	FINANCIAL COVENANTS	48

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20	GENERAL UNDERTAKINGS	49
21	EVENTS OF DEFAULT	56
SECTION 8 CHANGES TO PARTIES		62
22	CHANGES TO THE LENDERS	62
23	CHANGES TO THE BORROWER	66
SECTION 9 THE FINANCE PARTIES		67
24	ROLE OF THE AGENT AND THE MANDATED LEAD ARRANGERS	67
25	CONDUCT OF BUSINESS BY THE FINANCE PARTIES	72
26	SHARING AMONG THE FINANCE PARTIES	72
SECTION 10 ADMINISTRATION		75
27	PAYMENT MECHANICS	75
28	SET-OFF	77
29	NOTICES	77
30	CALCULATIONS AND CERTIFICATES	79
31	PARTIAL INVALIDITY	79
32	REMEDIES AND WAIVERS	79
33	AMENDMENTS AND WAIVERS	79
34	CONFIDENTIALITY	80
35	COUNTERPARTS	83
SECTION 11 GOVERNING LAW AND ENFORCEMENT		84
36	GOVERNING LAW	84
37	ARBITRATION	84
38	JURISDICTION	85
SCHEDULE 1 The Original Lenders		86
SCHEDULE 2 Conditions precedent		87
SCHEDULE 3 Utilisation Request		89
SCHEDULE 4 Selection Notice		90

ii

SCHEDULE 5 Mandatory Cost formula	91
SCHEDULE 6 Form of Transfer Certificate	94
THE SCHEDULE Commitment/rights and obligations to be transferred	95
SCHEDULE 7 Form of Compliance Certificate	96
SCHEDULE 8 Form of Additional Lender Accession Notice	97
THE SCHEDULE Additional Commitments	98
SCHEDULE 9 Form of Additional Commitment Notice	99

iii

THIS AGREEMENT is dated 18 May 2009 and made between:

(1)MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY, an open joint stock company established and existing under the laws of the Russian Federation and having its registered address at 4 Marksistskaya Street, 109147 Moscow, Russian Federation, as borrower (the “Borrower”);

(2)ABN AMRO BANK N.V., ABSOLUT BANK (ZAO), BANC OF AMERICA SECURITIES LIMITED, BANK OF CHINA (ELUOSI), BANK OF CHINA (UK) LIMITED, JOINT-STOCK COMPANY BANQUE SOCIÉTÉ GÉNÉRALE VOSTOK, BAYERISCHE LANDESBANK, BNP PARIBAS, CREDIT SUISSE INTERNATIONAL, EXPORT DEVELOPMENT CANADA, HSBC BANK PLC, ING BANK N.V., J.P. MORGAN PLC, SOCIÉTÉ GÉNÉRALE CORPORATE AND INVESTMENT BANKING PARIS, UNICREDIT BANK AUSTRIA AG, WESTLB AG, LONDON BRANCH and ZAO UNICREDIT BANK as mandated lead arrangers (the “Mandated Lead Arrangers”);

(3)THE FINANCIAL INSTITUTIONS listed in Schedule 1 as lenders (the “Original Lenders”); and

(4)ING BANK N.V., LONDON BRANCH as agent of the other Finance Parties (the “Agent”).

IT IS AGREED as follows:

SECTION 1
INTERPRETATION

1DEFINITIONS AND INTERPRETATION

1.1Definitions

In this Agreement:

“Additional Commitment” means, in respect of any Additional Lender, the amount specified as its Additional Commitment in any Additional Commitment Notice delivered by the Borrower pursuant to Clause 2.2 (Additional Commitments), to the extent not cancelled, reduced or transferred by it under this Agreement.

“Additional Commitments Establishment Date” means the date on which the Agent gives notice to the Borrower and each Additional Lender pursuant to paragraph (c) of Clause 2.2 (Additional Commitments).

“Additional Commitment Notice” means a notice from the Borrower to the Agent with respect to the Additional Commitments substantially in the form set out in Schedule 9 (Form of Additional Commitment Notice).

“Additional Cost Rate” has the meaning given to it in Schedule 5 (Mandatory Cost formula).

“Additional Dollars” means an amount in Dollars that, together with the relevant amounts of Facility A and Facility B to be drawn on the date of the first Utilisation (after such amounts under Facility B have been converted into Dollars), is sufficient to repay all amounts owing under the Existing Facility 1 on the date of the first Utilisation.

1

“Additional Lender” means any bank, financial institution, trust, fund or other entity which has become an Additional Lender in accordance with Clause 2.2 (Additional Commitments).

“Additional Lender Accession Notice” means a notice substantially in the form set out in Schedule 8 (Form of Additional Lender Accession Notice) or any other form agreed between the Agent and the Borrower.

“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

“Agency Fee Letter” means the Fee Letter to be entered into between the Borrower and the Agent on the same date as this Facility Agreement in accordance with Clause 11.2 (Agency fee).

“Agent’s Spot Rate of Exchange” means the Agent’s spot rate of exchange for the purchase of Dollars with euros in the London foreign exchange market at or about 11:00 a.m. on the day that the Agent has requested the Lenders to make a relevant determination that requires either Simple Majority Lender consent, Majority Lender consent or Super Majority Lender consent as the same is determined by the Agent and notified to the Lenders;

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“Availability Period” means:

(a)in relation to Facility A and Facility B (other than, in each case, in respect of the Additional Commitments), the period from and including the Signing Date to and including 20 May 2009; and

(b)in relation to any Additional Commitments, the period from the Additional Commitments Establishment Date to the date 5 Business Days after the Additional Commitments Establishment Date.

“Available Commitment” means, in relation to a Facility, a Lender’s Commitment under that Facility minus:

(a)the amount of its participation in any outstanding Loans under that Facility; and

(b)in relation to any proposed Utilisation, the amount of its participation in any Loans that are due to be made under that Facility on or before the proposed Utilisation Date.

“Available Facility” means, in relation to a Facility, the aggregate for the time being of each Lender’s Available Commitment in relation to that Facility.

“Bitel” means Bitel LLC, a limited liability company incorporated in Kirghizia registered by the Kirghiz Ministry of Justice on 24 February 2003 with re-registration certificate number 1386-3300-OOO (IU), and having its registered address at 121, Chui Prospect, Bishkek, 720000, the Kirghiz Republic.

“Bitel Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including Bitel) relating to or arising out of the acquisition, reorganisation or ownership of Bitel by the Borrower (whether directly or through any of its Affiliates).

2

“Break Costs” means the amount (if any) by which:

(a)the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b)the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and Moscow and:

(a)(in relation to any date for payment or purchase of a currency other than euro) the principal financial centre of the country of that currency; or

(b)(in relation to any date for payment or purchase of euro) any TARGET Day.

“Commitment” means a Facility A Commitment or a Facility B Commitment.

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 7 (Form of Compliance Certificate).

“Comstar” means Joint Stock Company “COMSTAR — United TeleSystems” with main state registration number 1027700003946, and having its registered address at 27, bldg. 2, Smolenskaya-Sennaya Sq., Moscow, 119121, Russian Federation.

“Confidential Information” means all information relating to the Borrower, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:

(a)any member of the Group or any of its advisers; or

(b)another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,

in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:

(i)is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 34 (Confidentiality); or

(ii)is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or

(iii)is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware,

3

unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

“Confidentiality Undertaking” means a confidentiality undertaking substantially in a recommended form of the LMA or in any other form agreed between the Borrower and the Agent.

“Debt Purchase Transaction” means, in relation to a person, a transaction where such person:

(a)purchases by way of assignment or transfer;

(b)enters into any sub-participation in respect of; or

(c)enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of,

any Commitment or amount outstanding under this Agreement.

“Default” means an Event of Default or any event or circumstance specified in Clause 21 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“Dollar Account” means a Dollar account held by the Borrower with the Agent in London.

“Environment” means living organisms including the ecological systems of which they form part and the following media:

(a)air (including air within natural or man-made structures, whether above or below ground);

(b)water (including territorial, coastal and inland waters, water under or within land and water in drains and sewers); and

(c)land (including land under water).

“Environmental Law” means all laws and regulations of any relevant jurisdiction which:

(a)have as a purpose or effect the protection of, and/or prevention of harm or damage to, the Environment;

(b)provide remedies or compensation for harm or damage to the Environment; or

(c)relate to any waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the Environment or a nuisance to any person or that may make the use or ownership of any affected land or property more costly or health and safety matters.

“Environmental Licence” means any Authorisation required at any time under Environmental Law.

“EUR”, “euro” and “€” denote the lawful currency of the Participating Member States.

“EURIBOR” means, in relation to any Loan in euro:

(a)the applicable Screen Rate; or

4

(b)(if no Screen Rate is available for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,

as of 10:00am on the Quotation Day for the offering of deposits in euro for a period comparable to the Interest Period of the relevant Loan.

“Euro Account” means a euro account held by the Borrower with the Agent in London.

“Event of Default” means any event or circumstance specified as such in Clause 21 (Events of Default).

“Existing Facility 1” means the $630,000,000 term loan facility made available under Facility 1 (as defined therein) of the Existing Facilities Agreement.

“Existing Facilities Agreement” means the syndicated facilities agreement dated 21 April 2006, as amended by an amendment letter dated 15 June 2006, an amendment and transfer agreement dated 13 July 2006 and a deed of amendment dated 10 September 2008, between the Borrower, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Bayerische Landesbank, HSBC Bank plc, ING Bank N.V., Raiffeisen Zentralbank Oesterreich AG, ZAO Raiffeisenbank Austria, and Sumitomo Mitsui Banking Corporation Europe Limited as mandated lead arrangers and ING Bank N.V., London Branch as agent.

“Facilities” means Facility A and Facility B and “Facility” means either of them.

“Facility Office” means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

“Facility A” means the term loan facility made available under this Agreement as described in paragraph (a) of Clause 2.1 (The Facilities).

“Facility A Commitment” means:

(a)in relation to an Original Lender, the amount set opposite its name under the heading “Facility A Commitment” in Schedule 1 (The Original Lenders) and the amount of any other Facility A Commitment transferred to it under this Agreement;

(b)in relation to an Additional Lender, the amount set out opposite its name under the heading “Proposed Additional Commitment for Facility A” in an Additional Commitment Notice and the amount of any other Facility A Commitment transferred to it under this Agreement; and

(c)in relation to any other Lender, the amount of any Facility A Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

“Facility A Lender” means:

(a)any Original Facility A Lender; and

(b)any bank, financial institution, trust, fund or other entity which has become a Facility A Lender in accordance with Clause 2 (Additional Commitments) or Clause 22 (Changes to the Lenders),

5

which in each case has not ceased to be a Facility A Lender in accordance with the terms of this Agreement.

“Facility A Loan” means a loan made or to be made under Facility A or the principal amount outstanding for the time being of that loan.

“Facility B” means the term loan facility made available under this Agreement as described in paragraph (b) of Clause 2.1 (The Facilities).

“Facility B Commitment” means:

(a)in relation to an Original Lender, the amount set opposite its name under the heading “Facility B Commitment” in Schedule 1 (The Original Lenders) and the amount of any other Facility B Commitment transferred to it under this Agreement;

(b)in relation to an Additional Lender, the amount set out opposite its name under the heading “Proposed Additional Commitment for Facility B” in an Additional Commitment Notice and the amount of any other Facility B Commitment transferred to it under this Agreement; and

(c)in relation to any other Lender, the amount of any Facility B Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

“Facility B Lender” means:

(a)any Original Facility B Lender; and

(b)any bank, financial institution, trust, fund or other entity which has become a Facility B Lender in accordance with Clause 2 (Additional Commitments) or Clause 22 (Changes to the Lenders),

which in each case has not ceased to be a Facility B Lender in accordance with the terms of this Agreement.

“Facility B Loan” means a loan made or to be made under Facility B or the principal amount outstanding for the time being of that loan.

“Fee Letters” means each of the letters dated on or about the date of this Agreement between the Agent and the Borrower setting out the fees payable by reference to this Agreement.

“Final Maturity Date” means 18 May 2012.

“Finance Document” means this Agreement, any Fee Letter, the Mandate Letter, any Additional Lender Accession Notice, any Additional Commitment Notice, any Transfer Certificate and any other document designated as such by the Agent and the Borrower.

“Finance Party” means the Agent, the Mandated Lead Arrangers or a Lender.

“Financial Indebtedness” means any indebtedness for or in respect of:

(a)moneys borrowed;

(b)any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

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(c)any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;

(e)receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

(g)any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h)shares which are expressed to be redeemable at the option of the holder on or prior to the Final Maturity Date (but excluding any accrued dividends) (and, for the avoidance of doubt, to the extent that any shares may be redeemable at the option of the holder solely as a result of a company reorganisation (reorgnizatsiya obschestva) or major transaction (krupnaja sdelka) (as these terms are construed by applicable Russian law), such shares shall not be included for the purposes of this definition prior to the holder of the shares exercising their option to redeem those shares);

(i)any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(j)the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

“GAAP” means generally accepted accounting principles, standards and practices in the United States of America.

“Group” means the Borrower and its Subsidiaries for the time being.

“Holding Company” means, in relation to a person, any other person in respect of which it is a Subsidiary.

“Information Memorandum” means the document in the form approved by the Borrower concerning the Group which, at the Borrower’s request and on its behalf, was prepared in relation to this transaction and distributed by Credit Suisse International and ING Bank N.V., London Branch to selected financial institutions before the Signing Date.

“Instruction 117-I” means the Central Bank of the Russian Federation Instruction N 117-I dated 15 June 2004.

“Intellectual Property” means all trade marks, service marks, trade names, domain names, logos, get-up, patents, inventions, registered and unregistered design rights, copyrights, topography rights, database rights, rights in confidential information and know-how, and any associated or similar rights anywhere in the world, which it now or in the future owns or (to the extent of its interest) in which it now or in the future has an interest (in each case whether registered or unregistered and including any related licences and

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sub-licences of the same granted by it or to it, applications and rights to apply for the same).

“Interest Expense” has the meaning given to it in Clause 19 (Financial covenants).

“Interest Period” means, in relation to a Loan, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“Lender” means a Facility A Lender or a Facility B Lender.

“LIBOR” means, in relation to any Loan, other than a Loan in euro:

(a)the applicable Screen Rate; or

(b)(if no Screen Rate is available for Dollars for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of 11:00 a.m. on the Quotation Day for the offering of deposits in Dollars for a period comparable to the Interest Period for that Loan.

“LMA” means the Loan Market Association.

“Loan” means a Facility A Loan or Facility B Loan.

“LCIA” means the London Court of International Arbitration.

“Majority Facility A Lenders” means:

(a)if there are no Facility A Loans then outstanding, a Facility A Lender or Facility A Lenders whose Facility A Commitments aggregate more than 662/3% of the Total Facility A Commitments (or, if the Total Facility A Commitments have been reduced to zero, aggregated more than 662/3% of the Total Facility A Commitments immediately prior to the reduction); or

(b)at any other time, a Facility A Lender or Facility A Lenders whose participations in the Facility A Loans then outstanding aggregate more than 662/3% of all the Facility A Loans then outstanding.

“Majority Facility B Lenders” means:

(a)if there are no Facility B Loans then outstanding, a Facility B Lender or Facility B Lenders whose Facility B Commitments aggregate more than 662/3% of the Total Facility B Commitments (or, if the Total Facility B Commitments have been reduced to zero, aggregated more than 662/3% of the Total Facility B Commitments immediately prior to the reduction); or

(b)at any other time, a Facility B Lender or Facility B Lenders whose participations in the Facility B Loans then outstanding aggregate more than 662/3% of all the Facility B Loans then outstanding.

“Majority Lenders” means:

(a)if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate more than 662/3% of the Total Commitments (or, if the Total

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Commitments have been reduced to zero, aggregated more than 662/3% of the Total Commitments immediately prior to the reduction); or

(b)at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 662/3% of all the Loans then outstanding.

For the purposes of this definition, Total Commitments and Commitments will be determined in Dollars, and any Facility B Commitments or participations in the Facility B Loans shall be deemed to be converted from euros into Dollars at the Agent’s Spot Rate of Exchange.

“Mandate Letter” means the letter agreement dated the date of this Agreement and accepted and agreed to by the Borrower on the date of this Agreement between the Mandated Lead Arrangers and the Borrower.

“Mandatory Cost” means the percentage rate per annum calculated by the Agent in accordance with Schedule 5 (Mandatory Cost formula).

“Margin” means 6.50 per cent. per annum.

“Material Adverse Effect” means a material adverse effect on or material adverse change in:

(a)the financial condition, operations, assets, prospects or business of the Borrower or the consolidated financial condition, operations, assets, prospects or business of the Group;

(b)the ability of the Borrower to perform and comply with its obligations under any Finance Document; or

(c)the validity, legality or enforceability of any Finance Document, or the rights or remedies of any Finance Party thereunder,

provided that for the purpose of paragraph (a) above any losses incurred by any member of the Group after the date of this Agreement as a consequence of an adverse determination of any or all of the Bitel Litigation, such losses not exceeding $330,000,000 or its equivalent in any other currency or currencies (including legal fees and associated expenses) in aggregate shall be disregarded.

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and

(b)if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.

The above rules will only apply to the last Month of any period.

“MTS Business Plan” means the business plan for the Borrower in the agreed form as included in the Information Memorandum.

“OIBDA” has the meaning given to it in Clause 19 (Financial covenants).

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“Original Facility A Lender” means a Lender listed in Schedule 1 (The Original Lenders) as having a Facility A Commitment.

“Original Facility B Lender” means a Lender listed in Schedule 1 (The Original Lenders) as having a Facility B Commitment.

“Original Financial Statements” means the audited consolidated financial statements of the Group for the financial year ended 31 December 2008.

“Original RAS Financial Statements” means the unaudited non-consolidated financial statements of the Borrower for the financial quarter ended 31 December 2008 or, to the extent completed after that date but prior to the date of this Agreement, the unaudited non-consolidated financial statements of the Group for the financial quarter ended 31 March 2009.

“Participating Member State” means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

“Party” means a party to this Agreement.

“Passport Bank” means ING Bank (Eurasia) ZAO or another Russian authorised bank (as such term is defined in Instruction 117-I) selected by the Borrower and approved by the Agent.

“Permitted Security” means:

(a)any Security on any assets of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower and not created in contemplation of such event, provided that no such Security shall extend to any other assets;

(b)any Security existing on any assets prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower and not created in contemplation of such acquisition, provided that no such Security shall extend to any other assets;

(c)any Security on any assets securing Financial Indebtedness of the Borrower or Financial Indebtedness of any Subsidiary of the Borrower incurred or assumed for the purpose of financing all or part of the cost of acquiring, repairing or refurbishing such assets, provided that (i) no such Security shall extend to any other assets; (ii) the aggregate principal amount of all Financial Indebtedness secured by such Security on such assets shall not exceed the lower of (x) the purchase price of such assets and (y) the fair market value of such assets at the time of acquisition, repair or refurbishing; and (iii) such Security attaches to such assets concurrently with the repair or refurbishing thereof or within 90 days after the acquisition thereof, as the case may be;

(d)any Security arising by operation of law, including any Security (i) arising in the ordinary course of business with respect to amounts not yet delinquent or being contested by the Borrower or a Subsidiary of the Borrower in good faith in appropriate proceedings or (ii) for taxes, assessments, government charges or claims, including without limitation those in favour of Russian governmental fiscal authorities;

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(e)any Security on the assets of any Subsidiary of the Borrower securing intercompany Financial Indebtedness of such Subsidiary owing to the Borrower or another Subsidiary of the Borrower;

(f)any netting or set-off arrangement entered into by a member of the Group with a bank or any other financial institution in the normal course of its banking arrangements for the purpose of netting or setting off its debit and credit facilities with that bank or financial institution;

(g)easements, rights-of-way, restrictions and any other similar charges or encumbrances incurred in the ordinary course of business and not interfering in any material respect with the business of the Borrower or the business of any Subsidiary of the Borrower, including any encumbrance or restriction with respect to an equity interest of any joint venture pursuant to a joint venture agreement;

(h)any extension, renewal or replacement of any Security described in clauses (a) to (g) above, provided that (i) such extension, renewal or replacement shall be no more restrictive in any material respect than the original Security; (ii) the amount of Financial Indebtedness secured by such Security is not increased; and (iii) if the assets securing the Financial Indebtedness subject to such Security are changed in connection with such refinancing, extension or replacement, the fair market value of the property or assets is not increased; and

(i)any other Security (excluding any Security described in (a)-(h) above) provided that, immediately after giving effect to such Security, the aggregate amount of all secured Financial Indebtedness of the Group does not exceed 10% of the Borrower’s Total Assets.

“Proposed Additional Commitment” means, in respect of any Proposed Additional Lender, the amount listed as being its “Proposed Additional Commitment for Facility A” or “Proposed Additional Commitment for Facility B” in any Additional Commitment Notice delivered by the Borrower pursuant to Clause 2.2 (Additional Commitments).

“Proposed Additional Lender” means any person listed as being a “Proposed Additional Lender” in any Additional Commitment Notice.

“Qualifying Lender” has the meaning given to it in Clause 12 (Tax gross-up and indemnities).

“Quotation Day” means, in relation to any period for which an interest rate is to be determined:

(a)(if the currency is euro) two TARGET Days before the first day of that period; or

(b)(for any other currency) two Business Days before the first day of that period,

unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“RAS” means generally accepted accounting principles, standards and practices in the Russian Federation.

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“Reference Banks” means in relation to LIBOR the principal London offices of Credit Suisse International, HSBC Bank plc, ING Bank N.V. and J.P. Morgan plc and in relation to EURIBOR the principal London offices of Credit Suisse International, HSBC Bank plc, ING Bank N.V. and J.P. Morgan plc or such other banks as may be designated by the Agent as agreed with the Borrower.

“Related Fund” in relation to a fund (the “first fund”), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.

“Related Party” has the meaning given to it in clause 20.11 (Transactions with Related Parties).

“Relevant Interbank Market” means in relation to euro, the European interbank market and, in relation to any other currency, the London interbank market.

“Relevant Period” has the meaning given to it in Clause 19 (Financial covenants).

“Repayment Date” means 20 May 2011, 18 November 2011 and the Final Maturity Date.

“Repeating Representations” means each of the representations set out in Clauses 17.1 (Status), 17.2 (Binding obligations), 17.3 (Non-conflict with other obligations), 17.4 (Power and authority), 17.6 (Governing law and enforcement), 17.11 (No default), 17.14 (Pari passu ranking), 17.15 (No proceedings pending or threatened), 17.16 (Environmental laws and licences), 17.17 (Telecommunications law and licences) and 17.19 (No Immunity).

“Representative” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

“Requested Amount” means the amount specified beside the heading “Requested Amount” in an Additional Commitment Notice.

“Roubles” or “RUR” means the lawful currency of the Russian Federation for the time being.

“Russian Insolvency Law” means the Federal Law of the Russian Federation No. 127-FZ of 26 October 2002 “On Insolvency (Bankruptcy)”.

“Screen Rate” means:

(a)in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and

(b)in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period,

displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders.

“Security” means a mortgage, charge, lien, pledge or other security interest securing any obligations of any person or any other agreement or arrangement having a similar effect.

“Selection Notice” means a notice substantially in the form set out in Schedule 4 (Selection Notice) given in accordance with Clause 9 (Interest Periods).

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“Shyam” means Sistema Shyam TeleServices Limited, having its registered address at B-2-D, Shiv Marg, Bani Park, Jaipur — 302016, (Rajasthan), a telecom operator in India that is a subsidiary of Sistema JSFC and its subsidiaries.

“Significant Subsidiary” means:

(a)UMC (unless, pursuant to the UMC Litigation, any or all of the Borrower’s shares in UMC are transferred to a person that is not a member of the Group, with the result that UMC ceases to be a member of the Group);

(b)any Subsidiary of the Borrower to which (i) the Borrower or UMC sells, leases or otherwise transfers its GSM 900 or 1800 licences or the Borrower sells, leases or otherwise transfers its 3G licence or (ii) any such licence is re-issued; and

(c)any Subsidiary of the Borrower (i) whose total assets (or, where such Subsidiary prepares consolidated accounts, whose total consolidated assets) have a book value (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) equal to or exceeding 10% of the Borrower’s Total Assets or (ii) whose gross annual revenues (or, where such Subsidiary prepares consolidated accounts, whose gross annual consolidated revenues) (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) are equal to or exceed 10% of the Borrower’s gross annual consolidated revenues in the year for which the Borrower’s most recent consolidated financial statements were prepared.

“Signing Date” means the date of this Agreement.

“Simple Majority Lenders” means:

(a)if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate more than 50.1% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 50% of the Total Commitments immediately prior to the reduction); or

(b)at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 50.1% of all the Loans then outstanding.

For the purposes of this definition, Total Commitments and Commitments will be determined in Dollars, and any Facility B Commitments or participations in the Facility B Loans shall be deemed to be converted from euros into Dollars at the Agent’s Spot Rate of Exchange.

“Sistema JSFC” means Sistema JSFC with main state registration number 1027700003891, and having its registered address at bldg 1, 17/8/9 Prechistenka str., Moscow, 119034, Russian Federation, the holding company of the Borrower.

“Subsidiary” means an entity from time to time of which a person has direct or indirect control or owns directly or indirectly more than 50% of the share capital or similar right of ownership.

“Super Majority Lenders” means:

(a)if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate more than 85% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 85% of the Total Commitments immediately prior to the reduction); or

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(b)at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 85% of all the Loans then outstanding.

For the purposes of this definition, Total Commitments and Commitments will be determined in Dollars, and any Facility B Commitments or participations in the Facility B Loans shall be deemed to be converted from euros into Dollars at the Agent’s Spot Rate of Exchange.

“TARGET” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.

“TARGET Day” means any day on which TARGET is open for the settlement of payments in euro.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Telecommunications Authorisation”means any Authorisation from any governmental or other regulatory authority necessary in order for each of the Borrower and its Significant Subsidiaries to maintain, operate and conduct its business as it is being conducted in accordance with Telecommunications Laws.

“Telecommunications Laws”means (a) all laws and regulations which relate to telecommunications and/or the business of providing mobile telephone services and (b) all rules, guidelines, policies and regulations made thereunder, that are applicable to each of the Borrower and its Significant Subsidiaries and/or the business carried on by it.

“Telecommunications Licence” means any Authorisation required at any time under Telecommunications Laws.

“Total Assets” means the book value of the consolidated total assets of the Borrower as determined by reference to the Borrower’s most recent annual consolidated balance sheet delivered in accordance with paragraph (a) of Clause 18.1 (Financial statements) or, prior to the first delivery, to the Original Financial Statements.

“Total Commitments” means the aggregate of the Total Facility A Commitments and the Total Facility B Commitments, being $295,000,000 and €214,500,000 at the Signing Date as the same may be increased pursuant to this Agreement.

“Total Debt” has the meaning given to it in Clause 19 (Financial covenants).

“Total Additional Commitments” means the aggregate of the Additional Commitments, being zero at the Signing Date .

“Total Facility A Commitments” means the aggregate of the Facility A Commitments, being $295,000,000 at the Signing Date as the same may be increased pursuant to this Agreement.

“Total Facility B Commitments” means the aggregate of the Facility B Commitments, being €214,500,000 at the Signing Date as the same may be increased pursuant to this Agreement.

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“Transfer Certificate” means a certificate substantially in the form set out in Schedule 6 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrower.

“Transfer Date” means, in relation to a transfer, the later of:

(a)the proposed Transfer Date specified in the Transfer Certificate; and

(b)the date on which the Agent executes the Transfer Certificate.

“UMC” means OJSC Company “Ukrainian Mobile Communications” with registration number 10701230000002699, and having its registered address at 15, Leiptsigska str., Kyiv 01015, Ukraine.

“UMC Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including UMC) relating to or arising out of the sale of UMC to the Borrower or the acquisition, reorganisation or ownership of UMC by the Borrower.

“Unpaid Sum” means any sum due and payable but unpaid by the Borrower under the Finance Documents.

“US Dollars”, “Dollars”, “USD” and “$” denote the lawful currency of the United States of America.

“Utilisation” means a utilisation of a Facility.

“Utilisation Date” means the date of a Utilisation, being the date on which the relevant Loan is to be made.

“Utilisation Request” means a notice substantially in the form set out in Schedule 3 (Utilisation Request).

“VAT” means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

1.2Construction

(a)Unless a contrary indication appears, any reference in this Agreement to:

(i)the “Agent”, any “Mandated Lead Arranger”, any “Finance Party”, any “Lender”, the “Borrower” and any “Party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii)“assets” includes present and future properties, revenues and rights of every description;

(iii)“control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management polices of a person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise;

(iv)a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

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(v)“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(vi)a “person” includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(vii)a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation;

(viii)a “3G licence” shall be construed so as to include any licence that is more technically advanced than a 3G licence;

(ix)a provision of law is a reference to that provision as amended or re-enacted; and

(x)a time of day is a reference to London time.

(b)Section, Clause and Schedule headings are for ease of reference only.

(c)Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d)A Default (other than an Event of Default) is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived.

1.3Third party rights

A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

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SECTION 2

THE FACILITIES

2THE FACILITIES

2.1The Facilities

Subject to the terms of this Agreement:

(a)the Facility A Lenders make available to the Borrower a term loan facility in Dollars to be designated “Facility A” in an aggregate amount equal to the Total Facility A Commitments; and

(b)the Facility B Lenders make available to the Borrower a term loan facility in euro to be designated “Facility B” in an aggregate amount equal to the Total Facility B Commitments.

2.2Additional Commitments

(a)The Borrower may notify the Agent if one or more of the Lenders or any other bank, financial institution, trust, fund or other entity has agreed to commit Additional Commitments by delivering an Additional Commitment Notice to the Agent.

(b)An Additional Commitment Notice is irrevocable and will not be regarded as having been duly completed unless:

(i)it lists each Proposed Additional Lender, together with its Proposed Additional Commitment for Facility A and/or Facility B;

(ii)it specifies that no Default has occurred and is continuing as at the date of the Additional Commitment Notice or would reasonably be expected to occur as a result of the Borrower borrowing the Requested Amount; and

(iii)it specifies that borrowing the Requested Amount would not cause any borrowing or similar limit binding on the Borrower to be exceeded.

(c)If each of the conditions set out in paragraph (d) below have been satisfied in form and substance satisfactory to the Agent, the Agent shall, as soon as reasonably practicable:

(i)execute each Additional Lender Accession Notice;

(ii)execute the Additional Commitment Notice;

(iii)notify the Borrower and each Additional Lender that it is satisfied that each of the conditions set out in paragraph (d) below have been met,

whereupon:

(A)each Additional Lender party to an Additional Lender Accession Notice shall become a Party as a Facility A Lender and/or a Facility B Lender;

(B)the amount of the Additional Commitments will increase Facility A and Facility B respectively in accordance with the Proposed Additional Commitments for Facility A

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and the Proposed Additional Commitments for Facility B set out in the Additional Commitment Notice; and

(C)subject to the terms of this Agreement, the Additional Lenders shall make available to the Borrower a term loan facility in an aggregate amount equal to the Total Additional Commitments.

(d)The conditions referred to in paragraph (c) above are:

(i)delivery to the Agent of a duly completed and executed Additional Commitment Notice by the Borrower not later than the date falling three Months after the initial Utilisation Date less five Business Days;

(ii)delivery to the Agent of a duly executed Additional Lender Accession Notice by each Proposed Additional Lender and, in each case, the Borrower not later than the date falling three Months after the initial Utilisation Date less five Business Days;

(iii)that the Requested Amount is equal to the aggregate of the Proposed Additional Commitments;

(iv)the Proposed Additional Commitment of each Proposed Additional Lender is equal to the Additional Commitment of that Additional Lender;

(v)the Agent satisfying itself that it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the accession of each Proposed Additional Lender; and

(vi)the provision by the Borrower of such other details, Authorisations or other documents, opinions or assurances as the Agent may reasonably require (if the aggregate amount of the Total Commitments and the Requested Amount exceeds the amount approved in the corporate authorisations delivered as conditions precedent under Clause 4.1 (Initial conditions precedent) and it has notified the Borrower accordingly prior to the date falling five Business Days after receipt by the Agent of an Additional Commitment Notice).

(e)On the Additional Commitments Establishment Date, each Additional Lender expressly acknowledges and gives each confirmation contained in Clause 22.4 (Limitation of responsibility of Existing Lenders) as if:

(i)that Additional Lender was a New Lender under that clause; and

(ii)each Finance Party (other than that Additional Lender) was an Existing Lender under that clause.

(f)Prior to the issuance of an Additional Commitment Notice, the Borrower shall invite each Lender to provide any Additional Commitments.

(g)Each Finance Party irrevocably authorises and instructs the Agent to execute on its behalf any Additional Commitment Notice which has been duly completed and signed on behalf of the Borrower.

(h)Each Finance Party (other than the relevant Proposed Additional Lender party to that Additional Lender Accession Notice) irrevocably authorises and instructs the Agent to execute on its behalf any Additional Lender Accession Notice which has been duly

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completed and signed on behalf of that Proposed Additional Lender and the Borrower and each Finance Party agrees to be bound by each such accession.

(i)The Borrower may deliver only one Additional Commitment Notice under this Agreement.

2.3Finance Parties’ rights and obligations

(a)The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

(b)The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from the Borrower shall be a separate and independent debt.

(c)A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

3PURPOSE

3.1Purpose

(a)The Borrower shall apply all amounts borrowed by it under Facility A and Facility B up to and including 20 May 2009, and in respect of Facility B via a foreign exchange transaction, to repay, together with the Additional Dollars, all amounts outstanding under the Existing Facility 1.

(b)The Borrower shall apply all amounts borrowed by it under Facility A and Facility B after 20 May 2009 for its general corporate purposes.

3.2Monitoring

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4CONDITIONS OF UTILISATION

4.1Initial conditions precedent

(a)The Borrower may not deliver the first Utilisation Request unless the Agent has received all of the documents and other evidence listed in Schedule 2 (Conditions precedent) in form and substance satisfactory to the Agent. The Agent shall notify the Borrower and the Lenders promptly (within one Business Day) upon being so satisfied.

(b)The Lenders will only be obliged to comply with Clause 5.4 (Lenders’ participation) if on or before the date of the first Utilisation of the Facilities, the Additional Dollars have been deposited into the Dollar Account.

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4.2Further conditions precedent

The Lenders will only be obliged to comply with Clause 5.4 (Lenders’ participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:

(a)no Default is continuing or would result from the proposed Loan; and

(b)the Repeating Representations to be made by the Borrower are true in all material respects,

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SECTION 3
UTILISATION

5UTILISATION

5.1Delivery of a Utilisation Request

(a)The Borrower may utilise a Facility by delivery to the Agent of a duly completed Utilisation Request not later than 10:00 a.m. on the day falling 3 Business Days before the proposed Utilisation Date (or, in relation to the first Utilisation Request, not later than 9:00 a.m. on the day falling 2 Business Days before the proposed Utilisation Date).

(b)The Borrower may only deliver a Utilisation Request for Facility A if on the same day it also delivers a Utilisation Request for Facility B with the same Utilisation Date as in the Utilisation Request delivered on that day for Facility A.

(c)The Borrower may only deliver a Utilisation Request for Facility B if on the same day it also delivers a Utilisation Request for Facility A with the same Utilisation Date as in the Utilisation Request delivered on that day for Facility B.

5.2Completion of a Utilisation Request

(a)Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(i)it identifies the Facility to be utilised;

(ii)the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility or, if applicable, to the Additional Commitments;

(iii)the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(iv)it specifies the account and bank to which the proceeds of the Utilisation are to be credited.

(b)Only one Loan may be requested in each Utilisation Request.

5.3Currency and amount

(a)The currency specified in a Utilisation Request must be Dollars for Facility A and euro for Facility B.

(b)Before the occurrence of the Additional Commitments Establishment Date, the amount of the proposed Loan must be:

(i)in relation to Facility A, the total amount of the Facility A Commitments listed in Schedule 1 (The Original Lenders);

(ii)in relation to Facility B, the total amount of the Facility B Commitments listed in Schedule 1 (The Original Lenders);

(c)On or after the occurrence of the Additional Commitments Establishment Date, the amount of the proposed Loan must be:

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(i)in relation to Facility A, the total amount of the Proposed Additional Commitments for Facility A in an Additional Commitment Notice;

(ii)in relation to Facility B, the total amount of the Proposed Additional Commitments for Facility B in an Additional Commitment Notice.

5.4Lenders’ participation

(a)If the conditions set out in this Agreement have been met, each Facility A Lender shall make its participation in each Facility A Loan available by the Utilisation Date through its Facility Office, and each Facility B Lender shall make its participation in each Facility B Loan available by the Utilisation Date through its Facility Office.

(b)The amount of each Lender’s participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.

(c)The Agent shall notify each Facility A Lender of the amount of each Facility A Loan and the amount of its participation in that Facility A Loan and each Facility B Lender of the amount of each Facility B Loan and the amount of its participation in that Facility B Loan, in each case not later than 3:00 p.m. on the day falling 3 Business Days before the relevant proposed Utilisation Date (or, in relation to the first Loan, not later than 9:00 a.m. on the day falling 2 Business Days before the proposed first Utilisation Date).

5.5Utilisation on or after the Additional Commitments Establishment Date

On or after the occurrence of the Additional Commitments Establishment Date, the Lenders shall not be obliged to participate in a Loan unless the Utilisation Date applicable to that Loan is on the date falling one, two, or as the case may be, three Months after the initial Utilisation Date.

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SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION

6REPAYMENT

6.1Repayment of Loans

The Borrower shall repay the Loans in three equal instalments, by paying on each Repayment Date an amount equal to one third of the amount of the Loans outstanding at the close of business on the last day of the Availability Period, or if any Additional Commitments are made available at the close of business on the last day of the Availability Period taking into account such Additional Commitments. Any amount outstanding on the Final Maturity Date shall be repaid in full on that date. The Borrower shall repay the Loans from its bank accounts with the Passport Bank, unless otherwise agreed between the Borrower and the Agent.

6.2Reborrowing

The Borrower may not reborrow any part of the Facilities which are repaid.

7PREPAYMENT AND CANCELLATION

7.1Illegality

If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan:

(a)that Lender shall promptly notify the Agent upon becoming aware of that event;

(b)upon the Agent notifying the Borrower, the Commitment of that Lender will be immediately cancelled; and

(c)the Borrower shall repay that Lender’s participation in the Loans on the later of the last day of the Interest Period for each Loan occurring, and the date falling 20 days after the Agent has notified the Borrower (but in any event no longer than any grace period permitted by law) or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).

7.2Voluntary cancellation

(a)The Borrower may, if it gives the Agent not less than 10 Business Days’ (or such shorter period as the Majority Lenders may agree) prior written notice, cancel the whole or any part (being a minimum amount of $25,000,000 or its equivalent in euros) of an Available Facility. Any cancellation under this Clause 7.2 shall reduce the Commitments of the Lenders rateably under that Facility.

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(b)The Borrower shall not cancel any part of the Available Commitment of a Facility unless at the same time it cancels a pro rata amount of the Available Commitments for the other Facility.

7.3Voluntary prepayment of Loans

(a)The Borrower may, if it gives the Agent not less than 10 Business Days’ (or such shorter period as the Majority Lenders may agree) prior written notice, prepay the whole or any part of any Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of $25,000,000 or its equivalent in euros).

(b)A Loan in respect of a Facility may only be prepaid after the last day of the Availability Period for that Facility (or, if earlier, the day on which the relevant Available Facility is zero).

(c)Each prepayment shall be applied in satisfaction of the Borrower’s obligations under Clause 6 (Repayment) in the inverse order of maturity of the Loans (or, at the option of the Borrower, pro rata to the remaining principal instalments thereof) and pro rata as between the Facilities.

7.4Mandatory Prepayment — Change of Control

(a)In this Clause 7.4, “Change of Control” means any of the following events or circumstances: any person or group of persons acting in concert or under an express or implied agreement or understanding, directly or through one or more intermediaries, shall (x) acquire ultimate beneficial or legal ownership of, or control over, more than 50% of the issued shares of the Borrower; (y) acquire ownership of or control over more than 50% of the voting interests in the share capital of the Borrower; or (z) obtain the power (whether or not exercised) to elect not less than half of the directors of the Borrower (provided, however, that any acquisition by Sistema JSFC or any of its Subsidiaries that results in the 50% threshold in paragraphs (x) and (y) above being exceeded, or in the power referred to in paragraph (z) above being obtained, will not be a Change of Control).

(b)If there is a Change of Control:

(i)the Borrower shall promptly notify the Agent upon becoming aware of that event;

(ii)the Borrower may not make a Utilisation; and

(iii)if any Lender (in its sole discretion) so requires, it may, within 5 Business Days of its receipt of the Borrower’s notification under sub-clause (i) above, direct the Agent to send a notice to the Borrower requiring the Borrower to repay that Lender’s participations in the Loans (together with accrued interest) in full on the day (the “Early Change of Control Repayment Date”) falling 30 days after the date of the Borrower’s notification under sub-clause (i) above. Before the Early Change of Control Repayment Date, the Lender and the Borrower shall consult with each other for a period of 5 Business Days with respect to the transfer of that Lender’s rights and obligations under this Agreement to another reputable international bank, financial institution, trust, fund or other entity nominated by the Borrower in accordance with Clause 22.5 (Procedure for transfer) for a purchase price equal to the outstanding principal amount of such Lender’s participation in the outstanding Loans and all accrued interest and fees and other amounts payable under this Agreement. If no such transfer has been effected on or before the Early Change of Control Repayment Date, then (x) the Borrower shall repay that Lender’s

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participations in the Loans (together with accrued interest) in full on the Early Change of Control Repayment Date and (y) the Commitments of that Lender shall be reduced to zero on that date.

7.5Mandatory Prepayment — Ratings Downgrade

(a)In this Clause 7.5:

“Fitch” means Fitch Ratings Ltd. and any successor to its rating business.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating business.

“Primary Rating” means a Rating of B for S&P, a Rating of B2 for Moody’s or a Rating of B for Fitch.

“Rating” means the credit rating assigned by a Rating Agency to the Borrower’s long-term foreign currency rating or equivalent rating as agreed by Majority Lenders.

“Ratings Agency” means each of S&P, Moody’s and Fitch.

“Ratings Downgrade” means any of the following events: (i) at least two of the Ratings Agencies assigning a Rating which falls below the Primary Rating or (ii) one or more of the Ratings Agencies assigning a Rating which falls below the Secondary Rating or not assigning any Rating.

“Secondary Rating” means a Rating of B- for S&P, a Rating of B3 for Moody’s or a Rating of B- for Fitch.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. and any successor to its rating business..

(b)If there is a Ratings Downgrade:

(i)the Borrower shall promptly notify the Agent upon becoming aware of that event;

(ii)the Borrower may not make a Utilisation; and

(iii)if any Lender (in its sole discretion) so requires, it may, if after a Utilisation Date, within 5 Business Days of its receipt of the Borrower’s notification under sub-clause (i) above or the occurrence of a Ratings Downgrade, direct the Agent to send a notice to the Borrower requiring the Borrower to repay that Lender’s participations in the Loans (together with accrued interest) in full on the day (the “Early Ratings Downgrade Repayment Date”) falling 30 days after the date of the Borrower’s notification under sub-clause (i) above. After receipt of the Borrower’s notification or the occurrence of a Ratings Downgrade and before the Early Ratings Downgrade Repayment Date, the Lender and the Borrower shall consult with each other for a period of 5 Business Days with respect to the transfer of that Lender’s rights and obligations under this Agreement to another reputable international bank, financial institution, trust, fund or other entity nominated by the Borrower in accordance with Clause 22.5 (Procedure for transfer) for a purchase price equal to the outstanding principal amount of such Lender’s participation in the outstanding Loans and all accrued interest and fees and other amounts payable under this Agreement. If no such transfer has been effected on or before the Early Ratings Downgrade Repayment Date, then (x) the Borrower shall repay that Lender’s participations in the Loans (together with accrued interest) in full on the Early

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Ratings Downgrade Repayment Date and (y) the Commitment of that Lender shall be reduced to zero on that date.

7.6Mandatory Prepayment — Retained Earnings and Capital Reduction

(a)In this Clause 7.6, “Retained Earnings” means retained earnings of the Borrower determined by reference to its most recent quarterly unaudited non-consolidated financial statements prepared in accordance with RAS adjusted so as to take into account any distributions made since the date of those statements.

(b)If Retained Earnings fall below the aggregate of RUR20,000,000,000 and the cumulative amount of consideration (the payment of which is in cash or would otherwise reduce the consolidated balance sheet of the Group during the life of the Facilities) paid by or on behalf of any member of the Group in respect of the purchase of shares in the Borrower or any reduction in the share capital of the Borrower after the date of this Agreement (and excluding any “treasury shares” in the Borrower held by the Borrower as at the date of this Agreement) to the extent such consideration does not reduce Retained Earnings:

(i)the Borrower shall promptly notify the Agent upon becoming aware of that event occurring or being likely to occur;

(ii)the Borrower may not make a Utilisation; and

(iii)if the Majority Lenders so require, they may, within 5 Business Days of receipt of the Borrower’s notification under sub-clause (i) above, direct the Agent to send a notice to the Borrower requiring the Borrower to repay each Lender’s participations in the Loans (together with accrued interest) in full on the day (the “Early Retained Earnings Repayment Date”) falling 30 days after the date of the Borrower’s notification under sub-clause (i) above. On the Early Retained Earnings Repayment Date the Commitments shall be reduced to zero.

7.7Right of repayment and cancellation in relation to a single Lender

If:

(a)any sum payable to any Lender by the Borrower is required to be increased under paragraph (c) of Clause 12.2 (Tax gross-up); or

(b)any Lender claims indemnification from the Borrower under Clause 12.3 (Tax indemnity) or Clause 13 (Increased Costs),

the Borrower may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Agent notice of cancellation of the Commitments of that Lender and its intention to procure the repayment of that Lender’s participation in the Loans on the last day of the Interest Period ending after the date of such notice (or, if earlier, on such other date as specified by the Borrower in that notice) (the “Cancellation Date”). After receipt of the Borrower’s notification and before the Cancellation Date, the Lender and the Borrower shall consult with each other for a period of 5 Business Days with respect to the transfer of that Lender’s rights and obligations under this Agreement to another reputable international bank, financial institution, trust, fund or other entity nominated by the Borrower in accordance with Clause 22.5 (Procedure for transfer). If no such transfer has been effected on or before the Cancellation Date, then (x) the Borrower shall repay that Lender’s participations in the Loans (together with accrued interest) in full

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on the Cancellation Date and (y) the Commitments of that Lender shall be reduced to zero on that date.

7.8Replacement of a Lender

(a)If at any time a Lender becomes a Non Consenting Lender then the Borrower may, on ten Business Days’ prior written notice to the Agent and that Non Consenting Lender, replace that Non Consenting Lender by causing it to (and that Non Consenting Lender shall) transfer pursuant to this Clause 7.8 all of its rights and obligations under this agreement to a Lender or other person being a reputable bank, financial institution, trust, fund or other entity active in the international syndicated loan market selected by the Borrower and acceptable to the Agent (acting reasonably) or a member of the Group (other than the Borrower) for a purchase price equal to the outstanding principal amount of such Non Consenting Lender’s participation in the outstanding Loans and all accrued interest and fees and other amounts payable under this Agreement.

(b)The Borrower shall have no right to replace a Mandated Lead Arranger or the Agent and none of the foregoing nor any Lender shall have any obligation to the Borrower to find a replacement Lender. The Borrower shall not make any payment or assume any obligation (whether by way of fees, expenses or otherwise) to or on behalf of the replacement Lender as an inducement for the replacement Lender to become a Lender.

(c)No Lender replaced under this Clause 7.8 may be required to pay or surrender to that replacement Lender or other entity any fees received by it.

(d)For the purposes of this Clause 7.8 a “Non Consenting Lender” is a Lender who does not agree to a consent or amendment where:

(i)the Borrower or the Agent has requested the Lenders to consent to a departure from or waiver of any provision of the Finance Documents or to agree to any amendment thereto;

(ii)the consent or amendment in question requires the agreement of all Lenders, or in the case of the consent required under paragraph (d) of Clause 20.12 (Restriction on acquisitions) only, the Simple Majority Lenders;

(iii)a period of not less than 14 days has elapsed from the date the consent or amendment was requested, or in the case of the consent required under paragraph (d) of Clause 20.12 (Restriction on acquisitions) only, 15 Business Days has elapsed from the date the consent was requested or, if later, the business plan as required under paragraph (g) of Clause 20.12 (Restriction on acquisitions) was delivered by the Agent to the Lenders;

(iv)the Super Majority Lenders have agreed to such consent or amendment, or in the case of the consent required under paragraph (d) of Clause 20.12 (Restriction on acquisitions) only, such Lender has not agreed to provide such consent; and

(v)the Borrower has notified the Agent it will treat the Lender as a Non Consenting Lender.

7.9Restrictions

(a)Any notice of cancellation or prepayment given by any Party under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the

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date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c)The Borrower shall not cancel any part of the Available Commitment of a Facility unless at the same time it cancels a pro rata amount of the Available Commitments for the other Facility.

(d)The Borrower may not reborrow any part of a Facility which is prepaid.

(e)The Borrower shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

(f)No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

(g)If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to either the Borrower or the affected Lender, as appropriate.

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SECTION 5
COSTS OF UTILISATION

8INTEREST

8.1Calculation of interest

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(a)Margin;

(b)LIBOR, or, in relation to any Loan in euro, EURIBOR; and

(c)Mandatory Cost, if any.

8.2Payment of interest

The Borrower shall pay accrued interest on each Loan on the last day of each Interest Period (and, if the Interest Period is longer than 6 Months, on the date falling at six monthly intervals after the first day of the Interest Period).

8.3Default interest

(a)If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is the sum of 2 per cent. and the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Borrower on demand by the Agent.

(b)If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

(i)the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

(ii)the rate of interest applying to the overdue amount during that first Interest Period shall be the sum of 2 per cent. and the rate which would have applied if the overdue amount had not become due.

(c)Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.4Notification of rates of interest

The Agent shall promptly notify the relevant Lenders and the Borrower of the determination of a rate of interest under this Agreement.

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9INTEREST PERIODS

9.1Duration of Interest Periods

(a)The first Interest Period for the first Loan made under a Facility shall begin on the Utilisation Date for that Loan and end on the last day of the Interest Period applicable to that first Loan which will be three Months. The Interest Period for a subsequent Loan under that Facility shall end on the last day of the current Interest Period for the first loan and at the end of that current Interest Period all Loans under that Facility shall be consolidated such that all Loans under that Facility shall then be treated as a single Loan.

(b)Subject to Clause 9.1(a), the Borrower may select an Interest Period for the Loan in the Utilisation Request or (if the Loan has already been borrowed) in a Selection Notice. The Borrower may select an Interest Period with a duration of three or six Months or any other period agreed between the Borrower and the Agent (acting on the instructions of all the Lenders participating in the relevant Loan).

(c)Each Selection Notice for the Loan is irrevocable and must be delivered to the Agent by the Borrower not later than 11:00 a.m. one Business Day before the Quotation Day.

(d)If the Borrower fails to deliver a Selection Notice to the Agent in accordance with paragraph (c) above, the relevant Interest Period will be six Months.

(e)An Interest Period shall not extend beyond a Repayment Date or the Final Maturity Date and if an Interest Period would otherwise overrun a Repayment Date or the Final Maturity Date, such Interest Period shall be shortened so that it ends on that Repayment Date or the Final Maturity Date.

(f)Each Interest Period shall start on the Utilisation Date or (if the Loan is already made) on the last day of its preceding Interest Period.

9.2Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

10CHANGES TO THE CALCULATION OF INTEREST

10.1Absence of quotations

Subject to Clause 10.2 (Market disruption), if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11:00 a.m. on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

10.2Market disruption

(a)If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender’s share of that Loan for the Interest Period shall be the rate per annum which is the sum of:

(i)the Margin;

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(ii)the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it may reasonably select; and

(iii)the Mandatory Cost, if any, applicable to that Lender’s participation in the Loan.

Lenders that choose not to provide cost of funding information will be deemed to be in agreement with the original rate of interest specified in the Loan. The rate of interest for those Lenders for the relevant Interest Period shall be the aggregate of the Margin, the LIBOR, or, in relation to any Loan in euro, EURIBOR for the relevant Interest Period, and the Mandatory Cost, if any, applicable to that Lender’s participation in the Loan.

The Agent shall treat all cost of funding information provided by Lenders as confidential information. Cost of funding information shall not be shared with the Borrower (unless on a no name basis) or other Lenders.

(b)In this Agreement “Market Disruption Event” means:

(i)at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for US Dollars or, if applicable, EURIBOR for the relevant Interest Period; or

(ii)before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 35 per cent. of that Loan) that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.

10.3Alternative basis of interest or funding

(a)If a Market Disruption Event occurs and the Agent or the Borrower so requires the Agent and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.

(b)Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.

10.4Break Costs

(a)The Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

(b)Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.

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11FEES

11.1Arrangement fee

The Borrower shall pay to the Agent, for distribution to the Mandated Lead Arrangers, an arrangement fee in the amount and at the times agreed in a Fee Letter.

11.2Agency fee

The Borrower shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in the Agency Fee Letter.

11.3Management fee

The Borrower shall pay to the Agent, for distribution to certain Lenders, a management fee on Facility 2 under and as defined in the Existing Facilities Agreement in the amount and at the times agreed in a Fee Letter.

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SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS

12TAX GROSS-UP AND INDEMNITIES

12.1Definitions

(a)In this Agreement:

“Protected Party” means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Qualifying Lender” means any Lender which is situated for tax purposes in the Russian Federation or in a Tax Treaty Jurisdiction.

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means an increased payment made by the Borrower to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

“Tax Treaty Jurisdiction” means a jurisdiction which has in force a double tax treaty with the Russian Federation (or with the Union of Soviet Socialist Republics to which the Russian Federation has succeeded) which provides for full exemption from Russian withholding tax on interest derived from a source within the Russian Federation payable to a resident of such jurisdiction.

(b)Unless a contrary indication appears, in this Clause 12 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

12.2Tax gross-up

(a)The Borrower shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)The Borrower shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from the Borrower or a Lender, it shall respectively notify the Lender and the Borrower.

(c)Subject to paragraph (d) below, if a Tax Deduction is required by law to be made by the Borrower, the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)The Borrower is not required to make an increased payment to a Lender under paragraph (c) above if, on the date on which the payment falls due, the Borrower could have made

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such a payment to that Lender without a Tax Deduction if that Lender was a Qualifying Lender, but on that date that Lender is not, or has ceased to be, a Qualifying Lender (other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or treaty, or any published practice or concession of any relevant taxing authority).

(e)If the Borrower is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f)Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall deliver to the Agent for the Finance Party entitled to the payment an original receipt (or certified copy thereof) demonstrating that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

(g)Each Lender and the Borrower shall co-operate in completing any procedural formalities necessary for the Borrower to obtain authorisation to make a payment without a Tax Deduction.

12.3Tax indemnity

(a)The Borrower shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines has been suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

(b)Paragraph (a) above shall not apply:

(i)with respect to any Tax assessed on a Finance Party:

(A)under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

(B)under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or

(ii)to the extent a loss, liability or cost:

(A)is compensated for by an increased payment under Clause 12.2 (Tax gross-up); or

(B)would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 12.2 (Tax gross-up) applied.

(c)A Protected Party making, or intending to make, a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrower.

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(d)A Protected Party shall, on receiving a payment from the Borrower under this Clause 12.3, notify the Agent.

12.4Tax Credit

If the Borrower makes a Tax Payment and the relevant Finance Party determines that:

(a)a Tax Credit is attributable to that Tax Payment; and

(b)that Finance Party has obtained, utilised and retained that Tax Credit,

the Finance Party shall pay promptly an amount to the Borrower which that Finance Party determines will leave the Finance Party (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Borrower.

12.5Lender Status Confirmation

Each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate or Additional Lender Accession Notice which it executes on becoming a Party, and for the benefit of the Agent and without liability to the Borrower, which of the following categories it falls in:

(a)not a Qualifying Lender; or

(b)a Qualifying Lender.

If a New Lender (as defined in Clause 22.1 (Assignments and transfers by the Lenders)) or Acceding Additional Lender fails to indicate its status in accordance with this Clause 12.5 then such New Lender or Acceding Additional Lender shall be treated for the purposes of this Agreement (including by the Borrower) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Borrower).  For the avoidance of doubt, a Transfer Certificate or Additional Lender Accession Notice shall not be invalidated by any failure of a Lender to comply with this Clause 12.5.

12.6Stamp taxes

The Borrower shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

12.7Value added tax

(a)All consideration expressed to be payable under a Finance Document by any Party to a Finance Party shall be deemed to be exclusive of any VAT. If VAT is chargeable on such consideration, that Party shall pay to the Finance Party (or directly to the appropriate tax authority, if so required by law) (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

(b)Where a Finance Document requires any Party to reimburse a Finance Party for any costs or expenses, that Party shall also at the same time pay and indemnify the Finance Party against all VAT incurred by the Finance Party in respect of the costs or expenses to the extent that the Finance Party reasonably determines that neither it nor any other member

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of the group of which it is a member for VAT purposes is entitled to credit or repayment from the relevant tax authority in respect of the VAT.

12.8Tax forms

(a)At least 10 Business Days prior to the date of the first scheduled payment of interest under this Agreement, and within 20 Business Days from the beginning of each calendar year falling after the Signing Date, each Qualifying Lender shall provide to the Borrower a document issued by the relevant government authority in its jurisdiction of residence confirming that it is a resident of that jurisdiction. That document shall be apostilled by each Qualifying Lender if requested by the Borrower (pursuant to a requirement of the Russian tax authorities). The Borrower shall pay to each Qualifying Lender an amount equal to the costs that the Qualifying Lender has incurred in apostilling any such document.

(b)At the request of the Borrower (acting reasonably), each Lender shall use its reasonable efforts to provide any other documentation or information to the Borrower that may be reasonably necessary for the Borrower to establish a complete exemption from Russian withholding tax in relation to payments of interest under this Agreement.

13INCREASED COSTS

13.1Increased Costs

(a)Subject to Clause 13.3 (Exceptions) the Borrower shall, within three Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or its Holding Company as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the Signing Date.

(b)In this Agreement “Increased Costs” means:

(i)a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;

(ii)an additional or increased cost; or

(iii)a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or its Holding Company to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.

13.2Increased Cost claims

(a)A Finance Party intending to make a claim pursuant to Clause 13.1 (Increased Costs) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrower.

(b)Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.

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13.3Exceptions

(a)Clause 13.1 (Increased Costs) does not apply to the extent any Increased Cost is:

(i)attributable to a Tax Deduction required by law to be made by the Borrower;

(ii)compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 (Tax indemnity) applied);

(iii)compensated for by the payment of the Mandatory Cost; or

(iv)attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.

(b)In this Clause 13.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 12.1 (Definitions).

14OTHER INDEMNITIES

14.1Currency indemnity

(a)If any sum due from the Borrower under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(i)making or filing a claim or proof against the Borrower;

(ii)obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Borrower shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

(b)The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2Other indemnities

The Borrower shall, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:

(a)the occurrence of any Event of Default;

(b)a failure by the Borrower to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 26 (Sharing among the Finance Parties);

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(c)funding, or making arrangements to fund, its participation in a Loan requested by the Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or

(d)a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower.

14.3Indemnity to the Agent

The Borrower shall promptly indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:

(a)investigating any event which it reasonably believes is a Default; or

(b)acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.

15MITIGATION BY THE LENDERS

15.1Mitigation

(a)Each Finance Party shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 (Illegality), Clause 12 (Tax gross-up and indemnities) or Clause 13.1 (Increased Costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b)Paragraph (a) above does not in any way limit the obligations of the Borrower under the Finance Documents.

15.2Limitation of liability

(a)The Borrower shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation).

(b)A Finance Party is not obliged to take any steps under Clause 15.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

16COSTS AND EXPENSES

16.1Transaction expenses

The Borrower shall promptly on demand pay the Agent and certain Finance Parties the amount of all reasonable out-of-pocket costs and legal expenses (subject to the terms of the letter dated 6 March 2009 between, among others, the Borrower and the Agent) incurred by any of them in connection with the negotiation, preparation and execution of:

(a)this Agreement and any other documents referred to in this Agreement; and

(b)any other Finance Documents executed after the date of this Agreement.

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16.2Amendment costs

If (a) the Borrower requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 27.9 (Change of currency), the Borrower shall, within three Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.

16.3Enforcement costs

The Borrower shall, within three Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

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SECTION 7
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

17REPRESENTATIONS

The Borrower makes the representations and warranties set out in this Clause 17 to each Finance Party on the date of this Agreement.

17.1Status

(a)It is an open joint stock company, duly established, registered and validly existing under the laws of the Russian Federation.

(b)It and each of its Significant Subsidiaries has the power to own its assets and carry on its business as it is being conducted.

17.2Binding obligations

The obligations expressed to be assumed by it in each Finance Document are legal, valid, binding and enforceable obligations, subject to insolvency and other laws affecting creditors’ rights generally and principles of equity.

17.3Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a)any law or regulation applicable to it;

(b)its or any of its Subsidiaries’ constitutional documents; or

(c)any agreement or instrument binding upon it or any of its Subsidiaries or any of its or its Subsidiaries’ assets.

17.4Power and authority

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents and the transactions contemplated by those Finance Documents.

17.5Validity and admissibility in evidence

All Authorisations required:

(a)to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents;

(b)for it and its Significant Subsidiaries to carry on its and their business; and

(c)to make the Finance Documents admissible in evidence in the general jurisdiction courts or commercial courts (arbitrazhniye sudi) of the Russian Federation in an original action or action to enforce a foreign arbitral award, provided that authenticated and notarised Russian texts are made available to such courts at

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that time and any other procedures and formalities regarding presentation of documents to a Russian court are complied with,

have been obtained or effected and are in full force and effect (except, in relation to paragraph (b) above, where the failure to obtain such Authorisations (excluding any Telecommunications Authorisations) is not reasonably likely to have a Material Adverse Effect).

17.6Governing law and enforcement

(a)The choice of English law as the governing law of the Finance Documents will be recognised and enforced in the Russian Federation.

(b)Any arbitration award obtained in England in relation to a Finance Document will be recognised and enforced in the Russian Federation in accordance with the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

17.7No bankruptcy proceedings

Neither the Borrower nor any of its Significant Subsidiaries has taken any corporate action nor have any other steps been taken or legal proceedings been started or, to the best of its knowledge and belief (after due inquiry), threatened against it or any of its Significant Subsidiaries for (a) its liquidation or bankruptcy or the appointment of a liquidation commission (likvidatsionnaya komissiya) or a similar officer of it or any of its Significant Subsidiaries; (b) the institution of supervision (nablyudeniye), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshniy upravlayucshiy) or the appointment of a bankruptcy manager (konkursniy upravlayuschiy) or similar officer of it or any of its Significant Subsidiaries; (c) the convening of a meeting of creditors for the purposes of considering an amicable settlement (as defined in the Russian Insolvency Law); or (d) any analogous act in respect of it or any of its Significant Subsidiaries in any jurisdiction.

17.8Deduction of Tax

It is not required under the law of the Russian Federation to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Qualifying Lender provided that it has received the documentation specified in paragraph (a) Clause 12.8 (Tax forms).

17.9No filing or stamp taxes

Under the law of the Russian Federation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in the Russian Federation or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, except for court registration fees in connection with any enforcement proceedings in such court.

17.10Payment of Taxes

Neither it nor any of its Significant Subsidiaries has overdue tax liabilities, other than tax liabilities (a) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves or other appropriate provision

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has been made or (b) whose amount, together with all such other unpaid or undischarged taxes, does not in aggregate exceed $25,000,000 (or its equivalent in any other currency or currencies).

17.11No default

(a)No Default or Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

(b)No event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which is reasonably likely to have a Material Adverse Effect.

17.12No misleading information

(a)Any factual information provided by or on behalf of any member of the Group for the purposes of the Information Memorandum was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.

(b)The financial projections contained in the Information Memorandum have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

(c)Nothing has occurred or been omitted from the Information Memorandum and no information has been given or withheld that results in the information contained in the Information Memorandum being untrue or misleading in any material respect.

17.13Financial statements

(a)Its Original Financial Statements were prepared in accordance with GAAP consistently applied.

(b)Its Original Financial Statements fairly represent its, and its consolidated, financial condition and operations as at the end of and for the relevant financial year.

(c)There has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of the Group) since the date of its unaudited consolidated financial statements for the financial year ended 31 December 2008.

(d)There will be no material difference between the unaudited consolidated financial statements of the Group for the financial year ended 31 December 2008 and the audited consolidated financial statements of the Group for the financial year ended 31 December 2008.

17.14Pari passu ranking

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

17.15No proceedings pending or threatened

Other than the UMC Litigation, no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (including but not limited to, investigative

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proceedings) have, to the best of its knowledge and belief (after due inquiry), been started or threatened against it or any of its Significant Subsidiaries which, if adversely determined would be reasonably likely to have a Material Adverse Effect.

17.16Environmental laws and licences

Except as disclosed in writing to the Agent before the date hereof, it and each of its Significant Subsidiaries has:

(a)complied with all Environmental Laws to which it may be subject;

(b)obtained all Environmental Licences required in connection with its business; and

(c)complied with the terms of those Environmental Licences,

in each case where failure to do so would be reasonably likely to have a Material Adverse Effect.

17.17Telecommunications laws and licences

(a)Each of the Borrower and its Significant Subsidiaries has:

(i)complied in all material respects with all Telecommunications Laws to which it may be subject;

(ii)obtained all material Telecommunications Authorisations necessary to conduct its business; and

(iii)complied in all material respects with the terms of those Telecommunication Authorisations,

in each case other than where failure to do so would not reasonably be expected to have a Material Adverse Effect.

(b)There has been no act, omission or event which might reasonably be expected to give rise to the material amendment, revocation, suspension, cancellation, withdrawal or termination of any provision of any Telecommunications Authorisation. To the best of its knowledge and belief (after due inquiry), no Telecommunications Authorisation is the subject of any pending or threatened proceedings which, if adversely determined, would reasonably be expected to have a Material Adverse Effect.

17.18Compliance with laws

Each of the Borrower and its Significant Subsidiaries is conducting its business and operations in compliance with all laws and regulations and all directives of any government agency having legal force applicable or relevant to it, excluding any such non-compliance which would not reasonably be expected to have a Material Adverse Effect.

17.19No Immunity

(a)The execution by the Borrower of the Finance Documents constitutes, and its exercise of its rights and performance of its obligations thereunder will constitute, private and commercial activities done and performed for private and commercial purposes (rather than public and governmental purposes).

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(b)In any proceedings taken in the Russian Federation in relation to the Finance Documents, the Borrower will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.

17.20Role of Borrower

The Borrower is acting as principal and for its own account and not as an agent or trustee or in any other capacity on behalf of any other party.

17.21Repetition

The Repeating Representations are deemed to be made by the Borrower by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period (provided that whenever the representation in paragraph (c) of Clause 17.3 (Non-conflict with other obligations) is deemed to be made on a date other than the Signing Date or a Utilisation Date, the statement “except where the same would not be reasonably likely to have a Material Adverse Effect” shall qualify the representation in said paragraph (c)).

18INFORMATION UNDERTAKINGS

The undertakings in this Clause 18 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

18.1Financial statements

The Borrower shall supply to the Agent in sufficient copies for all the Lenders:

(a)as soon as the same become available, but in any event within 180 days after the end of each of its financial years, its audited consolidated and non-consolidated financial statements for that financial year; and

(b)as soon as the same become available, but in any event within (i) 60 days after the end of each of its first, second and third financial quarters and (ii) 90 days after the end of its fourth financial quarter, its unaudited consolidated and non-consolidated financial statements for that financial quarter.

18.2Compliance Certificate

(a)The Borrower shall supply to the Agent with each set of financial statements delivered pursuant to Clause 18.1 (Financial statements), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 19 (Financial covenants) and the amount of Retained Earnings in accordance with Clause 7.6 (Mandatory Prepayment — Retained Earnings) as at the date as at which those financial statements were drawn up. Each Compliance Certificate shall be signed by an authorised officer of the Borrower.

(b)Where a Compliance Certificate is required to be delivered with the financial statements delivered pursuant to paragraph (a) of Clause 18.1 (Financial statements), it shall be accompanied by a report from the Borrower’s auditors using a form acceptable to those auditors.

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18.3Requirements as to financial statements

(a)Each set of financial statements delivered by the Borrower pursuant to Clause 18.1 (Financial statements) shall be certified by an authorised officer of the Borrower as fairly representing its (or, as the case may be, its consolidated) financial condition and operations as at the end of and for the period in relation to which those financial statements were drawn up.

(b)The Borrower shall procure that each set of consolidated financial statements delivered pursuant to Clause 18.1 (Financial statements) is prepared using GAAP accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Agent:

(i)a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

(ii)sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 19 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that the Original Financial Statements;

(c)Each set of audited financial statements delivered by the Borrower under Clause 18.1(a) (Financial statements) shall be audited by an internationally recognised independent qualified firm of auditors.

(d)Any reference in this Agreement to those consolidated financial statements shall be construed as a reference to those financial statements prepared as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

(e)The Borrower shall procure that each set of non-consolidated financial statements delivered pursuant to Clause 18.1 (Financial statements) is prepared using RAS accounting practices and financial reference periods consistent with those applied in the preparation of the Original RAS Financial Statements unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in RAS, the accounting practices or reference periods and it delivers to the Agent:

(i)a description of any change necessary for those financial statements to reflect the RAS, accounting practices and reference periods upon which the Original RAS Financial Statements were prepared; and

(ii)sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to make an accurate comparison between the financial position indicated in those financial statements and the Original RAS Financial Statements.

(f)Any reference in this Agreement to those non-consolidated financial statements shall be construed as a reference to those financial statements prepared as adjusted to reflect the basis upon which the Original RAS Financial Statements were prepared.

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18.4Information: miscellaneous

The Borrower shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):

(a)all documents dispatched by the Borrower to its shareholders (or any class of them) or its creditors generally promptly after they are dispatched;

(b)promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which would, if adversely determined, be reasonably likely to have a Material Adverse Effect;

(c)promptly, such information as may be reasonably requested by the Agent (including relevant figures from management accounts) to ascertain whether any Subsidiary of the Borrower falls within paragraph (d) of the definition of “Significant Subsidiary”; and

(d)promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Agent) may reasonably request.

18.5Notification of Default and prepayment

(a)The Borrower shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) or any event which will or could reasonably be expected to result in an obligation to make a prepayment of the Loan under Clause 7 (Prepayment and cancellation) promptly upon becoming aware of its occurrence.

(b)Promptly upon a request by the Agent, the Borrower shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it) or that no event which will or could reasonably be expected to result in an obligation to make a prepayment of the Loan under Clause 7 (Prepayment and cancellation) has occurred or could reasonably be expected to occur.

18.6Know your customer checks

(a)If:

(i)the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

(ii)any change in the status of the Borrower after the date of this Agreement; or

(iii)a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event

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described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

(b)Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

18.7Use of websites

(a)The Borrower may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the “Website Lenders”) who accept this method of communication by posting this information onto an electronic website designated by the Borrower and the Agent (the “Designated Website”) if:

(i)the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;

(ii)both the Borrower and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and

(iii)the information is in a format previously agreed between the Borrower and the Agent.

If any Lender (a “Paper Form Lender”) does not agree to the delivery of information electronically then the Agent shall notify the Borrower accordingly and the Borrower shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Borrower shall supply the Agent with at least one copy in paper form of any information required to be provided by it.

(b)The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrower and the Agent.

(c)The Borrower shall promptly upon becoming aware of its occurrence notify the Agent if:

(i)the Designated Website cannot be accessed due to technical failure;

(ii)the password specifications for the Designated Website change;

(iii)any new information which is required to be provided under this Agreement is posted onto the Designated Website;

(iv)any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or

(v)the Borrower becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

If the Borrower notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by the Borrower under this Agreement after the date of that

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notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

(d)Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Borrower shall comply with any such request within ten Business Days.

19FINANCIAL COVENANTS

The financial undertakings in this Clause 19 shall remain in force from the Signing Date for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

19.1Financial condition

The Borrower shall ensure that:

(a)The ratio of Total Debt as at the end of any Relevant Period to OIBDA in respect of such Relevant Period will not exceed 3:1; and

(b)the ratio of OIBDA to Interest Expense in respect of any Relevant Period will not be less than 5:1.

19.2Financial covenant calculations

Total Debt, OIBDA and Interest Expense shall be calculated and interpreted on a consolidated basis in accordance with the GAAP applicable to the Original Financial Statements of the Borrower and shall be expressed in Dollars.

19.3Definitions

In this Clause 19.3:

“Total Debt” means, as at any particular time, the aggregate outstanding principal, capital or nominal amount (and any fixed or minimum premium payable on prepayment or redemption) of the Financial Indebtedness of members of the Group (other than any indebtedness referred to in paragraph (g) of the definition of Financial Indebtedness and any guarantee or indemnity in respect of that indebtedness).

For this purpose, any amount outstanding or repayable in a currency other than Dollars shall on that day be taken into account in its Dollars equivalent at the rate of exchange that would have been used had an audited consolidated balance sheet of the Group been prepared as at that day in accordance with the GAAP applicable to the Original Financial Statements of the Borrower.

“OIBDA” means, in relation to any Relevant Period, the total consolidated net income of the Group for that Relevant Period:

(a)before taking into account the charge or credit to the profit and loss account in respect of:

(i)minority interests;

(ii)income tax;

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(iii)non-operating income less non-operating expenses;

(iv)the Group’s share in the net income (or loss) of any associated companies or undertakings;

(v)Interest Expense;

(vi)interest income; and

(vii)currency exchange and translation (gains)/losses; and

(b)after adding back all amounts provided for depreciation and amortisation for that Relevant Period,

multiplied by two,

as determined (except as needed to reflect the terms of this Clause 19) from the financial statements of the Group and Compliance Certificates delivered under Clause 18.1 (Financial statements) and Clause 18.2 (Compliance Certificate).

“Interest Expense” means, in relation to any Relevant Period, the aggregate amount of interest and any other finance charges (whether or not paid, payable or capitalised) accrued by the Group in that Relevant Period in respect of Total Debt including:

(a)the interest element of leasing and hire purchase payments;

(b)commitment fees, commissions, arrangement fees and guarantee fees; and

(c)amounts in the nature of interest payable in respect of any shares other than equity share capital,

adjusted (but without double counting) by:

(i)adding back the net amount payable (or deducting the net amount receivable) by members of the Group in respect of that Relevant Period under any interest or (so far as they relate to interest) currency hedging arrangements; and

(ii)deducting interest income of the Group in respect of that Relevant Period to the extent freely payable in cash,

multiplied by two,

as determined (except as needed to reflect the terms of this Clause 19) from the financial statements of the Group and Compliance Certificates delivered under Clause 18.1 (Financial statements) and Clause 18.2 (Compliance Certificate).

“Relevant Period” means each period of 6 consecutive Months ending on the last day of each financial year and financial quarter of the Borrower.

20GENERAL UNDERTAKINGS

The undertakings in this Clause 20 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

20.1Authorisations

The Borrower shall promptly:

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(a)obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b)supply certified copies to the Agent of,

any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.

20.2Compliance with laws

The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.

20.3Maintenance of existence

The Borrower shall maintain its corporate existence.

20.4Negative pledge

(a)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.

(b)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will):

(i)sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by the Borrower or any other member of the Group;

(ii)sell, transfer or otherwise dispose of any of its receivables on recourse terms;

(iii)enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(iv)enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

(c)Paragraphs (a) and (b) above do not apply to Permitted Security.

20.5Disposals

(a)The Borrower shall not (and shall ensure that no other member of the Group will) enter into a single transaction or a series of transactions (whether related or not and whether voluntary or involuntary) to sell, lease, transfer or otherwise dispose of any asset.

(b)Paragraph (a) above does not apply to any sale, lease, transfer or other disposal:

(i)made in the ordinary course of trading of the disposing entity;

(ii)of assets in exchange for other assets comparable or superior as to type, value and quality;

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(iii)made from one member of the Group (other than the Borrower) to another member of the Group;

(iv)of cash or cash equivalents for cash or cash equivalents;

(v)where the book value of such asset (when aggregated with the book value of each other asset disposed of under this sub-clause (v)) (in each case as calculated in accordance with GAAP) does not exceed (x) 10% of the Borrower’s Total Assets in any financial year of the Borrower and (y) 25% of the Borrower’s Total Assets during the period starting on the Signing Date and ending on the date that all amounts outstanding under this Agreement have been paid in full. At the request of the Agent (any such request to be made no more than once per calendar quarter, unless a Default is continuing), the Borrower shall provide a certificate to the Agent setting out in reasonable detail the book value of any assets disposed of under this sub-clause (v) (calculated in accordance with GAAP); or

(vi)involving the transfer of any or all of the Borrower’s shares in UMC pursuant to the UMC Litigation to a person that is not a member of the Group (provided that this sub-clause (vi) shall not in any way prejudice the rights of the Finance Parties under Clause 21.18 (UMC Litigation)).

When calculating the Borrower’s Total Assets under sub-clause (v) above in respect of any financial year, if the annual consolidated balance sheet of the Borrower for the immediately preceding financial year of the Borrower is not available, the Borrower’s Total Assets shall until such time as that annual consolidated balance sheet of the Borrower is available be calculated by reference to the draft audit report then available for that financial year and any other evidence reasonably requested by, and reasonably satisfactory to, the Agent.

20.6Merger

(a)The Borrower shall not enter into or become subject to any consolidation or reorganisation, whether by way of merger (sliyaniye obschestva), company accession (prisoedinyeniye obschestva), company division (razdelenie obschestva), company separation (vydelyeniye obschestva), company transformation (preobrazovaniye obschestva), company liquidation (likvidatisya obschestva) or any other company reorganisation (reorgnizatsiya obschestva) (as these terms are construed by applicable Russian law) or otherwise, or any analogous transaction in any jurisdiction, other than a consolidation or merger with one of its Subsidiaries where the Borrower is the surviving entity.

(b)The Borrower shall ensure that no Significant Subsidiary will enter into or become subject to any consolidation or reorganisation, whether by way of merger (sliyaniye obschestva), company accession (prisoedinyeniye obschestva), company division (razdeleyeniey obschestva), company separation (vydelyeniye obschestva), company transformation (preobrazovaniye obschestva), company liquidation (likvidatsiya obschestva) or any other company reorganisation (reorganizatsiya obschestva) (as these terms are construed by applicable Russian law) or otherwise, or any analogous transaction in any jurisdiction if such reorganisation or transaction would, in the opinion of the Agent (acting reasonably), have a Material Adverse Effect.

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20.7Change of business

The Borrower shall procure that no substantial change is made to the general nature of the business of the Borrower or the Group from that carried on at the Signing Date provided that for the purposes of this Clause 20.7 (Change of business) adding a fixed-line telecommunications business or retail business connected to the mobile telecommunications business shall not be considered as a ‘substantial change’ to the extent that it is not otherwise in breach of this Agreement.

20.8Conduct of business

The Borrower shall, and shall procure that each of its Significant Subsidiaries will, conduct its business in all material respects in accordance with:

(a)all Telecommunications Laws to which it is or may become subject;

(b)all requirements of the telecommunications regulators of the Russian Federation, Ukraine and any other jurisdiction where it conducts its business; and

(c)the terms of all relevant Telecommunications Authorisations.

20.9Asset and Intellectual Property maintenance

The Borrower shall, and shall procure that each of its Significant Subsidiaries will, have and maintain good and marketable title to or valid leases or licences of, or rights of use relating to, all assets and Intellectual Property necessary to maintain, develop and operate and otherwise conduct its business as then being conducted by it and in each case where failure to do so might reasonably be expected to have a Material Adverse Effect.

20.10Insurance

The Borrower shall (and shall ensure that each other member of the Group will) maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks, and to the extent, usually insured against by prudent companies located in the same or a similar location and carrying on a similar business.

20.11Transactions with Related Parties

(a)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will), directly or indirectly, enter into or permit to exist any loan or deposit any cash with, or for the benefit of, any Related Party, unless:

(i)the terms of such loan or deposit are no less favourable to such member of the Group than those that could be obtained in a comparable arm’s length transaction or series of related transactions with a person that is not a Related Party; or

(ii)such loan or deposit is made pursuant to a contract or contracts existing on the Signing Date (excluding any amendments or modifications thereto after the Signing Date),

provided that the aggregate outstanding amount of all such loans and amounts payable to the Borrower in respect of any such deposits described in sub-clauses (i) and (ii) above

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does not, at any time, exceed $100,000,000 or its equivalent in any other currency or currencies.

(b)Paragraph (a) above does not apply to:

(i)compensation or employee benefit arrangements with any officer or director of any member of the Group arising out of any employment contract entered into in the ordinary course of business; or

(ii)transactions between members of the Group.

(c)For the purposes of this Agreement, a “Related Party” means, with respect to any specified person or entity:

(i)any other person or entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified entity; or

(ii)any other person who is a director or executive officer of (a) such specified entity or (b) any entity described in (i) above.

For purposes of the definition of “Related Party” only, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any person or entity, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10 per cent. or more of any class, or any series of any class, of equity securities of a person, whether or not voting, shall be deemed to be control.

20.12Restriction on acquisitions

(a)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) establish or acquire any Subsidiary, acquire any Telecommunications Licence or invest in any other entity without the consent of the Majority Lenders (such consent not to be unreasonably withheld), provided that this paragraph (a) of Clause 20.12 shall not apply to any such acquisition or investment where such acquisition or investment relates to a Subsidiary or entity whose principal business is telecommunications or the provision of data services or related or ancillary businesses and the consideration paid by the Borrower or any other member of the Group in relation to such acquisition or investment, when aggregated with the consideration paid by the Borrower or any other member of the Group in relation to each other acquisition or investment in the same financial year permitted under this paragraph, does not exceed 20 per cent. (or such higher amount not exceeding 25 per cent. as the Majority Lenders may agree (acting reasonably)) of the Borrower’s Total Assets.

(b)Notwithstanding any other provision of this Agreement, neither the Borrower nor any other member of the Group shall establish or acquire any Subsidiary, acquire any Telecommunications Licence or invest in any other entity without the consent of all Lenders where the consideration paid by the Borrower or other member of the Group in relation to the acquisition or investment, when aggregated with the consideration paid by the Borrower or other member of the Group in relation to each other acquisition or investment in the same financial year permitted under this Clause 20.12, exceeds 25 per cent. of the Borrower’s Total Assets.

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(c)For the purposes of paragraph (d) below only, “control” means holding, whether directly or indirectly through any person beneficially (i) more than 50% of the issued share capital of Comstar, (ii) issued share capital having the right to cast more than 50% of the votes capable of being cast in general meetings of Comstar, or (iii) the right to determine the composition of the majority of the board of directors or equivalent body of Comstar.

(d)Notwithstanding any other provision of this Agreement, neither the Borrower nor any other member of the Group shall acquire control of Comstar without the prior written consent of the Simple Majority Lenders or if, at the time of the proposed acquisition, a Default or an Event of Default is continuing or would reasonably be expected to occur if such acquisition or investment was made.

(e)For the avoidance of doubt, if the Borrower or any other member of the Group does acquire or invest in Comstar (having obtained the prior consent of the Simple Majority Lenders if required by paragraph (d) above) the consideration paid by the Borrower or any other member of the Group in relation to such acquisition or investment shall be taken into account when determining compliance with paragraphs (a) or (b) above.

(f)The consent of the Lenders for the Borrower or any other member of the Group to acquire or invest in Comstar under paragraph (d) above must not be unreasonably withheld or made subject to any material condition (including, without limitation, any condition relating to the granting of additional roles to the Lenders) and shall not be withheld unless the pro forma business plan referred to in paragraph (g) below is not satisfactory to them (acting reasonably).

(g)Any Lender will be deemed to have given its consent 15 Business Days after delivery of the business plan approved by the CEO and CFO of the Borrower, showing the pro forma financial condition on a projected basis of the Group including Comstar in substantially the same level of detail as the MTS Business Plan, by the Agent to the Lenders (or such longer period as the Borrower and the Agent may agree) unless consent is expressly withheld by such Lender in compliance with paragraph (f) above. The Agent shall forward a copy of the business plan to each Lender on the same day as the Borrower delivers the business plan to the Agent provided that such business plan is delivered before 09:00 a.m. on a Business Day. If the business plan is delivered to the Agent after 09:00am on a Business Day or on a day that is not a Business Day then the business plan shall be forwarded by the Agent to each Lender on the next Business Day.

20.13Prompt payment of Taxes

The Borrower shall (and shall ensure that each Significant Subsidiary will) duly pay all Taxes payable by it, other than those taxes (a) which are being contested in good faith and by appropriate proceedings and in respect of which adequate reserves or other appropriate provisions have been made; or (b) whose amount does not exceed $25,000,000 (or its equivalent in any other currency or currencies).

20.14Pari passu

The Borrower shall, and shall procure that each member of the Group will, procure that its obligations under the Finance Documents rank at least pari passu with all its other unsecured, unsubordinated obligations save where such other obligations are mandatorily preferred by law.

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20.15Loans and guarantees

(a)The Borrower shall not (and the Borrower shall ensure that no member of the Group will):

(i)make any loan, or provide any form of credit or financial accommodation, to any person (including, without limitation, its employees, shareholders, another member of the Group and any Affiliate); or

(ii)give or issue any guarantee, indemnity, bond or letter of credit to or for the benefit of, or in respect of liabilities or obligations of, any other person or voluntarily assume any liability (whether actual or contingent) of any other person (including, in each case and without limitation, its employees, shareholders, another member of the Group and any Affiliate).

(b)The restrictions in this Clause 20.15 do not apply to (a) loans, credits, financial accommodation, guarantees, indemnities, bonds and letters of credit that are (i) expressly permitted by the Finance Documents or (ii) for normal trade credit on arm’s length terms and in the ordinary course of business or (iii) granted to or for the benefit of, in respect of liabilities or obligations of, any other person in connection with any investment in or acquisition of an entity the principal business of which is telecommunications, the provision of data services or business directly related to telecommunications and/or the provision of data services (the “Investment Loan”) where such Investment Loan is granted on arm’s length terms and such investment or acquisition is for fair market value, provided that the aggregate amount of such loans, credits, financial accommodation, guarantees, indemnities, bonds and letters of credit referred to in (i) — (iii) above does not at any time exceed 10 per cent. of the Borrower’s Total Assets; (b) guarantees by the Borrower in relation to the obligations of any other member of the Group; or (c) the arrangements permitted under Clause 20.11 (Transactions with Related Parties), including, for the avoidance of doubt, any transactions between the members of the Group.

20.16Purpose

The Borrower shall apply the proceeds of the Facilities in accordance with Clause 3.1 (Purpose).

20.17Existing Facility 1

The Borrower shall repay in full all amounts outstanding under the Existing Facility 1 not later than the date of the first Utilisation of the Facilities.

20.18Submission of documents to Passport Bank and tax authorities

The Borrower shall comply in all respects with applicable currency control laws and regulations to which it may be subject in connection with the entry into, and performance of its obligations under, the Finance Documents and shall, inter alia, timely submit to the Passport Bank or, as the case may be, the competent tax authorities, such documents and other information as may be required from time to time under Instruction 117-I and applicable currency control laws and regulations for the purpose of the receipt and making of such payments and for the purpose of the opening and maintenance of the accounts of the Borrower opened with ING Bank N.V., London Branch, in accordance with the procedure described therein and in form and substance satisfactory to the Passport Bank or, as the case may be, the competent tax authorities.

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20.19Financial Indebtedness

The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) incur (or agree to incur) any Financial Indebtedness the stated purpose of which is to facilitate the ability of the Borrower to declare, pay or make any dividend or other payment or distribution of any kind on or in respect of any of its shares or undertake any form of share capital reduction.

20.20Shyam

The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) invest in, provide any financial accommodation to, make loans to or otherwise engage with Shyam except to permit Shyam to use, by way of a licence, the brand name “MTS” or as a result of the Borrower’s or such other member of the Group’s ordinary course trading activities (including the entering into of “roaming” agreements).

21EVENTS OF DEFAULT

Each of the events or circumstances set out in Clause 21 is an Event of Default (save for Clause 21.20 (Acceleration)).

21.1Non-payment

The Borrower does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

(a)its failure to pay is caused by administrative or technical error; and

(b)payment is made within three Business Days of its due date.

21.2Financial covenants

Any requirement of Clause 19 (Financial covenants) is not satisfied.

21.3Other obligations

(a)The Borrower does not comply with any provision of the Finance Documents (other than those referred to in Clause 21.1 (Non-payment) and Clause 21.2 (Financial covenants)).

(b)No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 10 Business Days of the Agent giving notice to the Borrower or the Borrower becoming aware of the failure to comply.

21.4Misrepresentation

Any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of the Borrower under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made, and such representation or statement shall not have been rendered correct and not misleading within 10 Business Days of the Agent giving notice to the Borrower or the Borrower becoming aware of the same.

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21.5Cross default

(a)Any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is not paid when due nor within any originally applicable grace period.

(b)Any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c)Any single commitment for any Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).

(d)Any creditor of any member of the Group becomes entitled to declare any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) due and payable prior to its specified maturity as a result of an event of default (however described).

(e)Any of the events described in paragraphs (a) to (d) above occurs in relation to any Financial Indebtedness or commitment for Financial Indebtedness of any amount (including, for the avoidance of doubt, any amount that is less than $10,000,000 (or its equivalent in any other currency or currencies)), and the aggregate amount of all such Financial Indebtedness and commitments for Financial Indebtedness is in excess of $35,000,000 (or its equivalent in any other currency or currencies).

21.6Insolvency

(a)The Borrower or a Significant Subsidiary is unable or admits its inability to pay its debts as they fall due, suspends making payments on its debts generally or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling its indebtedness generally.

(b)The value of the assets of the Borrower or a Significant Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities).

(c)A moratorium is declared in respect of the indebtedness of the Borrower or a Significant Subsidiary.

21.7Insolvency proceedings

Any corporate action or legal proceedings are taken in relation to:

(a)the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary, including, but not limited to, institution of supervision (nablyudenie), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshneye upravlenie) or bankruptcy management (konkursnoye upravlenie) (and such legal proceedings continue for at least 14 days);

(b)the suspension of payments or a moratorium of any indebtedness of the Borrower or a Significant Subsidiary (and such suspension continues for at least 14 days);

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(c)the presentation or filing of a petition (or similar document) in respect of the Borrower or a Significant Subsidiary in any court, state arbitration court (arbitrazhnyi sud) or before any other authority in respect of the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary (and such petition has not been discharged within 14 days);

(d)the appointment of a liquidator (likvidator) or a liquidation commission (likvidatsionnaya komissiya), temporary manager (vremenniy upravlaushiy), administrative manager (administrativniy upravlaushiy), external manager (vneshniy upravlaushiy), bankruptcy manager (konkursniy upravlaushiy), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of the Borrower or a Significant Subsidiary or any of its assets (and such appointment continues for at least 14 days);

(e)the convening of a meeting of creditors of the Borrower or a Significant Subsidiary for the purposes of considering an amicable settlement (as defined in the Russian Insolvency Law); or

(f)the enforcement of any Security over any asset or assets of the Borrower or a Significant Subsidiary (unless such enforcement is stayed within 14 days),

or any analogous procedure or step is taken in any jurisdiction.

21.8Creditors’ process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower or a Significant Subsidiary with a value in excess of $10,000,000 (or its equivalent in any other currency or currencies) and is not discharged or stayed within 30 days.

21.9Judgment

The rendering against the Borrower or any Subsidiary of the Borrower of a judgment, decree or order for the payment of money in an amount in excess of $10,000,000 (or its equivalent in any other currency or currencies) and the continuance of any such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution.

21.10Loss of licence

(a)Any action results in the suspension for more than 30 days or the loss, revocation or termination of any of:

(i)the Borrower’s GSM 900 or 1800 licences for the Moscow licence area, the St.Petersburg licence area or the Krasnodar licence area;

(ii)the Borrower’s 3G licence for the Russian Federation licence area; or

(iii)UMC’s GSM 900 or 1800 licences for the Ukraine licence area,

except where, within 30 days of any such event, the relevant licence is re-issued on substantially the same terms to any member of the Group (a “Licensed Group Member”) and during the period falling before such re-issuance there is no material interruption to, or

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other material adverse effect on, the operations permitted by such licence as a direct result of such prior loss, revocation or termination.

(b)Any of the Borrower’s, UMC’s or a Licensed Group Member’s GSM 900, 1800 or 3G licences are amended (or any conditions are imposed with respect to any such licence) in a manner that, in the reasonable opinion of the Majority Lenders, has or is reasonably likely to have a Material Adverse Effect.

(c)Any of the Borrower’s or UMC’s assigned spectrum allocations are reassigned to other users (other than a Significant Subsidiary of the Borrower), cancelled or otherwise lost, and such event, in the reasonable opinion of the Majority Lenders, has or is reasonably likely to have a Material Adverse Effect.

(d)The Borrower sells, leases or otherwise transfers any of its GSM 900 or 1800 licences for the Moscow, St.Petersburg or Krasnodar licence areas or 3G licence for the Russian Federation licence area.

(e)Any of the Borrower’s GSM 900 or 1800 licences (other than its GSM 900 and 1800 licences for the Moscow, St.Petersburg or Krasnodar licence areas) is sold, leased or transferred to any person that is not (directly or indirectly) a wholly-owned Subsidiary of the Borrower or subsequently ceases to be (directly or indirectly) a wholly-owned Subsidiary of the Borrower.

(f)

(i)Any of the GSM 900 or 1800 licences of a Licensed Group Member is sold, leased or transferred to any person that is not (directly or indirectly) a wholly-owned Subsidiary of the Borrower or subsequently ceases to be (directly or indirectly) a wholly-owned Subsidiary of the Borrower.

(ii)Sub-clause (i) above does not apply to the transfer of the GSM 900 or 1800 licences of UMC pursuant to the UMC Litigation (provided that this sub-clause (ii) shall not in any way prejudice the rights of the Finance Parties under Clause 21.18 (UMC Litigation)).

21.11Cessation of business

The Borrower or any Significant Subsidiary suspends, ceases or threatens to suspend or cease to carry on all or a substantial part of its business.

21.12Expropriation

(a)By or under the authority of any government:

(i)any seizure, compulsory acquisition, expropriation, nationalisation or renationalisation is made after the Signing Date of all or any material part of the assets or shares of (or other ownership interest in) any member of the Group;

(ii)the management of any member of the Group is wholly or partially displaced or the authority of any member of the Group in the conduct of its business is wholly or partially curtailed; or

(iii)any member of the Group is otherwise deprived of, or prevented from exercising ownership or control of, its material business or assets.

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(b)Paragraph (a) above does not apply to:

(i)the transfer of any or all of the Borrower’s shares in UMC pursuant to the UMC Litigation to a person that is not a member of the Group (provided that this paragraph (b)(i) shall not in any way prejudice the rights of the Finance Parties under Clause 21.18 (UMC Litigation)); or

(ii)the transfer of any or all of:

(a)the assets (including licences) held by Bitel; and/or

(b)the shares in Bitel,

pursuant to the Bitel Litigation, to a person that is not a member of the Group.

21.13Russian foreign exchange restrictions

Any foreign exchange law is enacted or introduced in the Russian Federation which has the effect of prohibiting, restricting or delaying any payment by the Borrower or any member of the Group under the Finance Documents.

21.14Moratorium

Any moratorium is declared on the payment of any external indebtedness of the Russian Federation or of Russian residents generally.

21.15Sociopolitical and economic deterioration

The sociopolitical or economic situation in the Russian Federation deteriorates or an act of war or hostilities, invasion, armed conflict or act of a foreign enemy, revolution, insurrection or insurgency occurs in, or involves, the Russian Federation and such event, in the reasonable opinion of the Majority Lenders, has or is reasonably likely to have a Material Adverse Effect.

21.16Unlawfulness

It is or becomes unlawful for the Borrower to perform any of its obligations under the Finance Documents.

21.17Repudiation

The Borrower repudiates a Finance Document or evinces an intention to repudiate a Finance Document.

21.18UMC Litigation

The UMC Litigation is adversely determined and, in the reasonable opinion of the Majority Lenders, such adverse determination has or is reasonably likely to have a Material Adverse Effect.

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21.19Material adverse change

The Majority Lenders determine that a Material Adverse Effect exists, has occurred or is reasonably likely to occur.

21.20Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Borrower:

(a)cancel the Total Commitments whereupon they shall immediately be cancelled;

(b)declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and

(c)declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders.

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SECTION 8
CHANGES TO PARTIES

22CHANGES TO THE LENDERS

22.1Assignments and transfers by the Lenders

(a)Subject to this Clause 22, a Lender (the “Existing Lender”) may:

(i)assign any of its rights; or

(ii)transfer by novation any of its rights and obligations,

to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”).

(b)Unless (i) the assignment or transfer is to an Affiliate of the Existing Lender or to another Lender or (ii) an Event of Default has occurred, any assignment or transfer occurring after the Additional Commitments Establishment Date may be made only after notice of the proposed assignment or transfer has been given to the Borrower.

22.2Conditions of assignment or transfer

(a)An assignment will only be effective on:

(i)receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and

(ii)performance by the Agent of all “know your customer” or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.

(b)A transfer will only be effective if the procedure set out in Clause 22.5 (Procedure for transfer) is complied with.

(c)For the avoidance of doubt, a Lender may assign any of its rights, or transfer by novation any of its rights and obligations, under either Facility or both Facilities.

(d)If:

(i)a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii)as a result of circumstances existing at the date the assignment, transfer or change occurs, the Borrower would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 (Tax gross-up and indemnities) or Clause 13.1 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender

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acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

(e)Each New Lender, by executing the relevant Transfer Certificate, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.

22.3Assignment or transfer fee

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of $1,000.

22.4Limitation of responsibility of Existing Lenders

(a)Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

(i)the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

(ii)the financial condition of the Borrower;

(iii)the performance and observance by the Borrower of its obligations under the Finance Documents or any other documents; or

(iv)the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

and any representations or warranties implied by law are excluded.

(b)Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

(i)has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of the Borrower and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and

(ii)will continue to make its own independent appraisal of the creditworthiness of the Borrower and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

(c)Nothing in any Finance Document obliges an Existing Lender to:

(i)accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 22; or

(ii)support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by the Borrower of its obligations under the Finance Documents or otherwise.

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22.5Procedure for transfer

(a)Subject to the conditions set out in Clause 22.2 (Conditions of assignment or transfer) a transfer is effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

(b)The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

(c)On the Transfer Date:

(i)to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents the Borrower and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the “Discharged Rights and Obligations”);

(ii)the Borrower and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as the Borrower and the New Lender have assumed and/or acquired the same in place of the Borrower and the Existing Lender;

(iii)the Agent, the Mandated Lead Arrangers, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Mandated Lead Arrangers and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and

(iv)the New Lender shall become a Party as a “Lender”.

22.6Copy of Transfer Certificate to Borrower

If requested by the Borrower, the Agent shall, as soon as reasonably practicable after such request, send to the Borrower a copy of any Transfer Certificate it has executed.

22.7Disclosure of information

Any Lender may disclose to any of its Affiliates and any other person:

(a)to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;

(b)with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or the Borrower; or

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(c)to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,

any information about the Borrower, the Group and the Finance Documents as that Lender shall consider appropriate if, in relation to paragraphs (a) and (b) above, the person to whom the information is to be given has entered into a Confidentiality Undertaking. This Clause supersedes any previous agreement relating to the confidentiality of this information.

22.8Security over Lenders’ rights

In addition to the other rights provided to Lenders under this Clause 22, each Lender may without consulting with or obtaining consent from the Borrower, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:

(a)any charge, assignment or other Security to secure obligations to a federal reserve or central bank (including, without limitation, a United States Federal Reserve Bank); and

(b)in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,

except that no such charge, assignment or Security shall:

(i)release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or other Security for the Lender as a party to any of the Finance Documents; or

(ii)require any payments to be made by the Borrower or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.

22.9Transfer to Related Parties

Neither the Borrower nor any Related Party of the Borrower that is not a member of the Group may buy, purchase, repurchase or defease any amount of any of the Facilities or otherwise enter into arrangements having a similar effect including (for the avoidance of doubt) sub-participations, derivative arrangements or synthetic arrangements.

22.10Disenfranchisement of Debt Purchase Transactions entered into by Related Parties

(a)For so long as (i) a member of the Group (other than the Borrower) beneficially owns a Commitment or (ii) has entered into a Debt Purchase Transaction and such agreement or arrangement has not been terminated:

(i)in ascertaining the Simple Majority Lenders, the Majority Lenders, the Super Majority Lenders or all of the Lenders or whether any given percentage of the Total Commitments has been obtained to approve any

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request for a consent, waiver, amendment or other vote under this Agreement such Commitment shall be deemed to be zero; and

(ii)for the purposes of Clause 33.2 (Exceptions), a member of the Group (other than the Borrower) or the person with whom it has entered into such sub-participation, other agreement or arrangement shall be deemed not to be a Lender (unless in the case of a person not being a member of the Group it is a Lender by virtue otherwise than by beneficially owning the relevant Commitment).

(b)Each Lender shall, unless such Debt Purchase Transaction is an assignment or transfer, promptly notify the Agent if it knowingly enters into a Debt Purchase Transaction with a member of the Group (other than the Borrower), such notification to include the amount of Commitment to which the Debt Purchase Transaction relates whereupon the Agent shall be entitled to notify the Lenders thereof.

(c)A member of the Group (other than the Borrower) that is a Lender agrees that, in relation to any meeting or conference call to which all the Lenders are invited to attend or participate, it shall not attend or participate in the same if so requested by the Agent nor shall it be entitled to receive any communication between the Finance Parties.

23CHANGES TO THE BORROWER

The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

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SECTION 9
THE FINANCE PARTIES

24ROLE OF THE AGENT AND THE MANDATED LEAD ARRANGERS

24.1Appointment of the Agent

(a)Each other Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents.

(b)Each other Finance Party authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to it under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

24.2Duties of the Agent

(a)The Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.

(b)Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

(c)If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.

(d)If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Mandated Lead Arrangers) under this Agreement it shall promptly notify the other Finance Parties.

(e)The Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.

24.3Role of the Mandated Lead Arrangers

Except as specifically provided in the Finance Documents, the Mandated Lead Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.

24.4No fiduciary duties

(a)Nothing in this Agreement constitutes the Agent or the Mandated Lead Arrangers as a trustee or fiduciary of any other person.

(b)Neither the Agent nor any Mandated Lead Arranger shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.

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24.5Business with the Group

The Agent and the Mandated Lead Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.

24.6Rights and discretions of the Agent

(a)The Agent may rely on:

(i)any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

(ii)any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

(b)The Agent may assume, unless it has received notice to the contrary in its capacity as agent for the Lenders, that:

(i)no Default has occurred (unless it has actual knowledge of a Default arising under Clause 21.1 (Non-payment)); and

(ii)any right, power, authority or discretion vested in any Party or the Majority Lenders, Majority Facility A Lenders, Majority Facility B Lenders or Lenders has not been exercised.

(c)The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

(d)The Agent may act in relation to the Finance Documents through its personnel and agents.

(e)The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.

(f)Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor any Mandated Lead Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

24.7Majority Lenders’ instructions

(a)Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders.

(b)Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.

(c)The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

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(d)In the absence of instructions from the Majority Lenders (or, if appropriate, the Lenders), the Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.

(e)The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.

24.8Responsibility for documentation

Neither the Agent nor any Mandated Lead Arranger:

(a)is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Mandated Lead Arrangers, the Borrower or any other person given in or in connection with any Finance Document or the Information Memorandum; or

(b)is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.

24.9Exclusion of liability

(a)Without limiting paragraph (b) below, the Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

(b)No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause.

(c)The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by it if it has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by it for that purpose.

(d)Nothing in this Agreement shall oblige the Agent or the Mandated Lead Arrangers to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Mandated Lead Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Mandated Lead Arrangers.

24.10Lenders’ indemnity to the Agent

(a)Subject to paragraph (b) below, each Lender shall (in proportion to its Available Commitments and participations in the Loans then outstanding to the Available Facilities and all the Loans then outstanding) indemnify the Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Agent (otherwise than by reason of the Agent’s gross negligence or wilful misconduct) in acting as Agent under the Finance

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Documents (unless the Agent has been reimbursed by the Borrower pursuant to a Finance Document).

(b)If the Available Facilities are then zero each Lender’s indemnity under paragraph (a) above shall be in proportion to its Available Commitments to the Available Facilities immediately prior to their reduction to zero, unless there are then any Loans outstanding in which case it shall be in proportion to its participations in the Loans then outstanding to all the Loans then outstanding.

24.11Resignation of the Agent

(a)The Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Borrower.

(b)Alternatively the Agent may resign by giving notice to the other Finance Parties and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a successor Agent.

(c)If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the Agent (after consultation with the Borrower) may appoint a successor Agent (acting through an office in the United Kingdom).

(d)The retiring Agent shall, at its own cost, make available to its successor such documents and records and provide such assistance as its successor may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.

(e)The Agent’s resignation notice shall only take effect upon the appointment of a successor.

(f)Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 24. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g)After consultation with the Borrower, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above.

24.12Confidentiality

(a)In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

(b)If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.

24.13Relationship with the Lenders

(a)The Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than five Business Days’ prior notice from that Lender to the contrary in accordance with the terms of this

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Agreement. The Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent’s principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day, unless it has received not less than five Business Days’ prior notice from that Lender to the contrary in accordance with the terms of this Agreement.

(b)Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with Schedule 5 (Mandatory Cost formula).

(c)Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or dispatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 29.5 (Electronic communication)) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 29.2 (Addresses) and paragraph (a)(iii) of Clause 29.5 (Electronic communication) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.

24.14Credit appraisal by the Lenders

Without affecting the responsibility of the Borrower for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the Mandated Lead Arrangers that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:

(a)the financial condition, status and nature of each member of the Group;

(b)the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;

(c)whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

(d)the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.

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24.15Reference Banks

If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Borrower) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

24.16Deduction from amounts payable by the Agent

If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.

25CONDUCT OF BUSINESS BY THE FINANCE PARTIES

No provision of this Agreement will:

(a)interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b)oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c)oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

26SHARING AMONG THE FINANCE PARTIES

26.1Payments to Finance Parties

If a Finance Party (a “Recovering Finance Party”) receives or recovers any amount from the Borrower other than in accordance with Clause 27 (Payment mechanics) (a “Recovered Amount”) and applies that amount to a payment due under the Finance Documents then:

(a)the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery to the Agent;

(b)the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 27 (Payment mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and

(c)the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 27.5 (Partial payments).

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26.2Redistribution of payments

The Agent shall treat the Sharing Payment as if it had been paid by the Borrower and distribute it between the Finance Parties (other than the Recovering Finance Party) (the “Sharing Finance Parties”) in accordance with Clause 27.5 (Partial payments) towards the obligations of the Borrower to the Sharing Finance Parties.

26.3Recovering Finance Party’s rights

On a distribution by the Agent under Clause 26.2 (Redistribution of payments), of a payment received by a Recovering Finance Party from the Borrower, as between the Borrower and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by the Borrower.

26.4Reversal of redistribution

If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

(a)each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the “Redistributed Amount”); and

(b)as between the Borrower and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by the Borrower.

26.5Exceptions

(a)This Clause 26 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the Borrower.

(b)A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

(i)it notified that other Finance Party of the legal or arbitration proceedings; and

(ii)that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

26.6Moratoria, non-convertibility and transferability

Notwithstanding this Clause 26 and any other provision in this Agreement, each of the Lenders shall have the right to receive and retain, without any obligation to share with any other party, any Preferred Payment. A “Preferred Payment” shall mean any payment not exceeding the outstanding Commitment of the relevant Lender received by or for the account of a Lender in freely convertible and transferable currencies (“Convertible Currencies”) under circumstances in which any authority having the power to regulate

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foreign exchange in the Russian Federation or any other jurisdiction through which any payment due under any of the Finance Documents is made (each, a “Restricted Country”) is not generally permitting the conversion of the currency of such Restricted Country into Convertible Currencies or the remittance of Convertible Currencies from such Restricted Country, but that Lender is either being exempted from such foreign exchange restrictions or is otherwise being afforded preferential treatment by foreign exchange being made available for obligations owed to it in Convertible Currencies.

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SECTION 10
ADMINISTRATION

27PAYMENT MECHANICS

27.1Payments to the Agent

(a)On each date on which the Borrower or a Lender is required to make a payment under a Finance Document, the Borrower or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b)Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.

27.2Distributions by the Agent

Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 27.3 (Distributions to the Borrower) and Clause 27.4 (Clawback), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days’ notice with a bank in the principal financial centre of the country of that currency.

27.3Distributions to the Borrower

The Agent may (with the Borrower’s consent or in accordance with Clause 28 (Set-off)) apply any amount received by it for the Borrower in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Borrower under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

27.4Clawback

(a)Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

(b)If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.

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27.5Partial payments

(a)If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under the Finance Documents, the Agent shall apply that payment towards the obligations of the Borrower under the Finance Documents in the following order:

(i)first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent or the Mandated Lead Arrangers under the Finance Documents;

(ii)secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

(iii)thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv)fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b)The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.

(c)Paragraphs (a) and (b) above will override any appropriation made by the Borrower.

27.6No set-off by the Borrower

All payments to be made by the Borrower under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

27.7Business Days

(a)Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b)During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

27.8Currency of account

(a)Subject to paragraphs (b) to (e) below, Dollars is the currency of account and payment for any sum due from the Borrower under any Finance Document.

(b)A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.

(c)Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

(d)Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(e)Any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency.

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27.9Change of currency

(a)Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i)any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrower); and

(ii)any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).

(b)If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

28SET-OFF

A Finance Party may set off any matured obligation due from the Borrower under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

29NOTICES

29.1Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

29.2Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

(a)in the case of the Borrower, that identified with its name below;

(b)in the case of each Lender, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and

(c)in the case of the Agent, that identified with its name below,

or any substitute address, fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days’ notice.

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29.3Delivery

(a)Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i)if by way of fax, when received in legible form; or

(ii)if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 29.2 (Addresses), if addressed to that department or officer.

(b)Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with its signature below (or any substitute department or officer as it shall specify for this purpose).

(c)All notices from or to the Borrower shall be sent through the Agent.

29.4Notification of address and fax number

Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 29.2 (Addresses) or changing its own address or fax number, the Agent shall notify the other Parties.

29.5Electronic communication

(a)Any communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender:

(i)agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

(ii)notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

(iii)notify each other of any change to their address or any other such information supplied by them.

(b)Any electronic communication made between the Agent and a Lender will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.

29.6English language

(a)Any notice given under or in connection with any Finance Document must be in English.

(b)All other documents provided under or in connection with any Finance Document must be:

(i)in English; or

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(ii)if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

30CALCULATIONS AND CERTIFICATES

30.1Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.

30.2Certificates and determinations

Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

30.3Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

31PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

32REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

33AMENDMENTS AND WAIVERS

33.1Required consents

(a)Subject to Clause 33.2 (Exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Borrower and any such amendment or waiver will be binding on all Parties.

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(b)The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause.

33.2Exceptions

(a)An amendment or waiver that has the effect of changing or which relates to:

(i)the definition of “Majority Lenders”, “Majority Facility A Lenders”, “Majority Facility B Lenders”, “Simple Majority Lenders” or “Super Majority Lenders” in Clause 1.1 (Definitions);

(ii)an extension to the date of payment of any amount under the Finance Documents;

(iii)a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;

(iv)an increase in or an extension of any Commitment;

(v)a change to the Borrower;

(vi)any provision which expressly requires the consent of all the Lenders; or

(vii)Clause 2.3 (Finance Parties’ rights and obligations), Clause 22 (Changes to the Lenders), Clause 26 (Sharing among the Finance Parties) or this Clause 33,

shall not be made without the prior consent of all the Lenders.

(b)An amendment or waiver which relates to the rights or obligations of the Agent or the Mandated Lead Arrangers may not be effected without the consent of the Agent or the Mandated Lead Arrangers.

(c)Except where the consent of all Lenders is required by any Finance Document, an amendment or waiver which relates solely to the rights or obligations of the Facility A Lenders shall not be effective without the consent of the Majority Facility A Lenders and shall not require the consent of any Facility B Lender.

(d)Except where the consent of all Lenders is required by any Finance Document, an amendment or waiver which relates solely to the rights or obligations of the Facility B Lenders shall not be effective without the consent of the Majority Facility B Lenders and shall not require the consent of any Facility A Lender.

34CONFIDENTIALITY

34.1Confidential Information

Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 34.2 (Disclosure of Confidential Information), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

34.2Disclosure of Confidential Information

Any Finance Party may disclose:

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(a)to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

(b)(to any person:

(i)to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

(ii)(with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or the Borrower and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

(iii)(appointed by any Finance Party or by a person to whom paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph (c) of Clause 24.13 (Relationship with the Lenders));

(iv)who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph (b)(i) or (b)(ii) above;

(v)to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;

(vi)to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;

(vii)who is a Party; or

(viii)with the consent of the Borrower;

in each case, such Confidential Information as that Finance Party shall consider appropriate if:

(A)in relation to paragraphs (b)(i), (b)(ii) and (b)(iii) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to

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professional obligations to maintain the confidentiality of the Confidential Information;

(B)in relation to paragraph (b)(iv) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

(C)in relation to paragraphs (b)(v), (b)(vi) and (b)(vii) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;

(c)to any person appointed by that Finance Party or by a person to whom paragraph (b)(i) or (b)(ii) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrower and the relevant Finance Party.

34.3Entire agreement

This Clause 34 (Confidentiality) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

34.4Inside information

Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.

34.5Notification of disclosure

Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrower:

(a)of the circumstances of any disclosure of Confidential Information made pursuant to paragraph (b)(v) of Clause 34.2 (Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and

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(b)upon becoming aware that Confidential Information has been disclosed in breach of this Clause 34 (Confidentiality).

34.6Continuing obligations

The obligations in this Clause 34 (Confidentiality) are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twelve months from the earlier of:

(a)the date on which all amounts payable by the Borrower under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and

(b)the date on which such Finance Party otherwise ceases to be a Finance Party.

35COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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SECTION 11
GOVERNING LAW AND ENFORCEMENT

36GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

37ARBITRATION

37.1Arbitration

Subject to Clause 37.4 (Agent’s option), any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”) shall be referred to and finally resolved by arbitration under the Arbitration Rules (the “Rules”) of the LCIA.

37.2Procedure for arbitration

(a)The arbitral tribunal shall consist of three arbitrators. The claimant(s), irrespective of number, shall nominate jointly one arbitrator; the respondent(s), irrespective of number, shall nominate jointly the second arbitrator; and a third arbitrator, who shall serve as chairman (who shall be a lawyer currently qualified in England and Wales and be admitted to the Bar of England and Wales), shall be appointed by the LCIA within 15 days of the appointment of the second arbitrator.

(b)In the event the claimant(s) or the respondent(s) shall fail to nominate an arbitrator within the time limits specified in the Rules, such arbitrator shall be appointed by the LCIA within 15 days of such failure. In the event that both the claimant(s) and the respondent(s) fail to nominate an arbitrator within the time limits specified in the Rules, all three arbitrators shall be appointed by the LCIA within 15 days of such failure who shall designate one of them as chairman.

(c)If all the parties to an arbitration so agree, there shall be a sole arbitrator appointed by the LCIA within 15 days of such agreement.

(d)The seat of arbitration shall be London, England and the language of the arbitration shall be English.

37.3Recourse to courts

Save as provided in Clause 37.4 (Agent’s option), the parties exclude the jurisdiction of the courts under Sections 45 and 69 of the Arbitration Act 1996.

37.4Agent’s option

Before an arbitrator has been appointed by a Finance Party to determine a Dispute, the Agent may (and, if so instructed by the Majority Lenders, shall) by notice in writing to the Borrower require that all Disputes or a specific Dispute be heard by a court of law. If the

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Agent gives such notice, the Dispute to which such notice refers shall be determined in accordance with Clause 38 (Jurisdiction).

38JURISDICTION

38.1Jurisdiction of English courts

(a)The courts of England have exclusive jurisdiction to settle all Disputes.

(b)The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

(c)This Clause 38.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

38.2Service of process

Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

(a)irrevocably appoints Law Debenture Corporation, located at the date hereof at 5th Floor, 100 Wood Street, London EC2V 7EX, England, as its agent for service of process in relation to any proceedings commenced in accordance with this Agreement; and

(b)agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

38.3Waiver of immunity

The Borrower irrevocably agrees that, should any party take any proceedings anywhere (whether for an injunction, specific performance, damages or otherwise), no immunity (to the extent that it may at any time exist, whether on the grounds of sovereignty or otherwise) from those proceedings, from attachment (whether in aid of execution, before judgment or otherwise) of its assets or from execution of judgment shall be claimed by it or on behalf of it or with respect to its assets, any such immunity being irrevocably waived. The Borrower irrevocably agrees that it and its assets are, and shall be, subject to such proceedings, attachment or execution in respect of its obligations under the Finance Documents.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1
The Original Lenders

Name of Original Lender	Facility A Commitment ($)		Facility B Commitment (€)
ABN AMRO Bank N.V.	$	35,000,000	––
Absolut Bank (ZAO)	––		€	25,000,000
Bank of America, N.A.	$	50,000,000	––
BANK OF CHINA (ELUOSI)	$	9,000,000	––
Bank of China (UK) Limited	$	28,500,000	––
Joint-Stock company Banque Société Générale Vostok	––		€	12,500,000
Bayerische Landesbank	––		€	25,000,000
BNP Paribas	––		€	25,000,000
Credit Suisse International	$	35,000,000	––
Export Development Canada	$	35,000,000	––
HSBC Bank plc	$	35,000,000	––
ING Bank N.V., Dublin Branch	––		€	77,000,000
JPMorgan Chase Bank, N.A.	$	50,000,000	––
Société Générale Corporate and Investment Banking Paris	––		€	12,500,000
UniCredit Bank Austria AG	––		€	12,500,000
WestLB AG, London Branch	––		€	25,000,000
ZAO UniCredit Bank	$	17,500,000	––
TOTAL:	$	295,000,000	€	214,500,000

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SCHEDULE 2
Conditions precedent

1The Finance Documents

Executed originals of:

(a)this Agreement;

(b)each Fee Letter; and

(c)a management fee letter between the Borrower and the Facility 2 Lenders (as defined in the Existing Facilities Agreement) that are also Lenders under this Agreement.

2The Borrower

(a)Notarised copies of (i) the Borrower’s duly registered constitutional documents (including any amendments thereto) and certificates of registration thereof; (ii) the Borrower’s registration certificate(s) issued by the competent registration authority; and (iii) an extract from the Unified State Registry of Legal Entities in relation to the Borrower issued by the competent tax authority.

(b)Certified copies of all corporate resolutions necessary to authorise the Borrower to execute and perform the Finance Documents and any documents referred to therein and the transactions contemplated thereunder (including but not limited to any major transaction approvals or interested party transaction approvals, if applicable).

(c)Evidence of the authority of the relevant signatories of the Borrower (including, but not limited to, its Chief Accountant) to execute each Finance Document to which it is a party and any documents referred to therein and the transactions contemplated thereunder.

(d)An original certificate executed on behalf of the Borrower:

(i)certifying the sample signature and office of each person that signed the relevant Finance Document and any documents referred to therein and the transactions contemplated thereunder on behalf of the Borrower and certifying that such signatories hold the positions in which capacity they executed such documents; and

(ii)certifying that each copy document relating to it specified in this Schedule 2 (Conditions precedent) is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

(e)A certificate issued by the in-house legal counsel of the Borrower.

3Legal opinions

(a)A legal opinion of Linklaters LLP as to matters of English law.

(b)A legal opinion of Linklaters CIS as to matters of Russian law.

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4Other documents and evidence

(a)Evidence that the process agent referred to in Clause 38.2 (Service of process) has accepted its appointment.

(b)The unaudited consolidated financial statements of the Group for the financial year ended 31 December 2008.

(c)The Original Financial Statements.

(d)Certified copy of the balance sheet, prepared under RAS, as of the latest reporting date (by reference to the date of each Finance Document and the date of each corporate resolution referred to in paragraph 2(b) above) for the Borrower showing that Retained Earnings (as defined in Clause 7.6 (Mandatory Prepayment — Retained Earnings)) has not fallen below RUR20,000,000,000.

(e)Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clauses 11 (Fees) and 16 (Costs and expenses) have been paid or will be paid by the date of the first Utilisation of the Facility.

(f)Evidence that the Borrower has opened the Dollar Account and the Euro Account.

(g)Evidence that:

(i)the Borrower has complied or will comply with applicable currency control laws and regulations in respect of the entry into and performance of any Finance Document to which it is a party and the opening and maintenance of the Dollar Account and the Euro Account, providing certified copies of (a) the transaction passport (passport sdelki) of the Borrower in relation to the relevant Finance Document (in the form established by Instruction 117-I or other applicable currency control laws and regulations, as the case may be) accepted and duly certified by the Passport Bank and (b) if required by law, the Borrower’s notification to the competent tax authorities in relation to the Dollar Account and the Euro Account (in the form established by the applicable laws and regulations) duly filed with, and received by, such tax authorities; and

(ii)all necessary documents in relation to the Finance Documents have been submitted to the Passport Bank in accordance with applicable currency control laws and regulations in form and substance satisfactory to the Passport Bank, together with certified copies of any such documents as the Agent may reasonably require.

(h)An irrevocable instruction from the Borrower to the Agent to immediately convert all amounts drawn under Facility B on the date of the first Utilisation into Dollars.

(i)An irrevocable payment instruction from the Borrower to pay all amounts drawn under Facility A and Facility B on the date of the first Utilisation (after such amounts under Facility B have been converted into Dollars) and the Additional Dollars to the agent under the Existing Facilities Agreement in repayment of the Existing Facility 1.

(j)A list of all Significant Subsidiaries.

(k)The MTS Business Plan.

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SCHEDULE 3
Utilisation Request

From:     Mobile TeleSystems Open Joint Stock Company

To:         ING Bank N.V., London Branch as Agent

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company — Facility Agreement
dated [•] 2009 (the “Agreement”)

1We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2We wish to borrow a Loan on the following terms:

Proposed Utilisation Date:	[          ] or, if that is not a Business Day, the next Business Day
Facility to be utilised:	[Facility A]/[Facility B](1)
Currency of Loan:	[Dollars/Euro]
Amount:	[          ] or, if less, the Available Facility
First Interest Period:	[3/6 Months]

3We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4The proceeds of this Loan should be credited to [·].

5This Utilisation Request is irrevocable.

Mobile TeleSystems Open Joint Stock Company

By:	By:
Name:	Name:
Title:	Title:    Chief Accountant

(1)  Delete as appropriate

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SCHEDULE 4Selection Notice

From:Mobile TeleSystems
Open Joint Stock Company

To:ING Bank N.V., London Branch (as Agent)

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company – Facility Agreement
dated [•] 2009 (the “Agreement”)

1We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.

2We refer to the following [Loan[s] with an] Interest Period ending on [                    ]*:

3We request that the next Interest Period for the [above] Loan is [                    ].

4This Selection Notice is irrevocable.

Yours faithfully

for and on behalf of
Mobile TeleSystems
Open Joint Stock Company

By:	By:
Name:	Name:
Title:	Title: Chief Accountant

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SCHEDULE 5
Mandatory Cost formula

1The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:

(a)in relation to a Sterling Loan:

per cent. per annum

(b)in relation to a Loan in any currency other than sterling:

per cent. per annum

Where:

A.is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

B.is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in paragraph (a) of Clause 8.3 (Default interest)) payable for the relevant Interest Period on the Loan.

C.is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D.is the percentage rate per annum payable by the Bank of England to the Agent on interest bearing Special Deposits.

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E.is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5For the purposes of this Schedule:

(a)“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b)“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c)“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

(d)“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

7If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

8Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a)the jurisdiction of its Facility Office; and

(b)any other information that the Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.

9The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

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10The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

13The Agent may from time to time, after consultation with the Borrower and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

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SCHEDULE 6
Form of Transfer Certificate

To:ING Bank N.V., London Branch as Agent

From:[      ] (the “Existing Lender”) and [      ] (the “New Lender”)

Dated:

Mobile TeleSystems Open Joint Stock Company – Facility Agreement
dated [·] 2009 (the “Agreement”)

1We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.

2We refer to Clause 22.5 (Procedure for transfer):

(a)The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in accordance with Clause 22.5 (Procedure for transfer).

(b)The proposed Transfer Date is [          ].

(c)The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 29.2 (Addresses) are set out in the Schedule.

3The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 22.4 (Limitation of responsibility of Existing Lenders).

4The New Lender confirms, for the benefit of the Agent and without liability to the Borrower, that it is:

(a)[a Qualifying Lender;]

(b)[not a Qualifying Lender].(2)

5This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.

6This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.

(2)Delete as applicable – each new Lender is required to confirm which of these two categories it falls within.

94

THE SCHEDULE
Commitment/rights and obligations to be transferred

[insert relevant details]

[Facility Office address, fax number and attention details for notices and account details for payments.]

[Existing Lender]	[New Lender]
By:	By:

This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [          ].

ING Bank N.V., London Branch

By:

95

SCHEDULE 7
Form of Compliance Certificate

To:ING Bank N.V., London Branch as Agent

From:Mobile TeleSystems Open Joint Stock Company

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company – Facility Agreement
dated [·] 2009 (the “Agreement”)

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

1[We confirm that no Default is continuing.]*

2We confirm that the ratio of Total Debt as at the end of the Relevant Period ending on [·] to OIBDA in respect of such Relevant Period, was [·].

3We confirm that the ratio of OIBDA to Interest Expense for the Relevant Period ending on [·], was [·].

4We confirm that Retained Earnings as at the end of the Relevant Period ending on [·], was [·].

Signed:

[Chief Financial Officer] of

Mobile TeleSystems Open Joint Stock Company

*If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

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SCHEDULE 8

Form of Additional Lender Accession Notice

To:ING Bank N.V., London Branch as Agent

To:Mobile TeleSystems Open Joint Stock Company as Borrower

From:[          ] (the “Acceding Additional Lender”)

Dated:

Mobile TeleSystems Open Joint Stock Company – Facility Agreement
dated [•] 2009 (the “Agreement”)

1We refer to the Agreement. This is an Additional Lender Accession Notice. Terms defined in the Agreement have the same meaning in this Additional Lender Accession Notice unless given a different meaning in this Additional Lender Accession Notice.

2We refer to Clause 2.2 (Additional Commitments):

(a)The Acceding Additional Lender agrees to be bound by the terms of the Agreement as [a Facility A Lender] [and/or] [a Facility B Lender] with [a Facility A Commitment of $[          ] [and/or] [a Facility B Commitment of €[          ]].

(b)The Facility Office and address, fax number and attention details for notices of the Acceding Additional Lender for the purposes of Clause 29.2 (Addresses) are set out in the Schedule.

3The Acceding Additional Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 22.4 (Limitation of responsibility of Existing Lenders).

4The Acceding Additional Lender confirms, for the benefit of the Agent and without liability to any Borrower, that it is:

(a)[a Qualifying Lender;]

(b)[not a Qualifying Lender].(3)

5This Additional Lender Accession Notice may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Additional Lender Accession Notice.

6This Additional Lender Accession Notice and any non-contractual obligations arising out of or in connection with it are governed by English law.

(3)Delete as applicable – each Acceding Additional Lender is required to confirm which of these two categories it falls within.

97

THE SCHEDULE

Additional Commitments

[insert relevant details]

[Facility Office address, fax number and attention details for notices and account details for payments.]

[Acceding Additional Lender]

By:

This Additional Lender Accession Notice is accepted by the Agent and the Additional Commitments Establishment Date is confirmed as [          ].

ING Bank N.V., London Branch

By:

This Additional Lender Accession Notice is accepted and agreed by the Borrower.

By: Date: [      ]

authorised signatory for

Mobile TeleSystems Open Joint Stock Company

98

SCHEDULE 9

Form of Additional Commitment Notice

To:ING Bank N.V., London Branch as Agent

From:Mobile TeleSystems Open Joint Stock Company as Borrower

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company – Facility Agreement
dated [•] 2009 (the “Agreement”)

1We refer to the Agreement. This is an Additional Commitment Notice. Terms defined in the Agreement have the same meaning in this Additional Commitment Notice unless given a different meaning in this Additional Commitment Notice.

2We wish to establish Additional Commitments on the following terms:

(a)Requested Amount:                                  $[•] and/or €[•]

(b)

Proposed Additional
Lender Proposed Additional
Commitment for Facility A
($) Proposed Additional
Commitment for Facility B
(€)

3We confirm that:

(a)no Default has occurred and is continuing or would reasonably be expected to occur as a result of borrowing the Requested Amount; and

(b)borrowing the Requested Amount would not cause any borrowing or similar limit binding on the Borrower to be exceeded.

4This Additional Commitment Notice may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Additional Commitment Notice.

5This Additional Commitment Notice and any non-contractual obligations arising out of or in connection with it are governed by English law.

By:

authorised signatory for
Mobile TeleSystems Open Joint Stock Company

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This Additional Commitment Notice is accepted by the Agent and the Additional Commitments Establishment Date is confirmed as [        ].

ING Bank N.V., London Branch

By:

100

The Borrower

Mobile TeleSystems Open Joint Stock Company

Address:	Ul. Vorontsovskaya 8, Bld. 4,
	109004 Moscow, Russian Federation
Fax No:	+7 495 223 2168
Attention:	Alexey Kaurov
	Head of Corporate Finance Department

By:	ALEKSEY Y. KAUROV	By:	IRINA R. BORISENKOVA
Name:	Aleksey Y. Kaurov	Name:	Irina R. Borisenkova
Title:	Director of Corporate Finance	Title:	Chief Accountant

The Mandated Lead Arrangers

ABN AMRO Bank N.V.
By:	M. ELLIFF	By:	REID PAYNE
Name:	M. Elliff	Name:	Reid Payne
Title:	Managing Director	Title:	Executive Director

Absolut Bank (ZAO)
By:	OLEG SKVORTSOV	By:	OLGA PRIGORNITSKAYA
Name:	Oleg Skvortsov	Name:	Olga Prigornitskaya
Title:	Deputy Chairman of the Management Board	Title:	Chief Accountant

Banc of America Securities Limited
By:	KATE DAVEY
Name:	Kate Davey
Title:	Senior Vice President

BANK OF CHINA (ELUOSI)
By:	ZHAO LIANJIE
Name:	Zhao Lianjie
Title:	President

Bank of China (UK) Limited
By:	C.F. LI	By:	D. PASSMORE
Name:	C.F. Li	Name:	D. Passmore
Title:	Chief Lending Officer	Title:	Head of Corporate Banking

Joint-Stock company Banque Société Générale Vostok
By:	PIERRE-YVES GRIMAUD
Name:	Pierre-Yves Grimaud
Title:	General Director

Bayerische Landesbank
By:	DIETMAR LEIPOLD	By:	ALBERT BILLER
Name:	Dietmar Leipold	Name:	Albert Biller
Title:	First Vice President	Title:	First Vice President

BNP Paribas
By:	SIMON ALLOCCA	By:	FRANCOIS ARTIGNAN
Name:	Simon ALLOCCA	Name:	Francois Artignan
Title:	Head of Non-French Origination	Title:	Head of Media and Telecom Finance, Europe & Asia

Credit Suisse International
By:	ADRIAN WALKER	By:	JAVIER CALDEIRO
Name:	Adrian Walker	Name:	Javier Caldeiro
Title:	Director	Title:	Managing Director

Export Development Canada
By:	BRIAN CRAIG	By:	BASSAM HAMMOUD
Name:	Brian Craig	Name:	Bassam Hammoud
Title:	Senior Financing Manager	Title:	Senior Associate

HSBC Bank plc
By:	DAVID STENT
Name:	David Stent
Title:	Director

ING Bank N.V.
By:	OLIVER BLOUNT
Name:	Olivier Blount
Title:	Managing Director

J.P. Morgan plc
By:	FRANCES SMITH
Name:	Frances Smith
Title:	Executive Director

Société Générale Corporate and Investment Banking Paris
By:	OLIVIER ROYER	By:	DENIS STAS-DE-RICHELLE
Name:	Olivier Royer	Name:	Denis Stas-De-Richelle
Title:	Managing Director – EMEA Leveraged &	Title:	Global Head of Export Finance
Media Telecom Finance

UniCredit Bank Austria AG
By:	OLIVER BLOUNT
Name:	Oliver Blount
Title:	Authorised Attorney

WestLB AG, London Branch
By:	DAVID PEPPER	By:	ADA CERNE
Name:	David Pepper	Name:	Ada Cerne
Title:	Authorised Signatory	Title:	Authorised Signatory

ZAO UniCredit Bank
By:	TATIANA P. KONDRATIEVA	By:	NATALIA KH. KALSHAEVA
Name:	Tatiana P. Kondratieva	Name:	Natalia Kh. Kalshaeva
Title:	Head of Financing	Title:	Head of Corporate Lending

The Original Lenders

ABN AMRO Bank N.V.
By:	M. ELLIFF	By:	REID PAYNE
Name:	M. Elliff	Name:	Reid Payne
Title:	Managing Director	Title:	Executive Director

Absolut Bank (ZAO)
By:	OLEG SKVORTSOV	By:	OLGA PRIGORNITSKAYA
Name:	Oleg Skvortsov	Name:	Olga Prigornitskaya
Title:	Deputy Chairman of the Management Board	Title:	Chief Accountant

Bank of America, N.A.
By:	KATE DAVEY
Name:	Kate Davey
Title:	Senior Vice President

BANK OF CHINA (ELUOSI)
By:	ZHAO LIANJIE
Name:	Zhao Lianjie
Title:	President

Bank of China (UK) Limited
By:	C.F. LI	By:	D. PASSMORE
Name:	C.F. Li	Name:	D. Passmore
Title:	Chief Lending Officer	Title:	Head of Corporate Banking

Joint-Stock company Banque Société Générale Vostok
By:	PIERRE-YVES GRIMAUD
Name:	Pierre-Yves Grimaud
Title:	General Director

Bayerische Landesbank
By:	DIETMAR LEIPOLD	By:	ALBERT BILLER
Name:	Dietmar Leipold	Name:	Albert Biller
Title:	First Vice President	Title:	First Vice President

BNP Paribas
By:	SIMON ALLOCCA	By:	FRANCOIS ARTIGNAN
Name:	Simon Allocca	Name:	Francois Artignan
Title:	Head of Non-French Origination	Title:	Head of Media and Telecom Finance, Europe & Asia

Credit Suisse International
By:	ADRIAN WALKER	By:	JAVIER CALDEIRO
Name:	Adrian Walker	Name:	Javier Caldeiro
Title:	Director	Title:	Managing Director

Export Development Canada
By:	BRIAN CRAIG	By:	BASSAM HAMMOUD
Name:	Brian Craig	Name:	Bassam Hammoud
Title:	Senior Financing Manager	Title:	Senior Associate

HSBC Bank plc
By:	DARRYLL COATES	By:	VARSHA SHARAN
Name:	Darryll Coates	Name:	Varsha Sharan
Title:	Manager, Emerging Markets	Title:	Assistant Manager

ING Bank N.V., Dublin Branch
By:	AIDAN NEILL	By:	EMMA CONDON
Name:	Aidan Neill	Name:	Emma Condon
Title:	Director	Title:	Vice President

J.P. Morgan Chase Bank, N.A.
By:	FRANCES SMITH
Name:	Frances Smith
Title:	Executive Director

Société Générale Corporate and Investment Banking Paris
By:	OLIVIER ROYER	By:	DENIS STAS-DE-RICHELLE
Name:	Olivier Royer	Name:	Denis Stas-De-Richelle
Title:	Managing Director – EMEA Leveraged &	Title:	Global Head of Export Finance
Media Telecom Finance

UniCredit Bank Austria AG
By:	OLIVER BLOUNT
Name:	Oliver Blount
Title:	Authorised Attorney

WestLB AG, London Branch
By:	DAVID PEPPER	By:	ADA CERNE
Name:	David Pepper	Name:	Ada Cerne
Title:	Authorised Signatory	Title:	Authorised Signatory

ZAO UniCredit Bank
By:	TATIANA P. KONDRATIEVA	By:	NATALIA KH. KALSHAEVA
Name:	Tatiana P. Kondratieva	Name:	Natalia Kh. Kalshaeva
Title:	Head of Financing	Title:	Head of Corporate

The Agent

ING Bank N.V., London Branch

Address:	60 London Wall
	London EC2M 5TQ
Fax:	+44 207 767 7324
Attention:	Sally Hayward/Lorna Fleming
	Loans Agency

By:	OLIVER BLOUNT
Name:	Oliver Blount
Title:	Managing Director

EX-4.6

Exhibit 4.6

LOANAGREEMENTNO.250/08-V

Moscow dated December 30, 2008

Gasprombank (Open Joint Stock Company) hereinafter referred to as “the Bank” represented by Andrey Igorjevich Akimov, Chairman of the Board, acting on the basis of the Charter, on the one part, and Mobile TeleSystems Open Joint Stock Company hereinafter referred to as “the Borrower” represented by Mikhail Valerievich Shamolin, President and CEO, acting on the basis of the Charter, on the other part, jointly referred to as “Parties”, have agreed as follows:

1. SUBJECTOFTHEAGREEMENT

1.1. The Bank shall provide a loan of EUR 300,000,000.00 (Three Hundred Million) to the Borrower subject to the procedure and conditions set forth herein, with the period of loan up to and including June 30, 2011 and 12% interest on outstanding debt per annum.

The principal shall be repaid on or after December 24, 2009 according to the schedule below:

·EUR 100,000,000.00 (One Hundred Million) at least on December 24, 2009;

·EUR 100,000,000.00 (One Hundred Million) at least on December 24, 2010;

·EUR 100,000,000.00 (One Hundred Million) at least on June 30, 2011.

1.2. The Borrow shall pay to the Bank the loan account keeping (loan account operations) fee (hereinafter, the fee) in the amount of 2.0% (Two Percent) on outstanding debt per annum.

1.3. The loan shall be granted to the Borrower to finance its business.

The Borrower is forbidden to use the provided funds for the following purposes:

·repayment of its obligations to third-party banks;

·repayment of its obligations under loan agreements concluded with the Bank;

·repayment of loan indebtedness to other legal and natural persons;

·granting loans to third parties;

·purchase and payment of bills (except for bills issued by Gasprombank (Open Joint Stock Company), Bank of Russia, the Ministry of Finance of Russia);

·purchase and payment of equity securities (except for securities issued Gasprombank (Open Joint Stock Company), Bank of Russia, the Ministry of Finance of Russia);

·purchase from the Bank of property received, as compensation for release from obligations, as a result of termination of obligations under previously granted loans and,

·investments into equity capital of other legal entities including to buy shares in the secondary market.

2. LOAN TERMS AND PROCEDURE

2.1. The Bank shall credit the loan amount to the Borrower’s account No.   40702978000000004460 with Gasprombank (Open Joint Stock Company) at least on December 31, 2008.

2.2. The Bank may refuse to grant the loan to the Borrower, fully or partially, if there are circumstances that expressly indicate that the amount provided to the Borrower will not be repaid by the specified due date.

2.3. The Borrower may refuse to receive the loan, fully and partially, and in that case it shall be obliged to notify the Bank in writing at least two (2) business days before the date of provision of the loan set out in Item 2.1 hereof.

3. LOANCHARGE

3.1. The payment of interest for the first month of loan disbursement, as from the date of provision of funds and through the last calendar day of the month, shall be made at least on the last business day of the month in which the loan was provided. The payment of interest for the second month of loan disbursement, for the period beginning on the first day of the month and ending on and including the 25th day of the month, shall be made at least on the 25th day of the month. Hereafter, the payment of interest for loan disbursement, for the period beginning on the 26th day of the month preceding the current month and ending and including the 25th day of the current month shall be made by the

1

Borrower on a monthly basis, at least on the 25th day of the current month, and the payment of interest for the last incomplete month of loan disbursement shall be made simultaneously with the final repayment of the principal at least at the end of the loan disbursement period set out in Item 1.1 hereof. The interest shall be charged and paid during (within) the actual loan disbursement period.

3.2. The interest rate on outstanding debt may be revised by the Bank in its reasonable discretion, including due to change in the refinancing rate of the Bank of Russia. In this case, the Bank shall send to the Borrower, by courier, wire transfer or fax (fax number of the Borrower: +7 495                         ), a notification of its intention to change the interest rate. This notification must be reviewed by the Borrower immediately, and if the Borrower does not agree with the proposed interest rate, it shall repay the loan within five (5) business days following the date of notification. The non-repayment of the loan during the specified time period shall be deemed a ground for change in the interest rate from the date of expiration of the five-day period mentioned above.

The non-receipt by the Borrower of the notification of change in interest rate sent by the Bank following the procedure set out herein cannot serve as a ground for a claim against the Bank.

3.3. For the purpose of timely and proper performance of obligations to repay the loan and charged interest, the Borrower shall grant to the Bank the right to direct debiting from settlement account No. 40702810100000004460 and current foreign currency accounts No. 40702840400000004460 and No. 40702978000000004460 opened with the Bank, as from the loan repayment date (Item 1.1 hereof), the dates of payment of charged interest and fees (Items 1.2, 3.1 and 4.3.1 hereof) and also in case of occurrence of the right to claim an early payment of the principle and due interest and fees.

In case of conflict between the currency of the debited account and the currency of the loan, the Borrower hereby grants to the Bank the right to debit the account, as repayment of the debt, with the amount equivalent to the amount of liabilities, using the Bank’s foreign currency exchange rate in effect on the date of said transaction.

3.4. If the Borrower fails to perform its obligations to repay the principal and/or interest, the Bank may demand a penalty (fine) payment in the amount of 0.1% (zero point five percent) of the principal debt amount and payment of interest for each day of late payment. The penalty shall be charged by the Bank for the period beginning on the date following the date of the Borrower’s failure to perform its obligations hereunder and ending on the date of actual repayment of the debt.

If the Borrower fails to pay the fine within two (2) business days from the date of the notification, the Bank may directly debit the Borrower’s bank account with the fine amount.

3.5. In case of insufficiency of funds necessary to fully perform the Borrower’s obligations hereunder, the repayment priority shall be as follows:

· late penalty (Item 3.4. hereof);

· fee (Items 1.2., 4.3.1. hereof);

· overdue interest;

· interest due and payable for the current settlement period;

·principal.

The Bank may unilaterally change the priority of debts provided for herein and notify the Bank in writing of that change at least on the business day following the day on which the decision was made.

3.6. All payments hereunder, including the repayment of the principal, loan interest, fee and possible fines and penalties, shall be made by the Borrower to Gasprombank (Open Joint Stock Company) together with an indication of payment details and the number of this Agreement in the payment document in a mandatory manner.

4. RIGHTS AND OBLIGATIONS OF THE PARTIES

4.1. The Bank shall be entitled to:

4.1.1. Change the loan interest rate in accordance with the procedure set out in Item 3.2 hereof.

4.1.2. Monitor the intended use of funds provided under this Agreement, as well as the financial position of the Borrower, and require that the Borrower provide all necessary documents.

4.1.3. Recover the loan amount, loan interest and fee due and payable, if any of the cases specified below occurs:

· the Borrower failed to perform, fully or partially, its obligations provided for in Item 3.1. hereof;

· the Borrower is in default of its obligations provided for in Item 4.4. hereof;

2

· some documents submitted by the Borrower when receiving the loan or during the loan disbursement period turned out to be untrue; the accounting doesn’t comply with applicable accounting principles;

· the financial position of the Borrower became worse to the extent that its ability to perform its obligations hereunder is questioned, including any third parties’ claims for payment of any amount or recovery of, or demand for, property, and the amount of such claims threatens the performance of the Borrower’s loan repayment obligations; bankruptcy procedure initiated against the Borrower;

· the Borrower is in default of its financial obligations under any other contracts concluded with the Bank;

· the Borrower decided about its reorganization or liquidation;

· government or local authorities made decisions or take actions with respect to the Borrower which render impossible the disposal of the property of the Borrower or continuation of activities of the Borrower;

The demand for early recovery shall be forwarded to the Borrower in writing, specifying the procedure and terms of repayment of debt.

4.2. The Bank shall be obliged to:

4.2.1. Provide a loan in the amount and subject to the terms and conditions as mentioned in this Agreement;

4.2.2. Not to collect the indebtedness under the loan before the due date save as provided for in Item 4.1.3. hereof.

4.3. The Borrower shall be entitled to:

4.3.1. Repay the loan, fully or partially, in advance and pay the loan account keeping fee and interest charged for the actual period of loan disbursement, herewith:

The procedure for advanced loan repayment shall be as follows:

· The early repayment is not allowed within the period from the date of providing the loan through June 29, 2009.

· In case of early repayment of the loan, fully and/or partially, within the period from June 30, 2009 to December 23, 2009, the Borrower shall pay, simultaneously with the repayment of the loan, the early repayment fee in the amount of 2.0% (Two Percent) of the early repaid amount per annum to be calculated for the period beginning on and including the day of early repayment and ending on and including December 23, 2009. The Client shall forward to the Bank corresponding notification on early loan repayment, fully and/or partially, at least five (5) business days before the probable date of crediting the principal to the account with the Bank. Thenotificationonearlypaymentshallbeirrevocable.

·BeginningfromDecember 24, 2009, theBorrowermayrepaytheloaninadvance, fullyand/orpartially, providedthatitpreviouslynotifiestheBankatleastfive (5) businessdaysbeforetheearlyrepayment. Theearlyrepaymentfeeshallnotbecharged.

The procedure for payment of the loan account keeping fee and loan interest shall be as follows:

· If the Borrower repays the whole of the loan amount in advance, it must pay the loan account keeping fee and interest charged for the actual period of loan disbursement;

· If the Borrower repays a part of the loan amount in advance, it may pay the interest and loan account keeping fee within the time period specified in Item 3.1. hereof.

4.4. The Borrower shall be obliged to:

4.4.1. Repay the loan, interest and fee thereon within the time limits provided for in this Agreement;

4.4.2. Use the loan only for the purposes provided for in Item 1.3. hereof;

4.4.3. Not allow that its financial position becomes worse to the extent that its ability to perform its obligations hereunder is questioned, including not allow the presence of records of overdue accounts during more than five (5) days.

4.4.4. Furnish to the Bank financial statements (Balance Sheet and Form 2 as of each reporting date; Forms 3, 4, 5 to Annual Accounting Statements; explanations to financial accounting items which constitute five or more percent of the balance currency; statement of status of settlements with all-level budgets; information regarding the status of wage-settlements with employees; information regarding presence/absence of records of overdue bank accounts, and other documents as may be

3

required by the Bank), during the whole term of this Agreement, at least on the 15th day of the month following the month in which financial statements are to be submitted to tax authorities.

4.4.5. If the Borrower has settlement/current accounts in other credit institutions, furnish statements (references) of paying into and out of account from other banks, specifying the presence     of records of overdue account and/or liabilities of the Borrower to banks.

4.4.6. Furnish documents, as may be required by the Bank, necessary to monitor the intended use of funds and the financial position of the Borrower, including the statement of status of settlements with all-level budgets issued by tax authorities, information regarding the status of wage-settlements with employees, calculation of inflow of funds to repay the indebtedness under the loan, at least within two (2) day after receiving the request.

4.4.7. Immediately inform the Bank of opening of accounts in other credit institutions during the term of this Agreement and any pecuniary claims made by third parties exceeding the amount equivalent to USD 10,000,000.00 (Ten Million US Dollars and 00/100).

4.4.8. In case of decision on reorganization or liquidation of the Borrower, notify the Bank in writing on the next day after the decision made by an authorized body and repay the indebtedness under the loan in a manner and within the time limit specified in the Bank’s notification.

4.4.9. Guarantee monthly receipts to accounts with the Bank, as proceeds of the sale (net loan turnover) under commission contracts with companies being agents for payment collection (Evroset OJSC, E-Port CJSC, etc.) and inter-operator settlements with Vympercom CJSC, Megafon OJSC and other telecom operators, in the total amount of at least RUR 3,000,000,000.00 (Three Billion Rubles), starting from February 2009.

4.4.10. Furnish to the Bank certified copies of documents (letters and/or supplementary agreements) confirming the request to MTS OJSC’ contracting parties to effect settlements through MTS OJSC accounts opened with the Bank under commission contracts with companies being agents for payment collection (Evroset OJSC, E-Port CJSC, etc.) and inter-operator settlements with Vympercom CJSC and Megafon OJSC, at least within forty-five (45) business days following the date of this Agreement.

4.4.11. Furnish to the Bank a notarized copy of extract from the register of shareholders (without a request to furnish DEPO account statements of nominal shareholders, disclosing information about actual shareholders) at least within forty-five (45) business days following the date of this Agreement.

5. MISCELLANEOUS

5.1. ThisAgreementshallcomeintoeffectuponsigning.

5.2. Any amendments and additions to this Agreement, and the termination hereof, shall be introduced by supplementary agreements which shall be deemed an integral part of this Agreement. This condition doesn’t  apply to the cases referred to in Items 2.2., 2.3., 3.2., 4.1.3. and 4.3.1. hereof.

5.3. Liabilities matured, or which maturity is not specified or determined by the date of claiming, may be discharged, fully or partially, by offset of counter claims arising out of other contracts concluded by the Parties. Herewith, if the claims are expressed in different currencies, the conversion shall be effected at the exchange rate established by the Bank of Russia for the date of offset.

5.4. Any disputes arising out of this Agreement shall be settled by the Arbitration Tribunal of Moscow.

5.5. In case of change in any details (name, address, bank details, etc.), each Party must notify the other Party of assumed changes and furnish duly executed documents to the other Party within three (3) days after these changes coming into effect.

5.6. Any notification or other communication sent by the Parties to each other under this Agreement shall be made in writing, signed by an authorized person and forwarded by fax at:  +7 495                          (fax number of the Borrower), by courier or wire at the address specified in Section 6 hereof.

5.7. These Agreement is executed in three (3) counterparts, having equal legal effect, one of them for the Borrower and two for the Bank.

6. ADDRESSES AND PAYMENT DETAILS OF THE PARTIES

BANK: Gasprombank (Open Joint Stock Company), 117420, Moscow, 16, bldg. 1 Nemetkin St.,  INN (Taxpayer Identification Number) 7744001497, correspondent account No.  30101810200000000823

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with OPERU (Operations Department) of Moscow GTU (Main Territorial Department) of the Bank of Russia, BIC 044525823. DEUTSCHE BANK AG, FRANKFURT/MAIN, GERMANY SWIFT CODE: DEUTDEFF, account No. 9473836/1000 JSB GAZPROMBANK(CJSC), SWIFT CODE: GAZPRUMM

BORROWER: Mobile TeleSystems Open Joint Stock Company, 109147, Moscow, 4 Marksistskaya 4, INN 7740000076, settlement account No.  40702810100000004460, current foreign currency account No. 40702978000000004460 with Gazprombank (Open Joint Stock Company), BIC 044525823.

BANK:		BORROWER:
GPB (OJSC)		Mobile TeleSystems OJSC
Chairman of the Board:		President and CEO:
A.I. Akimov		M.V. Shamolin
	Stamp here		Stamp here
Chief Accountant:		Chief Accountant:
		I.R. Borisenkova

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EX-4.7

Exhibit 4.7

CONFORMED COPY Operation Number 39576

Dated  23rd  December  2008

EUR 225,000,000

FACILITY AGREEMENT

between

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

as Borrower

and

EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

as Lender

CONTENTS

CLAUSE		PAGE
SECTION I INTERPRETATION		1
1	DEFINITIONS AND INTERPRETATION	1
SECTION II THE FACILITY		13
2	THE FACILITY	13
3	PURPOSE	13
4	CONDITIONS OF UTILISATION	13
SECTION III UTILISATION		15
5	UTILISATION	15
SECTION IV REPAYMENT, PREPAYMENT AND CANCELLATION		16
6	REPAYMENT	16
7	PREPAYMENT AND CANCELLATION	16
SECTION V COSTS OF UTILISATION		19
8	INTEREST	19
9	CHANGES TO THE CALCULATION OF INTEREST	20
10	FEES	22
SECTION VI ADDITIONAL PAYMENT OBLIGATIONS		23
11	TAX GROSS-UP AND INDEMNITIES	23
12	INCREASED COSTS	25
13	OTHER INDEMNITIES	26
14	MITIGATION BY THE LENDER	27
15	COSTS AND EXPENSES	27
SECTION VII REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT		29
16	REPRESENTATIONS	29

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17	INFORMATION UNDERTAKINGS	33
18	FINANCIAL COVENANTS	36
19	GENERAL UNDERTAKINGS	37
20	EVENTS OF DEFAULT	43
SECTION VIII CHANGES TO PARTIES		48
21	CHANGES TO THE LENDER	48
22	CHANGES TO THE BORROWER	49
SECTION IX THE LENDER		50
23	CONDUCT OF BUSINESS BY THE LENDER	50
SECTION X ADMINISTRATION		51
24	PAYMENT MECHANICS	51
25	SET-OFF	52
26	NOTICES	52
27	CALCULATIONS AND CERTIFICATES	53
28	PARTIAL INVALIDITY	54
29	REMEDIES AND WAIVERS	54
30	AMENDMENTS AND WAIVERS	54
31	COUNTERPARTS	54
SECTION XI GOVERNING LAW AND ENFORCEMENT		55
32	GOVERNING LAW	55
33	ARBITRATION AND JURISDICTION	55
34	IMMUNITIES	56
SCHEDULE 1 Conditions precedent		58
SCHEDULE 2 Utilisation Request		60
SCHEDULE 3 Form of Compliance Certificate		61

ii

SCHEDULE 4 Definitions and Guidelines for Private Sector Operations (Fraud and Corruption) 62

iii

THIS AGREEMENT is dated 23rd December 2008 and made as a deed between:

(1)MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY, an open joint stock company established and existing under the laws of the Russian Federation and having its registered address at 4 Marksistskaya Street, 109147 Moscow, Russian Federation, as borrower (the “Borrower”); and

(2)EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT an international organisation formed by treaty, with its headquarters at One Exchange Square, London EC2A 2JN, United Kingdom (the “Lender”).

NOW THEREFORE, the Borrower and the Lender intend this Agreement to be effected as a deed and have agreed as follows:

SECTION I
INTERPRETATION

1DEFINITIONS AND INTERPRETATION

1.1Definitions

In this Agreement:

“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

“A Loan” means the maximum principal amount of the loan provided for in Clause 2(i), or, as the context may require, the principal amount thereof from time to time outstanding.

“A Loan Commitment” means EUR 115,000,000.

“Authorisation” means any consent, registration, filing, agreement, notarisation, certificate, license, approval, permit, authority or exemption from, by or with any Governmental Authority, whether given by or withheld by express action or deemed given or withheld by failure to act within any specified time period and all corporate, creditors’ and shareholders approvals and consents.

“Availability Period” means the period from and including March 1, 2009 to and including December 31, 2009.

“Available Commitment” means, in respect of the proposed Utilisation Date, the Commitment minus:

(a)the amount of the Loan outstanding; and

(b)in relation to any proposed Utilisation, the amount of the Loan that is due to be made on or before the proposed Utilisation Date.

“B Loan” means the maximum principal amount of the loan provided for in Clause 2(ii), or, as the context may require, the principal amount thereof from time to time outstanding.

“B Loan Commitment” means EUR 110,000,000.

“Bitel” means Bitel LLC, a limited liability company incorporated in the Kyrgyz Republic.

“Bitel Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including Bitel) relating to or arising out of the

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acquisition, reorganisation or ownership of Bitel by the Borrower (whether directly or through any of its Affiliates).

“Break Costs” means any costs of the Lender or a Participant, payable by the Borrower to the Lender or such Participant (as applicable) pursuant to Clause 9.3 (Break Costs).

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and which is a TARGET Day.

“Commitment” means the aggregate of the A Loan Commitment and the B Loan Commitment, to the extent either of such commitment is not cancelled or reduced in accordance with the terms of this Agreement.

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 3 (Form of Compliance Certificate).

“Confidentiality Undertaking” means a confidentiality undertaking substantially in a recommended form of the LMA or in any other form agreed between the Borrower and the Lender.

“Coercive Practice” means the impairing or harming of, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party as that term is interpreted in accordance with the EBRD Anti-Corruption Guidelines.

“Collusive Practice” means an arrangement between two or more parties designed to achieve an improper purpose, including influencing the actions of another party, as this term is defined in accordance with the EBRD Anti-corruption Guidelines.

“Corrupt Practice” means the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party, as this term is defined in accordance with the EBRD Anti-Corruption Guidelines.

“Country of Operation” means each of the Russian Federation, Uzbekistan and Turkmenistan.

“Default” means an Event of Default or any event or circumstance specified in Clause 20 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“Default Interest Determination Date” means the date two Business Days prior to the first day of the relevant Default Interest Period (or, at the Lender’s option, the first day of such Default Interest Period).

“Default Interest Period” means, with respect to any amount overdue under this Agreement, a period commencing on the day on which such amount becomes due, or, as the case may be, on the last day of the previous Default Interest Period with respect to such overdue amount, and ending on a Business Day selected by the Lender.

“Disbursement” means a disbursement of any portion of the Loan from time to time pursuant to or, as the context may require, the principal amount thereof from time to time outstanding.

“EBRD Anti-Corruption Guidelines” means EBRD’s Definitions and Guidelines for Private Sector Operations (Fraud and Corruption) attached hereto as Schedule 4.

“EIB” means European Investment Bank an international financial institution, having its headquarters at 100 boulevard Konrad Adenauer L-2950, Luxembourg.

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“EIB Loan” means the loan in the maximum principal amount of EUR 115,000,000, to be provided by EIB to the Borrower pursuant to the EIB Loan Agreement, or, as the context may require, the principal amount thereof from time to time outstanding.

“EIB Loan Agreement” means the loan agreement dated of even date herewith entered into between the Borrower and EIB

“Environmental Matter” means:

(a)the pollution or protection of the environment;

(b)harm to or the protection of human health;

(c)health and safety of the workplace; or

(d)any emission or substance capable of causing harm to any living organism or the environment.

“EUR” means the lawful currency of the European Union for the time being.

“Event of Default” means any event or circumstance specified as such in Clause 20 (Events of Default).

“Facility Office” means the office of the Lender located at One Exchange Square, London EC2A 2JN, United Kingdom, or the office or offices notified by the Lender to the Borrower (by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

“Facility” means the term loan facility made available under this Agreement as described in  Clause 2 (The Facility).

“Fee Letter” means the letter dated on or about the date of this Agreement between the Lender and the Borrower setting out the various fees to be paid by the Borrower to the Lender in respect of the Loan in accordance with Clause 10 (Fees).

“Final Maturity Date” means:

(a)for the A Loan, 20 January 2016; and

(b)for the B Loan, 20 January 2014.

“Finance Document” means:

(a)this Agreement;

(b)the NIB Loan Agreement;

(c)the EIB Loan Agreement;

(d)the Intercreditor Deed; and

(e)any other document designated as such by the Lender and the Borrower.

“Financial Indebtedness” means any indebtedness for or in respect of:

(a)moneys borrowed;

(b)any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

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(c)any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;

(e)receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

(g)any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h)shares which are expressed to be redeemable at the option of the holder on or prior to the Final Maturity Date (but excluding any accrued dividends);

(i)any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(j)the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

“Financial Statements” means the audited consolidated financial statements (including balance sheet, income statement, statement of changes in equity, cash flow statement and notes, comprising a summary of significant accounting policies and other explanatory notes) of the Borrower and its Subsidiaries prepared in accordance with GAAP.

“First Utilisation Date” means the date of the first Utilisation for the Loan.

“Fraudulent Practice” means any act or omission, including a misrepresentation that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation, as this term is interpreted in accordance with the EBRD Anti-Corruption Guidelines.

“GAAP” means generally accepted accounting principles, standards and practices in the United States of America.

“Governmental Authority” means the government of any country, or of any political subdivision thereof, whether state, regional or local, and any agency, authority, branch, department, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government or subdivision thereof (including any supra-national bodies), and all officials, agents and representatives of each of the foregoing.

“Group” means the Borrower and its Subsidiaries for the time being.

“Holding Company” means, in relation to a person, any other person in respect of which it is a Subsidiary.

“Interbank Rate” means:

(a)for the Interest Period of each Disbursement, the offered rate per annum for deposits in the Loan Currency which appears on the Reference Page as of 11.00 a.m. Brussels time on the relevant Interest Determination Date for the period which equals the duration of

4

such Interest Period (or if no such rate appears on the Reference Page for a period equal to the duration of such Interest Period but rates (“Reference Rates”) do appear on the Reference Page both for a period that is shorter than and for a period that is longer than the duration of such Interest Period, the Interbank Rate shall be the rate (rounded upward, if necessary, to four decimal places) that would be applicable for a period equal to the duration of such Interest Period as determined through the use of straight-line interpolation by reference to the Reference Rate that appears on the Reference Page for the period that is the next shorter in length than the duration of such Interest Period and the Reference Rate that appears on the Reference Page for the period that is the next longer in length than the duration of such Interest Period); and

(b)for each subsequent Interest Period, the offered rate per annum for deposits in the Loan Currency which appears on the Reference Page as of 11:00 a.m. Brussels time on the relevant Interest Determination Date for the period which is closest to the duration of such Interest Period (or, if two periods are equally close to the duration of such Interest Period, the average of the two relevant rates);

provided that, if, for any reason, the Interbank Rate cannot be determined at such time by reference to the Reference Page, the Interbank Rate for such Interest Period shall be the rate per annum which the Lender determines to be the arithmetic mean (rounded upward, if necessary, to four decimal places) of the offered rates per annum for deposits in the Loan Currency in an amount comparable to the portion of the Loan scheduled to be outstanding during such Interest Period for a period equal to such Interest Period which are quoted to leading banks in the Euro-zone interbank market as advised to the Lender by three major banks active in the Euro-zone interbank market selected by the Lender.

“Intercreditor Deed” means an intercreditor deed in respect of the Loan, the NIB Loan and the EIB Loan, to be entered into between the Lender, NIB and EIB.

“Interest Determination Date” means, for any Interest Period, the date two Business Days prior to the first day of such Interest Period.

“Interest Expense” has the meaning given to it in Clause 19 (Financial Covenants).

“Interest Payment Date” means any day which is 20 January or 20 July in any year; provided, however that, if any Interest Payment Date would otherwise fall on a day which is not a Business Day, such Interest Payment Date shall be changed to the next succeeding Business Day in the same calendar month or, if there is no succeeding Business Day in the same calendar month, the immediately preceding Business Day.

“Interest Period” means, for any Disbursement, the period commencing on the date of such Disbursement and ending on the next Interest Payment Date and each period of six Months thereafter commencing on an Interest Payment Date; provided that if such Disbursement is made less than 15 Business Days prior to the next Interest Payment Date, the first Interest Period for such Disbursement shall end on the Interest Payment Date following the next Interest Payment Date.

“Investment Period” means the period commencing on the Relevant Date and ending on the date falling 12 Months after the first Utilisation Date following the Relevant Date.

“Investments” means the capital expenditure program of the Borrower through further development of the existing networks in Uzbekistan, Turkmenistan, construction of the new 3G networks in Uzbekistan, expansion of 3G network coverage of the Borrower in Russia, including a demonstration trial for scavenger energy power base stations in Russia, network development,

5

associated local works, purchase of new equipment and/or acquisitions.  These investments are due to be made in approximately the following percentages of the Loan:

	Russia		Uzbekistan		Turkmenistan		Total
3G networks	35	%	2	%			37	%
Scavenger energy demonstration trial	4	%					4	%
Other Capex			29	%	30	%	59	%
Total	39	%	31	%	30	%	100	%

“LMA” means the Loan Market Association.

“Loan” means collectively, the A Loan and the B Loan, or, as the context may require, the principal thereof from time to time outstanding.

“Loan Currency” means the currency in which the Loan is denominated as set forth in Clause 2 (The Facility).

“Margin” means:

(a)for the A Loan, the margin for the B Loan plus 0.2 per cent; and

(b)subject at all times to Clause 8.2, for the B Loan, 5.9 per cent.

“Market Disruption Event” means:

(a)on the Interest Determination Date for the relevant Interest Period or the Default Interest Determination Date for the relevant Default Interest Period, the Reference Page is not available and fewer than three major banks active in the Euro-zone interbank market supply a rate to the Lender to determine the Interbank Rate for the Loan Currency for the relevant Interest Period or the default interest rate for the Loan Currency for the relevant Default Interest Period, as the case may be; or

(b)before close of business in Brussels on the Interest Determination Date for the relevant Interest Period  or the Default Interest Determination Date for the relevant Default Interest Period, (1) the Lender determines that the cost to it or (2) the Lender receives notification from one or more Participants whose aggregate Participation in the B Loan exceeds 50 per cent. of the B Loan that the cost to such Participant(s), as the case may be, of obtaining matching deposits in the Euro-zone interbank market would be in excess of the Interbank Rate.

“Material Adverse Effect” means a material adverse effect on or material adverse change in:

(a)the financial condition, operations, assets, prospects or business of the Borrower or the consolidated financial condition, operations, assets, prospects or business of the Group;

(b)the ability of the Borrower to perform and comply with its obligations under any Finance Document; or

(c)the validity, legality or enforceability of any Finance Document, or the rights or remedies of the Lender thereunder,

provided that for the purpose of paragraph (a) above, any losses incurred by any member of the Group after the date of this Agreement as a consequence of an adverse determination of any or all of the Bitel litigation, such losses not exceeding $330,000,000 or its equivalent in any other currency (including legal fees and associated expenses) in aggregate, shall be disregarded.

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“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and

(b)if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.

The above rules will only apply to the last Month of any period.

“MTS-Ukraine” means Closed Joint Stock Company “Ukrainian Mobile Communications (MTS-Ukraine)” in Ukraine.

“MTS-Ukraine Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including MTS-Ukraine) relating to or arising out of the sale of MTS-Ukraine to the Borrower or the acquisition, reorganization or ownership of MTS-Ukraine by the Borrower.

“MTS-Uzbekistan” means limited liability company JV Uzdunrobita in Uzbekistan.

“NIB” means Nordic Investment Bank, an international financial institution having its headquarters at Fabianinkatu 34, FIN 00171, Helsinki, Finland.

“NIB Loan” means the loan in the maximum principal amount of EUR 80,000,000, to be provided by NIB to the Borrower pursuant to the NIB Loan Agreement, or, as the context may require, the principal amount thereof from time to time outstanding.

“NIB Loan Agreement” means the loan agreement dated of even date herewith entered into between the Borrower and NIB.

“NIB B Loan” means the B loan provided for under the NIB Loan Agreement.

“NIB Participant” means a person from whom NIB receives a formal commitment to acquire a NIB Participation through the execution of, or the accession to, a NIB Participation Agreement with NIB.

“NIB Participation” means a participation in the NIB B Loan, or as the context may require, in a disbursement of the NIB B Loan.

“NIB Participation Agreement” means an agreement under which a NIB Participant makes a formal commitment to acquire a NIB Participation.

“OIBDA” has the meaning given to it in Clause 19 (Financial Covenants).

“Participant” means a person from whom the Lender receives a formal commitment to acquire a Participation through the execution of, or the accession to, a Participation Agreement with the Lender.

“Participation” means a participation in the B Loan, or as the context may require, in a Disbursement of the B Loan.

“Participation Agreement” means an agreement under which a Participant makes a formal commitment to acquire a Participation.

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“Participating Member State” means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

“Party” means a party to this Agreement.

“Permitted Security” means:

(a)any Security on any assets of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower and not created in contemplation of such event, provided that no such Security shall extend to any other assets;

(b)any Security existing on any assets prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower and not created in contemplation of such acquisition, provided that no such Security shall extend to any other assets;

(c)any Security on any assets securing Financial Indebtedness of the Borrower or Financial Indebtedness of any Subsidiary of the Borrower incurred or assumed for the purpose of financing all or part of the cost of acquiring, repairing or refurbishing such assets, provided that (i) no such Security shall extend to any other assets; (ii) the aggregate principal amount of all Financial Indebtedness secured by such Security on such assets shall not exceed the lower of (x) the purchase price of such assets and (y) the fair market value of such assets at the time of acquisition, repair or refurbishing; and (iii) such Security attaches to such assets concurrently with the repair or refurbishing thereof or within 90 days after the acquisition thereof, as the case may be;

(d)any Security arising by operation of law, including any Security (i) arising in the ordinary course of business with respect to amounts not yet delinquent or being contested by the Borrower or a Subsidiary of the Borrower in good faith in appropriate proceedings or (ii) for taxes, assessments, government charges or claims, including without limitation those in favour of Russian governmental fiscal authorities;

(e)any Security on the assets of any Subsidiary of the Borrower securing intercompany Financial Indebtedness of such Subsidiary owing to the Borrower or another Subsidiary of the Borrower;

(f)any netting or set-off arrangement entered into by a member of the Group with a bank or any other financial institution in the normal course of its banking arrangements for the purpose of netting or setting off its debit and credit facilities with that bank or financial institution;

(g)easements, rights-of-way, restrictions and any other similar charges or encumbrances incurred in the ordinary course of business and not interfering in any material respect with the business of the Borrower or the business of any Subsidiary of the Borrower, including any encumbrance or restriction with respect to an equity interest of any joint venture pursuant to a joint venture agreement;

(h)any extension, renewal or replacement of any Security described in clauses (a) to (g) above, provided that (i) such extension, renewal or replacement shall be no more restrictive in any material respect than the original Security; (ii) the amount of Financial Indebtedness secured by such Security is not increased; and (iii) if the assets securing the Financial Indebtedness subject to such Security are changed in connection with such

8

refinancing, extension or replacement, the fair market value of the property or assets is not increased; and

(i)any other Security (excluding any Security described in (a)-(h) above) provided that, immediately after giving effect to such Security, the aggregate amount of all secured Financial Indebtedness of the Group does not exceed 10% of the Borrower’s Total Assets.

“Prohibited Practice” means any Corrupt Practice, Fraudulent Practice, Coercive Practice or Collusive Practice.

“Qualifying Lender” has the meaning given to it in Clause 12 (Tax Gross-up and Indemnities).

“RAS” means generally accepted accounting principles, standards and practices in the Russian Federation.

“Reference Page” means the display of Euro-zone interbank offered rates for deposits in the Loan Currency designated as page EURIBOR01 on Reuters services (or such other page as may replace page EURIBOR01 on Reuters services for the purpose of displaying Euro-zone interbank offered rates for deposits in the Loan Currency).

“Relevant Date” means the date of the notification by the Lender under Clause 4.1 (Initial Conditions Precedent).

“Relevant Contract” means a contract:

(a)relating to an Investment;

(b)with a value in excess of EUR 1,000,000 (or the equivalent thereof in another currency at the rate of exchange on the date of that contract); and

(c)which is awarded either by the Borrower or by another member of the Group established under the laws of the Russian Federation.

“Relevant Period” has the meaning given to it in Clause 19 (Financial Covenants).

“Repayment Date” means:

(a)for the A Loan, 20 January 2010, 20 July 2010, 20 January 2011, 20 July 2011, 20 January 2012, 20 July 2012, 20 January 2013, 20 July 2013, 20 January 2014, 20 July 2014, 20 January 2015, 20 July 2015 and the Final Maturity Date; and

(b)for the B Loan, 20 January 2010, 20 July 2010, 20 January 2011, 20 July 2011, 20 January 2012, 20 July 2012, 20 January 2013, 20 July 2013 and the Final Maturity Date.

“Repeating Representations” means each of the representations set out in Clauses 16.1 (Status), 16.3 (Binding obligations), 16.4 (Non-conflict with other obligations), 16.5 (Power and authority), 16.7 (Governing law and enforcement), 16.12 (No default), 16.14 (Pari Passu Ranking), 16.15 (No proceedings pending or threatened), 16.16 (Environmental and social compliance) and 16.17 (Telecommunications laws and licences).

“Roubles” or “RUB” means the lawful currency of the Russian Federation for the time being.

“Russian Insolvency Law” means the Federal Law of the Russian Federation No. 127-FZ of 26 October 2002 “On Insolvency (Bankruptcy)”, as amended from time to time.

“Security” means a mortgage, charge, lien, pledge or other security interest securing any obligations of any person or any other agreement or arrangement having a similar effect.

“Significant Subsidiary” means:

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(a)MTS-Ukraine (unless, pursuant to the MTS-Ukraine Litigation, any or all of the Borrower’s shares in MTS-Ukraine are transferred to a person that is not a member of the Group, with the result that MTS-Ukraine ceases to be a member of the Group);

(b)MTS-Uzbekistan;

(c)any Subsidiary of the Borrower to which (i) the Borrower or MTS-Ukraine, or MTS-Uzbekistan sells, leases or otherwise transfers its GSM 900 or 1800 licences or (ii) any such licence is re-issued; and

(d)any Subsidiary of the Borrower (i) whose total assets (or, where such Subsidiary prepares consolidated accounts, whose total consolidated assets) have a book value (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) equal to or exceeding 10% of the Borrower’s Total Assets or (ii) whose gross annual revenues (or, where such Subsidiary prepares consolidated accounts, whose gross annual consolidated revenues) (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) are equal to or exceed 10% of the Borrower’s gross annual consolidated revenues in the year for which the Borrower’s most recent consolidated financial statements were prepared.

“Signing Date” means the date of this Agreement.

“Social Matters” means:

(a)labour standards and employment conditions as regulated by applicable law;

(b)the impact on persons of resettlement or land acquisition;

(c)the impact on indigenous peoples and other vulnerable groups;

(d)the impact on objects of cultural heritage including archaeological artefacts and sites; or

(e)public consultation and disclosure, including grievances from members of the public notified to the Borrower.

“Subsidiary” means an entity from time to time of which a person has direct or indirect control or owns directly or indirectly more than 50% of the share capital or similar right of ownership.

“TARGET Day” means any day on which the Trans-European Automated Real-time Gross Settlement Payment System (TARGET) is open for the settlement of payments in Euro.

“Tax” or “Taxes” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Telecommunications Authorisation” means any Authorisation from any governmental or other regulatory authority necessary in order for each of the Borrower and its Significant Subsidiaries to maintain, operate and conduct its business as it is being conducted in accordance with Telecommunications Laws.

“Telecommunications Laws” means (a) all laws and regulations which relate to telecommunications and/or the business of providing mobile telephone services and (b) all rules, guidelines, policies and regulations made thereunder, that are applicable to each of the Borrower and its Significant Subsidiaries and/or the business carried on by it.

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“Telecommunications Licence” means any Authorisation required at any time under Telecommunications Laws.

“Total Assets” means the book value of the consolidated total assets of the Borrower as determined by reference to the Borrower’s most recent annual consolidated balance sheet delivered in accordance with paragraph (a) of Clause 18.1 (Financial statements) or, prior to the first delivery, to the Financial Statements.

“Total Debt” has the meaning given to it in Clause 19 (Financial Covenants).

“Unpaid Sum” means any sum due and payable but unpaid by the Borrower under the Finance Documents.

“Utilisation” means a utilisation of the Facility.

“Utilisation Date” means the date of a Utilisation, being the date on which the Loan is to be made.

“Utilisation Request” means a notice substantially in the form set out in Schedule 2 (Utilisation Request).

“VAT” means value added tax and any other tax of a similar nature.

1.2Construction

(a)Unless a contrary indication appears, any reference in this Agreement to:

(i)the “Lender”, the “Borrower” and any “Party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii)“assets” includes present and future properties, revenues and rights of every description;

(iii)“control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management polices of a person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise;

(iv)a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;

(v)“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(vi)a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(vii)a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(viii)the singular shall include references to the plural and vice versa;

(ix)a provision of law is a reference to that provision as amended or re-enacted; and

(x)a time of day is a reference to London time.

(b)Section, Clause and Schedule headings are for ease of reference only.

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(c)Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d)A Default (other than an Event of Default) is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived.

1.3Third Party Rights

A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

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SECTION II
THE FACILITY

2THE FACILITY

Subject to the terms of this Agreement, the Lender makes available to the Borrower an amount not to exceed EUR 225,000,000 consisting of:

(i)the A Loan in an amount not to exceed EUR 115,000,000; and

(ii)the B Loan in an amount not to exceed EUR 110,000,000.

3PURPOSE

The Borrower shall apply all amounts borrowed by it under the Facility in the following manner:

(i)towards Investments in Russia, in an amount not to exceed EUR 87,000,000;

(ii)towards Investments in Uzbekistan, in an amount not to exceed EUR 70,000,000; and

(iii)towards Investments in Turkmenistan, in an amount not to exceed EUR 68,000,000.

4CONDITIONS OF UTILISATION

4.1Initial conditions precedent

The Lender will only be obliged to comply with Clause 5.4 (Availability of the Loan) in relation to any Disbursement if, on or before the Utilisation Date for such Disbursement, it has received all of the documents and other evidence listed in Schedule 1 (Conditions precedent) in form and substance satisfactory to the Lender, and the Lender has notified the Borrower that it is so satisfied.

4.2Pari Passu Disbursement

Notwithstanding anything in this Agreement to the contrary, the obligation of the Lender to make any Disbursement shall also be subject to the conditions that:

(i)the aggregate amount of the Loan disbursed by the Lender shall not at any time exceed (i) 285% of the aggregate amounts theretofore or contemporaneously disbursed under the NIB Loan Agreement; and (ii) 200% of the aggregate amounts theretofore or contemporaneously disbursed under the EIB Loan Agreement; and

(ii)immediately after such Disbursement, the ratio of the aggregate amount of the A Loan to the aggregate amount of the B Loan shall be 115:110,

provided that the conditions in this Clause 4.2 may be waived by the Lender at any time, in its sole discretion.

4.3Participations

Notwithstanding anything in this Agreement to the contrary, the obligation of the Lender to make any Disbursement shall also be subject to the conditions that:

(i)the Lender shall have entered into, in relation to the B Loan, a Participation Agreement or Participation Agreements with a Participant or Participants, for the full amount of the B Loan and NIB shall have entered into, in relation to the NIB B Loan, a NIB Participation

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Agreement or NIB Participation Agreements with a NIB Participant or NIB Participants, for the full amount of the NIB B Loan; and

(ii)the Lender shall not in any event be obliged to make any Disbursement of the B Loan except to the extent that corresponding funds in an aggregate amount equal to the amount of such Disbursement of the B Loan are provided to the Lender by Participants pursuant to Participations,

provided that the conditions in this Clause 4.3 may be waived by the Lender at any time, in its sole discretion.

4.4Further conditions precedent

The Lender will only be obliged to comply with Clause 5.4 (Availability of Loan) if on the date of the Utilisation Request and on the proposed Utilisation Date:

(i)no Default is continuing or would result from the proposed Utilisation; and

(ii)in relation to the First Utilisation, all representations and warranties in Clause 16 (Representations), or, in relation to any other Utilisation, the Repeating Representations, to be made by the Borrower are true in all material respects.

4.5Suspension and cancellation

(a)From time to time, the Lender may, by notice to the Borrower, suspend or cancel the right of the Borrower to make any Utilisation of the Loan if the Board of Governors of the Lender has decided in accordance with Article 8, paragraph 3, of the Agreement Establishing the European Bank of Reconstruction and Development that access by the Russian Federation, Uzbekistan or Turkmenistan to EBRD resources should be suspended or otherwise modified.

(b)Upon the issuance of such notice by the Lender, the right of the Borrower to further Disbursements in respect of the Loan shall be suspended and cancelled as indicated in the notice. The exercise by the Lender of the right of suspension shall not preclude the Lender from exercising any other right of cancellation it may have under this Agreement and shall not limit any other rights of the Lender under the Finance Agreements.

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SECTION III
UTILISATION

5UTILISATION

5.1Delivery of a Utilisation Request

The Borrower may utilise the Facility by delivery to the Lender of a duly completed Utilisation Request not later than 5:00 p.m. on the day falling ten Business Days before the proposed Utilisation Date.

5.2Completion of a Utilisation Request

(a)Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(i)the proposed Utilisation Date is a Business Day within the Availability Period;

(ii)the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(iii)it specifies the account and bank to which the proceeds of the Utilisation are to be credited.

(b)Only one Utilisation may be requested in each Utilisation Request.

5.3Currency and amount

(a)The currency specified in a Utilisation Request must be Euros.

(b)The amount of the proposed Loan must be:

(i)a minimum of EUR 40,000,000 or, if less, the Available Commitment; or

(ii)in any event such that it is less than or equal to the Available Commitment.

5.4Availability of the Loan

If the conditions set out in this Agreement have been met, the Lender shall make the Loan available by the Utilisation Date through its Facility Office.

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SECTION IV
REPAYMENT, PREPAYMENT AND CANCELLATION

6REPAYMENT

6.1Repayment of the Loan

(a)The Borrower shall repay the A Loan in 13 equal (or as nearly equal as possible) semi-annual instalments on each Repayment Date, provided that if any Disbursement is made after one or more of such repayment dates, such Disbursement shall be allocated by the Lender for repayment on each of the remaining repayment dates described above in amounts which are pro rata to the amounts of the respective remaining instalments of the A Loan on each such repayment date (with the Lender adjusting those allocations as necessary so as to achieve whole numbers in each case).

(b)The Borrower shall repay the B Loan in 9 equal (or as nearly equal as possible) semi-annual instalments on each Repayment Date, provided that if any Disbursement is made after one or more of such repayment dates, such Disbursement shall be allocated by the Lender for repayment on each of the remaining repayment dates described above in amounts which are pro rata to the amounts of the respective remaining instalments of the B Loan on each such repayment date (with the Lender adjusting those allocations as necessary so as to achieve whole numbers in each case).

(c)The Repayment Dates are intended to coincide with Interest Payment Dates. If any Interest Payment Date is affected by the proviso to the definition of “Interest Payment Date”, then the corresponding Repayment Date shall be changed to coincide with such Interest Payment Date.

(d)Amounts of the Loan repaid may not be reborrowed.

(e)No Disbursement shall be made following the expiry of the Availability Period other than by way of amendment to this Agreement.

7PREPAYMENT AND CANCELLATION

7.1Illegality

If it becomes unlawful in any applicable jurisdiction for the Lender to make, maintain or fund the Loan or for any Participant to maintain or fund its Participation:

(a)the Lender shall promptly notify the Borrower upon becoming aware of that event;

(b)upon the Lender notifying the Borrower, the Commitment of the Lender or Participant (as applicable) will be immediately cancelled; and

(c)the Borrower shall repay the Lender’s participation or that Participant’s Participation (as applicable) in the Loan made to the Borrower on the later of the last day of the Interest Period for each Loan occurring, and the date falling 20 days after the Lender has notified the Borrower (but in any event no longer than any grace period permitted by law) or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law).

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7.2Voluntary cancellation

The Borrower may, if it gives the Lender not less than 10 Business Days’ (or such shorter period as the Lender may agree) prior written notice, cancel the whole or any part (being a minimum amount of EUR 10,000,000) of the Available Commitment.

7.3Voluntary prepayment of the Loan

(a)The Borrower may, if it gives the Lender not less than 10 Business Days’ (or such shorter period as the Lender may agree) prior written notice, prepay the whole or any part of the Loan on any Interest Payment Date (but, if in part, being an amount that reduces the Loan by a minimum amount of EUR 10,000,000).

(b)In the case of a partial prepayment, such prepayment shall be applied pro rata between the A Loan and the B Loan in proportion to the respective principal amounts thereof then outstanding.

(c)The Loan may only be prepaid after the last day of the Availability Period (or, if earlier, the day on which the Available Commitment is zero).

(d)Each prepayment shall be applied in satisfaction of the Borrower’s obligations under Clause 6 (Repayment) in the inverse order of maturity of the Loan (or, at the option of the Borrower, pro rata to the remaining principal instalments thereof).

7.4Mandatory Prepayment — Change of Control

(a)In this Clause 7.4, “Change of Control” means any of the following events or circumstances: any person or group of persons acting in concert or under an express or implied agreement or understanding, directly or through one or more intermediaries, shall (x) acquire ultimate beneficial or legal ownership of, or control over, more than 50% of the issued shares of the Borrower; (y) acquire ownership of or control over more than 50% of the voting interests in the share capital of the Borrower; or (z) obtain the power (whether or not exercised) to elect not less than half of the directors of the Borrower.

(b)If there is a Change of Control:

(i)the Borrower shall promptly notify the Lender upon becoming aware of that event;

(ii)the Borrower may not make a Utilisation; and

(iii)if the Lender (in its sole discretion) so requires, it may, within five Business Days of its receipt of the Borrower’s notification under sub-clause (i) above, direct the Borrower to repay the Loan (together with accrued interest) in full on the day (the “Early Repayment Date”) falling 30 days after the date of the Borrower’s notification under sub-clause (i) above. Before the Early Repayment Date, the Lender and the Borrower shall consult with each other for a period of five Business Days with respect to the transfer of the Lender’s rights and obligations under this Agreement to another reputable international bank or financial institution nominated by the Borrower (but which is not an Affiliate of the Borrower) in accordance with Clause 21 (Changes to the Lender). If no such transfer has been effected on or before the Early Repayment Date, then (x) the Borrower shall repay the Loan (together with accrued interest) in full on the Early Repayment Date and (y) the Commitment shall be reduced to zero on that date.

7.5Right of repayment and cancellation in relation to the Lender or a Participant

If:

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(a)any sum payable to the Lender by the Borrower is required to be increased under paragraph (c) of Clause 11.2 (Tax gross-up); or

(b)the Lender claims indemnification from the Borrower under Clause 11.3 (Tax indemnity) or Clause 12 (Increased Costs),

the Borrower may, whilst the circumstance giving rise to the requirement or indemnification continues, give the Lender notice of cancellation of the Lender’s portion of the Commitment or that Participant’s Participation (as applicable) and its intention to procure the repayment of that portion of the principal amount of the Loan affected on the last day of the Interest Period ending after the date of such notice (or, if earlier, on such other date as specified by the Borrower in that notice) (the “Cancellation Date”). Before the Cancellation Date, the Lender and the Borrower shall consult with each other for a period of five Business Days with respect to the transfer of the Lender’s rights and obligations under this Agreement or that Participant’s Participation to another reputable international bank or financial institution nominated by the Borrower (but which is not an Affiliate of the Borrower) in accordance with Clause 21 (Changes to the Lender). If no such transfer has been effected on or before the Cancellation Date, then (x) the Borrower shall repay that portion of the Loan affected (together with accrued interest) in full on the Cancellation Date and (y) the Commitment shall be reduced to on that date by such amount cancelled and repaid.

7.6Restrictions

(a)Any notice of cancellation or prepayment given by any Party under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c)The Borrower may not reborrow any part of the Facility which is prepaid.

(d)The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitment except at the times and in the manner expressly provided for in this Agreement.

(e)No amount of the Commitment cancelled under this Agreement may be subsequently reinstated.

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SECTION V
COSTS OF UTILISATION

8INTEREST

8.1Calculation of interest

Except as provided in Clauses 8.3 (Default interest):

(a)the Borrower shall pay interest on the principal amount of each Disbursement of the A Loan from time to time outstanding during each Interest Period for such Disbursement at a rate equal to the sum of the Margin for the A Loan and, subject to Clause 9.1 (Market disruption), the Interbank Rate for such Interest Period; and

(b)the Borrower shall pay interest on the principal amount of each Disbursement of the B Loan from time to time outstanding during each Interest Period for such Disbursement at a rate equal to the sum of the Margin for the B Loan and, subject to Clause 9.1 (Market disruption), the Interbank Rate for such Interest Period.

8.2Market Flex

(a)In relation to the Margin for the B Loan, during the period from the Signing Date up to and including the date on which the Lender notifies the Borrower that a successful syndication has been achieved, the Lender shall be entitled in its sole discretion, to increase the Margin of the B Loan if the Lender, having regard to the prevailing conditions in the domestic and/or international money, debt capital or financial markets,  determines that such change is advisable in order to enhance the prospects of successful syndication, whether or not successful syndication is thereafter achieved.

(b)For the purposes of this Clause 8.2, “successful syndication” means in relation to the B Loan, the Lender shall have received from Participants, upon terms satisfactory to the Lender, formal commitments by such Participants, evidenced by the execution of one or more Participation Agreements, for the acquisition of Participations in the B Loan in the aggregate amount equal to the full amount of the B Loan.

(c)Any changes made pursuant to this Clause 8.2 will take effect by notice from the Lender to the Borrower.

(d)The Borrower agrees, at the Lender’s request, to amend the Finance Documents and do all things as may be required to reflect and give effect to any changes made under this Clause 8.2.

8.3Payment of interest

(a)The Borrower shall pay accrued interest on the Loan on each Interest Payment Date which is the last day of the relevant Interest Period.

(b)Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.

(c)Interest shall be calculated on the basis of the actual number of days elapsed and a 360-day year.

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8.4Default interest

(a)If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is the sum of:

(i)two per cent. per annum;

(ii)the Margin for the A Loan; and

(iii)the interest rate per annum offered in the Euro-zone interbank market on the Default Interest Determination Date for a deposit in the Loan Currency of an amount comparable to the overdue amount for a period equal to the relevant Default Interest Period or, if a Market Disruption Event has occurred, the rate which expresses as a percentage rate per annum the cost to the Lender of funding its respective portion of the Loan from whatever source the Lender may reasonably select (or, at the option of the Lender, the relevant Interbank rate, if available),

provided that, in the case of any amount payable by the Borrower under this Agreement in respect of the B Loan, the overdue amount shall bear interest at a rate equal to the sum of:

(i)two per cent. per annum;

(ii)the Margin for the B Loan; and

(iii)the interest rate per annum offered in the Euro-zone interbank market on the Default Interest Determination Date for a deposit in the Loan Currency of an amount comparable to the overdue amount for a period equal to the relevant Default Interest Period or, if a Market Disruption Event has occurred, the rate which expresses as a percentage rate per annum the cost to the Lender and each Participant of funding its respective portion of the Loan from whatever source the Lender or such Participant(s) may reasonably select (or, at the option of the Lender and such Participant(s), the relevant Interbank rate, if available).

(b)Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.5Notification of rates of interest

Except as otherwise provided in Clause 9.1(a) (Market disruption), on each Interest Determination Date, the Lender shall determine the interest rates applicable during the relevant Interest Period and promptly give notice thereof to the Borrower. Each determination by the Lender of the interest rate applicable to any portion of the Loan shall be final, conclusive and binding upon the Borrower unless shown by the Borrower to the satisfaction of the Lender that any such determination has involved manifest error.

9CHANGES TO THE CALCULATION OF INTEREST

9.1Market disruption

(a)If a Market Disruption Event occurs, then the Lender shall be entitled to notify the Borrower of the occurrence of such Market Disruption Event. If the Lender notifies the Borrower of the occurrence of the Market Disruption Event, interest shall accrue on the A Loan at a rate equal to the sum of:

(i)the Margin for the A Loan; and

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(ii)the rate which expresses as a percentage rate per annum the cost to the Lender and each Participant of funding its respective portion of the A Loan from whatever source the Lender or such Participant(s) may reasonably select (or at the option of the Lender and such Participant(s), the relevant Interbank Rate, if available), as notified by the Lender to the Borrower as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period,

and interest shall accrue on the B Loan at the rate equal to the sum of:

(i)the Margin for the B Loan; and

(ii)the rate which expresses as a percentage rate per annum the cost to the Lender and each Participant of funding its respective portion of the B Loan from whatever source the Lender or such Participant(s) may reasonably select (or at the option of the Lender and such Participant(s), the relevant Interbank Rate, if available), as notified by the Lender to the Borrower as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period,

in each case until the Lender has given notice to the Borrower that the Market Disruption Event has ceased to exist.

(b)If a Market Disruption Event has occurred, the Lender shall have the right, in its discretion, to change the duration of any relevant Interest Period by sending the Borrower a written notice thereof. Any such change to an Interest Period shall take effect on the date specified by the Lender in such notice.

(c)If a Market Disruption Event has occurred, the Lender shall be entitled to determine the interest rate applicable during the relevant Interest Period and give notice thereof to the Borrower on or before the end of such Interest Period.

9.2Alternative basis of interest or funding

(a)Notwithstanding sub-clause (a) of Clause 9.1 (Market disruption), if a Market Disruption Event occurs and the Lender or the Borrower so requires, within five Business Days of the notification by the Lender pursuant to Clause 9.1(a) (Market disruption), the Lender and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.  Any alternative basis so agreed shall take effect in accordance with its terms and replace the interest rate then in effect pursuant to Clause 9.1(a) (Market disruption). If agreement cannot be reached, the Borrower may, if it gives the Lender not less than 10 Business Days’ (or such shorter notice as the Lender may agree) prior written notice, prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of EUR 10,000,000).

(b)For the avoidance of doubt, if any prepayment of the Loan is made under sub-clause (a) above on a date that is not an Interest Payment Date, Break Costs, if any, shall be due and payable by the Borrower.

(c)If only part of the Loan is prepaid, each prepayment made under this Clause 9.2 shall be applied in satisfaction of the Borrower’s obligations under Clause 6 (Repayment) in the inverse order of maturity of the Loan (or, at the option of the Borrower, pro rata to the remaining principal instalments thereof).

(d)Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of the Lender and the Borrower, be binding on all Parties.

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9.3Break Costs

(a)If, for any reason (including, without limitation, an acceleration pursuant to Clause 20.21 (Acceleration)), any portion of the Loan becomes due and payable on a date other than the last day of an Interest Period, the Borrower shall pay to the Lender on demand, the amount, if any, by which:

(i)the interest which would have accrued on such portion of the Loan from the date on which such portion of the Loan has become due and payable to the last day of the then current Interest Period at a rate equal to the Interbank Rate for such Interest Period;

exceeds:

(ii)the interest which the Lender would be able to obtain if it were to place an amount equal to such portion of the Loan on deposit with a leading bank in the Euro-zone interbank market for the period commencing on the date on which such portion of the Loan has become due and payable and ending on the last day of the then current Interest Period.

(b)If any overdue amount is paid on a date other than the last day of a Default Interest Period, the Borrower shall pay to the Lender on demand the amount, if any, by which:

(i)the interest which would have accrued on such overdue amount from the date of receipt by the Lender of such overdue amount to the last day of the then current Default Interest Period at a rate equal to the rate specified in Clause 8.4 for such Default Interest Period;

exceeds:

(ii)the interest which the Lender would be able to obtain if it were to place an amount equal to such overdue amount on deposit with a leading bank in the Euro-zone interbank market for the period commencing on the Business Day immediately following the date of receipt of such overdue amount and ending on the last day of the then current Default Interest Period.

(c)The Borrower shall forthwith upon notice from the Lender reimburse the Lender for any costs, expenses and losses incurred by the Lender or any Participant, and not otherwise recovered by the Lender under sub-clauses (a) and (b) of this Clause 9.3, as a result of the occurrence of an Event of Default, prepayment of any portion of the Loan on a date other than the last day of an Interest Period, failure by the Borrower to pay any amount when due hereunder, failure by the Borrower to borrow in accordance with a Utilisation Request submitted pursuant to Clause 5.1 (Delivery of a Utilisation Request) or failure by the Borrower to make any prepayment in accordance with a notice of prepayment delivered pursuant to Clause 7.3 (Voluntary Prepayment of the Loan).

(d)The Lender shall, as soon as reasonably practicable after a demand by the Borrower, provide a certificate confirming the amount of its or any Participant’s Break Costs for any Interest Period or Default Interest Period (as applicable) in which they accrue.

10FEES

(a)The Borrower shall pay to the Lender certain fees in accordance with the Fee Letter. Such fees shall be paid at the times and in the manner specified in the Fee Letter.

(b)The charges, commissions and fees referred to in this Clause 10 are exclusive of any Tax which might be chargeable in connection with such charges, commissions or fees. If any such Tax becomes chargeable, the Borrower shall pay such Tax to the Lender at the same time that the relevant charge, commission or fee becomes due and payable.

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SECTION VI
ADDITIONAL PAYMENT OBLIGATIONS

11TAX GROSS-UP AND INDEMNITIES

11.1Definitions

(a)In this Agreement:

“Qualifying Lender” means a Lender which is situated for tax purposes in the Russian Federation or in a Tax Treaty Jurisdiction, or is otherwise entitled to receive interest free and clear of Russian withholding tax from a source within the Russian Federation.

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means an increased payment made by the Borrower to the Lender under Clause 11.2 (Tax gross-up) or a payment under Clause 11.3 (Tax indemnity).

“Tax Treaty Jurisdiction” means a jurisdiction which has in force a double tax treaty with the Russian Federation (or with the Union of Soviet Socialist Republics to which the Russian Federation has succeeded) which provides for full exemption from Russian withholding tax on interest derived from a source within the Russian Federation payable to a resident of such jurisdiction.

(b)Unless a contrary indication appears, in this Clause 11 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

11.2Tax gross-up

(a)The Borrower shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)The Borrower shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly. Similarly, the Lender shall notify the Borrower on becoming so aware in respect of a payment payable to the Lender.

(c)Subject to paragraph (d) below, if a Tax Deduction is required by law to be made by the Borrower, the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)The Borrower is not required to make an increased payment to the Lender under paragraph (c) above if, on the date on which the payment falls due, the Borrower could have made such a payment to the Lender without a Tax Deduction if the Lender was a Qualifying Lender, but on that date the Lender is not, or has ceased to be, a Qualifying Lender (other than as a result of any change after the date it became the Lender under this Agreement in (or in the interpretation, administration, or application of) any law or treaty, or any published practice or concession of any relevant taxing authority).

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(e)If the Borrower is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f)Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall deliver to the Lender an original receipt (or certified copy thereof) demonstrating that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

11.3Tax indemnity

(a)If the Lender is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document, the Borrower shall (within three Business Days of demand by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender determines has been suffered for or on account of Tax by the Lender  in respect of a Finance Document.

(b)Paragraph (a) above shall not apply:

(i)with respect to any Tax assessed on the Lender:

(A)under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(B)under the law of the jurisdiction in which the Lender’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(ii)to the extent a loss, liability or cost:

(A)is compensated for by an increased payment under Clause 11.2 (Tax gross-up); or

(B)would have been compensated for by an increased payment under Clause 11.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 11.2 (Tax gross-up) applied.

(c)If the Lender makes, or intends to make, a claim under paragraph (a) above, it shall promptly notify the Borrower of the event which will give, or has given, rise to the claim.

(d)The provisions of Clause 11.2(c) and sub-clause (a) of this Clause 11.3 shall not apply to Taxes, to the extent that such Taxes arise as a direct consequence of a Participation having been acquired a Participant whose principal office is located in a Country of Operation or by the permanent office of establishment in a Country of Operation by a Participant.

11.4Tax Credit

If the Borrower makes a Tax Payment and the Lender determines that:

(a)a Tax Credit is attributable to that Tax Payment; and

(b)that the Lender has obtained, utilised and retained that Tax Credit,

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the Lender shall pay promptly an amount to the Borrower which the Lender determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Borrower.

11.5Stamp taxes

The Borrower shall pay and, within three Business Days of demand, indemnify the Lender against any cost, loss or liability that the Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

11.6Value added tax

(a)All consideration expressed to be payable under a Finance Document by any Party to the Lender shall be deemed to be exclusive of any VAT. If VAT is chargeable on such consideration, that Party shall pay to the Lender (or directly to the appropriate tax authority, if so required by law) (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

(b)Where a Finance Document requires any Party to reimburse the Lender for any costs or expenses, that Party shall also at the same time pay and indemnify the Lender against all VAT incurred by the Lender in respect of the costs or expenses to the extent that the Lender reasonably determines that neither it nor any other member of the group of which it is a member for VAT purposes is entitled to credit or repayment from the relevant tax authority in respect of the VAT.

12INCREASED COSTS

12.1Increased Costs

(a)Subject to Clause 12.3 (Exceptions) the Borrower shall, within three Business Days of a demand by the Lender, pay to the Lender the amount of any Increased Costs incurred by the Lender or any Participant as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the Signing Date.

(b)In this Agreement “Increased Costs” means:

(i)a reduction in the rate of return from the Facility or on the Lender’s or such Participant’s overall capital;

(ii)an additional or increased cost; or

(iii)a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by the Lender or such Participant to the extent that it is attributable to the Lender having entered into the Commitment or funding or performing its obligations under any Finance Document or such Participant acquiring or maintaining its Participation (as applicable).

12.2Increased cost claims

(a)If the Lender intends to make a claim pursuant to Clause 12.1 (Increased Costs), the Lender shall notify the Borrower (on behalf of itself or on behalf of a Participant) of the event giving rise to the claim.

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(b)The Lender shall, as soon as practicable after a demand by the Borrower, provide a certificate of itself or a Participant confirming the amount of its or such Participant’s (as applicable) Increased Costs.

12.3Exceptions

(a)Clause 12.1 (Increased Costs) does not apply to the extent any Increased Cost is:

(i)attributable to a Tax Deduction required by law to be made by the Borrower;

(ii)a direct consequence of a Participation having been acquired by a Participant whose principal office is located in a Country of Operation or by the permanent office of a Participant in a Country of Operation;

(iii)compensated for by Clause 11.3 (Tax indemnity) (or would have been compensated for under Clause 11.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 11.3 (Tax indemnity) applied); or

(iv)attributable to the wilful breach by the Lender or its Affiliates of any law or regulation.

(b)In this Clause 12.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 11.1 (Definitions).

13OTHER INDEMNITIES

13.1Currency indemnity

(a)If any sum due from the Borrower under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(i)making or filing a claim or proof against the Borrower;

(ii)obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Borrower shall as an independent obligation, within three Business Days of demand, indemnify the Lender against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

(b)The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

13.2Other indemnities

The Borrower shall, within three Business Days of demand, indemnify the Lender against any cost, loss or liability incurred by the Lender or any Participant as a result of:

(a)the occurrence of any Event of Default;

(b)a failure by the Borrower to pay any amount due under a Finance Document on its due date;

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(c)funding, or making arrangements to fund, the Utilisation requested by the Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender alone); or

(d)the Loan (or part thereof) not being prepaid in accordance with a notice of prepayment given by the Borrower.

13.3Indemnity to the Lender

The Borrower shall promptly indemnify the Lender against any cost, loss or liability incurred by the Lender (acting reasonably) as a result of:

(a)investigating any event which it reasonably believes is a Default; or

(b)acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.

14MITIGATION BY THE LENDER

14.1Mitigation

(a)The Lender shall (and shall request each Participant to), in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 (Illegality), Clause 11 (Tax Gross-up and Indemnities) or Clause 12.1 (Increased Costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b)Paragraph (a) above does not in any way limit the obligations of the Borrower under the Finance Documents.

14.2Limitation of liability

(a)The Borrower shall indemnify the Lender and each Participant for all costs and expenses reasonably incurred by the Lender and such Participant as a result of steps taken by it under Clause 14.1 (Mitigation).

(b)The Lender is not and no Participant is, obliged to take any steps under Clause 14.1 (Mitigation) if, in the opinion of the Lender or such Participant (acting reasonably), to do so might be prejudicial to it.

15COSTS AND EXPENSES

15.1Transaction expenses

The Borrower shall promptly on demand pay the Lender the amount of all reasonable out-of-pocket costs and legal expenses incurred by each of them in connection with the negotiation, preparation and execution of:

(a)this Agreement and any other documents referred to in this Agreement; and

(b)any other Finance Documents executed after the date of this Agreement,

provided that if the total costs and expenses referred to in this Clause 15.1 reach the equivalent of two hundred thousand Euro (EUR 200,000), the Lender will inform the Borrower in writing that the

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costs and expenses have reached such amount and will consult with the Borrower in relation to the incurrence of costs and expenses in excess of such amount, it being understood by the Parties, for the avoidance of doubt, that this amount does not in any way represent a maximum amount in relation to such costs and expenses.

15.2Amendment costs

If (a) the Borrower requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 24.6 (Change of currency), the Borrower shall, within three Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in responding to, evaluating, negotiating or complying with that request or requirement.

15.3Enforcement costs

The Borrower shall, within three Business Days of demand, pay to the Lender the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

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SECTION VII
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

16REPRESENTATIONS

The Borrower makes the representations and warranties set out in this Clause 16 to the Lender on the date of this Agreement.

16.1Status

(a)It is an open joint stock company, duly established, registered and validly existing under the laws of the Russian Federation.

(b)It and each of its Significant Subsidiaries has the power to own its assets and carry on its business as it is being conducted.

16.2Directors and Officers

As of the date of this Agreement, the Directors of the Borrower are Vitaliy Savelyev, Anton Abugov, Alexei Buyanov, Mohanbir Gyani, Daniel Crawford, Sergei Drozdov, Tatiana Yevtoushenkova, Paul Ostling and Mikhail Shamolin, the President and Chief Executive Officer is Mikhail Shamolin and the Chief Accountant of the Borrower is Irina Borisenkova.

16.3Binding obligations

The obligations expressed to be assumed by it in each Finance Document are legal, valid, binding and enforceable obligations, subject to insolvency and other laws affecting creditors’ rights generally and principles of equity.

16.4Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a)any law or regulation applicable to it;

(b)its or any of its Subsidiaries’ constitutional documents; or

(c)any agreement or instrument binding upon it or any of its Subsidiaries or any of its or any of its Subsidiaries’ assets.

16.5Power and authority

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents and the transactions contemplated by those Finance Documents.

16.6Validity and admissibility in evidence

All Authorisations required:

(a)to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents;

(b)for it and its Significant Subsidiaries to carry on its and their business; and

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(c)to make the Finance Documents admissible in evidence in the general jurisdiction courts or commercial courts (arbitrazhniye sudi) of the Russian Federation in an original action or action to enforce a foreign arbitral award, provided that authenticated and notarised Russian texts are made available to such courts at that time and any other procedures and formalities regarding presentation of documents to a Russian court are complied with,

have been obtained or effected and are in full force and effect (except, in relation to paragraph (b) above, where the failure to obtain such Authorisations (excluding any Telecommunications Authorisations) is not reasonably likely to have a Material Adverse Effect).

16.7Governing law and enforcement

(a)The choice of English law as the governing law of the Finance Documents will be recognised and enforced in the Russian Federation.

(b)Any arbitration award obtained in England in relation to a Finance Document will be recognised and enforced in the Russian Federation in accordance with the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

16.8No bankruptcy proceedings

Neither the Borrower nor any of its Significant Subsidiaries has taken any corporate action nor have any other steps been taken or legal proceedings been started or, to the best of its knowledge and belief (after due inquiry), threatened against it or any of its Significant Subsidiaries for (a) its liquidation or bankruptcy or the appointment of a liquidation commission (likvidatsionnaya komissiya) or a similar officer of it or any of its Significant Subsidiaries; (b) the institution of supervision (nablyudeniye), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshnee upravlenie) or the appointment of a bankruptcy manager (konkursniy upravlayuschiy) or similar officer of it or any of its Significant Subsidiaries; (c) the convening of a meeting of creditors for the purposes of considering an amicable settlement (as defined in the Russian Insolvency Law); or (d) any analogous act in respect of it or any of its Significant Subsidiaries in any jurisdiction.

16.9Deduction of Tax

It is not required under the law of the Russian Federation to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Qualifying Lender.

16.10No filing or stamp taxes

Under the law of the Russian Federation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in the Russian Federation or that any stamp, registration or similar Tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, except for court registration fees in connection with any enforcement proceedings in such court.

16.11Payment of Taxes

Neither it nor any of its Significant Subsidiaries has overdue tax liabilities, other than tax liabilities (a) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves or other appropriate provision has been made or (b) whose amount, together with all such other unpaid or undischarged taxes, does not in aggregate exceed EUR 25,000,000 (or its equivalent in any other currency or currencies).

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16.12No default

(a)No Default or Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

(b)No event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which is reasonably likely to have a Material Adverse Effect.

16.13Financial statements

(a)Its Financial Statements were prepared in accordance with GAAP consistently applied.

(b)Its Financial Statements fairly represent its, and its consolidated, financial condition, financial performance, cash flows and operations as at the end of and for the relevant financial year.

(c)Since the date of the Financial Statements, there has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of the Group) and the Borrower has not, nor have any of its Subsidiaries, suffered any Material Adverse Effect, incurred any substantial or unusual loss or liability or undertaken or agreed to undertake any substantial or unusual obligation except under the Finance Agreements.

(d)The Borrower nor any of its Subsidiaries had, as at the date of the Financial Statements, no material contingent obligations, liabilities for Taxes or unusual forward or long term commitments not disclosed by, or reserved against in, such balance sheet or the notes thereto.

16.14Pari passu ranking

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

16.15No proceedings pending or threatened

Other than the MTS-Ukraine Litigation, no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (including but not limited to, investigative proceedings) have, to the best of its knowledge and belief (after due inquiry), been started or threatened against it or any of its Significant Subsidiaries which, if adversely determined would be reasonably likely to have a Material Adverse Effect.

16.16Environmental and social compliance

In relation to the Borrower and each of its Subsidiaries, its businesses, operations, assets, equipment, property, leaseholds and other facilities are in compliance with the provisions of all applicable laws relating to Environmental Matters and Social Matters. The Borrower and each of its Subsidiaries has been issued all required Authorisations relating to, and has received no complaint, order, directive, claim, citation or notice from any Governmental Authority or other person with respect to air emissions, discharges to surface water or ground water, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of toxic or hazardous substances or wastes, health and safety, employment conditions, the protection of indigenous peoples, cultural property, resettlement of persons or any other Environmental Matter or Social Matter.

16.17Telecommunications laws and licences

(a)Each of the Borrower and its Significant Subsidiaries has:

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(i)complied in all material respects with all Telecommunications Laws to which it may be subject;

(ii)obtained all material Telecommunications Authorisations necessary to conduct its business; and

(iii)complied in all material respects with the terms of those Telecommunication Authorisations,

in each case other than where failure to do so would not reasonably be expected to have a Material Adverse Effect.

(b)There has been no act, omission or event which might reasonably be expected to give rise to the material amendment, revocation, suspension, cancellation, withdrawal or termination of any provision of any Telecommunications Authorisation. To the best of its knowledge and belief (after due inquiry), no Telecommunications Authorisation is the subject of any pending or threatened proceedings which, if adversely determined, would reasonably be expected to have a Material Adverse Effect.

16.18Compliance with laws

The Borrower is not, and none of its Subsidiaries are, in violation of any law applicable to it and presently in effect.  To the best of the Borrower’s knowledge, no law has been proposed or is expected which may have a Material Adverse Effect.  All tax returns and reports of the Borrower required by law to be filed have been duly filed and all Taxes upon the Borrower, its properties and its income, which are due and payable, have been paid, other than those currently payable without penalty or interest.  The Borrower is in compliance with all applicable laws concerning money laundering.  Neither the Borrower nor any of its Subsidiaries, nor (to the best of the Borrower’s knowledge after due and careful enquiry in accordance with the Borrower’s internal procedures from time to time) any officers, directors, authorised employees, Affiliates, agents or representatives of the Borrower or its Subsidiaries has committed or engaged in, with respect to the Project, or any transactions contemplated by this Agreement, any Prohibited Practice.

16.19No Immunity

(a)The execution by the Borrower of the Finance Documents constitutes, and its exercise of its rights and performance of its obligations thereunder will constitute, private and commercial activities done and performed for private and commercial purposes (rather than public and governmental purposes).

(b)In any proceedings taken in the Russian Federation in relation to the Finance Documents, the Borrower will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.

16.20Repetition

The Repeating Representations are deemed to be made by the Borrower by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period (provided that whenever the representation in paragraph (c) of Clause 16.4 (Non-conflict with other obligations) is deemed to be made on a date other than the Signing Date or a Utilisation Date, the statement “except where the same would not be reasonably likely to have a Material Adverse Effect” shall qualify the representation in said paragraph (c)).

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17INFORMATION UNDERTAKINGS

The undertakings in this Clause 17 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

17.1Financial statements

The Borrower shall supply to the Lender:

(a)as soon as the same become available, but in any event within 180 days after the end of each of its financial years, its audited consolidated and non-consolidated financial statements for that financial year; and

(b)as soon as the same become available, but in any event within (i) 60 days after the end of each of its first, second and third financial quarters and (ii) 90 days after the end of its fourth financial quarter, its unaudited consolidated and non-consolidated financial statements for that financial quarter.

17.2Compliance Certificate

(a)The Borrower shall supply the Lender with each set of financial statements delivered pursuant to Clause 17.1 (Financial statements), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 18 (Financial Covenants) as at the date as at which those financial statements were drawn up.  Each Compliance Certificate shall be signed by an authorised officer of the Borrower.

(b)Where a Compliance Certificate is required to be delivered with the financial statements delivered pursuant to paragraph (a) of Clause 17.1 (Financial statements), it shall be accompanied by a report from the Borrower’s auditors using a form acceptable to those auditors.

17.3Requirements as to financial statements

(a)Each set of financial statements delivered by the Borrower pursuant to Clause 17.1 (Financial statements) shall be certified by an authorised officer of the Borrower as fairly representing its (or, as the case may be, its consolidated) financial condition and operations as at the end of and for the period in relation to which those financial statements were drawn up.

(b)The Borrower shall procure that each set of consolidated financial statements delivered pursuant to Clause 17.1 (Financial statements) is prepared using GAAP accounting practices and financial reference periods consistent with those applied in the preparation of the Financial Statements unless, in relation to any set of financial statements, it notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Lender:

(i)a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Financial Statements were prepared; and

(ii)sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to determine whether Clause 18 (Financial Covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that the Financial Statements.

(c)Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Financial Statements were prepared.

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(d)The Borrower shall procure that each set of non-consolidated financial statements delivered pursuant to Clause 17.1 (Financial statements) is prepared using RAS accounting practices and financial reference periods.

17.4Implementation Report

(a)The Borrower shall, within 60 days after the end of the Investment Period, provide to the Lender a report, in the form agreed between the Borrower and the Lender before the date hereof, and in substance satisfactory to the Lender, concerning the Investments made during the Investment Period.

(b)Until such time as the aggregate amount of Investments made is equal to the principal amount of the Loan outstanding, in relation to each Relevant Contract the Borrower shall provide to the Lender information as to the identity and nationality of the contractor and the amount and date of such Relevant Contract.

17.5Environmental health and safety report

As soon as available but, in any event, within 60 days after the end of each financial year, the Borrower shall furnish to the Lender a report, in form and in substance satisfactory to the Lender (acting reasonably), on Environmental Matters and Social Matters arising in relation to the Borrower and the Investments during such financial year, including:

(a)information on compliance by the Borrower with the environmental, health and safety and social standards mentioned in Clause 19.17 (Environmental and social compliance), including the status of any Authorisation required for the Borrower’s operations, the results of any inspection carried out by any regulatory authority, any violation of applicable laws, regulations or standards and any remedial action or fine relating to such violation;

(b)a summary of any material notices, reports and other communications on Environmental Matters or Social Matters submitted by the Borrower to any regulatory authority;

(c)information on the health and safety record of the Borrower, including the rate of accidents which are likely to have a material adverse effect on health and safety (as referred to in Clause 17.7 (Notification of accident)) and any initiatives in relation to health and safety matters which have been implemented or planned by the Borrower;

(d)a summary of any changes in laws relating to Environmental Matters or Social Matters  which may have a material adverse effect on the Borrower’s operations; and

(e)copies of information on Environmental Matters or Social Matters periodically submitted by the Borrower to its shareholders or the general public.

17.6Prohibited Practice

The Borrower shall promptly notify the Lender if the Borrower obtains any information regarding a violation of Clauses 16.18 (Compliance with laws) and 19.18 (Fraud and corruption) or if any international financial institution has imposed any sanction on the Borrower or any of its Subsidiaries for any Prohibited Practice. If the Lender notifies the Borrower of its concern that there has been a violation of such Clause 16.18 (Compliance with laws) or 19.18 (Fraud and corruption), the Borrower shall cooperate in good faith with the Lender its representatives in determining whether such violation has occurred and shall respond promptly and in reasonable detail to any such notice from the Lender and shall furnish documentary support for such response upon the Lender’s request.

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17.7Notification of accident

Promptly following the occurrence of any incident or accident relating to the Borrower which is likely to have a material adverse effect on the environment, health or safety, the Borrower shall give the Lender notice thereof by facsimile transmission or telex specifying the nature of such incident or accident and any steps the Borrower is taking to remedy the same. Without limiting the generality of the foregoing, an incident or accident is deemed to be likely to have a material adverse effect on the environment, health or safety if any applicable law requires notification of such incident or accident to any Governmental Authority, such incident or accident involves fatality or multiple serious injuries requiring hospitalisation or such incident or accident has become public knowledge (whether through media coverage or otherwise) and the Borrower is aware that it has become public knowledge.

17.8Insurance

Prior to the first Disbursement and thereafter, within 30 days after the effective date of any new or renewed insurance policy, the Borrower shall furnish to the Lender an original certificate from the Borrower’s insurer or insurance broker, indicating the properties insured, amounts and risks covered, names of loss payees, beneficiaries and assignees, name of the insurer and any special features of the new or renewed insurance policy, together with a certified copy of such insurance policy.

17.9Information: miscellaneous

The Borrower shall supply to the Lender:

(a)all documents dispatched by the Borrower to its shareholders (or any class of them) or its creditors generally promptly after they are dispatched;

(b)promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which would, if adversely determined, be reasonably likely to have a Material Adverse Effect;

(c)promptly, such information as may be reasonably requested by the Lender (including relevant figures from management accounts) to ascertain whether any Subsidiary of the Borrower falls within paragraph (e) of the definition of “Significant Subsidiary”; and

(d)promptly, such further information regarding the financial condition, business and operations of any member of the Group as the Lender may reasonably request.

17.10Notification of Default

(a)The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

(b)Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

17.11Know your customer checks

If:

(a)the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

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(b)any change in the status of the Borrower after the date of this Agreement; or

(c)a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement,

obliges the Lender (or, in the case of paragraph (c) above, any prospective new Lender) or any Participant to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or any Participant or, in the case of the event described in paragraph (c) above, on behalf of any prospective new Lender) in order for the Lender or any Participant or, in the case of the event described in paragraph (c) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

18FINANCIAL COVENANTS

The financial undertakings in this Clause 18 shall remain in force from the Signing Date for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

18.1Financial condition

The Borrower shall ensure that:

(a)The ratio of Total Debt as at the end of any Relevant Period to OIBDA in respect of such Relevant Period will not exceed 3:1; and

(b)the ratio of OIBDA to Interest Expense in respect of any Relevant Period will not be less than 5:1.

18.2Financial covenant calculations

Total Debt, OIBDA and Interest Expense shall be calculated and interpreted on a consolidated basis in accordance with the GAAP applicable to the Financial Statements of the Borrower and shall be expressed in Dollars.

18.3Definitions

In this Clause 18.3:

“Interest Expense” means, in relation to any Relevant Period, the aggregate amount of interest and any other finance charges (whether or not paid, payable or capitalised) accrued by the Group in that Relevant Period in respect of Total Debt including:

(a)the interest element of leasing and hire purchase payments;

(b)commitment fees, commissions, arrangement fees and guarantee fees; and

(c)amounts in the nature of interest payable in respect of any shares other than equity share capital,

adjusted (but without double counting) by:

(i)adding back the net amount payable (or deducting the net amount receivable) by members of the Group in respect of that Relevant Period under any interest or (so far as they relate to interest) currency hedging arrangements; and

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(ii)deducting interest income of the Group in respect of that Relevant Period to the extent freely payable in cash,

multiplied by two,

as determined (except as needed to reflect the terms of this Clause 18) from the financial statements of the Group and Compliance Certificates delivered under Clause 17.1 (Financial statements) and Clause 17.2 (Compliance Certificate).

“OIBDA” means, in relation to any Relevant Period, the total consolidated net income of the Group for that Relevant Period:

(a)before taking into account the charge or credit to the profit and loss account in respect of:

(i)minority interests;

(ii)income tax;

(iii)non-operating income less non-operating expenses;

(iv)the Group’s share in the net income (or loss) of any associated companies or undertakings;

(v)Interest Expense;

(vi)Interest income; and

(vii)Currency exchange and translation (gains)/losses

(b)after adding back all amounts provided for depreciation and amortisation for that Relevant Period,

multiplied by two,

as determined (except as needed to reflect the terms of this Clause 18) from the financial statements of the Group and Compliance Certificates delivered under Clause 17.1 (Financial statements) and Clause 17.2 (Compliance Certificate).

“Relevant Period” means each period of six consecutive Months ending on the last day of each financial year and financial quarter of the Borrower.

“Total Debt” means, as at any particular time, the aggregate outstanding principal, capital or nominal amount (and any fixed or minimum premium payable on prepayment or redemption) of the Financial Indebtedness of members of the Group (other than any indebtedness referred to in paragraph (g) of the definition of Financial Indebtedness and any guarantee or indemnity in respect of that indebtedness).

For this purpose, any amount outstanding or repayable in a currency other than Euros shall on that day be taken into account in its Euro equivalent at the rate of exchange that would have been used had an audited consolidated balance sheet of the Group been prepared as at that day in accordance with the GAAP applicable to the Financial Statements of the Borrower.

19GENERAL UNDERTAKINGS

The undertakings in this Clause 19 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

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19.1Authorisations

The Borrower shall promptly:

(i)obtain, comply with and do all that is necessary to maintain in full force and effect; and

(ii)supply certified copies to the Lender of,

any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.

19.2Compliance with laws

The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.

19.3Maintenance of existence

The Borrower shall maintain its corporate existence in compliance with all applicable laws. The Borrower shall conduct its business with due diligence and efficiency in accordance with sound engineering, financial and business practices and in compliance with all applicable laws, including all money laundering laws. The Borrower shall use procurement methods which ensure a sound selection of goods and services at fair market value and that the Borrower is making its capital investments in a cost effective manner.

19.4Negative pledge

(a)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.

(b)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will):

(i)sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may  be leased to or re-acquired by the Borrower or any other member of the Group;

(ii)sell, transfer or otherwise dispose of any of its receivables on recourse terms;

(iii)enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(iv)enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

(c)Paragraphs (a) and (b) above do not apply to Permitted Security.

19.5Disposals

(a)The Borrower shall not (and shall ensure that no other member of the Group will) enter into a single transaction or a series of transactions (whether related or not and whether voluntary or involuntary) to sell, lease, transfer or otherwise dispose of any asset.

(b)Paragraph (a) above does not apply to any sale, lease, transfer or other disposal:

(i)made in the ordinary course of trading of the disposing entity;

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(ii)of assets in exchange for other assets comparable or superior as to type, value and quality;

(iii)made from one member of the Group (other than the Borrower) to another member of the Group;

(iv)of cash or cash equivalents for cash or cash equivalents;

(v)where the book value of such asset (when aggregated with the book value of each other asset disposed of under this sub-clause (v)) (in each case as calculated in accordance with GAAP) does not exceed (x) 10% of the Borrower’s Total Assets in any financial year of the Borrower and (y) 25% of the Borrower’s Total Assets during the period starting on the Signing Date and ending on the date that all amounts outstanding under this Agreement have been paid in full. At the request of the Lender (any such request to be made no more than once per calendar quarter, unless a Default is continuing), the Borrower shall provide a certificate to the Lender setting out in reasonable detail the book value of any assets disposed of under this sub-clause (v) (calculated in accordance with GAAP); or

(vi)involving the transfer of any or all of the Borrower’s shares in MTS-Ukraine pursuant to the MTS-Ukraine Litigation to a person that is not a member of the Group (provided that this sub-clause (vi) shall not in any way prejudice the rights of the Lender under Clause 20.19 (MTS-Ukraine Litigation).

When calculating the Borrower’s Total Assets under sub-clause (v) above, if the annual consolidated balance sheet of the Borrower for the immediately preceding financial year of the Borrower is not available, the Borrower’s Total Assets shall be calculated by reference to the draft audit report then available for that financial year and any other evidence reasonably requested by, and reasonably satisfactory to, the Lender.

19.6Merger

(a)The Borrower shall not enter into or become subject to any consolidation or reorganisation, whether by way of merger (sliyaniye obschestva), company accession (prisoedinyeniye obschestva), company division (razdeleniye obschestva), company separation (vydelyeniye obschestva), company transformation (preobrazovaniye obschestva), company liquidation (likvidatisya obschestva) or any other company reorganisation (reorgnizatsiya obschestva) (as these terms are construed by applicable Russian law) or otherwise, or any analogous transaction in any jurisdiction, other than a consolidation or merger with one of its Subsidiaries where the Borrower is the surviving entity.

(b)The Borrower shall ensure that no Significant Subsidiary will enter into or become subject to any consolidation or reorganisation, whether by way of merger (sliyaniye obschestva), company accession (prisoedinyeniye obschestva), company division (razdeleniye obschestva), company separation (vydelyeniye obschestva), company transformation (preobrazovaniye obschestva), company liquidation (likvidatsiya obschestva) or any other company reorganisation (reorganizatsiya obschestva) (as these terms are construed by applicable Russian law) or otherwise, or any analogous transaction in any jurisdiction if such reorganisation or transaction would, in the opinion of the Lender (acting reasonably), have a Material Adverse Effect.

19.7Change of business

The Borrower shall procure that no substantial change is made to the general nature of the business of the Borrower or the Group from that carried on at the Signing Date.

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19.8Conduct of business

The Borrower shall, and shall procure that each of its Significant Subsidiaries will, conduct its business in all material respects in accordance with:

(a)all Telecommunications Laws to which it is or may become subject;

(b)all requirements of the telecommunications regulators of the Russian Federation, Ukraine and any other jurisdiction where it conducts its business; and

(c)the terms of all relevant Telecommunications Authorisations.

19.9Asset maintenance

The Borrower shall, and shall procure that each of its Significant Subsidiaries will, have and maintain good and marketable title to or valid leases or licences of, or rights of use relating to, all assets necessary to maintain, develop and operate and otherwise conduct its business as then being conducted by it and in each case where failure to do so might reasonably be expected to have a Material Adverse Effect.

19.10Insurance

The Borrower shall (and shall ensure that each other member of the Group will) maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks, and to the extent, usually insured against by prudent companies located in the same or a similar location and carrying on a similar business.

19.11Derivative Transactions

(a)The Borrower shall not enter into any exchange traded or over the counter financial derivatives, including any interest rate or currency swap, interest rate cap or collar, forward rate agreement or other interest rate, currency or commodity hedge or similar derivative transaction, except in the ordinary course of business.

(b)For the purposes of this Clause 19.11, entered into in the “ordinary course of business” shall mean where such derivative transactions are entered into by the Borrower for genuine commercial purposes, being hedging an existing exposure to commodity prices, interest rates or foreign exchange risk associated with transactions conducted by the Borrower or otherwise as a result of the Borrower’s usual business operations and not for speculative purposes.

19.12Transactions with Related Parties

(a)The Borrower shall not (and the Borrower shall ensure that no other member of the Group will), directly or indirectly, enter into or permit to exist any intercompany loan with, or for the benefit of, any Related Party, unless:

(i)the terms of such intercompany loan are no less favourable to such member of the Group than those that could be obtained in a comparable arm’s-length transaction or series of related transactions with a person that is not a Related Party; or

(ii)such intercompany loan is made pursuant to a contract or contracts existing on the Signing Date (excluding any amendments or modifications thereto after the Signing Date),

provided that the aggregate outstanding amount of all such intercompany loans described in sub-clauses (i) and (ii) above does not, at any time, exceed EUR 100,000,000.

(b)Paragraph (a) above does not apply to:

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(i)compensation or employee benefit arrangements with any officer or director of any member of the Group arising out of any employment contract entered into in the ordinary course of business; or

(ii)transactions between members of the Group.

(c)For the purposes of this Clause 19.12 only, a “Related Party” means, with respect to any specified person:

(i)any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person; or

(ii)any other person who is a director or executive officer of (a) such specified person or (b) any person described in (i) above.

For purposes of the definition of “Related Party” only, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10 per cent. or more of any class, or any series of any class, of equity securities of a person, whether or not voting, shall be deemed to be control.

19.13Restriction on acquisitions

The Borrower shall not establish or acquire any Subsidiary, acquire any Telecommunications Licence or invest in any other entity without the consent of the Lender (such consent not to be unreasonably withheld), provided that this Clause 19.13 shall not apply to any such acquisition or investment where such acquisition or investment relates to a Subsidiary or entity whose principal business is telecommunications or the provision of data services or related or ancillary businesses and the consideration paid by the Borrower in relation to such acquisition or investment, when aggregated with the consideration paid by the Borrower in relation to each other acquisition or investment in the same financial year permitted under this paragraph (a), does not exceed (i) 20 per cent. of the Borrower’s Total Assets in the financial year of the Borrower ending 31 December 2008; and (ii) 20 per cent. (or such higher amount not exceeding 25 per cent. as the Lender may agree (acting reasonably)) of the Borrower’s Total Assets in any other financial year of the Borrower.

19.14Prompt payment of Taxes

The Borrower shall (and shall ensure that each Significant Subsidiary will) duly pay all Taxes payable by it, other than (a) those taxes which are being contested in good faith and by appropriate proceedings and in respect of which adequate reserves or other appropriate provisions have been made; or (b) whose amount does not exceed EUR 25,000,000 (or its equivalent in any other currencies).

19.15Pari passu

The Borrower shall, and shall procure that each member of the Group will, procure that its obligations under the Finance Documents rank at least pari passu with all its other unsecured, unsubordinated obligations save where such other obligations are mandatorily preferred by law.

19.16Loans and guarantees

(a)The Borrower shall not (and the Borrower shall ensure that no member of the Group will):

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(i)make any loan, or provide any form of credit or financial accommodation, to any person (including, without limitation, its employees, shareholders, another member of the Group and any Affiliate); or

(ii)give or issue any guarantee, indemnity, bond or letter of credit to or for the benefit of, or in respect of liabilities or obligations of, any other person or voluntarily assume any liability (whether actual or contingent) of any other person (including, in each case and without limitation, its employees, shareholders, another member of the Group and any Affiliate).

(b)The restrictions in paragraph (a) above do not apply to (i) loans, credits, financial accommodation, guarantees, indemnities, bonds and letters of credit that are: (A) expressly permitted by the Finance Documents; or (B) for normal trade credit on arm’s length terms and in the ordinary course of business; or (C) granted to or for the benefit of, or in respect of liabilities or obligations of, any other person in connection with any investment in or acquisition of an entity, the principal business of which is telecommunications, the provision of data services or business directly related to telecommunications and/or the provision of data services (the “Investment Loan”) where such Investment Loan is granted on arm’s length terms and such investment or acquisition is for fair market value, provided that the aggregate amount of such loans, credits, financial accommodation, guarantees, indemnities, bonds and letters of credit referred to in (A) — (C) above, does not at any time exceed 10 per cent. of the Borrower’s Total Assets; (ii) guarantees by the Borrower in relation to the obligations of any other member of the Group; or (iii) the arrangements permitted under Clause 19.12 (Transactions with Related Parties).

19.17Environmental and social compliance

(a)The Borrower shall carry out the Investments in accordance with the environmental, health and safety regulations and standards in effect from time to time in the jurisdiction in which the Investments are located and the European Union environmental and health and safety standards existing on the date hereof and the International Finance Corporation’s Safeguard Policies on Indigenous Peoples, Involuntary Resettlement and Cultural Property as referred to in EBRD’s Environmental Policy as of the date hereof.

(b)The Borrower shall observe all applicable laws and standards on employment, including those relating to the employment of children and young people, discrimination at work, and forced labour. Such applicable laws and standards shall include (i) the International Labour Organisation’s fundamental conventions concerning the abolition of child labour, the elimination of discrimination at the workplace and the elimination of forced and compulsory labour and (ii) national law.

19.18Fraud and corruption

The Borrower shall not and shall procure that each of its Subsidiaries does not, and shall not authorise or permit any of its officers, directors, authorised employees, Affiliates, agents or representatives to, engage in with respect to its operations or any transactions contemplated by this Agreement any Prohibited Practice.

19.19Further documents

The Borrower shall execute all such other documents and instruments and do all such other acts and things as the Lender may determine are necessary or desirable to give effect to the provisions of the Finance Agreements and to cause the Finance Agreements to be duly registered, notarised and stamped in any applicable jurisdiction.  The Borrower hereby irrevocably appoints and constitutes the Lender as the Borrower’s true and lawful attorney with right of substitution (in the

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name of the Borrower or otherwise) to execute such documents and instruments and to do such acts and things in the name of and on behalf of the Borrower in order to carry out the provisions hereof.

20EVENTS OF DEFAULT

Each of the events or circumstances set out in Clauses 20.1 (Non-payment) to 20.20 (Material adverse change) is an Event of Default.

20.1Non-payment

The Borrower does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

(a)its failure to pay is caused by administrative or technical error; and

(b)payment is made within three Business Days of its due date.

20.2Financial covenants

Any requirement of Clause 18 (Financial Covenants) is not satisfied.

20.3Other obligations

(a)The Borrower does not comply with any provision of the Finance Documents (other than those referred to in Clause 20.1 (Non-payment) and Clause 20.2 (Financial covenants)).

(b)No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 10 Business Days of the Lender giving notice to the Borrower or the Borrower becoming aware of the failure to comply.

20.4Misrepresentation

Any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of the Borrower under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made, and such representation or statement shall not have been rendered correct and not misleading within 10 Business Days of the Lender giving notice to the Borrower or the Borrower becoming aware of the same.

20.5Cross default

(a)Any single item of Financial Indebtedness of any member of the Group in an amount exceeding EUR 10,000,000 (or its equivalent in any other currency or currencies) is not paid when due nor within any originally applicable grace period.

(b)Any single item of Financial Indebtedness of any member of the Group in an amount exceeding EUR 10,000,000 (or its equivalent in any other currency or currencies) is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c)Any single commitment for any Financial Indebtedness of any member of the Group in an amount exceeding EUR 10,000,000 (or its equivalent in any other currency or currencies) is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).

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(d)Any creditor of any member of the Group becomes entitled to declare any single item of Financial Indebtedness of any member of the Group in an amount exceeding EUR 10,000,000 (or its equivalent in any other currency or currencies) due and payable prior to its specified maturity as a result of an event of default (however described).

(e)Any of the events described in paragraphs (a) to (d) above occurs in relation to any Financial Indebtedness or commitment for Financial Indebtedness of any amount (including, for the avoidance of doubt, any amount that is less than EUR 10,000,000 (or its equivalent in any other currency or currencies)), and the aggregate amount of all such Financial Indebtedness and commitments for Financial Indebtedness is in excess of EUR 35,000,000 (or its equivalent in any other currency or currencies).

20.6Insolvency

(a)The Borrower or a Significant Subsidiary is unable or admits its inability to pay its debts as they fall due, suspends making payments on its debts generally or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling its indebtedness generally.

(b)The value of the assets of the Borrower or a Significant Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities).

(c)A moratorium is declared in respect of the indebtedness of the Borrower or a Significant Subsidiary.

20.7Insolvency proceedings

Any corporate action or legal proceedings are taken in relation to:

(a)the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary, including, but not limited to, institution of supervision (nablyudenie), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshneye upravlenie) or bankruptcy management (konkursnoye proizvodstvo) (and such legal proceedings continue for at least 14 days);

(b)the suspension of payments or a moratorium of any indebtedness of the Borrower or a Significant Subsidiary (and such suspension continues for at least 14 days);

(c)the presentation or filing of a petition (or similar document) in respect of the Borrower or a Significant Subsidiary in any court, state arbitration court (arbitrazhnyi sud) or before any other authority in respect of the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary (and such petition has not been discharged within 14 days);

(d)the appointment of a liquidator (likvidator) or a liquidation commission (likvidatsionnaya komissiya), temporary manager (vremenniy upravlaushiy), administrative manager (administrativniy upravlaushiy), external manager (vneshniy upravlaushiy), bankruptcy manager (konkursniy upravlaushiy), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of the Borrower or a Significant Subsidiary or any of its assets (and such appointment continues for at least 14 days); or

(e)the enforcement of any Security over any asset or assets of the Borrower or a Significant Subsidiary (unless such enforcement is stayed within 14 days),

or any analogous procedure or step is taken in any jurisdiction.

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20.8Creditors’ process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower or a Significant Subsidiary with a value in excess of EUR 10,000,000 (or its equivalent in any other currency or currencies) and is not discharged or stayed within 30 days.

20.9Judgment

The rendering against the Borrower or any Subsidiary of the Borrower of a judgment, decree or order for the payment of money in an amount in excess of EUR 10,000,000 (or its equivalent in any other currency or currencies) and the continuance of any such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution.

20.10Loss of Licence

(a)Any action results in the suspension for more than 30 days or the loss, revocation or termination of any of:

(i)the Borrower’s GSM 900 or 1800 licences for the Moscow licence area, the St. Petersburg licence area or the Krasnodar licence area; or

(ii)MTS-Ukraine’s GSM 900 or 1800 licences for the Ukraine licence area; or

(iii)MTS-Uzbekistan’s GSM 900 or 1800 licences for the Uzbekistan licence area.

except where, within 30 days of any such event, the relevant licence is re-issued on substantially the same terms to any member of the Group and during the period falling before such re-issuance there is no material interruption to, or other material adverse effect on, the operations permitted by such licence as a direct result of such prior loss, revocation or termination.

(b)Any of the Borrower’s, MTS-Ukraine’s or MTS-Uzbekistan’s GSM 900 or 1800 licences are amended (or any conditions are imposed with respect to any such licence) in a manner that, in the reasonable opinion of the Lender, has or is reasonably likely to have a Material Adverse Effect.

(c)Any of the Borrower’s, MTS-Ukraine’s or MTS-Uzbekistan’s assigned spectrum allocations are reassigned to other users (other than a Significant Subsidiary of the Borrower), cancelled or otherwise lost, and such event, in the reasonable opinion of the Lender, has or is reasonably likely to have a Material Adverse Effect.

(d)The Borrower sells, leases or otherwise transfers any of its GSM 900 or 1800 licences for the Moscow, St. Petersburg or Krasnodar licence areas.

(e)Any of the Borrower’s GSM 900 or 1800 licences (other than its GSM 900 and 1800 licences for the Moscow, St. Petersburg or Krasnodar licence areas) is sold, leased or transferred to any person that is not (directly or indirectly) a wholly-owned Subsidiary of the Borrower.

(f)

(i)Any of the GSM 900 or 1800 licences of MTS-Ukraine is sold, leased or transferred to any person that is not (directly or indirectly) a wholly-owned Subsidiary of the Borrower.

(ii)Sub-clause (i) above does not apply to the transfer of the GSM 900 or 1800 licences of MTS-Ukraine pursuant to the MTS-Ukraine Litigation (provided that this sub-clause (ii) shall not in any way prejudice the rights of the Lender under Clause 20.19 (MTS-Ukraine Litigation).

(g)Any of the GSM 900 or 1800 licences of MTS-Uzbekistan is sold, leased or transferred to any person that is not (directly or indirectly) a wholly-owned Subsidiary of the Borrower.

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20.11Cessation of Business

The Borrower or any Significant Subsidiary suspends, ceases or threatens to suspend or cease to carry on all or a substantial part of its business.

20.12Expropriation

(a)By or under the authority of any government:

(i)any seizure, compulsory acquisition, expropriation, nationalisation or renationalisation is made after the Signing Date of all or any material part of the assets or shares of (or other ownership interest in) any member of the Group;

(a)the management of any member of the Group is wholly or partially displaced or the authority of any member of the Group in the conduct of its business is wholly or partially curtailed; or

(b)any member of the Group is otherwise deprived of, or prevented from exercising ownership or control of, its material business or assets.

(b)Paragraph (a) above does not apply to:

(ii)the transfer of any or all of the Borrower’s shares in MTS-Ukraine pursuant to the MTS-Ukraine Litigation to a person that is not a member of the Group (provided that this paragraph (b) shall not in any way prejudice the rights of the Lender under Clause 20.19 (MTS-Ukraine Litigation)); or

(iii)the transfer of any or all of:

(a)the assets (including licences) held by Bitel; and/or

(b)the shares in Bitel

pursuant to the Bitel Litigation, to a person that is not a member of the Group.

20.13Russian Foreign Exchange Restrictions

Any foreign exchange law is enacted or introduced in the Russian Federation which has the effect of prohibiting, restricting or delaying any payment by the Borrower or any member of the Group under the Finance Documents.

20.14Moratorium

Any moratorium is declared on the payment of any external indebtedness of the Russian Federation or of Russian residents generally.

20.15The Russian Federation

The political or economic situation in the Russian Federation deteriorates or an act of war or hostilities, invasion, armed conflict or act of a foreign enemy, revolution, insurrection or insurgency occurs in, or involves, the Russian Federation and such event, in the reasonable opinion of the Lender, has or is reasonably likely to have a Material Adverse Effect.

20.16Unlawfulness

It is or becomes unlawful for the Borrower to perform any of its obligations under the Finance Documents.

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20.17Ineligibility for EBRD Financing

The Lender shall have determined that the Borrower has engaged in a Prohibited Practice in competing for, or in executing, an EBRD-financed contract and the Lender shall have declared the Borrower ineligible, either indefinitely or for a state period of time, to be awarded an EBRD-financed contract.

20.18Repudiation

The Borrower repudiates a Finance Document or evidences an intention to repudiate a Finance Document.

20.19MTS-Ukraine Litigation

The MTS-Ukraine Litigation is adversely determined and, in the reasonable opinion of the Lender, such adverse determination has or is reasonably likely to have a Material Adverse Effect.

20.20Material adverse change

The Lender determines that a Material Adverse Effect exists, has occurred or is reasonably likely to occur.

20.21Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may, by notice to the Borrower:

(a)cancel the Commitment whereupon it shall immediately be cancelled;

(b)declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under this Agreement be immediately due and payable, whereupon they shall become immediately due and payable; and

(c)declare that all or part of the Loan be payable on demand, whereupon they shall immediately become payable on demand by the Lender.

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SECTION VIII
CHANGES TO PARTIES

21CHANGES TO THE LENDER

21.1Assignments and transfers by the Lender

(a)Subject to this Clause 21, the Lender (the “Existing Lender”) may sell, transfer, assign, novate or otherwise dispose of all or part of its rights or obligations under this Agreement and any other Finance Documents to which it is a party (including, by granting of Participations or otherwise) to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”).

(b)Unless an Event of Default has occurred, any assignment or transfer shall require the consent of the Borrower, provided that (1) such consent shall not be unreasonably withheld or delayed; (2) unless the Borrower has notified the Lender to the contrary within five Business Days of receiving notice of the intended assignment or transfer, the Borrower will be deemed to have given its consent to that assignment or transfer; and (3) no such consent shall be required for granting Participations or the sale of any interest in the Loan whereby the Lender would continue to be the lender of record under this Agreement.

21.2Conditions of assignment or transfer

If:

(i)the Lender assigns or transfers any of its rights or obligations under the Finance Documents to which it is a party or changes its Facility Office; and

(ii)as a result of circumstances existing at the date the assignment, transfer or change occurs, the Borrower would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 11 (Tax Gross-up and Indemnities) or Clause 12.1 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

21.3Disclosure of information

The Lender may disclose to any of its Affiliates and any other person:

(a)to (or through) whom the Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;

(b)in connection with any Participation or proposed Participation or any other transaction under which payments are to be made by reference to, this Agreement or the Borrower; or

(c)to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,

any information about the Borrower, the Group and the Finance Documents as the Lender shall consider appropriate if, in relation to paragraphs (a) and (b) above, the person to whom the

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information is to be given has entered into a Confidentiality Undertaking. This Clause supersedes any previous agreement relating to the confidentiality of this information.

21.4Limitation of responsibility of Existing Lender

(a)Unless expressly agreed to the contrary, the Existing Lender make no representation or warranty and assumes no responsibility to a New Lender for:

(i)the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

(ii)the financial condition of the Borrower;

(iii)the performance and observance by the Borrower of its obligations under the Finance Documents or any other documents; or

(iv)the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

and any representations or warranties implied by law are excluded.

(b)Each New Lender confirms to the Existing Lender that it:

(i)has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of the Borrower and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document to which it is a party; and

(ii)will continue to make its own independent appraisal of the creditworthiness of the Borrower and its related entities whilst any amount is or may be outstanding under the Finance Documents or the Commitment is in force.

(c)Nothing in any Finance Document obliges the Existing Lender to:

(i)accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 21; or

(ii)support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by the Borrower of its obligations under the Finance Documents or otherwise.

22CHANGES TO THE BORROWER

The Borrower may not assign any of its rights or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender.

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SECTION IX
THE LENDER

23CONDUCT OF BUSINESS BY THE LENDER

No provision of this Agreement will:

(a)interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b)oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c)oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

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SECTION X
ADMINISTRATION

24PAYMENT MECHANICS

24.1Payments to the Lender

(a)On each date on which the Borrower is required to make a payment under a Finance Document, the Borrower shall make the same available to the Lender (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b)Payment shall be made to such account in the principal financial centre in a Participating Member State or London with such bank as the Lender specifies.

24.2Partial payments

(a)If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under this Agreement and the other Finance Documents to which the Lender is a party, the Lender shall apply that payment towards the obligations of the Borrower under this Agreement and such Finance Documents in any order selected by the Lender.

(b)Paragraph (a) above will override any appropriation made by the Borrower.

24.3No set-off by the Borrower

All payments to be made by the Borrower under this Agreement and any other Finance Documents to which the Lender is a party shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

24.4Business Days

(a)Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b)During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

24.5Currency of account

(a)Subject to paragraphs (b) to (e) below, Euros is the currency of account and payment for any sum due from the Borrower under this Agreement.

(b)A repayment of the Loan or Unpaid Sum or a part of the Loan or Unpaid Sum shall be made in the currency in which the Loan or Unpaid Sum is denominated on its due date.

(c)Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

(d)Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

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(e)Any amount expressed to be payable in a currency other than Euros shall be paid in that other currency.

24.6Change of currency

(a)Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i)any reference in any Finance Document to which the Lender is a party to, and any obligations arising under any Finance Document to which the Lender is a party in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Lender (after consultation with the Borrower); and

(ii)any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Lender (acting reasonably).

(b)If a change in any currency of a country occurs, this Agreement will, to the extent the Lender (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Euro-zone interbank market and otherwise to reflect the change in currency.

25SET-OFF

The Lender may set off any matured obligation due from the Borrower under the Finance Documents to which the Lender is a party (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

26NOTICES

26.1Communications in writing

Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

26.2Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below, or any substitute address, fax number or department or officer as a Party may notify to the other Party by not less than five Business Days’ notice.

The Borrower

Mobile TeleSystems Open Joint Stock Company

Address:	Ul. Vorontsovskaya 5, Bld. 2
	109147 Moscow

22 Borrower to confirm details.

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	Russian Federation
Fax No:	+7 495 911 6531
Attention:	Alexey Kaurov
	Head of Corporate Finance Department
The Lender
European Bank for Reconstruction and Development
Address:	One Exchange Square
	London ECA 2A 2 JN
	United Kingdom
Fax No:	+ 44 20 7338 6100
Attention:	Operation Administration Unit, Operation 29576

26.3Delivery

(a)Any communication or document made or delivered by one person to another under or in connection with this Agreement will only be effective:

(i)if by way of fax, when received in legible form; or

(ii)if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 26.2 (Addresses), if addressed to that department or officer.

(b)Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with its signature below (or any substitute department or officer as it shall specify for this purpose).

26.4English language

(a)Any notice given under or in connection with this Agreement must be in English.

(b)All other documents provided under or in connection with this Agreement must be:

(i)in English; or

(ii)if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

27CALCULATIONS AND CERTIFICATES

27.1Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document to which the Lender is a party, the entries made in the accounts maintained by the Lender are prima facie evidence of the matters to which they relate.

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27.2Certificates and Determinations

Any certification or determination by the Lender or a Participant of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

27.3Day count convention

Any interest, commission or fee accruing under a Finance Document to which the Lender is a party will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Euro-zone interbank market differs, in accordance with that market practice.

28PARTIAL INVALIDITY

If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

29REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under the Finance Documents to which it is a Party shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

30AMENDMENTS AND WAIVERS

No term of this Agreement may be amended or waived without the consent of the Lender and the Borrower and any such amendment or waiver will be binding on all Parties.

31COUNTERPARTS

This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

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SECTION XI
GOVERNING LAW AND ENFORCEMENT

32GOVERNING LAW

This Agreement is governed by English law.

33ARBITRATION AND JURISDICTION

33.1Arbitration

Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as in force on the Signing Date. There shall be one arbitrator and the appointing authority shall be the London Court of International Arbitration. The seat and place of arbitration shall be London, England and the English language shall be used throughout the arbitral proceedings.  The parties hereby waive any rights under the Arbitration Act 1996 or otherwise to appeal any arbitration award to, or to seek determination of a preliminary point of law by, the courts of England. The arbitral tribunal shall not be authorised to take or provide, and the Borrower agrees that it shall not seek from any judicial authority, any interim measures of protection or pre-award relief against the Lender, any provisions of the UNCITRAL Arbitration Rules notwithstanding. The arbitral tribunal shall have authority to consider and include in any proceeding, decision or award any further dispute properly brought before it by the Lender (but no other party) insofar as such dispute arises out of any Finance Document, but, subject to the foregoing, no other parties or other disputes shall be included in, or consolidated with, the arbitral proceedings. In any arbitral proceeding, the certificate of the Lender as to any amount due to it under any Finance Document shall, in the absence of manifest error, be prima facie evidence of such amount.

33.2Recourse to courts

Notwithstanding Clause 33.1 (Arbitration) above, this Agreement and any other Finance Document, and any rights of the Lender arising out of or relating to this Agreement or any other Finance Document, may, at the option of the Lender, be enforced by the Lender in the courts of England or in any other courts having jurisdiction. For the benefit of the Lender, the Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the courts of England with respect to any dispute, controversy or claim arising out of or relating to this Agreement or any other Finance Document, or the breach, termination or invalidity hereof or thereof. The Borrower hereby irrevocably designates, appoints and empowers Law Debenture Corporate Services Limited at its registered office (being, on the date hereof, at 5th floor, 100 Wood Street, London EC2V 7EX, England) to act as its authorised agent to receive service of process and any other legal summons in England for purposes of any legal action or proceeding brought by the Lender in respect of any Finance Document. The Borrower hereby irrevocably consents to the service of process or any other legal summons out of such courts by mailing copies thereof by registered airmail postage prepaid to its address specified herein. The Borrower covenants and agrees that, so long as it has any obligations under this Agreement, it shall maintain a duly appointed agent to receive service of process and any other legal summons in England for purposes of any legal action or proceeding brought by the Lender in respect of any Finance Document and shall keep the Lender advised of the identity and location of such agent.  Nothing herein shall affect the right of the Lender to commence legal actions or proceedings against the Borrower in any manner authorised by the

55

laws of any relevant jurisdiction. The commencement by the Lender of legal actions or proceedings in one or more jurisdictions shall not preclude the Lender from commencing legal actions or proceedings in any other jurisdiction, whether concurrently or not. The Borrower irrevocably waives any objection it may now or hereafter have on any grounds whatsoever to the laying of venue of any legal action or proceeding and any claim it may now or hereafter have that any such legal action or proceeding has been brought in an inconvenient forum.

34IMMUNITIES

34.1Privileges and Immunities of the Lender

Nothing in this Agreement shall be construed as a waiver, renunciation or other modification of any immunities, privileges or exemptions of the Lender accorded under the Agreement Establishing the European Bank for Reconstruction and Development, international convention or any applicable law. Notwithstanding the foregoing, the Lender has made an express submission to arbitration under Clause 33.1 (Arbitration) and accordingly and without prejudice to its other privileges and immunities (including without limitation, the inviolability of its archives), it acknowledges that it does not have immunity from suit and legal process under Article 5(2) of Statutory Instrument 1991, No. 757 (The European Bank for Reconstruction and Development (Immunities and Privileges) Order 1991) or any similar provision under English law, in respect of the enforcement of an arbitration award duly made against it as a result of its express submission to arbitration pursuant to Clause 33.1 (Arbitration).

34.2Waiver of immunity

The Borrower irrevocably agrees that, should any party take any proceedings anywhere (whether for an injunction, specific performance, damages or otherwise), no immunity (to the extent that it may at any time exist, whether on the grounds of sovereignty or otherwise) from those proceedings, from attachment (whether in aid of execution, before judgment or otherwise) of its assets or from execution of judgment shall be claimed by it or on behalf of it or with respect to its assets, any such immunity being irrevocably waived. The Borrower irrevocably agrees that it and its assets are, and shall be, subject to such proceedings, attachment or execution in respect of its obligations under the Finance Documents.

56

This Agreement has been executed and delivered as a deed on the date stated at the beginning of this Agreement.

Executed as a deed by:

MOBILE TELEPHONE SYSTEMS OPEN JOINT STOCK COMPANY

By	/s/ Mikhail V. Shamolin
Name:	Mikhail V. Shamolin
Title:	President and CEO
By	/s/ Irina Borisenkova
Name:	Irina Borisenkova
Title:	Chief Accountant

Executed as a deed by:

EUROPEAN BANK

FOR RECONSTRUCTION AND DEVELOPMENT

By	/s/ Aziz Muminov
Name:	Aziz Muminov
Title:	Senior Banker

57

SCHEDULE 1
Conditions precedent

1Finance Documents

An executed original of this Agreement and each other Finance Document.

2The Borrower

(a)Certified copies of the Borrower’s duly registered constitutional documents and certificates of registration.

(b)Certified copies of all corporate resolutions necessary to authorise the Borrower to execute and perform the Finance Documents and any documents referred to therein and the transactions contemplated thereunder (including but not limited to any major transaction approvals or interested party transaction approvals, if applicable).

(c)Evidence of the authority of the relevant signatories of the Borrower (including, but not limited to, its Chief Accountant) to execute each Finance Document to which it is a party and any documents referred to therein and the transactions contemplated thereunder.

(d)A certified copy of the most recent balance sheet of the Borrower by reference to the date of each Finance Document.

(e)A certificate executed on behalf of the Borrower:

(i)certifying the sample signature and office of each person that signed the relevant Finance Document and any documents referred to therein and the transactions contemplated thereunder on behalf of the Borrower and certifying that such signatories hold the positions in which capacity they executed such documents; and

(ii)certifying that each copy document relating to it specified in this Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

3Participations

The Lender shall have received from Participants, upon terms satisfactory to the Lender, formal commitments by such Participants, evidenced by the execution of one or more Participation Agreements, for the acquisition of Participations in the B Loan in an aggregate amount equal to the full amount of the B Loan.

4Legal opinions

(a)A legal opinion of White & Case LLP as to matters of English law.

(b)A legal opinion of White & Case LLC as to matters of Russian law.

(c)An in-house legal opinion of the Borrower.

5NIB Loan and EIB Loan

The Lender shall be satisfied that a disbursement of the full amount of the NIB Loan and EIB Loan is to be made available under the NIB Loan Agreement and the EIB Loan Agreement on the date of the proposed Disbursement; as evidence for such availability, the Borrower will provide a certified copy of the notice from NIB and EIB confirming that all conditions precedent to the

58

availability of the NIB Loan and EIB have been fulfilled by the Borrower; provided that if such notice is not issued by NIB and EIB, the Borrower will not be obligated to procure any other evidence and the Lender will consult with NIB and EIB to satisfy itself whether the condition set forth in this paragraph 5 has been fulfilled.

6Insurance

EBRD shall have received an original insurance certificate from the Borrower’s insurer or insurance broker showing that all insurance policies and endorsements required pursuant to Clause 17.8 (Insurance) are in full force and effect and certified copies of such insurance policies and endorsements.

7Other documents and evidence

(a)Evidence that the process agent referred to in Clause 33.2 (Recourse to courts) has accepted its appointment.

(b)A copy of any other Authorisation or other document, opinion or assurance which the Lender consider to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.

(c)The Financial Statements.

(d)Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 10 (Fees) and 15 (Costs and Expenses) have been paid by the first Utilisation Date.

(e)A copy of the deal passport of the Borrower (in the form established by Instruction No. 117-I of the Central Bank of the Russian Federation dated 15 June 2004) accepted and duly certified by a Russian authorised bank and copies of all other documents submitted by the Borrower to the Russian authorised bank in accordance with applicable Russian currency control regulations, as the Lender may reasonably require (or written confirmation from ING Bank (Eurasia) ZAO that all documents required to obtain such deal passport have been duly submitted to it by or on behalf of the Borrower).

(f)Such other documents or evidence which the Lender may reasonably require.

59

SCHEDULE 2
Utilisation Request

From:Mobile TeleSystems Open Joint Stock Company

To:European Bank for Reconstruction and Development

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company — EUR 225,000,000 Facility Agreement
dated [*] December 2008 (the “Agreement”)

1We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2We wish to borrow a Loan on the following terms:

Proposed Utilisation Date:	[                   ] or, if that is not a Business Day, the next Business Day
Amount:	[                   ] or, if less, the Available Commitment

3We confirm that each condition specified in Clause 4.4 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4The proceeds of this Loan should be credited to [specify bank account of the Borrower].

5This Utilisation Request is irrevocable.

Mobile TeleSystems Open Joint Stock Company

By:	By:
Name:	Name:
Title:	Title: Chief Accountant

60

SCHEDULE 3
Form of Compliance Certificate

To:                        European Bank for Reconstruction and Development

From:                    Mobile TeleSystems Open Joint Stock Company

Dated:

Dear Sirs

Mobile TeleSystems Open Joint Stock Company — EUR 225,000,000 Facility Agreement
dated [*] December 2008 (the “Agreement”)

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

1[We confirm that no Default is continuing.]*

2We confirm that the ratio of Total Debt as at the end of the Relevant Period ending on [•] to OIBDA in respect of such Relevant Period, was [•].

3We confirm that the ratio of OIBDA to Interest Expense for  the Relevant Period ending on [•], was [•].

Signed:

[Chief Financial Officer] of

Mobile TeleSystems Open Joint Stock Company

[*    insert applicable certification language

*If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

61

SCHEDULE 4
Definitions and Guidelines for Private Sector Operations (Fraud and Corruption)

The purpose of these Guidelines is to clarify the meaning of the terms “Corrupt Practices”, “Fraudulent Practices”, “Coercive Practices,” and “Collusive Practices” in the context of the EBRD’s non-sovereign operations in favour of private sector projects.

1.            CORRUPT PRACTICES

“Corrupt Practice” means the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.  In implementing this definition, the EBRD will be guided by the following principles:

(a)          The conduct in question must involve the use of improper means (such as bribery or kickbacks) by someone to induce another person to act or to refrain from acting in the exercise of his duties, in order to obtain or retain business, or to obtain an undue advantage.  Antitrust, securities and other violations of law that are not of this nature fall outside of the definition of Corrupt Practices but may still be scrutinised under alternative procedures.

(b)          It is acknowledged that foreign investment agreements, concessions and other types of contracts commonly require investors to make contributions for bona fide social development purposes or to provide funding for infrastructure unrelated to the project. Similarly, investors are often required or expected to make contributions to bona fide local charities.  These practices are not viewed as Corrupt Practices for purposes of these definitions, so long as they are permitted under local law and fully disclosed in the payer’s books and records. Similarly, an investor will not be held liable for corrupt or fraudulent practices committed by entities that administer bona fide social development funds or charitable contributions.

(c)          In the context of conduct between private parties, the offering, giving, receiving or soliciting of corporate hospitality and gifts that are customary by internationally-accepted industry standards shall not constitute Corrupt Practices unless the action violates applicable law.

(d)          Payment by private sector persons of the reasonable travel and entertainment expenses of public officials that are consistent with existing practice under relevant law and international conventions will not be viewed as Corrupt Practices.

(e)          The EBRD does not condone facilitation payments whether they are criminalised or not.   Such payments, which are illegal in most countries, are dealt with in accordance with relevant local laws and international conventions.

2.            FRAUDULENT PRACTICES

“Fraudulent Practice” means any action or omission, including misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial benefit or to avoid an obligation.  In implementing this definition, the EBRD will be guided by the following principles:

(a)          An action, omission, or misrepresentation will be regarded as made recklessly if it is made with reckless indifference as to whether it is true or false. Mere inaccuracy in such information, committed through simple negligence, is not enough to constitute a “Fraudulent Practice”.

(b)          Fraudulent Practices are intended to cover actions or omissions that are directed to or against the EBRD.  The expression also covers Fraudulent Practices directed to or against an EBRD member country in connection with the award or implementation of a government contract or concession in a project financed by the EBRD.    Frauds on, or other illegal behaviour directed against, other third parties are not condoned.   Such behaviour may represent an impediment to doing business with EBRD.

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3.            COERCIVE PRACTICES

“Coercive Practice” means impairing or harming, or threatening to impair or harm directly or indirectly, any party or the property of the party to influence improperly the actions of a party.  In implementing this definition, the EBRD will be guided by the following principles:

(a)          Coercive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.

(b)          Coercive Practices are threatened or actual illegal actions such as personal injury or abduction, damage to property, or injury to legally recognizable interests, in order to obtain an undue advantage or to avoid an obligation. It is not intended to cover hard bargaining, the exercise of legal or contractual remedies or litigation in such implementation.

4.            COLLUSIVE PRACTICES

“Collusive Practice” means an arrangement between two or more parties designed to achieve an improper purpose, including influencing improperly the actions of another party.  In implementing this definition, the EBRD will be guided by the principle that Collusive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.

5.            GENERAL

In implementing the foregoing definitions, the EBRD will be guided by the principle that a person should not be liable for actions taken by unrelated third parties unless that person has participated in the prohibited act in question.

63

EX-4.8

Exhibit 4.8

EXECUTION COPY

Dated   1 August   2008

EXPORT CREDIT AGREEMENT

between

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

as Borrower

and

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)

as Lender

CONTENTS

CLAUSE		PAGE
1	DEFINITIONS AND INTERPRETATION	2
2	THE FACILITIES	16
3	PURPOSE	17
4	CONDITIONS OF UTILISATION	17
5	UTILISATION	20
6	REPAYMENT	23
7	PREPAYMENT AND CANCELLATION	23
8	INTEREST	25
9	INTEREST PERIODS	26
10	CHANGES TO THE CALCULATION OF INTEREST	27
11	FEES	28
12	TAX GROSS-UP AND INDEMNITIES	29
13	INCREASED COSTS	32
14	OTHER INDEMNITIES	34
15	MITIGATION BY THE LENDER	35
16	COSTS AND EXPENSES	35
17	REPRESENTATIONS	37

i

18	INFORMATION UNDERTAKINGS	40
19	GENERAL UNDERTAKINGS	41
20	EVENTS OF DEFAULT	44
21	CHANGES TO THE LENDERS	50
22	CHANGES TO THE BORROWER	50
23	PAYMENT MECHANICS	51
24	SET-OFF	53
25	NOTICES	53
26	CALCULATIONS AND CERTIFICATES	54
27	PARTIAL INVALIDITY	55
28	REMEDIES AND WAIVERS	55
29	COUNTERPARTS	55
30	GOVERNING LAW	56
31	ARBITRATION	56
SCHEDULE 1 Initial Conditions Precedent		58
SCHEDULE 2 Requests		61

ii

THIS AGREEMENT is dated 1 August 2008 and made between:

(1)Mobile Telesystems Open Joint Stock Company, a  company established and existing under the laws of the Russian Federation and having its registered address at 4 Marksistskaya Street, 109147 Moscow, Russian Federation, as borrower (the “Borrower”);

(2)SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) a bank established and existing under the laws of Sweden and having its registered address at Kungsträdgårdsgatan 8, 106 40 Stockholm as lender (the “Lender”)

WHEREAS

The Borrower has concluded three  Contracts  (No. FCP 1036446/1, FCP 1038836 and FCP 1039451) with Ericsson AB, 164 80 Stockholm, Sweden (the “Exporter”) for the delivery of telecommunication equipment.

The total contract value of the deliveries that may be made under the Frame Supply Contract amounts to USD320,000,000 (the “Total Contract Value”).

According to the Frame Supply Contract the deliveries were/shall be made thorough the placement of individual purchase orders issued between February 2008 up to and including July 2009.

The Total Contract value is expected to consist of 15% down payments and a portion of 85% to be financed hereunder at the option of the Borrower subject to the agreement of EKN (as defined below) and the Lender.

IT IS AGREED as follows:

1

SECTION 1
INTERPRETATION

1DEFINITIONS AND INTERPRETATION

1.1Definitions

In this Agreement:

“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“Availability Period” means in relation to:

Tranche 1 and EKN Tranche 1 (which relates to order number FCP 103 6446/1) the period from and including the date of this Agreement and ending on a date 11 Months thereafter;

Tranche 2 and EKN Tranche 2 (which relates to order number FCP 1038836) the period from the first delivery date (as defined in the order no. above) +100 Business Days and ending on a date 11 Months thereafter; and

Tranche 3 and EKN Tranche 3 (which relates to order number FCP 1039451) the period from the first delivery date (as defined in the order no. above) +100 Business Days  and ending on a date  11 Months thereafter.

Neither of the Tranches above will be available after 1 December 2009.

“Available Facility” means, in respect of a Facility, the aggregate for the time being of each Lender’s Available Facility Commitment for that Facility.

“Available Facility Commitment” means, in relation to a Facility, the Lender’s Commitment under that Facility minus:

(a)the amount of outstanding Tranches under that Facility; and

(b)in relation to any proposed Utilisation, the amount of any Tranches that are due to be made under that Facility on or before the proposed Utilisation Date.

“Bitel” means Bitel LLC, a limited liability company incorporated in Kirghizia.

2

“Bitel Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including Bitel) relating to or arising out of the acquisition, reorganisation or ownership of Bitel by the Borrower (whether directly or through any of its Affiliates).

“Break Costs” means the amount (if any) by which:

(a)the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Tranche or Unpaid Sum to the last day of the current Interest Period in respect of that Tranche or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b)the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London, Moscow and Stockholm and in relation to any date for payment or purchase of dollars, New York.

“Central Bank” means the Central Bank of the Russian Federation.

“Commitments” means the aggregate of the Equipment Facility Commitments and the EKN Premium Facility Commitments.

“Confidentiality Undertaking” means a confidentiality undertaking substantially in a recommended form of the LMA from time to time or in any other form agreed between the Borrower and the Lender.

“Currency Law” means Federal Law No. 173-FZ of 10 December 2003 on Currency Regulation and Currency Control as amended, together with any regulations adopted or issued by the Government of the Russian Federation or the Central Bank pursuant thereto or implementing the provisions thereof.

3

“Default” means an Event of Default or any event or circumstance specified in Clause 19 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“EKN” means the Swedish Export Credit Guarantee Board, box 3064, SE-103 61 Stockholm Sweden

“EKN Conditions” means the general conditions for buyer credit guarantees issued by EKN effective commencing.

“EKN Final Guarantee” means the guarantee granted or to be granted by EKN in favour of the Lender in form and substance satisfactory to the Lender which guarantee shall incorporate the EKN Conditions as may be amended pursuant to such guarantee.

“EKN Premium” means the insurance premium payable in dollars to EKN under the EKN Final Guarantee in respect of the cover provided by EKN under the EKN Final Guarantee.

“EKN Premium Facility” means the Tranches as described in Clause 2.1 (the Facilities).

“EKN Premium Tranche” means a Tranche made or to be made by the Lender under the EKN Premium Facility.

“EKN Premium Tranche Utilisation Request” means a notice substantially in the form set out in Part 1 of Schedule 2(Requests).

“EKN Premium Facility Commitment” means an amount up to not exceeding USD 15,300,000.

“Eligible Goods” means goods supplied by the Supplier pursuant to the terms of the Frame Supply Contract and the Purchase Orders, which are eligible for support under the terms and conditions of the EKN Final Guarantee.

“Environment” means living organisms including the ecological systems of which they form part and the following media:

(a)air (including air within natural or man-made structures, whether above or below ground);

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(b)water (including territorial, coastal and inland waters, water under or within land and water in drains and sewers); and

(c)land (including land under water).

“Environmental Law” means all laws and regulations of any relevant jurisdiction applicable to the Borrower which:

(a)have as a purpose or effect the protection of, and/or prevention of harm or damage to, the Environment;

(b)provide remedies or compensation for harm or damage to the Environment; or

(c)relate to Hazardous Substances or health and safety matters.

“Environmental Licence” means any Authorisation required at any time under Environmental Law.

“Equipment Tranche” means a Tranche made or to be made by the Lenders in respect of the Equipment Facility.

“Equipment Tranche Utilisation Request” means a notice substantially in the form set out in Part 2 of Schedule 4 (Requests).

“Equipment Facility” means the Tranches as described in Clause 2.1 (the Facilities).

“Equipment Facility Commitment” means an amount up to not exceeding USD 255,000,000

“Event of Default” means any event or circumstance specified as such in Clause 22 (Events of Default).

“Facility” means the Equipment Facility and the EKN Premium Facility made available under this Agreement as described in Clause 2 (The Facility).

“Facility Office” means the office through which the Lender will perform its obligations under this Agreement.

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“Finance Documents” means this Agreement and the EKN Final Guarantee each other document designated as such by the Lender and the Borrower (and “Finance Document” means any one of them).

“Finance Parties” means the Lender and as applicable EKN (and “Finance Party” means any one of them).

“Financial Indebtedness” means any indebtedness for or in respect of:

(a)moneys borrowed;

(b)any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c)any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;

(e)receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

(g)any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h)shares which are expressed to be redeemable at the option of the holder on or prior to the Termination Date (but excluding any accrued dividends);

(i)any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

“Frame Supply Contract” means contract no. FCP 1036446/1, FCP 1038836and FCP 1039451 between the Borrower and the Supplier concerning the supply of mobile telephone equipment.

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“GAAP” means generally accepted accounting principles, standards and practices in the United States of America.

“Governmental Agency” means any government or any governmental agency, semi-governmental or judicial entity or authority (including, without limitation, any stock exchange or any self-regulatory organisation established under any law or regulation).

“Group” means the Borrower and its Subsidiaries for the time being.

“Hazardous Substance” means any waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the Environment or a nuisance to any person or that may make the use or ownership of any affected land or property more costly.

“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

“IFRS” means international accounting standards, international financial reporting standards and related interpretations issued, adopted or amended from time to time by the International Accounting Standards Board as in effect or applicable as at the date hereof.

“Indirect Tax” means any goods and services tax, consumption tax, value added tax or any Tax of a similar nature.

“Initial CP Satisfaction Date” means the date on which the Lender has notified the Borrower that the conditions referred to in subclause 4.1 (Initial conditions precedent) have been satisfied.

“Interest Payment Date” means the last day of an Interest Period applicable to a Tranche.

“Interest Period” means, in relation to a Tranche, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“Lender” means:

(a)the Lender; and

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(b)any bank or financial institution, trust, fund or other entity which has become a Lender in accordance with Clause 21 (Changes to the Lenders),

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

“LIBOR” means, in relation to any Tranche:

(a)the applicable Screen Rate; or

(if no Screen Rate is available for the Interest Period of that Tranche) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Lender at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of the 11.00 am on the Quotation Day for the offering of deposits in dollars for a period comparable to the Interest Period of the relevant Tranche.

“LMA” means the Loan Market Association.

“Margin” means 0.225 per cent per annum.

“Material Adverse Effect” means a material adverse effect on or material adverse change in:

(a)the financial condition, operations, assets, prospects or business of the Borrower or the consolidated financial condition, operations, assets, prospects or business of the Group;

(b)the ability of the Borrower to perform and comply with its obligations under any Finance Document; or

(c)the validity, legality or enforceability of any Finance Document, or the rights or remedies of any Finance Party thereunder,

provided that for the purpose of paragraph (a) above any losses incurred by any member of the Group after the date of this Agreement as a consequence of an adverse determination of any or all of the Bitel Litigation, such losses not exceeding USD330,000,000 or its equivalent in any other currency (including legal fees and associated expenses) in aggregate shall be disregarded.

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“Mean Value Delivery Date” means the date determined (and communicated to the Borrower) by the Lender (in consultation with the Supplier) as the mean value delivery date in respect of all Eligible Goods deliverable under Contract No FCP 1036446/1, FCP 1038836 and FCP 1039451 respectively, which is calculated by the Lender and recognised by EKN as the starting point of credit in respect of each Tranche.

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and

(b)if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.

The above rules will only apply to the last Month of any period.

“Party” means a party to this Agreement.

“Permitted Security” means:

(a)any Security on any assets of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower and not created in contemplation of such event, provided that no such Security shall extend to any other assets;

(b)any Security existing on any assets prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower and not created in contemplation of such acquisition, provided that no such Security shall extend to any other assets;

(c)any Security on any assets securing Financial Indebtedness of the Borrower or Financial Indebtedness of any Subsidiary of the Borrower incurred or assumed for the purpose of financing all or part of the cost of acquiring, repairing or refurbishing such assets, provided that (i) no such Security shall extend to any other assets; (ii) the aggregate principal amount of all Financial

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Indebtedness secured by such Security on such assets shall not exceed the lower of (x) the purchase price of such assets and (y) the fair market value of such assets at the time of acquisition, repair or refurbishing; and (iii) such Security attaches to such assets concurrently with the repair or refurbishing thereof or within 90 days after the acquisition thereof, as the case may be;

(d)any Security arising by operation of law, including any Security (i) arising in the ordinary course of business with respect to amounts not yet delinquent or being contested by the Borrower or a Subsidiary of the Borrower in good faith in appropriate proceedings or (ii) for taxes, assessments, government charges or claims, including without limitation those in favour of Russian governmental fiscal authorities;

(e)any Security on the assets of any Subsidiary of the Borrower securing intercompany Financial Indebtedness of such Subsidiary owing to the Borrower or another Subsidiary of the Borrower;

(f)any netting or set-off arrangement entered into by a member of the Group with a bank or any other financial institution in the normal course of its banking arrangements for the purpose of netting or setting off its debit and credit facilities with that bank or financial institution;

(g)easements, rights-of-way, restrictions and any other similar charges or encumbrances incurred in the ordinary course of business and not interfering in any material respect with the business of the Borrower or the business of any Subsidiary of the Borrower, including any encumbrance or restriction with respect to an equity interest of any joint venture pursuant to a joint venture agreement;

(h)any extension, renewal or replacement of any Security described in clauses (a) to (g) above, provided that (i) such extension, renewal or replacement shall be no more restrictive in any material respect than the original Security; (ii) the amount of Financial Indebtedness secured by such Security is not increased; and (iii) if the assets securing the Financial Indebtedness subject to such Security are changed in connection with such refinancing, extension or replacement, the fair market value of the property or assets is not increased; and

any other Security (excluding any Security described in (a)-(h) above) provided that, immediately after giving effect to such Security, the aggregate amount of all

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secured Financial Indebtedness of the Group does not exceed 10% of the Borrower’s Total Assets.

“Purchase Orders” means the Purchase Orders (as defined in the Frame Supply Contract) referred to in paragraph 4 (e) of Schedule 1 (Initial Conditions Precedent).

“Quotation Day” means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the London interbank market, in which case the Quotation Day will be determined by the Lender in accordance with market practice in the London interbank market (and if quotations for that currency and period would normally be given by leading banks in the London interbank market on more than one day, the Quotation Day will be the last of those days).

“RAS” means generally accepted accounting principles, standards and practices in the Russian Federation.

“Reference Banks” means in relation to LIBOR the principal London offices of HSBC Bank Plc and ING Bank N.V. or such other banks as may be designated by the Lender as agreed with the Borrower.

“Relevant Documents” means the Finance Documents, the Frame Supply Contract, the Purchase Orders and/or any other document issued or entered into pursuant thereto.

“Relevant Interbank Market” means, in relation to euro, the European interbank market and, in relation to any other currency, the London interbank market.

“Repayment Dates” means each date for the payment of a Repayment Instalment (or if such day is not a Business Day, the immediately succeeding Business Day).

“Repayment Instalment” means each instalment for repayment of the Tranches referred to in Clause 6 (Repayment)

“Repeating Representations” means each of the representations set out in Clauses 17.1 (Status), 17.2 (Binding obligations), 17.3 (Non-conflict with other obligations), 17.4 (Power and authority), 17.11 (No default), 17.10 (Pari Passu Ranking), 17.11 (No proceedings pending or threatened).

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“Russian Insolvency Law” means the Federal Law of the Russian Federation No. 127-FZ of 26 October 2002 “On Insolvency (Bankruptcy)”as amended.

“Screen Rate” the British Bankers’ Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate page of the Telerate screen. If the agreed page is replaced or service ceases to be available, the Lender may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders.

“Security” means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

Significant Subsidiary” means any Subsidiary of the Borrower (i) whose total assets (or, where such Subsidiary prepares consolidated accounts, whose total consolidated assets) have a book value (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) equal to or exceeding 10% of the Borrower’s Total Assets or (ii) whose gross annual revenues (or, where such Subsidiary prepares consolidated accounts, whose gross annual consolidated revenues) (as determined by reference to the most recent management accounts of that Subsidiary prepared in accordance with GAAP) are equal to or exceed 10% of the Borrower’s gross annual consolidated revenues in the year for which the Borrower’s most recent consolidated financial statements were prepared.

“Subsidiary” means an entity from time to time of which a person has direct or indirect control or owns directly or indirectly more than 50% of the share capital or similar right of ownership.

“Supplier” means Ericsson AB, a limited liability company duly organised under the laws of Sweden, having its head office at SE 164 80 Stockholm.

“Supplier’s Certificate” means a certificate substantially in the form set out in Part 3 of Schedule 2 (Requests).

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Telecommunications Authorisation”means any Authorisation from any governmental or other regulatory authority necessary in order for each of the

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Borrower and its Significant Subsidiaries to maintain, operate and conduct its business as it is being conducted in accordance with Telecommunications Laws.

“Telecommunications Laws”means (a) all laws and regulations which relate to telecommunications and/or the business of providing mobile telephone services and (b) all rules, guidelines, policies and regulations made thereunder, that are applicable to each of the Borrower and its Significant Subsidiaries and/or the business carried on by it.

“Telecommunications Licence” means any Authorisation required at any time under Telecommunications Laws.

“Total Assets” means the book value of the consolidated total assets of the Borrower as determined by reference to the Borrower’s most recent annual consolidated balance sheet delivered in accordance with paragraph (a) of Clause 18.1 (Financial statements) or, prior to the first delivery, to the Original Financial Statements.

“Termination Date” means for each Tranche the date which is 102 Months after the date of the Mean Value Delivery Date for such Tranche.

“Total Commitments” means the aggregate of the Commitments, being USD 270,300,000 at the date of this Agreement.

“Total Equipment Facility Commitments” means an amount of up to USD 255,000,000 which at the date of this Agreement represents less than 85% of the total value of equipment and services to be provided under the Frame Supply Contract which is USD 320,000,000.

“Total EKN Premium Facility Commitments” means an amount of up to USD 15,300,000.

“Tranches” means Tranche 1, 2 and 3 and EKN Tranche 1, 2 and 3 (and “Tranche” means any one of them) as defined in Clause 2.1.2 and 2.1.4.

“UMC” means Closed Joint Stock Company “Ukrainian Mobile Communications” in Ukraine.

“UMC Litigation” means any of the claims, proceedings (present or future) and causes of action involving the Borrower and/or any of its Affiliates (including

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UMC) relating to or arising out of the sale of UMC to the Borrower or the acquisition, reorganization or ownership of UMC by the Borrower.

“Unpaid Sum” means any sum due and payable but unpaid by the Borrower under the Finance Documents.

“US Dollars”, “Dollars”, “USD” and “$” denote the lawful currency of the United States of America.

“Utilisation Date” means the date of a Utilisation, being the date on which the relevant Tranche is to be made.

“Utilisation Request” means a EKN Premium Tranche Utilisation Request or an Equipment Tranche Utilisation Request, as the case may be.

“VAT” means value added tax and any other tax of a similar nature.

1.2Construction

(a)Unless a contrary indication appears, any reference in this Agreement to:

(i)the “Lender” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii)“assets” includes present and future properties, revenues and rights of every description;

(iii)“control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management polices of a person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise;

(iv)a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;

(v)“indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

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(vi)a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(vii)a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(viii)a provision of law is a reference to that provision as amended or re-enacted; and

(ix)a time of day is a reference to Stockholm time.

(b)Section, Clause and Schedule headings are for ease of reference only.

(c)Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d)A Default (other than an Event of Default) is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived.

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SECTION 2
THE FACILITY

2THE FACILITIES

2.1The Facilities

Subject to the terms of this Agreement, the Lender make available to the Borrower:

2.1.1the Equipment Facility, being an amount of USD255,000,000 at the date of this Agreement.

2.1.2the Equipment Facility is available in the following Tranches:

(a)Tranche 1 up to an amount not exceeding USD80,000,000;

(b)Tranche 2 up to an amount not exceeding USD80,000,000; and

(c)Tranche 3 up to an amount not exceeding USD95,000,000.

2.1.3the EKN Premium Facility being an amount of USD15,300,000 at the date of this Agreement.

2.1.4the EKN Premium Facility is available in the following Tranches:

(a)EKN Tranche 1 up to an amount of not exceeding USD4,800,000;

(b)EKN Tranche 2 up to an amount of not exceeding USD4,800,000; and

(c)EKN Tranche 3 up to an amount of not exceeding USD5,700,000.

2.2EKN override

2.2.1Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall oblige the Lender to act (or omit to act) in a manner that is inconsistent with the terms of the EKN Final Guarantee and, in particular:

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(a)the Lender shall be authorised to take all such actions as it may deem necessary to ensure that the terms of the EKN Final Guarantee are complied with; and

(b)the Lender shall not be obliged to do anything if, in its opinion, to do so could result in a breach of any term of the EKN Final Guarantee.

2.2.2Nothing in this Clause 2.2 shall affect the obligations of the Borrower.

3PURPOSE

3.1Purpose

The Borrower shall apply all amounts borrowed by it under the Facility as follows:

3.1.1by applying the Equipment Facility in payment of the purchase price for equipment purchased in accordance with the Frame Supply Contract but for an aggregate amount not exceeding the Total Equipment Facility Commitment; and

3.1.2by applying the EKN Facility in payment of 100 % of the EKN Premium but for an aggregate amount not exceeding the Total EKN Premium Facility Commitment ,

3.2Monitoring

The Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4CONDITIONS OF UTILISATION

4.1Initial conditions precedent

4.1.1Subject to subclause 4.1.2 the Borrower may not deliver an Utilisation Request in respect of a Facility unless the Lender has received all of the documents and other evidence listed in and appearing to comply with the requirements of Schedule 1 (Initial conditions precedent) in form and substance satisfactory to the Lender.

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4.1.2The Borrower may not deliver a Utilisation Request in respect of an Equipment Tranche unless and until the Lender has received a confirmation from the Borrower and the Supplier that the Frame Supply Contract is in full force and effect in form and substance satisfactory to the Lender.

4.1.3The Lender shall notify the Borrower promptly upon receiving such documents and other evidence specified in this Clause 4.1.

4.2Further conditions precedent

The obligations of the Lender hereunder with respect to each Tranche are subject to the further conditions precedent that:

4.2.1on the date of the Utilisation Request for such Tranche and on the proposed Utilisation Date for such Tranche:

(a)no Default is continuing or would result from the proposed Tranche;

(b)the Repeating Representations to be made by the Borrower are true in all material respects; and

(c)EKN has not advised to the Lender that the making of Tranches should be suspended.

4.2.2in the case of a Utilisation Request for a EKN Premium Tranche prior to the delivery (or deemed delivery) of the relevant Utilistion Request, the Lender has received from EKN an invoice setting out the amount of the EKN Premium.

4.2.3in the case of a Utilisation Request for an Equipment Tranche the Lender (prior to the delivery (or deemed delivery) of the relevant Utilisation Request) shall have received, in form and substance satisfactory to it:

(a)evidence that the EKN Premium has been paid in full;

(b)evidence that the EKN Final Guarantee is in full force and effect and shall apply to all Tranches outstanding hereunder and interest thereon during the period such Tranches are outstanding;

(c)in the case of any Tranche to be made pursuant to an Equipment Tranche Utilisation Request, a duly completed and executed Supplier’s Certificate; and

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(d)immediately prior to and following the making of the proposed Tranche, the Borrower will have paid to the Supplier in respect of its payment obligations under the Frame Supply Contract, from sources other than Tranches (including the proposed Tranche) made under this Agreement, an amount equal to or in excess of 15% of the aggregate amount of all invoiced amounts due or which have been due (on or prior to the proposed Utilisation Date) under the Frame Supply Contract

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SECTION 3
UTILISATION

5UTILISATION

5.1Utilisation of the EKN Premium Facility

5.1.1The Borrower may utilise the EKN Premium Facility by delivery to the Lender a duly completed EKN Premium Tranche Utilisation Request not later than 11.00 a.m. on the day following two Business Days before payment of the relevant EKN Premium

5.1.2An EKN Premium Tranche requested under Clause 5.1.1 shall

(a)be made if the Initial CP Satisfaction Date has occurred and the other conditions to Utilisation set out in Clauses 4.1 (Initial Conditions Precedent) and 4.2 (Further Conditions Precedent) are satisfied.

5.2Utilisation of the Equipment Tranche Facility

5.2.1Subject to Clause 5.2.2, if the Borrower has made any payment to the Supplier in respect of any invoice(s) issued for payment under the Frame Supply Contract out of its own funds, the Borrower may request an Equipment Tranche for reimbursement by delivery to the Lender of a duly completed Equipment Tranche Utilisation Request not later than on the day falling two Business Days before the proposed utilisation Date.

5.2.2An Equipment Tranche requested under Clause 5.2.1 shall:

(a)be made only if the Initial CP Satisfaction Date has occurred and the other conditions to Utilisation set out in Clauses 4.1 (Initial Conditions Precedent) and 4.2(Further Conditions Precedent) are satisfied;

(b)be made in an amount not exceeding the lesser of:

(i)85 per cent. of the principal amount paid by the Borrower in respect of the relevant Eligible Goods;

(ii)85 per cent. of the amount specified in the relevant invoice(s) for such Eligible Goods; and

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(iii)the Available Facility in respect of Equipment Facility; and

(c)be paid directly to such account in the Russian Federation as the Borrower shall specify in the relevant Equipment Tranche Utilisation Request.

5.3Completion of a Utilisation Request

5.3.1Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(a)the proposed Utilisation Date is a Business Day which is within the Availability Period;

(b)the currency specified is:

(i)(in relation to any Utilisation Request under the EKN Premium Tranche) dollars; and

(ii)(in relation to any Equipment Tranche Utilisation Request), dollars;

(c)the amount of any proposed Equipment Tranche is a minimum of US$ 5,000,000 or, if less, the Available Tranche (or such other lesser amount to which the Lender gives its prior approval), provided that in no event shall the amount of a proposed Equipment Tranche exceed the Available Tranche;

(d)the Borrower, attaches to the Utilisation Request all relevant documents contemplated by Schedule 2 (Requests) to be provided with that Utilisation Request each in form and substance satisfactory to the Lender;

(e)(in the case of a Utilisation under an Equipment Tranche), pursuant to the Supplier’s Certificate provided with the relevant Utilisation Request, the goods which the proceeds of the proposed Utilisation are intended to finance (or refinance, as the case may be) are Eligible Goods and for each invoice issued under the Frame Supply Contract to be financed by the Tranche requested pursuant to that Equipment Tranche Utilisation Request the Borrower has paid to the Supplier an amount equal to 100% of the payment due under those invoices;

(f)the proposed Utilisation complies with Clause 3.1 (Purpose); and

(g)the Utilisation Request is executed by a person duly authorised to do so on behalf of the Borrower.

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5.3.2Only one Tranche may be requested in each Utilisation Request.

5.4Acknowledgement by Borrower

The Borrower acknowledges and agrees that:

5.4.1none of the Lender or the Supplier is in any way involved in the final determination of the EKN Premium and the Borrower will not raise against the Lender or the Supplier any claim or defence of any kind whatsoever in relation to the calculation or payment of the EKN Premium. The exact amount of the EKN Premium will be evidenced by invoice(s) to be issued by EKN.  The Lender shall promptly send to the Borrower a copy of any invoice received from the EKN in relation to the EKN Premium.  If EKN issues a final invoice in respect of the EKN Premium, any difference between the amount of the EKN Premium initially invoiced and that of the final invoice will be payable on demand by, or refundable to, the Borrower in accordance with the instructions of the Lender provided that if any amount of the EKN Premium is refundable, such amount shall be refunded on terms and conditions acceptable to EKN; and

5.4.2in the event any part of the EKN Premium is refundable, the Lender shall only be required to refund to the Borrower such portion of the EKN Premium which has been refunded to the Lender.

5.5Borrower’s right to use own funds

Nothing in this Agreement shall preclude the Borrower from satisfying its payment obligations under the Frame Supply Contract using funds other than the proceeds of the Facility.

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SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION

6REPAYMENT

6.1Repayment of Tranches

6.1.1The Borrower shall repay respective Tranche in full by seventeen (17) semi annual instalments (“Repayment Instalments”), each being one seventeenth of the total Tranche Amount set out in Clause 2.1.2 and 2.1.4. The first Repayment Instalment for respective Tranche shall fall due six Months after the date of the Mean Value Delivery Date for that relevant Tranche (or if such day is not a Business Day, the immediately succeeding Business Day. The Borrower shall repay the outstanding amount of all the Tranches in full on the Termination Date.

6.1.2All repayments in accordance with this Clause 6 must be received by the Lender by 11:00 a.m. Stockholm time on the relevant Repayment Date.

6.2No reborrowing

The Borrower may not reborrow any part of the Facility which is repaid.

7PREPAYMENT AND CANCELLATION

7.1Illegality

If it is illegal for the Lender to make, maintain or fund Tranches under this Agreement, the Borrower must, within 20 Business Days of receipt of a notice from the Lender of the illegality, repay all amounts outstanding under this Agreement.

7.2Voluntary cancellation

The Borrower may, if it gives the Lender not less than 10 Business Days’ (or such shorter period as the Lender may agree) prior written notice, cancel the

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whole or any part (being a minimum amount of USD 25,000,000) of an Available Tranche.

7.3Voluntary prepayment of the Facilities

(a)The Borrower may, if it gives the Lender not less than 10 Business Days, (or such shorter period as the Lender may agree) prior written notice, prepay the whole or any part of any Tranche (but, if in part, being an amount that reduces the Tranche by a minimum amount of USD 25,000,000).

(b)A Tranche may only be prepaid after the last day of the Availability Period (or, if earlier, the day on which the relevant Available Facility is zero).

7.4Restrictions

(a)Any notice of cancellation or prepayment given by the Borrower under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c)The Borrower may not reborrow any part of a Facility which is prepaid.

(d)The Borrower shall not repay or prepay all or any part of the Tranches or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

(e)No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

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SECTION 5
COSTS OF UTILISATION

8INTEREST

8.1Calculation of interest

The rate of interest on each Tranche for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(a)Margin; and

(b)LIBOR.

8.2Payment of interest

The Borrower shall pay accrued interest on each Tranche on the last day of each Interest Period.

8.3Default interest

(a)If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is the sum of 2 per cent. and the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Tranche in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Lender (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Borrower on demand by the Lender.

(b)If any overdue amount consists of all or part of a Tranche which became due on a day which was not the last day of an Interest Period relating to that Tranche:

(i)the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Tranche; and

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(ii)the rate of interest applying to the overdue amount during that first Interest Period shall be the sum of 2 per cent. and the rate which would have applied if the overdue amount had not become due.

(c)Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.4Notification of rates of interest

The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

9INTEREST PERIODS

9.1Duration of Interest Periods

9.1.1Subject to this Clause 9 each Interest Period for a Tranche shall be six Months or any shorter period agreed between the Borrower and the Lender provided that the first Interest Period for a Tranche (other than the first Tranche made under a Facility) shall end on the last day of the then current Interest Period of any other Tranche then outstanding.

9.1.2Each Interest Period for a Tranche shall start on the Utilisation Date in respect of that Tranche or (if the Tranche has already been made) on the last day of the preceding Interest Period for that Tranche.

9.1.3An Interest Period for a Tranche shall not extend beyond a Repayment Date.

9.1.4An Interest Period for a Tranche shall not extend beyond the Termination Date.

9.2Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

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10CHANGES TO THE CALCULATION OF INTEREST

10.1Absence of quotations

Subject to Clause 10.2 (Market disruption), if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11:00 a.m. on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

10.2Market disruption

(a)If a Market Disruption Event occurs in relation to a Tranche for any Interest Period, then the rate of interest for the Interest Period shall be the rate per annum which is the sum of:

(i)the Margin;

(ii)the rate notified by the Lender to be that which expresses as a percentage rate per annum the cost to the Lender of funding from whatever source it may reasonably select.

(b)In this Agreement “Market Disruption Event” means:

(i)at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Lender to determine LIBOR for Dollars for the relevant Interest Period; or

(ii)that the cost to it of obtaining matching deposits in the London interbank market would be in excess of LIBOR.

10.3Alternative basis of interest or funding

If a Market Disruption Event occurs and the Lender or the Borrower so requires, the Lender and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.

10.4Break Costs

In case of a market Disruption Event the Borrower shall, within three Business Days of demand by the Lender, pay to the Lender its Break Costs attributable to

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all or any part of a Tranche or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for that Tranche or Unpaid Sum.

11FEES

11.1Management fee

The Borrower shall pay to the Lender a management fee of 0.2 % flat calculated on the Total Commitments. The management fee is due prior, to the first disbursement under this Agreement, at the latest however, within 30 days after the date of this Agreement.

11.2Commitment fee

From due date of this Agreement until disbursement of the Facility in full, the Borrower shall pay to the Lender a commitment fee at a rate of 0.0625 % calculated on a daily basis on such portion of the Total Commitments nor yet disbursed at any time. The Commitment fee is payable on each Interest Payment Date.

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SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS

12TAX GROSS-UP AND INDEMNITIES

12.1Definitions

(a)In this Agreement:

“Protected Party” means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Qualifying Lender” means a Lender which is situated for tax purposes in the Russian Federation or in a Tax Treaty Jurisdiction.

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means an increased payment made by the Borrower to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

“Tax Treaty Jurisdiction” means a jurisdiction which has in force a double tax treaty with the Russian Federation (or with the Union of Soviet Socialist Republics to which the Russian Federation has succeeded) which provides for full exemption from Russian withholding tax on interest derived from a source within the Russian Federation payable to a resident of such jurisdiction.

(b)Unless a contrary indication appears, in this Clause 12 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

12.2Tax gross-up

(a)The Borrower shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

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(b)The Borrower shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly.

(c)Subject to paragraph (d) below, if a Tax Deduction is required by law to be made by the Borrower, the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)If the Borrower is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(e)Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall deliver to the Lender for an original receipt (or certified copy thereof) demonstrating that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

12.3Tax indemnity

(a)The Borrower shall (within three Business Days of demand by the Lender) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines has been suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

(b)Paragraph (a) above shall not apply:

(i)with respect to any Tax assessed on a Finance Party:

(A)under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

(B)under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

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if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or

(ii)to the extent a loss, liability or cost:

(A)is compensated for by an increased payment under Clause 12.2 (Tax gross-up); or

(B)would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 12.2 (Tax gross-up) applied.

12.4Tax Credit

If the Borrower makes a Tax Payment and the relevant Finance Party determines that:

(a)a Tax Credit is attributable to that Tax Payment; and

(b)that Finance Party has obtained, utilised and retained that Tax Credit,

the Finance Party shall pay promptly an amount to the Borrower which that Finance Party determines will leave the Finance Party (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Borrower.

12.5Stamp taxes

The Borrower shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

12.6Value added tax

(a)All consideration expressed to be payable under a Finance Document by any Party to a Finance Party shall be deemed to be exclusive of any VAT. If VAT is chargeable on such consideration, that Party shall pay to the Finance Party (or directly to the appropriate tax authority, if so required by law) (in addition to and

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at the same time as paying the consideration) an amount equal to the amount of the VAT.

(b)Where a Finance Document requires any Party to reimburse a Finance Party for any costs or expenses, that Party shall also at the same time pay and indemnify the Finance Party against all VAT incurred by the Finance Party in respect of the costs or expenses to the extent that the Finance Party reasonably determines that neither it nor any other member of the group of which it is a member for VAT purposes is entitled to credit or repayment from the relevant tax authority in respect of the VAT.

12.7Tax forms

(a)At least 10 Business Days prior to the date of the first scheduled payment of interest under this Agreement, and within 20 Business Days from the beginning of each calendar year falling after the Signing Date, the Lender shall use its reasonable efforts to provide to the Borrower a document issued by the relevant government authority in its jurisdiction of residence confirming that it is a resident of that jurisdiction.

(b)At the request of the Borrower (acting reasonably), the Lender shall use its reasonable efforts to provide any other documentation or information to the Borrower that may be reasonably necessary for the Borrower to establish a complete exemption from Russian withholding tax in relation to payments of interest under this Agreement.

13INCREASED COSTS

13.1Increased costs

(a)Subject to Clause 13.3 (Exceptions) the Borrower shall, within three Business Days of a demand by the Lender, pay for the account of the Lender the amount of any Increased Costs incurred by the Lender or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

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(b)In this Agreement “Increased Costs” means:

(i)a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;

(ii)an additional or increased cost; or

(iii)a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered the Lender or any of its Affiliates to the extent that it is attributable to the Lender having entered into its Commitment or funding or performing its obligations under any Finance Document.

13.2Increased cost claims

(a)The Lender intending to make a claim pursuant to Clause 13.1 (Increased costs) shall promptly notify the Borrower.

(b)The Lender shall, as soon as practicable provide a certificate confirming the amount of its Increased Costs.

13.3Exceptions

(a)Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i)attributable to a Tax Deduction required by law to be made by the Borrower;

(ii)compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 (Tax indemnity) applied); or

(iii)attributable to a breach by the Lender or its Affiliates of any law or regulation.

(b)In this Clause 13.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 12.1 (Definitions).

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14OTHER INDEMNITIES

14.1Currency indemnity

(a)If any sum due from the Borrower under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(i)making or filing a claim or proof against the Borrower;

(ii)obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings against the Borrower,

the Borrower shall as an independent obligation, within three Business Days of demand, indemnify the Lender against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to the Lender at the time of its receipt of that Sum.

(b)The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2Other indemnities

The Borrower shall, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:

(a)the occurrence of any Event of Default;

(b)a failure by the Borrower to pay any amount due under a Finance Document on its due date;

(c)funding, or making arrangements to fund, its participation in a Tranche requested by the Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender; or

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(d)a Tranche (or part of a Tranche) not being prepaid in accordance with a notice of prepayment given by the Borrower.

15MITIGATION BY THE LENDER

15.1Mitigation

(a)The Lender shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 (Illegality), Clause 12 (Tax gross-up and indemnities) or Clause 13.1 (Increased costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b)Paragraph (a) above does not in any way limit the obligations of the Borrower under the Finance Documents.

15.2Limitation of liability

(a)The Borrower shall indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 15.1 (Mitigation).

(b)The Lender is not obliged to take any steps under Clause 15.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

16COSTS AND EXPENSES

16.1Transaction expenses

The Borrower shall promptly on demand pay the Lender the amount of all reasonable out-of-pocket costs and legal expenses (internal and external but with a cap amounting to USD 50,000) incurred by the Lender in connection with the negotiation, preparation and execution of:

(a)this Agreement and any other documents referred to in this Agreement; and

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(b)any other Finance Documents executed after the date of this Agreement.

16.2Amendment costs

If (a) the Borrower requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 23.6 (Change of currency), the Borrower shall, within ten Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in responding to, evaluating, negotiating or complying with that request or requirement.

16.3Enforcement costs

The Borrower shall, within ten Business Days of demand, pay to the Lender the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

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SECTION 7
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

17REPRESENTATIONS

The Borrower makes the representations and warranties set out in this Clause 17 to each Finance Party on the date of this Agreement.

17.1Status

(a)It is an open joint stock company, duly established, registered and validly existing under the laws of the Russian Federation.

(b)It has the power to own its assets and carry on its business as it is being conducted.

17.2Binding obligations

The obligations expressed to be assumed by it in each Finance Document are legal, valid, binding and enforceable obligations, subject to insolvency and other laws affecting creditors’ rights generally and principles of equity.

17.3Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a)any law or regulation applicable to it;

(b)its constitutional documents; or

(c)any agreement or instrument binding upon it or any of its assets.

17.4Power and authority

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents and the transactions contemplated by those Finance Documents.

17.5Validity and admissibility in evidence

All Authorisations required:

(a)to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents;

(b)for it to carry on its and their business; and

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(c)	to make the Finance Documents admissible in evidence in the general jurisdiction courts or commercial courts (arbitrazhniye sudi) of the Russian Federation in an original action or action to enforce a foreign arbitral award, provided that authenticated and notarised Russian texts are made available to such courts at that time and any other procedures and formalities regarding presentation of documents to a Russian court are complied with, have been obtained or effected and are in full force and effect (except, in relation to paragraph (b) above, where the failure to obtain such Authorisations (excluding any Telecommunications Authorisations) is not reasonably likely to have a Material Adverse Effect).
17.6	No bankruptcy proceedings
	Neither the Borrower nor any of its Significant Subsidiaries has taken any corporate action nor have any other steps been taken or legal proceedings been started or, to the best of its knowledge and belief (after due inquiry), threatened against it or any of its Significant Subsidiaries for (a) its liquidation or bankruptcy or the appointment of a liquidation commission (likvidatsionnaya komissiya) or a similar officer of it or any of its Significant Subsidiaries; (b) the institution of supervision (nablyudeniye), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshniy upravlayucshiy) or the appointment of a bankruptcy manager (konkursniy upravlayuschiy) or similar officer of it or any of its Significant Subsidiaries; (c) the convening of a meeting of creditors for the purposes of considering an amicable settlement (as defined in the Russian Insolvency Law); or (d) any analogous act in respect of it or any of its Significant Subsidiaries in any jurisdiction.
17.7	No filing or stamp taxes
	Under the law of the Russian Federation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in the Russian Federation or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, except for court registration fees in connection with any enforcement proceedings in such court.
17.8	Payment of Taxes
	It has not overdue tax liabilities, other than tax liabilities (a) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves or other appropriate provision has been made or (b) whose amount, together with all such other unpaid or

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	undischarged taxes, does not in aggregate exceed $25,000,000 (or its equivalent in any other currency or currencies).
17.9	No default
(a)	No Default or Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.
(b)	No event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which is reasonably likely to have a Material Adverse Effect.
17.10	Pari passu ranking
	Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
17.11	No proceedings pending or threatened
	Other than the UMC Litigation, no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (including but not limited to, investigative proceedings) have, to the best of its knowledge and belief (after due inquiry), been started or threatened against it or any of its Significant Subsidiaries which, if adversely determined would be reasonably likely to have a Material Adverse Effect.
17.12	Compliance with laws
	Each of the Borrower and its Significant Subsidiaries is conducting its business and operations in compliance with all laws and regulations and all directives of any government agency having legal force applicable or relevant to it, excluding any such non-compliance which would not reasonably be expected to have a Material Adverse Effect.
17.13	No Immunity
(a)	The execution by the Borrower of the Finance Documents constitutes, and its exercise of its rights and performance of its obligations thereunder will constitute, private and commercial activities done and performed for private and commercial purposes (rather than public and governmental purposes).
(b)	In any proceedings taken in the Russian Federation in relation to the Finance Documents, the Borrower will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.

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17.14	Repetition
	The Repeating Representations are deemed to be made by the Borrower by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period (provided that whenever the representation in paragraph (c) of Clause 17.3 is deemed to be made on a date other than the Signing Date or a Utilisation Date, the statement “except where the same would not be reasonably likely to have a Material Adverse Effect” shall qualify the representation in said paragraph (c)).
18	INFORMATION UNDERTAKINGS
	The undertakings in this Clause 18 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
18.1	Financial statements
	The Borrower shall supply to the Lender:
(a)	as soon as the same become available, but in any event within 180 days after the end of each of its financial years, its audited consolidated and non-consolidated financial statements for that financial year; and
(b)	as soon as the same become available, but in any event within (i) 60 days after the end of each of its first, second and third financial quarters and (ii) 90 days after the end of its fourth financial quarter, its unaudited consolidated and non-consolidated financial statements for that financial quarter.
18.2	Requirements as to financial statements
(a)	Each set of financial statements delivered by the Borrower pursuant to Clause 18.1 (Financial statements) shall be certified by an authorised officer of the Borrower as fairly representing its (or, as the case may be, its consolidated) financial condition and operations as at the end of and for the period in relation to which those financial statements were drawn up.
(b)	The Borrower shall procure that each set of consolidated financial statements delivered pursuant to Clause 18.1 (Financial statements) is prepared using GAAP accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Lender:

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(c)	a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and
(d)	Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.
(e)	The Borrower shall procure that each set of non-consolidated financial statements delivered pursuant to Clause 18.1 (Financial statements) is prepared using RAS accounting practices and financial reference periods.
18.3	Information: miscellaneous
	The Borrower shall supply to the Lender:
(a)	all documents dispatched by the Borrower to its shareholders (or any class of them) or its creditors generally promptly after they are dispatched; and
(b)	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which would, if adversely determined, be reasonably likely to have a Material Adverse Effect.
18.4	Notification of Default
(a)	The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
(b)	Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).
19	GENERAL UNDERTAKINGS
	The undertakings in this Clause 19 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
19.1	Authorisations
	The Borrower shall promptly:
	(i)	obtain, comply with and do all that is necessary to maintain in full force and effect; and

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	(ii)		supply certified copies to the Lender of,
	any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.
19.2	Compliance with laws
	The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.
19.3	Maintenance of existence
	The Borrower shall maintain its corporate existence.
19.4	Negative pledge
(a)	The Borrower shall not create or permit to subsist any Security over any of its assets.
(b)	The Borrower shall not
	(i)	sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by the Borrower or any other member of the Group;
	(ii)	sell, transfer or otherwise dispose of any of its receivables on recourse terms;
	(iii)	enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
	(iv)	enter into any other preferential arrangement having a similar effect, in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c)	Paragraphs (a) and (b) above do not apply to Permitted Security.
19.5	Disposals
(a)	The Borrower shall not (and shall ensure that no other member of the Group will) enter into a single transaction or a series of transactions (whether related or not and whether voluntary or involuntary) to sell, lease, transfer or otherwise dispose of any asset.

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(b)	Paragraph (a) above does not apply to any sale, lease, transfer or other disposal:
	(i)	made in the ordinary course of trading of the disposing entity;
	(ii)	of assets in exchange for other assets comparable or superior as to type, value and quality;
	(iii)	made from one member of the Group to another member of the Group;
	(iv)	of cash or cash equivalents for cash or cash equivalents;
	(v)	where the book value of such asset (when aggregated with the book value of each other asset disposed of under this sub-clause (v)) (in each case as calculated in accordance with GAAP) does not exceed (x) 10% of the Borrower’s Total Assets in any financial year of the Borrower and (y) 25% of the Borrower’s Total Assets during the period starting on the Signing Date and ending on the date that all amounts outstanding under this Agreement have been paid in full. At the request of the Lender (any such request to be made no more than once per calendar quarter, unless a Default is continuing), the Borrower shall provide a certificate to the Lender setting out in reasonable detail the book value of any assets disposed of under this sub-clause (v) (calculated in accordance with GAAP); or
	(vi)	involving the transfer of any or all of the Borrower’s shares in UMC pursuant to the UMC Litigation to a person that is not a member of the Group (provided that this sub-clause (vi) shall not in any way prejudice the rights of the Finance Parties under Clause 21.16 (UMC Litigation)).
		When calculating the Borrower’s Total Assets under sub-clause (v) above, if the annual consolidated balance sheet of the Borrower for the immediately preceding financial year of the Borrower is not available, the Borrower’s Total Assets shall be calculated by reference to the draft audit report then available for that financial year and any other evidence reasonably requested by, and reasonably satisfactory to, the Lender.
19.6	Merger
	Immediately upon the Borrower’s knowledge or awareness thereof inform the Lender of any forthcoming amalgamation, demerger, merger, consolidation or corporate reconstruction of the Borrower.
19.7	Change of business
	The Borrower shall procure that no substantial change is made to the general nature of the business of the Borrower or the Group from that carried on at the Signing Date.

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19.8	Conduct of business
	The Borrower shall, conduct its business in all material respects in accordance with:
	(a)	all Telecommunications Laws to which it is or may become subject;
	(b)	all requirements of the telecommunications regulators of the Russian Federation, Ukraine and any other jurisdiction where it conducts its business; and
	(c)	the terms of all relevant Telecommunications Authorisations.
19.9	Pari passu
	The Borrower shall, and shall procure that each member of the Group will, procure that its obligations under the Finance Documents rank at least pari passu with all its other unsecured, unsubordinated obligations save where such other obligations are mandatorily preferred by law.
19.10	Purpose
	The Borrower shall apply the proceeds of the Facilities in accordance with Clause 3.1 (Purpose).
19.11	Frame Supply Contract
	Only with the prior written consent of the Lender agree upon any modification and/or amendment to the Frame Supply Contract which represents a material change to the Frame Supply Contract including but not limited to changes in the price/currency, terms of payment, country of origin, delivery and/or installation period etc.
20	EVENTS OF DEFAULT
	Each of the events or circumstances set out in Clause 20 is an Event of Default.
20.1	Non-payment
	The Borrower does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:
(a)	its failure to pay is caused by administrative or technical error; and
(b)	payment is made within three Business Days of its due date.

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20.2	Other obligations
(a)	The Borrower does not comply with any provision of the Finance Documents (other than those referred to in Clause 20.1 (Non-payment)).
(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 15 Business Days of the Lender giving notice to the Borrower or the Borrower becoming aware of the failure to comply.
20.3	Misrepresentation
	Any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of the Borrower under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made, and such representation or statement shall not have been rendered correct and not misleading within 15 Business Days of the Lender giving notice to the Borrower or the Borrower becoming aware of the same.
20.4	Cross default
	(a)	Any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is not paid when due nor within any originally applicable grace period.
	(b)	Any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
	(c)	Any single commitment for any Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
	(d)	Any creditor of any member of the Group becomes entitled to declare any single item of Financial Indebtedness of any member of the Group in an amount exceeding $10,000,000 (or its equivalent in any other currency or currencies) due and payable prior to its specified maturity as a result of an event of default (however described).
	(e)	Any of the events described in paragraphs (a) to (d) above occurs in relation to any Financial Indebtedness or commitment for Financial Indebtedness of any amount (including, for the avoidance of doubt, any amount that is less than $10,000,000 (or its equivalent in any other currency or currencies)), and

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		the aggregate amount of all such Financial Indebtedness and commitments for Financial Indebtedness is in excess of $35,000,000 (or its equivalent in any other currency or currencies).
20.5	Insolvency
	(a)	The Borrower or a Significant Subsidiary is unable or admits its inability to pay its debts as they fall due, suspends making payments on its debts generally or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling its indebtedness generally.
	(b)	The value of the assets of the Borrower or a Significant Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities).
	(c)	A moratorium is declared in respect of the indebtedness of the Borrower or a Significant Subsidiary.
20.6	Insolvency proceedings
	Any corporate action or legal proceedings are taken in relation to:
	(a)	the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary, including, but not limited to, institution of supervision (nablyudenie), financial rehabilitation (finansovoe ozdorovlenie), external management (vneshneye upravlenie) or bankruptcy management (konkursnoye upravlenie) (and such legal proceedings continue for at least 14 days);
	(b)	the suspension of payments or a moratorium of any indebtedness of the Borrower or a Significant Subsidiary (and such suspension continues for at least 14 days);
	(c)	the presentation or filing of a petition (or similar document) in respect of the Borrower or a Significant Subsidiary in any court, state arbitration court (arbitrazhnyi sud) or before any other authority in respect of the bankruptcy, winding-up, insolvency, dissolution, administration, reorganisation or liquidation of the Borrower or a Significant Subsidiary (and such petition has not been discharged within 14 days);
	(d)	the appointment of a liquidator (likvidator) or a liquidation commission (likvidatsionnaya komissiya), temporary manager (vremenniy upravlaushiy), administrative manager (administrativniy upravlaushiy), external manager (vneshniy upravlaushiy), bankruptcy manager (konkursniy upravlaushiy), receiver, administrator, administrative receiver, compulsory manager or other

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			similar officer in respect of the Borrower or a Significant Subsidiary or any of its assets (and such appointment continues for at least 14 days); or
	(e)		the enforcement of any Security over any asset or assets of the Borrower or a Significant Subsidiary (unless such enforcement is stayed within 14 days),
	or any analogous procedure or step is taken in any jurisdiction.
20.7	Creditors’ process
	Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower with a value in excess of $10,000,000 (or its equivalent in any other currency or currencies) and is not discharged or stayed within 30 days.
20.8	Judgment
	The rendering against the Borrower or any Subsidiary of the Borrower of a judgment, decree or order for the payment of money in an amount in excess of $10,000,000 (or its equivalent in any other currency or currencies) and the continuance of any such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution.
20.9	Cessation of Business
	The Borrower or any Significant Subsidiary suspends, ceases or threatens to suspend or cease to carry on all or a substantial part of its business.
20.10	Expropriation
	(a)	By or under the authority of any government:
	(i)	any seizure, compulsory acquisition, expropriation, nationalisation or renationalisation is made after the Signing Date of all or any material part of the assets or shares of (or other ownership interest in) any member of the Group;
	(ii)	the management of any member of the Group is wholly or partially displaced or the authority of any member of the Group in the conduct of its business is wholly or partially curtailed; or
	(iii)	any member of the Group is otherwise deprived of, or prevented from exercising ownership or control of, its material business or assets.
	(b)	Paragraph (a) above does not apply to:
	(i)	the transfer of any or all of the Borrower’s shares in UMC pursuant to the UMC Litigation to a person that is not a member of the Group (provided

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		that this paragraph (b)(i) shall not in any way prejudice the rights of the Finance Parties under Clause 21.16 (UMC Litigation)) or
	(ii)	the transfer of any or all of:
		(a)	the assets (including licences) held by Bitel; and/or
		(b)	the shares in Bitel
		pursuant to the Bitel Litigation, to a person that is not a member of the Group.
20.11	Russian Foreign Exchange Restrictions
	Any foreign exchange law is enacted or introduced in the Russian Federation which has the effect of prohibiting, restricting or delaying any payment by the Borrower or any member of the Group under the Finance Documents.
20.12	Moratorium
	Any moratorium is declared on the payment of any external indebtedness of the Russian Federation or of Russian residents generally.
20.13	The Russian Federation
	The political or economic situation in the Russian Federation deteriorates or an act of war or hostilities, invasion, armed conflict or act of a foreign enemy, revolution, insurrection or insurgency occurs in, or involves, the Russian Federation and such event, in the reasonable opinion of the Lender, has or is reasonably likely to have a Material Adverse Effect.
20.14	Unlawfulness
	It is or becomes unlawful for the Borrower to perform any of its obligations under the Finance Documents.
20.15	Repudiation
	The Borrower repudiates a Finance Document or evinces an intention to repudiate a Finance Document.
20.16	UMC Litigation
	The UMC Litigation is adversely determined and, in the reasonable opinion of the Lender, such adverse determination has or is reasonably likely to have a Material Adverse Effect.

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20.17	EKN Final Guarantee
	The EKN Final Guarantee is fully or partially withdrawn, suspended, terminated or cancelled or otherwise ceases to be in full force and effect or binding or enforceable against EKN otherwise than (i) by reason solely of the amounts drawn under this Agreement being prepaid in full in accordance with the terms hereof or (ii) with the consent of Lender.
20.18	Material adverse change
	Any Material Adverse Effect shall occur in the financial condition or operations, assets, prospects, business or the legal status of the Borrower such that it is reasonably likely that the Borrower may not, or will be unable to perform or observe its obligations under this Agreement.
20.19	Acceleration
	On and at any time after the occurrence of an Event of Default which is continuing the Lender may, by notice to the Borrower:
(a)	cancel the Total Commitments whereupon they shall immediately be cancelled;
(b)	declare that all or part of the Tranches, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and
(c)	declare that all or part of the Tranches be payable on demand, whereupon they shall immediately become payable on demand by the Lender.
20.20	Rights under EKN Final Guarantee
	The remedies set out in Clause 20.19 (Acceleration) shall be without prejudice to the rights of the Lender to make claims under and enforce the EKN Final Guarantee.
20.21	No claims against Finance Parties
	The Borrower agrees that if EKN makes a payment to a Finance Party pursuant to the EKN Final Guarantee following a notice pursuant to Clause 20.19 (Acceleration) from the Lender to the Borrower, the Lender may act on the instructions of EKN and the Borrower shall have no claims whatsoever in respect of any loss, damage or expense suffered or incurred by it against any Finance Party.

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SECTION 8
CHANGES TO PARTIES

21	CHANGES TO THE LENDERS
21.1	Assignments and transfers by the Lender
	The Lender may assign and/or transfer all or any of its rights and/or obligations, under the Finance Documents and the EKN Final Guarantee, change its lending office and disclose to any potential Qualifying Lender this Agreement and any information provided by the Borrower in connection with it.
22	CHANGES TO THE BORROWER
	The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

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SECTION 9
ADMINISTRATION

23	PAYMENT MECHANICS
23.1	Payments to the Lender
(a)	On each date on which the Borrower is required to make a payment under a Finance Document, the Borrower shall make the same available to the Lender (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b)	Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Lender specifies.
23.2	Partial payments
(a)	If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under the Finance Documents, the Lender shall apply that payment towards the obligations of the Borrower under the Finance Documents in the following order:
(b)	first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;
	(i)	secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;
	(ii)	thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and
	(iii)	fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
(c)	Paragraphs (a) and (b) above will override any appropriation made by the Borrower.
23.3	No set-off by the Borrower
	All payments to be made by the Borrower under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

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23.4	Business Days
(a)	Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)	During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
23.5	Currency of account
(a)	Subject to paragraphs (b) to (e) below, Dollars is the currency of account and payment for any sum due from the Borrower under any Finance Document.
(b)	A repayment of a Tranche or Unpaid Sum or a part of a Tranche or Unpaid Sum shall be made in the currency in which that Tranche or Unpaid Sum is denominated on its due date.
(c)	Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
(d)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(e)	Any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency.
23.6	Change of currency
(a)	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(b)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Lender (after consultation with the Borrower); and
	(i)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Lender (acting reasonably).
(c)	If a change in any currency of a country occurs, this Agreement will, to the extent the Lender (acting reasonably and after consultation with the Borrower) specifies to be necessary, be amended to comply with any generally accepted

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	conventions and market practice in the London interbank market and otherwise to reflect the change in currency.
24	SET-OFF
	A Finance Party may set off any matured obligation due from the Borrower under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
25	NOTICES
25.1	Communications in writing
	Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
25.2	Addresses
	The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
(a)	in the case of the Borrower, that identified with its name below;
(b)	in the case of the Lender, that identified with its name below,
	or any substitute address, fax number or department or officer as the Party may notify to the Lender (or the Lender may notify to the other Parties, if a change is made by the Lender) by not less than five Business Days’ notice.
25.3	Delivery
(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:
(b)	if by way of fax, when received in legible form; or
	(i)	if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

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	and, if a particular department or officer is specified as part of its address details provided under Clause 25.2 (Addresses), if addressed to that department or officer.
(c)	Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with its signature below (or any substitute department or officer as it shall specify for this purpose).
25.4	English language
(a)	Any notice given under or in connection with any Finance Document must be in English.
(b)	All other documents provided under or in connection with any Finance Document must be:
(c)	in English; or
	(i)	if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
26	CALCULATIONS AND CERTIFICATES
26.1	Accounts
	In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
26.2	Certificates and Determinations
	Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
26.3	Day count convention
	Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the London interbank market differs, in accordance with that market practice.

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27	PARTIAL INVALIDITY
	If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
28	REMEDIES AND WAIVERS
	No failure to exercise, nor any delay in exercising, on the part of any Finance Party or the Borrower, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law..
29	COUNTERPARTS
	Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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SECTION 10
GOVERNING LAW AND ENFORCEMENT

30	GOVERNING LAW
	This Agreement is governed by Swedish law.
31	ARBITRATION
31.1	Arbitration
	Any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”) shall be referred to and finally resolved by arbitration under the Arbitration Rules (the “Rules”) of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC Institute).
31.2	Procedure for arbitration
	Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.
	The parties are advised to make the following additions to the arbitration clause, as required:
	The arbitral tribunal shall be composed of three (3) arbitrators
	The seat of arbitration shall be Stockholm.
	The language to be used in the arbitral proceedings shall be English.
31.3	Waiver of immunity
	The Borrower irrevocably agrees that, should any party take any proceedings anywhere (whether for an injunction, specific performance, damages or otherwise), no immunity (to the extent that it may at any time exist, whether on the grounds of sovereignty or otherwise) from those proceedings, from attachment (whether in aid of execution, before judgment or otherwise) of its assets or from execution of judgment shall be claimed by it or on behalf of it or with respect to its assets, any such immunity being irrevocably waived. The

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Borrower irrevocably agrees that it and its assets are, and shall be, subject to such proceedings, attachment or execution in respect of its obligations under the Finance Documents.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

The Borrower

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

Address:4 Marksistskaya Street,

109147 Moscow, Russian Federation

Fax No:+7 495 911 6531

Attention:Mikhail V. Shamolin

President and CEO

By:
Name:	Vsevolod V. Rosanov
Title:	Vice-President and CFO
By:
Name:	Irina R. Borisenkova
Title:	Chief Accountant

The Lender

Skandinaviska Enskilda Banken AB (publ)

Address:Kungsträdgårdsgatan 8

106 40 Stockholm, Sweden

Fax No:+46 8 763 8919

By
	Anders Falkman	Göran Fransson
	Head of Export & Project Finance	Legal Counsel

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SCHEDULE 1
INITIAL CONDITIONS PRECEDENT

1.	The Borrower
	(a)	Certified copy of all corporate or management resolutions necessary to authorise the Borrower to execute and perform the Finance Documents to which it is a party and any documents referred to therein and the transactions contemplated thereunder (including but not limited to any major transaction approvals or interested party transaction approvals, if applicable).
	(b)	Evidence of the authority of the relevant signatories of the Borrower to execute each Finance Document to which it is a party and any documents referred to therein and the transactions contemplated thereunder.
	(c)	A certified copy of the most recent balance sheet of the Borrower by reference to the date of each Finance Document.
	(d)	A certificate executed on behalf of the Borrower:
		(i)	certifying the sample signature and office of each person that signed the relevant Finance Document and any documents referred to therein and the transactions contemplated thereunder on behalf of the Borrower and certifying that such signatories hold the positions in which capacity they executed such documents;
		(ii)	certifying that each copy document relating to it specified in this Schedule 1is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement;
		(iii)	the Borrower, confirming that borrowing the Total Commitments would not cause any borrowing or similar limit binding on the Borrower to be exceeded; and
2.	Finance Documents
	The Lender has received each of the following documents in form and substance satisfactory to it:
	(a)	this Agreement; and
	(b)	Offer from EKN to issue a State Export Credit Guarantee in respect of loss on claim,

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	in each case, duly executed by the parties thereto.
3.	Legal opinions
	A legal opinion of law firm Mannheimer Swartling Advokatbyrå AB, Moscow legal advisers to the Lender in the Russian Federation, substantially in the form distributed to them prior to signing this Agreement.
4.	Other documents and evidence
	(a)	A certified copy of any other Authorisation or other document, opinion or assurance which the Lender acting on the advice of Russian law counsel considers to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document, including certified copies of all necessary approvals and consents from the Central Bank, as the case may be.
	(b)	The Original Financial Statements of the Borrower.
	(c)	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and expenses) have been paid or will be paid by the first Utilisation Date in respect of the Tranches.
	(d)	The original of the EKN Final Guarantee in terms satisfactory to the Lender which shall be in full force and effect and all conditions to the effectiveness thereof shall have been satisfied.
	(e)	A certified copy of the Frame Supply Contract, duly executed by the Borrower and the Supplier and a certified copy of the relevant Purchase Orders evidencing (to the satisfaction of the Lender) that the Borrower is required to purchase equipment in accordance with the Frame Supply Contract and such Purchase Orders in an aggregate amount of USD 320,000,000.
	(f)	In respect of the Frame Supply Contract and the Purchase Orders, a statement from the Supplier that it has not engaged in any bribery or other corrupt activity as may be required by EKN.
	(g)	A certified copy of the Business Plan and budget approved by the board of directors of the Borrower evidencing that the entering into of the Facility is within limits set out by such budget and Business Plan.

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(h)	A copy of any other Authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.
(i)	Satisfactory completion of “know-your-customer” due diligence.

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SCHEDULE 2

REQUESTS

Part 1

EKN PREMIUM TRANCHE UTILISATION REQUEST

From:OJSC Mobile Telesystems, Moscow

To:Skandinaviska Enskilda Banken AB (publ)

Dated:[                   ]

Dear Sirs

OJSC Mobile Telesystems, Moscow (the “Borrower”) — Export Credit Agreement dated [           ] 2008 (the “Facility Agreement”)

1.We refer to the Facility Agreement. This is a EKN Premium Tranche Utilisation Request. Terms defined in the Facility Agreement shall have the same meaning in this EKN Premium Tranche Utilisation Request unless given a different meaning in this EKN Premium Tranche Utilisation Request.

2.We request a Utilisation in dollars under the Facility Agreement on the following terms:

Tranche:	EKN Premium Tranche No.
Proposed Utilisation Date:	[                  ] (or, if that is not a Business Day, the next Business Day)
Tranche amount:	US$ [                  ] or, if less, the Available Facility in respect of the EKN Premium Facility.

3.We confirm that each condition specified in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4.The proceeds of this Tranche should be credited to the following account with the Tranche [account details to be inserted].

5.This Utilisation Request is irrevocable.

6.We confirm that:

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(a)the amount referred to in paragraph 2 above does not include any amount for which a drawing has been made under the Facility Agreement or any other loan facility agreement;

(b)the requested Tranche complies with Clause 3. (Purpose) of the Facility Agreement;

(c)the amount referred to in paragraph 2 above does not include any amount in respect of any matter currently the subject of any legal proceedings, nor to the best of our knowledge and belief will it become the subject of legal proceedings;

(d)the Frame Supply Contract is in full force and effect and there is no default under such contract;

(e)the Repeating Representations are true in all material respects; and

(f)you may rely on the accuracy and completeness of all information and documents contained in or supplied with this certificate or delivered pursuant hereto.

7.We undertake to supply you with such additional information and documentation, and such clarification, as you advise us is necessary or reasonably desirable in connection with the EKN Final Guarantee and we agree we will not hold you responsible for any delay in meeting this request for a Tranche occasioned by you making such request for information.

Yours faithfully

authorised signatory for
OJSC MobileTelesystems, Moscow

[signature of Chief Accountant is recognized]

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Part 2

EQUIPMENT TRANCHE UTILISATION REQUEST

From:OJSC MobileTelesystems, Moscow

To:Skandinaviska Enskilda Banken AB (publ)

Dated:[                   ]

Dear Sirs

OJSC MobileTelesystems, Moscow (the “Borrower”) — Export Credit Agreement dated [             ] 2008 (the “Facility Agreement”)

1.We refer to the Facility Agreement. This is an Equipment Tranche Utilisation Request. Terms defined in the Facility Agreement shall have the same meaning in this Equipment Tranche Utilisation Request unless given a different meaning in this Equipment Tranche Utilisation Request.

2.We request a Utilisation in dollars  under the Facility Agreement on the following terms:

Tranche:	Equipment Tranche No.
Proposed Utilisation Date:	[            ] (or, if that is not a Business Day, the next Business Day)
Tranche Amount:	[            ] or, if less, the Available Facility in respect of the Equipment Facility

3.The amount in paragraph 2 represents 85% or less of the amount of Eligible Goods paid by us to the Supplier pursuant to the Frame Supply Contract and Purchase Order no. [  ] and eligible for financing under the Facility Agreement.

4.We confirm that this is a request for reimbursement and that we have already paid 100% of the amount due in respect of the amount of Eligible Goods paid to the Supplier pursuant to the Frame Supply Contract and Purchase Order no. [  ].

5.We confirm that each condition specified in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

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6.The proceeds of this Tranche should be credited to the following account with the Tranche [account details to be inserted]

7.This Utilisation Request is irrevocable.

8.We also include true copies of the following documents:

(a)a summary of paid invoices as certified pursuant to a certificate from the Supplier; and

(b)a declaration of the origin of the equipment related to the Frame Supply Contract.

9.We confirm that:

(a)on [                   ] we made a payment to the Supplier in the amount of USD [     ] which was due under the Frame Supply Contract and Purchase Order no. [  ] in respect of Eligible Goods supplied by the Supplier;

(b)the requested Tranche complies with Clause 3 (Purpose) of the Facility Agreement;

(c)the Frame Supply Contract and Purchase Order no. [  ] are in full force and effect and there is no default under any of them;

(d)the amount referred to in paragraph 2 above does not include any amount in respect of any matter currently the subject of any legal proceedings, nor to the best of our knowledge and belief will it become the subject of legal proceedings;

(e)the amount referred to in paragraph 2 above does not include any amount for which a Tranche has previously been made under the Facility Agreement or for which a drawing has been made under any other loan facility agreement ;

(f)all documents supplied by us in support of this certificate are true copies of the originals and are in all material respects in conformity with the Frame Supply Contract and Purchase Order no. [  ];

(g)the Repeating Representations are true in all material respects; and

(h)you may rely on the accuracy and completeness of all information and documents contained in or supplied with this certificate or delivered pursuant hereto.

10.We enclose an original Supplier’s Certificate.

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11.We undertake to supply you with such additional information and documentation, and such clarification, as you advise us is necessary or reasonably desirable in connection with the EKN Final Guarantee and we agree we will not hold you responsible for any delay in meeting this request for a Tranche occasioned by you making such request for information.

Yours faithfully

authorised signatory for
OJSC MobileTelesystems, Moscow

[signature of Chief Accountant is required]

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Part 3

SUPPLIER’S CERTIFICATE

From:the Supplier

To:OJSC MobileTelesystems, Moscow

cc:Skandinaviska Enskilda Banken AB (publ)

Dated:[                   ]

Dear Sirs

OJSC MobileTelesystems, Moscow (the “Borrower”) — Export Credit Agreement dated [          ] 2008 (the “Facility Agreement”)

We refer to the Facility Agreement and the Equipment Tranche Utilisation Request dated [          ], which has been made available to us. We understand that the Borrower has requested a drawing of a Tranche under the Facility Agreement to reimburse a payment made in respect [insert details of relevant Equipment Tranche Utilisation Request], and we give this certificate in connection with the Borrower’s requested drawing. Terms defined in the Facility Agreement have the same meaning in this Supplier’s Certificate.

We represent and warrant that:

(a)the Borrower has to date fulfilled all of its payment obligations assumed towards us under the Frame Supply Contract and Purchase Order no. [  ] in respect of Eligible Goods;

(b)the amount claimed by the Borrower for reimbursement pursuant to the Equipment Tranche Utilisation Request dated [                   ] to which this certificate relates does not include any amount for which we have received a disbursement under the Facility or for which the Borrower has previously received a reimbursement under any document of which we have notice;

(c)the Borrower has fully paid 100 per cent. of the amount of the relevant invoice(s) in respect of the Eligible Goods which relate to the Equipment Tranche Utilisation Request.

By:

Authorised Signatory

66

EX-4.8.1

Exhibit 4.8.1

EXECUTION VERSION

AMENDMENT AGREEMENT NO.1

between

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

and

SKANDINAVISKA ENSKILDA BANKEN AB (publ)

in relation to a Export Credit Agreement

dated 1 August 2008

THIS AMENDMENT AGREEMENT is made on 28 October 2008

BETWEEN

1.MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY, a  company established and existing under the laws of the Russian Federation and having its registered address at 4 Marksistskaya Street, 109147 Moscow, Russian Federation, as borrower (the “Borrower”);

2.SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) a bank established and existing under the laws of Sweden and having its registered address at Kungsträdgårdsgatan 8, 106 40 Stockholm as lender (the “Lender”)

WHEREAS this Agreement is supplemental to a Export Credit Agreement (the “Credit Agreement”) dated 1 August 2008 and made between the Borrower and the Lender.

IT IS AGREED as follows:

1Definitions

1.1All words and expressions defined in the Credit Agreement shall have the same meanings when used herein. In addition:

“Effective Date” has the meaning given to it in Clause 3.1 hereunder.

2Amendments to the Credit Agreement

2.1On and from the Effective Date the definition of Availability Period be amended to read:

“Availability Period” means in relation to:

Tranche 1 and EKN Tranche 1 (which relates to order number FCP 103 6446/1) the period from and including the date of this Agreement and ending on a date 11 Months thereafter;

Tranche 2 and EKN Tranche 2 (which relates to order number FCP 1038836) the period from the first delivery date (as defined in the order no. above) and ending on a date 11 Months thereafter; and

Tranche 3 and EKN Tranche 3 (which relates to order number FCP 1039451) the period from the first delivery date (as defined in the order no. above) and ending on a date  11 Months thereafter.

Neither of the Tranches above will be available after 1 December 2009.

1

2.2On and from the Effective Date Schedule 2 Part 1, EKN Premium Tranch Utilisation Request shall be amended to read as set out in Appendix 1 to this Agreement

2.3On and from the Effective Date Schedule 2 Part 3, Supplier´s Certificate of the Credit Agreement shall be amended to read as set out in Appendix 2 to this Agreement.

3Effectiveness

3.1This Agreement shall become effective on the date (the “Effective Date”) on which the Borrower has signed this Agreement.

4Miscellaneous

4.1This Agreement shall be read in one with the Credit Agreement and save as varied hereby, the Credit Agreement shall continue in full force and effect.

5Governing Law; Jurisdiction

5.1The provisions of Clause 30 and 31 of the Credit Agreement shall be incorporated into this Agreement mutatis mutandis.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

The Borrower

MOBILE TELESYSTEMS OPEN JOINT STOCK COMPANY

Address:        4 Marksistskaya Street,

109147 Moscow, Russian Federation

Fax No:  +7 495 911 6531

Attention:

By:
Name:
Title:
By:
Name:	Irina R. Borisenkova
Title:	Chief Accountant

Signing page will follow.

2

The Lender

Skandinaviska Enskilda Banken AB (publ)

Address:        Kungsträdgårdsgatan 8

106 40 Stockholm, Sweden

Fax No:   +46 8 763 8919

By

3

Appendix 1 to Amendment Agreement No 1

SCHEDULE 2

Part 1

EKN PREMIUM TRANCHE UTILISATION REQUEST

From:	OJSC Mobile Telesystems, Moscow
To:	Skandinaviska Enskilda Banken AB (publ)
Dated:	[        ]

Dear Sirs

OJSC Mobile Telesystems, Moscow (the “Borrower”) — Export Credit Agreement dated [           ] 2008 (the “Facility Agreement”)

1.We refer to the Facility Agreement. This is a EKN Premium Tranche Utilisation Request. Terms defined in the Facility Agreement shall have the same meaning in this EKN Premium Tranche Utilisation Request unless given a different meaning in this EKN Premium Tranche Utilisation Request.

2.We request a Utilisation in dollars under the Facility Agreement on the following terms:

Tranche:	EKN Premium Tranche No.
Proposed Utilisation Date:	[           ] (or, if that is not a Business Day, the next Business Day)
Tranche amount:	US$ [           ] or, if less, the Available Facility in respect of the EKN Premium Facility.

3.We confirm that each condition specified in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4.We hereby approve that the Tranche amount above shall be used for payment of the EKN Premium according to an invoice issued by EKN and instruct the Lender to execute such payments to EKN.

5.This Utilisation Request is irrevocable.

6.We confirm that:

4

(a)the amount referred to in paragraph 2 above does not include any amount for which a drawing has been made under the Facility Agreement or any other loan facility agreement;

(b)the requested Tranche complies with Clause 3. (Purpose) of the Facility Agreement;

(c)the amount referred to in paragraph 2 above does not include any amount in respect of any matter currently the subject of any legal proceedings, nor to the best of our knowledge and belief will it become the subject of legal proceedings;

(d)the Frame Supply Contract is in full force and effect and there is no default under such contract;

(e)the Repeating Representations are true in all material respects; and

(f)you may rely on the accuracy and completeness of all information and documents contained in or supplied with this certificate or delivered pursuant hereto.

7.We undertake to supply you with such additional information and documentation, and such clarification, as you advise us is necessary or reasonably desirable in connection with the EKN Final Guarantee and we agree we will not hold you responsible for any delay in meeting this request for a Tranche occasioned by you making such request for information.

Yours faithfully

authorised signatory for

OJSC MobileTelesystems, Moscow

[signature of Chief Accountant is recognized]

5

To

OJSC Mobile Tele Systems

4 Marksistskaya Street

Moscow 109147

Russia Federation

Certificate for Disbursement for the EKN Premium

OJSC Mobile Tele Systems, Moscow (“the Borrower”) — Export Credit Agreement dated 1 August 2008 (the “Facility Agreement”)

We hereby confirm to you that the EKN Premium related to EKN Tranche [                    ] and your EKN Premium Tranche Utilisation Request dated [                       ] in an amount of USD  [                            ] has been paid to EKN as per [                    ] according to the attached invoice issued by EKN.

Stockholm

Skandinaviska Enskilda Banken AB (publ)

6

Appendix 2 to Amendment Agreement No 1

Part 3

SUPPLIER´S CERTIFICATE

From:	the Supplier
To:	OJSC MobileTelesystems, Moscow
cc:	Skandinaviska Enskilda Banken AB (publ)
Dated:	[                   ]

Dear Sirs

OJSC MobileTelesystems, Moscow (the “Borrower”) — Export Credit Agreement dated 1 August 2008 (the “Facility Agreement”)

We refer to the Facility Agreement and the Equipment Tranche Utilisation Request dated [          ], which has been made available to us. We understand that the Borrower has requested a drawing of a Tranche under the Facility Agreement to reimburse a payment made in respect [insert details of relevant Equipment Tranche Utilisation Request], and we give this certificate in connection with the Borrower’s requested drawing. Terms defined in the Facility Agreement have the same meaning in this Supplier’s Certificate.

We represent and warrant that:

(a)the Borrower has to date fulfilled all of its payment obligations assumed towards us under the Frame Supply Contract and Purchase Order no. [   ] in respect of Eligible Goods;

(b)the amount claimed by the Borrower for reimbursement pursuant to the Equipment Tranche Utilisation Request dated [                ] to which this certificate relates does not include any amount for which we have received a disbursement under the Facility or for which the Borrower has previously received a reimbursement under any document of which we have notice;

(c)the Borrower has fully paid 100 per cent. of the amount of the relevant invoice(s) in respect of the Eligible Goods which relate to the Equipment Tranche Utilisation Request.

(d)the new and amended payment schedule to the Frame Supply Contract is signed and legally binding and that the payment terms according to the Frame Supply Contract are compliant with the OECD rules.

7

(e)15% of the Frame Supply Contract no [              ] has been paid before the Mean Value Delivery Date is reached for that contract.

(f)all relevant  shipping documents are signed and executed and the Eligible Goods transported in accordance with the rules and regulations in the Frame Supply Contract and Purchase Orders mentioned under (a) above.

(g)We are enclosing a summary of invoices related to the Frame Supply Contract and Purchase orders mentioned under (a) above.

By:

Authorised Signatory

8

EX-4.9

Exhibit 4.9

Open Joint Stock Company “Mobile TeleSystems”

Location: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

Postal address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

CERTIFICATE OF SECURITIES

Interest-Bearing Documentary Non-Convertible Bearer Notes Under Mandatory Centralized Storage, Series 01¸ 10,000,000 (Ten million) pieces in total of par value RUR 1,000 (One thousand roubles) each, maturity on the day 1,820 (One thousand eight hundred twentieth) from the Opening date of the Notes placement through public offering.

State registration number of the securities issuance: 4-01-04715-A

Date of state registration of the securities issuance: December 27, 2007.

This paper is to certify title to 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Total quantity of Notes having state registration # 4-01-04715-A is 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Open Joint Stock Company “Mobile TeleSystems” shall ensure the rights of Note owners, provided they comply with the procedures for execution of such rights set by Russian Federation law.

This Certificate shall be deposited with Non-Commercial Partnership “National Depository Centre” having registered address: Moscow, Sredniy Kislovskiy per., 1/13, building 4, and providing mandatory centralized storage of the Note Certificates.

Surety for the Notes was provided by:

Limited Liability Company “Mobile TeleSystems — Capital”

General Director

of Limited Liability Company

“Mobile TeleSystems — Capital”                                                                /                                     /

                      200    

Place of Corporate Seal

CEO Open Joint Stock Company “Mobile TeleSystems”                              200                                      / Shamolin M.V./ Place of Corporate Seal

1. Class, category (type) of securities:

Class of securities: Bearer Notes.

Identification features of the offered securities: non-convertible interest-bearing documentary bearer notes under mandatory centralized storage, series 01 (hereinafter in this document jointly “Notes” or “Issuance Notes” and individually “Note” or “Issuance Note”).

2. Form of the securities:

Documentary issuance.

3. Indication of mandatory centralized storage:

The Issuance Notes shall be under mandatory centralized storage.

The Depository providing mandatory centralized storage:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Short corporate name: NDC

Location: Moscow City, Sredniy Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

TIN (Taxpayer’s Identification Number): 7706131216

Tel. # (495) 956-2790, (495) 956-2791

Data of professional securities market participant license for conducting depository activities:

License # 177-03431-000100

Date of Issuance: 04.12.2000

Effective period: no limitation of the effective period

The License was issued by: Federal Commission for the Security Market of Russia

All Notes of the issuance are documented with one certificate (hereinafter, “The Certificate”), which is subject to mandatory centralized storagein Non-Commercial Partnership “National Depository Centre” (hereinafter, also “NDC” and “The Depository”).  Prior to the Opening date of the Notes placement the Issuer shall deliver the Certificate to NDC for storage.

A sample copy of the Certificate is provided in Appendix to the Decision on issuance of securities and to the Securities Issuance Prospectus.  No separate Note Certificates shall be provided to Note owners on hand.  Note owners shall not be entitled to demand delivery of Certificates on hand.

Title to the Notes and transfer of the Notes including encumbrances on the Notes shall be registered and certified by NDC acting as a depository, and by the depositories acting as depositors of NDC (hereinafter, jointly — “The Depositories”).

Title to the Notes shall be certified by extracts from depo accounts issued by NDC and the Depositories.

Title to the Notes shall pass from a person to another person at the moment of entry record to the Notes acquirer’s depo account with NDC and the Depositories.

The Notes shall be written off the depo accounts at redemption after the issuer performs all its obligations to the Note owners with respect of coupon income payment and the Notes nominal value repayment.

The Certificate shall be cancelled after all Notes are written off the NDC depo accounts.

Procedures for registration and transfer of title to prospectus-based securities under mandatory centralized storage were established by Federal Law “On the Securities Market” # 39-FZ of 22.04.96, and “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97, and internal regulations of NDC and Depositories.

As per Federal Law “On the Securities Market” # 39-FZ of 22.04.96:

If certificates for bearer documentary securities are stored and/or rights of ownership for such securities are registered with a depository, transfer of title to a bearer documentary security shall pass to the acquirer at the moment of entry record made to the acquirer’s depo account. The rights provided for by a prospectus-based security shall pass to the acquirer at the moment of transfer of rights for such security.

If certificates for bearer documentary securities are stored with a depository, the rights provided for by a prospectus-based security shall be exercised with support of certificates presented by such depositories under instructions specified in depository contracts of owners, with attachment of a list of such owners.  An issuer in this case shall ensure implementation of the rights under bearer securities by the person included in such list.

If by the moment of making a List of Owners and/or Nominal Holders of Securities for the purpose of execution of Issuer’s obligations under the securities, information on a new owner was not delivered to the securities Depository or to the securities nominal holder, execution of obligations to the owner included in the List of Owners and/or Nominal Holders of Securities shall be deemed proper. The responsibility of timely notification shall be with the securities acquirer.

As per “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97:

A depository shall ensure segregated storage of securities and (or) registration of rights for securities of each customer (depositor) from the securities of other customers (depositors) of the depository, in particular, by opening to each customer (depositor) of a separate depo account.  Records of title to securities made by a depository shall certify the rights for securities, unless established otherwise through court proceedings.  A Depository shall execute transactions with its customers’ (depositors’) securities exclusively on assignment from such customers (depositors) or persons authorized by them including account custodians, and within the timeframe set by depository contracts.  A Depository shall only make records to customer’s (depositor’s) depo account if documents have been presented that under The Regulation on Depository Activities in the Russian Federation and other regulatory acts and depository contract represent the authorization documents for making such records.

Records to customer’s (depositor’s) depo account can be made on the basis of the following authorization documents:

· instruction issued by a customer (depositor) or by its authorized representative including an account custodian, in accordance with the terms of a depository contracts;

· in case title to securities passes under other than civil law transactions: the documents certifying transfer of title to securities under applicable laws and other regulatory acts.

A depository shall register the facts of encumbrances on customers’ (depositors’) securities by pledge or other rights of third parties under the procedures set in the depository contracts.

Title to securities stored in a depository and (or) to securities rights for which are registered by a depository shall be deemed passed from the moment of entry record made by the depository to the to customer’s (depositor’s) depo account.  However, in absence of a record on the depo account, the person concerned is not deprived of its capacity to prove its rights for a security by reference to other evidence.

Should the applicable legislation and / or regulations issued by federal regulator of the securities market be amended, the procedures for registration and transfer of title to the Notes shall be regulated with due account of the amended provisions of legislation and / or regulations issued by federal regulator of the securities market.

2

4. Par value of each security in the issuance:

RUR 1 000 (One thousand).

5. Quantity of securities in the issuance:

Quantity of Notes in the placement: 10 000 000 (Ten million).

The Notes issuance is not expected to include tranches.

6. Total quantity of previously placed securities of this issuance:

No securities of this issuance were previously placed.

7. Owner’s rights for each security in the issuance:

The Notes represent direct unconditional obligations of Open Joint Stock Company “Mobile TeleSystems” (hereinafter, “The Issuer”).

Owner of the Note is entitled to receive par value of the Note at its redemption at maturity.

Owner of the Note is entitled to receive coupon income (interest on the Notes par value) on expiration of each coupon period.

Owner of the Note is entitled to demand buy-out of the Notes by the Issuer in the cases and under the terms specified in the Securities Issuance Prospectus and Decision on the Securities Issuance.

Owner of the Notes is entitled to demand a compensation of the Notes par value and payment of the accrued coupon income on the Notes due to it in the following cases:

· The Notes have been delisted by every stock exchange that had the Notes in its Quote Lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

· The Issue was more than 7 (Seven) days late in repayment of its obligations on coupon income on the Notes than the due date of coupon income payment set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus;

· The Issue has declared its default on financial obligations with respect of Notes holders of the issuance.

Holder of the Notes can demand reimbursement of the Notes nominal value and repayment of accrued coupon interest on the Notes due to it and assessed in accordance with clause 15 of the Decision on Issuance of Securities and clause 10.10 of the Securities Issuance Prospectus. on the next day after the date when any of the above events occurred.

The Notes shall be prematurely redeemed upon request of their holders within 60 (Sixty) working days from the moment of disclosure of information on occurrence of the above events in accordance with the procedures set out in clauses 9.5. and 11.) of the Decision on Issuance of Securities, or from the date when holders of the Notes learned or were to learn of the fact of occurrence of such event.

The Notes may be prematurely redeemed only after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

Holder of the Notes is entitled to freely sell of otherwise dispose of the Notes. The Holder of the Notes that purchased the Notes in the course of the IPO is not entitled to exercise transactions with the Notes before the Notes are fully repaid and before a report on the securities issuance results is registered by the state authority, or a notice is filed with the registering authority on the Notes issuance results as required by the applicable Russian Federation legislation.

Holder of the Notes is entitled to exercise other rights provided for by the Russian Federation legislation.

The Issue undertakes to ensure the Notes holders’ rights, provided they comply with the procedures for exercising such rights set by the Russian Federation legislation.

Should the Issue fail to perform or properly perform its obligations under the Notes, owners of the Notes shall be entitled to address claims to Open Joint Stock Company Mobile TeleSystems - Capital (hereinafter, the Warrantor) that has provided surety for the Notes in accordance with the terms of provision of surety in the form of a warranty for the purposes of the Notes issuance.

Information of the person that provided surety for the issued notes:

Full corporate name: Limited Liability Company Mobile TeleSystems - Capital

Abbreviated corporate name: LLC MTS-Capital

Location: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya, 5,building 2.

The Warrantor that provided the surety shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform (properly perform) its obligations under the Notes.

Title to the provided surety shall pass to acquirer of the Note together with transfer of title to the Note, in the same scope and under the same terms that apply at the moment of transfer of title to the Note.  Transfer of rights arising from the provided surety shall not be effective if no transfer of title to the Note takes place.

Information on guarantees of fulfillment of obligations under the issued Notes and the procedures to be followed by owners and/or nominal holders of the Notes in case the Issuer defaults on its obligations under the Notes of this issuance or fails to perform or properly perform the obligations, were described in clauses 9.7, 12.2 of the Decision on issuance of securities and clause 9.1.2. of the Securities Issuance Prospectus.

If the Issue has overdue payments under the Notes of the issue to several Note holders, none of the Note holders shall have any priority with respect of such Issuer’s payables.

The Issuer undertakes that it shall repay the invested funds to the Note holders, should the Notes issuance be recognized as legally ineffective or invalid.

8. The terms and provisions of placement of the securities issuance.

8.1. Method of the securities placement: public subscription.

8.2 Validity period of the securities placement.

The procedures for establishing the Opening date of the placement:

The Opening date of the placement shall be established by the Issuer’s authorized management body and shall be communicated to all stakeholders in accordance with the RF legislation and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Opening date of the Notes placement cannot be earlier than two weeks after publication of an announcement on state registration of the securities issuance in accordance with the RF legislations and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The above two weeks period shall be counted from the date following the date of publication of an announcement on state registration of the Notes issuance by Vedomosti Newspaper.

The Opening date of the Notes placement established by the Issuer’s authorized management body can be modified by decision of the same Issuer’s management body, provided that all requirements to procedures of information disclosure on changing the date of the Notes placement have been complied with, as set out in the RF legislation, the Decision on issuance of the securities and the Securities Issuance Prospectus.

The procedures for establishing the final date of the placement:

The final date of the placement shall be established as the earlier of two dates:

a) 10 (Tenth) working day in a row from the date following the Opening date of the Notes placement;

b) the date of placement of the last Note in the issuance.

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The Notes placement validity period shall not exceed one year from the state of state registration of the Notes issuance.

8.3. Procedures for the securities placement:

No preferential rights for acquisition of the offered securities have been provided for including preferential rights of the securities acquisition as per Articles 40 and 41 the Federal Law “On Joint Stock Companies”.

Procedures and terms for making agreements (procedures and terms for filing and fulfillment of applications) seeking disposal of securities in the course of securities placement:

The Issue shall exercise placement of the Notes through involvement of professional participants of the securities market providing services to the Issuer of the securities placement and organization of the securities placement:

The organizations that shall provide to the Issuer the services of the Notes placement (hereinafter, the Originators) shall be Gazprombank (Open Joint Stock Company), Closed Joint Stock Company Raffeisenbank Austria, Closed Joint Stock Company Investment Company Troyka Dialog.

Full corporate name: Gazprombank (Open Joint Stock Company)

Abbreviated corporate name: GPB (OJSC)

TIN: 7744001497

Location: 117420, Moscow City, Namiotkina Street, 16, block 1

Postal address: 117418, Moscow City, Novocheriomushkinskaya street, 63

License #:  177-04229-100000 (for brokerage activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-04280-010000 (for dealership activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Raffeisenbank Austria

Abbreviated corporate name: CJSC Raffeisenbank Austria

TIN: 7744000302

Location: 129090, Moscow City, Troitskaya street, 17, building 1

Postal address: 129090, Moscow City, Troitskaya street, 17, building 1

License #: License for brokerage activities # 177-02900-100000

Date of issuance: 27.11.2000

Validity period: unrestricted validity period

The Licensor that issued the above license: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Investment Company Troyka Dialog

Abbreviated corporate name: CJSC IC Troyka Dialog

TIN: 7710048970

Location: Russian Federation, 125009, Moscow City, Romanov side street, 4

Postal address: Russian Federation, 125009, Moscow City, Romanov side street, 4

License #:  177-06514-100000 (for brokerage activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-06518-010000 (for dealership activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Any of the above Originators can act as Underwriter of the Notes Issuance (intermediary at placement) acting on behalf and on account of the Issuer.

Together with disclosure of the placement Opening date of the, the Issuer shall disclose information on the Underwriter, to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender to be held by CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement.

The Issuer shall disclose the Underwriter’s information to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender of CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement, using the following methods:

· news lines of AK&M and Interfax agencies, and of other information agencies authorized by federal regulator of the securities market to disclose information to the securities market — not later than 5 (Five) days before the Opening date of the securities placement;

· The Issuer’s website - www.mts.ru - not later than 4 (Four) days before the Opening date of the securities placement.

The above announcement should also include information on the bank account to which cash funds shall be received in payment for the Notes.

Key functions of the Originators:

Organization of preparation and placement of the Notes issue.

Key functions of the Underwriter:

The Underwriter shall act under a relevant agreement with The Issuer on organization of a loan supported by Notes (hereinafter, The Agreement).  As set out in the above Agreement, the Underwriter shall perform the following functions:

· In its own name, but on account, and on behalf of the Issuer, the Underwriter shall sell the Notes in accordance with the Agreement and under the procedures set out in the Decision on issuance of securities and the Securities Issuance Prospectus.

·Not later than the next working day after cash funds are received by the Underwriter from the Notes buyers in payment for the Notes to the Underwriter’s account, the Underwriter shall transfer the above funds to the Issuer’s settlement account specified in the Agreement, or to another Issuer’s account, additionally provided by the Issuer.  The Underwriter shall make the cash transfer with deduction of commission charged by CJSC MICEX Stock Exchange (hereinafter, MICEX Stock Exchange, the Market Maker) and by CJSC MICEX.

· In accordance with the procedures and timeframe set out in the Agreement, the Underwriter shall file with the Issuer a written report on execution of such Agreement by the Underwriter.

· Maintain accounting of the Issuer’s cash funds received by the Underwriter in connection with the Notes placement separately from accounting for own cash fund, and cash funds of other customers.

· Perform other actions required to fulfill its obligations with respect of the Notes placement in accordance with the applicable Russian Federation legislation.

The Originators’ obligations, if any, with respect of purchasing the securities that have not been placed within the allocated timeframe, and provided that such obligation exists, the quantity (the procedures for establishing the quantity) of securities that have not been placed within the allocated timeframe and that constitute the Originators’ purchasing obligation, and the time period (the procedures for establishing the time period) on expiration of which the Originators shall be obliged to purchase the above quantity of the securities:

In accordance with the Agreement, the Originators shall have no obligations of purchasing the securities that have not been placed within the allocated timeframe.

4

The Originators’ responsibilities, if any, with respect of maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization), including provision of market maker’s services, and, if applicable, the time period (the procedures for establishing the time period) during which the Originators shall be responsible for ensuring stabilization or provision of market maker’s services:

As per the Agreement between the Issuer and the Originators, the latter shall not be responsible for maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization).

Should the Notes be included in quoting list “B” of CJSC MICEX Stock Exchange, the Originators expect singing a contract on execution of market maker’s responsibilities with respect of the Notes throughout the period of their inclusion in quoting list “B”.  Throughout the period of inclusion of the Notes in quoting list “B” of CJSC MICEX Stock Exchange, the Market-maker shall provide services of the Notes trade in Closed Joint Stock Company MICEX Stock Exchange by way of setting and maintaining bilateral put and call quotes for the Notes.

Information on the Originators’ rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered; these additional securities may be sold or not sold depending on the securities placement results:

The Originators have no rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered.

Amount of the Underwriter’s remuneration; if such remuneration (part of remuneration) is paid to the above parties for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services — the amount of remuneration for such services:

In accordance with the Agreement, the Originators’ remuneration shall not exceed 1% (One per cent) of nominal value of the Notes issuance (shall not exceed RUR 100,000,000 (One hundred million).

The Originators’ remuneration (part of remuneration) for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services shall not exceed RUR 50,000 (Fifty thousand).

The Notes placement may be exercised with or without inclusion of the Notes in quoting list “B”. Inclusion of the Notes in quoting list “B” shall following the Rules of Listing, Acceptance for Placement and Trade of Securities by Closed Joint Stock Company MICEX Stock Exchange.

Placement of the Notes shall be exercised through purchase and sale deals at the Notes offering price indicated in clause 8.4. . of the Decision on issuance of securities and clause 9.2. of the Securities Issuance Prospectus).

If a potential buyer is not a Trade Participant of MICEX Stock Exchange, it should execute a relevant contract with any broker being a MICEX Stock Exchange Trade Participant, and issue to it an assignment for buying the Notes.

A potential buyer being a Trade Participant of MICEX Stock Exchange acts on its own.

A potential buyer of the Notes shall be required to open a relevant depo account with NDC or another Depository.  The procedures and timeframe of depo accounts opening shall follow the internal rules of respective depositories.

Terms and procedures of the securities placement:

The Notes shall be placed through a public offering by way of conducting trade by a securities market maker.

Information of the securities market maker:

Full and abbreviated corporate name: Closed Joint Stock Company MICEX Stock Exchange (CJSC MICEX Stock Exchange)

Location: 125009, Moscow City, Bolshoy Kislovskiy, 13

Postal address:125009, Moscow City, Bolshoy Kislovskiy, 13

License information:

Stock Exchange License #: 077-10489-000001

Date of License issuance: August 23, 2007

License Validity period: unrestricted

Licensor:Federal Commission for the Securities Market of Russia

In connection with the Notes placement, deals shall be made at MICEX Stock Exchange by way of fulfillment of addressed applications for Notes purchase submitted via MICEX Stock Exchange trading system and CJSC MICEX clearing system, respectively, in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange (hereinafter, MICEX Stock Exchange Rules) and regulations of CJSC MICEX.

Deals of the Notes placement shall be launched after the tender for interest rate on the first coupon of the Notes is completed (hereinafter, the Tender) and finished at the final date of the Notes issue placement.

The Tender shall be launched and completed at the Opening date of the Notes issue placement.  The Procedures for holding the Tender have been described in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. of the Securities Issuance Prospectus.

Having received information from the Issuer on interest rate established for the first coupon, the Underwriter shall make deals by submission to MICEX Stock Exchange trading system of addressed counter applications to the ones indicating lower or the same interest rate as that established for the first coupon.  MICEX Stock Exchange shall set the time for conducting transactions under the Tender framework and for making placement deals in coordination with the Underwriter and/or the Issuer.

The Underwriter shall publish an announcement of interest rate on the first coupon assisted by MICEX Stock Exchange trading system via an e-mail to all Trade Participants of MICEX Stock Exchange.

The Underwriter shall satisfy the submitted applications for purchasing the Notes in full scope provided that the quantity of Notes indicated in purchase applications does not exceed the quantity of unplaced Notes.  If a purchase application exceeds the quantity of unplaced Notes, such an application for purchasing the securities shall be satisfied within the available quantity of unplaced Notes.  The Underwriter shall satisfy the Notes purchase applications using the following procedures:

1) applications shall be met in the ascending order of the interest rate indicated in the above applications; i.e., first to be satisfied is the application which quotes the lowest interest rate of all applications submitted, second to be satisfied is the application which includes the lowest interest rate of all unsatisfied applications, etc.;

2) if applications quote equal interest rates, they shall be satisfied in the order of submission.  After all Notes are place, no more deals shall be made.

After establishing interest rate of the first coupon on the Notes and satisfaction of applications submitted during the Tender, and provided that not all Notes are placed through the Tender, MICEX Stock Exchange Trade Participants acting on their own behalf and account, as well as on behalf and on account of potential buyers shall be able to submit addressed applications for purchasing the Notes throughout the whole placement period.  The acceptable applications shall be addressed to the Underwriter and shall have settlement code T0.

Starting from the second day of placement, a purchaser of Notes shall pay the accrued coupon income on the Notes for the respective days under the procedures set out in clause 8.4. of the Decision on issuance of securities and in clause 9.2. of the Securities Issuance Prospectus.

Addressed applications for purchase of the Notes submitted by MICEX Stock Exchange Trade Participants shall be registered provided that the condition of adequacy of the provided surety is met, as required by CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Underwriter shall make a deal by submitting a counter application at the same date as that of the original application.  Applications shall be satisfied in the order of their submission.

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If an application requests more Notes than the quantity available on the Underwriter’s trading section, such application shall be satisfied within the balance of the Notes available on the Underwriter’s trading section.

Deals of Notes placement shall be made in accordance with MICEX Stock Exchange Rules.

Settlements on the signed deals shall be made in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Depository shall transfer the Sold Notes to buyers’ depo accounts as at the date of the purchase and sale deals.

Amendment or termination of contracts made at placement of the Notes shall take place on the grounds and under the procedures set out in Chapter 29 of the RF Civil Code.

The procedures for making an entry record to depo account of the first acquirer with a depository providing centralized storage:

Non-Commercial Partnership National Depository Centre or another Depository shall record the Notes placed through MICEX Stock Exchange to depo accounts of the Notes buyers as at the date of the respective purchase and sale transaction.

An entry record to depo account of the first acquirer with NDC shall be made under the instructions issued by CJSC MICEX, the clearing entity servicing the deals made in the course of the Notes placement through MICEX Stock Exchange.  The Depository shall record the placed Notes to accounts of the Notes buyers using the procedures for clearing activities of a clearing organization, and procedures for depository activities of Depositories.

All expenses arising in connection with entry records of the placed Notes to depo accounts of their first owners (acquirers) shall be borne by owners (acquirers) of such Notes.

8.4. The price (prices) or the procedures for establishing the securities placement price:

The Notes shall be placed at the price of RUR 1,000 (One thousand) per one Note (100% (One hundred per cent) of the Notes nominal value).

Starting from the second day of the Notes placement, at buying a Note, the buyer shall also pay the accrued coupon income for the respective quantity of days.  The accrued coupon income (ACI) per one Note shall be computed using the following formula:

ACI = Nom * C * ((T - T0)/ 365)/ 100 %, where

Nom — is nominal value of a Note,

C — interest rate of the first coupon (per cent annual),

T —date of the Notes placement;

T0 - Opening date of the Notes placement.

Accrued coupon income shall be computed down to one kopeck, truncation of computed values shall be based on the rules of mathematical round-up.  Rules of mathematical round-up shall be construed as the method that does not change the value of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases the quantity of whole kopecks by one provided that the first figure after truncation is from 5 to 9.

8.5. Procedures for exercising preemptive rights for purchasing the offered securities:

No preemptive rights for purchasing the offered securities are envisaged.

8.6. Terms and procedures for making settlements for the securities:

At acquisition of the offered securities of the issuance, payments can be made by cash transfer in the Russian Federation currency.

Form of payment: by bank transfer.

Terms and procedures for settlements for the Notes in installments.

Payment for the Notes in installments is not available.

The Notes are placed under the condition of full settlement.

Settlements for the Notes shall be made in cash transfers in the Russian Federation currency in accordance with clearing rules of CJSC MICEX.

Settlements for the Notes at placement shall be made on the terms “delivery against payment” in accordance with clearing rules of CJSC MICEX.  Cash proceeds received by CJSC MICEX Stock Exchange from the Notes placement shall be recorded to the Underwriter’s account with MICEX Clearing Chamber.

Crediting institution:

Full corporate name: NON-BANKING CREDITING ORGANIZATION CLOSED JOINT STOCK COMPANY ‘MOSCOW INTERBANK CURRENCY EXCHANGE CLEARING CHAMBER”

Abbreviated corporate name: CJSC MICEX Clearing Chamber

Location: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

Postal address: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

BIC: 044583505

TIN: 7702165310

Correspondent acc: 30105810100000000505

Information of the account to which cash funds in payment for the Notes are to be received shall be disclosed simultaneously with disclosure of the Underwriter’s information.

No non-cash payments for the securities shall be possible.

The Underwriter shall transfer the funds received from the Noted placement to the Issuer’s account within the timeframe set out in the contract on performing agency functions at placement of securities with CJSC MICEX Stock Exchange.

Other terms and procedures of settlements for the Notes:

Settlements for the Notes shall follow the CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

Cash settlements shall be executed via CJSC MICEX Clearing Chamber. Cash settlements related to purchase and sales deals for the Notes at their placement shall be executed on the same dates as the dates of respective deals.

Settlements under purchase and sales deals at the Notes placement shall be based on “delivery against payment” terms, i.e., the deals shall require preliminary provision of cash and of securities.

8.7. At what percentage of unplaced securities the issuance shall be recognized as ineffective, and what procedures shall be followed to recover the funds delivered in payment for the securities in the issue should the issue be recognized as ineffective

No percentage figure of unplaced securities has been established, at which the issuance shall be recognized as ineffective.

9. The terms of redemption of and income payment under the Notes

9.1. Form of the Notes redemption

The Notes shall be redeemed and income under the Notes shall be paid by a payment agent on behalf and on account of the Issuer in the form of a cash transfer in Russian Federation roubles (RUR).  Owners of the Notes shall not be able to select the method and the terms of the Notes redemption.

9.2. Procedures and terms of the Notes redemption; maturity

Redemption of the Notes of the issuance:

Maturity date:

1 820-th (One thousand eight hundred twentieth) day from the Opening date of the Notes placement.

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Redemption of the Notes shall be carried out by a payment agent on behalf and on account of the Issuer (hereinafter, The Payment Agent).  Data of the Payment Agent are provided in clause 9.6 of the Decision on issuance of securities and in clause 9.1.2.() of the Securities Issuance Prospectus.

The Issuer accepts the responsibility for timely and complete transfer to the Payment Agent for the current Notes issuance of the respective cash funds required to fulfill the payment obligations in accordance with the Decision on issuance of securities, the Securities Issuance Prospectus, and the contract between the Issuer and the Payment Agent.

If the Notes redemption maturity date is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

The Notes shall be redeemed at their nominal value.

The Notes shall be repaid in RUR as a bank transfer to benefit of the Note owners.

It is presumed that nominal holders — depositors of NDC are duly authorized to receive the sums paid in connection with redemption of the Notes.

Owner of the Notes that is not an NDC depositor is entitled to authorize a nominal Note holder that is an NDC depositor to receive the sums of the Notes redemption.  If the Owner failed to authorize the nominal Notes holder - an NDC depositor which has the Owner’s Notes recorded to its accounts with NDC, to receive the sums of the Notes redemption, such nominal holder no later than 1 p.m. Moscow time on the third working day preceding the Notes Maturity Date shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

The date (procedures for establishing the date) of the note owners list for the purposes of the notes redemption:

The Notes shall be redeemed to the benefit of the Note Owners, being such as at the end of NDC’s working day preceding the third working date prior to the Notes Maturity Date (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the nominal holder.

If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Notes Maturity Date, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List Production and including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of redemption under the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of redemption under the Notes;

c) location and postal address of the person authorized to receive the sums of redemption under the Notes;

z) banking information of the person authorized to receive the sums of redemption under the Notes, including:

·# of account with the bank;

·name of the bank (and the city where the bank is located) with which the account was opened;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Notes.

d) tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for repayment of redemption sums, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive redemption under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

· individual identification number (IIN) — if applicable;

b) if owner of the Notes is an individual:

· kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

· the owner’s birth day, month and year;

· the owner’s place of registration and postal address including zip code;

· the owner’s tax status;

· the owner’s # of state pension security certificate (if applicable);

· the owner’s TIN (if applicable).

· code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of redemption under the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

As at the Notes Maturity Date, Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of redemption under the Notes to benefit of the Note owners.

If one person is authorized to receive the sums of redemption under the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

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If the Notes Maturity Date is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

9.3. Procedures for assessing income payable under each Note.

Coupon (interest-bearing) period
Opening date	Closing date	Coupon (interest) income

1. Coupon: Interest rate on the first coupon - C1 — shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. () of the Securities Issuance Prospectus

The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement. The Closing date of the first coupon period is the date of repayment of this coupon, i.e. 182nd day from the Opening date of the Notes placement. Total payments under the first coupon per each Note shall be computed with the following formula: K1 = C1 * Nom * (T(1) - T(0))/ 365/ 100 %, where K1 — total coupon payment under 1st coupon per one Note, RUR; C1 — interest rate of the 1st coupon, per cent annual; Nom — nominal value of a Note, RUR; T(0) — Opening date of the 1st coupon period; T(1) — Closing date of the 1st coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole number. Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

2. Coupon: Interest rate on the second coupon — C2 — shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the second coupon of the issue is the182nd day from the Opening date of the Notes placement. The Closing date of the second coupon period is the date of repayment of this coupon, i.e. 364th day from the Opening date of the Notes placement. Total payments under the second coupon per each Note shall be computed with the following formula: K2 = C2 * Nom * (T(2) - T(1))/ 365/ 100 %, where K2 — total coupon payment under 2nd coupon per one Note, RUR; C2 — interest rate of the  coupon, per cent annual; Nom — nominal value of a Note, RUR; T(1) - Opening date of the  coupon period; T(2) - Closing date of the  coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

3. Coupon: Interest rate on the third coupon - C3 — shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the third coupon of the issue is the364th day from the Opening date of the Notes placement. The Closing date of the third coupon period is the date of repayment of this coupon, i.e. 546th day from the Opening date of the Notes placement. Total payments under the third coupon per each Note shall be computed with the following formula: K3 = C3 * Nom * (T(3) - T(2))/ 365/ 100 %, where K3 — total coupon payment under 3rd coupon per one Note, RUR; C3 — interest rate of the 3rd coupon, per cent annual; Nom — nominal value of a Note, RUR; T(2) — Opening date of the 3rd coupon period; T(3) — Closing date of the 3rd coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

4. Coupon: Interest rate on the fourth coupon - C4 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement. The Closing date of the fourth coupon period is the date of repayment of this coupon, i.e. 728th day from the Opening date of the Notes placement. Total payments under the fourth coupon per each Note shall be computed with the following formula: K4 = C4 * Nom * (T(4) - T(3))/ 365/ 100 %, where K4 — total coupon payment under 4th coupon per one Note, RUR; C4 — interest rate of the 4th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(3) — Opening date of the  coupon period; T(4) — Closing date of the  coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

5. Coupon: Interest rate on the fifth coupon - C5 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fifth coupon of the issue is the728-  day from the Opening date of the Notes placement. The Closing date of the fifth coupon period is the date of repayment of this coupon, i.e. 910th day from the Opening date of the Notes placement. Total payments under the fifth coupon per each Note shall be computed with the following formula: K5 = C5 * Nom * (T(5) - T(4))/ 365/ 100 %, where K5 — total coupon payment under 5th coupon per one Note, RUR; C5 — interest rate of the 5th coupon, per cent annual; Nom — nominal value of a Note, RUR;

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T(4) — Opening date of the 5th coupon period;

T(5) — Closing date of the 5th coupon period.

The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

6. Coupon: Interest rate on the sixth coupon - C6 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the sixth coupon of the issue is 910th day from the Opening date of the Notes placement. The Closing date of the sixth coupon period is the date of repayment of this coupon, i.e. 1092nd day from the Opening date of the Notes placement. Total payments under the sixth coupon per each Note shall be computed with the following formula: K6 = C6 * Nom * (T(6) - T(5))/ 365/ 100 %, where K6 — total coupon payment under 6th coupon per one Note, RUR; C6 — interest rate of the 6th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(5) — Opening date of the 6th coupon period; T(6) — Closing date of the 6th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

7. Coupon: Interest rate on the seventh coupon — C7 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the seventh coupon of the issue is the1092nd day from the Opening date of the Notes placement. The Closing date of the seventh coupon period is the date of repayment of this coupon, i.e. 1274th day from the Opening date of the Notes placement. Total payments under the seventh coupon per each Note shall be computed with the following formula: K7 = C7 * Nom * (T(7) - T(6))/ 365/ 100 %, where K7 — total coupon payment under 7th coupon per one Note, RUR; C7 — interest rate of the 7th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(6) — Opening date of the 7-ro coupon period; T(7) — Closing date of the 7-ro coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

8. Coupon: Interest rate on the eighth coupon — C8 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eighth coupon of the issue is the1274th day from the Opening date of the Notes placement. The Closing date of the eighth coupon period is the date of repayment of this coupon, i.e. 1456th day from the Opening date of the Notes placement. Total payments under the eighth coupon per each Note shall be computed with the following formula: K8 = C8 * Nom * (T(8) - T(7))/ 365/ 100 %, where K8 — total coupon payment under 8th coupon per one Note, RUR; C8 — interest rate of the 8th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(7) — Opening date of the 8th coupon period; T(8) — Closing date of the 8th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

9. Coupon: Interest rate on the ninth coupon — C9 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the ninth coupon of the issue is the1456th day from the Opening date of the Notes placement. The Closing date of the ninth coupon period is the date of repayment of this coupon, i.e. 1638th day from the Opening date of the Notes placement. Total payments under the ninth coupon per each Note shall be computed with the following formula: K9 = C9 * Nom * (T(9) - T(8))/ 365/ 100 %, where K9 — total coupon payment under 9th coupon per one Note, RUR; C9 — interest rate of the 9th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(8) — Opening date of the 9th coupon period; T(9) — Closing date of the 9th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

10. Coupon: Interest rate on the tenth coupon — C10 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the tenth coupon of the issue is the1638th day from the Opening date of the Notes placement. The Closing date of the tenth coupon period is the date of repayment of this coupon, i.e. 1820th day from the Opening date of the Notes placement. Total payments under the tenth coupon per each Note shall be computed with the following formula: K10 = C10 * Nom * (T(10) - T(9))/ 365/ 100 %, where K10 — total coupon payment under 10th coupon per one Note, RUR; C10 — interest rate of the 10th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(9) — Opening date of the 10th coupon period; T(10) — Closing date of the 10th coupon period.

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The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

11. Coupon: Interest rate on the eleventh coupon — C11 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eleventh coupon of the issue is the1820th day from the Opening date of the Notes placement. The Closing date of the eleventh coupon period is the date of repayment of this coupon, i.e. 2002nd day from the Opening date of the Notes placement. Total payments under the eleventh coupon per each Note shall be computed with the following formula: K11 = C11 * Nom * (T(11) - T(10))/ 365/ 100 %, where K11 — total coupon payment under 11th coupon per one Note, RUR; C11 — interest rate of the 11th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(10) — Opening date of the 11th coupon period; T(11) — Closing date of the 11th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

12. Coupon: Interest rate on the twelfth coupon — C12 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the twelfth coupon of the issue is the2002nd day from the Opening date of the Notes placement. The Closing date of the twelfth coupon period is the date of repayment of this coupon, i.e. 2184th day from the Opening date of the Notes placement. Total payments under the twelfth coupon per each Note shall be computed with the following formula: K12 = C12 * Nom * (T(12) - T(11))/ 365/ 100 %, where K12 — total coupon payment under 12th coupon per one Note, RUR; C12 — interest rate of the 12th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(11) — Opening date of the 12th coupon period; T(12) — Closing date of the 12th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

13. Coupon: Interest rate on the thirteenth coupon — C13 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the thirteenth coupon of the issue is the2184-   day from the Opening date of the Notes placement. The Closing date of the thirteenth coupon period is the date of repayment of this coupon, i.e. 2366-  day from the Opening date of the Notes placement. Total payments under the thirteenth coupon per each Note shall be computed with the following formula: K13 = C13 * Nom * (T(13) - T(12))/ 365/ 100 %, where K13 — total coupon payment under 13th coupon per one Note, RUR; C13 — interest rate of the 13th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(12) — Opening date of the 13th coupon period; T(13) — Closing date of the 13th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

14. Coupon: Interest rate on the fourteenth coupon — C14 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fourteenth coupon of the issue is the2366th day from the Opening date of the Notes placement. The Closing date of the fourteenth coupon period is the date of repayment of this coupon, i.e. 2548th day from the Opening date of the Notes placement. Total payments under the fourteenth coupon per each Note shall be computed with the following formula: K14 = C14 * Nom * (T(14) - T(13))/ 365/ 100 %, where K14 — total coupon payment under 14th coupon per one Note, RUR; C14 — interest rate of the 14th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(13) — Opening date of the 14th coupon period; T(14) — Closing date of the 14-ro coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

15. Coupon: Interest rate on the fifteenth coupon — C15 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fifteenth coupon of the issue is the2548th day from the Opening date of the Notes placement. The Closing date of the fifteenth coupon period is the date of repayment of this coupon, i.e. 2730th day from the Opening date of the Notes placement. Total payments under the fifteenth coupon per each Note shall be computed with the following formula: K15 = C15 * Nom * (T(15) - T(14))/ 365/ 100 %, where K15 — total coupon payment under 15th coupon per one Note, RUR; C15 — interest rate of the 15th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(14) — Opening date of the 15th coupon period; T(15) — Closing date of the 15th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole

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quantity. Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

16. Coupon: Interest rate on the sixteenth coupon — C16 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the sixteenth coupon of the issue is the2730th day from the Opening date of the Notes placement. The Closing date of the sixteenth coupon period is the date of repayment of this coupon, i.e. 2912th day from the Opening date of the Notes placement. Total payments under the sixteenth coupon per each Note shall be computed with the following formula: K16 = C16 * Nom * (T(16) - T(15))/ 365/ 100 %, where K16 — total coupon payment under 16th coupon per one Note, RUR; C16 — interest rate of the 16th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(15) — Opening date of the 16th coupon period; T(16) — Closing date of the 16th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

17. Coupon: Interest rate on the seventeenth coupon — C17 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the seventeenth coupon of the issue is the 2912nd day from the Opening date of the Notes placement. The Closing date of the seventeenth coupon period is the date of repayment of this coupon, i.e. 3094th day from the Opening date of the Notes placement. Total payments under the seventeenth coupon per each Note shall be computed with the following formula: K17 = C17 * Nom * (T(17) - T(16))/ 365/ 100 %, where K17 — total coupon payment under 17th coupon per one Note, RUR; C17 — interest rate of the 17th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(16) — Opening date of the 17th coupon period; T(17) — Closing date of the 17th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

18. Coupon: Interest rate on the eighteenth coupon — C18 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eighteenth coupon of the issue is the 3094th day from the Opening date of the Notes placement. The Closing date of the eighteenth coupon period is the date of repayment of this coupon, i.e. 3276th day from the Opening date of the Notes placement. Total payments under the eighteenth coupon per each Note shall be computed with the following formula: K18 = C18 * Nom * (T(18) - T(17))/ 365/ 100 %, where K18 — total coupon payment under 18th coupon per one Note, RUR; C18 — interest rate of the 18th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(17) — Opening date of the 18th coupon period; T(18) — Closing date of the 18th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

19. Coupon: Interest rate on the nineteenth coupon — C19 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the nineteenth coupon of the issue is the 3276th day from the Opening date of the Notes placement. The Closing date of the nineteenth coupon period is the date of repayment of this coupon, i.e. 3458th day from the Opening date of the Notes placement. Total payments under the nineteenth coupon per each Note shall be computed with the following formula: K19 = C19 * Nom * (T(19) - T(18))/ 365/ 100 %, where K19 — total coupon payment under 19th coupon per one Note, RUR; C19 — interest rate of the 19th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(18) — Opening date of the 19th coupon period; T(19) — Closing date of the 19th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

20. Coupon: Interest rate on the twentieth coupon — C20 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the twentieth coupon of the issue is the 3458th day from the Opening date of the Notes placement. The Closing date of the twentieth coupon period is the date of repayment of this coupon, i.e. 3640th day from the Opening date of the Notes placement. Total payments under the twentieth coupon per each Note shall be computed with the following formula: K20 = C20 * Nom * (T(20) - T(19))/ 365/ 100 %, where K20 — total coupon payment under 20th coupon per one Note, RUR; C20 — interest rate of the 20th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(19) — Opening date of the 20th coupon period; T(20) — Closing date of the 20th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the

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first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

Procedures for establishing interest rate for the first coupon:

Interest rate on the first coupon shall be established through the Tender held by stock exchange — MICEX Stock Exchange — between potential buyers of the Notes as at the Notes Placement Opening Date.

On the day of the Tender MICEX Stock Exchange Trade Participants shall submit addressed bids for the Notes with settlement code T0 to Underwriter via MICEX Stock Exchange trading system, both on their on account, and on account and on behalf of their customers.  MICEX Stock Exchange shall set the time and procedures for submission of Tender bids in coordination with the Underwriter and/or the Issuer.

A bid shall state the following relevant terms:

i. Purchasing price;

ii. Quantity of the Notes;

iii. Acceptable interest rate of the first coupon;

iv. Other parameters in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange.

Cash provision should be made in the amount sufficient for full payment for the Notes, as stated in the applications including commission fees of MICEX Stock Exchange and CJSC MICEX.

Purchasing price shall state the Notes Placement Price as per the Securities Issuance Prospectus and the Decision on issuance of securities.

The Notes quantity shall state the maximum quantity of the Notes that the potential buyer would be willing to buy, provided the Issuer sets the first coupon interest rate above or equal the acceptable interest rate for the first coupon, as stated in the bid.

The acceptable interest rate for the first coupon shall state the first coupon interest rate to be announced by the Issuer, at which rate the potential investor would be willing to buy the Notes in the quantity stated in the bid.  The acceptable interest rate shall be stated as per cent annual rate down to one hundredth of a per cent.

A bid of a MICEX Stock Exchange Trade Participant shall be accepted for execution if the provided surety is sufficient in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Issuer shall take decision on interest rate for the first coupon and shall inform MICEX Stock Exchange of its decision in writing.  After an information agency publishes an announcement of the first coupon interest rate, the Issuer shall inform the Underwriter of the established interest rate for the first coupon.

The Underwriter shall publish an announcement of the first coupon interest rate using the MICEX Stock Exchange Trading System via e-mail to all Trade Participants.

The Issuer shall disclose the interest rate established for the first coupon in accordance with the procedures set in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

Procedures for setting interest rate to the coupons starting from the second coupon:

1) Within 2 (Two) working days from the Notes Placement Opening, the Issuer may take a decision on purchasing the Notes from their owners within the next 5 (Five) working days of coupon period j (j=1-19).  If the Issuer takes such decision, interest rates for all coupons of the Notes, which have the sequential numbers below or equal to j, shall be established as equal to the first coupon interest rate.  The Issuer shall communicate the above information including sequential numbers of the coupons, for which interest rate was established as equal to the first coupon interest rate, and sequential number of the coupon period (j), in which owners of the Notes shall be able to demand repurchase of the Notes prior to potential Notes buyers by publishing the below announcements within the below time period from the date of the meeting protocol of the Issuer’s authorized body that has taken decision on purchasing the Notes:

· on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

2) For the coupons, for which the Issuer failed to establish an interest rate (procedures for establishing interest rate) prior to the Notes Placement Opening (i=(j+1),.,20), the interest rate shall be established as a numerical figure at the Date of Establishing the “i” coupon, which occurs not later than 7 (Seven) working days before payment of coupon (i-1).  At the date of establishing “i” coupon, the Issuer shall be able to set the rates of any quantity of undefined coupons following “i” coupon (where k — is the number of the last of the coupons being defined). The Issuer shall informs the Notes owners of the interest rate on “i” coupon within 5 (Five) working days before opening of i coupon period on the Notes by publishing a relevant announcement under the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

3) If after announcement of coupon interest rates (as set out in the previous subclauses) there still exist undefined rates of at least one of subsequent coupons, then together with the announcement of rates for i coupon and other coupons of the Notes being defined, the Issuer shall be required to ensure the Notes owners’ right to demand that the Issuer purchase the Notes in the last 5 (Five) working days of k coupon period (if the Issuer defines the rate for only one i coupon, i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined on the Date of Establishing i coupon, and sequential numbers of coupon period (k), in which the notes shall be purchased, shall be communicated to potential buyers of the Notes by way of publishing in accordance with the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Issuer shall inform MICES Stock Exchange of decisions taken in accordance with subclauses (2) and (3) of the above Decision on issuance of securities and subclauses (2) and (3) clause 9.1.2. (a) of the Securities Issuance Prospectus, including interest rates within 5 (Five) working days prior to completion of (i-1) coupon period (the period in which interest rate is defined for i coupon and subsequent coupons).

9.4. Procedures and timeframe of income payment under the Notes including the procedures and timeframe of income payment under each coupon

			Date of production of a list of Notes
Coupon (interest-bearing) period		Time (date) of coupon (interest)	owners for coupon (interest) income
Opening date	Closing date	income payment	payment

1. Coupon: Interest rate on the first coupon - C1 — shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. ()  of the Securities Issuance Prospectus

The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement. The Closing date of the first coupon period is the date of repayment of this coupon. Coupon income on the first coupon shall be paid on 182nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

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Procedures for payment of coupon (interest) income:

Income on the Notes shall be paid by the Payment Agent on account and on behalf of the Issuer.

Income on the Notes shall be paid in the Russian Federation currency by way of a bank transfer to benefit of the Notes owners. It is presumed that nominal holders — depositors of NDC are authorized to receive the sums of income on the Notes. An NDC depositor that has not been authorized by its customers to receive income on the Notes no later than 1 p.m. Moscow time on the third working day preceding the Date of Income Payment under the Notes shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of income of the Notes, then the person authorized to receive the sums of income on the Notes shall be the nominal holder.  If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of income on the Notes, then the person authorized to receive the sums of income on the Notes shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Date of Income Payment on the Notes, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List for the purposes of income payment, including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of income on the Notes;

c) location and postal address of the person authorized to receive the sums of income on the Notes;

r) banking information of the person authorized to receive the sums of income on the Notes, including:

·               # of account with the bank;

·               name of the bank (and the city where the bank is located) with which the account was opened;

·               corresponding account of the bank, with which the account was opened;

·               bank’s identification code of the bank, with which the account was opened (BIC);

·               taxpayer’s identification # (TIN) of the payment recipient;

·               code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

d) tax status of the person authorized to receive the sums of income on the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for receiving coupon income, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive coupon income under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

· individual identification number (IIN) — if applicable;

b) if owner of the Notes is an individual:

· kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

· the owner’s birth day, month and year;

· the owner’s place of registration and postal address including zip code;

· the owner’s tax status;

· the owner’s # of state pension security certificate (if applicable);

· the owner’s TIN (if applicable).

· code of reason for registration (CPP) of the person authorized to receive the sums of coupon income under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of income on the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

As at the Date of Income Payment on the Notes, the Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of income on the Notes and included in the List of the Note Owners and/or Nominal Holders.

If one person is authorized to receive the sums of income on the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

If the Date of Coupon Income Payment under the Notes is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

2. Coupon: Interest rate on the second coupon - C2 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the second coupon of the issue is the 182nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the second coupon shall be paid on 364th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of

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income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the second coupon are the same and the procedures for coupon income payment on the first coupon.

3. Coupon: Interest rate on the third coupon — C3 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the third coupon of the issue is the 364th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the third coupon shall be paid on 546th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the third coupon are the same and the procedures for coupon income payment on the first coupon.

4. Coupon: Interest rate on the fourth coupon — C4 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fourth coupon shall be paid on 728th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fourth coupon are the same and the procedures for coupon income payment on the first coupon.

5. Coupon: Interest rate on the fifth coupon — C5 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fifth coupon of the issue is the 728th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fifth coupon shall be paid on 910th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fifth coupon are the same and the procedures for coupon income payment on the first coupon.

6. Coupon: Interest rate on the sixth coupon — C6 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the sixth coupon of the issue is the 910- day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the sixth coupon shall be paid on 1092nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the sixth coupon are the same and the procedures for coupon income payment on the first coupon.

7. Coupon: Interest rate on the seventh coupon — C7 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the seventh coupon of the issue is the 1092nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the seventh coupon shall be paid on 1274th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the seventh coupon are the same and the procedures for coupon income payment on the first coupon.

8. Coupon: Interest rate on the eighth coupon — C8 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eighth coupon of the issue is the 1274th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eighth coupon shall be paid on 1456th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eighth coupon are the same and the procedures for coupon income payment on the first coupon.

9. Coupon: Interest rate on the ninth coupon — C9 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the ninth coupon of the issue is the 1456th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the ninth coupon shall be paid on 1638th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the ninth coupon are the same and the procedures for coupon income payment on the first coupon.

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10. Coupon: Interest rate on the tenth coupon — C10 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the tenth coupon of the issue is the 1638th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the tenth coupon shall be paid on 1820th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the tenth coupon are the same and the procedures for coupon income payment on the first coupon.

11. Coupon: Interest rate on the eleventh coupon — C11 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eleventh coupon of the issue is the 1820th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eleventh coupon shall be paid on 2002nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eleventh coupon are the same and the procedures for coupon income payment on the first coupon.

12. Coupon: Interest rate on the twelfth coupon — C12 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the twelfth coupon of the issue is the 2002nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the twelfth coupon shall be paid on 2184th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the twelfth coupon are the same and the procedures for coupon income payment on the first coupon.

13. Coupon: Interest rate on the thirteenth coupon — C13 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the thirteenth coupon of the issue is the 2184th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the thirteenth coupon shall be paid on 2366th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the thirteenth coupon are the same and the procedures for coupon income payment on the first coupon.

14. Coupon: Interest rate on the fourteenth coupon — C14 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fourteenth coupon of the issue is the 2366th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fourteenth coupon shall be paid on 2548th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fourteenth coupon are the same and the procedures for coupon income payment on the first coupon.

15. Coupon: Interest rate on the fifteenth coupon — C15 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fifteenth coupon of the issue is the 2548th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fifteenth coupon shall be paid on 2730th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fifteenth coupon are the same and the procedures for coupon income payment on the first coupon.

16. Coupon: Interest rate on the sixteenth coupon — C16 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the sixteenth coupon of the issue is the 2730th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the sixteenth coupon shall be paid on 2912th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the sixteenth coupon are the same and the procedures for coupon income payment on the first coupon.

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17. Coupon: Interest rate on the seventeenth coupon — C17 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the seventeenth coupon of the issue is the 2912th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the seventeenth coupon shall be paid on 3094th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the seventeenth coupon are the same and the procedures for coupon income payment on the first coupon.

18. Coupon: Interest rate on the eighteenth coupon — C18 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eighteenth coupon of the issue is the 3094th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eighteenth coupon shall be paid on 3276th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eighteenth coupon are the same and the procedures for coupon income payment on the first coupon.

19. Coupon: Interest rate on the nineteenth coupon — C19 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the nineteenth coupon of the issue is the 3276th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the nineteenth coupon shall be paid on 3458th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the nineteenth coupon are the same and the procedures for coupon income payment on the first coupon.

20. Coupon: Interest rate on the twentieth coupon — C20 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the twentieth coupon of the issue is the 3458th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the twentieth coupon shall be paid on 3640th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the twentieth coupon are the same and the procedures for coupon income payment on the first coupon.

For the purposes of income payment on the twentieth coupon the List of Notes owners and/or nominal holders produced for the Notes redemption shall be used.

Income on the twentieth coupon shall be paid simultaneously with redemption of the Notes.

9.5. Availability and terms of premature redemption of the Notes

The Notes can be redeemed prematurely on request of their owners.

The earliest possible date for claiming premature redemption of the Notes:

Premature redemption of the Notes shall not be possible before state registration of the Report on the Securities Issuance Results, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

In case of premature redemption of the Notes, the buy-out shall be executed at their nominal value. Accrued coupon income (ACI) as at the Date of the Notes Premature Redemption shall be additionally paid.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it in the following circumstances:

· delisting of the Notes by all stock exchanges that included the Notes in their quoting lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

· delay for more than 7 (Seven) days of execution by the Issuer of its obligations of coupon income payment on the Notes, after the due date of the respective coupon income payment as per the Decision on issuance of Securities and the Securities Issuance Prospectus;

· declaration by the Issuer of its default on the financial obligations towards owners of the Notes of the issue.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

Last date of presenting the Notes for premature redemption:

The Premature Redemption Date — The Notes can be prematurely redeemed on demand of their owners within 60 (Sixty) working days from the moment of disclosure by the Issuer of the fact of the above circumstances in accordance with the procedures set out in clauses 9.5. and 11(u) of the Decision on Issuance of Securities, or from the date when of the fact of the above circumstances became known or should have become known to owners of the Notes.

Terms and procedures for premature redemption of the Notes:

Premature redemption of the Notes shall be carried out on behalf of and on account of the Issuer by a Payment Agent (hereinafter, The Payment Agent).  Functions of the Payment Agent shall be performed by:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

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If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

In case of premature redemption the Notes shall be repurchased at their nominal value. In addition, the Issuer shall pay to the Notes owners the sums of accrued coupon income as at the date of execution by the Issuer of its obligations wit respect of premature redemption of the Notes assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

Nominal value of the Notes and accrued coupon income in connection with their premature redemption shall be repaid as a bank transfer in RUR.

The Notes prematurely redeemed by the Issuer cannot be put on the market.

In order to exercise its right for premature redemption of the Notes, owner of the Notes that is an NDC depositor, or nominal holder that is an NDC depositor authorized by the Notes owner to act towards premature redemption of the Notes, shall perform the following mandatory actions:

· submit to the Issuer a request (application) in a written form for premature redemption of the Notes (in accordance with the requirements specified in the Decision on issuance of Securities and in the Securities Issuance);

· submit to NDC an order issued in accordance with NDC requirements for transfer of the Notes subject to premature redemption to the depo account section designated for recording the Notes subject to premature redemption.

Request (application) for premature redemption of the Notes shall be delivered to the Issuer against its signature from 9 a.m. to 5 p.m. (Moscow time) within 30 (Thirty) working days after the moment when the Notes obtained the right to demand premature redemption of the Notes, or delivered by registered mail with a return receipt to the Issuer’s postal address.

Request (application) in a written form for premature redemption of the Notes shall be submitted with the following attachments:

·               if the request is signed by other person than the Notes owner, a document is to be attached supporting the powers of the person who signed the request on behalf of the Notes owner;

·               notarized sample of signature of the person who signed the request on behalf of the Notes owner;

·               a copy of NDC report certified by NDC on transfer of the Notes to the depo account section designated for blocking securities at redemption.

Request (application) for premature redemption of the Notes shall include the following:

·               statement of the circumstance based on which the Note owner became entitled to demand premature redemption;

·               for a corporate Notes owner — name of the legal entity, location, TIN;

·               for an individual Notes owner — surname, first, middle name, residential address, other passport data, TIN (if assigned in accordance with applicable procedures;

·               quantity of the Notes;

·               payment information of income recipient:

1. full name (surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

2. location and postal address of the person authorized to receive the sums of income on the Notes;

3. banking information of the person authorized to receive the sums of income on the Notes, including:

·# of account with the bank;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

4. tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

Non-residents and individuals are required to provide the following information in the Request:

·             full name/surname, first, patronymic name of the Notes owner;

·             full name of the person authorized to receive the sums of redemption under the Notes;

·             location (or registration for individuals) and postal address including postal zip code of the Notes owner

·               —          banking information of the person authorized to receive the sums of redemption under the Notes

·taxpayer’s identification # (TIN) of the Notes owner;

·             tax status of the Notes owner

if owner of the Notes is a corporate non-resident entity:

·             individual identification number (IIN) — if applicable;

if owner of the Notes is an individual:

·             kind, #, date and place of issuance of the Notes owner’s identification document, name of the issuing agency;

·             the Notes owner’s TIN (if applicable);

·             the Notes owner’s birth day, month and year).

Within 5 (Five) working days from the moment of receiving the documents, the Issuer shall review them for correctness, and provided that the submitted documents comply with the terms set out in the Decision on issuance of Securities and the Securities Issuance Prospectus the Issuer shall make cash transfer to benefit of the Notes owner.

The Issuer shall make cash transfer to account of the Payment Agent in the sum payable to the Notes owner, and shall provide the Payment Agent with data required for making a corresponding payment to benefit of the Notes owner.

Together with notification, the Issuer shall provide copies of NDC reports on transaction on the depo accounts of the Notes owners (nominal holders) supporting transfer of the Notes to the depo account sections designated for accounting for the Notes subject to premature redemption.

Within 2 (Two) days after the date of receiving cash funds from the Issuer and of data required for making corresponding payments to benefit of the Notes owners, the Payment Agent shall transfer cash to benefit of the Notes owner, as per the enclosed information.  Not later than the next working day after the date of transfer, the Payment Agent shall inform the Issuer and NDC depositor of the fact of transfer.

Obligations of the Issuer shall be considered fulfilled from the moment of writing the respective cash funds from account of the Payment Agent.

If the submitted documents do not meet the above requirements, the Issuer shall not later than the fifth working day from the moment of receiving the above documents deliver to the person who signed the request for the Notes redemption and to NDC a notice on the reasons for declining the documents. The Issuer shall submit information to NDC of the refusal to satisfy the Request for Premature Redemption stating the name, surname, first and patronymic name of individual owner, quantity of the Notes, and name of the Depository which opened an account to the owner.

Having received such a notification, the person who signed the request does not loose the right to resubmit the request for premature redemption of the Notes.

After the Issuer fulfills is obligations of premature redemption of the Notes, NDC shall write the redeemed Notes off the depositor’s account with NDC and record them to the respective issuance depo account section designated for accounting for redeemed Notes with NDC.

If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

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It is presumed that nominal holders — depositors of NDC are duly authorized to receive the sums paid in connection with premature redemption of the Notes and/or conduct other actions required for premature redemption of the Notes to benefit of the Notes owners.

The procedures for disclosure of information on premature redemption of the Notes:

on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

Within 1 (One) working day after the date of occurrence of the event that enables the Notes owner to demand premature redemption of the Notes the Issuer shall publish information on news lines (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) days after the above date the Issuer shall put information on its Internet website - www.mts.ru, stating the following:

· description of the event enabling the Notes owners to demand premature redemption of the Notes;

· the date when the event occurred;

· possible actions of the Notes owners towards satisfaction of their claims on premature redemption of the Notes.

Publication on the Internet website shall be done after publication on the news line.

After the Notes were prematurely redeemed by the Issuer, the Issuer shall announce the time of exercising its obligations.

The above information (including the quantity of redeemed Noted) shall be published within the following timeframe after the last date of exercising the obligations:

· on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

Publication on the Internet website shall be done after publication on the news line.

9.6. Information of payment agents on the notes

Coupon (interest) income and sums of redemption (premature redemption) shall be paid via the Payment Agent.

The Payment Agent:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

The Payment Agent shall perform the following functions:

1. On behalf and on account of the Issuer, shall transfer cash funds to the persons included in the List of Notes owners and/or Nominal Holders entitled to receive coupon income/sums of redemption (here below in this clause, The List of Notes Owners and/or Nominal Holders) in the amounts, within the timeframe and under the procedures established by the Decision on issuance of securities, the Securities Issuance Prospectus, and the Agreement between the Issuer and the Payment Agent.

The Issuer shall make preliminary transfer of the cash funds designated for Payments under the Notes to be executed by the Payment Agent to the bank account indicated by the Payment Agent under the procedures and within the timeframe specified in the Agreement between the Issuer and the Payment Agent.

2. Provide information to NDC depositors and to all concerned parties regarding the time and terms of coupon income payment under the Notes and/or redemption of the Notes by way of placement of the above information on NDC’s website: www.ndc.ru.

3. Ensure confidentiality of information received by the Payment Agent in the course of execution of its obligations provided this information is not public and is not required for disclosure by legal and regulatory acts of the Russian Federation.

The Issuer shall be able to appoint other payment agents or annul such appointments.

It is presumes that the Issuer cannot simultaneously appoint several payment agents.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days from the date of such appointments or their annulment on news line (AK&M or Interfax or ANO “AZIPI”) and in its Internet website — www.mts.ru.

9.7. Information on actions of the Notes owners and on the disclosure procedures in case of default on the Notes:

As required by Articles 810 and 811 of the RF Civil Code, the Issuer is obliged to repay to the Notes owners at redemption the nominal value of the Notes and coupon income on the Notes within the timeframe and under the procedures established by the Decision on Issuance of Securities, the Securities Issuance Prospectus.

The Issuer’s failure to fulfill the obligations under the Notes shall represent a material violation of the loan agreement (default) in case of:

· overdue obligation of the next interest income (coupon) payment under the Notes for over 7 (Seven) days, or refusal to fulfill the above obligation;

· overdue obligation of repayment of the principal on the Notes for over 30 (Thirty) days, or refusal to fulfill the above obligation.

Delay in execution of the respective obligations, but not exceeding the above time limits shall represent a technical default.

Each owner of the Notes is entitled to demand compensation of the Notes nominal value and repayment of the accrued coupon income under the notes due to it in the situations specified in the Decision on Issuance of Securities, the Securities Issuance Prospectus.

If the Issuer fails to execute and/or properly execute its obligations under the Notes, the Notes owners shall be entitled to apply to the Warrantor that has provided surety for the Notes of the issuance in accordance with the terms of surety provision in the form of a warranty for the purposes of the Notes issue, as specified in clause 12 of the Decision on Issuance of Securities, and in clause 9.1.2 of the Securities Issuance Prospectus.

If the Notes owners are unable to get satisfaction of the claims with respect of the Notes owned by them and addressed to the Issuer and/or the Warrantor, the Notes owners shall be entitled to apply to court or to arbitration with a claim against the Issuer and/or the Warrantor.

Individual Note owners shall in this case be able to apply to court of general jurisdiction at location of the defendant, and corporate Note owners and individual businessmen — Note owners shall be able to apply to arbitration at location of the defendant.

Overall limitation of sanctions for application to court (court of general jurisdiction or arbitration) with claims against the Issuer and/or the Warrantor shall be 3 (Three) years.

In case of the Issuer’s default or technical default under the Notes, the Issuer shall pay interest to the Notes owners in addition to overdue payments, as required by Article 395 of the RF Civil Code.

If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·the volume of defaulted obligations;

·the reason for the default;

·the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

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· on its Internet website — www.mts.ru— within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

10. Information on repurchase of the notes

The procedures for repurchasing the Notes on demand of their owner(s) with subsequent trade operations with the Notes; the timeframe of applications for such repurchase:

It is presumed that the Issuer shall repurchase the Notes on demand of their owners and further shall be able to trade them until maturity, in accordance with the terms specified in this clause. The Issuer shall be able to repurchase the Notes of this issuance after registration of the Report on the Securities Issuance with governmental authorities, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer is obliged to ensure the Notes owners’ right to demand repurchase by the Issuer of the Notes within the last 5 (Five) working days of the Notes coupon period preceding the coupon period for which the rate of interest was established by the Issuer (hereinafter, The Period of Filing for Repurchase of the Notes by the Issuer) after opening of the Notes placement.  Owners of the Notes shall be able to demand that the Issuer repurchase the Notes in the situations described in clause 9.3. of the Decision on Issuance of Securities, and clause 9.1.2. of the Prospectus.

The procedures for repurchase of the Notes:

The Issuer shall repurchase the notes via MICEX Stock Exchange (hereinafter, The Market Maker) in accordance with the regulatory documents applicable to activities of the securities market maker

In case of reorganization or liquidation of the Market Maker, or if repurchase by the Issuer of the Notes through the Market Maker under the procedures established by the Decision on Issuance of Securities, and the Securities Issuance Prospectus does not comply with the RF legislation, the Issuer shall have to select another securities market maker through which the Issuer shall make the Notes repurchase deals.

In this case the Issuer shall repurchase the Notes in accordance with the regulations applicable to activities of such securities market maker, and the Issuer shall in addition to announcement of the coupon interest rate (starting from the second coupon) publish information of the securities market maker through which the Issuer shall make the Notes repurchase deal.  The above information shall include:

· full and abbreviated name of the securities market maker;

· its location;

· license information: #, Date of issuance, Validity period, the body that issued the license;

The Issuer’s agent acting on behalf and on account of the Issuer for repurchasing the Notes (hereinafter, The Agent) shall be the Underwriter.

The Issuer can reassign the Agent’s functions to another person that will be able to exercise all actions required for the repurchase, as per this clause and the RF legislation.  In this case, the Issuer shall be obliged to publish an announcement providing the following information:

·full and abbreviated name of the person, to which the Agent’s functions were reassigned;

·its location, and also address and fax.# for delivery the applications in accordance with the procedures provided here below;

·information of the license for conducting professional activities on the securities market: #, Date of issuance, Validity period, the body that issued the license;

·confirmation of the fact that the appointed Agent is a trade participants of the Market Maker, through which the repurchase shall be carried out.

This information announcement shall be published not later than 30 (Thirty) days before the Repurchase Date established in accordance with the procedures provided here below in the following sources of information:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI”;

·             on the website in Internet (www.mts.ru);

The announcement in Internet shall be published after the publication on the news line.

In order to implement its right to sell the Notes, the trade participant that owns the Notes and wishes to sell the Notes, or the person authorized by its client being the Notes owner to sell the Notes at its account and on its behalf (hereinafter, The Acceptant) shall perform two actions:

1) submit to the Agent an application signed by the Acceptant (hereinafter, The Application). The Application can be accepted in any working day, but exclusively within the Submission Period (as defined here above), and should include the following information:

·full name of the Acceptant;

·state registration # and date of state registration of the Notes;

·quantity of the Notes, which the Acceptant intends to sell to the Issuer (in figures and words);

·location u postal address of the Acceptant.

2) From 11 a.m. to 1 p.m. Moscow time on the Repurchase Date (as defined here below), the Acceptant that previously transferred the above Application to the Agent shall submit an addressed applications for sale of a specified quantity of the Notes via the Market Maker’s Trading System in accordance with Rules of Securities Trading and/or other rules of the Market Maker which regulate its activities.  The Application shall be address to the Agent that is a Trade Participant, and shall indicate a Purchasing Price, as defined here below, in percentage of nominal value of the Notes, and settlement code T0.

Quantity of the Notes stated in the application should not exceed the Notes quantity previously stated in the Application submitted by the Acceptant to the Agent.

The Application should be received in any of the working days within the Submission Period.

The Application shall be addressed to the Agent’s postal address.

The Application shall be deemed received by the Agent from the moment of its handling to the addressee, or refusal by the addressee to receive it supporting by a relevant document.  The Issuer shall not have any obligations of repurchasing the Notes from owners and/or the Acceptants that have not submitted their Applications within the applicable timeframe, or have submitted the Applications that do not comply with the above requirements.

The Issuer shall accept an extract from the register of applications as an adequate confirmation of submission by the Acceptant of an application for sale of the Notes in accordance with the terms for repurchasing the Notes.  The extract shall be made in the form of a relevant application to the Rules of the Market Maker for Conducting Trade in Securities and/or Other Papers, certified by signature of an authorized person.

The Issuer undertakes that in the period from 4 p.m. to 6 p.m. Moscow time on the Repurchasing Date it shall make deals via the Agent with all Acceptants by way of submitting addressed counter applications to the ones submitted in accordance with action 2, and maintained in the trading system as at the moment of making the deal.

The addressed counter applications submitted in accordance with action 2 by the Acceptants that have earlier submitted the Applications under the applicable procedures, shall be satisfied by the Agent within the Notes quantity indicated in the addressed applications submitted by the Acceptants, and at the price established by the Decision on Issuance of Securities, and the Prospectus.  Obligations of the parties (The Notes Issuer and the Acceptant) for repurchasing the Notes shall be considered fulfilled from the moment of transfer of title to the repurchased Notes to the Issuer (recording of the Notes to issuance account of the Issuer) and repayment for the Notes by the Issuer (fulfillment of the condition “delivery against payment” in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market).

If the Issuer’s deal or several deals of purchasing its own Notes is recognized as major deals or deals with interest, such deals should be approved as required by the Russian Federation law.

The Notes repurchased by the Issuer shall be received to the depo account with NDC.  Subsequently, the Notes repurchased by the Issuer may be again submitted for trade operations at secondary market (provided that the Issuer complies with the Russian Federation law).

On expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish information on the timeframe for execution of its liabilities.

The above information (including quantity of repurchased notes) shall be published within the following timeframe from the moment of occurrence of the material fact:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·             on the website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Information on repurchase of the notes on demands of their owners shall be disclosed together with information on the interest rates defined for coupons:

Information on the interest rates defined by the Issuer for coupons of the Notes starting from the second coupon shall be communicated to potential purchasers by way of an announcement of material facts in accordance with the procedures and timeframe set in clause 11 of the Decision on Issuance of Securities, and in clause 2.9. of the Securities Issuance Prospectus.

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Timeframe for repurchasing the notes and the procedures for establishing it:

2nd (Second) working day from the completion date of the Period for Submission of the Notes for Repurchase by the Issuer

Purchasing price of the Notes:

100% (One hundred per cent) of the Notes nominal value.

If a purchase and sale deal is made on the Date of Purchasing the Notes, the Issuer shall additionally pay to the Owners the accrued coupon income on the Notes (ACI).

The procedures for repurchase by the Issuer of the Notes under agreement with the Notes owners:

The Issuer may be able to repurchase the Notes under agreement with their owner(s) and further use the Notes for trading until expiry of the redemption period on the terms set by the Decision on Issuance of Securities and the Securities Issuance Prospectus.

The Issuer may be able to repurchase the Notes of this issue after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer shall repurchase the Notes under the terms set by the Decision on Issuance of Securities, the Securities Issuance Prospectus, and individual decisions by the Issuer regarding purchase of the Notes taken by the Issuer’s authorized body in accordance with the Charter.

If owners of the Notes demand that the Issuer repurchases a larger quantity of the Notes than indicated in the Issuer’s offer, the Issuer shall purchase the Notes from their owners in proportion to the total of the Notes specified in the applications, provided that only whole notes are to be purchased.

The Issuer shall take decision on repurchasing the Notes on the basis of provisions of the Decision on Issuance of Securities, and the Securities Issuance Prospectus.  Several decisions on repurchasing the Notes can be taken.

Decisions on repurchasing the Notes shall be taken by the Issuer’s authorized body and shall specify the price, timeframe, and procedures for repurchasing the Notes.

Timeframe for repurchasing the notes by the Issuer, and the procedures for defining it:

The Issuer shall not be able to repurchase the Notes before registration of the Report on the securities issuance results by authorized federal regulator of the securities market, or filing with the registering body of a notice on the Notes issuance results.

The procedures for disclosure by the Issuer of information on repurchase of the notes:

The Issuer shall be required to publish an announcement for owners of the notes on the Issuer’s decision on repurchase of the Notes under agreement with their owners within the following time from the date when authorized Issuer’s body issued minutes of its meeting that took such decision (expiration date of the period established by the Russian Federation law for issuing minutes), but not later than 7 (Seven) days for the opening date of acceptance of the offers on repurchase of the notes:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·             on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The announcement to owners of the notes regarding the decision on repurchase of the Notes shall include the following information:

·               the date when the decision on repurchase (redemption) of the Notes of the issue was taken;

·               series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·               quantity of the Notes to be repurchased;

·               opening date of repurchase by the Issuer of the Notes of the issue;

·               closing date of repurchase of the Notes of the issue;

·               repurchasing price of the Notes of the issue or the procedures for defining it;

·               terms and procedures for repurchasing the Notes of the issue;

·               form and timeframe of payments;

·             name of the Agent authorized by the Issuer to repurchase (redeem) the Notes, its location, information of its professional license of a securities market participant.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

In connection with repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·             on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

11. The procedures for disclosure by the Issuer of information on issuance of securities

The Issuer shall disclose information on the issuance in accordance with provisions of the Russian Federation legislation on securities under the procedures and terms specified in the Decision on Issuance of Securities and the Securities Issuance Prospectus.  Should at the moment of occurrence of an event that is to be disclosed by the Issuer, other requirements on the procedures and terms of disclosure have been established by effective federal laws and regulatory acts issued by federal executive body on the securities market than those set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus, then disclosure of such event shall be carried out in accordance with the procedures and terms required by federal laws and regulatory acts issued by federal executive body on the securities market having effect at the moment of occurrence of such event.

a) The Issuer shall announce the fact of decision taken on placement of the Notes in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·             on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

b) The Issuer shall publish information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·             on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

c) The Issuer shall disclose information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” (information of state registration of the securities issuance) within the following time period, counting from the date of publication by the Issuer of an

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announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall publish the text of the registered Decision on Issuance of Securities on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.

The text of the Decision on Issuance of Securities shall be published on the website together with state registration number of the Notes issue, date of state registration and name of the registering body that provided state registration of the Notes issue.

The text of the registered Decision on Issuance of the Notes shall be available from Internet from the date of its publication in Internet and to the redemption date of the Notes of the issue.

The Issuer shall publish the text of the registered Securities Issuance Prospectus on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.  The text of the Securities Issuance Prospectus shall be published on the website together with state registration number of the Notes issue for which the Securities Issuance Prospectus was registered, the date of its registration and the name of the registering body that has registered the Securities Issuance Prospectus.

The text of the registered Securities Issuance Prospectus shall be available from Internet starting from the date of its publication in Internet and until expiry of no less than 6 (Six) months from the date of publication in Internet of the text of registered report on results of the securities issue; or, if under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results, within 6 (Six) months from the date of publication in Internet of the text of the notice on the issuance results filed with the registering body.

From the date of state registration of the Notes issue, all concerned parties shall be able to make themselves familiar with the Decision on Issuance of Securities and the Securities Issuance Prospectus, and receive their copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the above documents to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

d) At the Phase of the Notes placement the Issuer shall be required to disclose information in the following form:

· announcement of the opening date of the securities placement;

· announcement of changing the opening date of the securities placement;

· announcement of suspension of the securities placement;

· announcement of renewal of the securities placement;

· announcement of material facts “information of the phases of the securities issuance procedure”.

1. The Issuer shall publish information on the placement opening date in the form of an announcement of the placement opening date within the following timeframe:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement in Internet shall be published after the publication on the news line.

2. Should the Issuer take decision on changing the placement opening date, the Issuer shall be required to publish an announcement of changing the placement opening date on news line and on the Issuer’s website in Internet (www.mts.ru) not later than 1 (One) day before such date.

The announcement in Internet shall be published after the publication on the news line.

3. The Issuer shall publish information on launch of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is launched:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

4. Should the Issuer’s authorized body take decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or should the Issuer receive a written order (instruction, assessment) from the federal securities market regulator, the Issuer shall be required to suspend placement of the Notes and publish information on suspension of the placement within the following time from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken the decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or from the date when the Issuer receives a written order (instruction, assessment) from the federal securities market regulator on suspension of the securities placement via mail, facsimile, email, delivery against signature, depending on what takes place first:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is suspended in connection with decision taken by the registering authority on suspension of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

5. The Issuer shall publish information on renewal of the securities issue within the following timeframe from the date of publication of information on registration of amendments and/or additions to the Decision on Issuance of Securities and/or additions to the Decision on Issuance (Additional Issuance) of Securities and/or to the Securities Issuance Prospectus or information on decline of registration of the above amendments and/or additions on the website of the registering authority in Internet, or from delivery to the Issuer of a written notice of the registering authority on renewal of the securities issue (discontinuation of the events supporting suspension of the securities placement procedure) via mail, facsimile, e-mail, delivery against signature, depending on what takes place first::

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is renewed in connection with decision taken by the registering authority on renewal of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

Renewal of the securities placement shall not be possible before publication of information on renewal of the securities placement on news line and on the Internet website.

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6. The Issuer shall disclose the information on completion of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is completed:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

e) After state registration of the Report on the Securities Issuance Results, the Issuer shall publish information on state registration of the Report on the Securities Issuance Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of publication of information on state registration of the Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Within 2 (Two) days from the date of publication of information on state registration of the Issuer’s Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first, the Issuer shall publish the text of the registered Report on the Securities Issuance Results on its Internet website: www.mts.ru.

The text of the registered Report on the Securities Issuance Results should be available from Internet from the date of its publication in Internet and further on within no less than 6 (Six) months from the date of its publication in Internet.

From the date of state registration of the Report on the Securities Issuance Results, all concerned parties shall be able to make themselves familiar with the Report on the Securities Issuance Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of theReport on the Securities Issuance Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

f) If under Federal Law “On the Securities Issuance” and other federal law, the securities issuance does not require state registration of the Issuer’s Report on the Securities Issuance Results, provisions of clause 11.) of the Decision on Issuance of the Securities shall not apply.

In this case information shall be disclosed at the phase of submission to the registering authority of a notification of the Securities Issue Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of submission (direction) to the registering authority of the notification of the Securities Issue Results:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The Issuer shall publish the text of notification of the Securities Issue Results submitted to the registering authority in Internet within 2 (Two) days from the date of submission (direction)of the above notification to the registering authority.

The text of the notification of the Securities Issue Results submitted to the registering authority should be available from Internet website: www.mts.ru within no less than 6 (Six) months from the date of its publication in Internet.

If the Issuer provided additional means of access to information contained in the Securities Issuance Prospectus, the Issuer shall be required to provide the same additional means of access to information contained in the notification of the Securities Issue Results that ensured access to information of the Securities Issuance Prospectus.

From the date of submission (direction)of the notification of the Securities Issue Results to the registering authority, all concerned parties shall be able to make themselves familiar with the notification of the Securities Issue Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the notification of the Securities Issue Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

g) The Issuer shall disclose the information in the form of announcements of material facts in accordance with the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

The Issuer shall disclose the information in the form of announcements of material facts by publishing an announcement of a material fact within the following time period from the date of occurrence of such material fact:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Texts of announcements of material facts should be available from the Issuer’s website: www.mts.ru within no less than 6 (Six) months from the date of their publication.

In addition, the Issuer shall submit information on material facts to the registering authority within 5 (Five) days from the moment of occurrence of the material facts.

h) The Issuer shall disclose information in the form of a quarterly report under the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

Quarterly report shall compile results of each quarter and shall be submitted to the federal executive authority for the securities market within 45 (Forty Five) days from the last date of the reporting quarter.

Within 45 (Forty Five) days from the last date of the reporting quarter, the Issuer shall publish the text of the quarterly report on the Issuer’s prospectus-based securities on the Internet website — www.mts.ru.

The text of the quarterly report on the Issuer’s prospectus-based securities shall be available from the Issuer’s Internet website during no less than 3 (Three) years from the date of its publication.

Not later than 1 (One) day from the date of publication of the quarterly report in Internet, the Issuer shall publish on the news line an announcement of the procedures of access to the information included in the quarterly report.

i) Within 1 (One) working day from the date of occurrence of the event entitling the Notes owners to submit the Notes for premature redemption on news line of information agencies (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) working days from the above date on the Issuer’s website in Internet (www.mts.ru), the Issuer shall publish the following information:

· name of the event entitling the Notes owners to exercise premature redemption of the Notes;

· the date of occurrence of the event;

· the actions that the Notes owners may potentially take to satisfy their claims for premature redemption of the Notes.

The announcement in Internet shall be published after the publication on the news line.

After premature redemption of the Notes by the Issuer, the Issuer shall publish an announcement on the timeframe of execution of its obligations.

The above information (including the quantity of the redeemed Notes) shall be published within the following timeframe after the final date of execution of the obligation:

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·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

j) If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·the volume of defaulted obligations;

·the reason for the default;

·the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

· on its Internet website – www.mts.ru– within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

k) In addition to disclosure of the placement opening date, the Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement.

The Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement, using the following procedure:

·              on news lines of information agencies AK&M or Interfax, or other information agencies authorized by federal regulator of the securities market to execute information disclosure on the securities market - not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement should also include information of the bank account to which cash payment on the Notes shall be transferred.

l) If not later than the 2 (Second) working day before the opening date of the Notes placement the Issuer takes decision on repurchasing the Notes from their owners during the last 5 (Five) working days of “j” coupon period (j=1-19), interest rates of all coupons on the Notes having number of sequence below or equal j shall be defined as equal to interest rate on the first coupon.  The above information including sequential numbers of coupons, for which interest rate was defined as equal to interest rate on the first coupon, and the sequential number of coupon period (j), in which the Notes owners are entitled to demand repurchase of the Notes by the Issuer shall be communicated to potential buyers of the Notes by way of an announcement published within the following time from production of meeting minutes of the Issuer’s authorized body that has taken decision on repurchasing the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

· on Internet website – www.mts.ru– within 2 (Two) days.

This announcement shall be published no later than 1 (One) working day before of opening date of the Notes placement.

m) The Issuer shall disclose information on the first coupon interest rate defined through the Tender as at the opening date of the Notes placement, in the form of an announcement of material facts within the following timeframe from the moment of taking decision on the first coupon interest rate:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall take decision on the first coupon interest rate and shall inform MICEX Stock Exchange in writing of the decision taken by the Issuer.  After publication of an announcement by information agency (AK&M or Interfax or ANO “AZIPI”) on the first coupon interest rate, the Issuer shall inform the Underwriter of the first coupon interest rate.

The Underwriter shall communicate the announcement of the first coupon interest rate using MICEX Stock Exchange Trading System via e-mail to all MICEX Stock Exchange Trade Participants.

n) For those coupons, for which the Issuer did not define the interest rate (procedures for defining the interest rate) before the opening date of the Notes placement, the Issuer shall set the numerical interest rate at the Date of Defining the “i” Coupon, what cannot be later than 7 (Seven) working days before the date of payment of (i-1) coupon.  At the Date of Defining the “i” Coupon the Issuer is entitled to set interest rates for any number of undefined coupons following “i” coupon (where “k” coupon is the last of defined coupons).  The Issuer shall inform the Notes owners of interest rate of “i” coupon not later than 5 (Five) working days before the opening date of the “i” coupon period on the Notes by way of publishing a relevant announcement in the form of information of a material fact within the following timeframe:

· on news line (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day after the fact has occurred;

· on Internet website – www.mts.ru– within 2 (Two) days after the fact has occurred.

If after announcement of coupon interest rates in accordance with the procedures established in clause 9.3. of the Decision on Issuance of Securities, there are still undefined coupons on the Notes for at least one of subsequent coupons, then together with the announcement of interest rates of “i” and other coupons of the Notes, which are being defines, the Issuer shall be required to secure the rights of the Notes owners to demand that the Issuer repurchase the Notes during the last 5 (Five) working days of “k” coupon period (if the Issuer defines interest for only one “i” coupon, then i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined at the Date of defining the “i” coupon, and the sequential number of coupon period (k), in which repurchase of the Notes shall take place shall be communicated to potential buyers of the Notes by way of publishing an announcement of a material fact:

· on news line (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day after the fact has occurred;

· on Internet website – www.mts.ru– within 2 (Two) days after the fact has occurred.

The Issuer shall inform MICES Stock Exchange of the decisions taken in accordance with clauses 9.3.(2) and 9.3.(3) of the Decision on Issuance of Securities, and clauses 9.1.2.(2) and 9.1.2.(3) of the Securities Issuance Prospectus, including the defined interest rates, within 5 (Five) working days before expiry of (i-1) coupon period (the period in which interest rate on the “i” and following coupons is defined).

o) After expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish an announcement of the timeframe for execution of the obligations.

The above information (including the quantity of repurchased Notes) shall be published within the following time after occurrence of the material fact:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

p) The Issuer is entitled to appoint other payment agents and is entitled to revoke such appointments.

It is presumed that the Issuer cannot appoint several payment agents at a time.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days after the date of making such appointment or revoking them on news line (of AK&M or Interfax or ANO “AZIPI”) and on website —www.mts.ru.

The announcement in Internet shall be published after the publication in the news line.

q) The Issuer’s agent acting on behalf and on account of the Issuer in repurchasing the Notes (hereinafter, The Agent) is the Underwriter.

The Issuer shall be able to reassign the Agent’s functions to another person that shall be able to perform all actions required for the repurchase, as per clause 10 of the Decision on Issuance of Securities and legislation of the Russian Federation.  In this case, the Issuer shall be required to publish an information announcement including the following data:

·full and abbreviated name of the person to which the Agent’s functions were reassigned;

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·its location, and also address and facsimile # for receiving applications in accordance with the procedures defined in clause 10 of the Decision on Issuance of the Notes;

·data of the license of a professional participant of the securities market: #, Date of issuance, Validity period, the authority that issued the license;

·confirmation of the fact that the appointed Agent is a trade participant of the Market Maker, and shall exercise the repurchase through it.

This information shall be published not later than 30 (Thirty) days prior to the Date of repurchase established in accordance with the procedures described here below, in the following sources of information:

·              on news line (of AK&M or Interfax or ANO “AZIPI”);

·              on the website (www.mts.ru).

The announcement in Internet shall be published after the publication in the news line.

r) The Issuer shall publish an announcement to owners of the Notes of the decision taken on repurchase of the Notes by the Issuer under agreement with their owners within the following timeframe from the date of production of meeting minutes (expiry of the period established by the Russian Federation legislation for minutes production) of the Issuer’s authorized body at which the above decision has been taken, but not later than 7 (Seven) days prior to the opening date of receiving offers for repurchase of the Notes:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

The announcement to owners of the Notes of the decision taken on repurchase of the Notes shall include the following information:

·              the date when the decision on repurchase (redemption) of the Notes of the issue was taken;

·              series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·              quantity of the Notes to be repurchased;

·              opening date of repurchase by the Issuer of the Notes of the issue;

·              closing date of repurchase of the Notes of the issue;

·              repurchasing price of the Notes of the issue or the procedures for defining it;

·              terms and procedures for repurchasing the Notes of the issue;

·              form and timeframe of payments;

·              name of the Agent authorized by the Issuer to repurchase (redeem) the Notes, its location, information of its professional

license of a securities market participant.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

s) In case of repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

t) Notification (disclosure) procedures applicable in case of amendment of the surety terms for execution of obligations under the Notes that occurs because of the reasons beyond control of the Issuer or of owners of the Notes supported by collateral (reorganization, liquidation, or bankruptcy of the party that provided the collateral, other reasons):

·              on news lines of information agencies AK&M or Interfax or ANO “AZIPI” and on the website - www.mts.ru - within 3 (Three) working days.

The announcement in Internet shall be published after the publication in the news line.

The Issuer shall provide the following documents (within the statutory period of storage of such documents): copies of each announcement including copies of each announcement of a material fact, each certified by the Issuer’s authorized person, copies of the registered decision on the securities issue, of securities issuance prospectus, and amendments and/or additions to these, of report on the securities issue results, copy of notification on the securities issue results, copy of quarterly report, copies of other documents required for disclosure in accordance with the Russian Federation legislation on securities, to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy within 7 (Seven) days from the date of submission of the respective claim.

The Issuer shall publish the banking information of the account(s) to be used for repayment of the costs of production of the above copies and the amount (procedures for defining the amount) of such costs on the Issuer’s website (www.mts.ru).

12. Information on the surety supporting execution of obligations under the Notes of the issue

12.1. Information of the party that provided the surety supporting execution of obligations under the Notes

Full corporate name: Limited Liability Company “Mobile TeleSystems — Capital”

Abbreviated corporate name: LLC MTS-Capital”

Location: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Data of state registration of the legal entity

Main state registration #: 1037709022735

Data of entry record in the Unified State Register of Legal Entities: 14.03.2003.

The authority that entered the record in the Unified State Register of Legal Entities: Inspectorate # 9 of Moscow Central Administrative Region of the Russian Federal Ministry of Taxes

Limited Liability Company “Mobile TeleSystems — Capital” is not responsible for disclosure of its financial and economic activities, including in the form of quarterly reports or announcements of material facts (events, actions) related to the financial and economic activities.

12.2. Terms of surety supporting execution of obligations under the Notes:

Type of surety (method of warranty provision): Warranty.

Amount of surety (RUR): Maximum amount of warranty for the Notes is equal to total nominal value of the Notes of the issue - RUR 10 000 000 (Ten billion) plus aggregate coupon income on the Notes.

Terms of surety provision and procedures for exercising the rights of the Notes owners for the surety:

The Warrantor shall together with the Issuer respond to the Notes owners in case of the Issuer’s failure to comply or properly comply with its obligations on the Notes.

The relations of surety against the Notes shall be governed by Russian Federation legislation.  All disputes arising from the Warrantor’s failure to comply or properly comply with its obligations shall be under jurisdiction of courts of the Russian Federation.

If the Notes owners are unable to get satisfaction of their claims on the Notes owned by them and submitted to the Issuer and/or Warrantor, owners of the Notes shall be able to file a claim with a court or arbitration against the Issuer and/or the Warrantor in accordance with applicable legislation of the Russian Federation.

Warranty is an unconditional and irrevocable obligation of the Warrantor before each individual or corporate entity that owns title to the Notes at the respective

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moment of time (acting independently or through a nominal holder if Notes were transferred by the Notes owner to nominal holding) to respond for The Issuer’s failure to comply or properly comply with its obligations of payment in full of all sums payable by the Issuer on each of the Notes to such owner of the Notes at due moment of payment of such sums, if the Issuer because of any reason fails to pay and/or properly pay any of the above sums that are payable by it in accordance with the Issuance Documents (here, and further below through the text the Issuance Documents are construed as the Decision on Issuance of Securities and the Securities Issuance Prospectus) to any Notes owner within the timeframe and under the procedures defined in the Issuance Documents.

The Notes with a surety provide to their owners all rights arising from such surety.

A Surety Agreement shall be made by way of purchasing one or several Notes under the procedures and on the terms defined in the Issuance Documents.  The fact of purchasing any quantity of the Notes means that the Notes buyer enters in a surety agreement with the Warrantor, and under such agreement the Warrantor shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform or properly perform its obligations on the Notes with respect of the Notes owners on the terms defined in the Issuance Documents.

A Surety Agreement shall be construed as made from the moment when the first Notes owner obtains title to such Notes, and the written form of the agreement shall in this case be construed as executed.  Transfer of title to the surety provided in accordance with the Issuance Documents takes place as result of transfer of title to a Note to a new buyer; in this case title to the surety passes in the same volume and under the same terms, which exist at the moment of transfer of title to a Note.  Transfer of title to the surety without transfer of title to a Note shall be ineffective.

The fact of the Issuer’s failure to comply or properly comply with obligations under the Notes shall be considered as proven in the following situations:

1) The Issuer coupon income in the form of interest on the Notes nominal value to owners of the Notes within the timeframe defined in the Issuance Documents;

2) The Issuer has not paid or paid in full the principal at redemption of the Notes within the timeframe defined in the Issuance Documents;

3) The Issuer has not fulfilled or fulfilled in full scope the claims of the Notes owners of repurchase of the Notes within the timeframe and under the terms defined in the Issuance Documents.  The moment of fulfillment of the respective Issuer’s obligations occurs on the days of repurchase of the Notes by the Issuer defined by the Issuer in accordance with the Issuance Documents;

4) The Issuer failed to satisfy or properly satisfy the Notes owner’s claim of premature redemption and compensation to it of the Notes’ nominal value and repayment of the accrued coupon income on the Notes due to it as at the date of execution by the Issuer of its obligations regarding premature redemption of the Notes and defined in accordance with clause 15. of the Decision on Issuance of Securities and clause 10.10. of the Securities Issuance Prospectus.  The timeframe of execution of the respective obligations under the Notes by the Issuer shall be defined in accordance with the Issuance Documents.

In case of the Issuer’s failure to comply or properly comply with its obligations under the Notes, the Warrantor shall be liable for the Issuer’s failure to comply or properly comply with its obligations under the Notes, as, if owners of the Notes file claims against the Warrantor that meet the conditions defined in the Issuance Documents (hereinafter — The Claim).

If the Issuer fails to comply or properly comply with the abovementioned obligations on the Notes, the owners of such Notes shall be entitled to file a written claim directly against the Warrantor for execution of obligations on the Notes on the terms and under the timeframe defined in the Issuance Documents.

The Claim should include the following data:

(a)           identification features of the Notes (form, series, type, state registration # of the issue and date of state registration) and quantity of the Notes in ownership of each relevant owner of the Notes;

 (b)the contents of obligations on the Notes defaulted/improperly fulfilled by the Issuer;

(c)sum of obligations before the Notes owners defaulted/improperly fulfilled by the Issuer, which is payable, but has not been paid by the Issuer;

(d)full name (surname, first and middle names of an individual) of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if applicable);

(e)location and postal address (residential address), contact telephone # of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed);

(f)bank account information of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed) and other information required to transfer cash funds (name of corporate entity or surname, first and middle names of an individual; address of location (place of residence); TIN (if applicable); for individuals — series and # of ID, date of issuance, and name of the authority that issued this ID, for corporate entities — OKPO and OKVED codes (for banks - BIC);

(g)tax status of the person authorized to receive payments under the Notes (resident, non-resident with a permanent establishment, non-resident without a permanent establishment), indication of the country where this person is resident.

If owner of the Notes is a legal entity, the Claim shall be signed by its director, chief accountant, and stamped by the Notes owner’s seal.  If owner of the Notes is an individual, signature of the Notes owner on the Claim should be notarized as true.

The Claim shall be submitted to the Warrantor at the following address: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2 in person against signature of the Warrantor’s representative or via registered mail with return receipt.

The Claim shall be supplemented with:

(a)a copy of extract from the Notes owner’s depo account certified by Non-Commercial Partnership “National Depository Centre” (hereinafter - NDC) or by nominal holder —depositor of NDC where the depo account was opened, including quantity of the Notes owned by the Notes owner as at the date of submission of the Claim;

(b)a copy of NDC report on transfer of the Notes to the depo account section designated for blocking the securities at redemption certified by NDC or by nominal holder — NDC depositor, in case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption;

(c)documents supporting powers of the person who filed a claim on behalf of the Notes owner issued in accordance with the effective Russian federation law, if it is a representative of the Notes owner who files the claim;

(d)notarized copies of statutory documents and the documents supporting powers of the person who signed the claim, if an owner of the Notes is a corporate entity;

(f)a copy of passport certified by the Notes owner’s signature, if an owner of the Notes is an individual.

The Warrantor shall also accept the documents supporting tax status of the Notes owners as per the existing legislation, and availability to certain Notes owners of tax reliefs that allow for full or partial tax exemption of payments.

The Documents issued outside the Russian Federation should be duly legalized (or apostilled), and should be supplemented by a notarized translation into Russian.

Owners or the Notes can file claims directly against the Warrantor within 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes.  The date of submission of the Claim shall be the date of delivery to the Warrantor of the respective Claim.

The Claims filed against the Warrantor after expiry of 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes shall not be considered.

A Claim against the Warrantor can be filed by a nominal holder — NDC depositor having accounts for recording of the Notes and acting to benefit of the Notes owners — depositors of the above depository, provided that such person is duly authorized by the Note owner.

The Warrantor shall consider the Claim and the documents attached thereto, and shall review the data included in them for correctness within 14 (Fourteen) working days from the moment of delivery of the Claim to the Warrantor.

Not later than on the 5 (Fifth) working day from the date of expiry of the period of the Claim consideration, the Warrantor shall notify in writing of the decision to satisfy or refuse to satisfy (specifying the reasons) the Claim of the Notes owner or of the nominal holder — NDC depositor who filed the Claim.  In case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption, the Warrantor shall submit a notice with NDC on satisfaction/refusal to satisfy the Claim (specifying the name, surname, first and middle names of the owner, quantity of the Notes, name of the Depository that opened a depo account to the owner).

If a decision is taken to satisfy the claims of the Notes owner, the Warrantor shall within 10 (Ten) working days from the date of expiry of the period of the Claim consideration transfer cash funds to bank account of the Notes owner, of nominal holder of the Notes, or of any other person authorized by the Notes owner the banking information of which was provided in the Claim.

The Warrantor shall pay to the Notes owner the cash sums on the Notes payable to it within the amount that was not paid by the Issuer as at the moment when the Warrantor took the decision to satisfy the Claim.

The Warrantor’s obligations shall be deemed fulfilled from the moment of writing off the relevant cash funds from the Warrantor’s account.

The surety conditions established by the Issuance Documents shall be discontinued:

1) if Obligations of the Issuer are discontinued.  If payments on the Notes were made to a Notes owner in full scope, the surety shall discontinue its effect with respect of such owner, but shall retain effect with respect of other Notes owners;

2) if Obligations of the Issuer are amended towards creation of increased liability or other unfavorable effects for the Warrantor without approval of the latter;

3) in connection with other reasons established by the effective Russian Federation laws.

The Warrantor shall not be liable for default on its obligations to the Notes owner, if such default resulted from submission to the Warrantor of unreliable or incomplete data; in such case any additional expenses that the Warrantor incurs in connection with execution of its responsibilities of surety provider shall be reimbursed by the respective Notes owner or nominal Notes holder.

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The procedures for notification (disclosure) on amendment of surety terms supporting execution of obligations under the Notes that takes place because of the reasons beyond control of the Issuer or of the Notes owners with surety (reorganization, liquidation, or bankruptcy of the person that provided the surety, etc.):

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” and on the Issuer’s website in Internet - www.mts.ru - within 3 (Three) working days;

·in Vedomosti newspaper - within 5 (Five) working days.

The announcement in Internet and in printed mass media shall be published after the publication in the news line.

13. The Issuer’s obligation to ensure rights of securities owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation:

The Issuer undertakes to ensure rights of the Notes owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation.

14. Obligations of the persons that provided surety on the notes supporting fulfillment of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety

The person that provided surety on the notes shall be responsible to ensure execution of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety.

15. Other data required by Securities Issuance Standards and Securities Issuance Prospectus Standards

a) The Notes shall be accepted for free trade at stock exchanges and over-the-counter markets.

Non-residents shall be able to purchase the Notes in accordance with the Russian Federation legislation.

Sales and purchase deals of the Notes after completion of their placement shall be possible only after the date of state registration of the report on the Notes issue results, or after submission to the registering authority of a notice on the issue results if in accordance with Federal Law “On the Securities Market” or other federal laws the issue is executed without state registration of the report on the Notes issue results.

The Notes shall be traded over-the-counter without restrictions until the Notes maturity date.

The Notes shall be traded by stock exchanges with restrictions defined by securities market makers.

b) The procedures for defining the amount of accrued coupon income in the period of the Notes trade.

In any day between the opening date of the Notes placement and the redemption date the accrued coupon income (ACI) is computed with the following formula:

ACI = Cj * Nom * (T - T(j -1))/ 365/ 100 %, where

Nom — nominal value of one Note,

Cj — interest rate of “j” coupon period (in per cent annual),

j — sequential number of the coupon period, j=1...20,

T(j -1) - Opening date of the j coupon period,

T — current date.

ACI is computed to one kopeck, truncation of figures in the calculation is based on the rules of mathematical rounding.  The rules of mathematical rounding shall mean the method of rounding where the amount of equal kopeck(s) does not change if the first figure following the figure, which is rounded up is within the interval from 0 to 4, and increases for one, if the first figure following the figure, which is rounded up is within the interval from 5 to 9.

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EX-4.10

Exhibit 4.10

Open Joint Stock Company “Mobile TeleSystems”

Location: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

Postal address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

CERTIFICATE OF SECURITIES

interest-bearing documentary non-convertible bearer notes under mandatory centralized storage, series 02¸ in total 10,000,000 (Ten million) pieces of par value RUR 1,000 (One thousand roubles) each, maturity on the day 2,548 (Two thousand five hundred forty eighth) from the Opening date of the Notes placement through public offering.

State registration number of the securities issuance: 4-02-04715-A

Date of state registration of the securities issuance: December 27, 2007.

This paper is to certify title to 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Total quantity of Notes having state registration # 4-02-04715-A is 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Open Joint Stock Company “Mobile TeleSystems” shall ensure the rights of Note owners, provided they comply with the procedures for execution of such rights set by Russian Federation law.

This Certificate shall be deposited with Non-Commercial Partnership “National Depository Centre” having registered address: Moscow, Sredniy Kislovskiy per., 1/13, building 4, and providing mandatory centralized storage of the Note Certificates.

Surety for the Notes was provided by:

Limited Liability Company “Mobile TeleSystems – Capital”

General Director

of Limited Liability Company

“Mobile TeleSystems – Capital” / Kalinin M.A. /

                        200

Place of Corporate Seal

CEO
Open Joint Stock Company
“Mobile TeleSystems”	/ Shamolin M.V./
200   Place of Corporate Seal

1. Class, category (type) of securities:

Class of securities: Bearer Notes.

Identification features of the offered securities: non-convertible interest-bearing documentary bearer notes under mandatory centralized storage, series 02 (hereinafter in this document jointly “Notes” or “Issuance Notes” and individually “Note” or “Issuance Note”).

2. Form of the securities:

Documentary issuance.

3. Indication of mandatory centralized storage:

The Issuance Notes shall be under mandatory centralized storage.

The Depository providing mandatory centralized storage:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Short corporate name: NDC

Location: Moscow City, Sredniy Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

TIN (Taxpayer’s Identification Number): 7706131216

Tel. # (495) 956-2790, (495) 956-2791

Data of professional securities market participant license for conducting depository activities:

License # 177-03431-000100

Date of Issuance: 04.12.2000

Effective period: no limitation of the effective period

The License was issued by: Federal Commission for the Security Market of Russia

All Notes of the issuance are documented with one certificate (hereinafter, “The Certificate”), which is subject to mandatory centralized storagein Non-Commercial Partnership “National Depository Centre” (hereinafter, also “NDC” and “The Depository”).  Prior to the Opening date of the Notes placement the Issuer shall deliver the Certificate to NDC for storage.

A sample copy of the Certificate is provided in Appendix to the Decision on issuance of securities and to the Securities Issuance Prospectus.  No separate Note Certificates shall be provided to Note owners on hand.  Note owners shall not be entitled to demand delivery of Certificates on hand.

Title to the Notes and transfer of the Notes including encumbrances on the Notes shall be registered and certified by NDC acting as a depository, and by the depositories acting as depositors of NDC (hereinafter, jointly — “The Depositories”).

Title to the Notes shall be certified by extracts from depo accounts issued by NDC and the Depositories.

Title to the Notes shall pass from a person to another person at the moment of entry record to the Notes acquirer’s depo account with NDC and the Depositories.

The Notes shall be written off the depo accounts at redemption after the issuer performs all its obligations to the Note owners with respect of coupon income payment and the Notes nominal value repayment.

The Certificate shall be cancelled after all Notes are written off the NDC depo accounts.

Procedures for registration and transfer of title to prospectus-based securities under mandatory centralized storage were established by Federal Law “On the Securities Market” # 39-FZ of 22.04.96, and “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97, and internal regulations of NDC and Depositories.

As per Federal Law “On the Securities Market” # 39-FZ of 22.04.96:

If certificates for bearer documentary securities are stored and/or rights of ownership for such securities are registered with a depository, transfer of title to a bearer documentary security shall pass to the acquirer at the moment of entry record made to the acquirer’s depo account. The rights provided for by a prospectus-based security shall pass to the acquirer at the moment of transfer of rights for such security.

If certificates for bearer documentary securities are stored with a depository, the rights provided for by a prospectus-based security shall be exercised with support of certificates presented by such depositories under instructions specified in depository contracts of owners, with attachment of a list of such owners.  An issuer in this case shall ensure implementation of the rights under bearer securities by the person included in such list.

If by the moment of making a List of Owners and/or Nominal Holders of Securities for the purpose of execution of Issuer’s obligations under the securities, information on a new owner was not delivered to the securities Depository or to the securities nominal holder, execution of obligations to the owner included in the List of Owners and/or Nominal Holders of Securities shall be deemed proper. The responsibility of timely notification shall be with the securities acquirer.

As per “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97:

A depository shall ensure segregated storage of securities and (or) registration of rights for securities of each customer (depositor) from the securities of other customers (depositors) of the depository, in particular, by opening to each customer (depositor) of a separate depo account.  Records of title to securities made by a depository shall certify the rights for securities, unless established otherwise through court proceedings.  A Depository shall execute transactions with its customers’ (depositors’) securities exclusively on assignment from such customers (depositors) or persons authorized by them including account custodians, and within the timeframe set by depository contracts.  A Depository shall only make records to customer’s (depositor’s) depo account if documents have been presented that under The Regulation on Depository Activities in the Russian Federation and other regulatory acts and depository contract represent the authorization documents for making such records.

Records to customer’s (depositor’s) depo account can be made on the basis of the following authorization documents:

·instruction issued by a customer (depositor) or by its authorized representative including an account custodian, in accordance with the terms of a depository contracts;

· in case title to securities passes under other than civil law transactions: the documents certifying transfer of title to securities under applicable laws and other regulatory acts.

A depository shall register the facts of encumbrances on customers’ (depositors’) securities by pledge or other rights of third parties under the procedures set in the depository contracts.

Title to securities stored in a depository and (or) to securities rights for which are registered by a depository shall be deemed passed from the moment of entry record made by the depository to the to customer’s (depositor’s) depo account.  However, in absence of a record on the depo account, the person concerned is not deprived of its capacity to prove its rights for a security by reference to other evidence.

Should the applicable legislation and / or regulations issued by federal regulator of the securities market be amended, the procedures for registration and transfer of title to the Notes shall be regulated with due account of the amended provisions of legislation and / or regulations issued by federal regulator of the securities market.

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4. Par value of each security in the issuance:

RUR 1 000 (One thousand).

5. Quantity of securities in the issuance:

Quantity of Notes in the placement: 10 000 000 (Ten million).

The Notes issuance is not expected to include tranches.

6. Total quantity of previously placed securities of this issuance:

No securities of this issuance were previously placed.

7. Owner’s rights for each security in the issuance:

The Notes represent direct unconditional obligations of Open Joint Stock Company “Mobile TeleSystems” (hereinafter, “The Issuer”).

Owner of the Note is entitled to receive par value of the Note at its redemption at maturity.

Owner of the Note is entitled to receive coupon income (interest on the Notes par value) on expiration of each coupon period.

Owner of the Note is entitled to demand buy-out of the Notes by the Issuer in the cases and under the terms specified in the Securities Issuance Prospectus and Decision on the Securities Issuance.

Owner of the Notes is entitled to demand a compensation of the Notes par value and payment of the accrued coupon income on the Notes due to it in the following cases:

· The Notes have been delisted by every stock exchange that had the Notes in its Quote Lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

· The Issue was more than 7 (Seven) days late in repayment of its obligations on coupon income on the Notes than the due date of coupon income payment set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus;

· The Issue has declared its default on financial obligations with respect of Notes holders of the issuance.

Holder of the Notes can demand reimbursement of the Notes nominal value and repayment of accrued coupon interest on the Notes due to it and assessed in accordance with clause 15 of the Decision on Issuance of Securities and clause 10.10 of the Securities Issuance Prospectus. on the next day after the date when any of the above events occurred.

The Notes shall be prematurely redeemed upon request of their holders within 60 (Sixty) working days from the moment of disclosure of information on occurrence of the above events in accordance with the procedures set out in clauses 9.5. and 11.) of the Decision on Issuance of Securities, or from the date when holders of the Notes learned or were to learn of the fact of occurrence of such event.

The Notes may be prematurely redeemed only after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

Holder of the Notes is entitled to freely sell of otherwise dispose of the Notes. The Holder of the Notes that purchased the Notes in the course of the IPO is not entitled to exercise transactions with the Notes before the Notes are fully repaid and before a report on the securities issuance results is registered by the state authority, or a notice is filed with the registering authority on the Notes issuance results as required by the applicable Russian Federation legislation.

Holder of the Notes is entitled to exercise other rights provided for by the Russian Federation legislation.

The Issue undertakes to ensure the Notes holders’ rights, provided they comply with the procedures for exercising such rights set by the Russian Federation legislation.

Should the Issue fail to perform or properly perform its obligations under the Notes, owners of the Notes shall be entitled to address claims to Open Joint Stock Company Mobile TeleSystems - Capital (hereinafter, the Warrantor) that has provided surety for the Notes in accordance with the terms of provision of surety in the form of a warranty for the purposes of the Notes issuance.

Information of the person that provided surety for the issued notes:

Full corporate name: Limited Liability Company Mobile TeleSystems - Capital

Abbreviated corporate name: LLC MTS-Capital

Location: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya, 5,building 2.

The Warrantor that provided the surety shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform (properly perform) its obligations under the Notes.

Title to the provided surety shall pass to acquirer of the Note together with transfer of title to the Note, in the same scope and under the same terms that apply at the moment of transfer of title to the Note.  Transfer of rights arising from the provided surety shall not be effective if no transfer of title to the Note takes place.

Information on guarantees of fulfillment of obligations under the issued Notes and the procedures to be followed by owners and/or nominal holders of the Notes in case the Issuer defaults on its obligations under the Notes of this issuance or fails to perform or properly perform the obligations, were described in clauses 9.7, 12.2 of the Decision on issuance of securities and clause 9.1.2. of the Securities Issuance Prospectus.

If the Issue has overdue payments under the Notes of the issue to several Note holders, none of the Note holders shall have any priority with respect of such Issuer’s payables.

The Issuer undertakes that it shall repay the invested funds to the Note holders, should the Notes issuance be recognized as legally ineffective or invalid.

8. The terms and provisions of placement of the securities issuance.

8.1. Method of the securities placement: public subscription.

8.2 Validity period of the securities placement.

The procedures for establishing the Opening date of the placement:

The Opening date of the placement shall be established by the Issuer’s authorized management body and shall be communicated to all stakeholders in accordance with the RF legislation and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Opening date of the Notes placement cannot be earlier than two weeks after publication of an announcement on state registration of the securities issuance in accordance with the RF legislations and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The above two weeks period shall be counted from the date following the date of publication of an announcement on state registration of the Notes issuance by Vedomosti Newspaper.

The Opening date of the Notes placement established by the Issuer’s authorized management body can be modified by decision of the same Issuer’s management body, provided that all requirements to procedures of information disclosure on changing the date of the Notes placement have been complied with, as set out in the RF legislation, the Decision on issuance of the securities and the Securities Issuance Prospectus.

The procedures for establishing the final date of the placement:

The final date of the placement shall be established as the earlier of two dates:

a) 10 (Tenth) working day in a row from the date following the Opening date of the Notes placement;

b) the date of placement of the last Note in the issuance.

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The Notes placement validity period shall not exceed one year from the state of state registration of the Notes issuance.

8.3. Procedures for the securities placement:

No preferential rights for acquisition of the offered securities have been provided for including preferential rights of the securities acquisition as per Articles 40 and 41 the Federal Law “On Joint Stock Companies”.

Procedures and terms for making agreements (procedures and terms for filing and fulfillment of applications) seeking disposal of securities in the course of securities placement:

The Issue shall exercise placement of the Notes through involvement of professional participants of the securities market providing services to the Issuer of the securities placement and organization of the securities placement:

The organizations that shall provide to the Issuer the services of the Notes placement (hereinafter, the Originators) shall be Gazprombank (Open Joint Stock Company), Closed Joint Stock Company Raffeisenbank Austria, Closed Joint Stock Company Investment Company Troyka Dialog.

Full corporate name: Gazprombank (Open Joint Stock Company)

Abbreviated corporate name: GPB (OJSC)

TIN: 7744001497

Location: 117420, Moscow City, Namiotkina Street, 16, block 1

Postal address: 117418, Moscow City, Novocheriomushkinskaya street, 63

License #: 177-04229-100000 (for brokerage activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-04280-010000 (for dealership activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Raffeisenbank Austria

Abbreviated corporate name: CJSC Raffeisenbank Austria

TIN: 7744000302

Location: 129090, Moscow City, Troitskaya street, 17, building 1

Postal address: 129090, Moscow City, Troitskaya street, 17, building 1

License #: License for brokerage activities # 177-02900-100000

Date of issuance: 27.11.2000

Validity period: unrestricted validity period

The Licensor that issued the above license: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Investment Company Troyka Dialog

Abbreviated corporate name: CJSC IC Troyka Dialog

TIN: 7710048970

Location: Russian Federation, 125009, Moscow City, Romanov side street, 4

Postal address: Russian Federation, 125009, Moscow City, Romanov side street, 4

License #: 177-06514-100000 (for brokerage activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-06518-010000 (for dealership activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Any of the above Originators can act as Underwriter of the Notes Issuance (intermediary at placement) acting on behalf and on account of the Issuer.

Together with disclosure of the placement Opening date of the, the Issuer shall disclose information on the Underwriter, to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender to be held by CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement.

The Issuer shall disclose the Underwriter’s information to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender of CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement, using the following methods:

· news lines of AK&M and Interfax agencies, and of other information agencies authorized by federal regulator of the securities market to disclose information to the securities market — not later than 5 (Five) days before the Opening date of the securities placement;

· The Issuer’s website - www.mts.ru - not later than 4 (Four) days before the Opening date of the securities placement.

The above announcement should also include information on the bank account to which cash funds shall be received in payment for the Notes.

Key functions of the Originators:

Organization of preparation and placement of the Notes issue.

Key functions of the Underwriter:

The Underwriter shall act under a relevant agreement with The Issuer on organization of a loan supported by Notes (hereinafter, The Agreement).  As set out in the above Agreement, the Underwriter shall perform the following functions:

· In its own name, but on account, and on behalf of the Issuer, the Underwriter shall sell the Notes in accordance with the Agreement and under the procedures set out in the Decision on issuance of securities and the Securities Issuance Prospectus.

· Not later than the next working day after cash funds are received by the Underwriter from the Notes buyers in payment for the Notes to the Underwriter’s account, the Underwriter shall transfer the above funds to the Issuer’s settlement account specified in the Agreement, or to another Issuer’s account, additionally provided by the Issuer.  The Underwriter shall make the cash transfer with deduction of commission charged by CJSC MICEX Stock Exchange (hereinafter, MICEX Stock Exchange, the Market Maker) and by CJSC MICEX.

· In accordance with the procedures and timeframe set out in the Agreement, the Underwriter shall file with the Issuer a written report on execution of such Agreement by the Underwriter.

· Maintain accounting of the Issuer’s cash funds received by the Underwriter in connection with the Notes placement separately from accounting for own cash fund, and cash funds of other customers.

· Perform other actions required to fulfill its obligations with respect of the Notes placement in accordance with the applicable Russian Federation legislation.

The Originators’ obligations, if any, with respect of purchasing the securities that have not been placed within the allocated timeframe, and provided that such obligation exists, the quantity (the procedures for establishing the quantity) of securities that have not been placed within the allocated timeframe and that constitute the Originators’ purchasing obligation, and the time period (the procedures for establishing the time period) on expiration of which the Originators shall be obliged to purchase the above quantity of the securities:

In accordance with the Agreement, the Originators shall have no obligations of purchasing the securities that have not been placed within the allocated timeframe.

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The Originators’ responsibilities, if any, with respect of maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization), including provision of market maker’s services, and, if applicable, the time period (the procedures for establishing the time period) during which the Originators shall be responsible for ensuring stabilization or provision of market maker’s services:

As per the Agreement between the Issuer and the Originators, the latter shall not be responsible for maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization).

Should the Notes be included in quoting list “B” of CJSC MICEX Stock Exchange, the Originators expect singing a contract on execution of market maker’s responsibilities with respect of the Notes throughout the period of their inclusion in quoting list “B”.  Throughout the period of inclusion of the Notes in quoting list “B” of CJSC MICEX Stock Exchange, the Market-maker shall provide services of the Notes trade in Closed Joint Stock Company MICEX Stock Exchange by way of setting and maintaining bilateral put and call quotes for the Notes.

Information on the Originators’ rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered; these additional securities may be sold or not sold depending on the securities placement results:

The Originators have no rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered.

Amount of the Underwriter’s remuneration; if such remuneration (part of remuneration) is paid to the above parties for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services — the amount of remuneration for such services:

In accordance with the Agreement, the Originators’ remuneration shall not exceed 1% (One per cent) of nominal value of the Notes issuance (shall not exceed RUR 100,000,000 (One hundred million).

The Originators’ remuneration (part of remuneration) for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services shall not exceed RUR 50,000 (Fifty thousand).

The Notes placement may be exercised with or without inclusion of the Notes in quoting list “B”. Inclusion of the Notes in quoting list “B” shall following the Rules of Listing, Acceptance for Placement and Trade of Securities by Closed Joint Stock Company MICEX Stock Exchange.

Placement of the Notes shall be exercised through purchase and sale deals at the Notes offering price indicated in clause 8.4. . of the Decision on issuance of securities and clause 9.2. of the Securities Issuance Prospectus).

If a potential buyer is not a Trade Participant of MICEX Stock Exchange, it should execute a relevant contract with any broker being a MICEX Stock Exchange Trade Participant, and issue to it an assignment for buying the Notes.

A potential buyer being a Trade Participant of MICEX Stock Exchange acts on its own.

A potential buyer of the Notes shall be required to open a relevant depo account with NDC or another Depository.  The procedures and timeframe of depo accounts opening shall follow the internal rules of respective depositories.

Terms and procedures of the securities placement:

The Notes shall be placed through a public offering by way of conducting trade by a securities market maker.

Information of the securities market maker:

Full and abbreviated corporate name: Closed Joint Stock Company MICEX Stock Exchange (CJSC MICEX Stock Exchange)

Location: 125009, Moscow City, Bolshoy Kislovskiy, 13

Postal address:125009, Moscow City, Bolshoy Kislovskiy, 13

License information:

Stock Exchange License #: 077-10489-000001

Date of License issuance: August 23, 2007

License Validity period: unrestricted

Licensor:Federal Commission for the Securities Market of Russia

In connection with the Notes placement, deals shall be made at MICEX Stock Exchange by way of fulfillment of addressed applications for Notes purchase submitted via MICEX Stock Exchange trading system and CJSC MICEX clearing system, respectively, in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange (hereinafter, MICEX Stock Exchange Rules) and regulations of CJSC MICEX.

Deals of the Notes placement shall be launched after the tender for interest rate on the first coupon of the Notes is completed (hereinafter, the Tender) and finished at the final date of the Notes issue placement.

The Tender shall be launched and completed at the Opening date of the Notes issue placement.  The Procedures for holding the Tender have been described in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. of the Securities Issuance Prospectus.

Having received information from the Issuer on interest rate established for the first coupon, the Underwriter shall make deals by submission to MICEX Stock Exchange trading system of addressed counter applications to the ones indicating lower or the same interest rate as that established for the first coupon.  MICEX Stock Exchange shall set the time for conducting transactions under the Tender framework and for making placement deals in coordination with the Underwriter and/or the Issuer.

The Underwriter shall publish an announcement of interest rate on the first coupon assisted by MICEX Stock Exchange trading system via an e-mail to all Trade Participants of MICEX Stock Exchange.

The Underwriter shall satisfy the submitted applications for purchasing the Notes in full scope provided that the quantity of Notes indicated in purchase applications does not exceed the quantity of unplaced Notes.  If a purchase application exceeds the quantity of unplaced Notes, such an application for purchasing the securities shall be satisfied within the available quantity of unplaced Notes.  The Underwriter shall satisfy the Notes purchase applications using the following procedures:

1) applications shall be met in the ascending order of the interest rate indicated in the above applications; i.e., first to be satisfied is the application which quotes the lowest interest rate of all applications submitted, second to be satisfied is the application which includes the lowest interest rate of all unsatisfied applications, etc.;

2) if applications quote equal interest rates, they shall be satisfied in the order of submission.  After all Notes are place, no more deals shall be made.

After establishing interest rate of the first coupon on the Notes and satisfaction of applications submitted during the Tender, and provided that not all Notes are placed through the Tender, MICEX Stock Exchange Trade Participants acting on their own behalf and account, as well as on behalf and on account of potential buyers shall be able to submit addressed applications for purchasing the Notes throughout the whole placement period.  The acceptable applications shall be addressed to the Underwriter and shall have settlement code T0.

Starting from the second day of placement, a purchaser of Notes shall pay the accrued coupon income on the Notes for the respective days under the procedures set out in clause 8.4. of the Decision on issuance of securities and in clause 9.2. of the Securities Issuance Prospectus.

Addressed applications for purchase of the Notes submitted by MICEX Stock Exchange Trade Participants shall be registered provided that the condition of adequacy of the provided surety is met, as required by CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Underwriter shall make a deal by submitting a counter application at the same date as that of the original application.  Applications shall be satisfied in the order of their submission.

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If an application requests more Notes than the quantity available on the Underwriter’s trading section, such application shall be satisfied within the balance of the Notes available on the Underwriter’s trading section.

Deals of Notes placement shall be made in accordance with MICEX Stock Exchange Rules.

Settlements on the signed deals shall be made in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Depository shall transfer the Sold Notes to buyers’ depo accounts as at the date of the purchase and sale deals.

Amendment or termination of contracts made at placement of the Notes shall take place on the grounds and under the procedures set out in Chapter 29 of the RF Civil Code.

The procedures for making an entry record to depo account of the first acquirer with a depository providing centralized storage:

Non-Commercial Partnership National Depository Centre or another Depository shall record the Notes placed through MICEX Stock Exchange to depo accounts of the Notes buyers as at the date of the respective purchase and sale transaction.

An entry record to depo account of the first acquirer with NDC shall be made under the instructions issued by CJSC MICEX, the clearing entity servicing the deals made in the course of the Notes placement through MICEX Stock Exchange.  The Depository shall record the placed Notes to accounts of the Notes buyers using the procedures for clearing activities of a clearing organization, and procedures for depository activities of Depositories.

All expenses arising in connection with entry records of the placed Notes to depo accounts of their first owners (acquirers) shall be borne by owners (acquirers) of such Notes.

8.4. The price (prices) or the procedures for establishing the securities placement price:

The Notes shall be placed at the price of RUR 1,000 (One thousand) per one Note (100% (One hundred per cent) of the Notes nominal value).

Starting from the second day of the Notes placement, at buying a Note, the buyer shall also pay the accrued coupon income for the respective quantity of days.  The accrued coupon income (ACI) per one Note shall be computed using the following formula:

ACI = Nom * C * ((T - T0)/ 365)/ 100 %, where

Nom – is nominal value of a Note,

C – interest rate of the first coupon (per cent annual),

T –date of the Notes placement;

T0 - Opening date of the Notes placement.

Accrued coupon income shall be computed down to one kopeck, truncation of computed values shall be based on the rules of mathematical round-up.  Rules of mathematical round-up shall be construed as the method that does not change the value of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases the quantity of whole kopecks by one provided that the first figure after truncation is from 5 to 9.

8.5. Procedures for exercising preemptive rights for purchasing the offered securities:

No preemptive rights for purchasing the offered securities are envisaged.

8.6. Terms and procedures for making settlements for the securities:

At acquisition of the offered securities of the issuance, payments can be made by cash transfer in the Russian Federation currency.

Form of payment: by bank transfer.

Terms and procedures for settlements for the Notes in installments.

Payment for the Notes in installments is not available.

The Notes are placed under the condition of full settlement.

Settlements for the Notes shall be made in cash transfers in the Russian Federation currency in accordance with clearing rules of CJSC MICEX.

Settlements for the Notes at placement shall be made on the terms “delivery against payment” in accordance with clearing rules of CJSC MICEX.  Cash proceeds received by CJSC MICEX Stock Exchange from the Notes placement shall be recorded to the Underwriter’s account with MICEX Clearing Chamber.

Crediting institution:

Full corporate name: NON-BANKING CREDITING ORGANIZATION CLOSED JOINT STOCK COMPANY ‘MOSCOW INTERBANK CURRENCY EXCHANGE CLEARING CHAMBER”

Abbreviated corporate name: CJSC MICEX Clearing Chamber

Location: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

Postal address: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

BIC: 044583505

TIN: 7702165310

Correspondent acc: 30105810100000000505

Information of the account to which cash funds in payment for the Notes are to be received shall be disclosed simultaneously with disclosure of the Underwriter’s information.

No non-cash payments for the securities shall be possible.

The Underwriter shall transfer the funds received from the Noted placement to the Issuer’s account within the timeframe set out in the contract on performing agency functions at placement of securities with CJSC MICEX Stock Exchange.

Other terms and procedures of settlements for the Notes:

Settlements for the Notes shall follow the CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

Cash settlements shall be executed via CJSC MICEX Clearing Chamber. Cash settlements related to purchase and sales deals for the Notes at their placement shall be executed on the same dates as the dates of respective deals.

Settlements under purchase and sales deals at the Notes placement shall be based on “delivery against payment” terms, i.e., the deals shall require preliminary provision of cash and of securities.

8.7. At what percentage of unplaced securities the issuance shall be recognized as ineffective, and what procedures shall be followed to recover the funds delivered in payment for the securities in the issue should the issue be recognized as ineffective

No percentage figure of unplaced securities has been established, at which the issuance shall be recognized as ineffective.

9. The terms of redemption of and income payment under the Notes

9.1. Form of the Notes redemption

The Notes shall be redeemed and income under the Notes shall be paid by a payment agent on behalf and on account of the Issuer in the form of a cash transfer in Russian Federation roubles (RUR).  Owners of the Notes shall not be able to select the method and the terms of the Notes redemption.

9.2. Procedures and terms of the Notes redemption; maturity

Redemption of the Notes of the issuance:

Maturity date:

1 820-th (One thousand eight hundred twentieth) day from the Opening date of the Notes placement.

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Redemption of the Notes shall be carried out by a payment agent on behalf and on account of the Issuer (hereinafter, The Payment Agent).  Data of the Payment Agent are provided in clause 9.6 of the Decision on issuance of securities and in clause 9.1.2. ()  of the Securities Issuance Prospectus.

The Issuer accepts the responsibility for timely and complete transfer to the Payment Agent for the current Notes issuance of the respective cash funds required to fulfill the payment obligations in accordance with the Decision on issuance of securities, the Securities Issuance Prospectus, and the contract between the Issuer and the Payment Agent.

If the Notes redemption maturity date is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

The Notes shall be redeemed at their nominal value.

The Notes shall be repaid in RUR as a bank transfer to benefit of the Note owners.

It is presumed that nominal holders — depositors of NDC are duly authorized to receive the sums paid in connection with redemption of the Notes.

Owner of the Notes that is not an NDC depositor is entitled to authorize a nominal Note holder that is an NDC depositor to receive the sums of the Notes redemption.  If the Owner failed to authorize the nominal Notes holder - an NDC depositor which has the Owner’s Notes recorded to its accounts with NDC, to receive the sums of the Notes redemption, such nominal holder no later than 1 p.m. Moscow time on the third working day preceding the Notes Maturity Date shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

The date (procedures for establishing the date) of the note owners list for the purposes of the notes redemption:

The Notes shall be redeemed to the benefit of the Note Owners, being such as at the end of NDC’s working day preceding the third working date prior to the Notes Maturity Date (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the nominal holder.

If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Notes Maturity Date, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List Production and including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of redemption under the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of redemption under the Notes;

c) location and postal address of the person authorized to receive the sums of redemption under the Notes;

z) banking information of the person authorized to receive the sums of redemption under the Notes, including:

·# of account with the bank;

·name of the bank (and the city where the bank is located) with which the account was opened;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Notes.

d) tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for repayment of redemption sums, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive redemption under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

· individual identification number (IIN) – if applicable;

b) if owner of the Notes is an individual:

· kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

· the owner’s birth day, month and year;

· the owner’s place of registration and postal address including zip code;

· the owner’s tax status;

· the owner’s # of state pension security certificate (if applicable);

· the owner’s TIN (if applicable).

· code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of redemption under the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

As at the Notes Maturity Date, Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of redemption under the Notes to benefit of the Note owners.

If one person is authorized to receive the sums of redemption under the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

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If the Notes Maturity Date is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

9.3. Procedures for assessing income payable under each Note.

Coupon (interest-bearing) period		Coupon (interest) income
Opening date	Closing date

1. Coupon: Interest rate on the first coupon - C1 — shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. ()  of the Securities Issuance Prospectus

The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement. The Closing date of the first coupon period is the date of repayment of this coupon, i.e. 182nd  day from the Opening date of the Notes placement. Total payments under the first coupon per each Note shall be computed with the following formula: K1 = C1 * Nom * (T(1) - T(0))/ 365/ 100 %, where K1 — total coupon payment under 1st coupon per one Note, RUR; C1 — interest rate of the 1st coupon, per cent annual; Nom — nominal value of a Note, RUR; T(0) — Opening date of the 1st coupon period; T(1) — Closing date of the 1st coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole number. Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

2. Coupon: Interest rate on the second coupon — C2 — shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the second coupon of the issue is the182nd day from the Opening date of the Notes placement. The Closing date of the second coupon period is the date of repayment of this coupon, i.e. 364th day from the Opening date of the Notes placement. Total payments under the second coupon per each Note shall be computed with the following formula: K2 = C2 * Nom * (T(2) - T(1))/ 365/ 100 %, where K2 — total coupon payment under 2nd coupon per one Note, RUR; C2 — interest rate of the  coupon, per cent annual; Nom — nominal value of a Note, RUR; T(1) - Opening date of the  coupon period; T(2) - Closing date of the  coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

3. Coupon: Interest rate on the third coupon - C3 — shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the third coupon of the issue is the364th day from the Opening date of the Notes placement. The Closing date of the third coupon period is the date of repayment of this coupon, i.e. 546th day from the Opening date of the Notes placement. Total payments under the third coupon per each Note shall be computed with the following formula: K3 = C3 * Nom * (T(3) - T(2))/ 365/ 100 %, where K3 — total coupon payment under 3rd coupon per one Note, RUR; C3 — interest rate of the 3rd coupon, per cent annual; Nom — nominal value of a Note, RUR; T(2) — Opening date of the 3rd coupon period; T(3) — Closing date of the 3rd coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

4. Coupon: Interest rate on the fourth coupon - C4 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement. The Closing date of the fourth coupon period is the date of repayment of this coupon, i.e. 728th day from the Opening date of the Notes placement. Total payments under the fourth coupon per each Note shall be computed with the following formula: K4 = C4 * Nom * (T(4) - T(3))/ 365/ 100 %, where K4 — total coupon payment under 4th coupon per one Note, RUR; C4 — interest rate of the 4th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(3) — Opening date of the  coupon period; T(4) — Closing date of the  coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

5. Coupon: Interest rate on the fifth coupon - C5 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fifth coupon of the issue is the728-day from the Opening date of the Notes placement. The Closing date of the fifth coupon period is the date of repayment of this coupon, i.e. 910th day from the Opening date of the Notes placement. Total payments under the fifth coupon per each Note shall be computed with the following formula: K5 = C5 * Nom * (T(5) - T(4))/ 365/ 100 %, where K5 — total coupon payment under 5th coupon per one Note, RUR; C5 — interest rate of the 5th coupon, per cent annual; Nom — nominal value of a Note, RUR;

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T(4) — Opening date of the 5th coupon period;

T(5) — Closing date of the 5th coupon period.

The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

6. Coupon: Interest rate on the sixth coupon - C6 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the sixth coupon of the issue is 910th day from the Opening date of the Notes placement. The Closing date of the sixth coupon period is the date of repayment of this coupon, i.e. 1092nd day from the Opening date of the Notes placement. Total payments under the sixth coupon per each Note shall be computed with the following formula: K6 = C6 * Nom * (T(6) - T(5))/ 365/ 100 %, where K6 — total coupon payment under 6th coupon per one Note, RUR; C6 — interest rate of the 6th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(5) — Opening date of the 6th coupon period; T(6) — Closing date of the 6th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

7. Coupon: Interest rate on the seventh coupon — C7 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the seventh coupon of the issue is the1092nd day from the Opening date of the Notes placement. The Closing date of the seventh coupon period is the date of repayment of this coupon, i.e. 1274th day from the Opening date of the Notes placement. Total payments under the seventh coupon per each Note shall be computed with the following formula: K7 = C7 * Nom * (T(7) - T(6))/ 365/ 100 %, where K7 — total coupon payment under 7th coupon per one Note, RUR; C7 — interest rate of the 7th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(6) — Opening date of the  coupon period; T(7) — Closing date of the coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

8. Coupon: Interest rate on the eighth coupon – C8 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eighth coupon of the issue is the1274th day from the Opening date of the Notes placement. The Closing date of the eighth coupon period is the date of repayment of this coupon, i.e. 1456th day from the Opening date of the Notes placement. Total payments under the eighth coupon per each Note shall be computed with the following formula: K8 = C8 * Nom * (T(8) - T(7))/ 365/ 100 %, where K8 — total coupon payment under 8th coupon per one Note, RUR; C8 — interest rate of the 8th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(7) — Opening date of the 8th coupon period; T(8) — Closing date of the 8th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

9. Coupon: Interest rate on the ninth coupon — C9 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the ninth coupon of the issue is the1456th day from the Opening date of the Notes placement. The Closing date of the ninth coupon period is the date of repayment of this coupon, i.e. 1638th day from the Opening date of the Notes placement. Total payments under the ninth coupon per each Note shall be computed with the following formula: K9 = C9 * Nom * (T(9) - T(8))/ 365/ 100 %, where K9 — total coupon payment under 9th coupon per one Note, RUR; C9 — interest rate of the 9th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(8) — Opening date of the 9th coupon period; T(9) — Closing date of the 9th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

10. Coupon: Interest rate on the tenth coupon — C10 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the tenth coupon of the issue is the1638th day from the Opening date of the Notes placement. The Closing date of the tenth coupon period is the date of repayment of this coupon, i.e. 1820th day from the Opening date of the Notes placement. Total payments under the tenth coupon per each Note shall be computed with the following formula: K10 = C10 * Nom * (T(10) - T(9))/ 365/ 100 %, where K10 — total coupon payment under 10th coupon per one Note, RUR; C10 — interest rate of the 10th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(9) — Opening date of the 10th coupon period; T(10) — Closing date of the 10th coupon period.

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The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

11. Coupon: Interest rate on the eleventh coupon — C11 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eleventh coupon of the issue is the1820th day from the Opening date of the Notes placement. The Closing date of the eleventh coupon period is the date of repayment of this coupon, i.e. 2002nd day from the Opening date of the Notes placement. Total payments under the eleventh coupon per each Note shall be computed with the following formula: K11 = C11 * Nom * (T(11) - T(10))/ 365/ 100 %, where K11 — total coupon payment under 11th coupon per one Note, RUR; C11 — interest rate of the 11th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(10) — Opening date of the 11th coupon period; T(11) — Closing date of the 11th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

12. Coupon: Interest rate on the twelfth coupon — C12 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the twelfth coupon of the issue is the2002nd day from the Opening date of the Notes placement. The Closing date of the twelfth coupon period is the date of repayment of this coupon, i.e. 2184th day from the Opening date of the Notes placement. Total payments under the twelfth coupon per each Note shall be computed with the following formula: K12 = C12 * Nom * (T(12) - T(11))/ 365/ 100 %, where K12 — total coupon payment under 12th coupon per one Note, RUR; C12 — interest rate of the 12th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(11) — Opening date of the 12th coupon period; T(12) — Closing date of the 12th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

13. Coupon: Interest rate on the thirteenth coupon — C13 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the thirteenth coupon of the issue is the2184-day from the Opening date of the Notes placement. The Closing date of the thirteenth coupon period is the date of repayment of this coupon, i.e. 2366- day from the Opening date of the Notes placement. Total payments under the thirteenth coupon per each Note shall be computed with the following formula: K13 = C13 * Nom * (T(13) - T(12))/ 365/ 100 %, where K13 — total coupon payment under 13th coupon per one Note, RUR; C13 — interest rate of the 13th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(12) — Opening date of the 13th coupon period; T(13) — Closing date of the 13th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

14. Coupon: Interest rate on the fourteenth coupon — C14 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fourteenth coupon of the issue is the2366th day from the Opening date of the Notes placement. The Closing date of the fourteenth coupon period is the date of repayment of this coupon, i.e. 2548th day from the Opening date of the Notes placement. Total payments under the fourteenth coupon per each Note shall be computed with the following formula: K14 = C14 * Nom * (T(14) - T(13))/ 365/ 100 %, where K14 — total coupon payment under 14th coupon per one Note, RUR; C14 — interest rate of the 14th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(13) — Opening date of the 14th coupon period; T(14) — Closing date of the 14- coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

15. Coupon: Interest rate on the fifteenth coupon — C15 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the fifteenth coupon of the issue is the2548th day from the Opening date of the Notes placement. The Closing date of the fifteenth coupon period is the date of repayment of this coupon, i.e. 2730th day from the Opening date of the Notes placement. Total payments under the fifteenth coupon per each Note shall be computed with the following formula: K15 = C15 * Nom * (T(15) - T(14))/ 365/ 100 %, where K15 — total coupon payment under 15th coupon per one Note, RUR; C15 — interest rate of the 15th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(14) — Opening date of the 15th coupon period; T(15) — Closing date of the 15th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole

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quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

16. Coupon: Interest rate on the sixteenth coupon — C16 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the sixteenth coupon of the issue is the2730th day from the Opening date of the Notes placement. The Closing date of the sixteenth coupon period is the date of repayment of this coupon, i.e. 2912th day from the Opening date of the Notes placement. Total payments under the sixteenth coupon per each Note shall be computed with the following formula: K16 = C16 * Nom * (T(16) - T(15))/ 365/ 100 %, where K16 — total coupon payment under 16th coupon per one Note, RUR; C16 — interest rate of the 16th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(15) — Opening date of the 16th coupon period; T(16) — Closing date of the 16th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity. Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

17. Coupon: Interest rate on the seventeenth coupon — C17 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the seventeenth coupon of the issue is the2912nd day from the Opening date of the Notes placement. The Closing date of the seventeenth coupon period is the date of repayment of this coupon, i.e. 3094th day from the Opening date of the Notes placement. Total payments under the seventeenth coupon per each Note shall be computed with the following formula: K17 = C17 * Nom * (T(17) - T(16))/ 365/ 100 %, where K17 — total coupon payment under 17th coupon per one Note, RUR; C17 — interest rate of the 17th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(16) — Opening date of the 17th coupon period; T(17) — Closing date of the 17th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

18. Coupon: Interest rate on the eighteenth coupon — C18 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the eighteenth coupon of the issue is the3094th day from the Opening date of the Notes placement. The Closing date of the eighteenth coupon period is the date of repayment of this coupon, i.e. 3276th day from the Opening date of the Notes placement. Total payments under the eighteenth coupon per each Note shall be computed with the following formula: K18 = C18 * Nom * (T(18) - T(17))/ 365/ 100 %, where K18 — total coupon payment under 18th coupon per one Note, RUR; C18 — interest rate of the 18th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(17) — Opening date of the 18th coupon period; T(18) — Closing date of the 18th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

19. Coupon: Interest rate on the nineteenth coupon — C19 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the nineteenth coupon of the issue is the3276th day from the Opening date of the Notes placement. The Closing date of the nineteenth coupon period is the date of repayment of this coupon, i.e. 3458th day from the Opening date of the Notes placement. Total payments under the nineteenth coupon per each Note shall be computed with the following formula: K19 = C19 * Nom * (T(19) - T(18))/ 365/ 100 %, where K19 — total coupon payment under 19th coupon per one Note, RUR; C19 — interest rate of the 19th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(18) — Opening date of the 19th coupon period; T(19) — Closing date of the 19th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

20. Coupon: Interest rate on the twentieth coupon — C20 - shall be computed in accordance with the procedures set here below.

The coupon period Opening date of the twentieth coupon of the issue is the3458th day from the Opening date of the Notes placement. The Closing date of the twentieth coupon period is the date of repayment of this coupon, i.e. 3640th day from the Opening date of the Notes placement. Total payments under the twentieth coupon per each Note shall be computed with the following formula: K20 = C20 * Nom * (T(20) - T(19))/ 365/ 100 %, where K20 — total coupon payment under 20th coupon per one Note, RUR; C20 — interest rate of the 20th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(19) — Opening date of the 20th coupon period; T(20) — Closing date of the 20th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the

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first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

Procedures for establishing interest rate for the first coupon:

Interest rate on the first coupon shall be established through the Tender held by stock exchange — MICEX Stock Exchange — between potential buyers of the Notes as at the Notes Placement Opening Date.

On the day of the Tender MICEX Stock Exchange Trade Participants shall submit addressed bids for the Notes with settlement code T0 to Underwriter via MICEX Stock Exchange trading system, both on their on account, and on account and on behalf of their customers.  MICEX Stock Exchange shall set the time and procedures for submission of Tender bids in coordination with the Underwriter and/or the Issuer.

A bid shall state the following relevant terms:

i. Purchasing price;

ii. Quantity of the Notes;

iii. Acceptable interest rate of the first coupon;

iv. Other parameters in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange.

Cash provision should be made in the amount sufficient for full payment for the Notes, as stated in the applications including commission fees of MICEX Stock Exchange and CJSC MICEX.

Purchasing price shall state the Notes Placement Price as per the Securities Issuance Prospectus and the Decision on issuance of securities.

The Notes quantity shall state the maximum quantity of the Notes that the potential buyer would be willing to buy, provided the Issuer sets the first coupon interest rate above or equal the acceptable interest rate for the first coupon, as stated in the bid.

The acceptable interest rate for the first coupon shall state the first coupon interest rate to be announced by the Issuer, at which rate the potential investor would be willing to buy the Notes in the quantity stated in the bid.  The acceptable interest rate shall be stated as per cent annual rate down to one hundredth of a per cent.

A bid of a MICEX Stock Exchange Trade Participant shall be accepted for execution if the provided surety is sufficient in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Issuer shall take decision on interest rate for the first coupon and shall inform MICEX Stock Exchange of its decision in writing.  After an information agency publishes an announcement of the first coupon interest rate, the Issuer shall inform the Underwriter of the established interest rate for the first coupon. The Underwriter shall publish an announcement of the first coupon interest rate using the MICEX Stock Exchange Trading System via e-mail to all Trade Participants.

The Issuer shall disclose the interest rate established for the first coupon in accordance with the procedures set in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

Procedures for setting interest rate to the coupons starting from the second coupon:

1) Within 2 (Two) working days from the Notes Placement Opening, the Issuer may take a decision on purchasing the Notes from their owners within the next 5 (Five) working days of coupon period j (j=1-19).  If the Issuer takes such decision, interest rates for all coupons of the Notes, which have the sequential numbers below or equal to j, shall be established as equal to the first coupon interest rate.  The Issuer shall communicate the above information including sequential numbers of the coupons, for which interest rate was established as equal to the first coupon interest rate, and sequential number of the coupon period (j), in which owners of the Notes shall be able to demand repurchase of the Notes prior to potential Notes buyers by publishing the below announcements within the below time period from the date of the meeting protocol of the Issuer’s authorized body that has taken decision on purchasing the Notes:

· on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

2) For the coupons, for which the Issuer failed to establish an interest rate (procedures for establishing interest rate) prior to the Notes Placement Opening (i=(j+1),.,20), the interest rate shall be established as a numerical figure at the Date of Establishing the “i” coupon, which occurs not later than 7 (Seven) working days before payment of coupon (i-1).  At the date of establishing “i” coupon, the Issuer shall be able to set the rates of any quantity of undefined coupons following “i” coupon (where k — is the number of the last of the coupons being defined). The Issuer shall informs the Notes owners of the interest rate on “i” coupon within 5 (Five) working days before opening of i coupon period on the Notes by publishing a relevant announcement under the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

3) If after announcement of coupon interest rates (as set out in the previous subclauses) there still exist undefined rates of at least one of subsequent coupons, then together with the announcement of rates for i coupon and other coupons of the Notes being defined, the Issuer shall be required to ensure the Notes owners’ right to demand that the Issuer purchase the Notes in the last 5 (Five) working days of k coupon period (if the Issuer defines the rate for only one i coupon, i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined on the Date of Establishing i coupon, and sequential numbers of coupon period (k), in which the notes shall be purchased, shall be communicated to potential buyers of the Notes by way of publishing in accordance with the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Issuer shall inform MICES Stock Exchange of decisions taken in accordance with subclauses (2) and (3) of the above Decision on issuance of securities and subclauses (2) and (3) clause 9.1.2. (a) of the Securities Issuance Prospectus, including interest rates within 5 (Five) working days prior to completion of (i-1) coupon period (the period in which interest rate is defined for i coupon and subsequent coupons).

9.4. Procedures and timeframe of income payment under the Notes including the procedures and timeframe of income payment under each coupon

Coupon (interest-bearing) period		Time (date) of coupon (interest)	Date of production of a list of Notes owners for coupon (interest) income
Opening date	Closing date	income payment	payment

1. Coupon: Interest rate on the first coupon - C1 — shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. (д)  of the Securities Issuance Prospectus

The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement. The Closing date of the first coupon period is the date of repayment of this coupon. Coupon income on the first coupon shall be paid on 182nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

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Procedures for payment of coupon (interest) income:

Income on the Notes shall be paid by the Payment Agent on account and on behalf of the Issuer.

Income on the Notes shall be paid in the Russian Federation currency by way of a bank transfer to benefit of the Notes owners. It is presumed that nominal holders — depositors of NDC are authorized to receive the sums of income on the Notes. An NDC depositor that has not been authorized by its customers to receive income on the Notes no later than 1 p.m. Moscow time on the third working day preceding the Date of Income Payment under the Notes shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of income of the Notes, then the person authorized to receive the sums of income on the Notes shall be the nominal holder.  If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of income on the Notes, then the person authorized to receive the sums of income on the Notes shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Date of Income Payment on the Notes, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List for the purposes of income payment, including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of income on the Notes;

c) location and postal address of the person authorized to receive the sums of income on the Notes;

r) banking information of the person authorized to receive the sums of income on the Notes, including:

·               # of account with the bank;

·               name of the bank (and the city where the bank is located) with which the account was opened;

·               corresponding account of the bank, with which the account was opened;

·               bank’s identification code of the bank, with which the account was opened (BIC);

·               taxpayer’s identification # (TIN) of the payment recipient;

·               code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

d) tax status of the person authorized to receive the sums of income on the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for receiving coupon income, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive coupon income under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

· individual identification number (IIN) — if applicable;

b) if owner of the Notes is an individual:

· kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

· the owner’s birth day, month and year;

· the owner’s place of registration and postal address including zip code;

· the owner’s tax status;

· the owner’s # of state pension security certificate (if applicable);

· the owner’s TIN (if applicable).

· code of reason for registration (CPP) of the person authorized to receive the sums of coupon income under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of income on the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

As at the Date of Income Payment on the Notes, the Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of income on the Notes and included in the List of the Note Owners and/or Nominal Holders.

If one person is authorized to receive the sums of income on the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

If the Date of Coupon Income Payment under the Notes is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

2. Coupon: Interest rate on the second coupon - C2 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the second coupon of the issue is the182nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the second coupon shall be paid on 364th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of

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income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the second coupon are the same and the procedures for coupon income payment on the first coupon.

3. Coupon: Interest rate on the third coupon — C3 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the third coupon of the issue is the364th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the third coupon shall be paid on 546th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the third coupon are the same and the procedures for coupon income payment on the first coupon.

4. Coupon: Interest rate on the fourth coupon — C4 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fourth coupon shall be paid on 728th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fourth coupon are the same and the procedures for coupon income payment on the first coupon.

5. Coupon: Interest rate on the fifth coupon — C5 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fifth coupon of the issue is the728th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fifth coupon shall be paid on 910th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fifth coupon are the same and the procedures for coupon income payment on the first coupon.

6. Coupon: Interest rate on the sixth coupon — C6 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the sixth coupon of the issue is the910- day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the sixth coupon shall be paid on 1092nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the sixth coupon are the same and the procedures for coupon income payment on the first coupon.

7. Coupon: Interest rate on the seventh coupon — C7 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the seventh coupon of the issue is the1092nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the seventh coupon shall be paid on 1274th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the seventh coupon are the same and the procedures for coupon income payment on the first coupon.

8. Coupon: Interest rate on the eighth coupon — C8 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eighth coupon of the issue is the1274th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eighth coupon shall be paid on 1456th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eighth coupon are the same and the procedures for coupon income payment on the first coupon.

9. Coupon: Interest rate on the ninth coupon — C9 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the ninth coupon of the issue is the1456th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the ninth coupon shall be paid on 1638th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the ninth coupon are the same and the procedures for coupon income payment on the first coupon.

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10. Coupon: Interest rate on the tenth coupon — C10 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the tenth coupon of the issue is the1638th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the tenth coupon shall be paid on 1820th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the tenth coupon are the same and the procedures for coupon income payment on the first coupon.

11. Coupon: Interest rate on the eleventh coupon — C11 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eleventh coupon of the issue is the1820th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eleventh coupon shall be paid on 2002nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eleventh coupon are the same and the procedures for coupon income payment on the first coupon.

12. Coupon: Interest rate on the twelfth coupon — C12 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the twelfth coupon of the issue is the2002nd day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the twelfth coupon shall be paid on 2184th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the twelfth coupon are the same and the procedures for coupon income payment on the first coupon.

13. Coupon: Interest rate on the thirteenth coupon — C13 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the thirteenth coupon of the issue is the2184th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the thirteenth coupon shall be paid on 2366th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the thirteenth coupon are the same and the procedures for coupon income payment on the first coupon.

14. Coupon: Interest rate on the fourteenth coupon — C14 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fourteenth coupon of the issue is the2366th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fourteenth coupon shall be paid on 2548th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fourteenth coupon are the same and the procedures for coupon income payment on the first coupon.

15. Coupon: Interest rate on the fifteenth coupon — C15 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the fifteenth coupon of the issue is the2548th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the fifteenth coupon shall be paid on 2730th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the fifteenth coupon are the same and the procedures for coupon income payment on the first coupon.

16. Coupon: Interest rate on the sixteenth coupon — C16 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the sixteenth coupon of the issue is the2730th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the sixteenth coupon shall be paid on 2912th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the sixteenth coupon are the same and the procedures for coupon income payment on the first coupon.

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17. Coupon: Interest rate on the seventeenth coupon — C17 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the seventeenth coupon of the issue is the2912th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the seventeenth coupon shall be paid on 3094th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the seventeenth coupon are the same and the procedures for coupon income payment on the first coupon.

18. Coupon: Interest rate on the eighteenth coupon — C18 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the eighteenth coupon of the issue is the3094th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the eighteenth coupon shall be paid on 3276th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the eighteenth coupon are the same and the procedures for coupon income payment on the first coupon.

19. Coupon: Interest rate on the nineteenth coupon — C19 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the nineteenth coupon of the issue is the3276th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the nineteenth coupon shall be paid on 3458th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the nineteenth coupon are the same and the procedures for coupon income payment on the first coupon.

20. Coupon: Interest rate on the twentieth coupon — C20 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the twentieth coupon of the issue is the3458th day from the Opening date of the Notes placement. The coupon period Closing date shall be the date of payment of this coupon. Coupon income on the twentieth coupon shall be paid on 3640th day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

The procedures for coupon income payment on the twentieth coupon are the same and the procedures for coupon income payment on the first coupon.

For the purposes of income payment on the twentieth coupon the List of Notes owners and/or nominal holders produced for the Notes redemption shall be used.

Income on the twentieth coupon shall be paid simultaneously with redemption of the Notes.

9.5. Availability and terms of premature redemption of the Notes

The Notes can be redeemed prematurely on request of their owners.

The earliest possible date for claiming premature redemption of the Notes:

Premature redemption of the Notes shall not be possible before state registration of the Report on the Securities Issuance Results, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

In case of premature redemption of the Notes, the buy-out shall be executed at their nominal value. Accrued coupon income (ACI) as at the Date of the Notes Premature Redemption shall be additionally paid.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it in the following circumstances:

· delisting of the Notes by all stock exchanges that included the Notes in their quoting lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

·delay for more than 7 (Seven) days of execution by the Issuer of its obligations of coupon income payment on the Notes, after the due date of the respective coupon income payment as per the Decision on issuance of Securities and the Securities Issuance Prospectus;

· declaration by the Issuer of its default on the financial obligations towards owners of the Notes of the issue.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

Last date of presenting the Notes for premature redemption:

The Premature Redemption Date — The Notes can be prematurely redeemed on demand of their owners within 60 (Sixty) working days from the moment of disclosure by the Issuer of the fact of the above circumstances in accordance with the procedures set out in clauses 9.5. and 11(u) of the Decision on Issuance of Securities, or from the date when of the fact of the above circumstances became known or should have become known to owners of the Notes.

Terms and procedures for premature redemption of the Notes:

Premature redemption of the Notes shall be carried out on behalf of and on account of the Issuer by a Payment Agent (hereinafter, The Payment Agent).  Functions of the Payment Agent shall be performed by:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

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If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

In case of premature redemption the Notes shall be repurchased at their nominal value. In addition, the Issuer shall pay to the Notes owners the sums of accrued coupon income as at the date of execution by the Issuer of its obligations wit respect of premature redemption of the Notes assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

Nominal value of the Notes and accrued coupon income in connection with their premature redemption shall be repaid as a bank transfer in RUR.

The Notes prematurely redeemed by the Issuer cannot be put on the market.

In order to exercise its right for premature redemption of the Notes, owner of the Notes that is an NDC depositor, or nominal holder that is an NDC depositor authorized by the Notes owner to act towards premature redemption of the Notes, shall perform the following mandatory actions:

· submit to the Issuer a request (application) in a written form for premature redemption of the Notes (in accordance with the requirements specified in the Decision on issuance of Securities and in the Securities Issuance);

· submit to NDC an order issued in accordance with NDC requirements for transfer of the Notes subject to premature redemption to the depo account section designated for recording the Notes subject to premature redemption.

Request (application) for premature redemption of the Notes shall be delivered to the Issuer against its signature from 9 a.m. to 5 p.m. (Moscow time) within 30 (Thirty) working days after the moment when the Notes obtained the right to demand premature redemption of the Notes, or delivered by registered mail with a return receipt to the Issuer’s postal address.

Request (application) in a written form for premature redemption of the Notes shall be submitted with the following attachments:

·               if the request is signed by other person than the Notes owner, a document is to be attached supporting the powers of the person who signed the request on behalf of the Notes owner;

·               notarized sample of signature of the person who signed the request on behalf of the Notes owner;

·               a copy of NDC report certified by NDC on transfer of the Notes to the depo account section designated for blocking securities at redemption.

Request (application) for premature redemption of the Notes shall include the following:

·               statement of the circumstance based on which the Note owner became entitled to demand premature redemption;

·               for a corporate Notes owner — name of the legal entity, location, TIN;

·               for an individual Notes owner — surname, first, middle name, residential address, other passport data, TIN (if assigned in accordance with applicable procedures;

·               quantity of the Notes;

·               payment information of income recipient:

1. full name (surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

2. location and postal address of the person authorized to receive the sums of income on the Notes;

3. banking information of the person authorized to receive the sums of income on the Notes, including:

·# of account with the bank;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

4. tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

Non-residents and individuals are required to provide the following information in the Request:

·             full name/surname, first, patronymic name of the Notes owner;

·             full name of the person authorized to receive the sums of redemption under the Notes;

·             location (or registration for individuals) and postal address including postal zip code of the Notes owner

··              banking information of the person authorized to receive the sums of redemption under the Notes

·taxpayer’s identification # (TIN) of the Notes owner;

·             tax status of the Notes owner

if owner of the Notes is a corporate non-resident entity:

·              individual identification number (IIN) — if applicable;

if owner of the Notes is an individual:

·             kind, #, date and place of issuance of the Notes owner’s identification document, name of the issuing agency;

·             the Notes owner’s TIN (if applicable);

·             the Notes owner’s birth day, month and year).

Within 5 (Five) working days from the moment of receiving the documents, the Issuer shall review them for correctness, and provided that the submitted documents comply with the terms set out in the Decision on issuance of Securities and the Securities Issuance Prospectus the Issuer shall make cash transfer to benefit of the Notes owner.

The Issuer shall make cash transfer to account of the Payment Agent in the sum payable to the Notes owner, and shall provide the Payment Agent with data required for making a corresponding payment to benefit of the Notes owner.

Together with notification, the Issuer shall provide copies of NDC reports on transaction on the depo accounts of the Notes owners (nominal holders) supporting transfer of the Notes to the depo account sections designated for accounting for the Notes subject to premature redemption.

Within 2 (Two) days after the date of receiving cash funds from the Issuer and of data required for making corresponding payments to benefit of the Notes owners, the Payment Agent shall transfer cash to benefit of the Notes owner, as per the enclosed information.  Not later than the next working day after the date of transfer, the Payment Agent shall inform the Issuer and NDC depositor of the fact of transfer.

Obligations of the Issuer shall be considered fulfilled from the moment of writing the respective cash funds from account of the Payment Agent.

If the submitted documents do not meet the above requirements, the Issuer shall not later than the fifth working day from the moment of receiving the above documents deliver to the person who signed the request for the Notes redemption and to NDC a notice on the reasons for declining the documents. The Issuer shall submit information to NDC of the refusal to satisfy the Request for Premature Redemption stating the name, surname, first and patronymic name of individual owner, quantity of the Notes, and name of the Depository which opened an account to the owner.

Having received such a notification, the person who signed the request does not loose the right to resubmit the request for premature redemption of the Notes.

After the Issuer fulfills is obligations of premature redemption of the Notes, NDC shall write the redeemed Notes off the depositor’s account with NDC and record them to the respective issuance depo account section designated for accounting for redeemed Notes with NDC.

If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

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It is presumed that nominal holders — depositors of NDC are duly authorized to receive the sums paid in connection with premature redemption of the Notes and/or conduct other actions required for premature redemption of the Notes to benefit of the Notes owners.

The procedures for disclosure of information on premature redemption of the Notes:

on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

Within 1 (One) working day after the date of occurrence of the event that enables the Notes owner to demand premature redemption of the Notes the Issuer shall publish information on news lines (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) days after the above date the Issuer shall put information on its Internet website - www.mts.ru, stating the following:

· description of the event enabling the Notes owners to demand premature redemption of the Notes;

· the date when the event occurred;

· possible actions of the Notes owners towards satisfaction of their claims on premature redemption of the Notes.

Publication on the Internet website shall be done after publication on the news line.

After the Notes were prematurely redeemed by the Issuer, the Issuer shall announce the time of exercising its obligations.

The above information (including the quantity of redeemed Noted) shall be published within the following timeframe after the last date of exercising the obligations:

· on news lines (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

Publication on the Internet website shall be done after publication on the news line.

9.6. Information of payment agents on the notes

Coupon (interest) income and sums of redemption (premature redemption) shall be paid via the Payment Agent.

The Payment Agent:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

The Payment Agent shall perform the following functions:

1. On behalf and on account of the Issuer, shall transfer cash funds to the persons included in the List of Notes owners and/or Nominal Holders entitled to receive coupon income/sums of redemption (here below in this clause, The List of Notes Owners and/or Nominal Holders) in the amounts, within the timeframe and under the procedures established by the Decision on issuance of securities, the Securities Issuance Prospectus, and the Agreement between the Issuer and the Payment Agent.

The Issuer shall make preliminary transfer of the cash funds designated for Payments under the Notes to be executed by the Payment Agent to the bank account indicated by the Payment Agent under the procedures and within the timeframe specified in the Agreement between the Issuer and the Payment Agent.

2. Provide information to NDC depositors and to all concerned parties regarding the time and terms of coupon income payment under the Notes and/or redemption of the Notes by way of placement of the above information on NDC’s website: www.ndc.ru.

3. Ensure confidentiality of information received by the Payment Agent in the course of execution of its obligations provided this information is not public and is not required for disclosure by legal and regulatory acts of the Russian Federation.

The Issuer shall be able to appoint other payment agents or annul such appointments.

It is presumes that the Issuer cannot simultaneously appoint several payment agents.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days from the date of such appointments or their annulment on news line (AK&M or Interfax or ANO “AZIPI”) and in its Internet website — www.mts.ru.

9.7. Information on actions of the Notes owners and on the disclosure procedures in case of default on the Notes:

As required by Articles 810 and 811 of the RF Civil Code, the Issuer is obliged to repay to the Notes owners at redemption the nominal value of the Notes and coupon income on the Notes within the timeframe and under the procedures established by the Decision on Issuance of Securities, the Securities Issuance Prospectus.

The Issuer’s failure to fulfill the obligations under the Notes shall represent a material violation of the loan agreement (default) in case of:

· overdue obligation of the next interest income (coupon) payment under the Notes for over 7 (Seven) days, or refusal to fulfill the above obligation;

· overdue obligation of repayment of the principal on the Notes for over 30 (Thirty) days, or refusal to fulfill the above obligation.

Delay in execution of the respective obligations, but not exceeding the above time limits shall represent a technical default.

Each owner of the Notes is entitled to demand compensation of the Notes nominal value and repayment of the accrued coupon income under the notes due to it in the situations specified in the Decision on Issuance of Securities, the Securities Issuance Prospectus.

If the Issuer fails to execute and/or properly execute its obligations under the Notes, the Notes owners shall be entitled to apply to the Warrantor that has provided surety for the Notes of the issuance in accordance with the terms of surety provision in the form of a warranty for the purposes of the Notes issue, as specified in clause 12 of the Decision on Issuance of Securities, and in clause 9.1.2 of the Securities Issuance Prospectus.

If the Notes owners are unable to get satisfaction of the claims with respect of the Notes owned by them and addressed to the Issuer and/or the Warrantor, the Notes owners shall be entitled to apply to court or to arbitration with a claim against the Issuer and/or the Warrantor.

Individual Note owners shall in this case be able to apply to court of general jurisdiction at location of the defendant, and corporate Note owners and individual businessmen — Note owners shall be able to apply to arbitration at location of the defendant.

Overall limitation of sanctions for application to court (court of general jurisdiction or arbitration) with claims against the Issuer and/or the Warrantor shall be 3 (Three) years.

In case of the Issuer’s default or technical default under the Notes, the Issuer shall pay interest to the Notes owners in addition to overdue payments, as required by Article 395 of the RF Civil Code.

If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·the volume of defaulted obligations;

·the reason for the default;

·the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

·on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

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· on its Internet website — www.mts.ru— within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

10. Information on repurchase of the notes

The procedures for repurchasing the Notes on demand of their owner(s) with subsequent trade operations with the Notes; the timeframe of applications for such repurchase:

It is presumed that the Issuer shall repurchase the Notes on demand of their owners and further shall be able to trade them until maturity, in accordance with the terms specified in this clause. The Issuer shall be able to repurchase the Notes of this issuance after registration of the Report on the Securities Issuance with governmental authorities, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer is obliged to ensure the Notes owners’ right to demand repurchase by the Issuer of the Notes within the last 5 (Five) working days of the Notes coupon period preceding the coupon period for which the rate of interest was established by the Issuer (hereinafter, The Period of Filing for Repurchase of the Notes by the Issuer) after opening of the Notes placement.  Owners of the Notes shall be able to demand that the Issuer repurchase the Notes in the situations described in clause 9.3. of the Decision on Issuance of Securities, and clause 9.1.2. of the Prospectus.

The procedures for repurchase of the Notes:

The Issuer shall repurchase the notes via MICEX Stock Exchange (hereinafter, The Market Maker) in accordance with the regulatory documents applicable to activities of the securities market maker

In case of reorganization or liquidation of the Market Maker, or if repurchase by the Issuer of the Notes through the Market Maker under the procedures established by the Decision on Issuance of Securities, and the Securities Issuance Prospectus does not comply with the RF legislation, the Issuer shall have to select another securities market maker through which the Issuer shall make the Notes repurchase deals.

In this case the Issuer shall repurchase the Notes in accordance with the regulations applicable to activities of such securities market maker, and the Issuer shall in addition to announcement of the coupon interest rate (starting from the second coupon) publish information of the securities market maker through which the Issuer shall make the Notes repurchase deal.  The above information shall include:

· full and abbreviated name of the securities market maker;

· its location;

· license information: #, Date of issuance, Validity period, the body that issued the license;

The Issuer’s agent acting on behalf and on account of the Issuer for repurchasing the Notes (hereinafter, The Agent) shall be the Underwriter.

The Issuer can reassign the Agent’s functions to another person that will be able to exercise all actions required for the repurchase, as per this clause and the RF legislation.  In this case, the Issuer shall be obliged to publish an announcement providing the following information:

·full and abbreviated name of the person, to which the Agent’s functions were reassigned;

·its location, and also address and fax.# for delivery the applications in accordance with the procedures provided here below;

·information of the license for conducting professional activities on the securities market: #, Date of issuance, Validity period, the body that issued the license;

·confirmation of the fact that the appointed Agent is a trade participant of the Market Maker, through which the repurchase shall be carried out.

This information announcement shall be published not later than 30 (Thirty) days before the Repurchase Date established in accordance with the procedures provided here below in the following sources of information:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI”;

·              on the website in Internet (www.mts.ru);

The announcement in Internet shall be published after the publication on the news line.

In order to implement its right to sell the Notes, the trade participant that owns the Notes and wishes to sell the Notes, or the person authorized by its client being the Notes owner to sell the Notes at its account and on its behalf (hereinafter, The Acceptant) shall perform two actions:

1) submit to the Agent an application signed by the Acceptant (hereinafter, The Application). The Application can be accepted in any working day, but exclusively within the Submission Period (as defined here above), and should include the following information:

·full name of the Acceptant;

·state registration # and date of state registration of the Notes;

·quantity of the Notes, which the Acceptant intends to sell to the Issuer (in figures and words);

·location u postal address of the Acceptant.

2) From 11 a.m. to 1 p.m. Moscow time on the Repurchase Date (as defined here below), the Acceptant that previously transferred the above Application to the Agent shall submit an addressed applications for sale of a specified quantity of the Notes via the Market Maker’s Trading System in accordance with Rules of Securities Trading and/or other rules of the Market Maker which regulate its activities.  The Application shall be address to the Agent that is a Trade Participant, and shall indicate a Purchasing Price, as defined here below, in percentage of nominal value of the Notes, and settlement code T0.

Quantity of the Notes stated in the application should not exceed the Notes quantity previously stated in the Application submitted by the Acceptant to the Agent.

The Application should be received in any of the working days within the Submission Period.

The Application shall be addressed to the Agent’s postal address.

The Application shall be deemed received by the Agent from the moment of its handling to the addressee, or refusal by the addressee to receive it supporting by a relevant document.  The Issuer shall not have any obligations of repurchasing the Notes from owners and/or the Acceptants that have not submitted their Applications within the applicable timeframe, or have submitted the Applications that do not comply with the above requirements.

The Issuer shall accept an extract from the register of applications as an adequate confirmation of submission by the Acceptant of an application for sale of the Notes in accordance with the terms for repurchasing the Notes.  The extract shall be made in the form of a relevant application to the Rules of the Market Maker for Conducting Trade in Securities and/or Other Papers, certified by signature of an authorized person.

The Issuer undertakes that in the period from 4 p.m. to 6 p.m. Moscow time on the Repurchasing Date it shall make deals via the Agent with all Acceptants by way of submitting addressed counter applications to the ones submitted in accordance with action 2, and maintained in the trading system as at the moment of making the deal.

The addressed counter applications submitted in accordance with action 2 by the Acceptants that have earlier submitted the Applications under the applicable procedures, shall be satisfied by the Agent within the Notes quantity indicated in the addressed applications submitted by the Acceptants, and at the price established by the Decision on Issuance of Securities, and the Prospectus.  Obligations of the parties (The Notes Issuer and the Acceptant) for repurchasing the Notes shall be considered fulfilled from the moment of transfer of title to the repurchased Notes to the Issuer (recording of the Notes to issuance account of the Issuer) and repayment for the Notes by the Issuer (fulfillment of the condition “delivery against payment” in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market).

If the Issuer’s deal or several deals of purchasing its own Notes is recognized as major deals or deals with interest, such deals should be approved as required by the Russian Federation law.

The Notes repurchased by the Issuer shall be received to the depo account with NDC.  Subsequently, the Notes repurchased by the Issuer may be again submitted for trade operations at secondary market (provided that the Issuer complies with the Russian Federation law).

On expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish information on the timeframe for execution of its liabilities.

The above information (including quantity of repurchased notes) shall be published within the following timeframe from the moment of occurrence of the material fact:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Information on repurchase of the notes on demands of their owners shall be disclosed together with information on the interest rates defined for coupons:

Information on the interest rates defined by the Issuer for coupons of the Notes starting from the second coupon shall be communicated to potential purchasers by way of an announcement of material facts in accordance with the procedures and timeframe set in clause 11 of the Decision on Issuance of Securities, and in clause 2.9. of the Securities Issuance Prospectus.

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Timeframe for repurchasing the notes and the procedures for establishing it:

2nd (Second) working day from the completion date of the Period for Submission of the Notes for Repurchase by the Issuer

Purchasing price of the Notes:

100% (One hundred per cent) of the Notes nominal value.

If a purchase and sale deal is made on the Date of Purchasing the Notes, the Issuer shall additionally pay to the Owners the accrued coupon income on the Notes (ACI).

The procedures for repurchase by the Issuer of the Notes under agreement with the Notes owners:

The Issuer may be able to repurchase the Notes under agreement with their owner(s) and further use the Notes for trading until expiry of the redemption period on the terms set by the Decision on Issuance of Securities and the Securities Issuance Prospectus.

The Issuer may be able to repurchase the Notes of this issue after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer shall repurchase the Notes under the terms set by the Decision on Issuance of Securities, the Securities Issuance Prospectus, and individual decisions by the Issuer regarding purchase of the Notes taken by the Issuer’s authorized body in accordance with the Charter.

If owners of the Notes demand that the Issuer repurchases a larger quantity of the Notes than indicated in the Issuer’s offer, the Issuer shall purchase the Notes from their owners in proportion to the total of the Notes specified in the applications, provided that only whole notes are to be purchased.

The Issuer shall take decision on repurchasing the Notes on the basis of provisions of the Decision on Issuance of Securities, and the Securities Issuance Prospectus.  Several decisions on repurchasing the Notes can be taken.

Decisions on repurchasing the Notes shall be taken by the Issuer’s authorized body and shall specify the price, timeframe, and procedures for repurchasing the Notes.

Timeframe for repurchasing the notes by the Issuer, and the procedures for defining it:

The Issuer shall not be able to repurchase the Notes before registration of the Report on the securities issuance results by authorized federal regulator of the securities market, or filing with the registering body of a notice on the Notes issuance results.

The procedures for disclosure by the Issuer of information on repurchase of the notes:

The Issuer shall be required to publish an announcement for owners of the notes on the Issuer’s decision on repurchase of the Notes under agreement with their owners within the following time from the date when authorized Issuer’s body issued minutes of its meeting that took such decision (expiration date of the period established by the Russian Federation law for issuing minutes), but not later than 7 (Seven) days for the opening date of acceptance of the offers on repurchase of the notes:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

•              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The announcement to owners of the notes regarding the decision on repurchase of the Notes shall include the following information:

·the date when the decision on repurchase (redemption) of the Notes of the issue was taken;

·             series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·             quantity of the Notes to be repurchased;

·             opening date of repurchase by the Issuer of the Notes of the issue;

·             closing date of repurchase of the Notes of the issue;

·             repurchasing price of the Notes of the issue or the procedures for defining it;

·             terms and procedures for repurchasing the Notes of the issue;

·             form and timeframe of payments;

·name of the Agent authorized by the Issuer to repurchase (redeem) the Notes, its location, information of its professional license of a securities market participant.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

In connection with repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

•              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

11. The procedures for disclosure by the Issuer of information on issuance of securities

The Issuer shall disclose information on the issuance in accordance with provisions of the Russian Federation legislation on securities under the procedures and terms specified in the Decision on Issuance of Securities and the Securities Issuance Prospectus.  Should at the moment of occurrence of an event that is to be disclosed by the Issuer, other requirements on the procedures and terms of disclosure have been established by effective federal laws and regulatory acts issued by federal executive body on the securities market than those set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus, then disclosure of such event shall be carried out in accordance with the procedures and terms required by federal laws and regulatory acts issued by federal executive body on the securities market having effect at the moment of occurrence of such event.

a) The Issuer shall announce the fact of decision taken on placement of the Notes in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

b) The Issuer shall publish information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

c) The Issuer shall disclose information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” (information of state registration of the securities issuance) within the following time period, counting from the date of publication by the Issuer of an

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announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall publish the text of the registered Decision on Issuance of Securities on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.

The text of the Decision on Issuance of Securities shall be published on the website together with state registration number of the Notes issue, date of state registration and name of the registering body that provided state registration of the Notes issue.

The text of the registered Decision on Issuance of the Notes shall be available from Internet from the date of its publication in Internet and to the redemption date of the Notes of the issue.

The Issuer shall publish the text of the registered Securities Issuance Prospectus on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.  The text of the Securities Issuance Prospectus shall be published on the website together with state registration number of the Notes issue for which the Securities Issuance Prospectus was registered, the date of its registration and the name of the registering body that has registered the Securities Issuance Prospectus.

The text of the registered Securities Issuance Prospectus shall be available from Internet starting from the date of its publication in Internet and until expiry of no less than 6 (Six) months from the date of publication in Internet of the text of registered report on results of the securities issue; or, if under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results, within 6 (Six) months from the date of publication in Internet of the text of the notice on the issuance results filed with the registering body.

From the date of state registration of the Notes issue, all concerned parties shall be able to make themselves familiar with the Decision on Issuance of Securities and the Securities Issuance Prospectus, and receive their copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the above documents to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

d) At the Phase of the Notes placement the Issuer shall be required to disclose information in the following form:

· announcement of the opening date of the securities placement;

· announcement of changing the opening date of the securities placement;

· announcement of suspension of the securities placement;

· announcement of renewal of the securities placement;

· announcement of material facts “information of the phases of the securities issuance procedure”.

1. The Issuer shall publish information on the placement opening date in the form of an announcement of the placement opening date within the following timeframe:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement in Internet shall be published after the publication on the news line.

2. Should the Issuer take decision on changing the placement opening date, the Issuer shall be required to publish an announcement of changing the placement opening date on news line and on the Issuer’s website in Internet (www.mts.ru) not later than 1 (One) day before such date.

The announcement in Internet shall be published after the publication on the news line.

3. The Issuer shall publish information on launch of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is launched:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

4. Should the Issuer’s authorized body take decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or should the Issuer receive a written order (instruction, assessment) from the federal securities market regulator, the Issuer shall be required to suspend placement of the Notes and publish information on suspension of the placement within the following time from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken the decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or from the date when the Issuer receives a written order (instruction, assessment) from the federal securities market regulator on suspension of the securities placement via mail, facsimile, email, delivery against signature, depending on what takes place first:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is suspended in connection with decision taken by the registering authority on suspension of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

5. The Issuer shall publish information on renewal of the securities issue within the following timeframe from the date of publication of information on registration of amendments and/or additions to the Decision on Issuance of Securities and/or additions to the Decision on Issuance (Additional Issuance) of Securities and/or to the Securities Issuance Prospectus or information on decline of registration of the above amendments and/or additions on the website of the registering authority in Internet, or from delivery to the Issuer of a written notice of the registering authority on renewal of the securities issue (discontinuation of the events supporting suspension of the securities placement procedure) via mail, facsimile, e-mail, delivery against signature, depending on what takes place first::

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is renewed in connection with decision taken by the registering authority on renewal of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

Renewal of the securities placement shall not be possible before publication of information on renewal of the securities placement on news line and on the Internet website.

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6. The Issuer shall disclose the information on completion of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is completed:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

e) After state registration of the Report on the Securities Issuance Results, the Issuer shall publish information on state registration of the Report on the Securities Issuance Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of publication of information on state registration of the Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Within 2 (Two) days from the date of publication of information on state registration of the Issuer’s Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first, the Issuer shall publish the text of the registered Report on the Securities Issuance Results on its Internet website: www.mts.ru.

The text of the registered Report on the Securities Issuance Results should be available from Internet from the date of its publication in Internet and further on within no less than 6 (Six) months from the date of its publication in Internet.

From the date of state registration of the Report on the Securities Issuance Results, all concerned parties shall be able to make themselves familiar with the Report on the Securities Issuance Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the Report on the Securities Issuance Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

f) If under Federal Law “On the Securities Issuance” and other federal law, the securities issuance does not require state registration of the Issuer’s Report on the Securities Issuance Results, provisions of clause 11.) of the Decision on Issuance of the Securities shall not apply.

In this case information shall be disclosed at the phase of submission to the registering authority of a notification of the Securities Issue Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of submission (direction) to the registering authority of the notification of the Securities Issue Results:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The Issuer shall publish the text of notification of the Securities Issue Results submitted to the registering authority in Internet within 2 (Two) days from the date of submission (direction)of the above notification to the registering authority.

The text of the notification of the Securities Issue Results submitted to the registering authority should be available from Internet website: www.mts.ru within no less than 6 (Six) months from the date of its publication in Internet.

If the Issuer provided additional means of access to information contained in the Securities Issuance Prospectus, the Issuer shall be required to provide the same additional means of access to information contained in the notification of the Securities Issue Results that ensured access to information of the Securities Issuance Prospectus.

From the date of submission (direction)of the notification of the Securities Issue Results to the registering authority, all concerned parties shall be able to make themselves familiar with the notification of the Securities Issue Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the notification of the Securities Issue Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

g) The Issuer shall disclose the information in the form of announcements of material facts in accordance with the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

The Issuer shall disclose the information in the form of announcements of material facts by publishing an announcement of a material fact within the following time period from the date of occurrence of such material fact:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Texts of announcements of material facts should be available from the Issuer’s website: www.mts.ru within no less than 6 (Six) months from the date of their publication.

In addition, the Issuer shall submit information on material facts to the registering authority within 5 (Five) days from the moment of occurrence of the material facts.

h) The Issuer shall disclose information in the form of a quarterly report under the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

Quarterly report shall compile results of each quarter and shall be submitted to the federal executive authority for the securities market within 45 (Forty Five) days from the last date of the reporting quarter.

Within 45 (Forty Five) days from the last date of the reporting quarter, the Issuer shall publish the text of the quarterly report on the Issuer’s prospectus-based securities on the Internet website — www.mts.ru.

The text of the quarterly report on the Issuer’s prospectus-based securities shall be available from the Issuer’s Internet website during no less than 3 (Three) years from the date of its publication.

Not later than 1 (One) day from the date of publication of the quarterly report in Internet, the Issuer shall publish on the news line an announcement of the procedures of access to the information included in the quarterly report.

i) Within 1 (One) working day from the date of occurrence of the event entitling the Notes owners to submit the Notes for premature redemption on news line of information agencies (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) working days from the above date on the Issuer’s website in Internet (www.mts.ru), the Issuer shall publish the following information:

· name of the event entitling the Notes owners to exercise premature redemption of the Notes;

· the date of occurrence of the event;

· the actions that the Notes owners may potentially take to satisfy their claims for premature redemption of the Notes.

The announcement in Internet shall be published after the publication on the news line.

After premature redemption of the Notes by the Issuer, the Issuer shall publish an announcement on the timeframe of execution of its obligations.

The above information (including the quantity of the redeemed Notes) shall be published within the following timeframe after the final date of execution of the obligation:

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·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

j) If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·the volume of defaulted obligations;

·the reason for the default;

·the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on its Internet website — www.mts.ru— within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

k) In addition to disclosure of the placement opening date, the Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement.

The Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement, using the following procedure:

·              on news lines of information agencies AK&M or Interfax, or other information agencies authorized by federal regulator of the securities market to execute information disclosure on the securities market - not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement should also include information of the bank account to which cash payment on the Notes shall be transferred.

l) If not later than the 2 (Second) working day before the opening date of the Notes placement the Issuer takes decision on repurchasing the Notes from their owners during the last 5 (Five) working days of “j” coupon period (j=1-19), interest rates of all coupons on the Notes having number of sequence below or equal j shall be defined as equal to interest rate on the first coupon.  The above information including sequential numbers of coupons, for which interest rate was defined as equal to interest rate on the first coupon, and the sequential number of coupon period (j), in which the Notes owners are entitled to demand repurchase of the Notes by the Issuer shall be communicated to potential buyers of the Notes by way of an announcement published within the following time from production of meeting minutes of the Issuer’s authorized body that has taken decision on repurchasing the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website — www.mts.ru— within 2 (Two) days.

This announcement shall be published no later than 1 (One) working day before of opening date of the Notes placement.

m) The Issuer shall disclose information on the first coupon interest rate defined through the Tender as at the opening date of the Notes placement, in the form of an announcement of material facts within the following timeframe from the moment of taking decision on the first coupon interest rate:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall take decision on the first coupon interest rate and shall inform MICEX Stock Exchange in writing of the decision taken by the Issuer.  After publication of an announcement by information agency (AK&M or Interfax or ANO “AZIPI”) on the first coupon interest rate, the Issuer shall inform the Underwriter of the first coupon interest rate.

The Underwriter shall communicate the announcement of the first coupon interest rate using MICEX Stock Exchange Trading System via e-mail to all MICEX Stock Exchange Trade Participants.

n) For those coupons, for which the Issuer did not define the interest rate (procedures for defining the interest rate) before the opening date of the Notes placement, the Issuer shall set the numerical interest rate at the Date of Defining the “i” Coupon, what cannot be later than 7 (Seven) working days before the date of payment of (i-1) coupon.  At the Date of Defining the “i” Coupon the Issuer is entitled to set interest rates for any number of undefined coupons following “i” coupon (where “k” coupon is the last of defined coupons).  The Issuer shall inform the Notes owners of interest rate of “i” coupon not later than 5 (Five) working days before the opening date of the “i” coupon period on the Notes by way of publishing a relevant announcement in the form of information of a material fact within the following timeframe:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day after the fact has occurred;

· on Internet website — www.mts.ru— within 2 (Two) days after the fact has occurred.

If after announcement of coupon interest rates in accordance with the procedures established in clause 9.3. of the Decision on Issuance of Securities, there are still undefined coupons on the Notes for at least one of subsequent coupons, then together with the announcement of interest rates of “i” and other coupons of the Notes, which are being defines, the Issuer shall be required to secure the rights of the Notes owners to demand that the Issuer repurchase the Notes during the last 5 (Five) working days of “k” coupon period (if the Issuer defines interest for only one “i” coupon, then i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined at the Date of defining the “i” coupon, and the sequential number of coupon period (k), in which repurchase of the Notes shall take place shall be communicated to potential buyers of the Notes by way of publishing an announcement of a material fact:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day after the fact has occurred;

· on Internet website — www.mts.ru— within 2 (Two) days after the fact has occurred.

The Issuer shall inform MICES Stock Exchange of the decisions taken in accordance with clauses 9.3.(2) and 9.3.(3) of the Decision on Issuance of Securities, and clauses 9.1.2.(2) and 9.1.2.(3) of the Securities Issuance Prospectus, including the defined interest rates, within 5 (Five) working days before expiry of (i-1) coupon period (the period in which interest rate on the “i” and following coupons is defined).

o) After expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish an announcement of the timeframe for execution of the obligations.

The above information (including the quantity of repurchased Notes) shall be published within the following time after occurrence of the material fact:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

p) The Issuer is entitled to appoint other payment agents and is entitled to revoke such appointments.

It is presumed that the Issuer cannot appoint several payment agents at a time.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days after the date of making such appointment or revoking them on news line (of AK&M or Interfax or ANO “AZIPI”) and on website —www.mts.ru.

The announcement in Internet shall be published after the publication in the news line.

q) The Issuer’s agent acting on behalf and on account of the Issuer in repurchasing the Notes (hereinafter, The Agent) is the Underwriter.

The Issuer shall be able to reassign the Agent’s functions to another person that shall be able to perform all actions required for the repurchase, as per clause 10 of the Decision on Issuance of Securities and legislation of the Russian Federation.  In this case, the Issuer shall be required to publish an information announcement including the following data:

·full and abbreviated name of the person to which the Agent’s functions were reassigned;

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·its location, and also address and facsimile # for receiving applications in accordance with the procedures defined in clause 10 of the Decision on Issuance of the Notes;

·data of the license of a professional participant of the securities market: #, Date of issuance, Validity period, the authority that issued the license;

·confirmation of the fact that the appointed Agent is a trade participant of the Market Maker, and shall exercise the repurchase through it.

This information shall be published not later than 30 (Thirty) days prior to the Date of repurchase established in accordance with the procedures described here below, in the following sources of information:

·              on news line (of AK&M or Interfax or ANO “AZIPI”);

·              on the website (www.mts.ru).

The announcement in Internet shall be published after the publication in the news line.

r) The Issuer shall publish an announcement to owners of the Notes of the decision taken on repurchase of the Notes by the Issuer under agreement with their owners within the following timeframe from the date of production of meeting minutes (expiry of the period established by the Russian Federation legislation for minutes production) of the Issuer’s authorized body at which the above decision has been taken, but not later than 7 (Seven) days prior to the opening date of receiving offers for repurchase of the Notes:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

The announcement to owners of the Notes of the decision taken on repurchase of the Notes shall include the following information:

·             the date when the decision on repurchase (redemption) of the Notes of the issue was taken;

·             series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·             quantity of the Notes to be repurchased;

·             opening date of repurchase by the Issuer of the Notes of the issue;

·             closing date of repurchase of the Notes of the issue;

·             repurchasing price of the Notes of the issue or the procedures for defining it;

·             terms and procedures for repurchasing the Notes of the issue;

·             form and timeframe of payments;

·             name of the Agent authorized by the Issuer to repurchase (redeem) the Notes, its location, information of its professional license of a securities market participant.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

s) In case of repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

t) Notification (disclosure) procedures applicable in case of amendment of the surety terms for execution of obligations under the Notes that occurs because of the reasons beyond control of the Issuer or of owners of the Notes supported by collateral (reorganization, liquidation, or bankruptcy of the party that provided the collateral, other reasons):

·              on news lines of information agencies AK&M or Interfax or ANO “AZIPI” and on the website - www.mts.ru - within 3 (Three) working days.

The announcement in Internet shall be published after the publication in the news line.

The Issuer shall provide the following documents (within the statutory period of storage of such documents): copies of each announcement including copies of each announcement of a material fact, each certified by the Issuer’s authorized person, copies of the registered decision on the securities issue, of securities issuance prospectus, and amendments and/or additions to these, of report on the securities issue results, copy of notification on the securities issue results, copy of quarterly report, copies of other documents required for disclosure in accordance with the Russian Federation legislation on securities, to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy within 7 (Seven) days from the date of submission of the respective claim.

The Issuer shall publish the banking information of the account(s) to be used for repayment of the costs of production of the above copies and the amount (procedures for defining the amount) of such costs on the Issuer’s website (www.mts.ru).

12. Information on the surety supporting execution of obligations under the Notes of the issue

12.1. Information of the party that provided the surety supporting execution of obligations under the Notes

Full corporate name: Limited Liability Company “Mobile TeleSystems — Capital”

Abbreviated corporate name: LLC MTS-Capital”

Location: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Data of state registration of the legal entity

Main state registration #: 1037709022735

Data of entry record in the Unified State Register of Legal Entities: 14.03.2003.

The authority that entered the record in the Unified State Register of Legal Entities: Inspectorate # 9 of Moscow Central Administrative Region of the Russian Federal Ministry of Taxes

Limited Liability Company “Mobile TeleSystems — Capital” is not responsible for disclosure of its financial and economic activities, including in the form of quarterly reports or announcements of material facts (events, actions) related to the financial and economic activities.

12.2. Terms of surety supporting execution of obligations under the Notes:

Type of surety (method of warranty provision): Warranty.

Amount of surety (RUR): Maximum amount of warranty for the Notes is equal to total nominal value of the Notes of the issue - RUR 10 000 000 (Ten billion) plus aggregate coupon income on the Notes.

Terms of surety provision and procedures for exercising the rights of the Notes owners for the surety:

The Warrantor shall together with the Issuer respond to the Notes owners in case of the Issuer’s failure to comply or properly comply with its obligations on the Notes.

The relations of surety against the Notes shall be governed by Russian Federation legislation.  All disputes arising from the Warrantor’s failure to comply or properly comply with its obligations shall be under jurisdiction of courts of the Russian Federation.

If the Notes owners are unable to get satisfaction of their claims on the Notes owned by them and submitted to the Issuer and/or Warrantor, owners of the Notes shall be able to file a claim with a court or arbitration against the Issuer and/or the Warrantor in accordance with applicable legislation of the Russian Federation.

Warranty is an unconditional and irrevocable obligation of the Warrantor before each individual or corporate entity that owns title to the Notes at the respective

24

moment of time (acting independently or through a nominal holder if Notes were transferred by the Notes owner to nominal holding) to respond for The Issuer’s failure to comply or properly comply with its obligations of payment in full of all sums payable by the Issuer on each of the Notes to such owner of the Notes at due moment of payment of such sums, if the Issuer because of any reason fails to pay and/or properly pay any of the above sums that are payable by it in accordance with the Issuance Documents (here, and further below through the text the Issuance Documents are construed as the Decision on Issuance of Securities and the Securities Issuance Prospectus) to any Notes owner within the timeframe and under the procedures defined in the Issuance Documents.

The Notes with a surety provide to their owners all rights arising from such surety.

A Surety Agreement shall be made by way of purchasing one or several Notes under the procedures and on the terms defined in the Issuance Documents.  The fact of purchasing any quantity of the Notes means that the Notes buyer enters in a surety agreement with the Warrantor, and under such agreement the Warrantor shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform or properly perform its obligations on the Notes with respect of the Notes owners on the terms defined in the Issuance Documents.

A Surety Agreement shall be construed as made from the moment when the first Notes owner obtains title to such Notes, and the written form of the agreement shall in this case be construed as executed.  Transfer of title to the surety provided in accordance with the Issuance Documents takes place as result of transfer of title to a Note to a new buyer; in this case title to the surety passes in the same volume and under the same terms, which exist at the moment of transfer of title to a Note.  Transfer of title to the surety without transfer of title to a Note shall be ineffective.

The fact of the Issuer’s failure to comply or properly comply with obligations under the Notes shall be considered as proven in the following situations:

1) The Issuer coupon income in the form of interest on the Notes nominal value to owners of the Notes within the timeframe defined in the Issuance Documents;

2) The Issuer has not paid or paid in full the principal at redemption of the Notes within the timeframe defined in the Issuance Documents;

3) The Issuer has not fulfilled or fulfilled in full scope the claims of the Notes owners of repurchase of the Notes within the timeframe and under the terms defined in the Issuance Documents.  The moment of fulfillment of the respective Issuer’s obligations occurs on the days of repurchase of the Notes by the Issuer defined by the Issuer in accordance with the Issuance Documents;

4) The Issuer failed to satisfy or properly satisfy the Notes owner’s claim of premature redemption and compensation to it of the Notes’ nominal value and repayment of the accrued coupon income on the Notes due to it as at the date of execution by the Issuer of its obligations regarding premature redemption of the Notes and defined in accordance with clause 15. of the Decision on Issuance of Securities and clause 10.10. of the Securities Issuance Prospectus.  The timeframe of execution of the respective obligations under the Notes by the Issuer shall be defined in accordance with the Issuance Documents.

In case of the Issuer’s failure to comply or properly comply with its obligations under the Notes, the Warrantor shall be liable for the Issuer’s failure to comply or properly comply with its obligations under the Notes, as, if owners of the Notes file claims against the Warrantor that meet the conditions defined in the Issuance Documents (hereinafter — The Claim).

If the Issuer fails to comply or properly comply with the abovementioned obligations on the Notes, the owners of such Notes shall be entitled to file a written claim directly against the Warrantor for execution of obligations on the Notes on the terms and under the timeframe defined in the Issuance Documents.

The Claim should include the following data:

(a)           identification features of the Notes (form, series, type, state registration # of the issue and date of state registration) and quantity of the Notes in ownership of each relevant owner of the Notes;

(b)           the contents of obligations on the Notes defaulted/improperly fulfilled by the Issuer;

(c)           sum of obligations before the Notes owners defaulted/improperly fulfilled by the Issuer, which is payable, but has not been paid by the Issuer;

(d)           full name (surname, first and middle names of an individual) of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if applicable);

(e)           location and postal address (residential address), contact telephone # of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed);

(f)            bank account information of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed) and other information required to transfer cash funds (name of corporate entity or surname, first and middle names of an individual; address of location (place of residence); TIN (if applicable); for individuals — series and # of ID, date of issuance, and name of the authority that issued this ID, for corporate entities — OKPO and OKVED codes (for banks - BIC);

 (g)          tax status of the person authorized to receive payments under the Notes (resident, non-resident with a permanent establishment, non-resident without a permanent establishment), indication of the country where this person is resident.

If owner of the Notes is a legal entity, the Claim shall be signed by its director, chief accountant, and stamped by the Notes owner’s seal.  If owner of the Notes is an individual, signature of the Notes owner on the Claim should be notarized as true.

The Claim shall be submitted to the Warrantor at the following address: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2 in person against signature of the Warrantor’s representative or via registered mail with return receipt.

The Claim shall be supplemented with:

(a)           a copy of extract from the Notes owner’s depo account certified by Non-Commercial Partnership “National Depository Centre” (hereinafter - NDC) or by nominal holder —depositor of NDC where the depo account was opened, including quantity of the Notes owned by the Notes owner as at the date of submission of the Claim;

(b)           a copy of NDC report on transfer of the Notes to the depo account section designated for blocking the securities at redemption certified by NDC or by nominal holder — NDC depositor, in case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption;

(c)           documents supporting powers of the person who filed a claim on behalf of the Notes owner issued in accordance with the effective Russian federation law, if it is a representative of the Notes owner who files the claim;

(d)           notarized copies of statutory documents and the documents supporting powers of the person who signed the claim, if an owner of the Notes is a corporate entity;

(f)            a copy of passport certified by the Notes owner’s signature, if an owner of the Notes is an individual.

The Warrantor shall also accept the documents supporting tax status of the Notes owners as per the existing legislation, and availability to certain Notes owners of tax reliefs that allow for full or partial tax exemption of payments.

The Documents issued outside the Russian Federation should be duly legalized (or apostilled), and should be supplemented by a notarized translation into Russian.

Owners or the Notes can file claims directly against the Warrantor within 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes.  The date of submission of the Claim shall be the date of delivery to the Warrantor of the respective Claim.

The Claims filed against the Warrantor after expiry of 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes shall not be considered.

A Claim against the Warrantor can be filed by a nominal holder — NDC depositor having accounts for recording of the Notes and acting to benefit of the Notes owners — depositors of the above depository, provided that such person is duly authorized by the Note owner.

The Warrantor shall consider the Claim and the documents attached thereto, and shall review the data included in them for correctness within 14 (Fourteen) working days from the moment of delivery of the Claim to the Warrantor.

Not later than on the 5 (Fifth) working day from the date of expiry of the period of the Claim consideration, the Warrantor shall notify in writing of the decision to satisfy or refuse to satisfy (specifying the reasons) the Claim of the Notes owner or of the nominal holder — NDC depositor who filed the Claim.  In case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption, the Warrantor shall submit a notice with NDC on satisfaction/refusal to satisfy the Claim (specifying the name, surname, first and middle names of the owner, quantity of the Notes, name of the Depository that opened a depo account to the owner).

If a decision is taken to satisfy the claims of the Notes owner, the Warrantor shall within 10 (Ten) working days from the date of expiry of the period of the Claim consideration transfer cash funds to bank account of the Notes owner, of nominal holder of the Notes, or of any other person authorized by the Notes owner the banking information of which was provided in the Claim.

The Warrantor shall pay to the Notes owner the cash sums on the Notes payable to it within the amount that was not paid by the Issuer as at the moment when the Warrantor took the decision to satisfy the Claim.

The Warrantor’s obligations shall be deemed fulfilled from the moment of writing off the relevant cash funds from the Warrantor’s account.

The surety conditions established by the Issuance Documents shall be discontinued:

1) if Obligations of the Issuer are discontinued.  If payments on the Notes were made to a Notes owner in full scope, the surety shall discontinue its effect with respect of such owner, but shall retain effect with respect of other Notes owners;

2) if Obligations of the Issuer are amended towards creation of increased liability or other unfavorable effects for the Warrantor without approval of the latter;

3) in connection with other reasons established by the effective Russian Federation laws.

The Warrantor shall not be liable for default on its obligations to the Notes owner, if such default resulted from submission to the Warrantor of unreliable or incomplete data; in such case any additional expenses that the Warrantor incurs in connection with execution of its responsibilities of surety provider shall be reimbursed by the respective Notes owner or nominal Notes holder.

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The procedures for notification (disclosure) on amendment of surety terms supporting execution of obligations under the Notes that takes place because of the reasons beyond control of the Issuer or of the Notes owners with surety (reorganization, liquidation, or bankruptcy of the person that provided the surety, etc.):

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” and on the Issuer’s website in Internet - www.mts.ru - within 3 (Three) working days;

·              in Vedomosti newspaper - within 5 (Five) working days.

The announcement in Internet and in printed mass media shall be published after the publication in the news line.

13. The Issuer’s obligation to ensure rights of securities owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation:

The Issuer undertakes to ensure rights of the Notes owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation.

14. Obligations of the persons that provided surety on the notes supporting fulfillment of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety

The person that provided surety on the notes shall be responsible to ensure execution of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety.

15. Other data required by Securities Issuance Standards and Securities Issuance Prospectus Standards

a) The Notes shall be accepted for free trade at stock exchanges and over-the-counter markets.

Non-residents shall be able to purchase the Notes in accordance with the Russian Federation legislation.

Sales and purchase deals of the Notes after completion of their placement shall be possible only after the date of state registration of the report on the Notes issue results, or after submission to the registering authority of a notice on the issue results if in accordance with Federal Law “On the Securities Market” or other federal laws the issue is executed without state registration of the report on the Notes issue results.

The Notes shall be traded over-the-counter without restrictions until the Notes maturity date.

The Notes shall be traded by stock exchanges with restrictions defined by securities market makers.

b) The procedures for defining the amount of accrued coupon income in the period of the Notes trade.

In any day between the opening date of the Notes placement and the redemption date the accrued coupon income (ACI) is computed with the following formula:

ACI = Cj * Nom * (T - T(j -1))/ 365/ 100 %, where

Nom — nominal value of one Note,

Cj — interest rate of “j” coupon period (in per cent annual),

j — sequential number of the coupon period, j=1...20,

T(j -1) - Opening date of the j coupon period,

T — current date.

ACI is computed to one kopeck, truncation of figures in the calculation is based on the rules of mathematical rounding.  The rules of mathematical rounding shall mean the method of rounding where the amount of equal kopeck(s) does not change if the first figure following the figure, which is rounded up is within the interval from 0 to 4, and increases for one, if the first figure following the figure, which is rounded up is within the interval from 5 to 9.

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EX-4.11

Exhibit 4.11

Open Joint Stock Company “Mobile TeleSystems”

Location: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

Postal address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

CERTIFICATE OF SECURITIES

interest-bearing documentary non-convertible bearer notes under mandatory centralized storage, series 03¸ in total 10,000,000 (Ten million) pieces of par value RUR 1,000 (One thousand roubles) each, maturity on the day 3,640 (Three thousand six hundred fortieth) from the Opening date of the Notes placement through public offering.

State registration number of the securities issuance:          

Date of state registration of the securities issuance:                     , 200  .

This paper is to certify title to 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Total quantity of Notes having state registration #                       is 10,000,000 (Ten million) Notes of par value RUR 1,000 (One thousand roubles) each and RUR 10,000,000 (Ten billion roubles) in total.

Open Joint Stock Company “Mobile TeleSystems” shall ensure the rights of Note owners, provided they comply with the procedures for execution of such rights set by Russian Federation law.

This Certificate shall be deposited with Non-Commercial Partnership “National Depository Centre” having registered address: Moscow, Sredniy Kislovskiy per., 1/13, building 4, and providing mandatory centralized storage of the Note Certificates.

Surety for the Notes was provided by:

Limited Liability Company “Mobile TeleSystems — Capital”

General Director
of Limited Liability Company
“Mobile TeleSystems — Capital”	/                       /
200

Place of Corporate Seal

CEO
Open Joint Stock Company
“Mobile TeleSystems”	/                       /
	Place of Corporate Seal
200

Open Joint Stock Company “Mobile TeleSystems”

1. Class, category (type) of securities:

Class of securities: Bearer Notes.

Identification features of the offered securities: non-convertible interest-bearing documentary bearer notes under mandatory centralized storage, series 03 (hereinafter in this document jointly “Notes” or “Issuance Notes” and individually “Note” or “Issuance Note”).

2. Form of the securities:

Documentary issuance.

3. Indication of mandatory centralized storage:

The Issuance Notes shall be under mandatory centralized storage.

The Depository providing mandatory centralized storage:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Short corporate name: NDC

Location: Moscow City, Sredniy Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

TIN (Taxpayer’s Identification Number): 7706131216

Tel. # (495) 956-2790, (495) 956-2791

Data of professional securities market participant license for conducting depository activities:

License # 177-03431-000100

Date of Issuance: 04.12.2000

Effective period: no limitation of the effective period

The License was issued by: Federal Commission for the Security Market of Russia

All Notes of the issuance are documented with one certificate (hereinafter, “The Certificate”), which is subject to mandatory centralized storagein Non-Commercial Partnership “National Depository Centre” (hereinafter, also “NDC” and “The Depository”).  Prior to the Opening date of the Notes placement the Issuer shall deliver the Certificate to NDC for storage.

A sample copy of the Certificate is provided in Appendix to the Decision on issuance of securities and to the Securities Issuance Prospectus.  No separate Note Certificates shall be provided to Note owners on hand.  Note owners shall not be entitled to demand delivery of Certificates on hand.

Title to the Notes and transfer of the Notes including encumbrances on the Notes shall be registered and certified by NDC acting as a depository, and by the depositories acting as depositors of NDC (hereinafter, jointly — “The Depositories”).

Title to the Notes shall be certified by extracts from depo accounts issued by NDC and the Depositories.

Title to the Notes shall pass from a person to another person at the moment of entry record to the Notes acquirer’s depo account with NDC and the Depositories.

The Notes shall be written off the depo accounts at redemption after the issuer performs all its obligations to the Note owners with respect of coupon income payment and the Notes nominal value repayment.

The Certificate shall be cancelled after all Notes are written off the NDC depo accounts.

Procedures for registration and transfer of title to prospectus-based securities under mandatory centralized storage were established by Federal Law “On the Securities Market” # 39-FZ of 22.04.96, and “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97, and internal regulations of NDC and Depositories.

As per Federal Law “On the Securities Market” # 39-FZ of 22.04.96:

If certificates for bearer documentary securities are stored and/or rights of ownership for such securities are registered with a depository, transfer of title to a bearer documentary security shall pass to the acquirer at the moment of entry record made to the acquirer’s depo account. The rights provided for by a prospectus-based security shall pass to the acquirer at the moment of transfer of rights for such security.

If certificates for bearer documentary securities are stored with a depository, the rights provided for by a prospectus-based security shall be exercised with support of certificates presented by such depositories under instructions specified in depository contracts of owners, with attachment of a list of such owners.  An issuer in this case shall ensure implementation of the rights under bearer securities by the person included in such list.

If by the moment of making a List of Owners and/or Nominal Holders of Securities for the purpose of execution of Issuer’s obligations under the securities, information on a new owner was not delivered to the securities Depository or to the securities nominal holder, execution of obligations to the owner included in the List of Owners and/or Nominal Holders of Securities shall be deemed proper. The responsibility of timely notification shall be with the securities acquirer.

As per “The Regulation on Depository Activities in the Russian Federation” approved by Federal Commission on the Securities Market of Russia # 36 of 16.10.97:

A depository shall ensure segregated storage of securities and (or) registration of rights for securities of each customer (depositor) from the securities of other customers (depositors) of the depository, in particular, by opening to each customer (depositor) of a separate depo account.  Records of title to securities made by a depository shall certify the rights for securities, unless established otherwise through court proceedings.  A Depository shall execute transactions with its customers’ (depositors’) securities exclusively on assignment from such customers (depositors) or persons authorized by them including account custodians, and within the timeframe set by depository contracts.  A Depository shall only make records to customer’s (depositor’s) depo account if documents have been presented that under The Regulation on Depository Activities in the Russian Federation and other regulatory acts and depository contract represent the authorization documents for making such records.

Records to customer’s (depositor’s) depo account can be made on the basis of the following authorization documents:

· instruction issued by a customer (depositor) or by its authorized representative including an account custodian, in accordance with the terms of a depository contracts;

· in case title to securities passes under other than civil law transactions: the documents certifying transfer of title to securities under applicable laws and other regulatory acts.

A depository shall register the facts of encumbrances on customers’ (depositors’) securities by pledge or other rights of third parties under the procedures set in the depository contracts.

Title to securities stored in a depository and (or) to securities rights for which are registered by a depository shall be deemed passed from the moment of entry record made by the depository to the to customer’s (depositor’s) depo account.  However, in absence of a record on the depo account, the person concerned is not deprived of its capacity to prove its rights for a security by reference to other evidence.

Should the applicable legislation and / or regulations issued by federal regulator of the securities market be amended, the procedures for registration and transfer of title to the Notes shall be regulated with due account of the amended provisions of legislation and / or regulations issued by federal regulator of the securities market.

Decision on Issuance of Securities

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4. Par value of each security in the issuance:

RUR 1 000 (One thousand).

5. Quantity of securities in the issuance:

Quantity of Notes in the placement: 10 000 000 (Ten million).

The Notes issuance is not expected to include tranches.

6. Total quantity of previously placed securities of this issuance:

No securities of this issuance were previously placed.

7. Owner’s rights for each security in the issuance:

The Notes represent direct unconditional obligations of Open Joint Stock Company “Mobile TeleSystems” (hereinafter, “The Issuer”).

Owner of the Note is entitled to receive par value of the Note at its redemption at maturity.

Owner of the Note is entitled to receive coupon income (interest on the Notes par value) on expiration of each coupon period.

Owner of the Note is entitled to demand buy-out of the Notes by the Issuer in the cases and under the terms specified in the Securities Issuance Prospectus and Decision on the Securities Issuance.

Owner of the Notes is entitled to demand a compensation of the Notes par value and payment of the accrued coupon income on the Notes due to it in the following cases:

· The Notes have been delisted by every stock exchange that had the Notes in its Quote Lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

· The Issue was more than 7 (Seven) days late in repayment of its obligations on coupon income on the Notes than the due date of coupon income payment set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus;

· The Issue has declared its default on financial obligations with respect of Notes holders of the issuance.

Holder of the Notes can demand reimbursement of the Notes nominal value and repayment of accrued coupon interest on the Notes due to it and assessed in accordance with clause 15 of the Decision on Issuance of Securities and clause 10.10 of the Securities Issuance Prospectus. on the next day after the date when any of the above events occurred.

The Notes shall be prematurely redeemed upon request of their holders within 60 (Sixty) working days from the moment of disclosure of information on occurrence of the above events in accordance with the procedures set out in clauses 9.5. and 11.) of the Decision on Issuance of Securities, or from the date when holders of the Notes learned or were to learn of the fact of occurrence of such event.

The Notes may be prematurely redeemed only after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

Holder of the Notes is entitled to freely sell of otherwise dispose of the Notes. The Holder of the Notes that purchased the Notes in the course of the IPO is not entitled to exercise transactions with the Notes before the Notes are fully repaid and before a report on the securities issuance results is registered by the state authority, or a notice is filed with the registering authority on the Notes issuance results as required by the applicable Russian Federation legislation.

Holder of the Notes is entitled to exercise other rights provided for by the Russian Federation legislation.

The Issue undertakes to ensure the Notes holders’ rights, provided they comply with the procedures for exercising such rights set by the Russian Federation legislation.

Should the Issue fail to perform or properly perform its obligations under the Notes, owners of the Notes shall be entitled to address claims to Open Joint Stock Company Mobile TeleSystems - Capital (hereinafter, the Warrantor) that has provided surety for the Notes in accordance with the terms of provision of surety in the form of a warranty for the purposes of the Notes issuance.

Information of the person that provided surety for the issued notes:

Full corporate name: Limited Liability Company Mobile TeleSystems - Capital

Abbreviated corporate name: LLC MTS-Capital

Location: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya, 5,building 2.

The Warrantor that provided the surety shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform (properly perform) its obligations under the Notes.

Title to the provided surety shall pass to acquirer of the Note together with transfer of title to the Note, in the same scope and under the same terms that apply at the moment of transfer of title to the Note.  Transfer of rights arising from the provided surety shall not be effective if no transfer of title to the Note takes place.

Information on guarantees of fulfillment of obligations under the issued Notes and the procedures to be followed by owners and/or nominal holders of the Notes in case the Issuer defaults on its obligations under the Notes of this issuance or fails to perform or properly perform the obligations, were described in clauses 9.7, 12.2 of the Decision on issuance of securities and clause 9.1.2. of the Securities Issuance Prospectus.

If the Issue has overdue payments under the Notes of the issue to several Note holders, none of the Note holders shall have any priority with respect of such Issuer’s payables.

The Issuer undertakes that it shall repay the invested funds to the Note holders, should the Notes issuance be recognized as legally ineffective or invalid.

8. The terms and provisions of placement of the securities issuance.

8.1. Method of the securities placement: public subscription.

8.2 Validity period of the securities placement.

The procedures for establishing the Opening date of the placement:

The Opening date of the placement shall be established by the Issuer’s authorized management body and shall be communicated to all stakeholders in accordance with the RF legislation and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Opening date of the Notes placement cannot be earlier than two weeks after publication of an announcement on state registration of the securities issuance in accordance with the RF legislations and the procedures for information disclosure set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The above two weeks period shall be counted from the date following the date of publication of an announcement on state registration of the Notes issuance by Vedomosti Newspaper.

The Opening date of the Notes placement established by the Issuer’s authorized management body can be modified by decision of the same Issuer’s management body, provided that all requirements to procedures of information disclosure on changing the date of the Notes placement have been complied with, as set out in the RF legislation, the Decision on issuance of the securities and the Securities Issuance Prospectus.

The procedures for establishing the final date of the placement:

The final date of the placement shall be established as the earlier of two dates:

a) 10 (Tenth) working day in a row from the date following the Opening date of the Notes placement;

b) the date of placement of the last Note in the issuance.

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The Notes placement validity period shall not exceed one year from the state of state registration of the Notes issuance.

8.3. Procedures for the securities placement:

No preferential rights for acquisition of the offered securities have been provided for including preferential rights of the securities acquisition as per Articles 40 and 41 the Federal Law “On Joint Stock Companies”.

Procedures and terms for making agreements (procedures and terms for filing and fulfillment of applications) seeking disposal of securities in the course of securities placement:

The Issue shall exercise placement of the Notes through involvement of professional participants of the securities market providing services to the Issuer of the securities placement and organization of the securities placement:

The organizations that shall provide to the Issuer the services of the Notes placement (hereinafter, the Originators) shall be Gazprombank (Open Joint Stock Company), Closed Joint Stock Company Raffeisenbank Austria, Closed Joint Stock Company Investment Company Troyka Dialog.

Full corporate name: Gazprombank (Open Joint Stock Company)

Abbreviated corporate name: GPB (OJSC)

TIN: 7744001497

Location: 117420, Moscow City, Namiotkina Street, 16, block 1

Postal address: 117418, Moscow City, Novocheriomushkinskaya street, 63

License #:  177-04229-100000 (for brokerage activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-04280-010000 (for dealership activities)

Date of issuance: December 27, 2000

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Raffeisenbank Austria

Abbreviated corporate name: CJSC Raffeisenbank Austria

TIN: 7744000302

Location: 129090, Moscow City, Troitskaya street, 17, building 1

Postal address: 129090, Moscow City, Troitskaya street, 17, building 1

License #: License for brokerage activities # 177-02900-100000

Date of issuance: 27.11.2000

Validity period: unrestricted validity period

The Licensor that issued the above license: Federal Commission for the Securities Market of Russia

Full corporate name: Closed Joint Stock Company Investment Company Troyka Dialog

Abbreviated corporate name: CJSC IC Troyka Dialog

TIN: 7710048970

Location: Russian Federation, 125009, Moscow City, Romanov side street, 4

Postal address: Russian Federation, 125009, Moscow City, Romanov side street, 4

License #:  177-06514-100000 (for brokerage activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

License #: 177-06518-010000 (for dealership activities)

Date of issuance: April 08, 2003

Validity period: unrestricted validity period

Licensor: Federal Commission for the Securities Market of Russia

Any of the above Originators can act as Underwriter of the Notes Issuance (intermediary at placement) acting on behalf and on account of the Issuer.

Together with disclosure of the placement Opening date of the, the Issuer shall disclose information on the Underwriter, to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender to be held by CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement.

The Issuer shall disclose the Underwriter’s information to whom Trade Participants of MICEX Stock Exchange shall address their applications for acquisition of the Notes during the tender of CJSC MICEX Stock Exchange between potential purchasers of the Notes at the Opening date of the Notes placement, using the following methods:

· news lines of AK&M and Interfax agencies, and of other information agencies authorized by federal regulator of the securities market to disclose information to the securities market — not later than 5 (Five) days before the Opening date of the securities placement;

· The Issuer’s website - www.mts.ru - not later than 4 (Four) days before the Opening date of the securities placement.

The above announcement should also include information on the bank account to which cash funds shall be received in payment for the Notes.

Key functions of the Originators:

Organization of preparation and placement of the Notes issue.

Key functions of the Underwriter:

The Underwriter shall act under a relevant agreement with The Issuer on organization of a loan supported by Notes (hereinafter, The Agreement).  As set out in the above Agreement, the Underwriter shall perform the following functions:

· In its own name, but on account, and on behalf of the Issuer, the Underwriter shall sell the Notes in accordance with the Agreement and under the procedures set out in the Decision on issuance of securities and the Securities Issuance Prospectus.

· Not later than the next working day after cash funds are received by the Underwriter from the Notes buyers in payment for the Notes to the Underwriter’s account, the Underwriter shall transfer the above funds to the Issuer’s settlement account specified in the Agreement, or to another Issuer’s account, additionally provided by the Issuer.  The Underwriter shall make the cash transfer with deduction of commission charged by CJSC MICEX Stock Exchange (hereinafter, MICEX Stock Exchange, the Market Maker) and by CJSC MICEX.

· In accordance with the procedures and timeframe set out in the Agreement, the Underwriter shall file with the Issuer a written report on execution of such Agreement by the Underwriter.

· Maintain accounting of the Issuer’s cash funds received by the Underwriter in connection with the Notes placement separately from accounting for own cash fund, and cash funds of other customers.

· Perform other actions required to fulfill its obligations with respect of the Notes placement in accordance with the applicable Russian Federation legislation.

The Originators’ obligations, if any, with respect of purchasing the securities that have not been placed within the allocated timeframe, and provided that such obligation exists, the quantity (the procedures for establishing the quantity) of securities that have not been placed within the allocated timeframe and that constitute the Originators’ purchasing obligation, and the time period (the procedures for establishing the time period) on expiration of which the Originators shall be obliged to purchase the above quantity of the securities:

In accordance with the Agreement, the Originators shall have no obligations of purchasing the securities that have not been placed within the allocated timeframe.

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The Originators’ responsibilities, if any, with respect of maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization), including provision of market maker’s services, and, if applicable, the time period (the procedures for establishing the time period) during which the Originators shall be responsible for ensuring stabilization or provision of market maker’s services:

As per the Agreement between the Issuer and the Originators, the latter shall not be responsible for maintaining the prices for the securities in the placement at a certain level during a certain time period after their placement is completed (stabilization).

Should the Notes be included in quoting list “B” of CJSC MICEX Stock Exchange, the Originators expect singing a contract on execution of market maker’s responsibilities with respect of the Notes throughout the period of their inclusion in quoting list “B”.  Throughout the period of inclusion of the Notes in quoting list “B” of CJSC MICEX Stock Exchange, the Market-maker shall provide services of the Notes trade in Closed Joint Stock Company MICEX Stock Exchange by way of setting and maintaining bilateral put and call quotes for the Notes.

Information on the Originators’ rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered; these additional securities may be sold or not sold depending on the securities placement results:

The Originators have no rights for acquisition of additional quantity of the Issuer’s securities that belong to the Issuer’s placed (traded) securities of the same kind, category (type) as the securities being offered.

Amount of the Underwriter’s remuneration; if such remuneration (part of remuneration) is paid to the above parties for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services — the amount of remuneration for such services:

In accordance with the Agreement, the Originators’ remuneration shall not exceed 1% (One per cent) of nominal value of the Notes issuance (shall not exceed RUR 100,000,000 (One hundred million).

The Originators’ remuneration (part of remuneration) for the services of maintaining prices for the offered securities at a certain level during a certain time period after the placement is completed (stabilization), including the market maker’s services shall not exceed RUR 50,000 (Fifty thousand).

The Notes placement may be exercised with or without inclusion of the Notes in quoting list “B”. Inclusion of the Notes in quoting list “B” shall following the Rules of Listing, Acceptance for Placement and Trade of Securities by Closed Joint Stock Company MICEX Stock Exchange.

Placement of the Notes shall be exercised through purchase and sale deals at the Notes offering price indicated in clause 8.4. . of the Decision on issuance of securities and clause 9.2. of the Securities Issuance Prospectus).

If a potential buyer is not a Trade Participant of MICEX Stock Exchange, it should execute a relevant contract with any broker being a MICEX Stock Exchange Trade Participant, and issue to it an assignment for buying the Notes.

A potential buyer being a Trade Participant of MICEX Stock Exchange acts on its own.

A potential buyer of the Notes shall be required to open a relevant depo account with NDC or another Depository.  The procedures and timeframe of depo accounts opening shall follow the internal rules of respective depositories.

Terms and procedures of the securities placement:

The Notes shall be placed through a public offering by way of conducting trade by a securities market maker.

Information of the securities market maker:

Full and abbreviated corporate name: Closed Joint Stock Company MICEX Stock Exchange (CJSC MICEX Stock Exchange)

Location: 125009, Moscow City, Bolshoy Kislovskiy, 13

Postal address:125009, Moscow City, Bolshoy Kislovskiy, 13

License information:

Stock Exchange License #: 077-10489-000001

Date of License issuance: August 23, 2007

License Validity period: unrestricted

Licensor:Federal Commission for the Securities Market of Russia

In connection with the Notes placement, deals shall be made at MICEX Stock Exchange by way of fulfillment of addressed applications for Notes purchase submitted via MICEX Stock Exchange trading system and CJSC MICEX clearing system, respectively, in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange (hereinafter, MICEX Stock Exchange Rules) and regulations of CJSC MICEX.

Deals of the Notes placement shall be launched after the tender for interest rate on the first coupon of the Notes is completed (hereinafter, the Tender) and finished at the final date of the Notes issue placement.

The Tender shall be launched and completed at the Opening date of the Notes issue placement.  The Procedures for holding the Tender have been described in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. of the Securities Issuance Prospectus.

Having received information from the Issuer on interest rate established for the first coupon, the Underwriter shall make deals by submission to MICEX Stock Exchange trading system of addressed counter applications to the ones indicating lower or the same interest rate as that established for the first coupon.  MICEX Stock Exchange shall set the time for conducting transactions under the Tender framework and for making placement deals in coordination with the Underwriter and/or the Issuer.

The Underwriter shall publish an announcement of interest rate on the first coupon assisted by MICEX Stock Exchange trading system via an e-mail to all Trade Participants of MICEX Stock Exchange.

The Underwriter shall satisfy the submitted applications for purchasing the Notes in full scope provided that the quantity of Notes indicated in purchase applications does not exceed the quantity of unplaced Notes.  If a purchase application exceeds the quantity of unplaced Notes, such an application for purchasing the securities shall be satisfied within the available quantity of unplaced Notes.  The Underwriter shall satisfy the Notes purchase applications using the following procedures:

1) applications shall be met in the ascending order of the interest rate indicated in the above applications; i.e., first to be satisfied is the application which quotes the lowest interest rate of all applications submitted, second to be satisfied is the application which includes the lowest interest rate of all unsatisfied applications, etc.;

2) if applications quote equal interest rates, they shall be satisfied in the order of submission.  After all Notes are place, no more deals shall be made.

After establishing interest rate of the first coupon on the Notes and satisfaction of applications submitted during the Tender, and provided that not all Notes are placed through the Tender, MICEX Stock Exchange Trade Participants acting on their own behalf and account, as well as on behalf and on account of potential buyers shall be able to submit addressed applications for purchasing the Notes throughout the whole placement period.  The acceptable applications shall be addressed to the Underwriter and shall have settlement code T0.

Starting from the second day of placement, a purchaser of Notes shall pay the accrued coupon income on the Notes for the respective days under the procedures set out in clause 8.4. of the Decision on issuance of securities and in clause 9.2. of the Securities Issuance Prospectus.

Addressed applications for purchase of the Notes submitted by MICEX Stock Exchange Trade Participants shall be registered provided that the condition of adequacy of the provided surety is met, as required by CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

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The Underwriter shall make a deal by submitting a counter application at the same date as that of the original application.  Applications shall be satisfied in the order of their submission.

If an application requests more Notes than the quantity available on the Underwriter’s trading section, such application shall be satisfied within the balance of the Notes available on the Underwriter’s trading section.

Deals of Notes placement shall be made in accordance with MICEX Stock Exchange Rules.

Settlements on the signed deals shall be made in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Depository shall transfer the Sold Notes to buyers’ depo accounts as at the date of the purchase and sale deals.

Amendment or termination of contracts made at placement of the Notes shall take place on the grounds and under the procedures set out in Chapter 29 of the RF Civil Code.

The procedures for making an entry record to depo account of the first acquirer with a depository providing centralized storage:

Non-Commercial Partnership National Depository Centre or another Depository shall record the Notes placed through MICEX Stock Exchange to depo accounts of the Notes buyers as at the date of the respective purchase and sale transaction.

An entry record to depo account of the first acquirer with NDC shall be made under the instructions issued by CJSC MICEX, the clearing entity servicing the deals made in the course of the Notes placement through MICEX Stock Exchange.  The Depository shall record the placed Notes to accounts of the Notes buyers using the procedures for clearing activities of a clearing organization, and procedures for depository activities of Depositories.

All expenses arising in connection with entry records of the placed Notes to depo accounts of their first owners (acquirers) shall be borne by owners (acquirers) of such Notes.

8.4. The price (prices) or the procedures for establishing the securities placement price:

The Notes shall be placed at the price of RUR 1,000 (One thousand) per one Note (100% (One hundred per cent) of the Notes nominal value).

Starting from the second day of the Notes placement, at buying a Note, the buyer shall also pay the accrued coupon income for the respective quantity of days.  The accrued coupon income (ACI) per one Note shall be computed using the following formula:

ACI = Nom * C * ((T - T0)/ 365)/ 100 %, where

Nom — is nominal value of a Note,

C — interest rate of the first coupon (per cent annual),

T —date of the Notes placement;

T0 - Opening date of the Notes placement.

Accrued coupon income shall be computed down to one kopeck, truncation of computed values shall be based on the rules of mathematical round-up.  Rules of mathematical round-up shall be construed as the method that does not change the value of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases the quantity of whole kopecks by one provided that the first figure after truncation is from 5 to 9.

8.5. Procedures for exercising preemptive rights for purchasing the offered securities:

No preemptive rights for purchasing the offered securities are envisaged.

8.6. Terms and procedures for making settlements for the securities:

At acquisition of the offered securities of the issuance, payments can be made by cash transfer in the Russian Federation currency.

Form of payment: by bank transfer.

Terms and procedures for settlements for the Notes in installments.

Payment for the Notes in installments is not available.

The Notes are placed under the condition of full settlement.

Settlements for the Notes shall be made in cash transfers in the Russian Federation currency in accordance with clearing rules of CJSC MICEX.

Settlements for the Notes at placement shall be made on the terms “delivery against payment” in accordance with clearing rules of CJSC MICEX.  Cash proceeds received by CJSC MICEX Stock Exchange from the Notes placement shall be recorded to the Underwriter’s account with MICEX Clearing Chamber.

Crediting institution:

Full corporate name: NON-BANKING CREDITING ORGANIZATION CLOSED JOINT STOCK COMPANY ‘MOSCOW INTERBANK CURRENCY EXCHANGE CLEARING CHAMBER”

Abbreviated corporate name: CJSC MICEX Clearing Chamber

Location: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

Postal address: 125009, Moscow City, Middle Kislovskiy, 1/13, building 8

BIC: 044583505

TIN: 7702165310

Correspondent acc: 30105810100000000505

Information of the account to which cash funds in payment for the Notes are to be received shall be disclosed simultaneously with disclosure of the Underwriter’s information.

No non-cash payments for the securities shall be possible.

The Underwriter shall transfer the funds received from the Noted placement to the Issuer’s account within the timeframe set out in the contract on performing agency functions at placement of securities with CJSC MICEX Stock Exchange.

Other terms and procedures of settlements for the Notes:

Settlements for the Notes shall follow the CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

Cash settlements shall be executed via CJSC MICEX Clearing Chamber. Cash settlements related to purchase and sales deals for the Notes at their placement shall be executed on the same dates as the dates of respective deals.

Settlements under purchase and sales deals at the Notes placement shall be based on “delivery against payment” terms, i.e., the deals shall require preliminary provision of cash and of securities.

8.7. At what percentage of unplaced securities the issuance shall be recognized as ineffective, and what procedures shall be followed to recover the funds delivered in payment for the securities in the issue should the issue be recognized as ineffective

No percentage figure of unplaced securities has been established, at which the issuance shall be recognized as ineffective.

9. The terms of redemption of and income payment under the Notes

9.1. Form of the Notes redemption

The Notes shall be redeemed and income under the Notes shall be paid by a payment agent on behalf and on account of the Issuer in the form of a cash transfer in Russian Federation roubles (RUR).  Owners of the Notes shall not be able to select the method and the terms of the Notes redemption.

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9.2. Procedures and terms of the Notes redemption; maturity

Redemption of the Notes of the issuance:

Maturity date:

3640-th (Three thousand six hundred fortieth) day from the Opening date of the Notes placement.

Redemption of the Notes shall be carried out by a payment agent on behalf and on account of the Issuer (hereinafter, The Payment Agent).  Data of the Payment Agent are provided in clause 9.6 of the Decision on issuance of securities and in clause 9.1.2. (д) of the Securities Issuance Prospectus.

The Issuer accepts the responsibility for timely and complete transfer to the Payment Agent for the current Notes issuance of the respective cash funds required to fulfill the payment obligations in accordance with the Decision on issuance of securities, the Securities Issuance Prospectus, and the contract between the Issuer and the Payment Agent.

If the Notes redemption maturity date is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

The Notes shall be redeemed at their nominal value.

The Notes shall be repaid in RUR as a bank transfer to benefit of the Note owners.

It is presumed that nominal holders — depositors of NDC are duly authorized to receive the sums paid in connection with redemption of the Notes.

Owner of the Notes that is not an NDC depositor is entitled to authorize a nominal Note holder that is an NDC depositor to receive the sums of the Notes redemption.  If the Owner failed to authorize the nominal Notes holder - an NDC depositor which has the Owner’s Notes recorded to its accounts with NDC, to receive the sums of the Notes redemption, such nominal holder no later than 1 p.m. Moscow time on the third working day preceding the Notes Maturity Date shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

The date (procedures for establishing the date) of the note owners list for the purposes of the notes redemption:

The Notes shall be redeemed to the benefit of the Note Owners, being such as at the end of NDC’s working day preceding the third working date prior to the Notes Maturity Date (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the nominal holder.

If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of the Notes redemption, then the person authorized to receive the sums of the Notes redemption shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Notes Maturity Date, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List Production and including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of redemption under the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of redemption under the Notes;

c) location and postal address of the person authorized to receive the sums of redemption under the Notes;

z) banking information of the person authorized to receive the sums of redemption under the Notes, including:

·# of account with the bank;

·name of the bank (and the city where the bank is located) with which the account was opened;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Notes.

d) tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for repayment of redemption sums, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive redemption under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

· individual identification number (IIN) — if applicable;

b) if owner of the Notes is an individual:

· kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

· the owner’s birth day, month and year;

· the owner’s place of registration and postal address including zip code;

· the owner’s tax status;

· the owner’s # of state pension security certificate (if applicable);

· the owner’s TIN (if applicable).

· code of reason for registration (CPP) of the person authorized to receive the sums of redemption under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of redemption under the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

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As at the Notes Maturity Date, Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of redemption under the Notes to benefit of the Note owners.

If one person is authorized to receive the sums of redemption under the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

If the Notes Maturity Date is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

9.3. Procedures for assessing income payable under each Note.

Coupon (interest-bearing) period
Opening date	Closing date	Coupon (interest) income
1. Coupon: Interest rate on the first coupon - C1 — shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. ()of the Securities Issuance Prospectus
The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement.	The Closing date of the first coupon period is the date of repayment of this coupon, i.e. 182nd  day from the Opening date of the Notes placement.	Total payments under the first coupon per each Note shall be computed with the following formula: K1 = C1 * Nom * (T(1) - T(0))/ 365/ 100 %, where K1 — total coupon payment under 1st coupon per one Note, RUR; C1 — interest rate of the 1st coupon, per cent annual; Nom — nominal value of a Note, RUR; T(0) — Opening date of the 1st coupon period; T(1) — Closing date of the 1st coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole number. Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
2. Coupon: Interest rate on the second coupon — C2 — shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the second coupon of the issue is the182nd day from the Opening date of the Notes placement.	The Closing date of the second coupon period is the date of repayment of this coupon, i.e. 364th day from the Opening date of the Notes placement.	Total payments under the second coupon per each Note shall be computed with the following formula: K2 = C2 * Nom * (T(2) - T(1))/ 365/ 100 %, where K2 — total coupon payment under 2nd coupon per one Note, RUR; C2 — interest rate of the coupon, per cent annual; Nom — nominal value of a Note, RUR; T(1) - Opening date of the coupon period; T(2) - Closing date of the coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
3. Coupon: Interest rate on the third coupon - C3 — shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the third coupon of the issue is the364th day from the Opening date of the Notes placement.	The Closing date of the third coupon period is the date of repayment of this coupon, i.e. 546th day from the Opening date of the Notes placement.	Total payments under the third coupon per each Note shall be computed with the following formula: K3 = C3 * Nom * (T(3) - T(2))/ 365/ 100 %, where K3 — total coupon payment under 3rd coupon per one Note, RUR; C3 — interest rate of the 3rd coupon, per cent annual; Nom — nominal value of a Note, RUR; T(2) — Opening date of the 3rd coupon period; T(3) — Closing date of the 3rd coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
4. Coupon: Interest rate on the fourth coupon - C4 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement.	The Closing date of the fourth coupon period is the date of repayment of this coupon, i.e. 728th day from the Opening date of the Notes placement.	Total payments under the fourth coupon per each Note shall be computed with the following formula: K4 = C4 * Nom * (T(4) - T(3))/ 365/ 100 %, where K4 — total coupon payment under 4th coupon per one Note, RUR; C4 — interest rate of the 4th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(3) — Opening date of the coupon period; T(4) — Closing date of the coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
5. Coupon: Interest rate on the fifth coupon - C5 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of	The Closing date of the fifth	Total payments under the fifth coupon per each Note shall be computed with the

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the fifth coupon of the issue is the728 day from the Opening date of the Notes placement.	coupon period is the date of repayment of this coupon, i.e. 910th day from the Opening date of the Notes placement.	following formula: K5 = C5 * Nom * (T(5) - T(4))/ 365/ 100 %, where K5 — total coupon payment under 5th coupon per one Note, RUR; C5 — interest rate of the 5th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(4) — Opening date of the 5th coupon period; T(5) — Closing date of the 5th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
6. Coupon: Interest rate on the sixth coupon - C6 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the sixth coupon of the issue is 910th day from the Opening date of the Notes placement.	The Closing date of the sixth coupon period is the date of repayment of this coupon, i.e. 1092nd day from the Opening date of the Notes placement.	Total payments under the sixth coupon per each Note shall be computed with the following formula: K6 = C6 * Nom * (T(6) - T(5))/ 365/ 100 %, where K6 — total coupon payment under 6th coupon per one Note, RUR; C6 — interest rate of the 6th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(5) — Opening date of the 6th coupon period; T(6) — Closing date of the 6th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
7. Coupon: Interest rate on the seventh coupon — C7 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the seventh coupon of the issue is the1092nd day from the Opening date of the Notes placement.	The Closing date of the seventh coupon period is the date of repayment of this coupon, i.e. 1274th day from the Opening date of the Notes placement.	Total payments under the seventh coupon per each Note shall be computed with the following formula: K7 = C7 * Nom * (T(7) - T(6))/ 365/ 100 %, where K7 — total coupon payment under 7th coupon per one Note, RUR; C7 — interest rate of the 7th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(6) — Opening date of the coupon period; T(7) — Closing date of the coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
8. Coupon: Interest rate on the eighth coupon — C8 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the eighth coupon of the issue is the1274th day from the Opening date of the Notes placement.	The Closing date of the eighth coupon period is the date of repayment of this coupon, i.e. 1456th day from the Opening date of the Notes placement.	Total payments under the eighth coupon per each Note shall be computed with the following formula: K8 = C8 * Nom * (T(8) - T(7))/ 365/ 100 %, where K8 — total coupon payment under 8th coupon per one Note, RUR; C8 — interest rate of the 8th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(7) — Opening date of the 8th coupon period; T(8) — Closing date of the 8th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
9. Coupon: Interest rate on the ninth coupon — C9 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the ninth coupon of the issue is the1456th day from the Opening date of the Notes placement.	The Closing date of the ninth coupon period is the date of repayment of this coupon, i.e. 1638th day from the Opening date of the Notes placement.	Total payments under the ninth coupon per each Note shall be computed with the following formula: K9 = C9 * Nom * (T(9) - T(8))/ 365/ 100 %, where K9 — total coupon payment under 9th coupon per one Note, RUR; C9 — interest rate of the 9th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(8) — Opening date of the 9th coupon period; T(9) — Closing date of the 9th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
10. Coupon: Interest rate on the tenth coupon — C10 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the tenth coupon of the issue is	The Closing date of the tenth coupon period is the date of	Total payments under the tenth coupon per each Note shall be computed with the following formula:

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the1638th day from the Opening date of the Notes placement.	repayment of this coupon, i.e. 1820th day from the Opening date of the Notes placement.	K10 = C10 * Nom * (T(10) - T(9))/ 365/ 100 %, where K10 — total coupon payment under 10th coupon per one Note, RUR; C10 — interest rate of the 10th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(9) — Opening date of the 10th coupon period; T(10) — Closing date of the 10th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
11. Coupon: Interest rate on the eleventh coupon — C11 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the eleventh coupon of the issue is the1820th day from the Opening date of the Notes placement.	The Closing date of the eleventh coupon period is the date of repayment of this coupon, i.e. 2002nd day from the Opening date of the Notes placement.	Total payments under the eleventh coupon per each Note shall be computed with the following formula: K11 = C11 * Nom * (T(11) - T(10))/ 365/ 100 %, where K11 — total coupon payment under 11th coupon per one Note, RUR; C11 — interest rate of the 11th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(10) — Opening date of the 11th coupon period; T(11) — Closing date of the 11th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
12. Coupon: Interest rate on the twelfth coupon — C12 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the twelfth coupon of the issue is the2002nd day from the Opening date of the Notes placement.	The Closing date of the twelfth coupon period is the date of repayment of this coupon, i.e. 2184th day from the Opening date of the Notes placement.	Total payments under the twelfth coupon per each Note shall be computed with the following formula: K12 = C12 * Nom * (T(12) - T(11))/ 365/ 100 %, where K12 — total coupon payment under 12th coupon per one Note, RUR; C12 — interest rate of the 12th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(11) — Opening date of the 12th coupon period; T(12) — Closing date of the 12th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
13. Coupon: Interest rate on the thirteenth coupon — C13 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the thirteenth coupon of the issue is the2184- day from the Opening date of the Notes placement.	The Closing date of the thirteenth coupon period is the date of repayment of this coupon, i.e. 2366- day from the Opening date of the Notes placement.	Total payments under the thirteenth coupon per each Note shall be computed with the following formula: K13 = C13 * Nom * (T(13) - T(12))/ 365/ 100 %, where K13 — total coupon payment under 13th coupon per one Note, RUR; C13 — interest rate of the 13th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(12) — Opening date of the 13th coupon period; T(13) — Closing date of the 13th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
14. Coupon: Interest rate on the fourteenth coupon — C14 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the fourteenth coupon of the issue is the2366th day from the Opening date of the Notes placement.	The Closing date of the fourteenth coupon period is the date of repayment of this coupon, i.e. 2548th day from the Opening date of the Notes placement.	Total payments under the fourteenth coupon per each Note shall be computed with the following formula: K14 = C14 * Nom * (T(14) - T(13))/ 365/ 100 %, where K14 — total coupon payment under 14th coupon per one Note, RUR; C14 — interest rate of the 14th coupon, per cent annual; Nom — nominal value of a Note, RUR; T(13) — Opening date of the 14th coupon period; T(14) — Closing date of the  coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
15. Coupon: Interest rate on the fifteenth coupon — C15 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the fifteenth coupon of the issue is the2548th day from the Opening	The Closing date of the fifteenth coupon period is the date of repayment of this coupon, i.e.	Total payments under the fifteenth coupon per each Note shall be computed with the following formula: K15 = C15 * Nom * (T(15) - T(14))/ 365/ 100 %,

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date of the Notes placement.	2730th day from the Opening date of the Notes placement.	where K15 – total coupon payment under 15th coupon per one Note, RUR; C15 – interest rate of the 15th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(14) – Opening date of the 15th coupon period; T(15) – Closing date of the 15th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
16. Coupon: Interest rate on the sixteenth coupon – C16 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the sixteenth coupon of the issue is the2730th day from the Opening date of the Notes placement.	The Closing date of the sixteenth coupon period is the date of repayment of this coupon, i.e. 2912th day from the Opening date of the Notes placement.	Total payments under the sixteenth coupon per each Note shall be computed with the following formula: K16 = C16 * Nom * (T(16) - T(15))/ 365/ 100 %, where K16 – total coupon payment under 16th coupon per one Note, RUR; C16 – interest rate of the 16th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(15) – Opening date of the 16th coupon period; T(16) – Closing date of the 16th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
17. Coupon: Interest rate on the seventeenth coupon – C17 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the seventeenth coupon of the issue is the2912nd day from the Opening date of the Notes placement.	The Closing date of the seventeenth coupon period is the date of repayment of this coupon, i.e. 3094th day from the Opening date of the Notes placement.	Total payments under the seventeenth coupon per each Note shall be computed with the following formula: K17 = C17 * Nom * (T(17) - T(16))/ 365/ 100 %, where K17 – total coupon payment under 17th coupon per one Note, RUR; C17 – interest rate of the 17th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(16) – Opening date of the 17th coupon period; T(17) – Closing date of the 17th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
18. Coupon: Interest rate on the eighteenth coupon – C18 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the eighteenth coupon of the issue is the3094th day from the Opening date of the Notes placement.	The Closing date of the eighteenth coupon period is the date of repayment of this coupon, i.e. 3276th day from the Opening date of the Notes placement.	Total payments under the eighteenth coupon per each Note shall be computed with the following formula: K18 = C18 * Nom * (T(18) - T(17))/ 365/ 100 %, where K18 – total coupon payment under 18th coupon per one Note, RUR; C18 – interest rate of the 18th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(17) – Opening date of the 18th coupon period; T(18) – Closing date of the 18th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
19. Coupon: Interest rate on the nineteenth coupon – C19 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the nineteenth coupon of the issue is the3276th day from the Opening date of the Notes placement.	The Closing date of the nineteenth coupon period is the date of repayment of this coupon, i.e. 3458th day from the Opening date of the Notes placement.	Total payments under the nineteenth coupon per each Note shall be computed with the following formula: K19 = C19 * Nom * (T(19) - T(18))/ 365/ 100 %, where K19 – total coupon payment under 19th coupon per one Note, RUR; C19 – interest rate of the 19th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(18) – Opening date of the 19th coupon period; T(19) – Closing date of the 19th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).
20. Coupon: Interest rate on the twentieth coupon – C20 - shall be computed in accordance with the procedures set here below.
The coupon period Opening date of the twentieth coupon of the issue is the3458th day from the Opening date of the Notes placement.	The Closing date of the twentieth coupon period is the date of repayment of this coupon, i.e. 3640th day from the Opening date	Total payments under the twentieth coupon per each Note shall be computed with the following formula: K20 = C20 * Nom * (T(20) - T(19))/ 365/ 100 %, where

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of the Notes placement. K20 – total coupon payment under 20th coupon per one Note, RUR; C20 – interest rate of the 20th coupon, per cent annual; Nom – nominal value of a Note, RUR; T(19) – Opening date of the 20th coupon period; T(20) – Closing date of the 20th coupon period. The sum of coupon payment shall be computed down to one kopeck (truncation shall be based on the rules of mathematical round-up to the nearest whole quantity.  Rules of mathematical round-up shall be construed as the truncation method that does not change the quantity of whole kopecks provided that the first figure after truncation is from 0 to 4, but increases by one provided that the first figure after truncation is from 5 to 9).

Procedures for establishing interest rate for the first coupon:

Interest rate on the first coupon shall be established through the Tender held by stock exchange – MICEX Stock Exchange – between potential buyers of the Notes as at the Notes Placement Opening Date.

On the day of the Tender MICEX Stock Exchange Trade Participants shall submit addressed bids for the Notes with settlement code T0 to Underwriter via MICEX Stock Exchange trading system, both on their on account, and on account and on behalf of their customers.  MICEX Stock Exchange shall set the time and procedures for submission of Tender bids in coordination with the Underwriter and/or the Issuer.

A bid shall state the following relevant terms:

i. Purchasing price;

ii. Quantity of the Notes;

iii. Acceptable interest rate of the first coupon;

iv. Other parameters in accordance with Rules of Securities Trading and other regulations of MICEX Stock Exchange.

Cash provision should be made in the amount sufficient for full payment for the Notes, as stated in the applications including commission fees of MICEX Stock Exchange and CJSC MICEX.

Purchasing price shall state the Notes Placement Price as per the Securities Issuance Prospectus and the Decision on issuance of securities.

The Notes quantity shall state the maximum quantity of the Notes that the potential buyer would be willing to buy, provided the Issuer sets the first coupon interest rate above or equal the acceptable interest rate for the first coupon, as stated in the bid.

The acceptable interest rate for the first coupon shall state the first coupon interest rate to be announced by the Issuer, at which rate the potential investor would be willing to buy the Notes in the quantity stated in the bid.  The acceptable interest rate shall be stated as per cent annual rate down to one hundredth of a per cent.

A bid of a MICEX Stock Exchange Trade Participant shall be accepted for execution if the provided surety is sufficient in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market.

The Issuer shall take decision on interest rate for the first coupon and shall inform MICEX Stock Exchange of its decision in writing.  After an information agency publishes an announcement of the first coupon interest rate, the Issuer shall inform the Underwriter of the established interest rate for the first coupon.

The Underwriter shall publish an announcement of the first coupon interest rate using the MICEX Stock Exchange Trading System via e-mail to all Trade Participants.

The Issuer shall disclose the interest rate established for the first coupon in accordance with the procedures set in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

Procedures for setting interest rate to the coupons starting from the second coupon:

1) Within 2 (Two) working days from the Notes Placement Opening, the Issuer may take a decision on purchasing the Notes from their owners within the next 5 (Five) working days of coupon period j (j=1-19).  If the Issuer takes such decision, interest rates for all coupons of the Notes, which have the sequential numbers below or equal to j, shall be established as equal to the first coupon interest rate.  The Issuer shall communicate the above information including sequential numbers of the coupons, for which interest rate was established as equal to the first coupon interest rate, and sequential number of the coupon period (j), in which owners of the Notes shall be able to demand repurchase of the Notes prior to potential Notes buyers by publishing the below announcements within the below time period from the date of the meeting protocol of the Issuer’s authorized body that has taken decision on purchasing the Notes:

· on news lines (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

2) For the coupons, for which the Issuer failed to establish an interest rate (procedures for establishing interest rate) prior to the Notes Placement Opening (i=(j+1),.,20), the interest rate shall be established as a numerical figure at the Date of Establishing the “i” coupon, which occurs not later than 7 (Seven) working days before payment of coupon (i-1).  At the date of establishing “i” coupon, the Issuer shall be able to set the rates of any quantity of undefined coupons following “i” coupon (where k – is the number of the last of the coupons being defined). The Issuer shall informs the Notes owners of the interest rate on “i” coupon within 5 (Five) working days before opening of i coupon period on the Notes by publishing a relevant announcement under the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

3) If after announcement of coupon interest rates (as set out in the previous subclauses) there still exist undefined rates of at least one of subsequent coupons, then together with the announcement of rates for i coupon and other coupons of the Notes being defined, the Issuer shall be required to ensure the Notes owners’ right to demand that the Issuer purchase the Notes in the last 5 (Five) working days of k coupon period (if the Issuer defines the rate for only one i coupon, i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined on the Date of Establishing i coupon, and sequential numbers of coupon period (k), in which the notes shall be purchased, shall be communicated to potential buyers of the Notes by way of publishing in accordance with the procedures set out in clause 11. of the Decision on issuance of securities and clause 2.9. of the Securities Issuance Prospectus.

The Issuer shall inform MICES Stock Exchange of decisions taken in accordance with subclauses (2) and (3) of the above Decision on issuance of securities and subclauses (2) and (3) clause 9.1.2. (a) of the Securities Issuance Prospectus, including interest rates within 5 (Five) working days prior to completion of (i-1) coupon period (the period in which interest rate is defined for i coupon and subsequent coupons).

9.4. Procedures and timeframe of income payment under the Notes including the procedures and timeframe of income payment under each coupon

Coupon (interest-bearing) period		Time (date) of coupon (interest)	Date of production of a list of Notes owners for coupon (interest) income
Opening date	Closing date	income payment	payment

1. Coupon: Interest rate on the first coupon - C1 – shall be established through the tender of potential buyers of the Notes in the first day of the Notes placement.  The

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procedures and terms of the tender have been set out in clause 9.3. of the Decision on issuance of securities and in clause 9.1.2. (д)  of the Securities Issuance Prospectus

The coupon period Opening date of the first coupon of the issue is the Opening date of the Notes placement. The Closing date of the first coupon period is the date of repayment of this coupon. Coupon income on the first coupon shall be paid on 182nd day from placement opening of the Notes issue. Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.

Procedures for payment of coupon (interest) income:

Income on the Notes shall be paid by the Payment Agent on account and on behalf of the Issuer.

Income on the Notes shall be paid in the Russian Federation currency by way of a bank transfer to benefit of the Notes owners. It is presumed that nominal holders – depositors of NDC are authorized to receive the sums of income on the Notes. An NDC depositor that has not been authorized by its customers to receive income on the Notes no later than 1 p.m. Moscow time on the third working day preceding the Date of Income Payment under the Notes shall submit to NDC the list of owners including data referred to below as required for inclusion in the list of Owners and/or Nominal Holders of the Notes.

Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes (hereinafter, The Date of the Note Owners and/or Nominal Holders List Production).

Obligations fulfilled towards an owner included in the list of the note owners and/or nominal holders shall be recognized as properly fulfilled, including in case of the Notes disposal after the Date of the Note Owners and/or Nominal Holders List Production.

If rights of an owner of the Notes are accounted for by a nominal holder, and the nominal holder is authorized to receive the sums of income of the Notes, then the person authorized to receive the sums of income on the Notes shall be the nominal holder.  If rights of an owner of the Notes are not accounted for by a nominal holder, and/or the nominal holder has not been authorized to receive the sums of income on the Notes, then the person authorized to receive the sums of income on the Notes shall be the Notes owner (for an individual the list should include the owner’s full name).

Not later than on the 2nd (Second) working day before the Date of Income Payment on the Notes, NDC shall deliver to the Issuer and/or the Payment Agent a list of Note owners or nominal holders produced as at the Date of the Note Owners and/or Nominal Holders List for the purposes of income payment, including the following information:

a) full name (Surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

b) quantity of the Notes recorded to depo account of the person authorized to receive the sums of income on the Notes;

c) location and postal address of the person authorized to receive the sums of income on the Notes;

г) banking information of the person authorized to receive the sums of income on the Notes, including:

·              # of account with the bank;

·              name of the bank (and the city where the bank is located) with which the account was opened;

·              corresponding account of the bank, with which the account was opened;

·              bank’s identification code of the bank, with which the account was opened (BIC);

·              taxpayer’s identification # (TIN) of the payment recipient;

·              code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

d) tax status of the person authorized to receive the sums of income on the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

In addition to the above, a nominal holder is required to file with NDC, and NDC is obliged to include in the list of Notes owners and/or nominal holders for receiving coupon income, the following information on individual and corporate Note owners that are not tax residents of the Russian Federation, irrespective of nominal holder’s authority to receive coupon income under the Note or absence of such authority:

a) if owner of the Notes is a corporate non-resident entity:

·  individual identification number (IIN) – if applicable;

b) if owner of the Notes is an individual:

·  kind, #, date and place of issuance of the individual’s identification document, name of the issuing agency;

·  the owner’s birth day, month and year;

·  the owner’s place of registration and postal address including zip code;

·  the owner’s tax status;

·  the owner’s # of state pension security certificate (if applicable);

·  the owner’s TIN (if applicable).

·  code of reason for registration (CPP) of the person authorized to receive the sums of coupon income under the Note (if applicable).

The Issuer’s obligations shall be considered fulfilled from the moment of writing off respective cash funds from account of the Payment Agent.

The Note owners, their authorized persons including NDC depositors shall themselves be responsible for ensuring completeness and relevancy of information submitted by them to NDC (information required to perform the obligations under the Notes) including but not limited to banking data and information on the persons authorized to receive the sums of income on the Notes.  In case of failure to submit such information to NDC or failure to submit it in a timely manner, the above obligations shall be executed towards the person who presented a claim on fulfillment of obligations, and who is the Notes owner as at the date of presenting the claim.  The Issuer shall in this case fulfill the obligations under the Notes on the basis of data available to NDC.  And in this case the Issuer’s obligations shall be recognized fulfilled in full scope and in due manner.  If banking and other information provided by owner or nominal holder or available to NDC and required by the Issuer to perform its obligations under the Notes, prevent the Payment Agent from transferring cash funds in a timely manner, such delay cannot be viewed as delinquency of obligations under the Notes, and the Notes owner shall not be able to demand accrual of interest or any other compensation for such delay of payment.

The Issuer shall transfer the required cash funds for redemption of the Note to account of the Payment Agent within the timeframe and under the procedures set out in the Contract between the Issuer and the Payment Agent.

The Payment Agent shall compute the sum of cash funds payable to each of the persons in the list of owners and/or nominal holders of the Notes.

As at the Date of Income Payment on the Notes, the Payment Agent shall transfer the required cash funds to accounts of the persons authorized to receive the sums of income on the Notes and included in the List of the Note Owners and/or Nominal Holders.

If one person is authorized to receive the sums of income on the Notes by several Note owners, such person shall receive an aggregate amount not broken down by each Note owner.

If the Date of Coupon Income Payment under the Notes is a non-working day, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sum shall be paid on the first working day following such day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

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2. Coupon: Interest rate on the second coupon - C2 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the second coupon of the issue is the182nd day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the second coupon shall be paid on 364th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the second coupon are the same and the procedures for coupon income payment on the first coupon.
3. Coupon: Interest rate on the third coupon – C3 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the third coupon of the issue is the364th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the third coupon shall be paid on 546th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the third coupon are the same and the procedures for coupon income payment on the first coupon.
4. Coupon: Interest rate on the fourth coupon – C4 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the fourth coupon of the issue is the546th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the fourth coupon shall be paid on 728th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the fourth coupon are the same and the procedures for coupon income payment on the first coupon.
5. Coupon: Interest rate on the fifth coupon – C5 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the fifth coupon of the issue is the728th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the fifth coupon shall be paid on 910th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the fifth coupon are the same and the procedures for coupon income payment on the first coupon.
6. Coupon: Interest rate on the sixth coupon – C6 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the sixth coupon of the issue is the910- day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the sixth coupon shall be paid on 1092nd day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the sixth coupon are the same and the procedures for coupon income payment on the first coupon.
7. Coupon: Interest rate on the seventh coupon – C7 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the seventh coupon of the issue is the1092nd day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the seventh coupon shall be paid on 1274th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the seventh coupon are the same and the procedures for coupon income payment on the first coupon.
8. Coupon: Interest rate on the eighth coupon – C8 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the eighth coupon of the issue is the1274th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the eighth coupon shall be paid on 1456th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the eighth coupon are the same and the procedures for coupon income payment on the first coupon.

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9. Coupon: Interest rate on the ninth coupon – C9 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.

The coupon period Opening date of the ninth coupon of the issue is the1456th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the ninth coupon shall be paid on 1638th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the ninth coupon are the same and the procedures for coupon income payment on the first coupon.
10. Coupon: Interest rate on the tenth coupon – C10 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the tenth coupon of the issue is the1638th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the tenth coupon shall be paid on 1820th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the tenth coupon are the same and the procedures for coupon income payment on the first coupon.
11. Coupon: Interest rate on the eleventh coupon – C11 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the eleventh coupon of the issue is the1820th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the eleventh coupon shall be paid on 2002nd day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the eleventh coupon are the same and the procedures for coupon income payment on the first coupon.
12. Coupon: Interest rate on the twelfth coupon – C12 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the twelfth coupon of the issue is the2002nd day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the twelfth coupon shall be paid on 2184th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the twelfth coupon are the same and the procedures for coupon income payment on the first coupon.
13. Coupon: Interest rate on the thirteenth coupon – C13 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the thirteenth coupon of the issue is the2184th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the thirteenth coupon shall be paid on 2366th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the thirteenth coupon are the same and the procedures for coupon income payment on the first coupon.
14. Coupon: Interest rate on the fourteenth coupon – C14 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the fourteenth coupon of the issue is the2366th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the fourteenth coupon shall be paid on 2548th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the fourteenth coupon are the same and the procedures for coupon income payment on the first coupon.
15. Coupon: Interest rate on the fifteenth coupon – C15 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the fifteenth coupon of the issue is the2548th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the fifteenth coupon shall be paid on 2730th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the fifteenth coupon are the same and the procedures for coupon income payment on the first coupon.

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16. Coupon: Interest rate on the sixteenth coupon – C16 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the sixteenth coupon of the issue is the2730th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the sixteenth coupon shall be paid on 2912th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the sixteenth coupon are the same and the procedures for coupon income payment on the first coupon.
17. Coupon: Interest rate on the seventeenth coupon – C17 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the seventeenth coupon of the issue is the2912th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the seventeenth coupon shall be paid on 3094th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the seventeenth coupon are the same and the procedures for coupon income payment on the first coupon.
18. Coupon: Interest rate on the eighteenth coupon – C18 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the eighteenth coupon of the issue is the3094th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the eighteenth coupon shall be paid on 3276th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the eighteenth coupon are the same and the procedures for coupon income payment on the first coupon.
19. Coupon: Interest rate on the nineteenth coupon – C19 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the nineteenth coupon of the issue is the3276th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the nineteenth coupon shall be paid on 3458th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the nineteenth coupon are the same and the procedures for coupon income payment on the first coupon.
20. Coupon: Interest rate on the twentieth coupon – C20 - shall be established in accordance with the procedures set out in clause 9.3. of the Decision on issuance of Securities and clause 9.1.2. of the Securities Issuance Prospectus.
The coupon period Opening date of the twentieth coupon of the issue is the3458th day from the Opening date of the Notes placement.	The coupon period Closing date shall be the date of payment of this coupon.	Coupon income on the twentieth coupon shall be paid on 3640th day from placement opening of the Notes issue.	Income on the Notes shall be paid to the Notes owners that retain such status as at the end of NDC’s operating day preceding the third working day prior to the date of income payment under the Notes.
Procedures for payment of coupon (interest) income:
The procedures for coupon income payment on the twentieth coupon are the same and the procedures for coupon income payment on the first coupon.
For the purposes of income payment on the twentieth coupon the List of Notes owners and/or nominal holders produced for the Notes redemption shall be used.
Income on the twentieth coupon shall be paid simultaneously with redemption of the Notes.

9.5. Availability and terms of premature redemption of the Notes

The Notes can be redeemed prematurely on request of their owners.

The earliest possible date for claiming premature redemption of the Notes:

Premature redemption of the Notes shall not be possible before state registration of the Report on the Securities Issuance Results, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

In case of premature redemption of the Notes, the buy-out shall be executed at their nominal value. Accrued coupon income (ACI) as at the Date of the Notes Premature Redemption shall be additionally paid.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it in the following circumstances:

·  delisting of the Notes by all stock exchanges that included the Notes in their quoting lists, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results;

·  delay for more than 7 (Seven) days of execution by the Issuer of its obligations of coupon income payment on the Notes, after the due date of the respective coupon income payment as per the Decision on issuance of Securities and the Securities Issuance Prospectus;

·  declaration by the Issuer of its default on the financial obligations towards owners of the Notes of the issue.

Owner of the Notes shall be able to demand repayment of the Notes nominal value and accrued coupon income on the Notes due to it assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

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Last date of presenting the Notes for premature redemption:

The Premature Redemption Date – The Notes can be prematurely redeemed on demand of their owners within 60 (Sixty) working days from the moment of disclosure by the Issuer of the fact of the above circumstances in accordance with the procedures set out in clauses 9.5. and 11(u) of the Decision on Issuance of Securities, or from the date when of the fact of the above circumstances became known or should have become known to owners of the Notes.

Terms and procedures for premature redemption of the Notes:

Premature redemption of the Notes shall be carried out on behalf of and on account of the Issuer by a Payment Agent (hereinafter, The Payment Agent).  Functions of the Payment Agent shall be performed by:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

In case of premature redemption the Notes shall be repurchased at their nominal value. In addition, the Issuer shall pay to the Notes owners the sums of accrued coupon income as at the date of execution by the Issuer of its obligations wit respect of premature redemption of the Notes assessed in accordance with clause 15. of the Decision on issuance of Securities and clause 10.10 of the Securities Issuance Prospectus.

Nominal value of the Notes and accrued coupon income in connection with their premature redemption shall be repaid as a bank transfer in RUR.

The Notes prematurely redeemed by the Issuer cannot be put on the market.

In order to exercise its right for premature redemption of the Notes, owner of the Notes that is an NDC depositor, or nominal holder that is an NDC depositor authorized by the Notes owner to act towards premature redemption of the Notes, shall perform the following mandatory actions:

·  submit to the Issuer a request (application) in a written form for premature redemption of the Notes (in accordance with the requirements specified in the Decision on issuance of Securities and in the Securities Issuance);

·   submit to NDC an order issued in accordance with NDC requirements for transfer of the Notes subject to premature redemption to the depo account section designated for recording the Notes subject to premature redemption.

Request (application) for premature redemption of the Notes shall be delivered to the Issuer against its signature from 9 a.m. to 5 p.m. (Moscow time) within 30 (Thirty) working days after the moment when the Notes obtained the right to demand premature redemption of the Notes, or delivered by registered mail with a return receipt to the Issuer’s postal address.

Request (application) in a written form for premature redemption of the Notes shall be submitted with the following attachments:

·               if the request is signed by other person than the Notes owner, a document is to be attached supporting the powers of the person who signed the request on behalf of the Notes owner;

·               notarized sample of signature of the person who signed the request on behalf of the Notes owner;

·               a copy of NDC report certified by NDC on transfer of the Notes to the depo account section designated for blocking securities at redemption.

Request (application) for premature redemption of the Notes shall include the following:

·               statement of the circumstance based on which the Note owner became entitled to demand premature redemption;

·               for a corporate Notes owner – name of the legal entity, location, TIN;

·               for an individual Notes owner – surname, first, middle name, residential address, other passport data, TIN (if assigned in accordance with applicable procedures;

·               quantity of the Notes;

·               payment information of income recipient:

1. full name (surname, first, patronymic name) of the person authorized to receive the sums of income on the Notes.

2. location and postal address of the person authorized to receive the sums of income on the Notes;

3. banking information of the person authorized to receive the sums of income on the Notes, including:

·# of account with the bank;

·corresponding account of the bank, with which the account was opened;

·bank’s identification code of the bank, with which the account was opened (BIC);

·taxpayer’s identification # (TIN) of the payment recipient;

·code of reason for registration (CPP) of the person authorized to receive the sums of income on the Notes.

4. tax status of the person authorized to receive the sums of redemption under the Notes (resident, non-resident with a permanent establishment in the Russian Federation, non-resident without a permanent establishment in the Russian Federation).

Non-residents and individuals are required to provide the following information in the Request:

·             full name/surname, first, patronymic name of the Notes owner;

·             full name of the person authorized to receive the sums of redemption under the Notes;

·             location (or registration for individuals) and postal address including postal zip code of the Notes owner

·               -             banking information of the person authorized to receive the sums of redemption under the Notes

·taxpayer’s identification # (TIN) of the Notes owner;

·             tax status of the Notes owner

if owner of the Notes is a corporate non-resident entity:

·             individual identification number (IIN) – if applicable;

if owner of the Notes is an individual:

·             kind, #, date and place of issuance of the Notes owner’s identification document, name of the issuing agency;

·             the Notes owner’s TIN (if applicable);

·             the Notes owner’s birth day, month and year).

Within 5 (Five) working days from the moment of receiving the documents, the Issuer shall review them for correctness, and provided that the submitted documents comply with the terms set out in the Decision on issuance of Securities and the Securities Issuance Prospectus the Issuer shall make cash transfer to benefit of the Notes owner.

The Issuer shall make cash transfer to account of the Payment Agent in the sum payable to the Notes owner, and shall provide the Payment Agent with data required for making a corresponding payment to benefit of the Notes owner.

Together with notification, the Issuer shall provide copies of NDC reports on transaction on the depo accounts of the Notes owners (nominal holders) supporting transfer of the Notes to the depo account sections designated for accounting for the Notes subject to premature redemption.

Within 2 (Two) days after the date of receiving cash funds from the Issuer and of data required for making corresponding payments to benefit of the Notes owners, the Payment Agent shall transfer cash to benefit of the Notes owner, as per the enclosed information.  Not later than the next working day after the date of transfer, the Payment Agent shall inform the Issuer and NDC depositor of the fact of transfer.

Obligations of the Issuer shall be considered fulfilled from the moment of writing the respective cash funds from account of the Payment Agent.

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If the submitted documents do not meet the above requirements, the Issuer shall not later than the fifth working day from the moment of receiving the above documents deliver to the person who signed the request for the Notes redemption and to NDC a notice on the reasons for declining the documents. The Issuer shall submit information to NDC of the refusal to satisfy the Request for Premature Redemption stating the name, surname, first and patronymic name of individual owner, quantity of the Notes, and name of the Depository which opened an account to the owner.

Having received such a notification, the person who signed the request does not loose the right to resubmit the request for premature redemption of the Notes.

After the Issuer fulfills is obligations of premature redemption of the Notes, NDC shall write the redeemed Notes off the depositor’s account with NDC and record them to the respective issuance depo account section designated for accounting for redeemed Notes with NDC.

If the date of premature redemption of the Notes is a day off, be it a day off established by the state or a day off with respect of settlement transactions, the relevant sums shall be paid on the first working day following the day off.  Owner of the Notes shall not be entitled to demand accrual of interest or any other compensation for such delay of payment.

It is presumed that nominal holders – depositors of NDC are duly authorized to receive the sums paid in connection with premature redemption of the Notes and/or conduct other actions required for premature redemption of the Notes to benefit of the Notes owners.

The procedures for disclosure of information on premature redemption of the Notes:

on news lines (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

This information shall be published not later than the 1 (First) working day before the Notes Placement Opening.

Should the Issuer fail to take such decision, interest rates for all coupons starting from the second one, shall be established as equal to the first coupon interest rate.

Within 1 (One) working day after the date of occurrence of the event that enables the Notes owner to demand premature redemption of the Notes the Issuer shall publish information on news lines (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) days after the above date the Issuer shall put information on its Internet website - www.mts.ru, stating the following:

· description of the event enabling the Notes owners to demand premature redemption of the Notes;

· the date when the event occurred;

· possible actions of the Notes owners towards satisfaction of their claims on premature redemption of the Notes.

Publication on the Internet website shall be done after publication on the news line.

After the Notes were prematurely redeemed by the Issuer, the Issuer shall announce the time of exercising its obligations.

The above information (including the quantity of redeemed Noted) shall be published within the following timeframe after the last date of exercising the obligations:

· on news lines (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

· on Internet website - www.mts.ru - within 2 (Two) days.

Publication on the Internet website shall be done after publication on the news line.

9.6. Information of payment agents on the notes

Coupon (interest) income and sums of redemption (premature redemption) shall be paid via the Payment Agent.

The Payment Agent:

Full corporate name: Non-Commercial Partnership “National Depository Centre”

Abbreviated corporate name: NDC

Location: Moscow City, Middle Kislovskiy per., 1/13, building 4

Postal address: 105062, Russia, Moscow City, Mashkova street, 13, building. 1.

The Payment Agent shall perform the following functions:

1. On behalf and on account of the Issuer, shall transfer cash funds to the persons included in the List of Notes owners and/or Nominal Holders entitled to receive coupon income/sums of redemption (here below in this clause, The List of Notes Owners and/or Nominal Holders) in the amounts, within the timeframe and under the procedures established by the Decision on issuance of securities, the Securities Issuance Prospectus, and the Agreement between the Issuer and the Payment Agent.

The Issuer shall make preliminary transfer of the cash funds designated for Payments under the Notes to be executed by the Payment Agent to the bank account indicated by the Payment Agent under the procedures and within the timeframe specified in the Agreement between the Issuer and the Payment Agent.

2. Provide information to NDC depositors and to all concerned parties regarding the time and terms of coupon income payment under the Notes and/or redemption of the Notes by way of placement of the above information on NDC’s website: www.ndc.ru.

3. Ensure confidentiality of information received by the Payment Agent in the course of execution of its obligations provided this information is not public and is not required for disclosure by legal and regulatory acts of the Russian Federation.

The Issuer shall be able to appoint other payment agents or annul such appointments.

It is presumes that the Issuer cannot simultaneously appoint several payment agents.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days from the date of such appointments or their annulment on news line (AK&M or Interfax or ANO “AZIPI”) and in its Internet website – www.mts.ru.

9.7. Information on actions of the Notes owners and on the disclosure procedures in case of default on the Notes:

As required by Articles 809 and 810 of the RF Civil Code, the Issuer is obliged to repay to the Notes owners at redemption the nominal value of the Notes and coupon income within the timeframe and under the procedures established by the Decision on Issuance of Securities and the Securities Issuance Prospectus.

The Issuer’s failure to fulfill the obligations under the Notes shall represent a material violation of the loan agreement (default) in case of:

· overdue obligation of the next interest income (coupon) payment under the Notes for over 7 (Seven) days, or refusal to fulfill the above obligation;

· overdue obligation of repayment of the principal on the Notes for over 30 (Thirty) days, or refusal to fulfill the above obligation.

Delay in execution of the respective obligations, but not exceeding the above time limits shall represent a technical default.

In case of default or technical default on the Notes, together with repayment of overdue sums the Issuer shall pay interest to the Notes owners, as required by Article 395 of the Russian Federation Civil Code.

In the event of default owners of the Notes shall be entitled to demand that the Issuer repay the nominal value of the Note and/or income on it, as well as interest for late redemption of the Notes and/or income on the Notes, as per Articles 395 and 811 of the Russian Federation Civil Code.

In the event of technical default owners of the Notes shall be entitled to demand that the Issuer repay interest for late execution of obligations under the Notes, as per Articles 395 and 811 of the Russian Federation Civil Code.

In the event of failure to comply/properly comply with its obligations under the Notes (including in the event of default and/or technical default) owners and/or nominal holders shall be entitled to demand that the Warrantor – the party that provided surety for the Notes in accordance with the procedures defined in clause 12. of the Decision on Issuance of Securities, and clause 9.1.2 of the Securities Issuance Prospectus

The Warrantor that has provided surety shall be jointly liable with the Issuer for the Issuer’s failure to comply (properly comply) with its obligations under the Notes.

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Procedures for addressing claims to the Issuer:

In the event of the Issuer’s default or technical default on the Notes, owners of the Notes, their authorized representatives shall be entitled to demand that the Issuer repay the following:

1) in the event of default: the nominal value of the Note and/or income on it, as well as interest for late redemption of the Notes and/or income on the Notes, as per Articles 395 and 811 of the Russian Federation Civil Code.

2) in the event of technical default: interest for late execution of obligations under the Notes, as per Articles 395 and 811 of the Russian Federation Civil Code.

Claim should be presented to the Issuer in written form, under the name “The Claim”, signed by the Notes owner, a person authorized by the Notes owner, or a person authorized by nominal holder of the Notes.

A Claim should be delivered by registered mail with return receipt and inventory of contents to the Issuer’s postal address shown on title page of the Decision on Issuance of Securities, or delivered against signature to the Issuer’s authorized person.

If in connection with technical default on payment of the next due interest (coupon) the Issuer has repaid the payable sum of coupon interest within 7 (Seven) days from the due date, but failed to pay interest on later income payment on the Notes as per Article 395 of the Russian Federation Civil Code, the Notes owners or the persons authorized by them shall be entitled to demand that the Issuer make payment of such interest.  In this case within 5 (Five) days after receiving the Claim of the Notes owners the Issuer shall consider such Claim, and within 3 (Three) working days from the date of accepting the Claim shall transfer the payable sums to address of the Notes owners who filed the Claim.

The procedures for presenting claims against the Issuer in case of a delay by the Issuer in execution of its obligations of coupon income payment on the Notes or its refusal to execute such obligations exceeding 7 (Seven) days from the date of payment of the respective income defined in accordance with clause 9.5. of the Decision on Issuance of Securities, and clause 9.1.2 of the Securities Issuance Prospectus.

In case of a delay in execution of the obligation of repayment of the principal on the Notes or refusal to execute such obligation the Notes owners or the persons authorized by them shall be entitled to file a claim demanding repayment of the principal on the Notes and of interest for late redemption of the Notes, as per Article 395 of the Russian Federation Civil Code, starting from the day following the due date for execution of the obligation.  In this case within 5 (Five) days from the date of receiving the Claim of the Notes owners, the Issuer shall consider the Claim and shall no later than 30 (Thirty) days from the due date of execution of the obligation on repayment of the principal transfer the sums payable to address of the Notes owners who filed the Claim.

In case of refusal by the Issuer’s authorized representative to receive the Claim against signature or if registered mail of the Claim or letter directed to postal address of the Issuer were not delivered because of the Issuer’s absence at the specified address, or in case of the Issuer’s or the Warrantor’s refusal to satisfy the Claim, the Notes owners, the persons authorized by them shall be entitled to apply to court or to arbitration with a claim for collection of the respective amounts against the Issuer or the Warrantor.

In case of the Issuer’s failure to transfer or transfer in full the sums of the principal on the notes and interest for later redemption of the Notes due to the Notes owners as per Article 395 of the Russian Federation Civil Code, within 30 (Thirty) days from the due date of execution of the obligation on repayment of the principal owners of the Notes or persons authorized by them shall be entitled to apply to court or to arbitration with a claim for collection of the respective amounts against the Issuer or the Warrantor.

Procedures for filing a claim with a court or an arbitration.

If owners of the Notes are unable to obtain satisfaction of their claims with respect of the Notes owned by them and presented to the Issuer and/or the Warrantor, owners of the Notes shall be able to file a claim against the Issuer and/or the Warrantor with a court or arbitration.

Individual owners of the Notes shall be entitled to apply to general jurisdiction court at location of the respondent, and legal entities and individual businessmen that own the Notes shall be entitled to apply to arbitration at location of the respondent.

Statute of limitation for filing claims with an arbitration or court of general jurisdiction against the Issuer by the Note owners, persons authorized by them, including nominal holders of the Notes shall be 3 (Three) years (Article 196 of the Russian Federation Civil Code).

Statute of limitation for filing claims with an arbitration or court of general jurisdiction against the Warrantor by the Note owners, persons authorized by them shall be 1 (One) year from the Date of the Notes Redemption and (or) the date of coupon repayment (Article 367.4 of the Russian Federation Civil Code).

Statute of limitation shall be counted from the Date of the Notes Redemption and (or) the date of coupon repayment (Article 200.2 of the Russian Federation Civil Code).

Civil cases shall be under competence of courts of general jurisdiction in accordance with Article 22 of the Russian Federation Civil Practice Code.  As provided for in the above Article, courts of general jurisdiction shall consider and resolve the claims related to protection of violated or disputed rights, freedoms and lawful interests, disputes arising from civil, family, labor, housing, land, environments and other legal relations, where citizens, organizations, governmental authorities, local administrations act as a party.

Competence of arbitration over cases was established by Article 27 of the Russian Federation Arbitration Practice Code.  As provided for in the above Article, arbitration shall have competence over cases of economic disputes and other cases related to entrepreneurial and other activities.

Arbitration shall resolve economic disputes and consider other cases where a party is represented by organizations being legal entities, individuals conducting entrepreneurial activities without a legal entity and having the status of individual businessman obtained in accordance with the established legal procedure (hereinafter, “individual businessmen”), and in the cases specified in the Russian Federation Arbitration Practice Code and other federal laws, by the Russian Federation, Russian Federation constituents, municipalities, state authorities, local administrations, other agencies, officials, bodies having no legal entity status, and citizens having no status of an individual businessman.

Procedures for disclosure on failure to comply or properly comply with obligations on the notes:

If the Notes owners are unable to get satisfaction of the claims with respect of the Notes owned by them and addressed to the Issuer and/or the Warrantor, the Notes owners shall be entitled to apply to court or to arbitration with a claim against the Issuer and/or the Warrantor.

Individual Note owners shall in this case be able to apply to court of general jurisdiction at location of the defendant, and corporate Note owners and individual businessmen – Note owners shall be able to apply to arbitration at location of the defendant.

If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·the volume of defaulted obligations;

·the reason for the default;

·the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) – within 1 (One) day;

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·on its Internet website – www.mts.ru– within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

10. Information on repurchase of the notes

The procedures for repurchasing the Notes on demand of their owner(s) with subsequent trade operations with the Notes; the timeframe of applications for such repurchase:

It is presumed that the Issuer shall repurchase the Notes on demand of their owners and further shall be able to trade them until maturity, in accordance with the terms specified in this clause. The Issuer shall be able to repurchase the Notes of this issuance after registration of the Report on the Securities Issuance with governmental authorities, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer is obliged to ensure the Notes owners’ right to demand repurchase by the Issuer of the Notes within the last 5 (Five) working days of the Notes coupon period preceding the coupon period for which the rate of interest was established by the Issuer (hereinafter, The Period of Filing for Repurchase of the Notes by the Issuer) after opening of the Notes placement.  Owners of the Notes shall be able to demand that the Issuer repurchase the Notes in the situations described in clause 9.3. of the Decision on Issuance of Securities, and clause 9.1.2. of the Prospectus.

The procedures for repurchase of the Notes:

The Issuer shall repurchase the notes via MICEX Stock Exchange (hereinafter, The Market Maker) in accordance with the regulatory documents applicable to activities of the securities market maker

In case of reorganization or liquidation of the Market Maker, or if repurchase by the Issuer of the Notes through the Market Maker under the procedures established by the Decision on Issuance of Securities, and the Securities Issuance Prospectus does not comply with the RF legislation, the Issuer shall have to select another securities market maker through which the Issuer shall make the Notes repurchase deals.

In this case the Issuer shall repurchase the Notes in accordance with the regulations applicable to activities of such securities market maker, and the Issuer shall in addition to announcement of the coupon interest rate (starting from the second coupon) publish information of the securities market maker through which the Issuer shall make the Notes repurchase deal.  The above information shall include:

· full and abbreviated name of the securities market maker;

· its location;

· license information: #, Date of issuance, Validity period, the body that issued the license;

The Issuer’s agent acting on behalf and on account of the Issuer for repurchasing the Notes on request of their owners (hereinafter, The Agent for Repurchasing the Notes on Request of Their Owners) shall be the Underwriter.

The Issuer can reassign the functions of the Agent for Repurchasing the Notes on Request of Their Owners to another person that will be able to exercise all actions required for the repurchase, as per this clause and the RF legislation.  In this case, the Issuer shall be obliged to publish an announcement providing the following information:

·             full and abbreviated name of the person, to which the functions of the Agent for Repurchasing the Notes on Request of Their Owners were reassigned;

·             its location, and also address and fax.# for delivery the applications in accordance with the procedures provided here below;

·             information of the license for conducting professional activities on the securities market: #, Date of issuance, Validity period, the body that issued the license;

·             confirmation of the fact that the appointed Agent for Repurchasing the Notes on Request of Their Owners is a trade participant of the Market Maker, through which the repurchase shall be carried out.

This information announcement shall be published not later than 30 (Thirty) days before the Repurchase Date established in accordance with the procedures provided here below in the following sources of information:

·on news line of information agencies AK&M or Interfax or ANO “AZIPI”;

·on the website in Internet (www.mts.ru);

The announcement in Internet shall be published after the publication on the news line.

In order to implement its right to sell the Notes, the trade participant that owns the Notes and wishes to sell the Notes, or the person authorized by its client being the Notes owner to sell the Notes at its account and on its behalf (hereinafter, The Acceptant) shall perform two actions:

1) submit to the Agent for Repurchasing the Notes on Request of Their Owners an application signed by the Acceptant (hereinafter, The Application). The Application can be accepted in any working day, but exclusively within the Submission Period (as defined here above), and should include the following information:

·full name of the Acceptant;

·state registration # and date of state registration of the Notes;

·quantity of the Notes, which the Acceptant intends to sell to the Issuer (in figures and words);

·location u postal address of the Acceptant.

2) From 11 a.m. to 1 p.m. Moscow time on the Repurchase Date (as defined here below), the Acceptant that previously transferred the above Application to the Agent for Repurchasing the Notes on Request of Their Owners shall submit an addressed applications for sale of a specified quantity of the Notes via the Market Maker’s Trading System in accordance with Rules of Securities Trading and/or other rules of the Market Maker which regulate its activities.  The Application shall be address to the Agent for Repurchasing the Notes on Request of Their Owners that is a Trade Participant, and shall indicate a Purchasing Price, as defined here below, in percentage of nominal value of the Notes, and settlement code T0.

Quantity of the Notes stated in the application should not exceed the Notes quantity previously stated in the Application submitted by the Acceptant to the Agent for Repurchasing the Notes on Request of Their Owners.

The Application should be received in any of the working days within the Submission Period.

The Application shall be addressed to postal address of the Agent for Repurchasing the Notes on Request of Their Owners.

The Application shall be deemed received by the Agent for Repurchasing the Notes on Request of Their Owners from the moment of its handling to the addressee, or refusal by the addressee to receive it supporting by a relevant document.  The Issuer shall not have any obligations of repurchasing the Notes from owners and/or the Acceptants that have not submitted their Applications within the applicable timeframe, or have submitted the Applications that do not comply with the above requirements.

The Issuer shall accept an extract from the register of applications as an adequate confirmation of submission by the Acceptant of an application for sale of the Notes in accordance with the terms for repurchasing the Notes.  The extract shall be made in the form of a relevant application to the Rules of the Market Maker for Conducting Trade in Securities and/or Other Papers, certified by signature of an authorized person.

The Issuer undertakes that in the period from 4 p.m. to 6 p.m. Moscow time on the Repurchasing Date it shall make deals via the Agent for Repurchasing the Notes on Request of Their Owners with all Acceptants by way of submitting addressed counter applications to the ones submitted in accordance with action 2, and maintained in the trading system as at the moment of making the deal.

The addressed counter applications submitted in accordance with action 2 by the Acceptants that have earlier submitted the Applications under the applicable procedures, shall be satisfied by the Agent for Repurchasing the Notes on Request of Their Owners within the Notes quantity indicated in the addressed applications submitted by the Acceptants, and at the price established by the Decision on Issuance of Securities, and the Prospectus.  Obligations of the parties (The Notes Issuer and the Acceptant) for repurchasing the Notes shall be considered fulfilled from the moment of transfer of title to the repurchased Notes to the Issuer (recording of the Notes to issuance account of the Issuer) and repayment for the Notes by the Issuer (fulfillment of the condition “delivery against payment” in accordance with CJSC MICEX Rules for Conducting Clearing Activities on the Stock Market).

If the Issuer’s deal or several deals of purchasing its own Notes is recognized as major deals or deals with interest, such deals should be approved as required by the Russian Federation law.

The Notes repurchased by the Issuer shall be received to the depo account with NDC.  Subsequently, the Notes repurchased by the Issuer may be again submitted for trade operations at secondary market (provided that the Issuer complies with the Russian Federation law).

On expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish information on the timeframe for execution of its liabilities.

The above information (including quantity of repurchased notes) shall be published within the following timeframe from the moment of occurrence of the material fact:

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·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Information on repurchase of the notes on demands of their owners shall be disclosed together with information on the interest rates defined for coupons:

Information on the interest rates defined by the Issuer for coupons of the Notes starting from the second coupon shall be communicated to potential purchasers by way of an announcement of material facts in accordance with the procedures and timeframe set in clause 11 of the Decision on Issuance of Securities, and in clause 2.9. of the Securities Issuance Prospectus.

Timeframe for repurchasing the notes and the procedures for establishing it:

2nd (Second) working day from the completion date of the Period for Submission of the Notes for Repurchase by the Issuer

Purchasing price of the Notes:

100% (One hundred per cent) of the Notes nominal value.

If a purchase and sale deal is made on the Date of Purchasing the Notes, the Issuer shall additionally pay to the Owners the accrued coupon income on the Notes (ACI).

The procedures for repurchase by the Issuer of the Notes under agreement with the Notes owners:

The Issuer may be able to repurchase the Notes under agreement with their owner(s) and further use the Notes for trading until expiry of the redemption period on the terms set by the Decision on Issuance of Securities and the Securities Issuance Prospectus.

The Issuer may be able to repurchase the Notes of this issue after registration of the Report on the securities issuance, or after filing with the registering body of a notice on the issuance results, provided that under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results.

The Issuer shall repurchase the Notes under the terms set by the Decision on Issuance of Securities, the Securities Issuance Prospectus, and individual decisions by the Issuer regarding purchase of the Notes taken by the Issuer’s authorized body in accordance with the Charter.

The Issuer shall take decision on repurchasing the Notes on the basis of provisions of the Decision on Issuance of Securities, and the Securities Issuance Prospectus.  Several decisions on repurchasing the Notes can be taken.

Decisions on repurchasing the Notes shall be taken by the Issuer’s authorized body and shall specify the price, timeframe, and procedures for repurchasing the Notes.

Decision of the Issuer’s authorized body on repurchase of the Notes under agreement with the Notes owners shall include the following:

·quantity of the Notes to be repurchased;

·time period within which the Notes owners can accept the Issuer’s offer of repurchasing the Notes;

·date of repurchasing the Notes;

·purchasing price of the Notes or procedures for defining it;

·full and abbreviated corporate names, location of the agent for repurchase of the notes under agreement with their owners; #, date of issuance and validity period of the license for brokerage operations, the body that issued the above license.

The Notes shall be repurchased under agreement with their owners by an agent for repurchasing the notes under agreement with their owners acting on the Issuer’s behalf and account (hereinafter, The Agent for Repurchasing the Notes Under Agreement with Their Owners).

Owner of the Notes or a person authorized by the owner including nominal holder of the Notes shall send a letter by registered mail with return receipt and inventory of contents to postal address of the Agent for Repurchasing the Notes Under Agreement with Their Owners, or shall deliver against signature of authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners a written notification of its intension to sell a certain amount of Notes to the Issuer (hereinafter, The Notification”).

The Notification should be accepted by the Agent for Repurchasing the Notes Under Agreement with Their Owners or delivered to authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners within the period for accepting the Issuer’s offer of repurchasing the Notes by the Notes owners.

The Notification shall be deemed received by the Agent for Repurchasing the Notes Under Agreement with Their Owners , provided that:

·the return receipt for the postal delivery is market as mail accepted by the Agent for Repurchasing the Notes Under Agreement with Their Owners;

·the notice of postal delivery is marked as mail delivery rejected by the Agent for Repurchasing the Notes Under Agreement with Their Owners;

·the Notification was not delivered to the Agent for Repurchasing the Notes Under Agreement with Their Owners because of its absence at the address to which the post correspondence was directed.

The Notification shall be deemed received by an authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners , provided that:

·a copy of the Notification retained by the Notes owner or by a person authorized by the owner including nominal holder of the Notes is signed off as received by the authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners;

·the Notification bears a mark that the authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners refused to accept the Notification, and such mark is certified as true by unrelated persons.

The Notification shall be produced in the following form:

“Hereby we                                          (Surname, first and middle names of individual Notes owners, full name (corporate name) and State Registration # (OGRN) of corporate Notes owner; Surname, first and middle names of individual Notes owners, full name (corporate name) and State Registration # of authorized person of the Notes owner, including nominal holder of the Notes), TIN                           , form of our intention to sell to Open Joint Stock Company Mobile TeleSystems documentary interest-bearing non-convertible bearer Notes of series 01 with mandatory centralized storage, state registration # of the issue                          of                 , owned by                                      (Surname, first and middle names of individual Notes owners, full name (corporate name) and State Registration # (OGRN) of corporate Notes owner) under the terms and conditions of clause 10. of the Decision on Issuance of Securities, and clause 9.1.2. of the Securities Issuance Prospectus.

Quantity of the Notes offered for sale (in figures and its letters):

.

Name of the Trade Participant that on the date of Purchasing the Notes on behalf and on account of the Notes owner shall put in MICEX Stock Exchange Trading System an offer of Notes for sale addressed to the Agent for Repurchasing the Notes Under Agreement with Their Owners (of owner of the Notes is not a Trade Participant):

.

[Signature of the individual Notes owner, its authorized person, including authorized person of nominal holder of the Notes, authorized person of corporate Notes owner including authorized person of nominal holder of the Notes]  
[Seal of corporate Notes owner; or nominal holder of the Notes]”

The Notification is supplemented by Power of Attorney or other documents supporting posers of the authorized persons of the Notes owner, including nominal holder, for signing the Notification.

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The Issuer shall not be required to purchase the Notes under agreement with the Notes owners that have not ensured timely delivery of the Notifications to the Agent for Repurchasing the Notes Under Agreement with Their Owners or handling to authorized person of the Agent for Repurchasing the Notes Under Agreement with Their Owners, have not produced the Notification in accordance with the established form.

If owners of the Notes accept the Issuer’s offer of repurchasing the Notes in larger quantity of the Notes than the one indicated in the above offer, the Issuer shall repurchase the notes from the Notes owners proportionally to the presented claims, provided that only whole quantity of the Notes shall be purchased.

The Notes shall be purchased under agreement with the Notes owners during MICEX Stock Exchange trading sessions in accordance with MICEX Stock Exchange Rules of Trade and other regulatory documents of MICEX Stock Exchange and regulatory documents of CJSC MICEX.

From 11 a.m. to 1 p.m. Moscow time on the Notes Repurchase Date owner of the Notes that is a Trade Participant or a Trade Participant acting on behalf and on account of the Notes owner that is not a Trade Participant shall submit an applications for sale of the Notes via MICEX Stock Exchange Trading System in accordance with MICEX Stock Exchange Rules of Trading addressed to the Agent for Repurchasing the Notes Under Agreement with Their Owners and indicating a Purchasing Price and settlement code T0.

The fact of existence of an offer for sale of the Notes shall be supported by extract from the register of applications made in the form established by regulatory documents of MICEX Stock Exchange and certified by signature of authorized representative of MICEX Stock Exchange

From 4 to 6 p.m. Moscow time on the Date of Repurchasing the Notes, the Agent for Repurchasing the Notes Under Agreement with Their Owners shall on the Issuer’s behalf and in the Issuer’s name make deals of purchasing the Notes under agreements with the Notes owners, with the Notes owners who are Trade Participants, or with Trade Participants acting on behalf and on account of the Notes owners, by way of submitting counter applications for purchasing the Notes via MICEX Stock Exchange Trading System to the Notes owners who are Trade Participants, or with Trade Participants acting on behalf and on account of the Notes owners.

If the deal of purchasing the Notes under agreement with Notes owners shall have the features of a major deal and/or a deal with interest, such deals should be approved as required by the Russian Federation law.

On expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish information on the timeframe for execution of its liabilities.

The Issuer’s obligation of repurchasing the Notes under agreement with Notes owners shall be deemed fulfilled at the moment when cash funds are received in the amount equal to the Notes purchasing price of the relevant quantity of the Notes and ACI on the Notes to account of the Notes owner that is a Trade Participant, or of the Trade Participant acting on behalf and on account of the Notes owner in accordance with the terms of clearing operations conducted by CJSC MICEX.

Obligations of the Notes owner shall be exercised on the terms “delivery against payment” and shall be deemed fulfilled at the moment of recording the relevant number of the Notes indicated in the offer for sale of the Notes to the Issuer’s depo account with NDC.

The Notes purchased under agreement with the Notes owners shall be received to the Issuer’s depo account with NDC, and subsequently, may be again submitted for trade operations until the Date of the Notes Redemption.

Timeframe for repurchasing the notes by the Issuer, and the procedures for defining it:

The Issuer shall not be able to repurchase the Notes before registration of the Report on the securities issuance results by authorized federal regulator of the securities market, or filing with the registering body of a notice on the Notes issuance results.

The procedures for disclosure by the Issuer of information on repurchase of the notes:

The Issuer shall be required to publish an announcement for owners of the notes on the Issuer’s decision on repurchase of the Notes under agreement with their owners within the following time from the date when authorized Issuer’s body issued minutes of its meeting that took such decision (expiration date of the period established by the Russian Federation law for issuing minutes), but not later than 7 (Seven) days for the opening date of acceptance of the offers on repurchase of the notes:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The announcement to owners of the notes regarding the decision on repurchase of the Notes shall include the following information:

·               the date when the decision on repurchase (redemption) of the Notes of the issue under agreement with their owners, was taken;

·               series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·               quantity of the Notes to be repurchased;

·               time period during which owners of the Notes can accept the Issuer’s offer to purchase the Notes;

·               date of repurchase by the Issuer of the Notes of the issue;

·               repurchasing price of the Notes of the issue or the procedures for defining it;

·               full and abbreviated corporate names, location of the Agent for Repurchasing the Notes Under Agreement with Their Owners, #, date of issuance, and validity period of the license for brokerage activities, the body that issued the above license.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

In connection with repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

11. The procedures for disclosure by the Issuer of information on issuance of securities

The Issuer shall disclose information on the issuance in accordance with provisions of the Russian Federation legislation on securities under the procedures and terms specified in the Decision on Issuance of Securities and the Securities Issuance Prospectus.  Should at the moment of occurrence of an event that is to be disclosed by the Issuer, other requirements on the procedures and terms of disclosure have been established by effective federal laws and regulatory acts issued by federal executive body on the securities market than those set out in the Decision on Issuance of Securities and the Securities Issuance Prospectus, then disclosure of such event shall be carried out in accordance with the procedures and terms required by federal laws and regulatory acts issued by federal executive body on the securities market having effect at the moment of occurrence of such event.

a) The Issuer shall announce the fact of decision taken on placement of the Notes in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

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b) The Issuer shall publish information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken such decision:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

c) The Issuer shall disclose information on issue of the Notes in the form of an announcement of a material fact “information on phases of the securities issuance procedure” (information of state registration of the securities issuance) within the following time period, counting from the date of publication by the Issuer of an announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall publish the text of the registered Decision on Issuance of Securities on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.

The text of the Decision on Issuance of Securities shall be published on the website together with state registration number of the Notes issue, date of state registration and name of the registering body that provided state registration of the Notes issue.

The text of the registered Decision on Issuance of the Notes shall be available from Internet from the date of its publication in Internet and to the redemption date of the Notes of the issue.

The Issuer shall publish the text of the registered Securities Issuance Prospectus on its website: www.mts.ru within 2 (Two) days from the date of publication by the Issuer of the announcement of state registration of the Notes issue on website of the registering authority, or from delivery to the Issuer of a written notice of the registering authority supporting the fact of state registration of the Notes issue sent via mail, facsimile, e-mail, delivery against signature, depending on what takes place first.  The text of the Securities Issuance Prospectus shall be published on the website together with state registration number of the Notes issue for which the Securities Issuance Prospectus was registered, the date of its registration and the name of the registering body that has registered the Securities Issuance Prospectus.

The text of the registered Securities Issuance Prospectus shall be available from Internet starting from the date of its publication in Internet and until expiry of no less than 6 (Six) months from the date of publication in Internet of the text of registered report on results of the securities issue; or, if under the Federal Law “On the Securities Market” and other federal laws, the Notes issuance does not require state registration of a report on the securities issuance results, within 6 (Six) months from the date of publication in Internet of the text of the notice on the issuance results filed with the registering body.

From the date of state registration of the Notes issue, all concerned parties shall be able to make themselves familiar with the Decision on Issuance of Securities and the Securities Issuance Prospectus, and receive their copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the above documents to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

d) At the Phase of the Notes placement the Issuer shall be required to disclose information in the following form:

· announcement of the opening date of the securities placement;

· announcement of changing the opening date of the securities placement;

· announcement of suspension of the securities placement;

· announcement of renewal of the securities placement;

· announcement of material facts “information of the phases of the securities issuance procedure”.

1. The Issuer shall publish information on the placement opening date in the form of an announcement of the placement opening date within the following timeframe:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement in Internet shall be published after the publication on the news line.

2. Should the Issuer take decision on changing the placement opening date, the Issuer shall be required to publish an announcement of changing the placement opening date on news line and on the Issuer’s website in Internet (www.mts.ru) not later than 1 (One) day before such date.

The announcement in Internet shall be published after the publication on the news line.

3. The Issuer shall publish information on launch of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is launched:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

4. Should the Issuer’s authorized body take decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or should the Issuer receive a written order (instruction, assessment) from the federal securities market regulator, the Issuer shall be required to suspend placement of the Notes and publish information on suspension of the placement within the following time from the date of production of the relevant minutes (expiry date established by the Russian Federation law regarding production of minutes) of the meeting of the Issuer’s authorized body that has taken the decision on making amendments and/or additions to the Decision on Issuance of Securities and/or the Securities Issuance Prospectus, or from the date when the Issuer receives a written order (instruction, assessment) from the federal securities market regulator on suspension of the securities placement via mail, facsimile, email, delivery against signature, depending on what takes place first:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is suspended in connection with decision taken by the registering authority on suspension of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

5. The Issuer shall publish information on renewal of the securities issue within the following timeframe from the date of publication of information on registration of amendments and/or additions to the Decision on Issuance of Securities and/or additions to the Decision on Issuance (Additional Issuance) of Securities and/or to the Securities Issuance Prospectus or information on decline of registration of the above amendments and/or additions on the website of the registering authority in Internet, or from delivery to the Issuer of a written notice of the registering authority on renewal of the securities issue (discontinuation of the events supporting suspension of the securities placement procedure) via mail, facsimile, e-mail, delivery against signature, depending on what takes place first::

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

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·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

If placement of securities is renewed in connection with decision taken by the registering authority on renewal of the securities issue, the Issuer shall disclose the information on suspension of the securities issue in the form of announcement of a material fact “information on suspension and renewal of the securities issue”.

Renewal of the securities placement shall not be possible before publication of information on renewal of the securities placement on news line and on the Internet website.

6. The Issuer shall disclose the information on completion of the Notes placement in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following time period from the date of which the Notes placement is completed:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

e) After state registration of the Report on the Securities Issuance Results, the Issuer shall publish information on state registration of the Report on the Securities Issuance Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of publication of information on state registration of the Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Within 2 (Two) days from the date of publication of information on state registration of the Issuer’s Report on the Securities Issuance Results on the Internet website of the registering authority, or from the date of delivery to the Issuer of a written notice of the registering authority on state registration of the Report on the Securities Issuance Results via mail, facsimile, e-mail, delivery against signature, depending on which of the above dates takes place first, the Issuer shall publish the text of the registered Report on the Securities Issuance Results on its Internet website: www.mts.ru.

The text of the registered Report on the Securities Issuance Results should be available from Internet from the date of its publication in Internet and further on within no less than 6 (Six) months from the date of its publication in Internet.

From the date of state registration of the Report on the Securities Issuance Results, all concerned parties shall be able to make themselves familiar with the Report on the Securities Issuance Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the Report on the Securities Issuance Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

f) If under Federal Law “On the Securities Issuance” and other federal law, the securities issuance does not require state registration of the Issuer’s Report on the Securities Issuance Results, provisions of clause 11.) of the Decision on Issuance of the Securities shall not apply.

In this case information shall be disclosed at the phase of submission to the registering authority of a notification of the Securities Issue Results in the form of announcement of a material fact “information on phases of the securities issuance procedure” within the following timeframe from the date of submission (direction) to the registering authority of the notification of the Securities Issue Results:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The Issuer shall publish the text of notification of the Securities Issue Results submitted to the registering authority in Internet within 2 (Two) days from the date of submission (direction)of the above notification to the registering authority.

The text of the notification of the Securities Issue Results submitted to the registering authority should be available from Internet website: www.mts.ru within no less than 6 (Six) months from the date of its publication in Internet.

If the Issuer provided additional means of access to information contained in the Securities Issuance Prospectus, the Issuer shall be required to provide the same additional means of access to information contained in the notification of the Securities Issue Results that ensured access to information of the Securities Issuance Prospectus.

From the date of submission (direction)of the notification of the Securities Issue Results to the registering authority, all concerned parties shall be able to make themselves familiar with the notification of the Securities Issue Results and receive copies at the following address: Russian Federation, 109147, Moscow City, Marksistskaya street, 4.

The Issuer shall be required to provide copies of the notification of the Securities Issue Results to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy, within 7 (Seven) days from the date of presenting the request.

g) The Issuer shall disclose the information in the form of announcements of material facts in accordance with the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

The Issuer shall disclose the information in the form of announcements of material facts by publishing an announcement of a material fact within the following time period from the date of occurrence of such material fact:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

Texts of announcements of material facts should be available from the Issuer’s website: www.mts.ru within no less than 6 (Six) months from the date of their publication.

In addition, the Issuer shall submit information on material facts to the registering authority within 5 (Five) days from the moment of occurrence of the material facts.

h) The Issuer shall disclose information in the form of a quarterly report under the procedures established by the applicable RF legislation including regulatory acts of the federal executive authority for the securities market.

Quarterly report shall compile results of each quarter and shall be submitted to the federal executive authority for the securities market within 45 (Forty Five) days from the last date of the reporting quarter.

Within 45 (Forty Five) days from the last date of the reporting quarter, the Issuer shall publish the text of the quarterly report on the Issuer’s prospectus-based securities on the Internet website — www.mts.ru.

The text of the quarterly report on the Issuer’s prospectus-based securities shall be available from the Issuer’s Internet website during no less than 3 (Three) years from the date of its publication.

Not later than 1 (One) day from the date of publication of the quarterly report in Internet, the Issuer shall publish on the news line an announcement of the procedures of access to the information included in the quarterly report.

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i) Within 1 (One) working day from the date of occurrence of the event entitling the Notes owners to submit the Notes for premature redemption on news line of information agencies (AK&M or Interfax or ANO “AZIPI”), and within 2 (Two) working days from the above date on the Issuer’s website in Internet (www.mts.ru), the Issuer shall publish the following information:

· name of the event entitling the Notes owners to exercise premature redemption of the Notes;

· the date of occurrence of the event;

· the actions that the Notes owners may potentially take to satisfy their claims for premature redemption of the Notes.

The announcement in Internet shall be published after the publication on the news line.

After premature redemption of the Notes by the Issuer, the Issuer shall publish an announcement on the timeframe of execution of its obligations.

The above information (including the quantity of the redeemed Notes) shall be published within the following timeframe after the final date of execution of the obligation:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

j) If the Issuer fails to execute and/or properly execute its obligations under the Notes (including in case of default or technical default), the Issuer shall publish an announcement of its failure to execute and/or properly execute its obligations to the Notes owners, stating:

·      the volume of defaulted obligations;

·      the reason for the default;

·      the list of actions that the Notes owners may potentially take to satisfy their claims.

The Issuer shall publish the above information within the following timeframe from the date of failure to execute and/or properly execute The Issuer’s obligations under the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on its Internet website — www.mts.ru— within 2 (Two) days.

The announcement in Internet shall be published after the publication on the news line.

k) In addition to disclosure of the placement opening date, the Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement.

The Issuer shall disclose information on the Underwriter, to which MICEX Stock Exchange Trade Participants shall submit applications for purchasing the Notes in the course of tender conducted by CJSC MICEX Stock Exchange among potential buyers on the opening date of the Notes placement, using the following procedure:

·              on news lines of information agencies AK&M or Interfax, or other information agencies authorized by federal regulator of the securities market to execute information disclosure on the securities market - not later than 5 (Five) working days before the placement opening date;

·              on the Issuer’s website in Internet (www.mts.ru) not later than 4 (Four) working days before the placement opening date.

The announcement should also include information of the bank account to which cash payment on the Notes shall be transferred.

l) If not later than the 2 (Second) working day before the opening date of the Notes placement the Issuer takes decision on repurchasing the Notes from their owners during the last 5 (Five) working days of “j” coupon period (j=1-19), interest rates of all coupons on the Notes having number of sequence below or equal j shall be defined as equal to interest rate on the first coupon.  The above information including sequential numbers of coupons, for which interest rate was defined as equal to interest rate on the first coupon, and the sequential number of coupon period (j), in which the Notes owners are entitled to demand repurchase of the Notes by the Issuer shall be communicated to potential buyers of the Notes by way of an announcement published within the following time from production of meeting minutes of the Issuer’s authorized body that has taken decision on repurchasing the Notes:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day;

· on Internet website — www.mts.ru— within 2 (Two) days.

This announcement shall be published no later than 1 (One) working day before of opening date of the Notes placement.

m) The Issuer shall disclose information on the first coupon interest rate defined through the Tender as at the opening date of the Notes placement, in the form of an announcement of material facts within the following timeframe from the moment of taking decision on the first coupon interest rate:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

The Issuer shall take decision on the first coupon interest rate and shall inform MICEX Stock Exchange in writing of the decision taken by the Issuer.  After publication of an announcement by information agency (AK&M or Interfax or ANO “AZIPI”) on the first coupon interest rate, the Issuer shall inform the Underwriter of the first coupon interest rate.

The Underwriter shall communicate the announcement of the first coupon interest rate using MICEX Stock Exchange Trading System via e-mail to all MICEX Stock Exchange Trade Participants.

n) For those coupons, for which the Issuer did not define the interest rate (procedures for defining the interest rate) before the opening date of the Notes placement, the Issuer shall set the numerical interest rate at the Date of Defining the “i” Coupon, what cannot be later than 7 (Seven) working days before the date of payment of (i-1) coupon.  At the Date of Defining the “i” Coupon the Issuer is entitled to set interest rates for any number of undefined coupons following “i” coupon (where “k” coupon is the last of defined coupons).  The Issuer shall inform the Notes owners of interest rate of “i” coupon not later than 5 (Five) working days before the opening date of the “i” coupon period on the Notes by way of publishing a relevant announcement in the form of information of a material fact within the following timeframe:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day after the fact has occurred;

· on Internet website — www.mts.ru— within 2 (Two) days after the fact has occurred.

If after announcement of coupon interest rates in accordance with the procedures established in clause 9.3. of the Decision on Issuance of Securities, there are still undefined coupons on the Notes for at least one of subsequent coupons, then together with the announcement of interest rates of “i” and other coupons of the Notes, which are being defines, the Issuer shall be required to secure the rights of the Notes owners to demand that the Issuer repurchase the Notes during the last 5 (Five) working days of “k” coupon period (if the Issuer defines interest for only one “i” coupon, then i=k).  The above information including sequential numbers of the coupons, for which interest rate was defined at the Date of defining the “i” coupon, and the sequential number of coupon period (k), in which repurchase of the Notes shall take place shall be communicated to potential buyers of the Notes by way of publishing an announcement of a material fact:

· on news line (AK&M or Interfax or ANO “AZIPI”) — within 1 (One) day after the fact has occurred;

· on Internet website — www.mts.ru— within 2 (Two) days after the fact has occurred.

The Issuer shall inform MICES Stock Exchange of the decisions taken in accordance with clauses 9.3.(2) and 9.3.(3) of the Decision on Issuance of Securities, and clauses 9.1.2.(2) and 9.1.2.(3) of the Securities Issuance Prospectus, including the defined interest rates, within 5 (Five) working days before expiry of (i-1) coupon period (the period in which interest rate on the “i” and following coupons is defined).

o) After expiry of the period established for repurchasing the Notes by the Issuer, the Issuer shall publish an announcement of the timeframe for execution of the obligations.

The above information (including the quantity of repurchased Notes) shall be published within the following time after occurrence of the material fact:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication on the news line.

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p) The Issuer is entitled to appoint other payment agents and is entitled to revoke such appointments.

It is presumed that the Issuer cannot appoint several payment agents at a time.

The Issuer shall publish an official announcement of the above actions within 3 (Three) working days after the date of making such appointment or revoking them on news line (of AK&M or Interfax or ANO “AZIPI”) and on website —www.mts.ru.

The announcement in Internet shall be published after the publication in the news line.

q) The Issuer’s agent acting on behalf and on account of the Issuer in repurchasing the Notes on request of their owners (hereinafter, The Agent for Repurchasing the Notes on Request of Their Owners) is the Underwriter.

The Issuer shall be able to reassign the functions of the Agent for Repurchasing the Notes on Request of Their Owners to another person that shall be able to perform all actions required for the repurchase, as per clause 10 of the Decision on Issuance of Securities and legislation of the Russian Federation.  In this case, the Issuer shall be required to publish an information announcement including the following data:

·              full and abbreviated name of the person to which the functions of the Agent for Repurchasing the Notes on Request of Their Owners were reassigned;

·              its location, and also address and facsimile # for receiving applications in accordance with the procedures defined in clause 10 of the Decision on Issuance of the Notes;

·              data of the license of a professional participant of the securities market: #, Date of issuance, Validity period, the authority that issued the license;

·              confirmation of the fact that the appointed Agent for Repurchasing the Notes on Request of Their Owners is a trade participant of the Market Maker, and shall exercise the repurchase through it.

This information shall be published not later than 30 (Thirty) days prior to the Date of repurchase established in accordance with the procedures described here below, in the following sources of information:

·              on news line (of AK&M or Interfax or ANO “AZIPI”);

·              on the website (www.mts.ru).

The announcement in Internet shall be published after the publication in the news line.

r) The Issuer shall publish an announcement to owners of the Notes of the decision taken on repurchase of the Notes by the Issuer under agreement with their owners within the following timeframe from the date of production of meeting minutes (expiry of the period established by the Russian Federation legislation for minutes production) of the Issuer’s authorized body at which the above decision has been taken, but not later than 7 (Seven) days prior to the opening date of receiving offers for repurchase of the Notes:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

The announcement to owners of the Notes of the decision taken on repurchase of the Notes shall include the following information:

·               the date when the decision on repurchase (redemption) of the Notes of the issue under agreement with their owners was taken;

·               series and from of the Notes, state registration # and date of state registration of the Notes of the issue;

·               quantity of the Notes to be repurchased;

·               time period within which the Notes owners can accept the Issuer’s offer for repurchasing the Notes;

·               date of repurchase by the Issuer of the Notes of the issue;

·               repurchasing price of the Notes of the issue or the procedures for defining it;

·               full and abbreviated corporate name, location of the Agent for Repurchasing the Notes Under Agreement with Their Owners, #, date of issuance, and validity period of the license for conducting brokerage activities, the body that issued the above license.

The above information on the Issuer’s decision to repurchase the Notes under agreement with their owners shall constitute an irrevocable public offer for a purchase and sale contract regarding the Notes, including all material terms of the purchase and sale contract for the Notes of the issue, which makes it clear that the Issuer wishes to repurchase the Notes on the terms specified in the publication from any Notes owner that expressed its wish to accept the offer.

s) In case of repurchasing by the Issuer of its own Notes under agreements with the Notes owners, the Issuer shall publish information on repurchase of the Notes (stating, in particular, the quantity of repurchased Notes) in the form of an announcement of a material fact within the following period after the closing date of the Notes repurchase defined in accordance with the Decision on Issuance of Securities and the Securities Issuance Prospectus:

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” within 1 (One) working day;

·              on the Issuer’s website in Internet (www.mts.ru) within 2 (Two) working days.;

The announcement in Internet shall be published after the publication in the news line.

t) Notification (disclosure) procedures applicable in case of amendment of the surety terms for execution of obligations under the Notes that occurs because of the reasons beyond control of the Issuer or of owners of the Notes supported by collateral (reorganization, liquidation, or bankruptcy of the party that provided the collateral, other reasons):

·              on news lines of information agencies AK&M or Interfax or ANO “AZIPI” and on the website - www.mts.ru - within 3 (Three) working days.

The announcement in Internet shall be published after the publication in the news line.

The Issuer shall provide the following documents (within the statutory period of storage of such documents): copies of each announcement including copies of each announcement of a material fact, each certified by the Issuer’s authorized person, copies of the registered decision on the securities issue, of securities issuance prospectus, and amendments and/or additions to these, of report on the securities issue results, copy of notification on the securities issue results, copy of quarterly report, copies of other documents required for disclosure in accordance with the Russian Federation legislation on securities, to owners of the Issuer’s securities and to other concerned parties on their request and for a fee not exceeding the costs of production of such copy within 7 (Seven) days from the date of submission of the respective claim.

The Issuer shall publish the banking information of the account(s) to be used for repayment of the costs of production of the above copies and the amount (procedures for defining the amount) of such costs on the Issuer’s website (www.mts.ru).

12. Information on the surety supporting execution of obligations under the Notes of the issue

12.1. Information of the party that provided the surety supporting execution of obligations under the Notes

Full corporate name: Limited Liability Company “Mobile TeleSystems — Capital”

Abbreviated corporate name: LLC MTS-Capital”

Location: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Location of the Warrantor’s permanent executive body: Russian Federation, Moscow City, Vorontsovskaya street, 5, building 2.

Data of state registration of the legal entity

Main state registration #: 1037709022735

Data of entry record in the Unified State Register of Legal Entities: 14.03.2003.

The authority that entered the record in the Unified State Register of Legal Entities: Inspectorate # 9 of Moscow Central Administrative Region of the Russian Federal Ministry of Taxes

Limited Liability Company “Mobile TeleSystems — Capital” is not responsible for disclosure of its financial and economic activities, including in the form of quarterly reports or announcements of material facts (events, actions) related to the financial and economic activities.

12.2. Terms of surety supporting execution of obligations under the Notes:

Type of surety (method of warranty provision): Warranty.

26

Amount of surety (RUR): Maximum amount of warranty for the Notes is equal to total nominal value of the Notes of the issue - RUR 10 000 000 (Ten billion) plus aggregate coupon income on the Notes.

Terms of surety provision and procedures for exercising the rights of the Notes owners for the surety:

The Warrantor shall together with the Issuer respond to the Notes owners in case of the Issuer’s failure to comply or properly comply with its obligations on the Notes.

The relations of surety against the Notes shall be governed by Russian Federation legislation.  All disputes arising from the Warrantor’s failure to comply or properly comply with its obligations shall be under jurisdiction of courts of the Russian Federation.

If the Notes owners are unable to get satisfaction of their claims on the Notes owned by them and submitted to the Issuer and/or Warrantor, owners of the Notes shall be able to file a claim with a court or arbitration against the Issuer and/or the Warrantor in accordance with applicable legislation of the Russian Federation.

Warranty is an unconditional and irrevocable obligation of the Warrantor before each individual or corporate entity that owns title to the Notes at the respective moment of time (acting independently or through a nominal holder if Notes were transferred by the Notes owner to nominal holding) to respond for The Issuer’s failure to comply or properly comply with its obligations of payment in full of all sums payable by the Issuer on each of the Notes to such owner of the Notes at due moment of payment of such sums, if the Issuer because of any reason fails to pay and/or properly pay any of the above sums that are payable by it in accordance with the Issuance Documents (here, and further below through the text the Issuance Documents are construed as the Decision on Issuance of Securities and the Securities Issuance Prospectus) to any Notes owner within the timeframe and under the procedures defined in the Issuance Documents.

The Notes with a surety provide to their owners all rights arising from such surety.

A Surety Agreement shall be made by way of purchasing one or several Notes under the procedures and on the terms defined in the Issuance Documents.  The fact of purchasing any quantity of the Notes means that the Notes buyer enters in a surety agreement with the Warrantor, and under such agreement the Warrantor shall bear responsibility jointly with the Issuer for the Issuer’s failure to perform or properly perform its obligations on the Notes with respect of the Notes owners on the terms defined in the Issuance Documents.

A Surety Agreement shall be construed as made from the moment when the first Notes owner obtains title to such Notes, and the written form of the agreement shall in this case be construed as executed.  Transfer of title to the surety provided in accordance with the Issuance Documents takes place as result of transfer of title to a Note to a new buyer; in this case title to the surety passes in the same volume and under the same terms, which exist at the moment of transfer of title to a Note.  Transfer of title to the surety without transfer of title to a Note shall be ineffective.

The fact of the Issuer’s failure to comply or properly comply with obligations under the Notes shall be considered as proven in the following situations:

1) The Issuer coupon income in the form of interest on the Notes nominal value to owners of the Notes within the timeframe defined in the Issuance Documents;

2) The Issuer has not paid or paid in full the principal at redemption of the Notes within the timeframe defined in the Issuance Documents;

3) The Issuer has not fulfilled or fulfilled in full scope the claims of the Notes owners of repurchase of the Notes within the timeframe and under the terms defined in the Issuance Documents.  The moment of fulfillment of the respective Issuer’s obligations occurs on the days of repurchase of the Notes by the Issuer defined by the Issuer in accordance with the Issuance Documents;

4) The Issuer failed to satisfy or properly satisfy the Notes owner’s claim of premature redemption and compensation to it of the Notes’ nominal value and repayment of the accrued coupon income on the Notes due to it as at the date of execution by the Issuer of its obligations regarding premature redemption of the Notes and defined in accordance with clause 15. of the Decision on Issuance of Securities and clause 10.10. of the Securities Issuance Prospectus.  The timeframe of execution of the respective obligations under the Notes by the Issuer shall be defined in accordance with the Issuance Documents.

In case of the Issuer’s failure to comply or properly comply with its obligations under the Notes, the Warrantor shall be liable for the Issuer’s failure to comply or properly comply with its obligations under the Notes, as, if owners of the Notes file claims against the Warrantor that meet the conditions defined in the Issuance Documents (hereinafter — The Claim).

If the Issuer fails to comply or properly comply with the abovementioned obligations on the Notes, the owners of such Notes shall be entitled to file a written claim directly against the Warrantor for execution of obligations on the Notes on the terms and under the timeframe defined in the Issuance Documents.

The Claim should include the following data:

(a)           identification features of the Notes (form, series, type, state registration # of the issue and date of state registration) and quantity of the Notes in ownership of each relevant owner of the Notes;

(b)           the contents of obligations on the Notes defaulted/improperly fulfilled by the Issuer;

(c)           sum of obligations before the Notes owners defaulted/improperly fulfilled by the Issuer, which is payable, but has not been paid by the Issuer;

(d)           full name (surname, first and middle names of an individual) of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if applicable);

(e)           location and postal address (residential address), contact telephone # of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed);

(f)            bank account information of the Notes owner and the person authorized by the Notes owner to receive payments under the Notes (if such person was appointed) and other information required to transfer cash funds (name of corporate entity or surname, first and middle names of an individual; address of location (place of residence); TIN (if applicable); for individuals — series and # of ID, date of issuance, and name of the authority that issued this ID, for corporate entities — OKPO and OKVED codes (for banks - BIC);

(g)           tax status of the person authorized to receive payments under the Notes (resident, non-resident with a permanent establishment, non-resident without a permanent establishment), indication of the country where this person is resident.

If owner of the Notes is a legal entity, the Claim shall be signed by its director, chief accountant, and stamped by the Notes owner’s seal.  If owner of the Notes is an individual, signature of the Notes owner on the Claim should be notarized as true.

The Claim shall be submitted to the Warrantor at the following address: Russian Federation, Moscow City, Vorontsovskaya, 5, building 2 in person against signature of the Warrantor’s representative or via registered mail with return receipt.

The Claim shall be supplemented with:

(a)           a copy of extract from the Notes owner’s depo account certified by Non-Commercial Partnership “National Depository Centre” (hereinafter - NDC) or by nominal holder —depositor of NDC where the depo account was opened, including quantity of the Notes owned by the Notes owner as at the date of submission of the Claim;

(b)           a copy of NDC report on transfer of the Notes to the depo account section designated for blocking the securities at redemption certified by NDC or by nominal holder — NDC depositor, in case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption;

(c)           documents supporting powers of the person who filed a claim on behalf of the Notes owner issued in accordance with the effective Russian federation law, if it is a representative of the Notes owner who files the claim;

(d)           notarized copies of statutory documents and the documents supporting powers of the person who signed the claim, if an owner of the Notes is a corporate entity;

(f)            a copy of passport certified by the Notes owner’s signature, if an owner of the Notes is an individual.

The Warrantor shall also accept the documents supporting tax status of the Notes owners as per the existing legislation, and availability to certain Notes owners of tax reliefs that allow for full or partial tax exemption of payments.

The Documents issued outside the Russian Federation should be duly legalized (or apostilled), and should be supplemented by a notarized translation into Russian.

Owners or the Notes can file claims directly against the Warrantor within 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes.  The date of submission of the Claim shall be the date of delivery to the Warrantor of the respective Claim.

The Claims filed against the Warrantor after expiry of 60 (Sixty) days from the due date of the respective Issuer’s obligation on the Notes shall not be considered.

A Claim against the Warrantor can be filed by a nominal holder — NDC depositor having accounts for recording of the Notes and acting to benefit of the Notes owners — depositors of the above depository, provided that such person is duly authorized by the Note owner.

The Warrantor shall consider the Claim and the documents attached thereto, and shall review the data included in them for correctness within 14 (Fourteen) working days from the moment of delivery of the Claim to the Warrantor.

Not later than on the 5 (Fifth) working day from the date of expiry of the period of the Claim consideration, the Warrantor shall notify in writing of the decision to satisfy or refuse to satisfy (specifying the reasons) the Claim of the Notes owner or of the nominal holder — NDC depositor who filed the Claim.  In case a claim is filed presuming repayment of a certain sum in connection with default/improper fulfillment of the Issuer’s obligations on the Notes redemption, the Warrantor shall submit a notice with NDC on satisfaction/refusal to satisfy the Claim (specifying the name, surname, first and middle names of the owner, quantity of the Notes, name of the Depository that opened a depo account to the owner).

If a decision is taken to satisfy the claims of the Notes owner, the Warrantor shall within 10 (Ten) working days from the date of expiry of the period of the Claim

27

consideration transfer cash funds to bank account of the Notes owner, of nominal holder of the Notes, or of any other person authorized by the Notes owner the banking information of which was provided in the Claim.

The Warrantor shall pay to the Notes owner the cash sums on the Notes payable to it within the amount that was not paid by the Issuer as at the moment when the Warrantor took the decision to satisfy the Claim.

The Warrantor’s obligations shall be deemed fulfilled from the moment of writing off the relevant cash funds from the Warrantor’s account.

The surety conditions established by the Issuance Documents shall be discontinued:

1) if Obligations of the Issuer are discontinued.  If payments on the Notes were made to a Notes owner in full scope, the surety shall discontinue its effect with respect of such owner, but shall retain effect with respect of other Notes owners;

2) if Obligations of the Issuer are amended towards creation of increased liability or other unfavorable effects for the Warrantor without approval of the latter;

3) in connection with other reasons established by the effective Russian Federation laws.

The Warrantor shall not be liable for default on its obligations to the Notes owner, if such default resulted from submission to the Warrantor of unreliable or incomplete data; in such case any additional expenses that the Warrantor incurs in connection with execution of its responsibilities of surety provider shall be reimbursed by the respective Notes owner or nominal Notes holder.

The procedures for notification (disclosure) on amendment of surety terms supporting execution of obligations under the Notes that takes place because of the reasons beyond control of the Issuer or of the Notes owners with surety (reorganization, liquidation, or bankruptcy of the person that provided the surety, etc.):

·              on news line of information agencies AK&M or Interfax or ANO “AZIPI” and on the Issuer’s website in Internet - www.mts.ru - - within 3 (Three) working days;

·              in Vedomosti newspaper - within 5 (Five) working days.

The announcement in Internet and in printed mass media shall be published after the publication in the news line.

13. The Issuer’s obligation to ensure rights of securities owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation:

The Issuer undertakes to ensure rights of the Notes owners in the course of exercising their rights in accordance with the procedures established by the Russian Federation legislation.

14. Obligations of the persons that provided surety on the notes supporting fulfillment of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety

The person that provided surety on the notes shall be responsible to ensure execution of the Issuer’s obligations to the notes owners in case of the Issuer’s default or delay of execution of the relevant obligations on the notes, as per the terms of the provided surety.

15. Other data required by Securities Issuance Standards and Securities Issuance Prospectus Standards

a) The Notes shall be accepted for free trade at stock exchanges and over-the-counter markets.

Non-residents shall be able to purchase the Notes in accordance with the Russian Federation legislation.

Sales and purchase deals of the Notes after completion of their placement shall be possible only after the date of state registration of the report on the Notes issue results, or after submission to the registering authority of a notice on the issue results if in accordance with Federal Law “On the Securities Market” or other federal laws the issue is executed without state registration of the report on the Notes issue results.

The Notes shall be traded over-the-counter without restrictions until the Notes maturity date.

The Notes shall be traded by stock exchanges with restrictions defined by securities market makers.

b) The procedures for defining the amount of accrued coupon income in the period of the Notes trade.

In any day between the opening date of the Notes placement and the redemption date the accrued coupon income (ACI) is computed with the following formula:

ACI = Cj * Nom * (T - T(j -1))/ 365/ 100 %, where

Nom — nominal value of one Note,

Cj — interest rate of “j” coupon period (in per cent annual),

j — sequential number of the coupon period, j=1...20,

T(j -1) - Opening date of the j coupon period,

T — current date.

ACI is computed to one kopeck, truncation of figures in the calculation is based on the rules of mathematical rounding.  The rules of mathematical rounding shall mean the method of rounding where the amount of equal kopeck(s) does not change if the first figure following the figure, which is rounded up is within the interval from 0 to 4, and increases for one, if the first figure following the figure, which is rounded up is within the interval from 5 to 9.

28

EX-4.12

Exhibit 4.12

THE FEDERAL SUPERVISORY SERVICE IN THE AREA OF COMMUNICATIONS AND MASS MEDIA

LICENCE

No. 61443

Licensee’ details:

Mobile TeleSystems

Open Joint Stock Company

Legal address (place of residence):

109147 Moscow, Marksistskaya St., 4

Service description:

Mobile Radiophone Communication Services

This Licence includes licence provisions on 3 pages

Effective period of Licence :	from April 28, 2008 to April 28, 2013
Date of beginning of services provision:	April 28, 2008
(on or prior to)

Deputy Manager,
Federal Supervisory Service in the
Area of Communications and
Mass Media	(stamp)	C.K. Sitnikov

Conditions for Performance of Activities

Under Licence No. 61443**

1.Mobile TeleSystems OJSC (the Licensee) shall be obliged to keep the term of this License.

2.The Licensee shall be obliged to commence the provision of services under this License on or prior to April 28, 2008.

3.The Licensee shall be obliged to provide mobile radiophone communication services (GSM 900/1800 networks) under this License in the territory of:

Republic:	Buryatiya, Sakha (Yakutia)
Territory:	Khabarovsk, Primorsky, Kamchatka, Zabaykalsky
Autonomous District:	Chukotsk
Autonomous Region:	Jewish
Regions:	Amur, Irkutsk, Magadan, Sakhalin

4.In accordance with this Licence, the Licensee shall be obliged to ensure that a subscriber is provided with*:

a)	an access to the Licensee’s network;
b)	connections in the Licensee’s mobile radiophone communication network for receiving (transferring) voice and non-voice information ensuring the communication continuity while providing services, irrespective of location of the subscriber, including while his/her moving;
c)	connections with subscribers and (or) users of fixed public-switched telephone networks;
d)	possibility of using GSM 900/1800 mobile radiophone communication network while being outside the territory specified in the License;
e)	an access to telematic communication services and data transmission services, except for data transmission for the purpose of voice data transfer;
f)	an access to call centre system;
g)	possibility of making free twenty-four-hour calls to emergency services.

5.The Licensee shall be obliged to provide communication services in accordance with the Rules of Provision of Communication Services approved by the Government of the Russian Federation.

6.While provisioning communication services, the Licensee shall be obliged to observe the Rules of Connection and Interaction of Electrical Communication Networks, approved by the Government of the Russian Federation, when connecting the Licensee’s mobile radiophone communication network to the public-switched network, connecting the Licensee’s mobile radiophone communication network to other communication networks, accounting and transferring the traffic in the Licensee’s mobile radiophone communication network, accounting and transferring the traffic from/to the communication networks of other operators.

7.This Licensee was issued based on results of considering the application for reissuance of Licence No. 56066 dated April 28, 2008 without tendering (auction, competition). The license requirements for the Licensee’s discharge of obligations, undertaken by the Licensee when participating in tenders (auction, competition) to obtain respective license, were not established.

8.The Licensee shall adhere to the conditions, as established at the moment of allocation of frequencies and assignment of a radio frequency or radio frequency channel, in the process of provision of services under this License.

9.The Licensee shall have available a system to manage own communication network that should conform to the standards applied to communication network management systems, as prescribed by the federal executive body acting in the communication field.

10.The Licensee shall be obliged to adhere to the requirements for networks and means of communication regarding the performance of investigative work, as prescribed by the federal executive body and approved by authorized state bodies which conduct operational-investigative activities, and to take measures to prevent the disclosure of organizational or tactical techniques of conducting of the above.

*The provision of services stipulated by this License can entail provisioning other services which are technically integrated into mobile radiophone services and are aimed at improvement of their customer value, provided no additional license is required for this purpose.

**This Licence was a reissuance of Licence No. 56066 dated April 28, 2008.

Deputy Manager,
Federal Supervisory Service in the
Area of Communications and
Mass Media	(stamp)	C.K. Sitnikov

EX-4.13

Exhibit 4.13

FEDERAL SUPERVISORY SERVICE FOR COMMUNICATIONS

LICENCE

No. 33911

Licensee’ details:

Mobile TeleSystems

Open Joint Stock Company

Legal address (place of residence):

109147 Moscow, Marksistskaya St., 4

Service description:

Mobile Radiophone Communication Services in Public Use Communication Network

This Licence includes licence provisions on 3 pages

Effective period of Licence :	from July 01, 2005 to July 01, 2010
Date of beginning of services provision:	July 01, 2005
(on or prior to)

Deputy Manager,

Federal Supervisory Service for Communications S. A. Malyanov

Conditions for Performance of Activities

Under Licence No. 33911**

1.            Mobile TeleSystems OJSC (the Licensee) shall be obliged to keep the term of this License.

2.            The Licensee shall be obliged to commence the provision of services under this License on or prior to July 01, 2005.

3.            The Licensee shall be obliged to provide mobile radiophone communication services (GSM 900/1800 networks) under this License in the territory of the Rostov Region.

4.            In accordance with this Licence, the Licensee shall be obliged to ensure that a subscriber is provided with*:

a) an access to the Licensee’s network;

b) connections in the Licensee’s mobile radiophone communication network for receiving (transferring) voice and non-voice information ensuring the communication continuity while providing services, irrespective of location of the subscriber, including while his/her moving;

c) connections with subscribers and (or) users of fixed public-switched telephone networks;

d) possibility of using GSM 900/1800 mobile radiophone communication network while being outside the territory specified in the License;

e) an access to telematic communication services and data transmission services, except for data transmission for the purpose of voice data transfer;

f) an access to call centre system;

g) possibility of making free twenty-four-hour calls to emergency services.

5.            The Licensee shall be obliged to provide communication services in accordance with the Rules of Provision of Communication Services approved by the Government of the Russian Federation.

6.            While provisioning communication services, the Licensee shall be obliged to observe the Rules of Connection and Interaction of Electrical Communication Networks, approved by the Government of the Russian Federation, when connecting the Licensee’s mobile radiophone communication network to the public-switched network, connecting the Licensee’s mobile radiophone communication network to other communication networks, accounting and transferring the traffic in the Licensee’s mobile radiophone communication network, accounting and transferring the traffic from/to the communication networks of other operators.

7.            This Licensee was issued based on results of considering the application for reissuance of Licence No. 31795 dated July 01, 2005 without tendering (auction, competition). The license requirements for the Licensee’s discharge of obligations, undertaken by the Licensee when participating in tenders (auction, competition) to obtain respective license, were not established.

8.            The Licensee shall adhere to the conditions, as established at the moment of allocation of frequencies and assignment of a radio frequency or radio frequency channel, in the process of provision of services under this License.

9.            The Licensee shall have available a system to manage own communication network that should conform to the standards applied to communication network management systems, as prescribed by the federal executive body acting in the communication field.

10.          The Licensee shall be obliged to adhere to the requirements for networks and means of communication regarding the performance of investigative work, as prescribed by the federal executive body and approved by authorized state bodies which conduct operational-investigative activities, and to take measures to prevent the disclosure of organizational or tactical techniques of conducting of the above.

*             The provision of services stipulated by this License can entail provisioning other services which are technically integrated into mobile radiophone services and are aimed at improvement of their customer value, provided no additional license is required for this purpose.

**           This Licence a reissuance of Licence No. 31795 dated July 01, 2005.

Deputy Manager,
Federal Supervisory Service for Communications	(stamp)	S. A. Malyanov

EX-4.14

Exhibit 4.14

THE FEDERAL SUPERVISORY SERVICE FOR MASS MEDIA, COMMUNICATION

AND PROTECTION OF CULTURAL HERITAGE

LICENCE

No. 58749

Licensee’ details:

Mobile TeleSystems

Open Joint Stock Company

Legal address (place of residence):

109147 Moscow, Marksistskaya St., 4

Service description:

Mobile Radiophone Communication Services

This Licence includes licence provisions on 2 pages

Effective period of Licence:	from May 07, 2008 to May 07, 2013
Date of beginning of services provision:	May 07, 2010
(on or prior to)
Head of Permissive Activities Department	A.A. Pankov
In the Area of Communications

Conditions for Performance of Activities

Under Licence No. 58749

1.     Mobile TeleSystems OJSC (the Licensee) shall be obliged to keep the term of this License.

2.     The Licensee shall be obliged to commence the provision of services under this License on or prior to May 07, 2010.

3.     The Licensee shall be obliged to provide mobile radiophone communication services (GSM 900/1800 networks) under this License in the territory of Krasnoyarsk region.

4.     In accordance with this Licence, the Licensee shall be obliged to ensure that a subscriber is provided with*:

a)	an access to the Licensee’s network;
b)	connections in the Licensee’s mobile radiophone communication network for receiving (transferring) voice and non-voice information ensuring the communication continuity while providing services, irrespective of location of the subscriber, including while his/her moving;
c)	connections with subscribers and (or) users of fixed public-switched telephone networks;
d)	possibility of using GSM 900/1800 mobile radiophone communication network while being outside the territory specified in the License;
e)	an access to telematic communication services and data transmission services, except for data transmission for the purpose of voice data transfer;
f)	an access to call centre system;
g)	possibility of making free twenty-four-hour calls to emergency services.

5.      The Licensee shall be obliged to provide communication services in accordance with the Rules of Provision of Communication Services approved by the Government of the Russian Federation.

6.      While provisioning communication services, the Licensee shall be obliged to observe the Rules of Connection and Interaction of Electrical Communication Networks, approved by the Government of the Russian Federation, when connecting the Licensee’s mobile radiophone communication network to the public-switched network, connecting the Licensee’s mobile radiophone communication network to other communication networks, accounting and transferring the traffic in the Licensee’s mobile radiophone communication network, accounting and transferring the traffic from/to the communication networks of other operators.

7.      This Licensee was issued based on results of considering the application for the issuance of Licence without tendering (auction, competition). The license requirements for the Licensee’s discharge of obligations, undertaken by the Licensee when participating in tenders (auction, competition) to obtain respective license, were not established.

8.      The Licensee shall adhere to the conditions, as established at the moment of allocation of frequencies and assignment of a radio frequency or radio frequency channel, in the process of provision of services under this License.

9.      The Licensee shall have available a system to manage own communication network that should conform to the standards applied to communication network management systems, as prescribed by the federal executive body acting in the communication field.

10.    The Licensee shall be obliged to adhere to the requirements for networks and means of communication regarding the performance of investigative work, as prescribed by the federal executive body and approved by authorized state bodies which conduct operational-investigative activities, and to take measures to prevent the disclosure of organizational or tactical techniques of conducting of the above.

*             The provision of services stipulated by this License can entail provisioning other services which are technically integrated into mobile radiophone services and are aimed at improvement of their customer value, provided no additional license is required for this purpose.

Head of Permissive Activities Department	(stamp)	A.A. Pankov
In the Area of Communications

EX-8.1

Exhibit 8.1

Subsidiary		Country of Incorporation
1.	MTS Finance	Luxembourg
2.	MTS-Capital	Russia
3.	UMC	Ukraine
4.	MTS-Kostroma	Russia
5.	Uzdunrobita	Uzbekistan
6.	Sibintertelecom	Russia
7.	BCTI	USA
8.	Sweet-Com	Russia
9.	MTS-Bermuda	Bermuda
10.	Dagtelecom	Russia
11.	K-Telekom	Armenia
12.	Bashcell	Russia
13.	MTS Belarus	Belarus
14.	TS-Retail	Russia
15.	Coral/Sistema Strategic Fund	USA

EX-12.1

Exhibit 12.1

I, Mikhail V. Shamolin, certify that:

1.I have reviewed this annual report on Form 20-F of Mobile TeleSystems OJSC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 26, 2009	/s/ MIKHAIL V. SHAMOLIN
	Mikhail V. Shamolin
	Chief Executive Officer

EX-12.2

Exhibit 12.2

I, Alexey V. Kornya, certify that:

1.I have reviewed this annual report on Form 20-F of Mobile TeleSystems OJSC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 26, 2009	/s/ ALEXEY V. KORNYA
	Alexey V. Kornya
	Acting Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION PURSUANT TO

SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mobile TeleSystems OJSC (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 26, 2009	/s/ MIKHAIL V. SHAMOLIN
	Mikhail V. Shamolin
	Chief Executive Officer

EX-13.2

Exhibit 13.2

CERTIFICATION PURSUANT TO

SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mobile TeleSystems OJSC (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 26, 2009	/s/ Alexey V. Kornya
	Alexey V. Kornya
	Acting Chief Financial Officer