20-F

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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, 2011
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, Investor Relations
Mobile TeleSystems OJSC
5 Vorontsovskaya 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 2 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 1,988,916,837 ordinary shares, par value 0.10 Russian rubles each and 388,698,252 American Depositary Shares as of December 31, 2011.

            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

            Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

            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: ý    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	Other o
	the International Accounting Standards Board 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	8
C.	Reasons for the Offer and Use of Proceeds	8
D.	Risk Factors	8
Item 4.	Information on Our Company	66
A.	History and Development	66
B.	Business Overview	70
C.	Organizational Structure	133
D.	Property, Plant and Equipment	133
Item 4A.	Unresolved Staff Comments	134
Item 5.	Operating and Financial Review and Prospects	134
A.	Operating results	135
B.	Liquidity and Capital Resources	159
C.	Research and Development, Patents and Licenses, etc.	169
D.	Trend Information	169
E.	Off-balance Sheet Arrangements	171
F.	Tabular Disclosure of Contractual Obligations	172
Item 6.	Directors, Senior Management and Employees	173
A.	Directors and Senior Management Key Biographies	173
B.	Compensation of Directors and Senior Management	176
C.	Board Practices	177
D.	Employees	179
E.	Share Ownership	180
Item 7.	Major Shareholders and Related Party Transactions	181
A.	Major Shareholders	181
B.	Related Party Transactions	182
C.	Interests of Experts and Counsel	186
Item 8.	Financial Information	186
A.	Consolidated Statements and Other Financial Information	186
B.	Significant Changes	192
Item 9.	Offer and Listing Details	192
A.4.	Market Price Information	192
C.	Markets	193
Item 10.	Additional Information	193
A.	Share Capital	193
B.	Charter and Certain Requirements of Russian Legislation	193
C.	Material Contracts	209
D.	Exchange Controls	213
E.	Taxation	214
F.	Dividends and Paying Agents	223
G.	Statement by Experts	223
H.	Documents on Display	223
I.	Subsidiary Information	223
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	223
Item 12.	Description of Securities Other Than Equity Securities	228

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D.	American Depositary Shares	228
Item 13.	Defaults, Dividend Arrearages and Delinquencies	232
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	232
Item 15.	Controls and Procedures	232
Item 16A.	Audit Committee Financial Expert	234
Item 16B.	Code of Ethics	234
Item 16C.	Principal Accountant Fees and Services	234
Item 16D.	Exemption from the Listing Standards for Audit Committees	235
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	236
Item 16F.	Change in Registrant's Certifying Accountant	237
Item 16G.	Corporate Governance	237
Item 17.	Financial Statements	239
Item 18.	Financial Statements	239
Item 19.	Exhibits	241

        Unless otherwise indicated or unless the context requires otherwise, references in this document to (i) "MTS," "the Group," "we," "us," or "our" refer to Mobile TeleSystems OJSC and its subsidiaries; (ii) "MTS Ukraine" is to MTS Ukraine Private Joint Stock Company (formerly CJSC Ukrainian Mobile Communications), our Ukrainian subsidiary; (iii) "MTS-Uzbekistan" is to Uzdunrobita, our Uzbekistan subsidiary; (iv) "MTS-Turkmenistan" and "BCTI" are to Barash Communication Technologies, Inc., our Turkmenistan subsidiary; (v) "Comstar" or "Comstar-UTS" are to COMSTAR—United TeleSystems, our fixed line subsidiary, which was merged into us in 2011; (vi) "MGTS" is to Moscow City Telephone Network, our Moscow public switched telephone network ("PSTN") fixed line subsidiary; and (vii) "K-Telecom" or "VivaCell-MTS" are to K-Telecom CJSC, our Armenian subsidiary; and (viii) "Sistema" is to Joint-Stock Financial Corporation Sistema, our majority shareholder. We refer to Mobile TeleSystems LLC, our 49% owned equity investee 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 ("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 "RUB" 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, "dram" 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 two ordinary shares, and "ADRs" refers to the American depositary receipts that evidence our ADSs. Prior to May 3, 2010, each ADS represented five ordinary shares of our common stock. "CIS" refers to the Commonwealth of Independent States.

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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 (the "U.S. Securities Act"), and Section 21E of the U.S. Securities Exchange Act of 1934 (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.

        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

1

discussed 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 countries, 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 (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.

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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, 2009, 2010 and 2011, and as of December 31, 2009, 2010 and 2011, are derived from the audited consolidated financial statements, prepared in accordance with U.S. GAAP included elsewhere 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, other than with respect to our acquisition of certain subsidiaries of Sistema, as further described below.

        In October 2009, we acquired a 50.91% stake in Comstar, a provider of fixed line communication services in Russia, Ukraine and Armenia, from Sistema for RUB 39.15 billion ($1.32 billion as of October 12, 2009). We subsequently increased our ownership stake in Comstar to 61.97% in December 2009 and to 70.97% in September 2010 through a voluntary tender offer. On December 23, 2010, the extraordinary general meetings of shareholders of Comstar and MTS approved a merger of Comstar and us. On March 10, 2011, we completed a share buyback as part of the reorganization of MTS and on April 1, 2011 the merger was completed. A total of 8,000 MTS ordinary shares representing 0.0004% of our issued share capital were repurchased in the buyback for RUB 1.96 million ($70,000 as of March 31, 2011). The buyback price was set at RUB 245.19 ($8.62 as of March 31, 2011) per one MTS ordinary share. In addition, a total of 22,483,791 Comstar ordinary shares representing 5.38% of the Comstar issued share capital were repurchased for RUB 4.8 billion ($168.3 million as of March 31, 2011). The buyback price was set at RUB 212.85 ($7.49 as of March 31, 2011) per one Comstar ordinary share. The remaining 98,853,996 Comstar ordinary shares were converted into MTS ordinary shares at an exchange ratio of 0.825 MTS ordinary shares for each Comstar ordinary share. See "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Acquisitions."

        In August 2010, we acquired a 95% ownership interest in Metro-Telecom, a company which owns a fiber optic network located in the Moscow metro, from Invest-Svyaz CJSC, a wholly owned subsidiary of Sistema, for RUB 339.35 million ($11.01 million as of August 27, 2010).

        In June 2010, we acquired a 15% ownership interest in TS-Retail OJSC ("TS-Retail") from Sistema for one US dollar consequently increasing our effective ownership interest in TS-Retail to 49.6%. We subsequently increased our effective ownership interest in TS-Retail to 50.95%, which was achieved through a voluntary tender offer to purchase Comstar's shares in September 2010.

        In December 2010, we acquired a 100% ownership stake in Sistema Telecom, a subsidiary of Sistema which owns the egg-shaped logos each of the telecommunications companies operating within the Sistema group uses, including us, and a 45% ownership stake in TS-Retail, from Sistema for RUB 11.59 billion ($378.98 million as of December 27, 2010). As a result of this acquisition and the completion of our merger with Comstar on April 1, 2011, we currently own a 100% stake in TS-Retail.

        As we, Comstar, TS-Retail, Sistema Telecom and Metro-Telecom were under the common control of Sistema, our acquisition of majority stakes in these companies has been treated as a combination of entities under common control and accounted for in a manner similar to a pooling-of-interests, i.e., the assets and liabilities acquired were recorded at their historical carrying value and the consolidated

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financial statements were retroactively restated to reflect the Group as if these companies had been owned since the beginning of the earliest period presented. Accordingly, the financial data presented below for the years ended December 31, 2008 and 2009, the financial years preceding the acquisitions, have been restated to include the financial position and results of operations of the companies acquired from Sistema as if the acquisitions had occurred as of January 1, 2008, and the financial data for the years ended December 31, 2009 and 2010 includes the financial position and results of operations of Comstar, TS-Retail, Sistema Telecom and Metro-Telecom for the full year. See Notes 2 and 3 to our audited consolidated financial statements.

        Financial information for the year ended December 31, 2007, is restated to reflect the acquisition of Comstar.

        The selected 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,
	2007 (restated, other than industry and operating data)			2008 (restated, other than industry and operating data)		2009 (restated, other than industry and operating data)		2010			2011
	(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Consolidated statements of operations data:
Service revenues and connection fees	$	9,634,698		$	11,836,158	$	9,513,353	$	10,586,068		$	11,430,377
Sales of handsets and accessories		89,208			156,465		353,900		707,168			888,311
Total net operating revenues		9,723,906			11,992,623		9,867,253		11,293,236			12,318,688
Operating expenses:
Cost of services, excluding depreciation and amortization shown separately below		1,863,797			2,451,978		2,011,332		2,260,888			2,633,434
Cost of handsets and accessories		158,848			229,992		375,444		727,683			902,692
Sales and marketing expenses		775,240			908,824		728,483		850,584			878,222
Depreciation and amortization expense		1,674,885			2,153,077		1,844,174		2,000,496			2,335,204
Sundry operating expenses(1)		2,066,208			2,621,506		2,351,935		2,719,027			2,760,251
Net operating income		3,184,928			3,627,246		2,555,885		2,734,559			2,808,885
Currency exchange and transaction (gain)/loss		(161,856	)		561,963		252,694		(20,238	)		158,066

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	Years Ended December 31,
	2007 (restated, other than industry and operating data)			2008 (restated, other than industry and operating data)			2009 (restated, other than industry and operating data)			2010			2011
	(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Other (income) expenses:
Interest income		(53,507	)		(69,697	)		(104,566	)		(84,396	)		(62,559	)
Interest expense, net of capitalized interest		192,237			234,424			571,901			777,287			656,898
Equity in net income of associates		(71,116	)		(75,688	)		(60,313	)		(70,649	)		(49,443	)
Impairment of investments		22,691			—			368,355			—			—
Change in fair value of derivatives		145,860			41,554			5,420			—			—
Other expenses, net		38,781			29,090			23,254			66,924			6,571
Total other expenses, net		274,946			159,683			804,051			689,166			551,467
Income before provision for income taxes and noncontrolling interests		3,071,838			2,905,600			1,499,140			2,065,631			2,099,352
Provision for income taxes		852,015			744,320			505,047			517,188			531,620
Net income (loss) attributable to the noncontrolling interest	$	132,408		$	182,173		$	(20,110	)	$	167,812		$	123,788
Net income attributable to the Group		2,087,415			1,979,107			1,014,203			1,380,631			1,443,944
Dividends declared(2)	$	747,213		$	1,257,453		$	1,265,544		$	991,211		$	1,066,753
Net income per share, basic and diluted, US dollars		1.06			1.05			0.54			0.72			0.73
Dividends declared per share, US dollars		0.38			0.63			0.65			0.50			0.52
Dividends declared per share, rubles		9.67			14.84			20.15			15.40			14.54
Number of common shares outstanding		1,960,849,301			1,885,052,800			1,916,869,262			1,916,869,262			1,988,916,837
Weighted average number of common shares outstanding—basic		1,973,354,348			1,921,934,091			1,885,750,147			1,916,869,262			1,970,953,129
Weighted average number of common shares outstanding—diluted		1,974,074,908			1,921,934,091			1,885,750,147			1,916,869,262			1,970,953,129

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	Years Ended December 31,
	2007 (restated, other than industry and operating data)			2008 (restated, other than industry and operating data)			2009 (restated, other than industry and operating data)			2010			2011
	(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Consolidated statement of cash flows data:
Cash provided by operating activities	$	3,851,372		$	5,027,000		$	3,592,230		$	3,617,170		$	3,849,005
Cash used in investing activities		(3,247,320	)		(2,698,386			(2,372,171	)		(2,181,627	)		(2,555,039	)
(of which capital expenditures)(3)		(1,898,972	)		(2,612,825	)		(2,328,309	)		(2,647,117	)		(2,584,466	)
Cash (used in)/provided by financing activities		(258,069	)		(1,679,647	)		130,949			(3,036,442	)		(270,308	)
Consolidated statement of financial position (end of period):
Cash, cash equivalents and short-term investments	$	1,267,413		$	1,499,531		$	2,735,480		$	1,261,288		$	1,937,068
Property, plant and equipment, net		8,566,744			7,765,873			7,750,617			7,971,830			8,205,352
Total assets		15,874,942			14,737,318			15,764,489			14,478,042			15,318,229
Total debt (long-term and short-term)(4)		4,529,374			5,394,852			8,350,244			7,160,612			8,715,203
Total shareholders' equity		8,339,558			6,194,864			4,365,711			4,156,803			3,570,623
Common stock less treasury stock		(317,794	)		(1,376,195	)		(1,004,368	)		(1,004,368	)		(941,327	)
Financial ratios (end of period):
Total debt/total capitalization(5)		35.2%			46.5%			65.7%			63.3%			70.9%
Mobile industry and operating data:(6)
Mobile penetration in Russia (end of period)		119%			129%			143%			151%			157%
Mobile penetration in Ukraine (end of period)		120%			121%			121%			118%			118%
Mobile subscribers in Russia (end of period, thousands)(7)		57,426			64,628			69,342			71,442			69,954
Mobile subscribers in Ukraine (end of period, thousands)(7)		20,004			18,115			17,564			18,240			19,223

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	Years Ended December 31,
	2007 (restated, other than industry and operating data)		2008 (restated, other than industry and operating data)		2009 (restated, other than industry and operating data)		2010		2011
	(Amounts in thousands of U.S. dollars, except share and per share amounts, industry and operating data and ratios)
Overall market share in Russia (end of period)		33%		34%		33%		33%		31%
Overall market share in Ukraine (end of period)		36%		32%		32%		34%		36%
Average monthly usage per subscriber in Russia (minutes)(8)		157		208		213		234		269
Average monthly usage per subscriber in Ukraine (minutes)(8)		154		279		462		535		580
Average monthly service revenue per subscriber in Russia(9)	$	9	$	11	$	8	$	8	$	9
Average monthly service revenue per subscriber in Ukraine(9)	$	7	$	7	$	5	$	5	$	5
Subscriber acquisition costs in Ukraine(10)	$	12	$	11	$	7	$	8	$	8
Churn in Russia(11)		23.1%		27.0%		38.3%		45.9%		47.6%
Churn in Ukraine(11)		49.0%		47.3%		40.0%		31.0%		30.7%

(1)

"Sundry operating expenses" consist of general and administrative expenses, provision for doubtful accounts, impairment of long-lived assets and goodwill 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, 2007, 2008, 2009, 2010 and 2011 were, in each case, in respect of the prior fiscal year (i.e., in respect of each of the years ended December 31, 2006, 2007, 2008, 2009 and 2010, respectively). Includes dividends on treasury shares of $6.0 million, $36.5 million, $45.6 million, $35.1 million and $40.0 million for the years ended December 31, 2006, 2007, 2008, 2009, and 2010, respectively. Annual dividends are calculated at the exchange rate on the date when dividends are declared at the Annual General Meeting of Shareholders. On April 12, 2012, our Board of Directors recommended that the Annual General Meeting of Shareholders approve annual dividends of RUB 14.71 per ordinary MTS share (approximately $1.01 per ADS as of March 23, 2012) for the 2011 fiscal year, amounting to a total of RUB 30.4 billion (approximately $1.04 billion as of March 23, 2012).

(3)

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

(4)

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

(5)

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."

(6)

Source: AC&M-Consulting and our data. Operating data is presented for mobile operations only. None of this data is derived from our audited consolidated financial statements.

(7)

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.

(8)

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.

(9)

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

7

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, 2007, 2008, 2009, 2010 and 2011 presented in this table are based on our current calculation methodology.

(10)

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. In Russia, it is impracticable to calculate subscriber acquisition costs for the period as we now have the mobile and fixed line parts of the business combined in one reportable segment, "Russia."

(11)

We define our churn as the total number of subscribers who cease to be a subscriber (see footnote 7 above for the definition of 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.

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, Turkmenistan, Kyrgyzstan, Uzbekistan 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. Global financial or economic crises or even financial turmoil in any large emerging market country tend to adversely affect prices in equity markets of most or all emerging market countries as investors move their money to more stable, developed markets. Beginning in the second half of 2008, the Russian equity markets have been highly volatile, principally due to the impact of the global financial and economic crisis on the Russian economy. Such volatility has caused market regulators to temporarily suspend trading on the Moscow Interbank Currency Exchange ("MICEX") and the Russian Trading System ("RTS") multiple times. MICEX and RTS stock market indices have experienced significant overall declines since their peaks in May 2008. In December 2011, MICEX and RTS merged and now comprise the largest stock exchange in Russia, MICEX-RTS ("MICEX-RTS"). 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 and adversely affect the Russian economy. In addition, during such times, businesses that operate in emerging markets can face severe liquidity constraints as funding sources are withdrawn. Furthermore, 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. See also "—Legal Risks and Uncertainties—Our dispute with Nomihold Securities Inc. concerning Bitel has resulted in a final arbitral award against us of $175.9 million plus $34.9 million of

8

interest and related costs, and our inability to gain operational control over Bitel has prevented us from realizing the expected benefits of this acquisition and resulted in our write off of the costs relating to the purchase of Bitel," and "—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations." 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

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 in 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 Wi-Fi, Worldwide Inter-operability for Microwave Access ("Wi-Max"), Enhanced Data Rates for Global Evolution ("EDGE"), Universal Mobile Telecommunications System ("UMTS"), and Long Term Evolution ("LTE"), as well as 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.

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, where mobile penetration exceeds 100%. We also face increased competition in our fixed line business, where the market for alternative fixed line communications services in Russia is rapidly evolving and becoming increasingly competitive. Competition is generally based on price, product functionality, range of service offerings and customer service.

        Our principal wireless competitors in Russia are Open Joint Stock Company "Vimpel Communications," or Vimpelcom, and Open Joint Stock Company MegaFon ("MegaFon"). We also face competition from several regional operators and Tele2, which has entered the market in several regions with aggressive pricing. In addition, on April 1, 2011, the Russian government completed the reorganization of state-controlled telecommunications companies Svyazinvest Telecommunications Investment Joint Stock Company ("Svyazinvest"), and Open Joint Stock Company Long-Distance and International Telecommunications Rostelecom ("Rostelecom"). As a result, Rostelecom is currently the largest fixed-line operator and fourth largest mobile operator in Russia.

9

        In November 2009, a non-binding memorandum of understanding was signed by Sistema, Comstar and Svyazinvest contemplating an exchange of certain telecommunication assets. The transaction was completed in October 2010 and included, among other things, the entry by Sistema and Svyazinvest into an exchange transaction, upon completion of which, Svyazinvest obtained control over 100% of the share capital in Sky Link, Sistema acquired the 23.33% stake in MGTS controlled by Svyazinvest and Comstar transferred 25% plus 1 share in Svyazinvest to Rostelecom for cash consideration of 26 billion rubles. Sky Link is a Moscow-based code division multiple access ("CDMA") operator holding GSM licenses for a majority of Russian regions. In May 2011, Rostelecom announced its plans to acquire Sky Link and in November 2011 the Federal Antimonopoly Service ("FAS") approved the acquisition. In addition, Rostelecom won tenders for 39 out of 40 licenses to provide fourth-generation ("4G") wireless services within the 2.3-2.4 GHz frequency band and in November 2011 received permission from the Ministry of Defense to use the allotted frequencies for the creation of a 4G network.

        According to Direct INFO, Rostelecom controls over 76% of all fixed line telecommunications services in Russia. The emergence of Rostelecom as an integrated nationwide provider of fixed line local and long distance communications services and mobile communications services may significantly increase competition in our markets. Moreover, any new mobile operator formed within the new state-controlled group may receive favorable pricing terms for interconnect from the regional fixed line operators within the group, putting us at a competitive disadvantage. See also "—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."

        Of the telecommunication services we provide, broadband Internet access is among the most competitive. While the Moscow and St. Petersburg markets have become mature in recent years (more than 70% of the market is controlled by the five largest companies), regional markets are in the most active phase of market formation, and it is expected that regional markets will follow the same trend as the Moscow and St. Petersburg markets in the coming years, with competition in these markets becoming extremely intense. If we fail to obtain and preserve a substantial share of the broadband Internet access market, our business, financial condition, results of operations or prospects or the value of the Shares and ADRs may be materially adversely affected.

        In addition, we believe that Rostelecom, as a state-controlled company, is currently able to influence telecommunications policy and regulation in Russia and may cause substantial increases in interconnect rates for access to fixed line operators' networks by mobile cellular operators. Similarly, Rostelecom 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 may materially adversely affect our business, financial condition and results of operations.

        Competition in the Ukrainian wireless telecommunications market has significantly intensified over the last several years. In October 2010, the Antimonopoly Committee of Ukraine (the "AMC"), approved the merger of Kyivstar, our primary mobile competitor in Ukraine, with URS, Ukrainian mobile operator controlled by Vimpelcom, in connection with Vimpelcom's restructuring. We expect that the full integration of these companies will be completed by 2013. Currently, however, it is not clear how the Vimpelcom restructuring in Ukraine will affect our operations. Aggressive pricing by our competitors in Ukraine, driven primarily by Astelit, has also driven down the overall average price per minute levels significantly in Ukraine since 2006. Furthermore, we face increasing competition and aggressive pricing in Belarus from Best CJSC, a subsidiary of System Capital Management and Turkcell Iletisim Hizmetleri A.S. ("Turkcell") operating in Belarus under the "life:)" brand.

        In 2011, the government of Belarus announced its intention to hold a public tender to privatize a 51% ownership interest in MTS Belarus with an opening price of $1.0 billion. The public tender was scheduled to be held on December 23, 2011, but was cancelled due to a lack of bidders, and is now expected to be held by the State Property Committee of Belarus in 2012. If we are unable to acquire this ownership interest at a commercially reasonable price, or if it is acquired by one of our

10

competitors, it may impact our competitive position and results of operations in Belarus. In addition, Belarus is undergoing a balance of payments crisis which resulted from large government-mandated lending by local banks, rapid growth of public sector wages and pensions, and loose monetary policy. Furthermore, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary, and we have accordingly accounted for this in our financial statements. See Note 2 to our audited consolidated financial statements. It is possible that the use of administrative methods by the Belarusian government to regulate the currency and consumer markets may lead to an aggravation of the crisis. As a result, our business, financial condition and results of operations could be materially adversely affected. See also "—Risks Relating to Our Financial Condition—Inflation could increase our costs and adversely affect our results of operations."

        We also face competition in Armenia and Uzbekistan. In 2009, France Telecom operating under the Orange brand entered the Armenian telecommunications market and began offering voice and data transmission services, as well as mobile phones at highly competitive prices. The Uzbekistan telecommunications market can also be characterized by aggressive pricing by our competitors, Vimpelcom and Ucell, as well as by a rapidly developing market for mobile Internet services and the existence of various administrative barriers that make working in Uzbekistan challenging.

        Increased competition, including from the potential entry of new mobile operators, government-backed operators, mobile virtual network operators and alternative fixed line operators in the markets where we operate, as well as the strengthening of existing operators and increased use of Internet protocol telephony, may adversely affect our ability to increase the number of subscribers and could result in reduced operating margins and a loss of market share, as well as different pricing, service or marketing policies, and have a material adverse effect on our business, financial condition and results of operations.

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

        We are controlled by Sistema, which owns 50.8% of our total charter capital (52.8% excluding treasury shares). If not otherwise required by Russian law and/or our charter, resolutions at a shareholders' meeting are adopted by a simple majority in a meeting at which shareholders holding more than half of the issued share capital are present or 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, Sistema 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 security holders. 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. As of December 31, 2011, Sistema had consolidated indebtedness of approximately $0.3 billion of short-term debt, $4.1 billion comprising the short-term portion of its long-term debt, and $12.0 billion of long-term debt (net of the short-term portion). At the corporate level, Sistema had $9.3 million of short-term debt, $682.3 million comprising the short-term portion of its long-term debt, and $555.2 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.

11

        Sistema voted in favor of declaring dividends of $747.2 million in 2007 for 2006, $1,257.5 million in 2008 for 2007, $1,265.5 million in 2009 for 2008, $991.2 million in 2010 for 2009 and $1,066.8 million in 2011 for 2010. Annual dividends are calculated at the exchange rate on the date when dividends are declared at the Annual General Meeting of Shareholders. 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. Furthermore, our credit ratings can be and have been affected in the past by Sistema's activity and credit ratings.

Failure to effectively implement 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 in both the mobile and fixed broadband segments. These acquisitions may occur in countries that 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.

        For example, see "—Legal Risks and Uncertainties—Our dispute with Nomihold Securities Inc. concerning Bitel has resulted in a final arbitral award against us of $175.9 million plus $34.9 million of interest and related costs, and our inability to gain operational control over Bitel has prevented us from realizing the expected benefits of this acquisition and resulted in our write off of the costs relating to the purchase of Bitel," and "—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations."

        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.

Acquisitions and mergers may pose significant risks to our business.

        We have expanded our business through several acquisitions. 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.

        Prior to 2009, most of our acquisitions were of regional operators with a focus on expanding our network and subscriber footprint. In 2009 and 2010, our acquisitions focus shifted to dealer acquisitions in furtherance of our effort to develop our distribution network, and to the acquisitions of Comstar and regional cable TV and broadband providers in furtherance of our strategy to become a provider of integrated telecommunications services. In 2010, we also acquired Sistema Telecom in order to obtain full control over our logos. These and other business combinations entail a number of risks that could

12

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 businesses and markets in which we lack experience, including political, economic, social, legal and regulatory risks and uncertainties;

•

more onerous government regulation;

•

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 2009, for example, we had write downs of $349.4 million related to Comstar's investment in Svyazinvest, the government-controlled holding for fixed line telephone companies, which contributed to our loss in the fourth quarter of 2009.

        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 is structured as a merger with another company, or we merge with or absorb a company subsequent to its acquisition by us, such a merger would be considered a corporate reorganization under Russian law. In turn, this would provide our creditors with a statutory-based right to file a claim seeking to accelerate their claims or terminate the respective obligations, as well as seek damages. To prevail, the creditors would need to prove in court that we will not perform our obligations in due course and the amount of damages suffered. Secured creditors would be required to further prove that the security provided by us, our shareholders or third parties is not sufficient to secure our obligations. Creditors whose claims are secured by pledge do not have the right to claim additional security.

        In addition, a merger, as well as any 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 reorganization or 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."

Difficulties integrating the operations of Comstar with our existing operations may prevent us from achieving the expected benefits from the acquisition.

        In October 2009, we acquired a 50.91% stake in Comstar, a leading fixed line operator in Russia, from Sistema, and subsequently increased our ownership interest to 61.97% (or 64.03% excluding treasury shares) in December 2009 and to 70.97% (or 73.33% excluding treasury shares) in September

13

2010 through a voluntary tender offer. On December 23, 2010, the extraordinary general meetings of shareholders of Comstar and MTS approved a merger of Comstar and us, which was completed on April 1, 2011. As a result, Comstar ceased to exist as a separate legal entity and we became the legal successor of Comstar in respect of all its rights and obligations.

        We merged with Comstar in furtherance of our strategy to become a full service provider of integrated telecommunications services and strengthen our position in the growing fixed and mobile broadband markets. This strategy is premised on our belief that consumer Internet use in our markets will continue to rapidly grow, the mobile and fixed line assets of MTS and Comstar are complementary, and the combination of our respective telecommunications assets will enable us to develop and provide bundled telecommunications services and take advantage of cross-selling opportunities. If any of these assumptions are incorrect or if we are unable to effectively execute our strategy, the return on our substantial investment in Comstar may not materialize and our business, financial condition and results of operations and prospects would be materially adversely affected.

        In addition, our management will be required to devote substantial time and resources over the next several years to integrating the operations of Comstar and MTS, which will decrease the time that they are able to devote to managing the combined company's business. Additionally, we will depend to a significant extent upon the continued performance and contributions of individuals who formerly served in senior management positions at Comstar, as we have little or, in some cases, no experience providing certain services that were offered by Comstar.

        Although a large part of Comstar operations has now been integrated, this process is still ongoing and the completion of this integration into MTS may require significant time and resources. Our inability to integrate successfully Comstar's operations into us could have a material adverse effect on our business, financial condition, results of operations and prospects. See also "—Acquisitions and mergers may pose significant risks to our business" and "Item 4. Information on Our Company— B. Business Overview—Business Strategy."

If our purchase of Ukrainian Mobile Communications ("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 ("Ukrtelecom") of its 51% stake in UMC to us. The complaint also sought an order prohibiting us from alienating our 51% 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

14

applicable to the sale by Ukrtelecom of the UMC shares, and does not preclude the challenging of such sale in the commercial courts of Ukraine.

        If the Constitutional Court of Ukraine rules 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 at a 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.

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

        Our ability to increase our subscriber base depends upon the success of our network expansion. We have expended considerable amounts of resources to enable both organic expansion and expansion through acquisitions and plan to continue to do so. 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 may not be able to integrate previous or future acquisitions successfully or operate them profitably. 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.

        The build-out 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. We are also required to receive permits for the operation of telecommunications equipment as well as governmental certification and/or permission for the import and export of certain network equipment, which can result in procurement delays and slow network development. The failure of any equipment we use to receive timely certification or re-certification could hinder our expansion plans.

        For example, the import and export of products containing cryptographic hardware is subject to special documentation requirements and approvals. As telecommunication networks comprise various components with cryptographic hardware, we must comply with these requirements in order to import such components. Moreover, where imported equipment does not contain cryptographic hardware, the federal customs service requires manufacturers to provide written confirmation regarding the absence of such hardware. The range of goods requiring the provision of "certificates of conformance" by suppliers and manufactures prior to their import into Russia has also been expanded to cover most of our key network components, and imported radioelectronic equipment is required to be licensed by the Russian Ministry of Industry and Trade. Similar requirements regarding the import and export of cryptographic hardware exist in Ukraine.

        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. See also "—Risks Relating to Our Financial Condition—If we are unable to obtain adequate capital, we may

15

have to limit our operations substantially, which could have a material adverse effect on our business, financial condition, results of operations and prospects."

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 156.8% and 117.6%, respectively, as of December 31, 2011, 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 competitive services, including value-added, third-generation ("3G"), Internet, 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.

The reduction, consolidation or acquisition of independent dealers and our failure to 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 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 of Vimpelcom's services over ours at Euroset outlets, notwithstanding these regulatory prohibitions. In addition, Euroset has recently launched an aggressive campaign to acquire retail outlets which belong to Svyaznoy, a large independent nationwide dealer in Russia. Although we continue to work with Euroset, our ability to attract new customers through Euroset outlets may be limited. If Euroset continues to expand its footprint in Russia through the acquisition of Svyaznoy's operations, our opportunities for marketing our services may be restricted. See "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information— 7. Litigation." As a result, we accelerated the development of our proprietary distribution network and have been working to increase our relationship with small regional dealers following Vimpelcom's acquisition of its stake in Euroset and in view of the deteriorating financial condition of many nationwide dealer networks. See "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Sales and Marketing—Sales and Distribution." If we are not successful in expanding our proprietary network and maintaining and further developing our distribution network of national, regional and local retailers, our subscriber growth rate, market share and revenues may decrease, which would 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 interconnecting are established by agreements with network operators and vary depending on the network used, the nature of the call and the call destination.

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        In Russia, the government has previously expressed its intent to privatize Svyazinvest and to obtain a listing of Rostelecom Global and American Depositary Receipts after completion of the Svyazinvest reorganization. In Ukraine, the government completed the privatization of Ukrtelecom, which, according to its public disclosure, has a 71% share of the local telephony market and an 83% share of the domestic and international long distance market in Ukraine. The auction to privatize Ukrtelecom was held by the State Property Fund of Ukraine in December 2010 and on March 11, 2011, following the completion of an independent appraisal required by Ukrainian law, the State Property Fund of Ukraine and ESU LLC, a wholly owned subsidiary of European Privatization & Investment Corporation ("EPIC"), signed an agreement for the sale of a 92.8% stake in Ukrtelecom to ESU LLC. On May 11, 2011, the ownership stake was transferred to ESU LLC upon the payment of a purchase price of 10,575.1 million hryvnia ($1,325 million as of May 11, 2011) and the fulfillment of certain requirements under Ukrainian law. It is currently unclear how the privatizations of Svyazinvest and Ukrtelecom will affect our interconnect arrangements and costs, but there is a chance that our ability to interconnect cost-effectively with other telecommunications operators could be hampered.

        Although Russian legislation requires that operators of public switched telephone networks that are deemed "substantial position" operators cannot refuse to provide interconnects or discriminate against one operator over another, we believe that, in practice, some operators attempt to impede wireless operators by delaying interconnect applications and establishing technical conditions for interconnect 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 would have a material adverse effect on our business and results of operations. See also "—If we or any of our mobile operator 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, as part of the restructuring of Svyazinvest, the Russian government has expressed its intent to establish a fourth national mobile operator in Russia. As Svyazinvest controls regional fixed line operators in all regions of Russia (other than Moscow), a mobile operator established as part of the Svyazinvest group may receive preferential terms for interconnecting with these operators, which would allow it greater flexibility in setting tariffs and put us at a competitive disadvantage. See also "—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."

        Trimob (formerly known as Utel), a subsidiary of Ukrtelecom, is the only UMTS license holder in Ukraine. Trimob is expected to be sold by the end of 2012, subject to approval by the AMC and certain other regulatory bodies. A sale of Trimob to one of our competitors would provide that competitor with a significant advantage over us and would adversely affect our competitiveness in Ukraine, as well as our business, financial condition and results of operations. The Ukrainian government has previously indicated that funds required for the conversion of the remaining UMTS frequencies have not been provided in Ukraine's 2012 State Budget. Therefore, there is a possibility that auctions for additional UMTS licenses will not be held in 2012. Nevertheless, if we do not acquire Trimob and we are unable to acquire a UMTS license when an auction is ultimately held, and our competitors do, those competitors would have an advantage over us. See also "—Our inability to obtain a UMTS license in Ukraine on commercially reasonable terms, or at all, may negatively affect our competitive position in Ukraine."

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

        Under the Ukrainian Telecommunications Law, adopted in November 2003, the National Commission for the Regulation on Communications (the "NCRC"), was authorized to regulate the tariffs for public telecommunications services rendered by fixed line operators within one geographical

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numbering zone. While mobile cellular operators (including MTS Ukraine) were generally entitled to set their retail tariffs and negotiate interconnect rates with other operators, the NCRC was entitled to regulate the interconnect rates of any mobile cellular operator declared to have a dominant position on the telecommunications market by the AMC. On June 24, 2010, MTS Ukraine and its competitors, including Kyivstar, Golden Telecom Ukraine, URS, Ukrtelecom, Astelit, Intertelecom and PEOPLENet, were declared to have a dominant position on the network interconnect market. As a result, the interconnect fees charged by us and our competitors for terminating calls connecting to any of our respective networks became subject to regulation by the NCRC. See "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—Regulation in Ukraine—Competition" for additional information.

        In 2011, NCRC announced its intent to change the telecommunications regulations in Ukraine to regulate the interconnect rates of only those operators deemed by the AMC to have "significant market power." Kyivstar and MTS Ukraine are the largest mobile cellular operators in Ukraine with market shares of 46% and 36%, as of December 31, 2011, respectively, according to AC&M-Consulting.

        On October 20, 2011, the NCRC recognized all telecommunications operators on the Ukrainian market as operators with significant market power in the market of call termination on their respective networks.

        On November 23, 2011, the NCRC was dissolved and replaced with the National Commission for the State Regulation of Communications and Informatization (the "NCCIR"). The NCCIR may similarly consider interconnect rates and may reduce the interconnect rates that we charge, which, in turn, may have a material adverse effect on our financial condition and results of operations. See also "—Legal Risks and Uncertainties—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."

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 MegaFon, Vimpelcom and us a license to provide 3G services in the Russian Federation. The 3G license allows us to provide mobile radio telephone services using the International Mobile Telecommunications-2000 ("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 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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we will be able to build-out our 3G network in a timely manner;

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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;

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

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

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

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

        See also "—If we cannot successfully develop our network, we will be unable to expand our subscriber base and maintain our profitability."

        In addition, Russian military authorities also use frequencies of 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. For example, conflicts over the availability of frequency long reserved for military use in Moscow caused delay in the commercial launch of 3G services in Moscow by all of the 3G license holders, although some of these frequencies were cleared for commercial use in 2009. If additional overlap were to occur, it could cause problems or delays in the development and operation of our 3G network in Russia.

        We may also face competition from operators using second generation ("2G") or other forms of 3G technology. For example, licenses for the use of 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 ("NMT-450") standard. If CDMA operators were able to develop widespread networks throughout Russia, we would face increased competition.

        In addition, the development of Wi-Max networks will likely pose additional competition for 3G providers operating in the IMT-2000/UMTS standard. The Russian government held tenders for the issuance of 4G licenses for 40 Russian regions (in the 2.3-2.4 GHz frequency band). Fourth-generation wireless services are expected to provide faster, higher quality data transfer and streaming capabilities as compared to 2G and 3G and may pose additional competition for 3G providers. Rostelecom won the tender for 39 of the 40 4G licenses (in the 2.3-2.4 GHz frequency band) in February-March 2010 and in November 2011 received permission from the Ministry of Defense to use the allotted frequencies for the creation of a 4G network.

        Potential competition from other 3G, CDMA, Wi-Max and 4G 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.

If we are unable to successfully develop and/or deploy 4G wireless services in Russia or one of the operators in the market obtains significant technological and/or commercial advantage over us in 4G wireless services, it may have a material adverse effect on our business and results of operations in the long term.

        The next step in the development of Russian telecommunications is the deployment of 4G/LTE networks. The cost of 4G/LTE network development and quality of services (data speed, quality of coverage) depend on the band and the width of frequency range given to an operator.

        In September 2011, the Russian government announced its intention to auction frequencies for LTE use on a national level in 2012. Additionally, the State Radio Frequencies Commission gave Scartel (Yota brand) two ranges of LTE frequencies, 30 MHz each, in the 2.5-2.7 GHz band for use on the whole territory of Russia in exchange for 4G frequencies held by Scartel for Wi-Max technology of total width of 70MHz (the exchange was completed on a non-auction basis). Four sets of frequencies in the 791-862 MHz band are planned to be sold during the auction in 2012, after which the winners of the frequencies will also receive frequencies in the 2.5-2.7 GHz band. The remaining frequencies that are to be sold during the auction comprise 40 MHz of the 2.5-2.7 GHz band. Therefore, other

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operators may receive frequency ranges much later than Scartel and the ranges they receive may be much smaller than those given to Scartel.

        Initially it was planned that all operators would receive equal access to the Scartel infrastructure, which would allow each operator to reduce its 4G/LTE network development costs. In March 2011, we, MegaFon, Vimpelcom and Rostelecom signed a non-binding memorandum of understanding with Scartel, according to which we, MegaFon, Vimpelcom and Rostelecom were to receive access to Scartel's 4G network infrastructure (which was to be built) and were to receive options to purchase shares in Scartel in 2014 at a price determined by an independent appraisal. MTS considered a preliminary value assessment of Scartel to be unduly high. Currently, we are still considering our further actions in regards to this arrangement.

        According to recent news reports, Megafon is negotiating a possible acquisition of Scartel. If this transaction takes place, Megafon may obtain significant short term competitive advantage both in terms of frequency resources and LTE network development costs.

        Furthermore, the limited number of available frequencies may prevent us from realizing the full benefits we expect to receive from the development of a 4G network, because our network capacity would be constrained and our ability to expand limited. Moreover, if we cannot develop a commercially viable 4G network, and one of our competitors does, that competitor would have an advantage over us, which in turn may have a material adverse effect on our business.

Our inability to obtain a UMTS license in Ukraine on commercially reasonable terms, or at all, may negatively affect our competitive position in Ukraine.

        In September 2009, the NCRC announced plans to launch a tender for a single 3G/UMTS mobile services license in Ukraine with the starting price set at 400 million hryvnia (equivalent to $50.1 million at December 31, 2009). However, the NCRC canceled the planned tender in November 2009 following a decision by the President of Ukraine to put the tender and conversion of the radio frequencies on hold. Following the election of Viktor Yanukovich as Ukraine's new President in February 2010, a tender for a 3G/UMTS license in Ukraine is expected in 2012 after the planned sale of Trimob. See also "—Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations."

        Our ability to prevail in a tender for a 3G/UMTS license in Ukraine may require us to pay a significant amount for the license as well as incur significant costs in building out the 3G network, and we may not be able to recoup these costs through our service revenues. Specifically, the Ministry of Defense of Ukraine indicated in 2010 that the cost of conversion of the radio frequencies required to establish a 3G/UMTS network would be equal to 2.5 billion hryvnia. That same year, as a result of discussions between the government and the telecommunications operators, it was concluded that the justifiable market price of conversion of the radio frequencies is 600 million hryvnia. However, in the beginning of 2011, the head of the Administration of State Service on Special Communications and Information Protection of Ukraine stated that the conversion of a narrow range of radio frequencies would cost 2.5 billion hryvnia.

        To date, the Ministry of Defense of Ukraine has not adopted a radio frequencies conversion plan or indicated when they plan to do so and, therefore, the tender for a 3G/UMTS license in Ukraine has still not occurred. If we do not obtain a 3G/UMTS license, the award of the license to one of our competitors would increase the competition we face in the provision of both GSM and 3G services in Ukraine and inhibit our expansion efforts. Either of the foregoing may have a material adverse effect on our business, financial condition, results of operations and prospects.

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Service disruptions on our networks 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, interconnect 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 mobile 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 mobile 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 interconnect rules, among others. The license requirements applicable to our fixed line businesses include participation in a federal communications network, adherence to technical standards, investment in network infrastructure, employment of Russian technical personnel and the provision of certain services to the federal government and PSTN subscribers at regulated tariffs, 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. In addition to the impact on our operations, the suspension or loss of certain licenses could also cause an event of default under certain of our debt obligations. A suspension or termination of our licenses or other necessary governmental authorizations could therefore have a material adverse effect on our business and results of operations.

Failure to renew our licenses or receive renewed or new 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 2012 to 2022. These licenses 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. License renewals may be subject to additional conditions, such as revenue sharing or the mandatory modernization of our network. These and similar conditions would constitute indirect payment obligations.

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        In addition, we may be subject to penalties or our licenses may be suspended or terminated for non-compliance with the new licenses requirements. The suspension or loss of certain licenses could significantly limit our operations and cause certain of our debt to be accelerated.

        Failure to renew our telecommunications licenses or receive renewed or new 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.

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.

        We have in the past been unable to obtain certain requested frequency allocations. For example, our tender bid in Ukraine for additional frequencies on the CDMA-450 spectrum was denied in March 2010 as we were the only applicant in the tender process. In the near term, available CDMA-450 frequency spectrum capacity combined with network optimization measures undertaken by us is sufficient to support existing and potential demand for CDMA services, and generally we consider UMTS frequencies to be a bigger strategic priority than CDMA. However, if in the future we are not allocated the requested CDMA frequencies, our ability to expand CDMA-450 services in Ukraine may be hindered.

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. For example, new rules on the calculation of fees for frequency spectrum usage in Russia effective as of January 1, 2012 will lead to the increase of the fees we pay for frequency spectrum usage by 40-45% in 2012 as compared to 2011. Similarly, in April 2010, the Cabinet of Ministers of Ukraine significantly increased the fees for frequency spectrum usage in Ukraine for cellular communications. Furthermore, according to the Tax Code of Ukraine, the fees payable for frequency usage shall be determined based in part on the rate of inflation and reviewed annually effective January 1, 2011. Accordingly, the fees for frequency usage were increased by 9.4% in 2011 as compared to 2010, and by 8.9% in 2012 as compared to 2011.

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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.

        Developing and maintaining awareness of our brands is critical to informing and educating the public about our current and future services and is an important element in attracting new subscribers. We believe that the importance of brand recognition is increasing as our markets become more competitive. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful products and services at competitive prices. Brand promotion activities may not yield increased operating revenues, and even if they do, such operating revenues may not offset the operating expenses we incur in building our brands. Furthermore, 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 failure to successfully and efficiently promote and maintain our brands may limit our ability to attract new subscribers and retain our existing subscribers and materially adversely affect our business and results of operations.

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 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 ("Maxima"), and Closed Joint Stock Company Mediaplanning ("Mediaplanning"), IT services and hardware purchases (LLC Sitronics IT and Private Joint Stock Company Sitronics IT Ukraine), banking services (MTS Bank, formerly Moscow Bank of Reconstruction and Development ("MBRD")), telephone network services (MGTS), leasing of office space (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 not determined by market forces. 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

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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 and our ability to attract, retain and motivate qualified key personnel could have a material adverse effect on our business, financial condition and results of operations.

        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 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.

In the event that deficiencies or ambiguities in privatization legislation are exploited to challenge our ownership in our privatized subsidiaries and we are unable to defeat these challenges, we risk losing our ownership interests in our subsidiaries or their assets, which could materially adversely affect our business, financial condition and results of operations.

        Through our acquisition of a controlling stake in Comstar, we gained a controlling stake in its subsidiary, MGTS, the incumbent PSTN operator in Moscow, and our business strategy may involve the acquisition of additional privatized companies. To the extent that privatization legislation is vague, inconsistent or in conflict with other legislation, including conflicts between federal and local privatization legislation, many privatizations are vulnerable to challenge, including selective challenges. For instance, a series of presidential decrees issued in 1991 and 1992 that granted to the Moscow City government the right to adopt its own privatization procedures were subsequently held to be invalid by the Constitutional Court of the Russian Federation, which ruled, in part, that the presidential decrees addressed issues that were the subject of federal law. While this court ruling, in theory, did not require any implementing actions, the presidential decrees were not officially annulled by another presidential decree until 2000.

        Sistema won a privatization tender for MGTS in April 1995 and was issued 25% of MGTS' share capital. As part of its tender obligations, Sistema committed to invest approximately $106 million in MGTS over a three-year period in exchange for the right to purchase an additional issue of MGTS' ordinary shares. In 1998, upon satisfying its tender obligations, Sistema exercised this right and increased its stake to 50% of MGTS' share capital. At the time Sistema took possession of this interest, there were press reports that certain minority shareholders of MGTS had filed complaints with the prosecutor's office and the Federal Commission on the Securities Market (currently the Federal Service for Financial Markets ("FSFM")) objecting to the share issuance. In addition, certain members of the Russian parliament requested the Audit Chamber of the Russian Federation and other governmental agencies to investigate whether there was compliance with the relevant rules and regulations governing MGTS' privatization. Although no formal action or claim against MGTS or its shareholders was ever made by any governmental entity, in the event that any of our privatized companies are subject to challenge in the future as having been improperly privatized and we are unable to defeat this claim, we

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risk losing our ownership interest in the company or its assets, which could materially adversely affect our business, financial condition and results of operations.

        In addition, under Russian law, transactions in shares may be invalidated on many grounds, including a sale of shares by a person without the right to dispose of such shares, breach of interested party and/or major transactions rules and failure to register the share transfer in the securities register. As a result, defects in earlier transactions in shares of our subsidiaries (where such shares were acquired from third parties) may cause our title to such shares to be subject to challenge. While Russian law provides for a three year statute of limitations for challenging private merger and acquisition transactions, there is no statute of limitations for challenging privatizations.

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 ("MVNOs"). MVNOs are companies that provide mobile communications services but do not own the radio frequencies and, often, the 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 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.

        In March 2011, Sky Link and CountryCom, a Moscow based telecommunications company, announced that together they would launch MVNO services in the Moscow region which will be based on frequencies and infrastructure owned by Sky Link and CountryCom would be responsible for billing and other customer-related services. In September 2010, Sky Link also launched an MVNO project with Center Telecom, a regional fixed-line telecommunications company which has merged into Rostelecom, under the Domolink brand which is currently limited to Internet services. In August 2010, we launched a tariff plan under a separate brand name through X5 Retail group as a pseudo-MVNO. In addition, MegaFon recently launched a new tariff plan under a separate brand name as a pseudo-MVNO.

        In December 2011, Scartel reached an agreement with MegaFon and Rostelecom to allow them to provide LTE services through Scartel's network in exchange for permitting Scartel to use the two companies' network infrastructure. In February 2012, Scartel and MegaFon received the necessary licenses to allow MegaFon to provide such services over the Scartel LTE network.

        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 increase market competition and subscriber churn and, as a result, have a material adverse effect on our business, financial condition, results of operations and prospects.

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A finding by FAS that we have acted in contravention of antimonopoly legislation could have a material adverse effect on our business, financial condition and results of operation.

        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.

        In October 2010, FAS found that we, Vimpelcom and MegaFon violated antimonopoly laws on competition relating to our pricing for roaming services. As a result, FAS imposed an administrative fine on us in the amount of RUR 21.9 million which represents 1.0% of the revenues we derived from roaming services in CIS countries in 2009. We paid the fine imposed on us by FAS on March 28, 2011. See also "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation."

        In addition, in October 2011, FAS began an investigation of our and Vimpelcom's actions, suspecting violation of antimonopoly laws by coordinated pricing of iPhone 4 handsets. The investigation is currently in progress. Although we believe that we have not violated antimonopoly laws, we could be liable for fines of up to 15% of the revenues we derived from iPhone 4 sales if a violation is found.

A finding by the AMC that we have acted in contravention of antimonopoly legislation could have a material adverse effect on our business, financial condition and results of operation.

        In December 2011, the AMC opened an investigation into whether MTS Ukraine violated antimonopoly legislation with its pricing of international roaming services. The AMC stated that the average price of international roaming services offered by MTS Ukraine and its roaming partners is higher than the corresponding prices in the European Union, which may demonstrate that the prices charged by MTS Ukraine are not economically justified. The investigation will examine whether MTS Ukraine used its dominant position in the Ukrainian telecommunications market to establish prices that would not be possible if there was significant competition on the telecommunications market. Although we believe that we did not violate antimonopoly laws, we could be liable for up to 10% of MTS Ukraine revenues. We plan to submit our arguments to the AMC regarding the matter of this investigation. However, the AMC may determine that we violated antimonopoly legislation in this or other matters, and may impose fines on us, which may have a material adverse effect on our business, financial condition and results of operation. In addition, we may be required to adjust the prices that we charge for international roaming services, which may adversely affect our revenues. See also "—Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations" and "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—Regulation in Ukraine—Competition" for additional information."

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 between 35%-50% or over 50% of a market or otherwise able to control market conditions as a dominant force in such market. Moreover, recent amendments to Russian antimonopoly regulations made it possible that any three

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companies collectively holding a market share of over 50% or five companies collectively holding a market share of over 70%, and in each case over 8% individually, can be found to have a dominant position on a certain market. Companies controlling over 35% or otherwise occupying a dominant position on the market 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. One of our subsidiaries, MGTS, is categorized by the Federal Tariff Service as a natural monopoly in the Moscow telecommunications market. As a result, MGTS' tariffs are subject to regulation by the Federal Tariff Service. See "—We and MGTS are subject to extensive regulation of our respective tariffs, and these tariffs may not fully compensate us for the cost of providing required services."

        We were also categorized by FAS as a company with a market share exceeding 35% in the mobile communications market in the Ivanovo region, Magadan region, Omsk region, Sakhalin region, Nenets Autonomous District and Udmurt Republic. In the event that we are found in the future to have a dominant position on these or any additional markets, FAS would have the right to impose certain restrictions provided for under the antimonopoly laws, including a mandated reduction in our tariffs, and FAS would have the right to impose certain restrictions on our operations in such markets. See "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—Regulation in the Russian Federation—Competition, Interconnect and Pricing" for additional information."

        Additionally, MTS Ukraine, was categorized as a company with a dominant position in the telecommunications market and is subject to certain government imposed restrictions, including limitations on the interconnect rates it can charge other operators. See "—Governmental regulation of our interconnect rates in Ukraine could adversely affect our results of operations" and "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—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 and the Federal Tariff Service (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 our revenues. Moreover, our refusal to adjust our tariffs according to such government-determined rates could result in the imposition of fines. Additionally, geographic restrictions on our expansion could reduce our subscriber base and prevent us from fully implementing our business strategy, which may materially adversely affect our business, financial condition, results of operations and prospects.

If we or any of our mobile operator 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 such operators' interconnect agreements, including the interconnect tariffs. In addition, such operators are required to develop standard interconnect agreements and publish them as a public offer made to 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 of Telecommunications in the Russian Federation and Ukraine—Regulation in the Russian Federation."

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        At present, the foregoing regulations apply only to fixed line operators in Russia and therefore apply to our fixed line business. Draft legislation was introduced in 2008 that would extend the law to apply to mobile operators. Although the proposed law was not adopted, the risk that similar legislation will be introduced and adopted in the future remains. If legislation which extends the foregoing regulations to apply to mobile operators is adopted, and we and any of our mobile operator subsidiaries operating in Russia are identified as operators occupying a "substantial position," regulators may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our revenues, financial condition and results of operations.

We and MGTS are subject to extensive regulation of our respective tariffs, and these tariffs may not fully compensate us for the cost of providing required services.

        As the PSTN operator in Moscow, MGTS is considered to be a company holding a dominant position as well as a natural monopoly in the Moscow telecommunications market under Russian antimonopoly regulations. Consequently, the Federal Tariff Service regulates MGTS' tariffs for most services provided to its PSTN subscribers, including installation fees, monthly subscription fees (for subscribers to the unlimited tariff plan) and local call charges (for subscribers who do not use the unlimited tariff plan). In addition, the Federal Law on Communications also provides for the 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. Comstar and MGTS were added to the register of telecommunications operators occupying a substantial position in 2005 and 2006, respectively. Accordingly, the interconnect tariffs established by Comstar, prior to its merger with us, and MGTS are also subject to regulation by the Federal Agency on Communications. Although we have not been formally recognized as a telecommunications operator occupying a substantial position on the market, we believe that interconnect tariffs previously approved by the Federal Agency on Communications for Comstar also apply to us following the merger completed on April 1, 2011. While we believe the tariffs currently set by the Federal Tariff Service and the Federal Agency on Communications are sufficient to compensate us for the costs of providing these services, future tariffs may not be set at a level that fully compensates us for the provision of these services or increased in parallel with corresponding increases in our costs and/or inflation.

        Although we are permitted to petition the Federal Tariff Service for increases in tariffs based on such criteria as inflation, increased costs and the need for network investments, it is possible that future requested increases may not be granted or that the Federal Tariff Service may not adequately take such factors into account in setting tariffs. If the tariffs applicable to Comstar (prior to its merger with us, but now, applicable to us), and MGTS do not compensate us for the cost of providing services, our business and results of operations could be materially adversely affected.

Changes to the rules and regulations involving roaming charges in Russia may adversely affect our financial condition and results of operations.

        In 2010, the Russian government announced its intent to monitor the pricing of roaming services. As a result, FAS conducted an investigation of the activities of Russian telecommunications operators and found that we, Vimpelcom and MegaFon violated antimonopoly laws relating to our pricing for roaming services. Subsequently, FAS imposed an administrative fine on us in the amount of RUR 21.9 million which represents 1.0% of the revenues we derived from roaming services in CIS countries in 2009. Since this decision, several draft laws were submitted for consideration to the State Duma, which are intended to change the regulation of so-called "national" (between networks) and "intra-network" (within network) roaming in Russia by introducing a flat national roaming tariff and eliminating intra-network roaming tariffs for incoming calls. It is not currently clear whether this legislation will be adopted. However, if the new legislation is adopted, we believe that our revenues

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from the provision of roaming services would decline considerably, which could have a material adverse effect on our financial condition and results of operations.

        In addition, in 2011, the Russian government continued its efforts to decrease the level of prices for international roaming services and entered into discussions with the European Commission regarding the roaming pricing strategy of both Russian and European telecommunications operators due to an increasing number of complaints from subscribers. Further to our conversations with FAS and in response to public discussions initiated by various Russian consumers associations, we, Megafon and Vimpelcom have voluntarily lowered international roaming tariffs and introduced certain tariff plans and options aimed at the reduction of prices for roaming services. See also "Item 4. Information on Our Company—Business overview—Sales and Marketing—Advertising and Marketing."

        However, if the Russian government determines the decrease of roaming tariffs to be insufficient, it may require us to decrease our prices for roaming services, which may adversely affect our revenues and financial condition. See also "—A finding by FAS that we have acted in contravention of antimonopoly legislation could have a material adverse effect on our business, financial condition and results of operation."

Compliance with the new regulations on International Mobile Equipment Identity ("IMEI") numbers may present us with technical difficulties and may lead to the expenditure of significant resources.

        On January 11, 2012, the Ministry of Communications and Mass Media published a draft regulation, which will require all handsets and other telecommunications devices to be assigned individual IMEI numbers. It is still unclear if and when this regulation will be adopted. If this regulation is adopted, we may be required to develop a system to monitor IMEI numbers, and we may need to establish and maintain a database of IMEI numbers, which would necessitate the expenditure of significant technical and financial resources.

The accession of Russia into the World Trade Organization ("WTO") may lead to legislative and other changes which may adversely affect our business, financial condition and results of operation.

        On December 16, 2011, Russia signed the accession protocol in order to enter into the WTO which may lead to significant changes in Russian legislation including, among others, regulation of foreign investments in Russian companies, competition laws, as well as changes in the taxation system and customs regulations in Russia. In addition, implementation of the WTO rules may lead to the increase of competition on the markets we operate. It is unclear yet if and when these legislative developments may take place. However, if the new legislation is implemented in Russia as a result of accession to the WTO and there is an increase in competition, this could 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 interconnect 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 domestic or international long distance ("DLD/ILD") 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.

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        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.

Much of our fixed line infrastructure is outdated, and we may be required to make significant investments beyond those that are currently planned to modernize it.

        A significant portion of MGTS' infrastructure has not been modernized. For example, although MGTS has recently completed the digitalization of its network, the newly installed equipment may not function properly within parts of the network that have not yet been upgraded. In addition, MGTS' network switching equipment may become obsolete or unusable, in which case we may be required to make significant investments to modernize MGTS' infrastructure in order to ensure that it fulfills its regulatory obligation to provide telephony services as a PSTN operator. The overburdening of MGTS' infrastructure may inconvenience subscribers by causing incoming and outgoing calls to have lower completion rates.

        MGTS invested approximately 1.5 billion rubles in 2010 ($49.5 million as of December 31, 2010) and approximately 1,328 million rubles in 2011 ($41.25 million as of December 31, 2011) and plans to invest approximately 15.1 billion rubles in 2012 ($468.3 million as of December 31, 2011) to upgrade its infrastructure. If MGTS is not able to upgrade its network in a timely manner or if it is required to make significant investments beyond those that are currently planned, our business, financial condition, results of operations and prospects could be materially adversely affected.

We are subject to anti-corruption laws in the jurisdictions in which we operate, including anti-corruption laws of Russia and the US Foreign Corrupt Practices Act (the "FCPA"), and we may be subject to the UK Bribery Act of 2010 (the "UK Bribery Act"). Our failure to comply therewith could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

        We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits, along with various other anti-corruption laws. We may also be subject to the recently-enacted UK Bribery Act. The UK Bribery Act is broader in scope than the FCPA in that it directly addresses commercial bribery in addition to bribery of government officials and it does not recognize certain exceptions, notably facilitation payments that are permitted by the FCPA. Although we regularly review and update our policies and procedures designed to ensure that we, our employees, distributors and other intermediaries comply with the anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all of the time or protect us against liability under these or other laws for actions taken by our employees, distributors and other intermediaries with respect to our business or any businesses that we may acquire. We operate primarily in Russia and other countries of the former Soviet Union, many of which pose elevated risks of anti-corruption violations. We and certain of our subsidiaries are in frequent contact with persons who may be considered "foreign officials" under the FCPA and UK Bribery Act, and therefore, are subject to an increased risk of potential FCPA and UK Bribery Act violations. If we are not in compliance with the FCPA, the UK Bribery Act and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, results of operations, financial condition and liquidity. Any investigation of any potential violations of the FCPA, the UK Bribery Act

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or other anti-corruption laws by US, UK or foreign authorities could also have an adverse impact on our business, financial condition and results of operations.

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 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, trademarks 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.

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

        We have completed implementation of a new billing system in Russia and Belarus. We have also completed the transfer of our individual subscribers in Ukraine to a new billing system, and are approaching the final stage of transferring our individual subscribers in Uzbekistan to a new billing system. In addition, we may face difficulties and delays in implementing the new billing system in newly acquired companies. 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, in Ukraine it is still necessary for us 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 subscribers in the short term. In addition, we are also currently optimizing our information technology infrastructure, which may result in temporary technical disruptions. 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.

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, 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

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our subscribers. 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. In each case, the stolen databases were thereafter available for sale in Russia. 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.

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 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. Each of these potential circumstances may adversely affect our business, financial condition, results of operations and prospects.

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 Closed Joint Stock Company "Beta Link," or 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 also "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information— 7. Litigation."

        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. Future write downs relating to the value of the goodwill or portion of such value could have a material adverse effect on our financial condition and results of operations.

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Continued turmoil in the credit markets could cause our business, financial condition, results of operations and the value 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. Continued volatility in the United States, European and/or Russian securities markets stemming from these or other factors may continue to adversely affect the value of our shares and ADSs.

        The 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 and resulting volatility of the trading price of our shares and ADSs may negatively impact our ability to obtain financing on commercially reasonable terms 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, 2011, our consolidated total debt, including capital lease obligations, was $8,715 million. Our interest expense for the year ended December 31, 2011 was $656,899 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, 2011, approximately 14.7% 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 with respect to approximately 21.6% 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 for a number of reasons; for example, the terms of some of our loan agreements may require us to prepay the loan in certain circumstances, such as a deterioration in our credit rating, we are delisted or our retained earnings drop below a certain level. This, in turn, may force us to 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— B. Liquidity and Capital Resources."

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Ruble depreciation and regulatory changes in foreign currency regulation 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 two decades, the ruble has fluctuated, at times substantially over short periods of time, against the U.S. dollar. In particular, it significantly depreciated against the U.S. dollar in 2008 and 2009 as a result of the ongoing global financial downturn. For example, on December 31, 2008, the official exchange rate published by the Central Bank of Russia ("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. The ruble continued to depreciate against the U.S. dollar in early 2009, reaching 36.43 rubles per one U.S. dollar on February 19, 2009. As of December 31, 2011, the exchange rate was 32.20 rubles per one U.S. dollar and as of April 20, 2012, the exchange rate was 29.51 rubles per one U.S. dollar. The ruble has also depreciated against the euro. On December 31, 2010 and 2011, the official exchange rate was 40.33 rubles and 41.67 rubles per one euro, respectively, as compared to 43.38 rubles and 41.44 rubles per one euro on December 31, 2009 and 2008, respectively.

        Currently, the Russian foreign currency market is regulated by legislation, which is aimed at liberalization of currency regulation and lowering of administrative barriers. This legislation provides a general framework and a set of rules, within which both the Russian government and the CBR are authorized to propose various regulations, which result in uncertainty for us in carrying out importation of equipment. 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. Furthermore, changes in foreign currency regulation may affect our ability to fund payments denominated in foreign currency and result in us entering into supplementary agreements with our foreign counterparts.

        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 the financial ratios contained in our various loan agreements or fund cash payments on our indebtedness on time. 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, which would have an adverse impact on our results.

        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

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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 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 that country. 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 experienced significant volatility over the last quarter of 2008 and 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 and 7.97 hryvnias per one U.S. dollar as of December 31, 2008, and 2009, respectively. The official exchange rate stabilized in the last two years and was 7.96 hryvnias and 7.99 hryvnias per U.S. dollar as of December 31, 2010 and 2011, respectively.

        The Belarusian ruble experienced significant volatility in 2011, with the official exchange rate falling from 3,000.00 rubles per one U.S. dollar as of January 1, 2011 to 4,970.00 rubles per one U.S. dollar as of June 1, 2011 and to 8,450 rubles per one U.S. dollar as of November 1, 2011. On May 23, 2011, the National Bank of the Republic of Belarus announced the significant devaluation of the Belarusian ruble against major foreign currencies to stabilize the situation on the foreign currency exchange market. Furthermore, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary, and we have accordingly accounted for this in our financial statements. The continued devaluation of the Belarusian ruble and the highly inflationary economy may adversely affect our revenues from this market. See also "—Risks Relating to Our Financial Condition—Inflation could increase our costs and adversely affect our results of operations," "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk" and Note 2 to our audited consolidated financial statements.

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 and 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 mobile and fixed line networks. We spent $2,328.3 million in 2009, $2,647.1 million in 2010 and $2,585 million in 2011, for the fulfillment of our capital spending plans. In addition, the acquisition of 3G licenses and frequency allocations and the build-out of our 3G and broadband Internet networks will require additional capital expenditures. However, future financings and cash flow from our operations may not

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be sufficient to meet our planned needs in the event of various unanticipated potential developments, including the following:

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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.

        Our indebtedness and the limits imposed by covenants in our debt obligations could limit our ability to obtain additional financing and thereby constrain our ability to invest in our business and place us at a possible competitive disadvantage relative to our competitors. 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 25% of a Russian company's shares 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. According to the Federal Statistics Service, inflation reached 8.8% and 6.1% in Russia in 2010 and 2011, respectively. Inflation reached 9.4% and 8.0% in Ukraine in 2010 and 2011, respectively, according to the State Statistics Committee of Ukraine. 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—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Inflation."

        In May 2011, Belarus announced a significant devaluation of the Belarusian ruble against major foreign currencies. Furthermore, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary, and we have accordingly accounted for this in our financial statements. See Note 2 to our audited consolidated financial statements. Since most of our revenues in Belarus are denominated in local currency, the devaluation has resulted in lower revenues in dollar terms. Additionally, since a significant portion of our operating costs are denominated or tied to foreign currency, the devaluation and high inflation have also resulted in higher operating costs in

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comparison to revenues. Accordingly, the devaluation and the highly inflationary economy in Belarus may materially adversely affect our revenues and results of operations in that country. See also "—Risks Relating to Our Financial Condition—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" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

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 2008, we entered into an unconditional purchase agreement with Apple Sales International to buy certain quantities of iPhone handsets at list prices at the dates of the respective purchases. Pursuant to the agreement, we are also to incur certain iPhone promotional costs. We did not fulfill our total purchase installment contemplated by the agreement in 2011, 2010, 2009 and 2008. As a result, 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. To date, Apple has not brought a claim against us. The total amount paid for handsets purchased under the agreement for the years ended December 31, 2011, 2010, 2009 and 2008 amounted to $140.8 million, $79.4 million, $3.4 million and $65.4 million, respectively. The purchase agreement with Apple Sales International expired on March 31, 2012, and we intend to negotiate an extension of this agreement. Failure to renew the agreement with Apple Sales International on commercially acceptable terms or at all may adversely affect our financial condition and results of operations.

Indentures relating to our 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.

        Covenants in the loan agreement relating to our notes due 2020 limit our ability to create liens on our properties, merge or consolidate with another person or convey our properties and assets to another person. Additionally, the loan agreement contains covenants limiting our ability to incur debt, create liens on our properties, enter into sale and lease-back transactions, 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, including in relation to the incurrence of indebtedness, creation of liens and disposal of assets. 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 owns 50.8% of our total charter capital (52.8% excluding treasury shares) and consolidates our results in its financial statements, is subject to various covenants in its credit facilities. These covenants impose restrictions 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. The inability to implement our business strategy may have a material adverse effect on our financial condition and results of operations.

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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 interest accrued prior to the redemption date. A change in control will be deemed to have occurred in any of the following circumstances:

•

With respect to the notes due 2020, any person acquires beneficial or legal ownership of, or control over, more than 50% of our issued shares, ownership of or control over more than 50% of the voting interests in our share capital or obtains the power to elect not less than half of our directors, provided that the following transactions would not be deemed to result in a change of control:

•

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

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any acquisition by us, our subsidiary or our employee benefit plan; and

•

a contribution by Sistema of all or part of its ownership interest in us into a partnership, joint venture or other indirect holding vehicle as long as any other person who is an owner of or party interested in that partnership, joint venture or other indirect holding vehicle does not acquire beneficial ownership of or control over more than 50% of our issued shares, does not acquire ownership of or control over more than 50% of the voting interests in our share capital and does not obtain the power to elect not less than half of our directors.

        Some of our loan agreements contain similar change of control provisions. 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 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 downturn, as well as any future economic downturns or slowturns in Russia or the other CIS

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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. In December 2008, Standard & Poor's lowered Russia's long-term sovereign credit rating to BBB and maintained its negative outlook, citing the "rapid depletion" of Russia's financial reserves. In addition to anticipated slower asset growth on the Russian banking market in 2009, the Russian Federation was facing significant inflation, a significant volatility in stock prices and a substantial outflow of capital from the country. In December 2009, Standard & Poor's changed its outlook on Russia's long-term sovereign credit rating to stable. 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 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

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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, Ukraine and the other countries where we operate is in poor condition, which could disrupt our normal business activities and adversely impact our results.

        The physical infrastructure in Russia, Ukraine and the other countries where we operate 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. For example, in August 2009, a major accident occurred at Russia's largest power plant, the Sayano-Shushenskaya hydroelectric power station, resulting in flooding of the engine and turbine rooms, a transformer explosion and the death of 75 people. Power generation from the station ceased completely following the incident, which led to a major power outage in the nearby residential areas and at certain industrial facilities as well as pollution of the rivers and soil as a result of an oil spill from the transformer.

        In addition, the road conditions throughout our countries of operation 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 their national 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, Ukraine and the other countries where we operate 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. In addition, the increased charges and tariffs that may result from the government reorganization may also 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.

        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

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constraints on our liquidity and ability to obtain debt financing, which may have a material adverse effect on our business, financial conditions and results of operations.

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. A deterioration of the socio-political situation in Russia could also trigger an event of default under some of our loan agreements.

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.

        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 conference of the representatives of the regional authorities in eastern Ukraine decided to conduct a referendum on

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creating an autonomous region, separate from Ukraine. Though the regional authorities ultimately backed down from this intention, 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 our shares and 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.

Political instability 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 Constitution of Ukraine that came into effect on January 1, 2006, shifted important powers from the President to the Parliament, including the right to appoint the Prime Minister and to form the government. Although these new changes were intended to prevent an impasse between the President and the Parliament, they effectively caused a protracted political struggle.

        On February 7, 2010, Viktor Yanukovych, a leader of the Party of Regions, won 48.95% of the popular vote in a tightly contested presidential election campaign over Ukraine's then Prime Minister, Yulia Tymoshenko, a leader of the Yulia Tymoshenko Bloc, who won 45.47% of the popular vote. Although Ms. Tymoshenko initially contested the results of the election, she subsequently conceded and Mr. Yanukovych was inaugurated as the President of Ukraine on February 25, 2010. The close results of the Presidential election and the significantly different political platforms on which the candidates based their campaigns are indicative of a significant split in popular opinion amongst the general public over the best path forward for Ukraine.

        On March 3, 2010, Ms. Tymoshenko was removed from the position of Prime Minister after the Parliament concluded a vote of no confidence. In March 2010, the law governing the formation of parliamentary coalitions (the "Parliament Law") was amended to enable President Yanukovych to form a new parliamentary coalition and appoint Mr. Mykola Azarov as the Prime Minister on March 11, 2010. The amended Parliament Law was challenged by members of Parliament in the Constitutional Court of Ukraine by two groups of Parliament members, with one group requesting an official interpretation of certain provisions of the law, and the other challenging the constitutionality of

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certain provisions of the law. In April 2010, the Constitutional Court issued a ruling in connection with the application requesting an official interpretation, but it did not expressly opine on the constitutionality of such provisions. Accordingly, any future ruling by the Court that relevant provisions of the Parliament Law are unconstitutional may result in further political instability in Ukraine.

        Furthermore, the Ukrainian tax authorities and the General Prosecutor Office of Ukraine initiated several criminal investigations against Ms. Tymoshenko alleging numerous corrupt practices and abuse of powers while being the Prime Minister of Ukraine. On October 11, 2011, the Pechersky District Court found Ms. Tymoshenko guilty of abuse of powers and sentenced her to 7 years of imprisonment.

        A number of additional factors could adversely affect political stability in Ukraine, including:

•

failure to obtain or maintain the number of parliamentary votes required to support a stable government;

•

lack of agreement within the factions and amongst the deputies that form a parliamentary coalition;

•

court action taken by opposition parliamentarians against decrees and other actions of the President, the government or parliamentary coalition;

•

political polarization in Ukrainian society resulting from what is seen as an insufficiently balanced or controversial position of the President and the government on various domestic and foreign policy issues; and

•

growing opposition of certain factions in the Parliament and certain political parties and associations which are not represented in the Parliament to what is broadly seen as significant concessions made by the President and the government to the Russian Federation in certain political and economic areas.

        New parliamentary elections in Ukraine are expected to be held in October 2012 and may influence the political landscape in Ukraine. If political instability continues or heightens, it may have negative effects on the Ukrainian economy and, as a result, have a material adverse effect on our business, results of operations and financial condition.

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.

        A decrease in the price of oil, as well as increased unemployment rates, the failure of the government and many private enterprises to pay full salaries on a regular basis and the failure of

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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

The inability of Barash Communication Technologies, Inc. ("BCTI") to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations.

        In June 2005, we commenced operations in Turkmenistan through our wholly owned subsidiary BCTI. By December 2010, our investments in BCTI exceeded $250.0 million and, as a result, BTCI became the largest telecommunications operator in Turkmenistan providing services to more than 2.4 million subscribers. Our annual revenues from providing telecommunications services in Turkmenistan for the years ended December 31, 2008, 2009 and 2010 amounted to $131.4 million, $160.7 million and $207.6 million, respectively.

        In December 2010, our operations in Turkmenistan were suspended following a notice received from the Ministry of Communications of Turkmenistan informing us of a decision by the Turkmenistan government to suspend licenses held by BCTI for a period of one month starting from December 21, 2010. On January 21, 2011, the period of license suspension expired, however, permission to resume operations was never granted.

        We conducted operations in Turkmenistan under a trilateral agreement signed in November 2005 by BCTI, us and the Ministry of Communications of Turkmenistan, which was due to be automatically extended on December 21, 2010, provided certain terms and conditions were satisfied (the "2005 Agreement"). Under the 2005 Agreement, BCTI shared net profits derived from its operations in the country with the Ministry of Communications of Turkmenistan. The amount of shared net profit was calculated based on the financial statements prepared in accordance with local accounting principles subject to certain adjustments. Accordingly, BCTI shared 20% of its net profit commencing December 21, 2005. We at all times were led to believe that the 2005 Agreement would be extended and approached the Ministry of Communications within the required timeframe to formalize the extension. However, the Ministry of Communications and the Turkmenistan government failed to extend the 2005 Agreement in accordance with its terms.

        Following the decision to suspend BCTI's licenses, Turkmenistan government authorities took further steps, including unilateral termination of interconnect agreements between BCTI and state-owned telecom operators, to prevent us from providing services to our customers.

        We initiated a number of proceedings against Turkmenistan government authorities and state-owned telecom operators to defend our legal rights. On December 21, 2010, BCTI filed three requests for arbitration with the International Court of Arbitration of the International Chamber of Commerce (the "ICC") against the Ministry of Communications of Turkmenistan and several state-owned telecom operators requesting specific performance on the respective agreements and compensation of damages. Subsequently, the sovereign state of Turkmenistan was joined as a respondent in the proceedings against the Ministry of Communications of Turkmenistan. An independent appraisal has shown that we have suffered damages amounting to $855 million as a result of breaches committed by the respondents. We have made a claim for this amount in the ICC proceedings. In March 2012, we withdrew the demand for specific performance of the 2005 Agreement from our claim against the

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Ministry of Communications of Turkmenistan and the sovereign state of Turkmenistan after negotiations with the Turkmenistan government stopped at the end of 2011 and not resumed to date.

        On January 21, 2011, we sent a formal notice to the Government of Turkmenistan requesting to resolve the dispute through negotiations and notifying it of our intention to file a claim pursuant to the provisions of the Bilateral Investment Treaty between the Russian Federation and Turkmenistan. The dispute was not resolved by negotiations and, accordingly, on September 1, 2011, we filed a claim against Turkmenistan in the International Centre for the Settlement of Investment Disputes (the "ICSID"). On October 5, 2011, the claim was registered by the ICSID Secretariat.

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:

•

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

•

conflicting local, regional and federal rules and regulations;

•

the lack of judicial and administrative guidance on interpreting legislation;

•

the relative inexperience of judges and courts in interpreting legislation;

•

the lack of an independent judiciary;

•

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

•

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.

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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, if the net assets of a Russian joint stock company calculated on the basis of Russian accounting standards are lower than its charter capital as at the end of its third or any subsequent financial year, the company must either decrease its charter capital or liquidate. If the company fails to comply with these requirements, governmental or local authorities can seek the involuntary liquidation of such company in court, and the company's creditors will have the right to accelerate their claims or demand early performance of the company's obligations as well as demand compensation of any damages.

        The existence of negative assets may not accurately reflect the actual ability to pay debts as they come due. 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. Some Russian courts, in deciding whether or not to order the liquidation of a company for having negative net assets, have looked beyond the fact that the company failed to fully comply with all applicable legal requirements and have taken into account other factors, such as the financial standing of the company and its ability to meet its tax obligations, as well as the economic and social consequences of its liquidation. Nonetheless, creditors have the right to accelerate claims, including damages claims, and governmental or local authorities may seek the liquidation of a company with negative net assets. Courts have, on rare occasions, ordered the involuntary liquidation of a company for having net assets less than the minimum charter capital required by law, even if the company had continued to fulfill its obligations and had net assets in excess of the minimum charter capital at the time of liquidation.

        The amount of net assets of some of our subsidiaries is negative. Although we are currently taking steps to remedy this and these subsidiaries continue to meet all of their obligations to creditors, there is a risk of their liquidation while the net assets remain below the minimum legal requirements.

        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, net assets 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 securities 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 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,

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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 uncompensated expropriation and nationalization. However, there is a risk 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, potentially without adequate compensation, would have a material adverse effect on our business, financial condition, results of operations and prospects.

Our dispute with Nomihold Securities Inc. concerning Bitel has resulted in a final arbitral award against us of $175.9 million plus $34.9 million of interest and related costs, and our inability to gain operational control over Bitel has prevented us from realizing the expected benefits of this acquisition and resulted in our write off of the costs relating to the purchase of Bitel.

        In December 2005, our wholly owned subsidiary 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 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. As reflected in our audited annual consolidated financial statements for the year ended December 31, 2006, we wrote off the costs relating to the purchase of the 51.0% stake in Bitel. 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 ("LCIA") in order to compel MTS Finance to purchase the Option Shares. Nomihold sought specific performance of the put option, unspecified monetary damages, interest, and costs. In January 2011, the LCIA made an award in favor of Nomihold satisfying Nomihold's specific performance request and ordered MTS Finance to pay to Nomihold $170.0 million for the Option Shares, $5.9 million in damages and $34.9 million in interest and other costs—all representing in total approximately $210.8 million ("Award"). The Award is accruing interest until the Award is satisfied. In addition to the $170.0 million liability related to this case and accrued in the year ended December 31, 2006, we recorded an additional $40.8 million and $3.2 million in the consolidated financial statements for the year ended December 31, 2010 and 2011, respectively (representing interest accrued on the awarded sums).

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        On January 26, 2011, Nomihold obtained a freezing order in respect of the Award from the English High Court of Justice ("High Court") which, in part, restricts MTS Finance from dissipating its assets. Additionally, MTS Finance has been granted permission to appeal the Award, but the High Court has imposed conditions upon the appeal. MTS Finance is currently seeking to have the conditions lifted.

        Further on February 1, 2011, Nomihold obtained an order of the Luxembourg District Court enforcing the Award in Luxembourg. This order is in the process of being appealed.

        As an issuer of US $400,000,000 2012 Notes pursuant to an Indenture dated January 28, 2005 (as amended) (the "Notes"), MTS Finance was due to redeem the principal of the Notes and pay the final coupon payment on January 30, 2012. However as a result of the freezing order, we applied to and obtained from the High Court an order authorizing both payments to be made by us instead of by MTS Finance (the "Direct Payments"). The Direct Payments to noteholders by the trustee under the Indenture were made on or around January 28, 2012.

        The Direct Payments were made despite an obligation under an intercompany loan agreement dated January 28, 2005, between MTS Finance and us (the "Intercompany Loan Agreement") to process the payments through MTS Finance. However, because MTS Finance was subject to a freezing order and not capable of transferring out the money to the trustee for distribution, and because we owed obligations to the noteholders as guarantor under the Indenture, we decided to make the Direct Payments to the noteholders pursuant to an order of the High Court.

        In relation to the obligations under the Intercompany Loan Agreement, we and MTS Finance have agreed to refer to arbitration the question of whether under the Intercompany Loan Agreement itself there remains an obligation by us to make any further payments to MTS Finance in light of the Direct Payment. On February 9, 2012, we received a request for arbitration from MTS Finance. The process is underway and will clarify the rights between the parties under the Intercompany Loan Agreement. We deny that any further payments are due under the Intercompany Loan Agreement. The arbitration will be conducted under the Rules of the LCIA and it is expected to last between 6 and 12 months.

        In addition, three Isle of Man companies affiliated with us (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 KFG Companies do not prevail in these lawsuits, they may be liable to Bitel for such claims. Bitel's Isle of Man advocates have recently withdrawn from their representation of Bitel, and Bitel does not appear to be pursuing these claims.

        In January 2007, the KFG Companies asserted counterclaims against Bitel, and claims against other defendants, including Altimo LLC ("Altimo"), Altimo Holdings & Investments Limited ("Altimo Holdings"), CP-Crédit Privé SA and Fellowes International Holdings Limited, for the wrongful misappropriation and seizure of Bitel. The defendants sought to challenge the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies.

        On March 10, 2011, the Judicial Committee of the UK Privy Council ruled in favor of the KFG Companies and confirmed the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies against various defendants, including Sky Mobile, Altimo and Altimo Holdings, for the wrongful misappropriation and seizure of Kyrgyz telecom operator Bitel and its assets.

        On June 30, 2011, the KFG Companies obtained from the Isle of Man court a general asset freezing injunction over the assets of Altimo and Altimo Holdings. The general freezing injunction against Altimo Holdings was replaced on November 30, 2011, by a specific freezing injunction over (i) Altimo Holding's interest in its Dutch subsidiary, Altimo Coöperatief U.A., and (ii) VimpelCom common shares worth approximately $500 million that Altimo Coöperatief U.A. has lodged with the

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Isle of Man court. The KFG Companies are proceeding with their counterclaims in the Isle of Man. A trial has been set to commence in May 2013.

        In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited ("KMIC") under the rules of the LCIA, 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. The tribunal is currently deciding whether to stay the damages phase of the LCIA proceedings pending conclusion of the Isle of Man proceedings. 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 27 to our audited consolidated financial statements.

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.

        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 Turkmenistan, we commenced operations in June 2005 through our wholly owned subsidiary, BCTI, and operated under a trilateral agreement by and among the Ministry of Communication of Turkmenistan, BCTI and us. However, when this agreement expired on December 21, 2010, the Ministry of Communication of Turkmenistan refused to prolong the agreement and suspended BCTI's telecommunications services license for one month. The suspension lapsed on January 21, 2010; however, the license remains suspended as of the date of this document. Similar actions in other countries where we operate could have a material adverse effect on results of our operations. See also "—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations."

        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.

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Failure to comply with existing laws and regulations or to obtain all approvals, authorizations and permits required to transmit television channels or 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, it is frequently 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.

        In addition, we may be unable to transmit certain television channels if entities that provide television content to us do not possess the requisite licenses. In case such providers of television content do not obtain the required licenses, or have their existing licenses suspended or terminated, our selection of potential television channels for transmission could be significantly limited. Furthermore, we could be subject to fines and other penalties, including forced suspension of our cable network operators' activity for up to 90 days. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.

        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 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, insider trading, disclosure and reporting requirements, are relatively new, while other laws concerning anti-fraud and fiduciary duties

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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:

•

the Federal Service for the Financial Markets;

•

FAS;

•

the CBR; and

•

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 capital markets 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 our shares and ADSs.

        While the Federal Law on Joint Stock Companies of December 26, 1995, (the "Joint Stock Companies Law") provides that shareholders owning not less than 1% of the company's stock may bring an action for damages on behalf of the company, Russian courts to date do not have much experience with such lawsuits. In 2009, new legislation was adopted which contemplates class action litigation. However, since the legislation is relatively new, Russian courts are not experienced in resolving such disputes and do not have a clear and consistent approach in regards to 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 our shares and ADSs.

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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 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 did not participate in 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. Also, on March 10, 2011, we completed a share buyback as part of the reorganization of MTS involving a merger with Comstar, Dagtelecom and Evrotel. Specifically, a total of 8,000 MTS ordinary shares representing 0.0004% of our issued share capital were repurchased for RUR 1.96 million ($67,000 as of the date of repurchase). In addition, a total of 22,483,791 Comstar ordinary shares representing 5.3809% of the Comstar issued share capital were repurchased for RUR 4.8 billion ($161.3 million as of the date of repurchase).

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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.

The Strategic Foreign Investment Law imposes certain restrictions on us and our existing and potential 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 were required to notify the authorized governmental agency about their current shareholding in such companies.

        On April 8, 2009, MTS and two of our subsidiaries, Dagtelecom LLC (Dagtelecom LLC has since been merged into MTS) 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.

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 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 (i.e., there was no charge in addition to the monthly fee for fixed line service). 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 regulator could have a negative impact on our average monthly service revenues per subscriber and margins.

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        In addition, FAS recently indicated its intention to introduce a draft law which would require telecommunications operators, including us, to base their tariffs on per-second billing. It is not clear yet whether this draft law will be adopted; however, if the proposed changes, including the switch from per-minute billing to per-second billing, become effective, the new law may have a negative impact on our revenues and results of operations.

        Additionally, President Dmitry Medvedev has recently called for the implementation of new rules to allow customers in Russia to retain their mobile phone numbers after switching their mobile operator and has asked the Ministry of Communications and Mass Media and the Prosecutor General's Office to review this issue. If new rules that mandate mobile number portability are introduced, they may have a material adverse effect on our financial condition and results of operation.

        Furthermore, potential regulatory changes that may be enacted in the future, such as 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 our information storage, processing and protection practices to be in compliance with the statutory standards, effective as of July 1, 2011. Additionally, various amendments to the current regulatory regime have been proposed by the State Duma, the Ministry of Communications and Mass Media, the Federal Service for Technical and Export Control, and the Federal Security Service, in order to increase regulatory oversight over data protection.

        As a result of these and other changes in personal data protection regulations, we are faced with significant technical, financial and managerial undertakings. For example, we are required to treat subscribers' personal data with the level of protection afforded to state secrets, obtain state certification of our installed information protection facilities from the Federal Service for Technical and Export Control and the Federal Security Service and ensure that our automated accounting systems do not have any undeclared capabilities. We are also now directly liable for the actions of third parties to whom we forward personal data for processing. Moreover, we must now make public our data protection policies, which currently comprise a trade secret, and which may increase the risk of data protection violations if revealed. Furthermore, the modernization of our information protection systems and the optimization and reengineering of our personal data processing systems will require us to incur significant expenses. At the same time, the new regulations contain significant ambiguity and in certain cases their implementation may be impossible on technical grounds, which may impede our ability to comply and creates the potential for Russian authorities to form differing views on compliance. It is expected that by the middle of 2012 current standards will be supplemented by government regulations which will detail these standards. However, although the regulations are only expected in 2012, the Federal Law on Personal Data applies to relevant data protection systems as of July 1, 2011.

        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.

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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 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 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. On September 30, 2010, the Constitutional Court of Ukraine passed another decision which stated that members and the chairperson of the NCRC are to be appointed by the President of Ukraine.

        On November 23, 2011, the NCRC was dissolved and the Ukrainian government created the NCCIR. As a result of the NCRC dissolution, the State Inspection of Communications has similarly been dissolved and there are currently no provisions in the legislation that would provide for a similar regulatory body or for its authority. The authority granted to the NCCIR is largely similar to the authority that was afforded to the NCRC.

        In addition, the Ukrainian Law on Telecommunications may require, among other things, companies declared to have dominant position on the telecommunications market to develop public telecommunications services if directed to do so by the regulatory authorities. On June 24, 2010, MTS Ukraine was found to have a dominant position on the interconnect market by the AMC. Accordingly, the implementation of this law may materially adversely affect our business, financial condition and results of operations. See "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—Regulation in Ukraine—Legislation."

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 our shares and 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 tax laws 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 Arbitrazh Court of the Russian Federation issued Resolution No. 53 formulating the concept of "unjustified tax benefit," which is described in the

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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 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 or, in certain limited instances, by a tax authority which conducted an initial review.

        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. Additionally, according to amendments to the Tax Code of the Russian Federation, effective January 1, 2007, the three-year statute of limitations may be extended 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 terms. According to Presidium of High Arbitrazh Court Resolution #4134/11 of September 27, 2011, the statute of limitations for tax penalties is calculated starting from the day immediately following the expiration of the tax period when the violation was committed.

        On March 17, 2009, the Constitutional Court of the Russian Federation issued a decision preventing the Russian tax authorities from carrying out a subsequent tax audit of a tax period if, following the initial audit of such tax period, a court decision was made concerning a tax dispute between the relevant taxpayer and the relevant tax authority arising out of such tax period, and such decision has not been revised or discharged. The Constitutional Court of the Russian Federation then issued Decision # 138-O-P on January 28, 2010, which confirmed the above approach. Subsequently, the Presidium of High Arbitrazh Court held in several cases that under certain circumstances (in particular, when the case has not been considered in substance) a superior tax body is still entitled to conduct a tax audit with respect to re-opened tax periods and taxes already reviewed during the initial tax audit; however, the circumstances under which the audit is conducted should differ from the initial ones (# 14585/09 of March 16, 2010, # 17099/09 of May 25, 2010, # 7278/10 of October 20, 2010).

        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 prospects.

        As of January 1, 2012, changes to the Tax Code of the Russian Federation enable Russian taxpayers which are part of a group to consolidate their financial results for profit tax purposes. It is yet unclear how the new legislative provisions will be applied by the tax authorities as currently only limited regulatory guidance is available on this matter. In addition to imposing certain criteria that must be met in order to create a consolidated group of taxpayers, the law also limits certain transactions within the group (e.g. corporate restructurings, etc.). Given the uncertainty regarding this law, we may not be able to benefit from this new legislation.

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        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.

        The Russian tax authorities may take a 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 challenges 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 are increasingly taking a "substance and 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.

        It is expected that Russian tax legislation will become more sophisticated, which may result in the introduction of additional revenue raising measures. Although it is unclear how any new measures would operate, any such introduction may affect our overall tax efficiency and may result in significant additional taxes becoming payable. 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 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, we were assessed with 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. As of December 31, 2008, we paid to the tax authorities the full amount assessed. However, we also filed a petition with the Arbitrazh 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). This decision was upheld by higher courts, most recently by the Federal Arbitrazh Court of the Moscow District. The amount invalidated was used to set off subsequent tax liability.

        In 2009, the tax authorities completed a tax audit of our subsidiary, Sibintertelecom, in respect of the years ended December 31, 2006, 2007 and 2008. As a result of the audit, the tax authorities imposed additional tax liability in the amount of 174.5 million rubles (approximately $5.8 million as of December 31, 2009), including taxes, fines and penalties. Sibintertelecom filed a petition with the Arbitrazh Court of Moscow seeking to invalidate this assessment and in November 2010 the court ruled to invalidate the decision of the tax authorities. The court decision was further upheld by the Ninth Arbitrazh Appeal Court in February 2011. The tax authorities then appealed the latter decision to the Federal Arbitrazh Court of the Moscow District, which similarly upheld the decision.

        In 2010, the Russian tax authorities initiated an audit of our compliance with tax legislation for the years ended December 31, 2008 and 2007. Based on the results of this audit, the tax authorities

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imposed an additional tax liability in the amount of 353.9 million rubles (approximately $11.6 million as of December 31, 2010), including taxes, fines and penalties. We appealed this assessment with the Federal Tax Service, which ruled to partially invalidate the assessment. We have filed a petition with a court in order to invalidate this tax assessment in full. The sitting of the court is set to commence on April 26, 2012.

        Recently, the tax authorities conducted a field tax audit of MGTS for the years 2007-2008. After consideration of company objections, additional tax liability in the amount of 258.1 million rubles (including taxes, fines and penalties) was imposed on February 9, 2012.

        See also "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Tax Audits and Claims."

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

        Besides the new Tax Code, which came into force on January 1, 2011, Ukraine currently has a number of laws related to various taxes imposed by both central and regional authorities. Applicable taxes include value added tax ("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.

        Furthermore, with the entry into force of the new Tax Code of Ukraine (the "TCU"), there is uncertainty in regards to tax accounting of payments for the use of computer software. As part of its business, MTS Ukraine purchases limited end-user rights for the use of computer software. Currently, there are no clear rules for the classification of the payments made by MTS Ukraine for these purchases. Under the TCU, these payments may be treated as payments for copyrights (royalties), as payments for intangible assets or as payments for fixed assets. Tax authorities of different levels have provided inconsistent tax clarifications on this matter. The tax rate applicable to these payments will vary according to their classification.

        Also, rules established by the TCU for recalculation of the input tax credit for non-current assets are unclear. As a result, the issue of how to recalculate the input tax credit for non-current assets purchased before January 1, 2011, remains unresolved. There are currently two contradictory clarifications from the tax authorities on this issue, but both do not comply with the existing law.

        Uncertain transfer pricing rules and their inconsistent application by the Ukrainian tax authorities and courts may also adversely affect MTS Ukraine's operations. MTS Ukraine's transactions with its related parties as well as certain transactions with non-Ukrainian entities that are not MTS Ukraine's related parties may be affected by the application of the transfer pricing rules. No "safe harbor" margin is provided under Ukrainian legislation if the sale price deviates from the arm's length price.

        Due to the poor quality of the applicable tax legislation and its inconsistent interpretation, it is possible that MTS Ukraine's prices could be subject to challenge and adjustment for corporate income tax or VAT purposes. Profit repatriation arrangements, such as the level of royalties for trademarks or loan interest paid by MTS Ukraine from Ukraine abroad, may also be challenged for the same reasons. If such price adjustments are implemented, MTS Ukraine's effective tax rate may increase and its financial results may be adversely affected.

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        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 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 materially 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 allowed the tax authorities to make transfer pricing adjustments and impose additional tax liabilities with respect to all "controlled" transactions, provided that the transaction price differed from the market price by more than 20%. "Controlled" transactions included transactions with related parties, barter transactions, foreign trade transactions and transactions 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 were established for operations with securities and derivatives. Russian transfer pricing rules were 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. These transfer pricing rules apply with respect to transactions that occurred before January 1, 2012.

        New transfer pricing rules became effective on January 1, 2012. The implementation of these new rules should help to align domestic rules with OECD principles. The new rules are expected to considerably toughen the previously effective law by, among other things, effectively shifting the burden of proving market prices from the tax authorities to the taxpayer and obliging the taxpayer to keep in certain cases specific documentation. In addition, the amendments:

•

introduce the possibility for major taxpayers to enter into an advance pricing agreement with the tax authorities;

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introduce the 'arm's length' principle as a fundamental principle of the Russian transfer pricing rules;

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establish a new list of controlled transactions (which would cover cross-border transactions with certain commodities, cross-border transactions with related parties and tax haven residents, and certain intra-Russian transactions with related parties);

•

extend the list of related parties;

•

extend the list of transfer pricing methods (including the Transactional Net Margin Method and the Profit Split method) with the choice of method depending on the allocation of functions performed, risks assumed and assets used by the parties to a transaction (instead of a rigid priority of methods under prior legislation);

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•

replace the existing permitted deviation threshold with the 'arm's length' range of market prices (profitability);

•

introduce double-side adjustments in relation to domestic transactions; and

•

introduce special transfer pricing audits by federal tax authorities and specific transfer pricing penalties (more severe that in case of other, non-transfer pricing related, tax assessments).

        If the Russian tax authorities were to impose significant additional tax liabilities through the introduction of transfer pricing adjustments, it could have a material adverse impact on our business, financial condition and results of operations. Adoption of the new transfer pricing rules may increase the risk of transfer pricing adjustments being made by the tax authorities. In addition to the usual tax risks and tax burden imposed on Russian taxpayers, the uncertainties of the new transfer pricing rules complicate tax planning and related business decisions. It will also require us to ensure compliance with the new transfer pricing documentation requirements proposed in such rules. Uncertainty of the new rules may also require us to expend significant additional time and material resources for implementation of our internal compliance procedures. Tax authorities could impose additional tax liability as well as penalties on the underpaid tax in case the prices or profitability are outside the market range and if the required transfer pricing documentation has not been prepared.

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 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 25% of a Russian company's shares 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

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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.

New Russian legislation will require the disclosure of beneficial ownership of the ADSs, and a failure to provide such disclosure may restrict your ability to vote and/or receive dividends

        Pursuant to recently enacted legislation, starting 1 January 2013, depositaries, and as a result, ADS holders, will not be able to vote or receive dividends in connection with the shares underlying ADSs on behalf of the ADS holders unless they provide certain information to the issuer. At a minimum, this information will include the identity of the ultimate owner of the ADSs and the number of shares attributable to each ADS holder. The exact scope of the required disclosure and procedures involved are not fully described in the new legislation, and can be further clarified in regulations to be issued by the FSFM.

        Moreover, even if an ADS holder chooses to provide the required information, there may be no assurance that the depositary will be successful in collecting and providing this information to the issuer on a timely basis or at all, since the process of obtaining this information is untested and could be technically complicated. In particular, the ADS ownership chains are typically multi-layered and involve, among others, global clearing systems and institutional participants in such clearing systems. Since similar data collection processes have not been widely used to date, and due to the multitude of parties involved, it is possible that technical or procedural complications will make it difficult to obtain and provide all the necessary information to the issuer on a timely basis, if at all. As a result, in case you fail to disclose your ownership or the disclosed details are not provided by the depositary to us in a timely fashion, you may be unable to vote the ADSs and/or receive dividends.

        Furthermore, the new legislation stipulates that starting from 1 July 2012:

•

issuers must collate, at least quarterly, lists of ADS holders, and depositaries must facilitate the collection of the relevant information and provision thereof to issuers; and

•

the FSFM, Russian courts, pretrial investigation agencies and internal affairs authorities may request such lists of DR holders from the issuers.

        In case of non-compliance with the above requirements, the FSFM may suspend, or impose limitations on, transactions with securities held in the relevant accounts of Russian custodians for a period of up to six months. As a result, the shares underlying the ADSs may be blocked and it may be impossible to deposit or withdraw the shares into or from the depositary program during this period. Moreover, the depositary may be subject to administrative fines in case of non-compliance.

        In addition, the new legislation envisages the accreditation of a central depositary, which will be selected by the FSFM among the existing Russian depositaries. Within one year from the accreditation of the central depositary, only entities maintaining an account with this central depositary will be able to serve as custodians for shares underlying all depositary programs of Russian issuers. Accordingly, the compliance of our ADS program with this new legislation will depend on the ability of our custodian to timely adapt to the new regulation and open the requisite accounts.

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

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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.

        According to recently enacted Russian legislation, within one year of the accreditation of the central depositary, shares underlying the ADSs will need to be moved to a special nominee account for the depositary. Starting January 1, 2013, Shares that are moved to such an account will no longer be subject to seizure or arrest in case of a lawsuit against the depositary. See also "—New Russian legislation will require the disclosure of beneficial ownership of the ADSs, and a failure to provide such disclosure may restrict your ability to vote and/or receive dividends."

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. The closing price of our ADSs on the New York Stock Exchange ranged from a low of $18.60 to a high of $54.54 per ADS in 2009, a low of $17.84 to a high of $23.55 per ADS in 2010 and a low of $11.41 to a high of $21.86 per ADS in 2011. On May 3, 2010, the ADS to ordinary share ratio was changed from five ordinary share for one ADS to two ordinary shares for one 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:

•

periods of regional or global macroeconomic instability;

•

announcements of technological or competitive developments;

•

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

•

actual or anticipated fluctuations in our quarterly operating results;

•

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

•

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

•

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

•

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

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individual companies. These broad market fluctuations may adversely affect the price of our ADSs, regardless of our operating performance.

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.

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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%. 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 (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. Russian tax law does 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."

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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 central and rigorously regulated 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.

        According to recently enacted legislation, a central depositary may be established in the near future. It is yet unclear how this legislation will be implemented, when the central depositary will be established and how this will affect us. See also "—New Russian legislation will require the disclosure of beneficial ownership of the ADSs, and a failure to provide such disclosure may restrict your ability to vote and/or receive dividends."

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 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 our shares and 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.

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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 user ("ARPU"), average monthly usage per user ("MOU") or churn exists in the 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 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 telecommunications companies may be difficult to draw.

Item 4.    Information on Our Company

A.  History and Development

        Mobile TeleSystems CJSC ("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 remaining 47%. Sistema currently owns 50.8% of our share capital (52.8% 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 in Russia and the CIS. We expanded into the fixed line communications market in 2009 with our acquisition of Comstar.

        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 (the "NYSE") under the symbol "MBT." Each ADS represents two underlying shares of our common stock. Prior to May 3, 2010, each ADS represented five shares of our common stock.

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        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). According to the tender conditions we also paid a lump sum of $10.0 million to the government of Belarus, MTS Belarus made a one-time payment of $5.0 million (which was funded by a $5.0 million loan from us) and we paid a total of $6.0 million to the government of Belarus 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 April 30, 2012. We expect the license will be renewed in due course. The State Property Committee of Belarus is expected to conduct a public tender in 2012 to privatize a 51% ownership interest in MTS Belarus. 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."

        In March 2003, we purchased a 57.7% stake in MTS Ukraine 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 MTS Ukraine from Ukrtelecom for $87.6 million pursuant to a call option agreement, which increased our ownership in MTS Ukraine to 83.7%. We purchased the remaining 16.33% stake in MTS Ukraine 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.

        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.

        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.

        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. On December 21, 2010, the Ministry of Communication of Turkmenistan suspended our primary operating license and we have since ceased providing mobile telecommunications services in Turkmenistan and are in the process of resolving the disagreement with the relevant authorities in that country. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations" and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan."

        In September 2007, we acquired an 80% stake in International Cell Holding Ltd., a 100% indirect owner of K-Telecom, the leading wireless operator in Armenia, for €260.0 million ($361.2 million as of the date of acquisition), and entered into a call and put option agreement initially valid until 2012 (and later extended until 2016) for the remaining 20%. K-Telecom operates in the GSM-900/1800 standard, covering the entire territory of Armenia. It historically operated under the VivaCell brand, and was re-branded as VivaCell-MTS in September 2008.

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        Our legal name is Mobile TeleSystems OJSC, and we are incorporated under the laws of the Russian Federation. Our head office is located at 5 Vorontsovskaya Street, Bldg. 2, Moscow 109147, Russian Federation, and the telephone number of our investor relations department is +7 495 223-2025. The address of our incorporation is 4 Marksistskaya Street, Moscow 109147, Russian Federation. 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.

        In October 2009, we acquired a 50.91% stake in Comstar, a leading fixed line operator in Russia, from Sistema, and subsequently increased our ownership interest to 61.97% in December 2009 and to 70.97% in September 2010 through a voluntary tender offer. On December 23, 2010, the extraordinary general meetings of shareholders of Comstar and MTS approved a merger of Comstar and us, which was completed on April 1, 2011. As a result, Comstar ceased to exist as a separate legal entity and we became the legal successor of Comstar in respect of all its rights and obligations.

        As we and Comstar were under the common control of Sistema, our acquisition of a majority stake in Comstar has been treated as a combination of entities under common control and accounted for in a manner similar to a pooling-of-interests, i.e., the assets and liabilities acquired were recorded at their historical carrying value and the consolidated financial statements were retroactively restated to reflect the Group as if Comstar had been owned since the beginning of the earliest period presented. As a result, Comstar and its assets have been recorded at book value as if the businesses and assets of Comstar had been owned by us since the beginning of the financial periods presented in this document. See "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Acquisitions."

        Prior to April 1, 2011, Comstar operated in both the alternative and traditional fixed line communications markets, offering voice telephony, broadband Internet and pay-TV, operator interconnect and other services to its subscribers. After April 1, 2011, we continued, and still continue to provide these services. Among our subsidiaries is MGTS, Moscow's incumbent fixed line operator with "last mile" access (the final phase of delivering connectivity from a communications provider to a customer) to approximately 96% of the households in Moscow. We believe the merger of Comstar into us provides us access to important growth markets in corporate and residential broadband in furtherance of our strategy to develop convergent telecommunications services and evolve into an integrated telecommunications operator.

        In 2011, we completed the re-branding of Comstar with our main MTS brand. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Difficulties integrating the operations of Comstar with our existing operations may prevent us from achieving the expected benefits from the acquisition."

Capital Expenditures

        We spent in total $2,584.5 million in 2011 for network development in Russia and the other countries where we operate, which included $2,239.8 million in cash expenditures on property, plant and equipment, and $344.7 million for the purchase of intangible assets. We expect to spend approximately $2,494.5 million (USD amount at exchange rate on December 31, 2011) in 2012 for our current operations, including for increasing network capacity, maintaining and modernizing our mobile and fixed line networks, developing our network in the regions and continuing the build-out of our 3G and broadband Internet networks. 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 2012 may vary depending on subscriber growth, demand and network development, as well as currency volatility, vendor terms and the availability of external financing. The capital expenditure estimate for 2012 excludes expenditures that may be made in

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connection with acquisitions or new licenses. A breakdown of our capital expenditures in 2011 by country is set forth below. For the first quarter of 2012 and continuing into the second quarter, our principal capital expenditures have related and continue to relate to the build-out of our 3G network and other expenditures related to the maintenance and expansion of our GSM network which we have financed through operating cash flows.

        Excluding our acquisition of Comstar and certain other subsidiaries from our related parties, we spent $270.5 million, $195.1 million and $219.5 million in 2009, 2010 and 2011, respectively, for acquisitions of subsidiaries, net of cash acquired. We additionally spent $1,322.3 million for the acquisition of a 50.91% stake in Comstar, additional consideration in the form of cash and MTS common shares for the acquisition of an 11.06% ownership stake in Comstar in December 2009, as well as RUB8.3 billion ($271.9 million as of October 6, 2010) for the acquisition of an additional 9% in Comstar through a voluntary tender offer in September 2010.

        Furthermore, on December 23, 2010, an extraordinary general meeting of the MTS' shareholders approved the merger of Comstar-UTS into MTS OJSC. We redeemed Comstar-UTS shares held and put by non-controlling interest shareholders within the limit set forth by Russian law at a specified price. The consideration paid to Comstar-UTS shareholders in the first quarter of 2011 totaled $168.5 million.

        In December 2011, we acquired 29% of the ordinary shares of MGTS from Sistema for RUB10.56 billion ($336.3 million as of exchange rate on December 1, 2011). In addition, we assumed debt in the amount of RUB10.41 billion ($331.5 million as of exchange rate on December 1, 2011) due and payable by the end of 2011. See also "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Acquisitions" and Note 3 to our audited consolidated financial statements.

Russia

        We spent $2,242.3 million in 2011 for network development in Russia, including $1,995.4 million in cash expenditures on property, plant and equipment, and $246.9 million for the purchase of intangible assets.

Ukraine

        We spent $148.0 million in 2011 for network development in Ukraine, including $98.1 million in cash expenditures on property, plant and equipment, and $49.9 million for the purchase of intangible assets.

Uzbekistan

        We spent $145.7 million in 2011 for network development in Uzbekistan, including $108.6 million in cash expenditures on property, plant and equipment, and $37.1 million for the purchase of intangible assets.

Armenia

        We spent $45.0 million in 2011 for network development in Armenia, including $34.7 million in cash expenditures on property, plant and equipment, and $10.3 million for the purchase of intangible assets.

Belarus

        MTS Belarus spent $35.5 million in 2011 for network development in Belarus, including $26.8 million in cash expenditures on property, plant and equipment, and $8.7 million for the purchase

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of intangible assets. 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.

B.  Business Overview

        We are a leading telecommunications provider in Russia and the CIS, providing a wide range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV and various value-added services, as well as selling equipment and accessories. According to AC&M-Consulting, we are the largest mobile operator in Russia, Uzbekistan and Armenia and the second largest in Ukraine in terms of mobile subscribers.

        As of December 31, 2011, we had a mobile subscriber base of approximately 101.14 million (approximately 69.95 million in Russia, 19.51 million in Ukraine, 9.30 million in Uzbekistan, and 2.38 million in Armenia), which is a decrease of 2.41% compared to December 31, 2010. We are also the largest operator in the Moscow residential broadband market in terms of subscribers, with a 28.5% market share as of December 31, 2011, according to Direct INFO.

        However, see also "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations" regarding the recent suspension of our primary operating license in Turkmenistan.

        Our revenues for the year ended December 31, 2011, were $12,319 million, an increase of 9.1% from the year ended December 31, 2010. Our net income for the year ended December 31, 2011, was $1,568 million, an increase of 1.2% from the year ended December 31, 2010.

        Russia is our principal market, both in terms of subscribers and revenues. For the years ended December 31, 2009, 2010 and 2011, approximately 81%, 83%, and 86% of our revenues came from operations in Russia; approximately 11%, 9%, and 9% of our revenues came from operations in Ukraine; and approximately 8%, 8%, and 5% of our revenues came from operations in our other countries, respectively.

        At December 31, 2011, approximately 69% of our mobile subscriber base was in Russia and approximately 19% was in Ukraine. According to AC&M-Consulting, we had a 30.73% and 35.8% market share of total mobile subscribers in Russia and Ukraine, at December 31, 2011, respectively.

        The table below sets forth our total mobile subscribers as of the end of the last five years:

Period	Subscribers(1)
	(in thousands)
2007		82.0
2008		91.3
2009		97.8
2010		103.3
2011		101.1	(2)

(1)

Excludes MTS Belarus subscribers. 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.

(2)

Excludes Turkmenistan subscribers.

        Our consolidated mobile subscriber base decreased insignificantly in 2012. Specifically, according to our estimates at April 1, 2012, we had approximately 100.5 million subscribers, including approximately 69.4 million in Russia, 19.4 million in Ukraine, 9.45 million in Uzbekistan and 2.2 million in Armenia.

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        In Turkmenistan, our primary operating license was suspended on December 21, 2010, and we ceased providing mobile telecommunications services in that country since that date. For more information, see "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations" and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan."

        According to AC&M-Consulting, overall mobile cellular penetration in Russia was approximately 156.8% at December 31, 2011, which was an increase from 151.0% at December 31, 2010. Mobile cellular penetration in Ukraine was approximately 117.6% at December 31, 2011, which was a decrease from 118.1% at December 31, 2010, according to AC&M-Consulting. According to our estimates, mobile cellular penetration in Uzbekistan and Armenia was approximately 82.2% and 116.4% at December 31, 2011, respectively, as compared to approximately 73.3% and 115.5% at December 31, 2010, respectively.

        As of December 31, 2011, we had mobile licenses to operate and commercial mobile operations for the entire territory of Russia with a population of approximately 143 million people, 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 28 million people and for the entire territory of Armenia with a population of approximately 3 million people. Prior to December 21, 2010 when we suspended our operations in Turkmenistan, we had mobile licenses to operate and commercial mobile operations for the entire territory of Turkmenistan with a population of approximately 5 million people. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations."

        MTS Belarus had approximately 4.93 million subscribers and a leading market share of 43% at December 31, 2011, according to our estimates. At December 31, 2010, according to our estimates, MTS Belarus had approximately 4.72 million subscribers and a leading market share of 45.1%. Belarus, a country with a population of approximately 9.5 million, had a mobile cellular penetration rate of approximately 121% at December 31, 2011, according to our estimates.

        In 2009, 2010 and 2011, we significantly expanded our operations in an effort to meet the challenges of our evolving markets and further the goals of our new "3i" strategy set out in more detail below. Through our acquisition of a controlling stake in Comstar in October 2009, we have become a leading integrated fixed line services provider in Russia.

        We also continued to aggressively develop our proprietary sales and distribution network organically. We additionally focused on the development of online platforms and content, launching Omlet.ru in September 2009. Omlet.ru is an online and mobile content portal offering a large selection of videos, music and games for sale and a high degree of interoperability between mobile devices and computers as well as network flexibility (e.g., EDGE and 3G).

        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.

Business Strategy

        Our primary strategic goal is to be the leading communications operator in the territories where we are present, providing our customers with mobile and fixed telephony, high-speed Internet access at home and on the move, cable TV and the widest choice of licensed content on the market. We strive to

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maintain and strengthen our market position by investing in network and product development, new technologies and customer service.

        From October 2009, we have adopted a new "3i" strategy, which we believe represents a logical development of our previous strategic principles and corresponds to the changing market environment. Consistent with our new strategy, we moved beyond simple mobile access, both horizontally and vertically, through our acquisition of Comstar, the rapid build-out of our proprietary distribution network and the launch of our first online content platform, Omlet.ru. Our development beyond mobile access is the intrinsic part of our new "3i" strategy, which is focused on the following key directions:

•

Integration:  developing new pipelines and customer touch points. We aim to provide a comprehensive integrated service portfolio for all of our customers' communication needs, through both fixed line and wireless access. Through the networks and platforms we develop, we will seek to create a seamless and unsurpassed user experience.

•

Internet:  offering universal connectivity. Our customers increasingly expect faster and broader connectivity as more devices and services depend on integrated mobile and fixed networks. Our goal is to create smarter pipelines so customers can realize the full benefits of today's technologies, while creating additional value for us. Through so-called "smart pipes," we will strive to offer best-in-class content applications and market- leading services, enabling transactions and bringing us closer to our customers.

•

Innovation:  differentiating ourselves from our competitors by offering a unique mix of products and services. We will offer exclusive devices, distinct packages of services catering to all customer segments and a market-leading end-to-end user experience at home, work and on the move.

        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

        We are a provider of mobile cellular communications services in Russia, Ukraine, Uzbekistan and Armenia. Prior to the suspension of BCTI's primary operating license on December 21, 2010, by the Ministry of Communication of Turkmenistan, we also provided mobile cellular communications services for the entire territory of Turkmenistan. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations."

Subsidiaries

        For a list of our major subsidiaries and our ownership percentages in these subsidiaries, see "Item 4. Information on our Company—C. Organizational Structure."

Mobile Operations

Services Offered

Network Access

        We primarily offer mobile cellular voice and data communication services to our subscribers on the basis of various tariff plans designed for different market segments. In general, most of our tariff plans combine per minute usage charges, value-added services and, in some cases, monthly network access fees. See "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Tariffs."

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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, 2011, we had bilateral roaming contracts with 711 wireless operators in 228 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, 2011, in addition to our network coverage area in 82 of the 83 regions of Russia, GSM service was available to our subscribers in the Penza region of Russia where we operated through our roaming agreements with 11 regional operators. On April 19, 2011, we won a public tender held by the State Radio Frequencies Commission and obtained radio frequencies which allows us to provide GSM services in the Penza region, where we did not previously have a GSM license. We plan to start the construction of a GSM network in the Penza region in 2012. As a result, we are now able to expand our GSM network coverage throughout the entire territory of Russia.

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

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

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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 launched EDGE services in the Moscow metropolitan area. Further, we extended our data transmission network to expand EDGE services to cover the most developed markets where we operate. EDGE is a high-speed, high-quality data transfer technology 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 and Belarus. Prior to the suspension of BCTI's primary operating license on December 21, 2010, we also provided our subscribers in Turkmenistan with EDGE services. For more information, see "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations" and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan."

        We also offer the MTS-Connect service, which allows our subscribers to get mobile Internet access through a GPRS/EDGE/3G/HSDPA/HSPA ("High Speed Packet Access") connection, using a computer, PC-card and USB-modem. This service is available to our subscribers in Russia and Ukraine and in more than 181 countries where we have GPRS roaming.

        We signed an agreement with Research In Motion in September 2005 to offer BlackBerry services to our subscribers and were the first mobile operator to offer BlackBerry services in the CIS. Following our receipt of the required regulatory approvals, we began providing BlackBerry services to corporate users in Ukraine in October 2007 and to corporate users in Russia in June 2008. In addition to corporate users, we also provide BlackBerry services to individual subscribers in Ukraine and in Moscow and the Moscow region in Russia. In May 2009, we launched Blackberry Internet Service in Moscow and the Moscow region, and in October 2009, we launched commercial operations of BlackBerry Enterprise Server ("BES") and BlackBerry Internet Service ("BIS") in 39 regions of Russia, and expanded such services to 81 regions by the end of 2011.

3G Technology

        The key benefit of a 3G network based on R99/HSDPA/HSPA technologies is the ability to provide subscribers with faster data download and upload speeds with top download capacity using HSPA technology up to 21 Mbit per second in Russia and Armenia. This is over 50 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 (Universal Mobile Telecommunications System) 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. We currently have commercial 3G networks launched in all regions of Russia.

        In May 2009, we, along with Vimpelcom OJSC ("Vimpelcom") and MegaFon OJSC ("MegaFon"), were allocated 3G/UMTS frequencies to begin testing our 3G network in Moscow and the Moscow region. Starting from May 2009, we were allowed to launch our 3G network inside buildings and other indoor structures in Moscow as well as in the Moscow metro. As of December 31, 2011, our 3G indoor network operates in 96 trade and business centers in Moscow and in various metro stations. We also provide 3G services to various large companies within Moscow.

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        In December 2009, we obtained a permit to install 783 base stations in the UMTS standard in Moscow and commercially launched our 3G network in Moscow. Our 3G network uses 1950-1965 MHz, 2015-2020 MHz and 2140-2155 MHz frequencies and complements our existing GSM network. By the end of 2011, we installed 21,670 3G base stations throughout Russia. In order to expand our coverage in the Moscow region's countryside, we launched a 3G network in the 900 MHz frequency band.

        In 2010, we began to implement an upgraded version of the HSPA technology known as HSPA+. This technology allows us to provide our subscribers with faster data transmission speeds. We have launched HSPA+ technology in Moscow which supports 42 Mbit per second data transmission speed.

        In 2011, we began to develop a 3G femtocell network. Femtocells are small low-power wireless base stations in the licensed 2100 MHz spectrum. They connect to a mobile operator's network using residential DSL or cable broadband connections and can support multiple standard mobile devices. Femtocells deliver a strong signal and high-quality voice service to standard mobile devices in homes, small and large offices, outdoor public spaces, metro hotspots and rural areas. They allow for strong signal performance even in areas where MTS cellular coverage is limited or unavailable. A femtocell network also provides for high speed of data upload and download. In 2011, we installed 66 femtocells in Moscow and 60 femtocells in Saint-Petersburg.

        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 Internet access 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—Urgench, Khiva and Bukhara—in January 2009. In 2011, we completed our 3G network expansion into all regional centers of Uzbekistan. We plan to further develop our 3G network in Uzbekistan in 2012.

        In January 2010, the Communications and Information Agency of Uzbekistan granted us an LTE license covering Uzbekistan. In July 2010, we started to construct a 4G network based on the LTE technology in Uzbekistan. Currently, the 4G network is accessible only in the central part of Tashkent; however, we plan to expand it in the future to cover all of Uzbekistan.

        In Armenia, our subsidiary K-Telecom 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 2009, we commercially launched our 3G network in Armenia. In 2010, we further expanded our 3G network to cover all towns and villages with a population of more than 2,000 people, and, as a result, our 3G outdoor coverage currently covers more than 91% of inhabited areas. In 2011, K-Telecom started to provide telecommunications services based on HSPA+ technology in Yerevan, Guymri and Vanadzor. We plan to extend HSPA+ technology to all regions of the country.

        In Yerevan, the capital of Armenia, we commenced a commercial test of the first 4G/LTE network in December 2010. We plan to start providing LTE services in Guymri and Vanadzor in 2012.

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

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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 client relationship management ("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.

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. Today, we are considered a mass-market mobile network operator with a wide range of subscribers in all customer segments. As part of our business, we provide a wide range of products and services to these 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 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 international and cross market offers with other companies, positioning the MTS brand as a truly national brand. 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.

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        In 2010, we made enhancements to the MTS Bonus loyalty program, including better opportunities for participants both in terms of points accumulation and points exchange. The MTS Bonus loyalty program is aimed at retaining subscribers within the MTS network and stimulating their further use of our mobile services. It is also designed to enhance brand loyalty and create overall positive brand perception. In April 2010, we signed an agreement with Sberbank, one of the leading Russian banks, to launch co-branded credit cards. The holders of such credit cards receive MTS Bonus program points when they make payments using the credit card. The bonus points can be used to pay for our services, make purchases in MTS-branded stores and pay for other goods and services with a co-branded MTS credit card.

        In 2011, we took several steps to increase our subscribers' loyalty with successful enhancements to the MTS Bonus loyalty program, such as the launch of the advertising campaign "Which MTS Bonus prize is yours?" and the creation of the financial product "MTS Dengi." The main purpose of the advertising campaign was to inform our customers that they can obtain various gifts in exchange for accumulated bonus points. We also promoted the use of the "MTS Dengi" credit card, as it allows customers to receive more bonus points.

        In addition to further promoting the MTS Bonus loyalty program, we undertook the following initiatives in 2011:

•

New Plan

In 2011, we introduced the "Super MTS" tariff plan. This is our "flagship" tariff plan which is aimed at mass-market subscribers. Super MTS, developed from the Super Zero tariff plan, was our main sales-driving offer of 2011. In addition, we continued to implement our long-term strategy of developing data offers to customers. We focused on offers for mobile internet users as well as for those customers who prefer internet access from computer or tablet devices. For more detailed information, see "—Tariffs."

•

Roaming

During 2011 we launched an advertising campaign aimed at promoting our roaming offers and changing the commonly-held perception that roaming services are overpriced. The campaign publicized the special offer, "Everywhere like home," which allows for unlimited incoming calls while travelling in Russia. It also publicized the offer, "Zero without borders," which allows for limited incoming calls while travelling abroad.

•

Fixed

In 2011, we presented the "Twenty percent back" program as a part of our triple-play products promotion campaign. As part of the program, we offered to give back to mobile subscribers 20% of their monthly payments for 3G Internet, broadband or TV services. The amounts returned to the mobile subscribers' accounts can then be used to purchase other telecommunications services provided by us. The "Twenty percent back" program was promoted online, over television and radio. We also promoted our fixed line services, such as broadband and cable TV, on the regional level with the use of special offers.

•

Business-to-business offers

In 2011, we launched several offers for small and medium-sized companies. We introduced new SIM-chips that enable companies to monitor and manage technological equipment in difficult climatic conditions. In 2011, we also advertised two new tariff plans: "Ready office" and "United business." "Ready office" is the first tariff plan on the market that enables companies to customize tariff rates and conditions for each individual employee. "United business" is the first tariff plan developed for businesses which operate in multiple regions.

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•

Handsets sales offers

During 2011, we continued reinforcing our image as a leading retailer of mobile devices, including MTS branded phones and phones of other vendors. We significantly increased the range of offered MTS branded phones. In partnership with Google we developed an advertising campaign to promote MTS 916—the first MTS branded smartphone based on the Android platform. We also introduced the MTS 1055 tablet and two other smartphones based on the Anrdoid platform, MTS 950 and MTS 955. In addition, we launched several low-cost non-smartphone models during 2011. During 2011, we continued active collaboration with key vendors. Throughout the year we launched joint advertising campaigns with Nokia, HTC, Apple and Samsung to promote offers of new smartphones.

Renewed Brand

        In December 2008, we reached an agreement with Sistema Shyam TeleServices Limited ("Sistema Shyam") allowing Sistema Shyam to use the MTS brand in India. Sistema is the majority shareholder of Sistema Shyam with an ownership stake of 56.68%. Under the terms of the agreement, Sistema Shyam has had the right to use the MTS brand in India since March 2009, while we started receiving royalties of 0.16% of Sistema Shyam's revenues. 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.

        On October 1, 2010, we announced the launch of a refreshed logo which we believe better emphasizes the ideas of innovation and dynamism reflected in our recently introduced new slogan "a step ahead." Our logo and brand style refresh are among the goals of our new brand positioning. The refreshed logo retains the same egg shape, but transforms the former logo into a 3D image of a white egg against a red background, which gives the logo a more dynamic and modern look and perception. This new logo is aimed at graphically enhancing and modernizing the egg-shaped logo we have been using since 2006. In addition, we believe that the new logo better symbolizes our dynamic and innovative approach to doing business and our stated mission of "creating the best client experience," and our slogan "a step ahead."

        In December 2010, we acquired Sistema Telecom from Sistema, which gave us control over the universal brand featuring the egg-shaped symbol against backgrounds of various colors used by us and our affiliates operating in the telecommunications sphere.

        In furtherance of our effort to integrate Comstar within our group, develop and offer integrated communications services and create a unified platform for subscribers, we completed the process of re-branding Comstar with our main MTS brand. Specifically, we carry out advertising campaigns aimed at promoting each of our mobile network, fixed TV and Internet broadband services under the MTS brand name across all media channels.

        In February 2012, MBRD Bank, a subsidiary of Sistema, announced a change of its name to MTS Bank OJSC ("MTS Bank"), having agreed to use the MTS brand owned by us as a basis for further development.

Global recognition

        In May 2011, MTS was ranked 80 in the BRANDZ™ Top 100 Most Powerful Brands, an independent 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 2008 and remain the highest-ranked brand in Russia. In December 2010, MTS was named the Best Russian Brand 2010, according to Interbrand, an international brand consulting agency.

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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. However, according to press reports, the financial downturn and tightening of the credit markets resulted in virtually all of the large national and regional mobile handset retailers in Russia facing liquidity issues or being on the verge of bankruptcy. In addition, as of April 1, 2009, we ceased working with Euroset, the largest mobile handset retailer in Russia, following Vimpelcom's indirect acquisition of a 49.9% stake. As a result of these factors, the share of our subscribers enrolled through these retailers dropped dramatically during the last quarter of 2008 and continued to drop in 2009. In the second half of 2010, we focused on improving our cooperation with certain of the large national and regional mobile handset retailers such as AltTelekom. In addition, we restored our cooperation and resumed working with Euroset in November 2010. We intend to continue developing a diversified range of distribution channels by entering into cooperation agreements with major national retailers of electronics and household appliances. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—The reduction, consolidation or acquisition of independent dealers and our failure to further develop our distribution network may lead to a decrease in our subscriber growth rate, market share and revenues."

        In 2009, we changed the structure of our retail operations by significantly expanding our proprietary sales and distribution network both organically and through the acquisition of several national and regional retail chains. Over the course of 2009, we acquired 100% of handset retailer Telefon.Ru, which at the date of acquisition operated 512 stores in 180 cities in Russia; 100% of the Eldorado handset retail chain, which operated 383 stores in 153 cities in Russia; and 100% of handset retailer Teleforum, which operated 180 stores in St. Petersburg and several other regions of 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. Under the agreement, the Svyaznoy shareholder provides operational and strategic consultancy services to us, as well as procures 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. The contract terminated in 2011 and former managers of Svyaznoy ceased to be our employees.

        In addition, we organized our retail operations under a wholly owned subsidiary, Russian Telephone Company ("RTC"). RTC handles all functions relating to our retail operations, including the management of points-of-sale, the purchase and sale of handsets and accessories and subscriber enrollment at our retail outlets. It also endeavors to secure optimal locations for our points-of-sale and monitors the effectiveness of their operations.

        In 2011, we continued to implement our strategy in retail operations by significantly expanding our proprietary sales and distribution network organically. The number of MTS retail outlets (including our partners, operating under the MTS brand), increased in 2011 by 17% as compared to 2010.

        Our proprietary distribution network consists of MTS-branded franchise points-of-sale (third-party dealers operating under the MTS brand) and MTS-branded points-of-sale owned by us. As of December 31, 2010, our proprietary distribution network in Russia consisted of 3,539 points-of-sale, including 1,206 franchise points-of-sale and 2,333 points-of-sale owned by us.

        In 2011, we have been focusing on the further development of our proprietary network in Russia. As of December 31, 2011, we operated 4,146 points-of-sale, including 1,686 franchise points-of-sale and 2,460 points-of-sale owned by us.

        Of the retail outlets acquired by us, 411 were re-branded as MTS monobrand outlets in 2010, and 308 outlets in 2011.

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        As a result of our strategy, the number of subscribers in Russia who were enrolled directly by us increased by 16% during the year ended December 31, 2011, as compared to the year ended December 31, 2010. In 2011, the share of subscribers enrolled through our own distribution network reached 35%.

        Our proprietary distribution network outside of Russia as of December 31, 2011, consisted of 41 points-of-sale in Ukraine, 26 points-of-sale in Uzbekistan and 99 points-of-sale in Armenia.

        For newly acquired mobile subscribers in Russia, we link commissions 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. The dealer commissions in Russia currently range between RUB 100 and RUB 2,800 ($3 and $87) per subscription.

        In Ukraine, we link dealer commissions to the tariff package sold, category of subscriber, subscriber revenue, the duration of a subscriber being active, city of subscription and status of the specific dealer. 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 or monthly payments based on the revenue generated from the subscriber. The dealer commissions in Ukraine for postpaid tariffs consist of one-time commissions of $5 and we are entitled to retain the full commission amount if the subscriber stops using our services within five months following the month of activation. In addition, we may also pay monthly commission in an amount ranging from 30% to 36% of the revenues generated by the subscriber for a period of 12 months. Prepaid tariff commissions for activation of a subscriber are linked to the territory where a dealer operates. The period during which we pay a dealer commission depends on our market share in that territory and may vary from 4 to 8 months, and is the lesser amount of 50% of the subscriber's monthly invoice and $10.6. We also pay monthly dealer commissions of $15 for high quality, long-term subscribers, as well as a lump sum amount of between $156 and $3,150 to exclusive dealers who sell exclusively MTS Ukraine subscriptions. For CDMA subscriptions, we typically pay dealers a one-time fee of $5 upon subscriber activation, as well as monthly payments up to 12 months based on the revenue generated by the subscriber.

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

Competition

The Russian wireless telecommunications market

        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. As of December 31, 2011, overall wireless penetration in Russia was approximately 156.8%, or approximately 227.6 million subscribers, according to AC&M-Consulting.

        The Russian market has achieved high levels of penetration in Moscow and St. Petersburg, where penetration reached approximately 212.1% and 215.6%, respectively, as of December 31, 2011, according to AC&M-Consulting. The average penetration rate in regional markets reached approximately 146.0% as of December 31, 2011, according to AC&M-Consulting.

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        The following table sets forth key data on Russia's wireless telecommunications market as of the dates indicated:

	As of December 31,
	2007			2008			2009			2010			2011
	(amounts in millions, except for percentages)
Subscribers(1)		172.9			187.8			207.9			219.2			227.6
Subscriber penetration		119	%		129	%		143	%		151	%		157	%

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 38.6% and 36.2% of subscribers in Moscow, 31.0% and 28.0% of subscribers in St. Petersburg and 32.6% and 30.7% of total Russian subscribers as of December 31, 2010 and 2011, respectively. We believe that the decrease in our market share in Russia, particularly in Moscow, is the result of our effort to restructure our subscriber base to minimize the number of subscribers who have a positive balance but are infrequent users of our mobile services. We believe that this restructuring will increase the overall rate of usage and ultimately have a positive influence on average revenue per user in the future.

        The primary mobile competitors in Russia include us, MegaFon and Vimpelcom, 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."

        The following table illustrates the number of wireless subscribers for each network operator in Russia as of December 31, 2009, 2010 and 2011:

	As of December 31,
Operator	2009		2010		2011
	(amounts in millions)
MTS		69.3		71.4		70.0
MegaFon		50.2		56.6		61.6
Vimpelcom		50.9		52.0		57.2
Others		37.5		39.3		38.8

Source: AC&M-Consulting.

        MegaFon.    MegaFon, 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. The MegaFon group holds GSM 900/1800/UMTS (3G) licenses to operate in all 83 regions of the Russian Federation. According to AC&M-Consulting, MegaFon had a subscriber base of approximately 61.6 million subscribers in Russia as of December 31, 2011, including 9.4 million subscribers in the Moscow license area. At December 31, 2011, according to AC&M-Consulting, MegaFon had a 26.1% market share in Moscow, a 34.0% market share in St. Petersburg and a 27.1% market share of total wireless subscribers in Russia.

        Vimpelcom.    In addition to MegaFon, we also compete with Vimpelcom, which is the third largest GSM 900/1800/UMTS (3G) wireless operator in Russia in terms of subscribers.

        According to AC&M-Consulting, it had a subscriber base of approximately 57.2 million in Russia at December 31, 2010, including 12.9 million subscribers in the Moscow license area. At December 31,

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2011, according to AC&M-Consulting, Vimpelcom had a 35.7% market share in Moscow, a 20.0% market share in St. Petersburg and a 25.1% market share of total wireless subscribers in Russia.

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

        In certain areas of Russia, we compete with Tele2, which had approximately 20.6 million subscribers as of December 31, 2011. Also, we compete with Rostelecom (through its subsidiaries CenterTelecom, SibirTelecom, Dalsvyaz, Uralsvyazinform, Volga Telecom, North-West Telecom, Southern Telecommunications Company and Dagsvyazinform), which had approximately 12.6 million customers as of December 31, 2011.

The Ukrainian wireless telecommunications market

        From 2003 to 2007, the Ukrainian wireless telecommunications market enjoyed rapid growth, in part, due to broader economic recovery in Ukraine, changes in ownership of the two major operators, the introduction of CPP (calling party pays) billing arrangements and the launch of the Beeline brand in Ukraine in April 2006 by Ukrainian RadioSystems ("URS"), a wholly owned subsidiary of Vimpelcom. The two largest wireless telecommunications providers in Ukraine are MTS Ukraine and Kyivstar who share 82% of the market, with 36% and 46%, respectively, as of December 31, 2011, according to AC&M-Consulting. The competitive environment in Ukraine changed after Vimpelcom Ltd., a Bermuda holding company, completed the acquisition of Vimpelcom and Kyivstar initiated earlier in 2010 pursuant to the restructuring of Vimpelcom. As a result, Vimpelcom Ltd. currently controls both Kyivstar and URS. Consequently, in October 2010, Kyivstar and URS each announced that they have started integrating their operating activities in Ukraine, including the re-branding of URS services under the Kyivstar brand and introducing unified tariffs and a common system for client relationships management.

        Astelit, another competitor operating in Ukraine, is continuing its campaign of aggressive pricing in the market. 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 15% during 2010 and more than 10% during 2011, offsetting a decline in average price per minute.

        Overall wireless penetration in Ukraine in 2011 increased to 117.6%, or approximately 51.0 million subscribers, as compared to 113.0%, or approximately 48.7 million subscribers, in 2010, according to our estimates.

        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, 2009			December 31, 2010			December 31, 2011
	(amounts in millions)
Kyivstar		22.0			24.4	(1)		24.8
MTS Ukraine		17.6	(2)		18.2	(2)		19.5	(2)
Astelit		7.8	(3)		6.1	(3)		7.0	(3)
URS (Vimpelcom)(1)		2.0

(1)

In October 2010, Kyivstar and URS each announced that they started integrating their operating activities in Ukraine. The number of subscribers of Kyivstar has been adjusted to reflect this integration.

(2)

Number indicates our GSM subscribers. As of December 31, 2011, also includes our CDMA subscribers, which reached 0.3 million.

(3)

Number of three-month active subscribers.

Source: Subscriber information based on AC&M-Consulting data and operators official financial and operational reports.

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        In Ukraine, we compete primarily with Kyivstar, a GSM operator with approximately 24.8 million subscribers as of December 31, 2011. Kyivstar offers wireless services using GSM 900/1800 technologies. Kyivstar is also licensed to provide fixed line services by the fiber-to-the-building technology ("FTTB") under the brand "Kyivstar Home Internet." FTTB technology allows provision of services using a fiber-optic cable. Astelit is owned by Turkcell and 13.2% of Turkcell is owned by Alfa Group. Astelit offers services in GSM 900/1800 standards under the "life:)" 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. In 2010 we started to offer prepaid CDMA tariffs. Our CDMA business in Ukraine faces competition from other operators, including Intertelecom, People.net, CDMA Ukraine, Utel (the only UMTS license holder in Ukraine), fixed broadband operators and Wi-Max operators

        In December 2011, MTS in cooperation with Comstar Ukraine began to provide fixed line services using FTTB technology, including Internet Protocol Television ("IPTV), under the brand "Home MTS Connect."

The Uzbekistan wireless telecommunications market

        The Uzbekistan wireless telecommunications market is characterized by increasing penetration rates. In 2011, overall wireless penetration in Uzbekistan increased from approximately 73.3% in 2010 to 82.2% in 2011, or by approximately 2.9 million subscribers, according to our estimates and data from the websites of Vimpelcom and TeliaSonera.

        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, 2009		December 31, 2010		December 31, 2011
	(amounts in millions)
MTS-Uzbekistan(1)		7.1		8.8		9.3
Unitel (Vimpelcom)(2)		3.5		4.8		6.4
Ucell (Coscom)(3)		5.1		6.8		7.7
Others(1)		0.3		0.3		0.3

(1)

Subscriber information based on our estimates.

(2)

Subscriber information based on Vimpelcom's estimates.

(3)

Subscriber information based on TeliSonera's estimates.

        MTS-Uzbekistan offers wireless services in Uzbekistan using GSM, UMTS and LTE (4G) technologies. As of December 31, 2011, it had approximately 9.3 million subscribers and a 39.2% market share according to our estimates. In Uzbekistan, we compete primarily with Ucell (Coscom), a GSM operator beneficially owned by TeliaSonera with approximately 7.69 million subscribers and a 32.4% market share as of December 31, 2011. We also compete with Beeline (Unitel), a GSM and UMTS operator owned by Vimpelcom with approximately 6.36 million subscribers and a 26.8% market share as of December 31, 2011 (according to our estimates).

The Armenian wireless telecommunications market

        As of December 31, 2011, overall wireless penetration in Armenia was approximately 116.4%, or approximately 3.723 million subscribers, according to our estimates.

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

Operator	December 31, 2009		December 31, 2010		December 31, 2011
	(amounts in millions)
VivaCell-MTS		2.1		2.5		2.4
ArmenTel (Vimpelcom)		0.5		0.7		0.8
Orange (France Telecom)		0.1		0.6		0.6

Source: Subscriber information based on our estimates.

        As of December 31, 2011, VivaCell-MTS had approximately 2,378 million subscribers and a 63.86% 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. Starting from 2009, we also compete with Orange (France Telecom), which was granted a GSM-900/1800 network license in October 2008.

Tariffs

        We customize our marketing efforts and pricing policies in each region of Russia and our other countries of operation by considering such factors as average income levels, 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. 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,
	2009			2010			2011
Russia
Prepaid		79	%		81	%		77	%
Contract and corporate		21	%		19	%		23	%
Ukraine
Prepaid		92	%		92	%		92	%
Other		8	%		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. All tariffs presented below are expressed in U.S. dollars converted from rubles using the exchange rate as of December 31, 2011.

        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

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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 five categories—"Prepaid," "Maxi," "Unlimited," "Data" and "Corporate"—with each category designed to target specific segments as follows:

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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, "Red Energy", geared towards students and youth that allows subscribers to elect on-demand additional unlimited on-net, SMS and data options that are charged on a daily basis. We also offer a family-oriented tariff plan, Super MTS, which allows family members to make up to 60 minutes of calls per day within the network for free (on condition that customers top up their account for a specified amount). The Super MTS tariff plan was launched instead of the Super Zero tariff plan in the fourth quarter of 2011 as part of our "zero territory" evolution (our development of tariff plans with at least one included free option). The Super MTS tariff plan varies depending on the region of the customer and it is a tariff plan which we believe will remain a competitive tariff plan over a long period of time. 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 three 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 (USSD request) to a designated number.

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Maxi:  "Maxi" tariff plans are geared toward moderate- and heavy users who use their mobile phones for personal and business communications. These plans feature a monthly fee for a package of services, including a certain pre-determined number of minutes and reduced fees for subscribers who exceed this limit. "Maxi" subscribers choose between a local and federal number with the local number being more expensive, and from a wide range of value-added services.

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Unlimited:  "Unlimited" tariff plans are designed for heavy users who call primarily within their domestic region. Subscribers of unlimited tariff plans 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 subscribers issued a local number, monthly fees start from $97 and those using a federal number pay from $69 per month. In 2011, we improved the tariff plan "Ultra", which offers unlimited voice and SMS services and mobile Internet access. We added an "Unlimited SMS" option to the tariff plan (with no additional charges), which provides 30 SMS messages per day to other mobile networks (within the region) and unlimited SMS messages to MTS numbers (within the region). The Ultra tariff plan includes unlimited calls to MTS numbers as long as the recipient and the caller are in the same region (defined as "home region"), free domestic calls from the MTS network to any number regardless of carrier up to a certain limit of minutes, no roaming charges within Russia, unlimited mobile Internet access and unlimited SMS messages within the network.

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Data:  We offer special tariffs for active users of mobile Internet devices (e.g., USB-modems and 3G-capable devices). These tariffs are offered with different plans and unlimited data options at competitive prices per megabyte. In 2011, we introduced a specifically designed tariff option, "Super BIT", for unlimited mobile internet via mobile phone. This option provides customers with unlimited mobile Internet in any region within Russia for a monthly fee. We plan to continue active development of mobile internet usage in 2012.

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Corporate:  We offer up to four tariff plans in each region targeted to meet the demands of our corporate clients, each plan 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, 2011, the per-minute tariff for local calls within the MTS network varied from $0.041 per minute to $0.060 per minute. Different rates apply to local calls to other networks and vary from $0.052 per minute to $0.082 per minute. Higher rates apply to domestic long distance calls and rates for international calls vary from $0.12 per minute for calls to MTS subscribers within the CIS to $1.91 per minute for calls to other parts of the world. Certain value-added services 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 $1.87 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.

        Our tariff plans in Ukraine are oriented towards the following three main segments: (i) Business Postpaid, (ii) Private Postpaid and (iii) Private Prepaid. Private Prepaid tariffs are further divided into national mass-market tariffs, youth market tariffs, regional tariffs, and segmented tariffs.

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Business Postpaid:  A set of postpaid corporate tariff plans designed to appeal to business segment subscribers, including tariffs with per second billing, as well as special low prices, no connection fees and free minutes for calls among members of the same company and within the MTS Ukraine network. We also offer corporate clients discounts based in their monthly usage, as well as provide handset subsidies.

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Private Postpaid:  A set of postpaid tariff plans designed to appeal to mass-market subscribers, offering free calls within the MTS network and no connection fees. These tariff plans also include a certain number of free minutes per month for calls within the MTS network.

Private Prepaid:

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MTS Prepaid Mass:  A set of special tariff plans designed to appeal to mass-market subscribers. The main tariff plan "Super MTS Without Call Setup Fee" offers a limited number of minutes and SMS messages for free each day within the MTS Ukraine network. The provision of free minutes is available to subscribers only after account recharge on a specified amount. There is also a subscription fee in this tariff plan.

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MTS Prepaid Youth:  A set of special tariff plans designed to appeal to youth-market subscribers. The popular tariff plan "MAX Energy" offers a monthly set of minutes and SMS messages within the MTS Ukraine network, as well as a limited number of GPRS megabytes for mobile internet use. The plan is available upon payment of a monthly subscription fee.

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MTS Prepaid Regional:  A set of aggressively priced tariff plans tailored to particular regions and cities where MTS Ukraine currently has a relatively low market share of subscribers (e.g., Kiev, Odessa and Lvov). The main price differentiators between regional tariffs are volumes of free minutes in the network, prices on calls to other operators' networks and the existence of daily fees.

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MTS Prepaid Segmented:  A set of special tariff plans offered to certain underrepresented market segments such as Russian tourists spending summer months in Crimea or children between the ages of 7 and 12. In particular, the tariff plan "Tourist MTS 2011" offers low rates for calls from Ukraine to Russia, while the tariff plan "Super MTS Team" allows children to make calls free of charge to their parents, but denies them access to the Internet.

        As of December 31, 2011, the standard per minute tariff for calls in Ukraine varied from $0.03 per minute to $0.13 per minute. The standard per minute tariff for calls made within the MTS Ukraine network ranged from $0 per minute with limitations in minutes to $0.08 per minute. Higher rates applied to international calls ranging from $0.13 per minute for calls using special tariffs to $9.2 per minute for standard international tariffs. 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, 2011.

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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, 2011, approximately 80% of our consolidated subscriber base was enrolled in the advance payment program and 20% used the credit system.

        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. 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, 2011, subscribers using the credit system of payment had credit limits of up to $1.6 million for key corporate customers in Russia. When a credit limit is reached, we block the telephone number until the balance is settled. There are no credit limits established for certain exceptional, high loyalty level customers.

        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 the period from 2009 to 2010, we introduced the "in full confidence" service (instead of the "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. We assign credit limits to our subscribers based on their payments and charge history (i.e., average balance usage) during the prior three months. As of December 31, 2011, subscribers using the "in full confidence" service had a maximum credit limit of $6,300. Customer service representatives can also set individual credit limits for subscribers. When the credit limit is reached, our billing system blocks the phone number until the balance is settled. Similarly to the credit payment system, the subscribers are billed monthly in arrears for usage. The invoice, which can be delivered to the customer by e-mail, fax, regular post and Internet, should be settled within 24 days. If the invoice is not paid five to seven days prior to the due date, the system sends an additional reminder. The telephone number is blocked on the 25^th day if the invoice is not settled.

        We completed implementation of the Foris billing system in Russia and Belarus in 2008 and have already begun to experience increases in our overall efficiency and reductions in our expenses. We are planning to complete the transfer of our individual subscribers in Ukraine to the Foris billing system by the end of 2012, and are approaching the final stage of transferring our individual subscribers in Uzbekistan to a new billing system. In Armenia, we use the "Eskadenia" billing system which is currently being upgraded. The new billing system allows us to offer all of our subscribers a uniform and consistently high level of service. It also supports the monitoring of account usage in real time. In addition, the system provides us with the ability to offer flexible tariff plans with various usage discounts and subscriber loyalty bonuses. Furthermore, 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.

        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 contract subscribers, who make an advance payment, are able to continue using our services once they reach a zero balance or until their accounts reach the credit limit specified in their service agreements. When the limit for such a subscriber is reached, we suspend our service until the balance is settled. We determine account terms and credit limits for each subscriber based on the subscriber's age, payment history and tariff plan.

        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.

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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 contact centers that provide customer service 24 hours a day, seven days a week. Contact centers provide services to our customers through various channels (i.e., telephony, e-mail, SMS/MMS and fax). 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. We regularly use automatic systems and independent analysis to monitor the contact centers' accessibility and customer satisfaction with the service level offered at such centers. To improve customer loyalty, reduce churn rate and promote our services, we conduct outbound calling campaigns using MTS staff, including the outbound contacts center and the customer relationship management laboratory, a system for managing our interaction with customers, clients and sales prospects.

        In 2009, we implemented the CRM system for our customer care processes in each of our primary macro-regions in Russia. We intend to use the functionality of the CRM system to aid in the planning of our marketing activities.

        In 2011, we started the process of integration of our fixed line business customer service and assistance into MTS. As a result of this integration, any MTS fixed line services customer in Russia can now receive advice and expert assistance in the MTS Contact Center.

        In order to reduce operating expenses, the contact centers were relocated from regions where property ownership was expensive to other Russian regions where such costs are lower. To further increase operating efficiencies, we completed the consolidation of our contact centers into three key locations in Russia in 2011. We continuously work to improve customer satisfaction by providing our subscribers with convenient and functional self-service systems (e.g., Internet-Helper, interactive voice response ("IVR") and Mobile Helper). For instance, Internet-Helper is a service that, among other things, provides the customer with an opportunity to view information about his contract and personal information as well as manage certain account data. Similarly, Mobile Helper, among other things, allows a customer to receive information about his current balance, tariff plan details, as well as change service language and view bills for previous months.

        In 2010 and 2011, we also continued expanding our retail chain and began providing customer support in our retail stores. Currently, customer assistance is offered in over 3,000 monobrand retail stores in Russia. In order to support customer assistance in our monobrand outlets, in 2011 we established a special center for processing delayed customers' claims and requests from all over Russia.

        We also have back-office employees responsible for handling diverse customer inquiries and for helping reduce the impact of technical problems and incidents on our customers. In addition, 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. In 2010 and 2011, we also continued pursuing a personalized approach in customer care using the Siebel CRM system, which helps us manage all customer-facing operations. We plan to implement the CRM system across the MTS-branded retail network. Further CRM system development will help us to assist all of our customers, including fixed line services customers, in a more personalized manner. The segmentation model we use in customer care allows us to differentiate the service levels for our customers.

        In 2008, in Ukraine, we launched a web portal and started to provide free access at special terminals in our sales offices for contract customers. In 2009, 2010 and 2011, we further enhanced the

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quality of our customer service as a result of the complete integration of our IVRs and billing. In 2011, we made improvements to the IVRs menu to enhance their usability.

        In 2010, in Ukraine, we launched an online "self-service" for our pre-paid customers and significantly increased the number of its users in 2011. As part of online "self-service", we continued developing "self-care" functions through the web and IVRs (which provide, among other things, details of the subscriber's account, tariff plan specifications, amounts charged on credit cards, management of on-line service and charge details for contract subscribers). We also developed special services, such as shortened phone numbers, for broadband users and premium customers who require assistance. We increased the number of services available to our customers in contact centers and started telephone outbound sales through the outsourced contact center.

        We also increased the number of outsourced personnel who process various customer requests in 2011, such as requests related to value-added services and account balance information.

        Additionally, with the addition of new software, we improved our e-learning system for personnel in 2011. We also launched "blended learning", a new training method for our employees in contact centers, that included special interactive courses and learning combined with practical work with customers. All these efforts helped us increase customer satisfaction in Ukraine to 93.0% for the year ended December 31, 2011, from 91.7% for the year ended December 31, 2010.

        In 2012, we plan to make the customer assistance process in Ukraine more personalized by anticipating customer needs. We plan to maintain a history of subscribers' requests and personalize the IVR for each customer profile, which will depend on individual ARPU, region and other parameters. Based on these parameters we calculate the customer lifetime value index ("CLVI"), which we use to classify our subscribers, so that we can provide our priority customers with a wider range of services. We also aim to offer personal agents to our premium customers, establish an operational CRM system and renew the technical platform of our contact center.

Network

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 2G 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.

        Our 3G network is based on UMTS 2100, and our existing GSM infrastructure is actively used for our 3G rollout. We are combining our UMTS and GSM infrastructures in a unified network based on the Single RAN concept introduced by our vendors. In 2012, we will continue to develop UMTS 2100 networks in Russia, Belarus, Uzbekistan and Armenia in order to provide our subscribers with high-quality services. In 2011, we launched UMTS 900 in the Moscow region. The double-band 2100/900 UMTS network in the Moscow region gives us a significant advantage on the wireless broadband market of the Moscow region in terms of coverage area. We are planning to launch UMTS 900 in the Far East (Khabarovsk region) because of the regulatory limitations on the use of UMTS 2100. All mobile GSM and UMTS networks are being developed towards IP interfaces in accordance with the ALL (full set) IP concept which is the basic concept in future LTE networks.

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        We have been implementing the latest cutting-edge technologies such as LTE. We launched LTE FDD 2600 in Uzbekistan and Armenia in 2010. We are planning to launch LTE TDD 2600 in Moscow in 2012. We also plan to participate in the LTE frequency band tender that the Federal Service for Supervision in the Area of Communications, Information Technologies and Mass Media is going to arrange in 2012.

Network Infrastructure and Frequency Allocation

        We use switching and other network equipment supplied by Motorola, Nokia Siemens Networks, 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 2011, we have allocated frequencies 2596-2610 MHz spanning 25 MHz for LTE TDD network deployment in Moscow and the Moscow region. We have submitted applications for 873 LTE TDD base stations in Moscow and the Moscow region to the State Radio Frequencies Commission.

        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 allocated frequencies 1950-1965 MHz, 2010-2015 MHz and 2140-2155 MHz in the UMTS core frequency bands spanning 2 × 15 MHz (for FDD mode) and 5 MHz (for TDD mode) for UMTS network deployment for the entire territory of the Russian Federation.

        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. In addition, we have been allocated frequencies spanning from 453.35-457.1 MHz and 463.35-467.1 MHz in the CDMA-450 core frequency and bands spanning 3 × 1.25 MHz for CDMA-450 network deployment for the entire territory of the Ukraine.

        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 build-out.

        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

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towers to accommodate base station antennas, 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, UMTS 2100 and UMTS 900 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.

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, 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.

        The handling of any significant network problems and outages is monitored and coordinated at our corporate headquarters in Moscow, which also manages the cross-functional coordination of our networks in all of our countries of operation.

Interconnect Arrangements and Telephone Numbering Capacity

        We operate various types of communications networks, including mobile cellular, DLD/ILD and local fixed line and zonal fixed line networks.

        Cellular operators must interconnect with fixed zonal, wireless, long distance and international telephone operators to obtain access to their networks and, via these operators, to the networks of other operators around the world. Cellular and fixed line operators must also obtain telephone numbering capacity to allocate to their subscribers. There are two categories of telephone numbers: "federal" 11-digit numbers (non-geographical numbering plan for cellular operators) and "local" seven-digit numbers (geographical numbering plan for fixed-line operators which can also be used as additional numbering capacity for mobile operators). In Moscow, both "federal" and "local" numbers have been used in the 11-digit format since the beginning of 2011. We have entered into various agreements for the provision of local telephone numbering capacity with several local telecommunications operators in Moscow and in other regions of Russia and 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 interconnect services to other operators on the zonal level in all regions of Russia. Zonal/local interconnect typically entails payment of a one-time connection fee per point of interconnect (E1) and a usage charge based on minutes of traffic.

        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

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"495" code and the Moscow region's "496" code have already reached numbering capacity limits. As a result, the new "499" code was 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 Ministry of Communications and Mass Media subsequently took the view that numbering capacity assigned to one operator could not be rented to other operators. Accordingly, we have entered into 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 a result of our merger with Comstar, we have decreased the use of local numbering capacity of other operators. As of December 31, 2011, we had numbering capacity (federal and local) for over 24.73 million subscribers in the Moscow license area.

        To provide our subscribers in Russia with DLD/ILD services, we have interconnect agreements with national operators Rostelecom, MTT (an affiliate of Sistema until March 18, 2009), Vimpelcom and other national transit operators. We have also built and operate our own DLD/ILD network, which allows us to interconnect directly to foreign operators and thereby decrease our interconnect costs. 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 interconnect and usage by minute which vary depending on the destination called.

        Russian legislation provides that fixed line operators with a substantial position in the market cannot refuse to provide interconnect 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 of Telecommunications in the Russian Federation and Ukraine—Regulation in the Russian Federation—Competition, Interconnect 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."

        Interconnect 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; through the network of transit long distance operators, which connect the networks of different mobile operators in different cities; or through operators' proprietary long distance networks. For domestic long distance traffic transit, we use our DLD/ILD network and networks of different national operators, including among others, MTT, Rostelecom and Vimpelcom. For ILD traffic transit, we use primarily our DLD/ILD network which is interconnected with more than 20 international carriers, including, for example, France Telecom S.A. and Deutsche Telecom A.G. We also have an interconnect of a DLD/ILD MTS network to the ILD networks of our subsidiaries, MTS Ukraine and K-Telecom, in order to provide the transit of international traffic.

        In Ukraine, mobile operators are allocated numbering capacity by the NCCIR. We believe that we have been allocated sufficient numbering capacity in Ukraine for the development of our mobile network. We also believe that we have been allocated sufficient fixed line numbering capacity with respect to the cities in which we are developing our fixed line network. Furthermore, in 2011 we expanded our numbering capacity by obtaining 800,000 numbers with the code "896" which allows us to develop our fixed line network without regard to administrative country zones throughout Ukraine and allows us to use IP-technology for providing fixed line services. However, we estimate that it would take between 1.5-2 years to obtain additional fixed line numbering capacity should we seek such increased capacity.

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Handsets

        Nearly all of our handset sales in 2009 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. In 2010 and 2011, nearly all of our handset sales consisted of tri-band GSM 900/1800/1900 and dual-band UMTS 900/2100 handsets, except for certain models in the low cost segment and touch-phones. 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 to a limited number of contract subscribers as well as modem subsidies for GSM and CDMA users. For the years ended December 31, 2009, 2010 and 2011, we provided net handset subsidies of $15.6 million, $12.8 million and $8.6 million, respectively, in Ukraine.

        In 2009, we substantially changed the strategy and structure of our retail operations by significantly expanding our proprietary sales and distribution network both organically and through the acquisition of national and regional retail chains. We organized these operations under RTC, our wholly owned subsidiary. From 2009, RTC handles all functions relating to our retail operations, including the purchase and sale of handsets and accessories and subscriber enrollment at our retail outlets. RTC has entered into arrangements with Sony Ericsson, Nokia, Motorola, Samsung, Siemens, Alcatel and others to purchase handsets. In 2010, we entered into an agreement with Huawei to purchase handsets. We are not dependent on any particular supplier for handsets. We also offer an array of mobile telephone accessories.

        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. The purchase agreement with Apple Sales International expired on March 31, 2012, and we intend to negotiate an extension of this agreement. 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 financial condition and results of operations" and Note 27 to our audited consolidated financial statements.

        In line with our strategy to expand our proprietary distribution network, our handset sales increased by 303% in 2010 and by 25.6% in 2011. We expect moderate growth in our handset sales in 2012. See also "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Revenues—Sales of Handsets and Accessories."

Fixed Line Operations

        On April 1, 2011, we completed our merger with Comstar, the leading supplier of integrated fixed line telecommunications solutions in Russia. In addition to our mobile operations, we now also operate in both the alternative and traditional fixed line communications markets. We now offer alternative and traditional communications services in over 150 cities across Russia, covering a population of over 53 million people.

        Our alternative fixed line communications services include voice, data and Internet and pay-TV services for corporate and residential subscribers, as well as the provision of interconnect services to other communications operators and numbering capacity to their subscribers. According to Direct INFO, as of December 31, 2011, we are the largest operator in the Moscow residential broadband market in terms of subscribers, with a 28.5% market share. We also operate in Ukraine and Armenia, where we provide digital telephony communications services, data transmission, Internet access and the renting of channels.

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        Our traditional fixed line communications services are provided through incumbent operator MGTS. Through MGTS, we own "last mile" access to approximately 4.1 million households in Moscow, representing approximately 96% of the city's total households who are active users of fixed line voice telephony, according to Direct INFO. MGTS provides regulated and unregulated services, including:

•

local telephony services at tariffs regulated by the Russian government;

•

DLD/ILD voice telephony through licensed operators;

•

interconnect to other operators; and

•

Internet and data transmission services and numbering capacity to subscribers of other communications operators through agency agreements concluded with such operators.

        In November 2009, Sistema, Comstar and Svyazinvest signed a non-binding memorandum of understanding, contemplating an exchange of certain telecommunications assets. The transaction was completed in October 2010 and included, among other things, the entry by Sistema and Svyazinvest into an exchange transaction pursuant to which Svyazinvest obtained control over 100% of the share capital of Sky Link and Sistema acquired a 23.33% stake in MGTS from Svyazinvest. In addition, Comstar transferred its 25% plus 1 share ownership stake in Svyazinvest to Rostelecom for cash consideration of RUB 26 billion ($839.2 million as of September 23, 2010). The proceeds of the sale were used by Comstar to pay down its outstanding debt to Sberbank in the amount of RUB 26 billion ($839.2 million as of September 23, 2010). Sky Link is a Moscow-based CDMA operator holding GSM licenses for a majority of the Russian regions.

        Comstar's shares of common stock, represented by Global Depositary Receipts, were listed on the London Stock Exchange under the symbol "CMST" from February 2006 until March 25, 2011. On March 25, 2011, the UK Listing Authority cancelled the listing of Comstar's Global Depositary Receipts from the Official List following Comstar's announcements regarding its intention to seek cancellation of its listing of Global Depositary Receipts. As a result, Comstar's Global Depositary Receipts are no longer admitted to trade on the London Stock Exchange.

        For a list of the telecommunications licenses held by us, see "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation and Ukraine—Licenses."

Customers and Services Offered—Alternative Fixed Line Business

        We provide alternative fixed line communications services to corporate, operator and residential subscribers in over 150 cities throughout Russia. Specifically, we offer local voice, DLD/ILD voice, data and Internet and pay-TV services to our subscribers. The interconnect tariffs we charge to other telecommunications operators in Moscow and certain other cities are regulated by the Russian government. We believe our alternative fixed line subscribers typically evaluate our service and product offerings based on such factors as price, technology, security, reliability and customer service.

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        The following table presents certain operating data for our alternative fixed line business in the Moscow market and in the Russian regions and the CIS as of and for the years ended December 31, 2010 and 2011.

Alternative fixed line business	December 31, 2010		December 31, 2011
Moscow market
Installed telephone lines (000s)		659		659
Residential
Number of subscribers (000s)(1)		541		620
ARPU (RUB)		566		554
ARPU (USD)		18.6		18.9
Corporate(2)
Number of subscribers (000s)		29		30
ARPU (RUB)(4)		17,477		16,375
ARPU (USD)(4)		575.7		557.9
Operators
Number of active lines (000s)		438		438
of which, used by mobile operators (000s)		307		85
Russian regions and the CIS (excluding Moscow market)(3)
Residential
Number of subscribers (000s)(1)		3,661		4,392
ARPU (RUB)		188		178
ARPU (USD)		6.2		6.1
Corporate(2)
Number of subscribers (000s)		73		117
ARPU (RUB)		3,302		2,614
ARPU (USD)		108.6		89.0
Operators
Number of active lines (000s)		5		9

(1)

Subscribers to broadband Internet, pay-TV, Wi-Max, voice and other services. We calculate our subscribers based on the number of active lines in service. A line is considered "active" if the subscriber has used and paid for the service within the last six months.

(2)

Includes state-owned enterprises and government agencies.

(3)

No reliable data is available on installed lines outside the Moscow market.

(4)

The calculation changed from 2011 onwards. Pay-TV and data transmission revenue are now included in the calculation of ARPU.

Corporate subscribers

        We target corporate subscribers covering a range of industries, such as business centers, hotels, financial institutions, professional services firms, consumer goods companies, manufacturers and companies involved in extractive industries, among others. These subscribers vary in size, ranging from large multinational and Russian corporations with thousands of employees to small-and medium-sized enterprises with up to several hundred employees. As of December 31, 2011, we had approximately 51,000 voice and 73,000 Internet corporate subscribers.

        As further described below, we offer voice, data transmission and Internet and various value-added services to our corporate subscribers.

        Voice Services.    We provide a full range of alternative fixed line voice services to corporates in Moscow, the Moscow region and other select regions of Russia, which include local and DLD/ILD services using our transmission network and leased capacity between major Russian cities. We also

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provide integrated voice and data services, voice over frame relay and certain integrated services digital network ("ISDN") services. We charge our corporates a connection fee of RUB 3,200-RUB 11,200 ($99.4-$347.9) per number, as well as a monthly subscription fee of RUB 224-RUB 1,120 ($7.0-$34.8) per number, based on the quantity of numbers used by the corporate subscriber.

        Data Transmission and Internet Services.    We offer high quality data transmission services to corporates, which allow for data exchange between their various branches or offices located within Russia and internationally. For data transmission services, our network is capable of transferring data at speeds of up to 10 Gbps and utilizes various technologies, such as 10 GE, GE, ATM, TDM, VPN-MPLS, xDSL, Wi-Max and Wi-Fi to provide high quality solutions at a relatively low cost. We endeavor to ensure the reliability of network connections by utilizing a full reservation approach to back up all elements of the network.

        In addition, we offer a wide range of Internet services to corporates, including broadband Internet access, VoIP, VPNs and data center services using the following technologies: (1) NGN (up to 1 Gbps), (2) ADSL2+ (up to 24 Mbps), (3) radio Ethernet (up to 27 Mbps), (4) Wi-Fi (up to 54 Mbps), and (5) Wi-Max (up to 10 Mbps). We also provide continuous flexibility to upgrade their network capacity to handle additional Internet services. For example, we often integrate data transmission and Internet services for our clients as they expand their operations and need to interconnect and exchange data with newly opened offices and/or branches.

        We offer a broad range of Internet packages that vary in terms of data transfer speeds and pricing, with higher tariffs for faster uploading and downloading capabilities. Corporates with ADSL-based broadband Internet packages generally experience data transfer speeds between 1.5 Mbps and 29 Mbps. In addition, we offer a premium broadband Internet service over our NGN in which subscribers enjoy data transfer speeds between 64 Kbps and 10 Gbps. The NGN provides subscribers with the benefit of the same uploading and downloading data transfer speeds, whereas Internet subscribers using an ADSL connection upload at speeds that are much slower than the one at which they can download.

        For the provision of broadband Internet services, we have secured access to MGTS' network allowing data transmission at speeds of up to 24 Mbps along installed copper lines using ADSL technology. As of December 31, 2011, all of MGTS' 225 PoPs were DSL-enabled. In addition, we utilize MGTS' PDTN to provide high-speed reliable Internet services and create VPNs for our corporates.

        We charge our corporate subscribers a connection fee of RUB 3,200-RUB 176,000 ($99.4-$5,466.5) per digital channel, as well as a monthly subscription fee of RUB 1,600-RUB 160,000 ($49.7-$4,695.5) per channel, based on the maximum speed of the connection.

        Leased Channels.    We provide corporate clients with the ability to rent high speed data channels. These "leased channels" are dedicated lines of data transmission.

        Value-Added Services.    We provide corporates with several value-added services, including Logic Line and integrated solutions. The Logic Line service is based on our proprietary IN and is designed to help our corporates manage the reception and servicing of a large volume of incoming calls. The unique multi- channel telephone number assigned to customers will not change even if the customer moves to a different location in Moscow, and does not require the customer to install any equipment. In addition, this service allows all incoming calls to be transferred to other fixed or mobile telephone numbers in Russia or in other countries. The IN identifies a subscriber by phone number, phone card or password, which allows our customers to bill their subscribers for services and, if necessary, block access for subscribers who have a negative balance on their account.

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        In addition, we serve as general contractor for the provision of a full range of integrated solutions to subscribers wishing to establish a modern integrated communications infrastructure. Each solution is customized for subscriber-specific needs. In developing these customized networks, we are able to offer the following range of services: site survey, cost analysis and optimum project planning, assistance with government-related documentation, supply of equipment and operational, technical and maintenance support on an ongoing basis. Once the infrastructure is established or renovated, as the case may be, we typically provide digital voice communications, voice intelligent services, high-speed Internet services, videoconferencing and other data transmission services. We intend to expand our service offerings to include customer premises management and network-centric IT solutions.

        Fixed mobile convergence.    Based on our fixed and mobile networks, we offer fixed-to-mobile convergence services to corporate clients providing use of their mobile phone as an extension of their private branch exchange ("PBX"). We also provide access to corporate IP-networks from a mobile phone via GPRS/EDGE/3G.

        Equipment Sales.    We offer and sell equipment manufactured by different manufacturers.

Operators

        We are the largest mobile operator in Russia, according to AC&M-Consulting. We also operate fixed-line local networks in Moscow and other cities mostly for provision of local numbers to mobile subscribers. In order to lower the costs of intercity and international traffic transition, we put into operation an intercity international network in December 2008.

        According to Direct INFO, together with MGTS, we had approximately 77% of the total active numbering capacity in Moscow as of December 31, 2011. We now have approximately 78 local fixed networks in 51 regions of Russia, including Moscow, and 21 zonal fixed networks to provide telephony services to subscribers. Our integrated intercity\international network is interconnected to more than 45 international operators. As of December 31, 2011, we had more than 1100 interconnect agreements with national and international operators for interconnection of our fixed networks.

Residential subscribers

        We offer voice, Internet and pay-TV services to residential subscribers.

        Voice Services.    We provide voice services to residential and corporate subscribers. For a more detailed discussion of these services, see "—Corporate subscribers—Voice Services." Like corporate subscribers, residential subscribers in each of the regions that we have a presence seek a full range of high quality voice services equivalent to those provided in Western Europe. In addition to "basic" voice telephony services, we provide a number of additional services, such as call forwarding, call transferring, call waiting, conference, voicemail and Caller ID, among others. Residential voice services are primarily offered by our alternative fixed line business to high value residential subscribers in high-end housing. Local and domestic fixed voice service rates are regulated by the government in certain cities.

        Internet Services.    We offer broadband Internet services to residential subscribers throughout Russia. As of December 31, 2011, we had a 28.5% share of the residential broadband Internet market in Moscow, according to Direct INFO. In 2009, we launched wireless broadband Internet services throughout Moscow based on mobile Wi-Max technology. As a result, the Internet is currently accessible for Moscow residents from nearly any place in the city using a range of our fixed and wireless technologies. Depending on the Internet connection speed, we charge residential subscribers a subscription fee of RUB 300-RUB 3,000 ($9.3-$93.2) per month in Moscow and a subscription fee of RUB 100-RUB 2,000 ($3.1-$62.1) in other regions of Russia. We do not charge a connection fee in Moscow and in most of the Russian regions.

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        Pay-TV.    We operate a TV service based on ADSL IP technology in Moscow. In addition, we offer pay-TV services in most of the regions in which we are present, based on HFC (broadband network which combines optical fiber and coaxial cable), FTTB, DVB-C (digital television via cable connection) and MMDS (wireless cable) technologies. Special auxiliary equipment allows pay-TV subscribers to access more than 100 channels of digital quality from a home television without satellite dishes or specialized antennas. International and Russian channels are included as part of the base services package. As of December 31, 2011, we had approximately 133,800 pay-TV subscribers in Moscow and approximately 2,849,900 subscribers in other regions of Russia.

        Our pricing structure is designed to appeal to large numbers of consumers with various interests and purchasing power, and varies significantly between regions. We charge a subscription fee of RUB 110-RUB 450 ($3.4-$14.0) per month in Moscow and a subscription fee of up to RUB 99-RUB 365 ($3.1-$11.3) in other regions of Russia, depending on the number of channels included in the package. There is a connection fee in some regions of Russia. We also offer bundled Internet and pay-TV services for RUB 260-RUB 1,480 ($8.1-$46.0) per month in Moscow and RUB 299-RUB 2,350 ($9.3-$73.0) in certain other regions of Russia, depending on the speed of the Internet connection, the number of pay-TV channels being provided and level of competition in a particular region.

Customers and Services Offered—Traditional Fixed Line Business

        We provide traditional fixed line communications services through our subsidiary, MGTS, which is the incumbent fixed line PSTN operator in Moscow. MGTS owns Moscow's PSTN infrastructure, including switches, a transmission network, underground ducts, and owns or holds leases to properties housing its offices and equipment.

        As of December 31, 2011, MGTS had approximately 4.42 million active lines in service, a cable network of over 110,217 km, a fiber optic network of over 8,896 km and 2,997 payphones. Although MGTS' core backbone network is fully digital and is based on state-of-the-art SDH technology, only around 69% of installed lines were digital as of December 31, 2010. As a result, those subscribers who connect to our network using an analog ATE (automatic test equipment) are currently not able to receive our value-added services. In 2011, MGTS completed the digitalization of its network based on the special range of equipment MPN (Mediator Private Network), which allowed MGTS to complete the digitalization of the network two years ahead of schedule. The total installed capacity of the telephone network reached 4.9 million numbers as of December 31, 2011.

        Residential subscribers accounted for approximately 81.7% of MGTS' total lines, corporates for 11.2% and public sector subscribers for 7.1%, as of December 31, 2011.

        MGTS holds licenses and regulatory approvals to provide, among others, the following services:

•

local telephony;

•

DLD/ILD voice telephony through licensed DLD/ILD operators, including us;

•

interconnect to other operators;

•

Internet and data transmission, including leased DLD/ILD services;

•

inquiry and information, including telephone directories;

•

use of payphones; and

•

numbering capacity provided to the subscribers of other communications operators through agency agreements concluded with such operators.

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        As the only licensed PSTN operator in Moscow, MGTS is considered a natural monopoly under Russian antimonopoly regulations. Consequently, most of the services provided by MGTS are subject to governmental regulation. The Federal Tariff Service regulates MGTS' tariffs for voice telephony services provided to its PSTN subscribers, including monthly subscription fees, installation fees and local call charges. Operating revenues from regulated services accounted for approximately 69% of service operating revenues of our traditional fixed line business in 2009, 2010 and 2011. The Federal Tariff Service sets the tariffs MGTS can charge taking into account cost of services, network investment and a certain profit margin, and the current tariffs fully compensate MGTS for the cost of services provided to residential and government subscribers. According to Russian legislation, MGTS is allowed to petition the Federal Tariff Service for tariff increases upon certain conditions, such as inflation or increases in the cost of services. Historically, MGTS has petitioned the relevant Russian government agency for tariff increases once or twice per year. The Federal Tariff Service has permitted MGTS to increase its tariffs several times.

        MGTS also provides a number of unregulated services. According to Russian legislation, DLD/ILD services provided by licensed non-monopoly operators, public payphones, data transmission services, value-added services and a number of other services are not subject to tariff regulation. Among others, MGTS provides the following unregulated services:

•

various value-added services, including call forwarding, call waiting, call holding, caller ID, provision of second direct inward dialing (DID) number;

•

Internet access for residential subscribers and corporates; and

•

rent of space for telecommunications equipment of other operators connected to MGTS' network.

        MGTS is not licensed to provide DLD/ILD communications services directly to its subscribers but must route such traffic through a licensed DLD/ILD operator. As a result, DLD/ILD traffic originated by MGTS subscribers is carried either by us, with these services included in MGTS' monthly bill, or by other providers of DLD/ILD services, who bill MGTS subscribers directly or pay MGTS an agency fee for processing their bills.

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        The following table presents certain operating data for our traditional fixed line business as of and for the years ended December 31, 2010 and 2011.

Traditional fixed line business	December 31, 2010		December 31, 2011
Installed telephone lines (000s)		4,903		5,100
Residential
Number of subscribers (000s)(1)		3,615		3,610
CPP traffic (millions of minutes)		1,993		1,832
ARPU (RUB)		352		371
ARPU (USD)		11.6		12.7
Corporate(2)
Number of active lines (000s)		785		809
Number of subscribers (000s)		66		66
CPP traffic (millions of minutes)		924		883
ARPU (excl. revenue from points of interconnect) (RUB)		7,016		8,047
ARPU (excl. revenue from points of interconnect) (USD)		231.1		274.7
Number of points of interconnect (000s)		20		10
Average monthly revenue per point of interconnect (RUB)		6,714		9,932
Average monthly revenue per point of interconnect (USD)		221.3		341.6
Operators
Number of interconnected operators		195		200
Number of points of interconnect (000s)		235		244
Average monthly revenue per point of interconnect (RUB)		1,194		1,247
Average monthly revenue per point of interconnect (USD)		39.3		42.5

(1)

We calculate our subscribers based on the number of active lines in service. A line is considered "active" if the subscriber has used and paid for the service within the last six months.

(2)

Includes state-owned enterprises and government agencies.

        MGTS' subscriber segments and the services provided to each subscriber segment are further described below.

Residential and corporate subscribers

        MGTS provides basic regulated voice services to residential and corporate subscribers using its PSTN facilities and copper "last mile" access. Tariffs for these services are established by the Federal Tariff Service.

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        The following table illustrates MGTS' regulated tariff development in the period from February 1, 2008, to March 1, 2012:

MGTS Regulated Tariffs	February 1, 2008		March 1, 2009		February 1, 2010		January 1, 2011		March 1, 2012
Residential(1)
Line rental
RUB per month		125		135		155		175		190
USD per month		5.12		3.78		5.09		5.87		6.55
Per minute tariff plan—local connection fee
RUB per minute		0.28		0.30		0.36		0.40		0.44
USD per minute		0.01		0.01		0.01		0.01		0.02
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month		220		245		250		260		266
USD per month		9.01		6.86		8.22		8.72		9.16
Combined tariff plan—fee for fixed amount of minutes(2)
RUB per month		104		120		140		152		172
USD per month		4.26		3.36		4.6		5.1		5.93
Combined tariff plan—fee for each additional minute
RUB per minute		0.24		0.28		0.34		0.38		0.42
USD per minute		0.01		0.01		0.01		0.01		0.01
Corporate (non-governmental)(1)
Line rental (USD per month)
RUB per month		160		160		175		195		205
USD per month		6.55		4.48		5.75		6.54		7.06
Per minute tariff plan—local connection fee
RUB per minute		0.28		0.30		0.36		0.40		0.44
USD per minute		0.01		0.01		0.01		0.01		0.02
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month		342		342		350		365		375
USD per month		14.0		9.57		11.5		12.25		12.92
Combined tariff plan—fee for fixed amount of minutes(2)
RUB per month		104		120		140		152		172
USD per month		4.26		3.36		4.6		5		5.93
Combined tariff plan—fee for each additional minute
RUB per minute		0.24		0.28		0.34		0.38		0.42
USD per minute		0.01		0.01		0.01		0.01		0.01
Corporate (governmental and state-funded organizations)(1)
Line rental
RUB per month		136		145		160		180		200
USD per month		5.57		4.06		5.26		6.04		6.89
Per minute tariff plan—local connection fee
RUB per minute		0.28		0.3		0.36		0.40		0.44
USD per minute		0.01		0.01		0.01		0.01		0.02

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MGTS Regulated Tariffs	February 1, 2008		March 1, 2009		February 1, 2010		January 1, 2011		March 1, 2012
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month		302		331		350		365		375
USD per month		12.36		9.27		11.5		12.25		12.92
Combined tariff plan—fee for fixed amount of minutes(2)
RUB per month		104		120		140		152		172
USD per month		4.26		3.36		4.6		5.1		5.93
Combined tariff plan—fee for each additional minute
RUB per minute		0.24		0.28		0.34		0.38		0.42
USD per minute		0.01		0.01		0.01		0.01		0.01

(1)

Tariffs for residential subscribers are shown including VAT; tariffs for non-governmental corporate subscribers and governmental/state-funded organizations are shown excluding VAT.

(2)

From February 1, 2007, until February 1, 2010, this plan included 450 minutes per month; from February 1, 2010, until March 1, 2012, this plan included 400 minutes per month.

        In addition to basic voice services, MGTS also provides its residential and corporate subscribers with digital telecommunication, Internet and VPN deployment services, rental of high-speed communication channels, intelligent voice and various other services.

Operators

        MGTS provides interconnect, traffic transmission and leased line services to other communications operators. Interconnect is carried out on the local and zonal levels in accordance with terms and conditions that are publicly disclosed. MGTS also provides additional services to operators interconnecting to MGTS' network, including access to emergency service, information and customer care numbers.

        MGTS has also established an active presence in the data transmission market. Through its PDTN, MGTS can establish VPNs for other operators as well as provide other data network services. Operators can also rent space and utility systems from MGTS to house their network equipment.

Sales and Marketing

Alternative fixed line business

        Our target customers include corporate, operator and residential subscribers.

        To promote our product and service offerings, we use various communication channels for advertising and marketing, including direct marketing, printed mass media, television, Internet, radio, directories, outdoor advertising, advertising in the subway, special promotions and cross promotions. Through these various advertising and marketing channels, we intend to further develop our brand recognition. Our marketing strategy is designed to create a unified brand for each of our various product and service offerings with the aim of becoming a single source for all of our subscribers' communications needs.

        We also actively promote our services to existing subscribers with special bundled product offerings aimed at servicing their communications requirements and enhancing subscriber loyalty. Our advertising and information materials are aimed primarily at the promotion of the MTS brand. Since the beginning of 2011, we promote only the MTS. All fixed-line products are offered and marketed under this brand. However, in new markets, where the introduction of a new brand soon after the introduction of the older brand may strain customer loyalty, we can still use two brands to decrease churn. In addition to

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promoting the MTS brand, we also promote specific product and service offerings such as Wi-Fi and Wi-Max. Our advertising and marketing efforts are designed to convey a positive image of us to the market as a leading communications operator focused on customer satisfaction.

Traditional fixed line business

        As the incumbent PSTN, MGTS has not invested significantly in sales and marketing. In connection with the long term modernization program of our network based on passive optical network ("PON") technology, we expect to increase our investments in sales and marketing of convergent products, including double and triple-play products. In 2010, we launched several pilot projects based on PON technology which allows us to provide higher quality services than our competitors. In addition, PON technology allows us to provide services that generate a high volume of traffic, such as video security, video social networking and other similar services.

        In 2011, MGTS completed its migration to provision of digital services and connection of new subscribers is based on PON technology. Due to this fact, we were able to expand the range of provided services which resulted in an increase in the number of Internet users.

        Together with the provision of fast Internet access, MGTS is replacing the old networks of Moscow's educational institutions and transitioning them to PON. MGTS will also provide schools with fire-alarm systems and safety monitoring.

Competition

        We compete with a number of fixed line telecommunications operators servicing Moscow, St. Petersburg and other major Russian cities. Moscow is the largest and most competitive of these markets. Our primary competitors include:

•

Vimpelcom, which is also one of our primary competitors in the Russian mobile communications market. Vimpelcom acquired alternative operators Golden Telecom and Corbina Telecom in 2008, and offers voice, data and Internet services to corporates, operators and residential subscribers in major cities throughout Russia, Ukraine, Kazakhstan and Uzbekistan using intercity fiber optic and satellite-based networks. We compete with Vimpelcom in the corporate, operator and residential fixed line telecommunications markets in Moscow and in certain other regions of Russia where we are present, including, among others, Rostov, Nizhny Novgorod, St. Petersburg, Ekaterinburg and Krasnodar.

•

Rostelecom, Russia's primary DLD/ILD operator. According to Direct INFO, Rostelecom controls over 76% of all fixed line telecommunications services in Russia. We compete with Rostelecom in the corporate, operator and residential fixed line telecommunications markets in all regions where we operate in Russia (including the Moscow region). We also compete with Rostelecom in the mobile telecommunications market in certain parts of Siberia.

•

Akado Group (formerly Renova Media) comprised of AKADO Stolitsa, a leading provider of pay-TV, broadband Internet and digital telephony in Moscow; Comcor, a Moscow-based fiber optic network operator providing services under the AKADO Telecom brand; and several Internet and pay-TV providers in St. Petersburg, Ekaterinburg and Minsk (Belarus). We compete with the Akado Group primarily in the residential fixed line telecommunications markets in Moscow and Ekaterinburg.

•

MegaFon, which acquired operators Synterra and Net-by-Net, and offers services in the operator, corporate and residential fixed line telecommunications markets in Moscow, St.-Petersburg, and other regions.

•

Er-Telecom, voice telephony, broadband and TV operator. We compete with Er-Telecom in the residential fixed line telecommunications market in St.-Petersburg, Novosibirsk, Omsk, N.Novgorod, Ekaterinburg, Kazan, Rostov, Chelyabinsk and other regions.

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Corporate subscribers

        The following table sets forth the corporate subscriber market shares of the primary fixed line operators (including both alternative and incumbent operators) in Moscow as of December 31, 2011:

MTS	9	%
MGTS	11	%
Vimpelcom	21	%
Synterra	6	%
Company TransTeleCom (TTK)	5	%
Orange	3	%
Akado	10	%
Rostelecom (incl. RTCOMM)	9	%
Other	26	%
Total	100	%

Source: Direct INFO

        In the corporate subscriber segment, we generally compete on the basis of network quality, individual and bundled service offerings, customer service, installation time, geographical presence and pricing.

Residential subscribers

Voice services

        The following table sets forth the market shares of the primary fixed line operators (including both alternative and incumbent operators) for voice services in Russia as of December 31, 2011:

Company	Russia
MGTS		12	%
Rostelecom		76	%
Other		12	%
Total		100	%

Source: Direct INFO

        As Moscow's only PSTN operator, MGTS faces limited competition in the market for residential local telephony services in Moscow. As of December 31, 2011, it provided local voice telephony services for approximately 97% of all residential subscribers in Moscow, according to Direct INFO.

        In the alternative voice services market, we generally compete based on the availability of bundled packages comprising broadband Internet access and pay-TV services, value-added services, network quality, installation time and customer service.

Internet

        According to Direct INFO, as of December 31, 2011, computer penetration of households was 67% in Russia, with 94% of these households having Internet access. The following table sets forth the

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market shares of the primary operators in the residential broadband Internet market in Russia as of December 31, 2011:

Company	Russia
MTS		8	%
MGTS		2	%
Akado		4	%
Vimpelcom		9	%
Er-Telecom		9	%
Rostelecom (including OJSC «National Cable Networks»)		37	%
Other		31	%
Total		100	%

Source: Direct INFO

Pay-TV

        According to Direct INFO, as of December 31, 2011, TV penetration was 74% in Russia. The following table sets forth the market shares of the primary operators in the TV market in Russia as of December 31, 2011:

Company	Russia
MTS		11	%
Akado		4	%
Rostelecom		20	%
Tricolor TV		29	%
Vimpelcom		1	%
Er-Telecom		7	%
Other		28	%
Total		100	%

Source: Direct INFO

        In the TV market, we generally compete on the basis of pricing, channel selection and content, individual and bundled service offerings, customer service and installation time.

Tariffs

        We establish prices for our unregulated services and different subscriber segments based on certain common considerations, policies and goals. For example, we generally seek to establish competitive prices based on market rates for the services we offer and below market prices when our lower-than-average costs or economies of scale allow us to do so. We also offer subscribers bundled service packages with several services offered together at a discount to the cost of ordering each individual service separately and to promote additional services to our existing subscribers. In addition, we often offer promotions to our various subscriber segments waiving or discounting installation fees in order to attract new subscribers or promote new services.

        With regard to corporates, we generally aim to derive the bulk of our operating revenues from monthly payments. Thus, depending on the scale and type of services ordered, we will often discount or waive installation fees.

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        For services offered to other communications service providers, we aim to generate most of our operating revenues from monthly payments and by offering an array of value-added services.

        We develop tariffs for service offerings to residential subscribers with the aim of attracting new subscribers, as well as expanding the services used by existing subscribers in order to generate higher ARPU. In particular, we offer several flexible tariff plans customized for various types of residential subscribers, as well as various promotions, such as free installation and bundled service packages offered at a discount.

Network Infrastructure

Long-haul backbone network

        As a result of our acquisitions of Comstar and Evrotel, we became one of the largest operators of the Internet long-haul backbone networks in Russia. We continue to develop our long-haul backbone network through the build-out of a fiber optic infrastructure and acquisitions of other Internet backbone service providers. We currently have a fiber optic network of approximately 65,000 km, which also allows us to operate an optical transport network using dense wavelength division multeplexing technology.

        In addition, we have our own IP MPLS network, which is capable of providing Internet and L2/L3 VPN services, as well as deliver other media products, such as digital television and internet protocol television, to regional networks for the use in our fixed line and mobile operations, as well as for our wholesale customers. Our IP MPLS backbone network covers most of Russia and Ukraine and is present in most of the European and U.S. Internet exchange points, such as DE-CIX in Frankfurt, NETNOD in Stockholm, AMS-IX in Amsterdam, PARIX in Paris, LINX in London, Equinix in Ashburn and New York, NIIX in New York and Any2 in Los-Angeles. In 2011, we also established connection to FICIX in Helsinki. More than 75% of our international Internet traffic is delivered through settlement-free peerings with other large networks. The remaining international Internet traffic is delivered through direct connections with certain of the largest networks. All internet traffic in Russia is delivered through settlement-free peering with the largest ISPs in Russia.

Alternative fixed line business

        The network infrastructure we maintain in Moscow is substantially different from the infrastructures we use in the regions. In Moscow, we have primarily grown organically, while our regional development has largely been through the acquisition of companies with different business models and a focus on different services. As a result, the network infrastructures in the regions outside Moscow and the technologies used to support such infrastructures are different from the network infrastructure established in Moscow and which we currently own.

Moscow and Moscow Region

        The Moscow telephone network consists of 15 switching nodes (13 TDM switches and 2 soft switches) with total capacity of over 700,000 subscribers.

        The Moscow region telephone network consists of 10 soft switches with total capacity of around 15,000 suscribers.

        All of our PSTN switching centers are connected to a digital transport network, which uses SDH technology and covers the entire territory of Moscow and most of the Moscow region. The network ensures the functioning of our digital ATSs and their connectivity with analog and digital equipment of PSTNs of other operators. The digital transport network includes a trunk core STM-64, with connected half-rings STM-16 and STM-4. Multiplexers of access level are connected to trunk nodes by means of fiber-optic lines that organize streams STM-4 and STM-1. There are 987 multiplexers. The

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management of the transport network and digital ATSs is carried out remotely from network operation centers.

        For the provision of Internet access, IP-telephony and other services, we have our own IP MPLS network, the core of which is constructed as IP MPLS rings with routers connected to each other by means of 10 GE channels. In addition, separate routers are used for inter-carrier connections and are connected to the core routers by means of 10 GE interfaces.

        As of December 31, 2011, our wireless broadband network in Moscow and the Moscow region included 51 base stations in the 5 GHz frequency band. During 2011, in the 2.4-2.5 GHz frequency band, we continued the construction of the Wi-Max network started by Comstar, which consisted of over 210 base stations as of December 31, 2011. Our radio-relay communication lines included 25 links and it also had 115 Internet hot-spots using Wi-Fi technology as of December 31, 2011.

Russian Regions

        As of December 31, 2011, outside of Moscow and the Moscow region, we provide cable Internet access to 6.5 million households and cable TV access to 7.7 million households. Among the access equipment used are Ethernet switches, IP DSLAM and PON. We mainly use FTTB technology for internet access, which can provide speeds up to 1 Gb/se?. In 2011, we started to roll-out DVB-C technology for cable TV service.

Traditional fixed line business

PSTN

        Our traditional fixed line communications network has an installed capacity of more than 5.044 million numbers, of which 2.2 million is digital exchange, 0.284 million is analog exchange and 2.560 million is NGN exchange capacity. The digital portion of the network is based on the SDH backbone and the transport level of the PDTN. The total length of the fiber-optic network is more than 8,648 km.

        The SDH network, which uses Lucent Technologies equipment, is configured as follows: 29 rings STM-4/STM-16, based on DACS cross-switches, located in the buildings with switches ATC 316 and ATC 201. There are a total of 159 multiplexers in the network, including ISM2000, ADM16/1, ADM16/1c, ADM4/1 and ADM4/1c. The SDH network allows for traffic transmission between exchanges and traffic exchange with interconnected carriers 1676 E1. The ECI SDH network topology (SDM 1/4/16, XDM500 and XDM1000) is multi-layered, with each network layer designed to carry a certain type of traffic: 19139E1, 168 rings STM-4/STM-16, 457 multiplexers.

        Network management is carried out in two control centers: one active control center and one stand-by control center. These centers contain an ORION system to monitor and control the fiber-optic network and SyncView Manager 3.1.1 to monitor and control timing sources. Subscribers are connected directly on the level of host switches and remote units. The network currently operates 26 TDM hosts, 29 local analog exchanges (cross bar system and step by step), 37 exchanges based on DX-200 (NSN), 50 SG exchanges based on NGN cores (NSN, Huawei technologies and STS), 23 TG—product Huawei technologies and STS, 2 IMS cores (Huawei technologies) included 19 MSAN and 136 SG (Media Gateway converter) and 10 AXE-10 tandem nodes (Ericsson) with total capacity of 1.0 million ports. TDM hosts are interconnected to each other by mesh topology via transit nodes with the analog network. We use the following types of host switches: EWSD (Siemens), 5ESS (Lucent Technologies) and MEDIO (STROM Telecom). To provide services with instant dialing (e.g., emergency and information calls), MGTS has two nodes based on MEDIO IN equipment.

        Monitoring of the digital network and management of switching equipment is centralized and carried out from MGTS' control centers.

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Public Data Transmission Network ("PDTN")

        Our PDTN is a hierarchical 3-layer IP/MPLS network. The first level is the transport level for high rate traffic throughput over the PDTN. The second level is used for terminating subscriber sessions and, at the same time, to backhaul traffic from PoPs to the transport level. The third level allows subscribers to access the PDTN.

        The first level comprises the core of the PDTN and contains 10 nodes based on Cisco ASR9010 routers. Topologically, the nodes are linked into a 10-node transport ring with an attached two-node "minor" ring based on Cisco CRS-16. The transport ring is designed to connect peripheral networks of the PDTN and overlay network equipment and for interconnect with partner providers. The minor transport ring covers the points of connection of Internet channel groups of other operators and content providers. On the transport level, the trunk connections are made by optical mono-mode 10 GE interfaces.

        The second or termination level of the PDTN is based on Redback SE routers designed to direct traffic to the nearest transport node and to terminate subscribers. Topologically, the termination level is comprised of several Redback SE routers connected to the transport level routers by 10GE interfaces. All the routers of the transport level and termination level function in one IP/MPLS network with automatic re-routing.

        The third or access level of PDTN is built based on IP DSLAM, linked by GE trunk interfaces and GE switches, linked by GE interfaces. The main function performed on the access level is data transmission on the "last mile" network. The network currently uses mostly DSLAM hiX5635M1100 from Siemens and SmartAX MA5600 from Huawei. Both DSLAMs use an optical or electrical GE interface for trunk interfacing.

        As access nodes (PoP), the PDTN uses MGTS' switching centers connected with at least 4,000 subscribers. We currently have over 250 PoPs in service. The coupling of two or more DSLAMs within one PoP is through Catalyst 2970G GE switches or similar switches having a minimum of 12 GE ports. Each PoP is connected to an individual GE port of the nearest Cisco 7606 router.

Principal suppliers

        Our principal suppliers are Sitronics Telecom Solutions, Huawei, Nokia Siemens Networks and NEC for switching equipment; ECI Telecom and Alcatel Lucent for transport network equipment; Cisco Systems, Huawei and Alcatel Lucent for Internet and data network equipment; Secure Media for crypto-protection conditional access software; and Tandberg TV for broadcasting equipment. All of our equipment is supplied directly through authorized dealers.

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 can also be influenced by a number of factors, including new marketing campaigns and promotions, and may not be consistent from year to year. Furthermore, our results of operations may be impacted by unexpected adverse weather conditions. In 2010, for example, we were significantly and adversely affected by a sustained heat wave in Moscow and severe wildfires in the surrounding regions. Many of our subscribers left Moscow, which resulted in a substantial decline in the volume of calls made and, in turn, our revenues in the fixed line segment in the third quarter of 2010.

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Regulation of Telecommunications in the Russian Federation and Ukraine

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:

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licensing of telecommunications services;

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requirements for obtaining a radio frequency allocation;

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equipment certification;

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

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fair competition;

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

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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."

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

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and controls the activities of its subordinate agencies. The Ministry has the authority to issue certain regulations implementing the federal law on communications and other federal laws.

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

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

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

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

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the technical supervision of networks and network equipment throughout Russia;

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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;

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the enforcement of equipment certification requirements;

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

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

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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 allocation of numbering capacity and 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 the radio frequency spectrum, develops long-term policy for frequency allocation in the Russian Federation and decides on the allocation of frequency bands.

The FAS is a federal executive body that supervises competition regulations and enforces the Federal Law on Protection of Competition and the Federal Law on Natural Monopolies and the regulations enacted thereunder. FAS controls certain activity of natural monopolies, including monitoring their execution of certain obligatory contracts, and can issue mandatory orders as provided for in the Federal Law on Natural Monopolies.

        Other regulatory authorities.    In addition, the Federal Tariff Service regulates certain tariffs in the sphere of telecommunications, including the tariffs on the local and DLD 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.

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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 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, Information Technologies and Mass Media. Officials of the Federal Service for Supervision in the Area of Communications, Information Technologies 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:

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receive a license from the Federal Service for Supervision in the Area of Communications, Information Technologies 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

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obtain permission from the Federal Service for Supervision in the Area of Communications, Information Technologies 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, Information Technologies 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, Information Technologies 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:

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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;

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

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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:

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

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

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

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

        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 the frequency was allocated.

        The following one-time license fee is payable irrespective of the number of regions covered by the license: RUB 2,600 (equivalent to $80 as of December 31, 2011) for services involving, among other things, the use of a frequency spectrum and the lease of communication channels. 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, required 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 required that all wireless telecommunications services operators pay an annual fee set by the State Radio Frequencies Commission and approved by FAS for the use of their frequency spectrums. On January 1, 2012, a new government decree came into force which provides that fees for the use of radio frequency spectrums consist of a one-time fee and an annual fee. The fees are determined according to the methodology approved by the Ministry of Communications and Mass Media.

        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. 532 adopted on June 25, 2009, 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 proven 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.

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        Further, certain high-frequency equipment, a list of which was approved by Government Decree No. 539 dated 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, Information Technologies and Mass 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, Interconnect 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. The Federal Law on Communications and Presidential Decree No. 221, enacted on February 28, 1995, as amended, on Measures for Streamlining State Regulation of Prices (Tariffs) allow 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 Tariff Service to set the following tariffs for the natural monopolies in the communications market:

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provision of access to a local telephone network;

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permanent use of a subscriber's line; and

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local, intra-zone and DLD calls.

        In addition, the Federal Law on Natural Monopolies establishes the legal basis for federal regulation of natural monopolies, including those in the communications market, and provides for governmental control over tariffs and certain activities of the natural monopolies. The Federal Law on Natural Monopolies outlines the types of transactions for which a regulated entity must obtain prior FAS approval and establishes the general principle that regulated entities may not refuse to provide regulated services to certain types of consumers. Regulated entities are also subject to continuous reporting requirements, including submitting plans for capital investments.

        The Federal Tariff 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 a decision by the Federal Tariff Service based on the Service's analysis of the operator's activities and the market conditions.

        Our subsidiary, MGTS, was added to the Register of Natural Monopolies in 2000. In addition, Comstar-Regions, a former subsidiary of Comstar, was added to the Register of National Monopolies in 2009. As a result, MGTS and Comstar-Regions are subject to the requirements of the Federal Law on Natural Monopolies including, inter alia, the following:

•

the Federal Tariff Service regulates and controls tariffs for services provided by MGTS and Comstar-Regions, including installation fees, monthly subscription fees (for subscribers to the unlimited tariff plan) and local call charges (for subscribers who do not use the unlimited tariff plan), as well as interconnect and traffic transit tariffs;

•

MGTS and Comstar-Regions must obtain prior FAS approval for any transaction involving the acquisition, disposal or lease of assets not related to the regulated activity, if the value of such assets exceeds 10% of MGTS' or Comstar-Regions' share capital, additional capital, retained profits and reserves;

•

MGTS and Comstar-Regions are required to maintain separate accounting records for each type of activity they carry out; and

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•

MGTS and Comstar-Regions are required to publicly disclose information on their tariffs, products, material conditions of their contracts with customers, capital expenditure programs and certain other information.

        In addition, FAS is authorized by law to maintain a register of companies holding a market share in excess of 35%. Companies included in this register may become subject to certain restrictions in conducting their business, including in relation to pricing, acquisitions, geographical expansion, and associations and agreements with competitors. We are categorized by FAS as a company with a market share exceeding 35% in Ivanovo Region, Arkhangelsk region, Magadan region, Omsk region and Nenets Autonomous District. See also "Item 3. Key Information—D. 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 also provides for the 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. Comstar and MGTS were added to the register of telecommunications operators occupying a substantial position in 2005 and 2006, respectively. Following the completion of our merger with Comstar on April 1, 2011, we and MGTS are subject to the requirements of the Federal Law on Communications relating to operators occupying a substantial position in the public switched telephone networks including, inter alia, the following:

•

we and MGTS must develop interconnect rules and procedures in accordance with the requirements set forth by the federal government;

•

we and MGTS must ensure that interconnect agreements with operators who intend to interconnect to our networks are entered on the same terms and conditions as the agreements between MGTS, us and our affiliates; we and MGTS also cannot refuse to provide interconnect or discriminate against one operator over another; and

•

the Federal Service for Supervision in the Area of Communications, Information Technologies and Mass Media may monitor MGTS' and our interconnect terms and procedures and issue mandatory orders to the companies where non-compliance with the law is found.

        The Federal Law on Communications and implementation rules adopted by Government Decrees No. 161 dated March 28, 2005, and No. 627 dated October 19, 2005, also provides for government regulation of interconnect tariffs established by operators occupying a substantial position. In addition, such operators, including MGTS and us, are required to develop standard interconnect contracts and publish them as a public offer for all operators who intend to use such interconnect 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. Also see "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we or any of our mobile operator 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."

Calling Party Pays

        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 current system, fixed line operators charge their subscribers for such calls and transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to

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mobile operators is regulated by the Federal Service for Supervision in the Area of Communications, Information Technologies 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

Administration of State Service on Special Communications and Information Protection of Ukraine. This body is responsible mainly for establishing and overseeing technical policies and standards in the sphere of telecommunications. Previously these functions were carried out by the State Communications Administration (the "SCA"). The SCA was also the main regulatory body in the sphere of communications until the establishment of the NCRC in January 2005.

        The NCCIR.    The functions of the NCCIR were formerly carried out by 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 telecommunications on January 1, 2005 pursuant to the Telecommunications Law described below. It had consisted of seven members and a chairperson. The NCRC commenced its activity in April 2005 when the chairperson and its members were appointed as required by the Telecommunications Law.

        The NCRC has been responsible for issuing licenses for telecommunications services and use of radio frequencies commencing January 1, 2005, as well as various other responsibilities of the SCA from that date. According to the amendments to the Telecommunications Law introduced in July 2011, the NCRC was replaced with the NCCIR, which now consists of six members and a chairperson. The NCCIR is now responsible for issuing licenses for telecommunications services and use of radio frequencies, and other functions of the NCRC.

        The State Center for Radio Frequencies of Ukraine (the "SCRF").    While licenses for radio frequencies for wireless communications are issued by the NCCIR, 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 NCCIR 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, and maintains a data base of IMEI codes of mobile terminals.

The State Inspection of Communications (the "SIC"), established by the new Telecommunications Law, was a division of the NCRC. The SIC was responsible for the general supervision of the telecommunications market and the use of radio frequency resources. The SIC also monitored compliance with license terms, physically inspected operators and providers of telecommunications services and, together with the SCRF, reviewed cases relating to administrative violations in the areas of telecommunications and radio frequencies. In July 2011, the SIC was eliminated, and inspectors tasked with supervision were re-assigned to the NCCIR.

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.

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Legislation

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

        The Telecommunications Law provides for, among other things, equal rights for private entrepreneurs 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 various areas of telecommunications services in Ukraine, including numbering requirements, tariff and settlement regulations, interconnect, 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, between January 1, 2005, and July 5, 2011, had been responsible for many of the functions formerly handled by the SCA. In July 2011, the NCRC was replaced with the NCCIR, which 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 NCCIR is also authorized to conduct hearings and to resolve disputes among operators concerning the interconnect of telecommunications networks.

        In July 2010, the Telecommunications Law was amended with provisions on mobile number portability and national roaming obligations. According to the amendments, the NCCIR (formerly NCRC) shall adopt regulations which would allow subscribers to retain their mobile telephone numbers when switching from one mobile telecommunications operator to another. On August 25, 2011, the NCCIR enacted national roaming regulations. Accordingly, telecommunications operators were enabled to conclude agreements on national roaming and prescribed to provide this service as described in the regulations (e.g., must inform users on roaming prices and maintain quality of service on the same level for own subscribers and subscribers of operators with whom roaming agreements are signed). 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.

Licensing of Telecommunications Services and Radio Frequency Allocation

        Commencing January 1, 2005, the NCCIR (formerly NCRC) has assumed responsibility for issuing telecommunications licenses and frequency licenses pursuant to the Telecommunications Law and the

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2004 amendments to the Radio Frequencies Law. Licenses are issued for the following types of telecommunications services:

•

fixed-line telephone communications services (local, intercity, international):

•

fixed-wireless telephone communications services (local, intercity, international):

•

mobile telephone communications services; and

•

technical maintenance and exploitation of telecommunications networks.

        Starting from July 5, 2011, lease of electric communications channels no longer requires licensing.

        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 and UMTS 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. UMTS radio frequencies are currently allocated for special users, in particular, the Ministry of Defense. In September 2009, the NCRC announced plans to launch a tender for a single 3G/UMTS mobile services license in Ukraine. However, the NCRC canceled the planned tender in November 2009 following a decision by the President of Ukraine to put the tender and conversion of the radio frequencies on hold.

        Following the election of Viktor Yanukovich as Ukraine's new President in February 2010, a working group was created in order to fulfill the assignment of Ukraine's Cabinet of Ministers on conversion of frequencies.

        In October 2010, the NCRC proposed an updated plan that stipulates carrying out the conversion within eight months of November 2010 and at a cost of UAH 841 million in one stage by means of releasing a whole range of 100 MHz frequency. In March 2011, the NCRC developed a draft regulation (which has yet to be approved by the Ukrainian government) for the compensation of costs incurred by various governmental agencies (including the Ministry of Defense) that currently hold frequencies to be converted. In 2012, the NCCIR is planning to determine the specific requirements of a public tender for the sale of frequencies for the development of 3G networks. The tender may be held in the first half of 2012. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Our inability to obtain a UMTS license in Ukraine on commercially reasonable terms, or at all, may negatively affect our competitive position in Ukraine."

        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 NCCIR at least four months prior to the expiration of the license term. NCCIR officials have broad discretion with respect to both the issuance and the renewal of licenses. The Telecommunications Law further provides that the NCCIR 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 NCCIR 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 NCCIR issues a frequency license concurrently with the issuance of a telecommunications license for the type of services requiring use of radio frequency resources. A telecommunications operator that has the respective telecommunications license

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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 NCCIR 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. Telecommunications operators are allowed to apply to the NCCIR for redistribution of the radio frequency resources previously allocated to them.

        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, terms of network deployment and territory coverage, the requirement to use only certified equipment, the technical standards which must be considered 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 NCCIR 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.

        Some licenses also provide that services for persons entitled to certain social benefits must be provided at or below certain maximum thresholds 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 NCCIR 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;

•

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

•

failure to pay monthly fees for the use of allocated radio frequencies for six months or more.

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

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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 NCCIR issue 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 NCCIR.

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.

        Ukrainian antimonopoly legislation prohibits a company operating in Ukraine from abusing its dominant position in its market to gain, inter alia, 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. Further, Ukrainian antimonopoly legislation provides that a company shall be deemed dominant if its market share in the respective product market exceeds 35% unless such company proves that it faces significant competition in the respective product market.

        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 NCCIR irrevocable public offers regarding interconnect with the other operators' telecommunications networks;

•

comply with the regulations of the NCCIR regarding the technical, organizational and commercial terms and conditions of interconnect with the other operators' telecommunications networks;

•

comply with the cost determination factors set by the NCCIR for access to the operator's own network; and

•

not discriminate against other players in the telecommunications market.

        According to AC&M-Consulting, MTS Ukraine had a 37.7% market share of the wireless communications market in Ukraine as of December 31, 2011. 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

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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 an investigation of the telecommunications interconnect market among mobile operators in Ukraine and issued a finding in May 2009 that eight mobile operators, including MTS Ukraine and its closest competitors, have a dominant position in relation to the market for interconnecting to each of their own respective mobile networks. MTS Ukraine appealed this decision in June 2009, and the AMC suspended the decision pending resolution of the appeal. In June 2010, the AMC confirmed its earlier decision and eight mobile operators, including MTS Ukraine and its closest competitors, were determined to have a dominant position on the market for interconnecting to their own mobile networks. As a result, the interconnect fees charged by these operators, including MTS Ukraine, for termination of calls on their networks are currently regulated by the NCCIR. In February 2010, the NCRC approved interconnect rates for telecommunications operators found by the AMC to have a dominant position. Thus, MTS Ukraine was obligated to charge interconnect rates established by the NCRC, which were UAH 0.35-0.40 per minute excluding VAT (approximately $0.04 - $0.05 as of December 31, 2011). 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."

        In December 2010, the Telecommunications Law was amended to introduce the term "significant market power operator." An operator qualifies as a significant market power operator ("SMP operator") if its share of gross revenue from the provision of traffic transfer services on fixed or mobile telecommunications networks during the last 12 months exceeded 25% of total gross revenues of all telecommunications operators for the same services during the same period. An operator can be classified as a significant market power operator on either the fixed telecommunications market, the mobile telecommunications market, or on both. Such an amendment could allow the NCCIR to recognize certain operators, including us, as operators with significant market power (rather than operators with dominant positions) and to consequently regulate their fees for traffic transfer services (rather than interconnect fees for termination of calls on the operators' networks).

        On October 20, 2011, the NCCIR issued a decision, which recognizes all mobile operators, including MTS Ukraine, as SMP operators on the market of call termination on their own networks.

        On December 1, 2011, the NCCIR approved an interconnect rate of UAH 0.36 per minute excluding VAT (approximately $0.04 as of December 31, 2011) which came into effect on January 1, 2012, for all SMP operators on the market of call termination on their own networks.

        The Telecommunications Law also extends the power of the NCCIR to receive financial and economic data from telecommunications operators. Such information allows the NCCIR to analyze the Ukrainian telecommunications services market in order to determine which operators (if any) have a dominant position and which ones (if any) are significant market power operators for purposes of regulating fees such operators can charge for interconnect and traffic transfer services. In addition, the financial and economic data permits the NCCIR to better regulate the interaction of operators with regard to traffic transfer services and to assist with out of court dispute settlement. New amendments to the Telecommunications Law also set forth the methodology for fee determination that can be charged for traffic transfer sevices based largely on a calculation that includes an operator's base cost

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plus profitibality of certain services. Furthermore, in order to prevent "dumping" fees, operators that do not have a dominant position nor significant market power are prohibited under the Telecommunications Law from charging fees less than those charged by the regulated entities, but can certainly charge more should they choose.

        Due to the currently large market shares held by MTS Ukraine and Kyivstar in Ukraine, we believe that the AMC may determine that only these two operators (and not the current eight operators) have dominant positions on the market in 2011. If so, we and Kyivstar would remain the only regulated operators in Ukraine and, as a result, we could suffer a significant decrease in our interconnect revenues as well as an increase in the interconnect fees we pay to other operators not deemed to have a dominant position or significant market power.

Tariffs

        Telecommunications tariffs are regulated by the NCCIR 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 April 2009, 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, inter alia, request the violating telecommunications operator to remedy the situation, in particular, by amending its tariff schedule, and impose fines on the company for an infringement.

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

Interconnect

        Interconnect activity is regulated by the NCCIR. Operators may provide offers for interconnect to the NCCIR, and the NCCIR is required to publish on an annual or regular basis a catalog of such offers. Operators with a dominant position on the market are obligated to submit interconnect offers to the NCCIR for each catalog.

        Interconnect is made pursuant to interconnect 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 position cannot refuse an offer to conclude an interconnect agreement with another operator, if the offeror has offered points of interconnect that were previously published by the NCCIR in the catalogue of interconnect proposals.

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

        In May 2009, the AMC issued a finding that eight mobile operators, including MTS Ukraine and its closest competitors, have a dominant position in relation to the market for interconnecting to each of their respective networks. MTS Ukraine appealed this decision in June 2009, and the AMC suspended the decision pending resolution of the appeal. In June 2010, the AMC confirmed its earlier decision and interconnect fees charged by MTS Ukraine for terminating calls on its network are currently regulated. In February 2010, the NCRC established regulated interconnect fees for termination of calls on the networks of operators that have a dominant position. See "—Competition."

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Licenses

Mobile Operations

        The following table shows, as of March 1, 2012, 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, 2016
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	—	—	MTS OJSC	April 28, 2016
Dagestan Republic	Dagtelecom LLC	June 5, 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, 2016	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 Region	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, 2017	MTS OJSC	January 15, 2017
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 Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Nizhny Novgorod 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
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
Penza Region	MTS OJSC	May 6, 2021	—	—
Perm Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Pskov Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Rostov Region	MTS OJSC	July 1, 2015	MTS OJSC	July 1, 2015
Ryazan Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
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, 2016	MTS OJSC	September 1, 2016
Smolensk Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Stavropol Region	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	May 6, 2021	MTS OJSC	December 30, 2013
Vladimir Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Volgograd Region	—	—	MTS OJSC	October 4, 2016
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
Altaisk Region	MTS OJSC	September 8, 2015	MTS OJSC	September 8, 2015
Altai Republic	MTS OJSC	July 19, 2016	MTS OJSC	December 30, 2013
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
Zabaykalsky Region	Sibintertelecom CJSC	June 5, 2014	Sibintertelecom CJSC	June 5, 2014
Zabaykalsky Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Chukotsk Autonomous Region	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	MTS OJSC	April 28, 2013
Kamchatka Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Kemerovo Region	MTS OJSC	December 30, 2013	MTS OJSC	December 30, 2013
Khabarovsk Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Khakassiya Republic	MTS OJSC	September 13, 2016	MTS OJSC	September 13, 2016
Khanty Mansiysk Autonomous Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Krasnoyarsk Region	MTS OJSC	May 7, 2013	MTS OJSC	May 7, 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

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	GSM 900		GSM 1800
License Region	Licensee	Expiry date	Licensee	Expiry date
Novosibirsk Region	MTS OJSC	February 21, 2017	MTS OJSC	February 21, 2017
Omsk Region	MTS OJSC	December 20, 2016	MTS OJSC	December 20, 2016
Primorsky Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Sakha Republic (Yakutia)	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
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, 2016	MTS OJSC	December 30, 2013
Yamalo-Nenetsk Autonomous Region	MTS OJSC	April 28, 2013	MTS OJSC	April 28, 2013
Ukraine
Ukraine	MTS Ukraine PrJSC	December 3, 2013	MTS Ukraine PrJSC	December 3, 2013
Armenia
Armenia	K-Telecom CJSC	November 4, 2019	K-Telecom CJSC	November 4, 2019
Uzbekistan
Uzbekistan	Uzdunrobita FE LLS	June 30, 2016	Uzdunrobita FE LLS	June 30, 2016
Belarus
Belarus(1)	Mobile Telesystems LLC	April 30, 2022	Mobile Telesystems LLC	April 30, 2022

(1)

This license was initially valid until April 30, 2012, but in February 2012 was extended until April 30, 2022.

IMT-2000/UMTS/CDMA

License Region	Licensee	Expiry date
Russian Federation	MTS OJSC	May 21, 2017
Uzbekistan	Uzdunrobita FE LLC	June 30, 2016
Armenia	K-Telecom CJSC	November 4, 2019
Belarus	Mobile Telesystems LLC	April 30, 2022
Ukraine	MTS Ukraine PrJSC	September 27, 2021

LTE

License Region	Licensee	Expiry date
Moscow, Moscow Region	MTS OJSC	December 29, 2016
Uzbekistan	Uzdunrobita FE LLC	June 30, 2016
Armenia	K-Telecom CJSC	November 4, 2019

        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 (except for Turkmenistan, see "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan."). 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.

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Fixed Line Operations

        The following table shows, as of March 1, 2012, information with respect to our fixed line licenses:

Licensee	License Region(s)	License number	Expiry Date
International, national, intra-zonal and local communications services
MGTS	Moscow	No. 30000	December 11, 2013
MGTS	Moscow	No. 73888	July 28, 2015
MTS OJSC	Moscow	No. 94370	March 30, 2017
MTS OJSC	Russian Federation	No. 87176	February 16, 2013
MTS OJSC	Moscow Region	No. 94371	March 30, 2017
MTS OJSC	Moscow	No. 87181	February 16, 2016
MTS OJSC	Moscow Region	No. 87182	November 21, 2015
MTS OJSC	Rostov Region	No. 61088	August 1, 2013
MTS OJSC	Severnaya Osetia-Alania Republic	No. 61089	August 1, 2013
MTS OJSC	Krasnodar Region	No. 61090	August 1, 2013
MTS OJSC	Bashkortostan Republic	No. 77972	November 21, 2015
MTS OJSC	Astrakhan Region	No. 65672	January 19, 2014
MTS OJSC	Kemerovo Region	No. 65673	January 19, 2014
MTS OJSC	Arkhangelsk Region	No. 65677	January 19, 2014
MTS OJSC	Vologda Region	No. 65678	January 19, 2014
MTS OJSC	Kaliningrad Region	No. 65679	January 19, 2014
MTS OJSC	Karelia Republic	No. 65680	January 19, 2014
MTS OJSC	Murmansk Region	No. 65681	January 19, 2014
MTS OJSC	Novgorod Region	No. 65682	January 19, 2014
MTS OJSC	St. Petersburg	No. 65684	January 19, 2014
MTS OJSC	Komi Republic	No. 65685	January 19, 2014
MTS OJSC	Volgograd Region	No. 66352	March 4, 2014
MTS OJSC	Omsk Region	No. 90203	October 4, 2016
MTS OJSC	Khakassiya Republic	No. 75296	May 6, 2015
MTS OJSC	Tomsk Region	No. 56547	February 27, 2013
MTS OJSC	Altai Region	No. 56548	February 27, 2013
MTS OJSC	Krasnoyarsk Region	No. 56549	February 27, 2013
MTS OJSC	Novosibirsk Region	No. 56550	February 27, 2013
MTS OJSC	Khakassiya Republic	No. 88183	June 6, 2016
MTS OJSC	Kaluga Region	No. 87186	July 3, 2015
MTS OJSC	Tyumen Region	No. 87189	August 31, 2012
MTS OJSC	Volgograd Region	No. 90196	November 17, 2016
MTS OJSC	Irkutsk Region	No. 90208	October 24, 2016
MTS OJSC	Sakhalin Region	No. 90197	October 24, 2016
MTS OJSC	Primorsky Region	No. 90198	October 24, 2016
MTS OJSC	Bashkortostan Republic	No. 77981	September 8, 2015
MTS OJSC	Bashkortostan Republic	No. 92587	March 5, 2017
MTS OJSC	Kemerovo Region	No. 64842	December 26, 2013
MTS OJSC	Omsk Region	No. 90201	October 4, 2016
MTS OJSC	Udmurt Republic	No. 90202	October 4, 2016
MTS OJSC	Ryazan Region	No. 75034	July 3, 2015
MTS OJSC	Voronezh Region, Orel Region	No. 49876	October 24, 2012
MTS OJSC	Lipetsk Region, Kursk Region, Bryansk Region, Belgorod Region	No. 49877	February 7, 2013
MTS OJSC	Severnaya Osetia-Alania Republic	No. 51207	June 5, 2012

125

Licensee	License Region(s)	License number	Expiry Date
MTS OJSC	Dagestan Republic	No. 87178	June 5, 2012
MTS OJSC	Tver Region	No. 56551	February 27, 2013
MTS OJSC	Smolensk Region	No. 56552	February 27, 2013
MTS OJSC	Buryatiya Republic	No. 58061	April 18, 2013
MTS OJSC	Saratov Region	No. 58062	April 18, 2013
MTS OJSC	Zabaykalsky Region	No. 75297	May 6, 2015
MTS OJSC	Vologda Region, Pskov Region, Novgorod Region, Murmansk Region, Karelia Republic, Arkhangelsk Region, Leningrad Region, St. Petersburg	No. 94373	April 17, 2017
MTS OJSC	Kaliningrad Region	No. 33926	December 17, 2012
MTS OJSC	Krasnoyarsk Region	No. 90204	October 24, 2016
MTS OJSC	Yaroslavl Region	No. 90185	October 24, 2016
MTS OJSC	Ivanovo Region	No. 90212	October 24, 2016
MTS OJSC	Astrakhan Region	No. 90199	October 24, 2016
MTS OJSC	Rostov Region	No. 90205	October 24, 2016
MTS OJSC	Krasnodar Region	No. 90213	October 24, 2016
MTS OJSC	Chelyabinsk Region	No. 90190	October 24, 2016
MTS OJSC	Perm Region	No. 90206	October 24, 2016
MTS OJSC	Kurgan Region	No. 90214	October 24, 2016
MTS OJSC	Khanty Mansiysk Autonomous Region	No. 90215	October 24, 2016
MTS OJSC	Tomsk Region	No. 90189	October 24, 2016
MTS OJSC	Novosibirsk Region	No. 90209	October 24, 2016
MTS OJSC	Altai Region	No. 90191	October 24, 2016
MTS OJSC	Samara Region	No. 90210	October 24, 2016
MTS OJSC	Orenburg Region	No. 90192	October 24, 2016
MTS OJSC	Tatarstan Republic	No. 90207	October 24, 2016
MTS OJSC	Nizhny Novgorod Region	No. 90193	October 24, 2016
MTS OJSC	Kirov Region	No. 90188	October 24, 2016
MTS OJSC	Komi Republic	No. 90187	October 24, 2016
MTS OJSC	Sakha Republic (Yakutia)	No. 90186	October 24, 2016
MTS OJSC	Khabarovsk Region	No. 90194	October 24, 2016
MTS OJSC	Amur Region	No. 90195	October 24, 2016
Comstar Regions	Ryazan Region	No. 79714	October 23, 2015
Comstar Regions	Tver Region	No. 71081	November 24, 2014
Comstar Regions	Kaluga Region	No. 71078	November 24, 2014
Comstar Regions	Ivanovo Region	No. 71079	November 24, 2014
Comstar Regions	Smolensk Region	No. 71080	November 24, 2014
Comstar Regions	Tambov Region	No. 71705	December 18, 2014
Comstar Regions	Orel Region	No. 71715	December 18, 2014
Comstar Regions	Kursk Region	No. 71718	December 18, 2014
Comstar Regions	Samara Region	No. 72419	December 31, 2014
MGTS	Moscow	No. 60094	July 10, 2013
MGTS	Moscow Region	No. 66707	April 17, 2014
MGTS	Moscow Region	No. 66708	April 17, 2014
Comstar Regions	Ulyanovsk Region	No. 71089	November 24, 2014
Comstar Regions	Tambov Region	No. 71706	December 18, 2014

126

Licensee	License Region(s)	License number	Expiry Date
Comstar Regions	Sverdlovsk Region	No. 84299	April 28, 2016
Comstar Regions	Sverdlovsk Region	No. 82418	March 15, 2016
Comstar Regions	Tyumen Region, Yamalo Nenetskiy Autonomous Region, Khanty Mansiysky Autonomous Region-Yugra	No. 81886	December 1, 2015
Comstar Regions	Tyumen Region, Yamalo Nenetskiy Autonomous Region, Khanty Mansiysky Autonomous Region-Yugra	No. 81893	December 1, 2015
Comstar Regions	Saratov Region	No. 80565	October 19, 2015
Comstar Regions	Ulyanovsk Region	No. 82807	December 15, 2015
Comstar Regions	Nizhniy Novgorod Region	No. 82806	December 15, 2015
Comstar Regions	Chelyabinsk Region	No. 82802	December 15, 2015
Comstar Regions	Irkutsk Region	No. 82801	December 15, 2015
Comstar Regions	Perm Region	No. 82799	December 15, 2015
Comstar Regions	Yaroslavl Region	No. 86886	May 6, 2016
Comstar Regions	The Udmurt Republic	No. 89706	July 28, 2016
Comstar Regions	Penza Region	No. 94385	March 14, 2017
Comstar Regions	Penza Region	No. 94388	March 14, 2017
Comstar Regions	Leningrad Region	No. 93879	December 7, 2016
Telematic Services
MTS OJSC	Kamchatka Region, Irkutsk Region, Jewish Autonomous Region, Chukotsk Autonomous Region	No. 78184	August 13, 2015
MTS OJSC	Mari El Republic	No. 77976	September 14, 2015
MTS OJSC	Volgograd Region	No. 75029	May 30, 2015
MTS OJSC	Primorsky Region	No. 79704	December 21, 2015
MTS OJSC	Sakhalin region, Magadan region, Kamchatka region, Buryatiya Republic	No. 75027	June 17, 2015
MTS OJSC	Zabaykalsky Region	No. 67990	June 5, 2014
MTS OJSC	Stavropol Region	No. 73258	May 26, 2015
MTS OJSC	Samara Region	No. 73944	May 26, 2015
MTS OJSC	Saratov Region	No. 73941	May 31, 2015
MTS OJSC	Ulyanovsk Region	No. 73940	May 31, 2015
MTS OJSC	Kemerovo Region	No. 73007	May 31, 2015
MTS OJSC	Astrakhan Region	No. 75713	July 15, 2015
MTS OJSC	Adygeya Republic	No. 75711	July 15, 2015
MTS OJSC	Kalmykia Republic	No. 75709	July 28, 2015
MTS OJSC	Chechen Republic	No. 54980	December 6, 2012
MTS OJSC	Krasnoyarsk Region	No. 58746	May 7, 2013
MTS OJSC	Tyva Republic	No. 75705	July 28, 2015
MTS OJSC	Krasnodar Region	No. 75701	July 15, 2015
MTS OJSC	Severnaya Osetia-Alania Republic, Karachaevo-Cherkesia Republic, Kabardino-Balkar Republic, Ingushetia Republic, Dagestan Republic	No. 77982	September 14, 2015

127

Licensee	License Region(s)	License number	Expiry Date
MTS OJSC	Mordovia Republic, Chuvashia Republic	No. 77978	September 14, 2015
MTS OJSC	Rostov Region	No. 77973	October 26, 2015
MTS OJSC	Komi Republic, Perm Region, Orenburg Region, Orel Region, Nizhny Novgorod Region, Lipetsk Region, Moscow, Kostroma Region, Smolensk Region, Kirov Region, Kaluga Region, Ivanovo Region, Bryansk Region, Belgorod Region, Moscow Region, Kursk Region, Voronezh Region, Tyumen Region, Sverdlovsk Region, Omsk Region, Kurgan Region, Khanty Mansiysk Autonomous Region, Chelyabinsk Region, Pskov Region, Yaroslavl Region, Ryazan Region, Vladimir Region, Udmurt Republic, Tver Region, Tula Region, Tambov Region, Yamalo-Nenetsk Autonomous Region, Amur Region	No. 80186	February 15, 2016
MTS OJSC	Bashkortostan Republic	No. 86010	June 21, 2016
MTS OJSC	Khabarovsk Region	No. 75033	June 17, 2015
MTS OJSC	Novosibirsk Region	No. 82395	April 13, 2016
MTS OJSC	Khakassiya Republic	No. 75000	June 17, 2015
MTS OJSC	Tomsk Region	No. 75032	June 17, 2015
MTS OJSC	Sakha Republic (Yakutia)	No. 75031	July 15, 2015
MTS OJSC	Tatarstan Republic	No. 75697	July 15, 2015
MTS OJSC	Vologda Region, Novgorod Region, Nenetsk Autonomous Region, Murmansk Region, Karelia Republic, Kaliningrad Region, Arkhangelsk Region, Leningrad Region, St. Petersburg	No. 90184	October 4, 2016
MTS OJSC	Altai Region	No. 91422	December 1, 2016
MTS OJSC	Altai Republic	No. 49807	May 22, 2012
MTS OJSC	Penza Region	No. 74091	April 1, 2015
MGTS	Moscow, Moscow Region	No. 90226	December 11, 2016
Leased Communications Circuits
MTS OJSC	Rostov Region	No. 59529	October 2, 2013
MTS OJSC	Mari El Republic	No. 77975	October 5, 2015
MTS OJSC	Zabaykalsky Region, Sakha Republic (Yakutia), Khabarovsk Region	No. 78822	November 21, 2015
MTS OJSC	Magadan Region	No. 96042	May 21, 2017
MTS OJSC	Irkutsk Region	No. 96040	May 21, 2017
MTS OJSC	Koryakski Autonomous Region, Kamchatka Region	No. 96043	May 21, 2017
MTS OJSC	Sakhalin Region	No. 76588	August 25, 2015

128

Licensee	License Region(s)	License number	Expiry Date
MTS OJSC	Buryatiya Republic	No. 76589	August 25, 2015
MTS OJSC	Primorsky Region	No. 73005	May 10, 2015
MTS OJSC	Tver Region, Kostroma Region, Komi Republic, Moscow Region, Moscow	No. 61473	November 24, 2013
MTS OJSC	Penza Region	No. 81729	December 1, 2015
MTS OJSC	Aginski-Buryat Autonomous District	No. 81728	December 1, 2015
MTS OJSC	Ulyanovsk Region, Saratov Region, Samara Region	No. 73942	May 31, 2015
MTS OJSC	Stavropol Region, Astrakhan Region	No. 73259	May 31, 2015
MTS OJSC	Dagestan Republic	No. 96041	May 21, 2017
MTS OJSC	Volgograd Region, Karachaevo-Cherkesia Republic, Kabardino-Balkar Republic, Ingushetia Republic	No. 58060	April 18, 2013
MTS OJSC	Krasnoyarsk Region	No. 58748	May 7, 2013
MTS OJSC	Bashkortostan Republic	No. 58750	May 7, 2013
MTS OJSC	Tatarstan Republic	No. 58751	May 7, 2013
MTS OJSC	Tomsk Region, Kemerovo Region	No. 58752	May 7, 2013
MTS OJSC	Severnaya Osetia-Alania Republic, Kalmykia Republic	No. 58753	May 7, 2013
MTS OJSC	Chuvashia Republic	No. 75707	July 28, 2015
MTS OJSC	Tyva Republic	No. 75706	July 28, 2015
MTS OJSC	Vladimir Region, Tula Region, Smolensk Region, Ryazan Region, Pskov Region, Kaluga Region	No. 77974	October 7, 2015
MTS OJSC	Yaroslavl Region, Nizhny Novgorod Region, Kirov Region, Ivanovo Region	No. 77977	October 13, 2015
MTS OJSC	Krasnodar Region, Adygeya Republic	No. 75703	July 15, 2015
MTS OJSC	Russian Federation	No. 94560	December 29, 2016
MTS OJSC	Yamalo-Nenetsk Autonomous Region, Tyumen Region, Sverdlovsk Region, Kurgan Region, Khanty Mansiysk Autonomous Region, Chelyabinsk Region, Amur Region, Udmurt Republic, Tambov Region, Perm Region, Orenburg Region	No. 82394	April 13, 2016
MTS OJSC	Mordovia Republic	No. 78823	December 23, 2015
MTS OJSC	Novosibirsk Region, Altai Republic, Altai Region	No. 76586	July 28, 2015
MTS OJSC	Khakassiya Republic	No. 74998	June 17, 2015
MTS OJSC	Kaliningrad Region	No. 92589	March 1, 2017
MTS OJSC	Vologda Region, Novgorod Region, Yamalo-Nenetsk Autonomous region, Murmansk Region, Karelia Republic, Arkhangelsk Region, Leningrad Region, St. Petersburg	No. 92586	March 1, 2017

129

Licensee	License Region(s)	License number	Expiry Date
MTS OJSC	Omsk Region	No. 91421	December 27, 2016
MTS OJSC	Chukotsk Autonomous Region	No. 68959	August 6, 2014
MTS OJSC	Voronezh Region, Orel Region, Lipetsk Region, Kursk Region, Bryansk Region, Belgorod Region	No. 68431	July 2, 2014
MGTS	Moscow	No. 29336	December 11, 2013
Data Transmission Services
MTS OJSC	Kamchatka Region, Irkutsk Region, Jewish Autonomous Region, Chukotsk Autonomous Region	No. 78185	August 13, 2015
MTS OJSC	Zabaykalsky Region	No. 67991	June 5, 2014
MTS OJSC	Mari El Republic	No. 77971	September 14, 2015
MTS OJSC	Altai Region	No. 60113	October 31, 2013
MTS OJSC	Volgograd Region	No. 74996	June 30, 2015
MTS OJSC	Sakhalin Region, Magadan Region, Kamchatka Region, Buryatiya Republic	No. 75026	June 17, 2015
MTS OJSC	Primorsky Region	No. 79703	December 21, 2015
MTS OJSC	Stavropol Region	No. 73856	May 26, 2015
MTS OJSC	Samara Region	No. 73943	May 26, 2015
MTS OJSC	Kemerovo Region	No. 73006	May 31, 2015
MTS OJSC	Saratov Region	No. 73939	May 31, 2015
MTS OJSC	Ulyanovsk Region	No. 73938	May 31, 2015
MTS OJSC	Astrakhan Region	No. 75712	July 15, 2015
MTS OJSC	Adygeya Republic	No. 75710	July 15, 2015
MTS OJSC	Chechen Republic	No. 54981	December 6, 2012
MTS OJSC	Krasnoyarsk Region	No. 58747	May 7, 2013
MTS OJSC	Kalmykia Republic	No. 75708	July 28, 2015
MTS OJSC	Tyva Republic	No. 75704	July 28, 2015
MTS OJSC	Krasnodar Region	No. 75702	July 15, 2015
MTS OJSC	Mordovia Republic, Chuvashia Republic	No. 77979	September 14, 2015
MTS OJSC	Severnaya Osetia-Alania Republic, Karachaevo-Cherkesia Republic, Kabardino-Balkar Republic, Ingushetia Republic, Dagestan Republic	No. 77980	September 14, 2015
MTS OJSC	Rostov Region	No. 82396	April 3, 2016
MTS OJSC	Bashkortostan Republic	No. 75001	June 30, 2015
MTS OJSC	Khabarovsk Region	No. 75028	May 31, 2015
MTS OJSC	Altai Republic	No. 75700	July 15, 2015
MTS OJSC	Novosibirsk Region	No. 75699	July 15, 2015
MTS OJSC	Khakassiya Republic	No. 74999	June 17, 2015
MTS OJSC	Tomsk Region	No. 74997	June 17, 2015
MTS OJSC	Sakha Republic (Yakutia)	No. 75030	June 17, 2015
MTS OJSC	Tatarstan Republic	No. 75698	July 15, 2015

130

Licensee	License Region(s)	License number	Expiry Date
MTS OJSC	Yamalo-Nenetsk Autonomous Region, Tyumen Region, Sverdlovsk Region, Omsk Region, Kurgan Region, Khanty Mansiysk Autonomous Region, Chelyabinsk Region, Perm Region	No. 93682	April 17, 2017
MTS OJSC	Orenburg Region	No. 93684	April 17, 2017
MTS OJSC	Udmurt Republic, Nizhny Novgorod Region, Kirov Region	No. 93685	April 17, 2017
MTS OJSC	Moscow, Moscow Region	No. 93680	April 17, 2017
MTS OJSC	Amur Region	No. 93681	April 17, 2017
MTS OJSC	Voronezh Region, Orel Region, Lipetsk Region, Kursk Region, Bryansk Region, Belgorod Region	No. 93686	April 17, 2017
MTS OJSC	Yaroslavl Region, Vladimir Region, Tver Region, Tula Region, Tambov Region, Smolensk Region, Ryazan Region, Kostroma Region, Kaluga Region, Ivanovo Region	No. 96687	April 17, 2017
MTS OJSC	Vologda Region, Pskov Region, Novgorod Region, Nenetsk Autonomous Region, Murmansk Region, Komi Republic, Karelia Republic, Kaliningrad Region, Arkhangelsk Region, Leningrad Region, St. Petersburg,	No. 93683	April 17, 2017
MTS OJSC	Penza Region	No. 74182	April 1, 2015
MGTS	Moscow Region	No. 66706	April 17, 2014
MGTS	Moscow	No. 61511	December 11, 2013
MGTS	Moscow	No. 79706	February 16, 2016
Data Transmission Services for Voice
MTS OJSC	Kaluga Region	No. 87185	October 26, 2015
MTS OJSC	Yaroslavl Region	No. 87179	March 15, 2016
MTS OJSC	Rostov Region	No. 87180	February 16, 2016
MTS OJSC	Ivanovo Region	No. 87183	October 31, 2015
MTS OJSC	Moscow Region	No. 87184	October 26, 2015
MTS OJSC	Moscow	No. 94372	March 30, 2017
MTS OJSC	Sakhalin Region, Primorsky Region, Irkutsk Region	No. 80184	December 12, 2015
MTS OJSC	Voronezh Region, Orel Region, Lipetsk Region, Kursk Region, Bryansk Region, Belgorod Region	No. 76587	July 28, 2015
MTS OJSC	Bashkortostan Republic	No. 82398	April 11, 2016
Comstar Regions	Nizhny Novgorod Region	No. 70501	February 17, 2013
Comstar Regions	Samara Region	No. 72422	December 31, 2014
Comstar Regions	Udmurt Republic	No. 70556	February 07, 2013

131

Licensee	License Region(s)	License number	Expiry Date
Comstar Regions	Yamalo-Nenetsk Autonomous Region, Khanty Mansiysk Autonomous Region, Tyumen Region	No. 81889	December 01, 2015
Comstar Regions	Perm Region	No. 70515	February 22, 2015
Comstar Regions	Sverdlovsk Region	No. 82416	March 15, 2016
Comstar Regions	Ryazan Region	No. 92022	December 08, 2016
Comstar Regions	Tver Region	No. 71093	November 24, 2014
Comstar Regions	Smolensk Region	No. 71094	November 24, 2014
Comstar Regions	Tambov Region	No. 71708	December 18, 2014
Comstar Regions	Astrakhan Region	No. 71703	December 18, 2014
Comstar Regions	Volgograd Region	No. 70460	August 31, 2012
Comstar Regions	Krasnodar Region	No. 70490	August 31, 2012
Comstar Regions	Leningrad Region	No. 86882	May 16, 2016
Comstar Regions	St. Petersburg	No. 72755	January 28, 2015
Comstar Regions	Arkhangelsk Region	No. 72753	January 28, 2015
Comstar Regions	Novgorod Region	No. 72748	January 28, 2015
Comstar Regions	Kemerovo Region	No. 71724	December 18, 2014
Comstar Regions	Krasnoyarsk Region	No. 71723	December 18, 2014
Comstar Regions	Novosibirsk Region	No. 71721	December 18, 2014
Comstar Regions	Omsk Region	No. 71722	December 18, 2014
Comstar Regions	Vologda Region	No. 72749	January 28, 2015
Comstar Regions	Saratov Region	No. 80566	October 19, 2015
Comstar Regions	Chelyabinsk Region	No. 81891	December 15, 2015
Comstar Regions	Penza Region	No. 94384	March 01, 2017
Comstar Regions	Kirov Region	No. 93878	December 07, 2016
Comstar Regions	Irkutsk Region	No. 93880	December 07, 2016
Mobile Radio Services
Comstar Regions	Rostov Region	No. 70524	August 31, 2012
Comstar Regions	Tyumen Region, Yamalo Nenetskiy Autonomous Region, Khanty Mansiysky Autonomous Region-Yugra	No. 82793	December 15, 2015
Telecommunications Services for Cablecasting
MTS OJSC	Russian Federation	No. 71222	November 24, 2014
Telecommunications Services for Broadcasting
Comstar Regions	Tver	No. 85267	December 27, 2012
Comstar Regions	Severodvinsk	No. 89469	August 1, 2014
Comstar Regions	Kaluga	No. 85261	June 13, 2013
Comstar Regions	Nizhniy Novgorod	No. 85261	June 26, 2013
Comstar Regions	Arkhangelsk	No. 85263	November 4, 2014
Comstar Regions	Koryazhma	No. 85263	November 4, 2014
Comstar Regions	Rostov-on-Don	No. 85264	September 27, 2013
Comstar Regions	Yekaterinburg	No. 85265	September 29, 2013
Comstar Regions	Taganrog	No. 86478	March 30, 2014
Comstar Regions	Astrakhan	No. 86479	August 30, 2014
Comstar Regions	Nizhniy Tagil, Sverdlovsk Region	No. 90643	July 19, 2012
Comstar Regions	Izhevsk	No. 94936	July 19, 2012
Comstar Regions	Ivanovo	No. 94937	September 29, 2015

132

C.  Organizational Structure

        The table below presents our significant subsidiaries and investees, the places of incorporation and our effective ownership interests therein as of December 31, 2011.

Subsidiary	Accounting Method	Ownership Interest			Place of Incorporation/ Organization
Sibintertelecom	Consolidated		100.0	%	Russia
Russian Telephone Company	Consolidated		100.0	%	Russia
Comstar Regions	Consolidated		100.0	%	Russia
Sistema Telecom	Consolidated		100.0	%	Russia
Infocentr	Consolidated		100.0	%	Russia
Inteleca Group	Consolidated		100.0	%	Russia
Altair	Consolidated		100.0	%	Russia
Teleradiokompania "TVT"	Consolidated		100.0	%	Russia
TS-Retail	Consolidated		100.0	%	Russia
Metro-Telecom	Consolidated		95.0	%	Russia
MGTS	Consolidated		94.1	%	Russia
MTS Ukraine	Consolidated		100.0	%	Ukraine
MTS Finance(1)	Consolidated		100.0	%	Luxembourg
Uzdunrobita	Consolidated		100.0	%	Uzbekistan
BCTI	Consolidated		100.0	%	USA
MTS Bermuda(2)	Consolidated		100.0	%	Bermuda
MTS International Funding(3)	Consolidated		VIE		Ireland
K-Telecom	Consolidated		80.0	%	Armenia
MTS Belarus	Equity		49.0	%	Belarus
IntellectTelecom	Equity		47.0	%	Russia

(1)

Represents beneficial ownership interest.

(2)

A wholly owned subsidiary established to repurchase our ADSs.

(3)

A private limited company organized and existing under the laws of Ireland for the sole purpose of financing a loan to MTS. The company is a variable interest entity of the Group.

        See also Note 2 to our audited consolidated financial statements.

D.  Property, Plant and Equipment

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 Bldgs. 2 and 2a, 5 Vorontsovskaya Street Bldgs. 1 and 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, 19 Dmitrovskoye shosse Bldg. 2, 103 Prospect Mira, 42 Profsoyuznaya Street Bldg. 1, 24/2 Malaya Dmitrovka Street, Sheremetyevo Airport, 58\1 Ryazanskiy prospect, 60 Varshavskoe shosse, 27 Smolenskaya-Sennaya square Bldg 2, 27 Smolenskaya-Sennaya square Bldg 3, 6 Ostrovitjanova Street, 2 Mozhayskoe shosse, 12/3 Petrovsky Blvd., 27/2 Smolenskaya-Sennaya square, 25/1 Bolshaya Ordynka, and 25/2 Bolshaya Ordynka, 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. In addition, through our subsidiary MGTS, we own approximately 238 buildings located throughout Moscow, which serve as sales and customer service offices and house MGTS'

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telecommunication equipment. 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 and 3G technologies are 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.

        The table below sets forth certain information on our network equipment as of December 31, 2011.

	Base stations GSM-900		Base stations GSM-1800		Base stations UMTS-2100		Base station controllers*		Switches*		Media gateways
Russia		20951		13991		21670		908		175		124
Ukraine		5376		8745		—		352		43		4
Uzbekistan		770		1960		805		67		35		53
Turkmenistan		630		521		42		15		3		8
Armenia		819		82		743		32		6		6

(*)

Includes 3G equipment.

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 us, 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.

As we, Comstar, TS-Retail, Sistema Telecom and Metro-Telecom were under the common control of Sistema, our acquisition of majority stakes in these companies has been treated as a combination of entities under common control and accounted for in a manner similar to a pooling-of-interests, i.e., the assets and liabilities acquired were recorded at their historical carrying value and the consolidated financial statements were retroactively restated to reflect the Group as if these companies had been owned since the beginning of the earliest period presented. As a result, assets of these companies have been recorded at book value as if these companies have been owned by us since the beginning of the periods presented. Accordingly, the financial data presented below for the years ended December 31, 2008 and 2009, the financial years preceding the acquisition, have been restated to include the financial position and results of operations of the companies acquired from Sistema as if the acquisition had occurred as of January 1, 2008, and the financial data for the years ended December 31, 2009 and 2010 includes the financial position and results of operations of Comstar, TS-Retail, Sistema Telecom and Metro-Telecom for the full year. See Notes 2 and 3 to our audited consolidated financial statements.

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A.  Operating Results

Overview

        We are a leading telecommunications provider in Russia and the CIS, providing a wide range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV and various value-added services, as well as selling equipment and accessories.

        According to AC&M-Consulting, we are the largest mobile operator in Russia, Uzbekistan, and Armenia and the second largest in Ukraine in terms of mobile subscribers. As of December 31, 2011, we had a mobile subscriber base of approximately 101.14 million.

        We are also the largest operator in the Moscow residential broadband market in terms of subscribers, with a 28.5% market share as of December 31, 2011, according to Direct INFO.

        Our revenues for the year ended December 31, 2011, were $12,318.7 million, an increase of 9.1% from the year ended December 31, 2010. Our net income for the year ended December 31, 2011, was $1,444.0 million, an increase of 4.6% from the year ended December 31, 2010. Our revenues historically have increased through organic growth, as well as through acquisitions.

        The acquisition of Comstar in 2009 and the subsequent merger have provided us access to important growth markets in corporate and residential broadband in furtherance of our strategy to develop convergent telecommunications services and evolve into an integrated telecommunications operator.

        We also aggressively expanded our proprietary retail and distribution network over the course of 2009, 2010 and 2011, both organically and through the acquisition of several national and regional retail chains. See "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Sales and Marketing—Sales and Distribution" and "—Acquisitions."

        We require significant funds to support our subscriber growth, primarily for increasing network capacity, maintaining and modernizing our mobile and fixed line networks, developing our network in the regions and continuing the build-out of our 3G and broadband Internet networks.

        Our cash outlays for capital expenditures (consisting of purchases of property, plant and equipment and intangible assets) for the years ended December 31, 2009, 2010 and 2011 were $2,328.3 million, $2,647.1 million and $2,584.5 million, respectively.

        We have financed our cash requirements through our operating cash flows and borrowings. Net cash provided by operating activities for the years ended December 31, 2009, 2010 and 2011 was $3,592.2 million, $3,617.2 and $3,849.0 million, respectively.

        Our borrowings consist of notes and bank loans. Since 2001, we have raised a total of $2.5 billion through seven U.S. dollar-denominated unsecured bond offerings in the international capital markets, as well as ruble-denominated bonds totaling RUB 86 billion (equivalent in aggregate to $2.7 billion as of December 31, 2011). Our bank loans consist of U.S. dollar, euro and ruble-denominated borrowings totaling approximately $5.3 billion as of December 31, 2011.

        We repaid approximately $358.0 million of indebtedness in 2011. As of December 31, 2011, the total amount available to us under our credit facilities amounted to $1,321.3 million. We had total indebtedness of approximately $8.7 billion as of December 31, 2011, including capital lease obligations, compared to approximately $7.2 billion as of December 31, 2010.

        Our total interest expense for the years ended December 31, 2010 and 2011 was $777.3 million and $656.9 million, net of amounts capitalized, respectively. See Note 16 to our audited consolidated financial statements for a description of our indebtedness.

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        Our reporting currency is the U.S. dollar. Our and our subsidiaries' functional currencies are the ruble in Russia, the hryvnia in Ukraine, the U.S. dollar in Uzbekistan, the manat in Turkmenistan and the dram in Armenia. See "—Certain Factors Affecting our Financial Position and Results of Operations—Currency Fluctuation" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

Segments

        We have two reportable segments and four operating segments.

        We align our business into two reportable segments, Russia and Ukraine, to effectively manage both the mobile and the fixed line operations as an integrated business and to respond to the demands of our customers. The "Other" category does not constitute either an operating segment or a reportable segment. Rather, it includes the results of a number of other operating segments that do not meet the quantitative thresholds for separate reporting, such as Uzbekistan, Armenia, and corporate headquarters expenses. See also Note 26 to our audited consolidated financial statements for segment information.

        We manage our operations separately in each country where we operate due to the different economic and regulatory environments, which require us to separately and specifically tailor our marketing and investment strategies. Our management evaluates our performance based on the operating results in each country. Thus, we currently have four operating segments that correspond to our countries of operation and business activities: (1) Russia, (2) Ukraine, (3) Uzbekistan, and (4) Armenia, which include our mobile and fixed line communications operations in Russia, Ukraine, Uzbekistan and Armenia, respectively.

        The net operating revenues of our reportable segments for the years ended December 31, 2009, 2010 and 2011 were as follows:

	Year Ended December 31,
	2009			2010			2011
	(in thousands of U.S. dollars)
Net operating revenues
Russia	$	8,074,816		$	9,414,933		$	10,632,278
Ukraine	$	1,048,751		$	1,072,830		$	1,142,557
Other	$	787,543		$	864,372		$	643,030
Eliminations(1)	$	(43,857	)	$	(58,899	)	$	(99,177	)
Net operating revenues as reported	$	9,867,253		$	11,293,236		$	12,318,688

(1)

Represents the eliminations of intercompany transactions and results, which are primarily related to interconnect and roaming arrangements.

Certain Operating Data

        Below we provide certain operating data not included in our financial statements that we believe is useful for evaluating our business and results. The data focuses primarily on our mobile operations, particularly in Russia and Ukraine, which comprise the most significant share of our revenue in the periods presented, and is among the information routinely reviewed by our management as part of their regular evaluation of our performance.

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Mobile Subscriber Data

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

	At December 31,
	2009		2010		2011
	(in millions)
Subscribers(1)
Russia		69.3		71.4		70.0
Ukraine(2)		17.6		18.2		19.5
Uzbekistan		7.1		8.8		9.3
Armenia		2.1		2.5		2.4
Turkmenistan(3)		1.8		2.4		n/a
Total consolidated		97.8		103.3		101.1
MTS Belarus (unconsolidated)		4.6		4.7		4.9

(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.

(2)

Including CDMA subscribers starting 2011.

(3)

We do not present subscribers for 2011 as our operations in Turkmenistan have been terminated.

        We had approximately 69.95 million subscribers in Russia as of December 31, 2011, and a leading 30.7% market share of total mobile cellular subscribers in Russia, according to AC&M-Consulting. Overall penetration in Russia was at approximately 156.8%, according to AC&M-Consulting. We had approximately 19.51 million subscribers in Ukraine as of December 31, 2011 and, according to AC&M-Consulting, a 35.8% market share of total mobile cellular subscribers in Ukraine. In addition, as of December 31, 2011, we had approximately 9.30 million subscribers in Uzbekistan and 2.38 million subscribers in Armenia, representing a 39.2% and 63.9% market share, respectively, according to AC&M-Consulting and our estimates. For a description of our fixed line subscriber base, see "Item 4. Information on Our Company—B. Business Overview—Fixed Line Operations."

Mobile churn rate

        We define mobile 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,
	2009			2010			2011
Subscriber Churn
Russia		38.3	%		45.9	%		47.6	%
Ukraine		40.0	%		31.0	%		30.7	%

        The churn rate is highly dependent on competition in our license areas and those subscribers who migrate as a result of such competition. Our churn rate in Russia increased by 1.7% in 2011, as compared to 2010, as our mobile subscribers became more price sensitive and more likely to switch tariffs and switch to operators with lower-priced tariff plans and offers. In addition, due to the financial distress experienced by several mobile retailers in Russia, many increased their sales efforts in 2010 and

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2011 to stimulate revenue earned from subscription fees, which we believe led to a decline in the quality of new subscribers.

        The churn rate in Ukraine remained stable at 30.7% and 31.0% in the years ended December 31, 2011 and 2010 respectively. It remains high due to the competitive environment among mobile operators in Ukraine, which has significantly intensified in recent years.

Mobile ARPU

        We calculate mobile 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. The following table shows our average monthly service revenue per Russian and Ukrainian subscriber based on our current calculation methodology and average monthly minutes of use per Russian and Ukrainian subscriber for the periods indicated.

	Year Ended December 31,
	2009		2010		2011
Average monthly service revenue per subscriber
Russia	$	7.8	$	8.3	$	9.3
Ukraine	$	4.7	$	4.8	$	4.9
Average monthly minutes of use per subscriber
Russia		213		234		269
Ukraine		462		535		580

        Average monthly service revenue per subscriber in Russia increased to RUB 272.6 ($9.3) for the year ended December 31, 2011, from RUB 252.8 ($8.3) for the year ended December 31, 2010. This increase was coupled with a stable subscriber base in 2011, and was caused by inflation and an increase in the disposable income of the general population. Average monthly minutes of use per subscriber in Russia increased from 234 minutes in 2010 to 269 minutes in 2011 mainly due to marketing campaigns and tariff promotions aimed at increasing voice traffic.

        In Ukraine, average monthly service revenue per subscriber remained stable at UAH 38.8 ($4.9 in 2011; $4.8 in 2010). The average monthly minutes of use per subscriber increased from 462 minutes in 2009 to 535 minutes in 2010 and to 580 minutes in 2011 due to the introduction of a wide range of attractive tariffs aimed at stimulating traffic, such as inexpensive intra-network rates, as well as the increased use by subscribers of tariffs that include a flat amount of minutes per month.

Revenues

        Our principal sources of revenue are:

•

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

•

fixed service revenues from individual and corporate subscribers, which include monthly subscription fees, traffic charges, connection fees, revenues from broadband Internet connection and data transmission services, revenues from pay-TV and from sales of end-user telecommunications equipment. Fixed service revenues also include revenues received from operators, which are comprised of revenues from the renting out of channels and traffic charges and revenues from the renting out of telecommunications infrastructure; and

•

revenues from sales of handsets and accessories.

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        Our mobile service subscriber tariffs in Russia and Ukraine are not currently regulated by any organization or governmental authority. The interconnect fees we charge to other operators for terminating calls interconnecting to our mobile network are not regulated in Russia, but are regulated in Ukraine. 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 subscriber tariffs and restrict our operations" and "—If we or any of our mobile operator 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."

        Certain of our fixed service tariffs are regulated, including tariffs charged by Moscow incumbent operator MGTS for installation fees, monthly subscription fees and local call charges, as well as interconnect and traffic transit tariffs. The interconnect tariffs charged by us are also regulated by the Federal Agency on Communications.

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. Since July 2006, pursuant to an amendment to the Federal Law on Communications, mobile operators in Russia have been prohibited from charging their subscribers for incoming calls.

        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 our total revenues were 37.3% in 2009, 35.5% in 2010 and 31.5% in 2011. Usage fees as a percentage of our total revenues have been decreasing largely due to the increase in revenues from value-added services as a percentage of our total revenues.

Interconnect fees, which are fees for connecting users of other operators' fixed line and wireless networks to our network, comprised 10.7%, 10.2% and 10.8% of our total revenues in 2009, 2010 and 2011, respectively. The steady growth of our revenues was accompanied by the growth in traffic volumes from our competitors. We expect that interconnect revenues in absolute terms will increase due to the growth in traffic volumes from our competitors.

Value-added services as a percentage of our total revenues comprised 14.1% in 2009, 15.2% in 2010 and 18.2% in 2011. We offer our subscribers an array of value-added services. The increase in 2011 in revenue from value-added services was due to an increase in data traffic, resulting from active marketing initiatives, expansion of mobile internet penetration and overall improvement of the quality of these services.

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 9.2% in 2009, 7.3% in 2010 and 7.4% in 2011, respectively. The fluctuations of the monthly subscription fees as a percentage of our 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 our 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.

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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 1.2% in 2009, 1.0% in 2010 and 0.8% in 2011. We generally expect that roaming fees will continue to decline as a percentage of our total revenues due to the large increase of revenues from our value-added services. In addition, roaming tariffs between mobile operators have a tendency to decrease relative to the increase in the total number of mobile users. We may also be pressured or required to lower our roaming tariffs by FAS. See "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation."

Roaming fees for our own subscribers include amounts charged to our subscribers while traveling out of our service area. Roaming fees for own subscribers as a percentage of our total revenues represented 8.1% in 2009, 8.6% in 2010 and 8.4% in 2011. The decline in 2011 is mainly attributable to the increase in revenues from our value-added services, which grew faster than our revenue from roaming 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 18 to our audited consolidated financial statements. Connection fees represented 0.5%, 0.4%, 0.3% of our total revenues in 2009, 2010, and 2011, respectively. We expect connection fee revenues to remain at a low level as a percentage of our total revenues.

Fixed service revenues which consist primarily of fixed line telephony services, broadband internet and pay-TV services, comprised 14.6%, 14.9% and 14.9% of our total revenues in 2009, 2010 and 2011, respectively. The continued growth of our revenues was accompanied by an increase in regulated tariffs and acquisitions of several regional operators. We expect that fixed service revenues in absolute terms will grow due to the further increase in regulated tariffs caused by inflation and future acquisitions.

Sales of Handsets and Accessories

        During 2009 we significantly expanded our retail network through acquisitions of national and regional dealer chains. During 2010 and 2011, our retail network grew through organic expansion. As a result of the establishment of new points of sale and the overall expansion of retail activities in 2010 and 2011, revenue from the sale of handsets and accessories as a percentage of total revenue increased to 7.2% in 2011 compared to 6.3% in 2010 and 3.6% in 2009.

        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™ handsets over 2009, 2010 and 2011. The purchase agreement with Apple Sales International expired on March 31, 2012, and we intend to negotiate an extension of this agreement. 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 financial condition and results of operations," "—Tabular Disclosure of Contractual Obligations" and Note 27 to our audited consolidated financial statements.

        We expect that sales of handsets and accessories will decrease as a percentage of total revenue due to our reduction of wholesales to third-party retailers as we intend to maintain a strong gross margin and wholesales to third-party retailers generally do not contribute to a strong gross margin. We do not subsidize handset sales in Russia. In Ukraine, we subsidize handsets for some of our contract subscribers as well as modems for GSM and CDMA users. See "—Cost of Handsets and Accessories" below.

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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. Interconnect charges as a percentage of our total revenues represented 11.5% in 2009, 11.5% in 2010 and 12.3% in 2011. Line rental charges as a percentage of our total revenues represented 1.7% in 2009, 1.6% in 2010 and 1.9% in 2011.

        We expect that interconnect expenses payable by us to other operators for termination of traffic generated by our subscribers will increase. Primarily, this increase will likely be attributable to the growth in the volume of traffic resulting from our efforts to encourage greater voice usage through the introduction of new tariff plans and services, which may be supported by marketing campaigns.

        We expect line rental costs to increase based on the number of base stations, base station controllers, the number and capacity of rented lines.

        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 1.9% in 2009, 1.7% in 2010 and 1.4% in 2011.

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, accessories sold and SIM-cards provided to customers as a percentage of our total revenues represented 3.8% in 2009, 6.4% in 2010 and 7.3% in 2011. The increase in 2010 and 2011 was primarily attributable to the expansion of our proprietary retail network. We do not subsidize handset sales other than in Ukraine, where we subsidize handsets on a limited basis to contract subscribers as well as modems for CDMA users. In the years ended December 31, 2009, 2010, and 2011 we provided net handset subsidies in Ukraine totaling $15.6 million, $12.8 million, and $8.6 million, respectively.

        Generally, we provide SIM cards to our customers free of charge. The cost of SIM cards amounted to $77.1 million in 2009, $71.9 million in 2010 and $57.1 million in 2011.

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.

        Sales and marketing expenses reflect, among other things, advertising, promotions and other costs associated with the expansion of services in our license areas. These expenses have generally increased in prior years as subscriber numbers, market saturation and market competition have increased, as well as in connection with the further development of our brand and introduction of new value-added services. Although we generally expect that our sales and marketing expenses will continue to increase, we retain some degree of flexibility to increase or decrease these expenses in any given period based on our requirements, strategy and the general economic environment. We also expect to experience certain efficiencies and savings in these costs as we further develop our retail network operations

Mobile dealer commissions and mobile SAC in Russia and Ukraine

        For the structure of our dealer commissions in Russia and Ukraine please see "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Sales and Marketing—Sales and Distribution."

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        We measure subscriber acquisition costs ("SAC") to monitor the cost-effectiveness of our sales and marketing expenses. We define SAC as total sales and marketing expenses 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 during the period. The following table shows SAC in Russia and Ukraine for the periods indicated:

	Year Ended December 31,
	2009		2010		2011
SAC per Gross New Subscriber
Russia	$	18	$	19		n/a*
Ukraine	$	7	$	8	$	8

*

Since completion of the merger with Comstar in 2011, we ceased calculating SAC per Gross New Subscriber, as separation of mobile sales and marketing expenses in Russia has become impracticable.

        SAC in Ukraine remained relatively stable in U.S. dollar terms in 2011 as compared to 2010.

Sundry Operating Expenses

        Our sundry operating expenses consist primarily of:

•

employee salaries and bonuses;

•

social contributions payable to state funds;

•

general and administrative expenses;

•

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

•

office maintenance expenses;

•

network repair and maintenance;

•

rental of premises;

•

provision for doubtful accounts;

•

long-lived assets and goodwill impairment loss; and

•

other operating expenses.

        Sundry operating expenses as a percentage of our total revenues represented 23.0% in 2009, 22.9% in 2010 and 22.4% in 2011. Sundry operating expenses as a percentage of revenue are expected to decrease over time as a result of our cost reduction programs and continued improvement of operating efficiency.

Provision for Doubtful Accounts

        Our expense for provision for doubtful accounts for 2011 remained stable and amounted to $111.3 million, or 0.9% of our total revenues and $111.1 million, or 1.0% of our total revenues, for 2010.

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 our total revenues increased to 19.0% for the year ended December 31, 2011 as compared to 17.7% of our total revenues for the year ended December 31, 2010. This increase was in line with our expectations, and we expect further increases in connection with our ongoing network development and modernization program and the build-out associated with our regional networks.

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Interest Expense

        Our interest expense for 2011 decreased by $120.4 million or 15.5% compared to 2010 and amounted to $656.9 million. We expect interest expense to increase, which is principally associated with external debt incurred by us to finance our network development and modernization programs, as well as 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 and services reduced by the amount of business expenses incurred in such operations with certain exceptions.

        Effective January 1, 2009, the statutory income tax rate in Russia was reduced from 24% to 20%. Effective April 1, 2011, the statutory income tax rate in Ukraine was reduced from 25% to 23%. Subsequently, the rate in Ukraine will decrease to 21% in 2012, to 19% in 2013 and to 16% in 2014. The effective tax rate applicable to our consolidated group in the year ended December 31, 2011 was 25.3%. 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.

Certain Factors Affecting our Financial Position and Results of Operations

Currency Fluctuation

        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, depreciation 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.

        In addition, a decline in the value of our functional currencies against the U.S. dollar will result in revenue decrease in U.S. dollar terms, and would be reflected in our audited consolidated financial statements. The Group's and our subsidiaries' functional currencies are the ruble in Russia, the hryvnia in Ukraine, the U.S. dollar in Uzbekistan, the manat in Turkmenistan and the dram in Armenia. During 2010, the U.S. dollar fluctuated against the ruble. As a result, the average exchange rate of the U.S. dollar against the ruble in 2010 decreased by 4.3% as compared to 2009, which resulted in an overall increase in our revenues and operating costs in our audited consolidated financial statements for 2010. In 2011, the U.S. dollar continued to fluctuate against the ruble and the average exchange rate of the U.S. dollar against the ruble in 2011 decreased by 3.3% as compared to 2010. This change resulted in an overall increase in our revenues and operating costs in our audited consolidated financial statements for the year ended December 31, 2011. 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," and "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

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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
2006		9.0	%
2007		11.9	%
2008		13.3	%
2009		8.8	%
2010		8.8	%
2011		6.1	%

Source: Federal State Statistics Service

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

Year	Inflation rate
2006		9.1	%
2007		12.8	%
2008		25.2	%
2009		15.9	%
2010		9.4	%
2011		8.0	%

Source: State Statistics Committee of Ukraine

        Inflation rates in Uzbekistan and Armenia in 2011 were estimated at 8% and 4.8%, respectively.

        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. See "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. Except with respect to Comstar and other subsidiaries acquired from Sistema, results of operations of acquired businesses are included in our audited consolidated financial statements for the periods after their respective dates of acquisition. See "Item 3. Key Information—A. Selected Financial Data."

        Below is a list of our major acquisitions during 2009, 2010 and 2011.

Company	Type	Date of acquisition	Stake acquired			Purchase price
						(in millions of U.S. dollars)(1)
2009
Dagtelecom	Dagestan region mobile operator	January 2009		25.01	%		38.8
Telefon.ru	Mobile phone retail chain	February 2009		100.0	%		60.0
Eldorado	Mobile phone retail chain	March 2009		100.0	%		17.9
Stream-TV	Digital television company	March 2009		100.0	%		117.2
Kolorit	Outdoor advertising services	September 2009		100.0	%		39.7

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Company	Type	Date of acquisition	Stake acquired			Purchase price
						(in millions of U.S. dollars)(1)
Comstar(2)	Fixed line operator	October 2009		50.91	%		1,322.3	(3)
Teleforum	Mobile phone retail chain	October 2009		100.0	%		2.2
Evrotel	Fixed line operator	December 2009		100.0	%		90.0
						$	1,688.1
2010
Tenzor Telecom	Fixed line operator	February 2010		100	%		6.2
Penza Telecom	Fixed line operator	June 2010		100	%		19.3
SWEET-COM	Holder of licenses for provision of telematics communications and data transmission services	June 2010		25.1	%		8.5
TS-Retail(3)	Mobile phone retail chain	June 2010		15	%		0.0
Multiregion	Fixed line operator	July 2010		100	%		123.6
Metro-Telecom	Optical fiber network provider	August 2010		95	%		11.0
Sistema Telecom	Holder of MTS' trademark	December 2010		100	%		379.0
NMSK	Fixed line operator	December 2010		100	%		23.2
Lanck Telecom	Fixed line operator	December 2010		100	%		17.8
						$	588.6
2011
Infocentr	Optical fiber network provider	April 2011		100	%		15.4
Inteleca Group	Optical fiber network provider	April 2011		100	%		19.2
Altair	Fixed line operator	August 2011		100	%		25.6
Teleradiokompania "TVT"	Fixed line operator	October 2011		100	%		162.5
MGTS(4)	Fixed line operator	December 2011		29	%		667.8
						$	890.5

(1)

Excluding debt assumed.

(2)

In December 2009, in a series of transactions, we acquired an additional 14.2% stake in MGTS in exchange for 31,816,462 ordinary MTS shares and $7.3 million in cash. The MGTS stake was held by a wholly owned subsidiary of Comstar. Simultaneously, we received shares representing 11.06% of the total shares outstanding Comstar from MGTS Finance S.A., a wholly owned subsidiary of MGTS. We paid Comstar cash consideration of $8.3 million. As a result of these transactions, our ownership stake in Comstar increased to 61.97% as of December 31, 2009. We further increased our ownership stake in Comstar to 70.97% in September 2010 through a voluntary tender offer. See Note 3 to our audited consolidated financial statements.

(3)

In June 2010, we increased our direct ownership in TS-Retail OJSC from 25% to 40% for a nominal sum of $1. We subsequently increased our effective ownership interest in TS-Retail to 50.95%, which was achieved through a voluntary tender offer to purchase Comstar's shares in September 2010. In December 2010, as a result of the acquisition of Sistema Telecom, we acquired an additional 45% stake in TS-Retail, thereby increasing our effective ownership interest to 96.0%. In 2011, as a result of our merger with Comstar, we increased our ownership interest in TS-Retail to 100%.

(4)

MTS acquired 29% of MGTS ordinary shares as part of its acquisition of a 100% stake in CJSC Sistema-Inventure, which directly owned 29% of the ordinary shares of MGTS.

Results of Operations

        Formerly, we had three reportable segments: Russia Mobile, Russia Fixed and Ukraine Mobile. Following our merger with Comstar in 2011 and its complete integration into us, the fixed line business became an inseparable part of the core mobile business. Both the mobile and the fixed line services are now provided through one integrated business unit. This has affected our presentation of information

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about segments, as our Board and management have identified two reportable segments: Russia and Ukraine. See "—Segments."

        Headquarters expenses are not allocated to any reportable segments and are included in other countries and business activities results of operations ("Other"). See Note 26 to our audited consolidated financial statements for additional information.

        Intercompany eliminations presented below consist primarily of sales transactions between segments conducted in the normal course of operations.

        Financial information by reportable segments is presented below:

	Year Ended December 31,
	2009			2010			2011
	(in thousands of U.S. dollars)
Net operating revenues
Russia	$	8,074,816		$	9,414,933		$	10,632,278
Ukraine		1,048,751			1,072,830			1,142,557
Other		787,543			864,372			643,030
Eliminations(1)		(43,857	)		(58,899	)		(99,177	)
Net operating revenues as reported	$	9,867,253		$	11,293,236		$	12,318,688
Costs of services, excluding depreciation and amortization shown separately below, and cost of handsets and accessories
Russia	$	1,935,762		$	2,571,484		$	3,173,769
Ukraine		332,807			313,742			320,862
Other		156,793			156,617			132,745
Eliminations(1)		(38,587	)		(53,272	)		(91,250	)
Cost of services and cost of handsets and accessories as reported	$	2,386,775		$	2,988,570		$	3,536,126
Sundry operating expenses(2)
Russia	$	1,897,443		$	2,046,999		$	2,182,519
Ukraine		151,061			178,536			197,315
Other		303,460			494,989			380,616
Eliminations		(29	)		(1,497	)		(199	)
Sundry operating expenses as reported	$	2,351,935		$	2,719,027		$	2,760,251
Sales and marketing expenses
Russia	$	582,673		$	704,108		$	749,546
Ukraine		92,598			81,925			76,062
Other		58,451			69,971			59,768
Eliminations		(5,239	)		(5,420	)		(7,154	)
Sales and marketing expenses as reported	$	728,483		$	850,584		$	878,222
Depreciation and amortization expenses
Russia	$	1,305,556		$	1,418,727		$	1,752,022
Ukraine		352,037			354,154			344,709
Other		186,581			227,615			238,473
Depreciation and amortization as reported	$	1,844,174		$	2,000,496		$	2,335,204
Operating Income
Russia	$	2,353,380		$	2,673,617		$	2,774,422
Ukraine		120,248			144,473			203,609
Other		82,257			(84,820	)		(168,572	)
Eliminations		—			1,289			(574	)
Operating income as reported	$	2,555,885		$	2,734,559		$	2,808,885

(1)

Represents the elimination of inter-company transaction results, primarily interconnect and roaming arrangements.

(2)

For the purposes of this analysis "Sundry operating expenses" consist of general and administrative expenses, provision for doubtful accounts, impairment of long-lived assets and goodwill and other operating expenses.

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Year Ended December 31, 2011 compared to Year Ended December 31, 2010

Revenues and cost of services and cost of handsets and accessories

Consolidated revenues for the year ended December 31, 2011, increased by $1,025.5 million, or 9.1%, to $12,318.7 million from $11,293.2 million for the year ended December 31, 2010. The dominant reason for the growth of our consolidated revenues for the year ended December 31, 2011, was the large increase in the usage of value-added services by our subscribers, which was mainly attributable to the increase of data traffic due to our active promotion of value-added services, the increase of mobile Internet penetration, active 3G network expansion and the consequent improvement of the quality of value-added services. The increase of our consolidated revenues for the year ended December 31, 2011, was also helped by the growth of interconnect revenues, fixed revenues, sales of handsets and accessories. The growth of our interconnect revenues was supported by the overall increase in the volume of traffic from our competitors. The growth of fixed revenues was attributable to the regulatory price increase and the acquisitions of various regional operators throughout the year. The increase in sales of handsets and accessories was stimulated by the continued expansion of our retail operations. Our consolidated mobile subscriber base, excluding subscribers in Turkmenistan, remained stable and amounted to 101.1 million as of December 31, 2011. In Armenia and Uzbekistan, our revenues decreased in functional currency terms mainly due to the highly competitive environment in these countries.

Consolidated cost of services and cost of handsets and accessories for the year ended December 31, 2011, increased by 18.3% to $3,536.1 million from $2,988.6 million for the year ended December 31, 2010. Our consolidated cost of services and cost of handsets and accessories as a percentage of our total revenues in the year ended December 31, 2011, increased to 28.7% as compared to 26.5% in the year ended December 31, 2010, due to the expansion of our retail operations, which generally have lower margins than our communications service operations. The cost of value-added services as a percentage of our total revenues in the year ended December 31, 2011, increased to 3.1% as compared to 2.5% in the year ended December 31, 2010, which corresponds to the increase in value-added services revenues. Interconnect expenses as a percentage of our total revenues in the year ended December 31, 2011, increased to 12.3%, as compared to 11.5% in the year ended December 31, 2010, due to an increase in outgoing traffic volumes.

Russia revenues for the year ended December 31, 2011, increased by 12.9% to $10,632.3 million from $9,414.9 million for the year ended December 31, 2010. The increase in Russia revenues in the year ended December 31, 2011, was primarily due to the growth of revenues from value-added services, fixed revenues, interconnect revenues, sales of handsets and accessories. The increase in Russia revenues for the year ended December 31, 2011, as compared to the year ended December 31, 2010, is also partially attributable to the appreciation of the Russian ruble, our functional currency in Russia, against the U.S. dollar. Revenues from value-added services as a percentage of Russia revenues in the year ended December 31, 2011, grew to 17.2% as compared to 14.3% in the year ended December 31, 2010, due to the increase in data traffic volumes attributable to the introduction of new marketing initiatives aimed at stimulating greater usage of value-added services among our subscribers and the overall improvement of quality of these services. Interconnect revenues as a percentage of Russia revenues in the year ended December 31, 2011, grew to 10.4%, as compared to 9.5% in the year ended December 31, 2010, due to the growth in the volume of traffic from our competitors. Our continued expansion of our monobrand retail chain in 2011 caused sales of handsets and accessories to increase as a percentage of Russia revenues to 8.2% in the year ended December 31, 2011, from 7.5% in the year ended December 31, 2010. The increase in fixed revenues was primarily due to the continued growth in domestic and international long distance and "calling party pays" traffic volumes, growth in the broadband Internet business and the regulatory price increase for residential and corporate voice services.

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Russia cost of services and cost of handsets and accessories for the year ended December 31, 2011, increased by 23.4% to $3,173.8 million from $2,571.5 million for the year ended December 31, 2010. The growth was primarily due to the increase in outgoing traffic volumes, cost of handsets and accessories and cost of value-added services. Interconnect expenses increased to $1,347.0 million or 12.7% of Russia revenues in the year ended December 31, 2011, from $1,083.4 million or 11.5% of Russia revenues in the year ended December 31, 2010, mainly due to the growth in outgoing network traffic. Cost of handsets and accessories sold and SIM-cards provided to customers as a percentage of Russia revenues in the year ended December 31, 2011, increased to 8.1% as compared to 7.3% in the year ended December 31, 2010, mainly due to to the continued expansion of our retail business in 2011. Active promotion of value-added services during the year ended December 31, 2011, resulted in an increase of value-added services cost as a percentage of Russia revenues in the year ended December 31, 2011, to 3.1% as compared to 2.5% in the year ended December 31, 2010.

Ukraine revenues increased by 6.5% to $1,142.6 million in the year ended December 31, 2011, from $1,072.8 million in the year ended December 31, 2010, primarily due to the growth in usage of value-added services by our subscribers and the increase in the number of our subscribers by 7.1% to 19.5 million from 18.2 million. Value-added services revenues increased by 23.6% to $303.1 million in the year ended December 31, 2011, from $245.2 million in the year ended December 31, 2010, due to the active promotion of these services among our subscribers. Value-added services revenues as a percentage of Ukraine revenues in the year ended December 31, 2011, grew to 26.5%, as compared to 22.9% in the year ended December 31, 2010.

Ukraine cost of services and cost of handsets and accessories increased insignificantly by 2.3% to $320.9 million in the year ended December 31, 2011, from $313.7 million in the year ended December 31, 2010. The increase occurred primarily due to an increase in regular payments for radio frequencies and growth of electricity tariffs regulated by the government by $11.5 million to $64.4 million in the year ended December 31, 2011, from $52.9 million in the year ended December 31, 2010, and to 5.6% from 4.9%, respectively, as a percentage of Ukraine revenues. This was partially offset by a decrease in interconnect expenses as a percentage of Ukraine revenues to 13.9% for the year ended December 31, 2011, from 15.2% for the year ended December 31, 2010, due to the decrease in interconnect rates charged by Kyivstar. Ukraine cost of services and cost of handsets and accessories as a percentage of Ukraine revenues decreased to 28.1% for the year ended December 31, 2011, from 29.2% for the year ended December 31, 2010.

Other countries and business activities revenues for the year ended December 31, 2011, decreased by 25.6% to $643.0 million from $864.4 million for the year ended December 31, 2010. The decline was primarily caused by us ceasing to provide mobile telecommunications services in Turkmenistan at the end of 2010. In functional currency terms, we experienced a decrease in revenues in the year ended December 31, 2011, as compared to the year ended December 31, 2010, by approximately 1.6% in Uzbekistan and 3.4% in Armenia. While the subscriber base in Uzbekistan grew by 5.8% to 9.3 million as of December 31, 2011, from 8.8 million as of December 31, 2010, and traffic volume increased overall, these increases were offset by a decrease in tariffs as a response to our competitors' actions and the subscribers' migration to low cost tariff plans. The subscriber base in Armenia decreased by 3.4% to 2.4 million as of December 31, 2011, from 2.5 million as of December 31, 2010.

Other countries and business activities cost of services and cost of handsets and accessories for the year ended December 31, 2011, decreased to $132.7 million from $156.6 million for the year ended December 31, 2010. The decline was primarily caused by us ceasing to provide mobile telecommunications services in Turkmenistan at the end of 2010.

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Sundry operating expenses

Consolidated sundry operating expenses for the year ended December 31, 2011, increased by 1.5% to $2,760.3 million from $2,719.0 million for the year ended December 31, 2010. The increase of $41.3 million in sundry operating expenses was partly attributable to a general increase in expenses caused by the growth in our operations, as well as the appreciation of the functional currencies, in countries in which we operate, against the U.S. dollar. Sundry operating expenses as a percentage of our total revenues decreased to 22.4% in the year ended December 31, 2011, from 24.1% in the year ended December 31, 2010. This decrease was mainly attributable to the decrease in salary expenses and related social contributions as a percentage of our revenues to 10.0% for the year ended December 31, 2011 from 10.4% for the year ended December 31, 2010, due to our cost reduction programs and improvements in operational efficiencies. Moreover, sundry operating expenses for the year ended December 31, 2010, were adversely affected by the impairment of our assets in Turkmenistan which contributed an additional 1.2% to sundry operating expense margin.

Russia sundry operating expenses for the year ended December 31, 2011, increased by 6.6% to $2,182.5 million from $2,047.0 million for the year ended December 31, 2010. Russia sundry operating expenses as a percentage of Russia revenues decreased to 20.5% for the year ended December 31, 2011, from 21.7% for the year ended December 31, 2010. The decrease of Russia sundry operating expenses as a percentage of Russia revenues was mainly attributable to a decrease in the percentage of salary expenses and related social contributions to 9.0% for the year ended December 31, 2011, from 10.1% for the year ended December 31, 2010, due to our cost reduction programs and improvements in operational efficiencies.

Ukraine sundry operating expenses for the year ended December 31, 2011, increased by 10.5% to $197.3 million from $178.5 million for the year ended December 31, 2010. Ukraine sundry operating expenses as a percentage of Ukraine revenues increased to 17.3% for the year ended December 31, 2011, from 16.6% for the year ended December 31, 2010. The increase is primarily attributable to the VAT-related changes in Ukrainian tax legislation.

Other countries and business activities sundry operating expenses for the year ended December 31, 2011, decreased by 23.1% to $380.7 million from $495.0 million for the year ended December 31, 2010. This decrease was primarily attributable to the termination of our operations in Turkmenistan and subsequent decline in sundry operating expenses by $190.2 million for the year ended December 31, 2011, including the impairment of assets in the amount of $137.8 million. The decrease was partially offset by the growth in sundry operating expenses of our corporate headquarters by $75.8 million due to the merger with Comstar, as sundry operating expenses of the former Comstar Headquarters are now included in other countries and business activities results of operations for the year ended December 31, 2011. Other countries and business activities sundry operating expenses as a percentage of other countries and business activities revenues increased to 59.2% for the year ended December 31, 2011, from 57.3% for the year ended December 31, 2010. This increase is mainly attributable to the merger with Comstar.

Sales and marketing expenses

Consolidated sales and marketing expenses for the year ended December 31, 2011, increased by 3.2%, or $27.6 million, to $878.2 million from $850.6 million for the year ended December 31, 2010. This growth was mainly attributable to the increase in commissions payable to dealers while dealers' commissions as a percentage of our revenues remained stable at 4.7% for the years ended December 31, 2011 and 2010. This resulted from the fact that dealers acquired subscribers with a higher ARPU, while our subscriber base remained stable. Advertising and promotion expenses decreased by 4.5%, or $14.6 million, to $305.2 million for the year ended December 31, 2011, from $319.7 million for the year ended December 31, 2010, which was primarily attributable to our cost

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optimization efforts. Sales and marketing expenses as a percentage of our total revenues decreased to 7.1% for the year ended December 31, 2011, as compared to 7.5% for the year ended December 31, 2010.

Russia sales and marketing expenses for the year ended December 31, 2011, increased to $749.5 million, or 7.0% of Russia revenue, from $704.1 million, or 7.5% of Russia revenue, for the year ended December 31, 2010. The increase in sales and marketing expenses by 6.4% was due to the appreciation of the ruble and the increase of dealers commissions. Dealer commissions as a percentage of Russia revenues decreased to 4.7% for the year ended December 31, 2011, from 4.9% for the year ended December 31, 2010. Advertising and marketing expenses as a percentage of Russia revenues decreased to 2.3% for the year ended December 31, 2011, as compared to 2.6% for the year ended December 31, 2010.

Ukraine sales and marketing expenses for the year ended December 31, 2011, decreased to $76.1 million, or 6.7% of Ukraine revenues, from $81.9 million, or 7.6% of Ukraine revenues, for the year ended December 31, 2010. The decrease in sales and marketing expenses by $5.8 million and as a percentage of Ukraine revenues was primarily attributable to the reduction of advertising and promotion expenses as a result of our cost optimization efforts.

Other countries and business activities sales and marketing expenses for the year ended December 31, 2011, decreased by 14.6% to $59.8 million from $70.0 million for the year ended December 31, 2010. This decrease was mainly attributable to the reduction of advertising and promotion expenses as a result of our cost optimization efforts. As a percentage of other countries and business activities total revenues, other countries and business activities sales and marketing expenses increased to 9.3% for the year ended December 31, 2011, from 8.1% for the year ended December 31, 2010. The increase was mainly attributable to the termination of our operations in Turkmenistan.

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, 2011, increased by 16.7% to $2,335.2 million from $2,000.5 million for the year ended December 31, 2010. The increase was due to our increased asset base resulting from the continued expansion of our network through build-outs, as well as due to the decrease of the estimated useful life of certain equipment which we intend to replace. Depreciation and amortization expenses as a percentage of our total revenues increased to 19.0% for the year ended December 31, 2011, from 17.7% for the year ended December 31, 2010, due to reasons described below.

Russia depreciation and amortization for the year ended December 31, 2011, increased by 23.5% to $1,752.0 million from $1,418.7 million for the year ended December 31, 2010, mainly as a result of the build-out of our 3G networks and acquisition of fixed line operators. Depreciation and amortization expenses as a percentage of total revenues increased to 16.5% for the year ended December 31, 2011, from 15.1% for the year ended December 31, 2010.

Ukraine depreciation and amortization for the year ended December 31, 2011, was $344.7 million, or 30.2% of Ukraine revenues, and $354.2 million, or 33.0% of Ukraine revenues, for the year ended December 31, 2010. Depreciation and amortization expense as percentage of Ukraine revenues decreased due to the growth of our revenues from value-added services.

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Other countries and business activities depreciation and amortization for the year ended December 31, 2011, increased by 4.8% to $238.5 million from $227.6 million for the year ended December 31, 2010, and increased as a percentage of other countries and business activities total revenues to 37.1% from 26.3%, respectively. Growth in other countries and business activities depreciation and amortization expense as a percentage of other countries and business activities total revenues was primarily attributable to the termination of our operations in Turkmenistan and the overall growth of the depreciation expenses in Uzbekistan, where we continued the expansion of our network.

Operating Income

Consolidated operating income increased by 2.7% to $2,808.9 million for the year ended December 31, 2011, from $2,734.6 million for the year ended December 31, 2010. Operating income as a percentage of our total revenues decreased to 22.8% for the year ended December 31, 2011, compared to 24.2% for the year ended December 31, 2010. The increase of operating income in absolute terms by $74.3 million was mainly driven by the growth of our consolidated revenues due to the factors described above. Moreover, the impairment of our assets in Turkmenistan adversely affected our operating income for the year ended December 31, 2010. The decrease in operating income margin for the year ended December 31, 2011, was primarily due to an increase in depreciation and amortization, cost of services and cost of handsets and accessories as a percentage of our total revenues.

Russia operating income for the year ended December 31, 2011, increased by 3.8% to $2,774.4 million from $2,673.6 million for the year ended December 31, 2010. Russia operating income decreased as a percentage of Russia revenues to 26.1% for the year ended December 31, 2011, from 28.1% for the year ended December 31, 2010, mainly due to the increase in depreciation and amortization expenses as a percentage of Russia revenues to 16.5% for the year ended December 31, 2011, from 15.1% for the year ended December 31, 2010. The decrease was also accelerated by the expansion of our retail network with its historically lower margins on sales of handsets and accessories, and a slight increase in cost of services as a percentage of our Russia revenues to 21.7% for the year ended December 31, 2011, from 20.0% for the year ended December 31, 2010, due to the reasons described above. The increase of cost of services and cost of handsets and accessories was offset by a decrease in sales and marketing and sundry operating expenses as a percentage of Russia revenues to 27.6% for the year ended December 31, 2011, from 29.2% for the year ended December 31, 2010, due to cost reduction programs and improvements in operational efficiencies.

Ukraine operating income for the year ended December 31, 2011, increased by 40.9% to $203.6 million from $144.5 million for the year ended December 31, 2010. Ukraine operating income increased as a percentage of Ukraine revenues to 17.8% for the year ended December 31, 2011, from 13.5% for the year ended December 31, 2010. These increases were largely due to the growth in Ukraine revenues and the simultaneous decline of interconnect expense as a percentage of Ukraine revenues due to a decrease in interconnect rates charged by Kyivstar. We also experienced a decrease of sales and marketing expenses as a percentage of Ukraine revenues to 6.7% for the year ended December 31, 2011, from 7.6% for the year ended December 31, 2010, which resulted from our cost optimization efforts. Depreciation and amortization expenses also declined as a percentage of our Ukraine revenues to 30.2% for the year ended December 31, 2011, from 33.0% for the year ended December 31, 2010.

Other countries and business activities operating loss for the year ended December 31, 2011, amounted to $168.6 million, while other countries and business activities' operating loss for the year ended December 31, 2010, was $84.8 million. The increase in loss resulted from growth in sundry operating expenses of our corporate headquarters due to the reasons described above and the increase in depreciation and amortization expense as a percentage of other countries and business activities

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revenues to 37.1% for the year ended December 31, 2011, from 26.3% for the year ended December 31, 2010. This was primarily attributable to the termination of our operations in Turkmenistan and the increase in depreciation expenses in Uzbekistan where we continued to expand our network while our revenues decreased due to the factors described above.

Currency exchange and transaction gains/losses

Consolidated currency exchange and transaction losses for the year ended December 31, 2011, were $158.1 million, compared to gains of $20.2 million for the year ended December 31, 2010. We conduct our operations within the Russian Federation, Ukraine, Uzbekistan and Armenia, and we are therefore subject to currency fluctuations. The local currencies of these countries fluctuated significantly against the U.S. dollar and euro during the years ended December 31, 2011 and 2010, and the currency exchange and transaction losses we incurred were primarily due to the translation effect of our U.S. dollar and euro-denominated debt as of December 31, 2011 and 2010. The losses recognized in 2011 as compared to gains recorded in 2010 were mainly due to the depreciation of the Russian ruble and the Uzbek sum against the U.S. dollar and euro during the year ended December 31, 2011, as compared to 2010.

Interest expense

Consolidated interest expense for the year ended December 31, 2011, decreased by $120.4 million, or 15.5%, to $656.9 million from $777.3 million for the year ended December 31, 2010. The decrease in the amount of $60.7 million is due to the decline in amortization of our debt issuance costs. In 2010, the amortization of debt issuance costs was affected by the voluntary repayment of approximately $1.4 billion of our debt balance outstanding as of December 31, 2010, before the due date, which resulted in an immediate write-off of the related debt issuance cost in a total amount of $24.3 million. Additionally, in 2010, we renegotiated the interest rates and maturities of several credit facilities, which led to a significant modification of the related debt agreements and the consequent write-off of capitalized issuance costs totaling $26.4 million. None of the amendments to our credit facilities agreements in 2011 were considered to be substantial, so that no additional expense occurred. The hedging activities in 2011 resulted in an interest expense decrease in the amount of $19.2 million as compared to 2010. The extension of our construction activities in 2011 allowed us to capitalize $8.4 million more interest expense than in 2010. The remaining decrease was due to the decrease in our weighted average interest rate in 2011. See Note 16 to our consolidated financial statements for more information.

Equity in net income of associates

Consolidated equity in net income of associates for the year ended December 31, 2011, decreased by $21.2 million, or 30.0%, to a gain of $49.4 million, compared to a gain of $70.6 million for the year ended December 31, 2010. The decline is attributable to the significant depreciation of the Belarusian ruble against the U.S. dollar and subsequent decline in revenues of our equity investee in Belarus during the year ended December 31, 2011.

Other expenses (income), net

Consolidated other expenses for the year ended December 31, 2011, decreased to $6.6 million, as compared to $66.9 million for the year ended December 31, 2010. This decrease was primarily attributable to accrued damages plus interest relating to the dispute with Nomihold in the year ended December 31, 2010, as described in Note 16 to our consolidated financial statements.

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Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2011, increased by 2.8% to $531.6 million from $517.2 million for the year ended December 31, 2010. The effective tax rate increased slightly to 25.3% in the year ended December 31, 2011, from 25.0% in the year ended December 31, 2010.

Net income attributable to the non-controlling interest

Net income attributable to the non-controlling interest for the year ended December 31, 2011, amounted to $123.8 million compared to net income attributable to the non-controlling interest of $167.8 million for the year ended December 31, 2010. The decline in net income attributable to the non-controlling interest resulted from the increase of our ownership interest in MGTS during the year ended December 31, 2011, from 51.3% to 94.1%.

Net income attributable to the Group

Net income attributable to the Group for the year ended December 31, 2011, increased by $63.3 million, or 4.6%, to $1,443.9 million, compared to $1,380.6 million for the year ended December 31, 2010. Net income as a percentage of revenues was 11.7% in the year ended December 31, 2011, and 12.2% in the year ended December 31, 2010. Net income attributable to the Group for the year ended December 31, 2011, as compared to the year ended December 31, 2010, increased mainly due to the effect of the loss from the impairment of our assets in Turkmenistan recognized in the year ended December 31, 2010.

Year Ended December 31, 2010 compared to Year Ended December 31, 2009

Revenues and cost of services and cost of handsets and accessories

Consolidated revenues for the year ended December 31, 2010, increased by $1,426.0 million, or 14.5%, to $11,293.2 million from $9,867.3 million for the year ended December 31, 2009. In functional currency terms, our consolidated revenues increased in all countries in which we operate, other than in Armenia, in 2010 compared to 2009 mainly due to increased usage of value-added services, increased traffic on our mobile networks and as a result of the expansion of our retail business in Russia. Our consolidated mobile subscriber base grew by 5.7% to approximately 103.35 million as of December 31, 2010, from approximately 97.8 million as of December 31, 2009. The growth in our subscriber base was mainly attributable to our sales and marketing efforts and the expansion of our network. In Armenia, our consolidated revenues decreased in functional currency terms mainly due to the highly competitive environment in Armenia.

Consolidated cost of services and cost of handsets and accessories for the year ended December 31, 2010, increased by 25.2% to $2,988.6 million from $2,386.8 million for the year ended December 31, 2009. In functional currency terms, our consolidated cost of services and cost of handsets and accessories increased in all countries in which we operate, other than in Armenia, largely due to the same factors described above that caused our consolidated revenues to increase in functional currency terms. Our consolidated cost of services and cost of handsets and accessories as a percentage of our total revenues in the year ended December 31, 2010, increased to 26.5% as compared to 24.2% in the year ended December 31, 2009, mainly due to the expansion of our retail operations, which generally have lower margins than our communications service operations.

Russia revenues for the year ended December 31, 2010, increased by 16.6% to $9,414.9 million from $8,074.8 million for the year ended December 31, 2009. The increase in Russia revenues in the year ended December 31, 2010, was primarily due to the growth of roaming revenues, revenues from value-added services, sales of handsets and accessories, and fixed revenues. Roaming revenues increased

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by 20.0% in the year ended December 31, 2010, as compared to the year ended December 31, 2009, primarily due to the growth of roaming activity as a result of an economic recovery and increase in number of subscribers by 3.1% to 71.4 million as of December 31, 2010, from 69.3 million as of December 31, 2009. Revenues from value-added services as a percentage of Russia revenues in the year ended December 31, 2010, grew to 17.3% as compared to 16.3% in the year ended December 31, 2009, due to the introduction of new marketing initiatives aimed at stimulating greater usage of value-added services among our subscribers. Our continued expansion of our monobrand retail chain in 2010 caused sales of handsets and accessories to increase as a percentage of Russia revenues to 7.5% in the year ended December 31, 2010, from 4.3% in the year ended December 31, 2009. The increase in fixed revenues was primarily caused by continued growth in domestic and international long distance and "calling party pays" traffic volumes, growth in the broadband Internet business and a regulatory price increase for residential and corporate voice services.

Russia cost of services and cost of handsets and accessories for the year ended December 31, 2010, increased by 34.5% to $2,571.5 million from $1,935.8 million for the year ended December 31, 2009. The growth was primarily due to the increase in the number of subscribers, traffic volume, cost of handsets and accessories, and a rise in utility and energy costs due to the increase in state regulated tariffs. Interconnect expenses increased to $1,083.4 million or 11.5% of Russia revenues in the year ended December 31, 2010, from $874.0 million or 10.8% of Russia revenues in the year ended December 31, 2009, mainly due to the growth in outgoing network traffic. Cost of handsets, accessories sold and SIM-cards provided to customers as a percentage of Russia revenues in the year ended December 31, 2010, increased to 7.3% as compared to 4.1% in the year ended December 31, 2009, mainly due to the continued expansion of our retail business in 2010.

Ukraine revenues increased by 2.3% to $1,072.8 million in the year ended December 31, 2010, from $1,048.8 million in the year ended December 31, 2009, primarily due to growth in the number of our subscribers by 3.6% to 18.2 million from 17.6 million.

Ukraine cost of services and cost of handsets and accessories decreased by 5.7% to $313.7 million in the year ended December 31, 2010, from $332.8 million in the year ended December 31, 2009. The decline occurred primarily due to a decrease in interconnect expenses by $30.2 million to $163.2 million in the year ended December 31, 2010, from $193.4 million in the year ended December 31, 2009, and to 15.2% from 18.4%, respectively, as a percentage of Ukraine revenues. The decrease in interconnect expenses resulted from a reduction of interconnect rates with Kyivstar, which was partially offset by an increase in the cost of providing value-added services to 3.5% from 2.8% of total Ukraine revenues.

Other countries and business activities revenues for the year ended December 31, 2010, increased by 9.8% to $864.4 million from $787.5 million for the year ended December 31, 2009. In functional currency terms, the increase in revenues in 2010 as compared to 2009 was approximately 19.8% in Uzbekistan and 29.1% in Turkmenistan. In Armenia, in functional currency terms we experienced a decrease in revenues of 3.7%. Our subscriber base in Turkmenistan increased by 37.6% during the year ended December 31, 2010, which led to increased traffic volume. Our subscriber base grew by 23.7% in Uzbekistan during the year ended December 31, 2010, and our revenues generally increased in line with this growth. Our subscriber base in Armenia grew by 18.7% during 2010 as compared to 2009 which was diluted by a decrease in tariffs as a response to our competitors' actions in Armenia.

Other countries and business activities cost of services and cost of handsets and accessories for the year ended December 31, 2010, remained stable as compared to the year ended December 31, 2009, and equaled $156.6 million for the year ended December 31, 2010, and $156.8 million for the year ended December 31, 2009. As a percentage of other countries and business activities total revenues, these costs decreased to 18.1% for the year ended December 31, 2010, from 19.9% for the year ended December 31, 2009, primarily due to effective cost control.

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Sundry operating expenses

Consolidated sundry operating expenses for the year ended December 31, 2010, increased by 15.6% to $2,719.0 million from $2,351.9 million for the year ended December 31, 2009. The increase of $367.1 million in sundry operating expenses was attributable in part to the acquisition of Multiregion, the impairment of our business in Turkmenistan, as well as the appreciation of the functional currencies in countries in which we operate against the U.S. dollar. Sundry operating expenses as a percentage of our total revenues increased to 24.2% in the year ended December 31, 2010, from 23.8% in the year ended December 31, 2009. This increase was mainly attributable to growth in salary expenses and related social contributions as well as rent expense due to the expansion of our retail network and a corresponding increase in employees. Salary expenses and related social contributions as a percentage of our total revenues grew to 10.4% for the year ended December 31, 2010, from 10.2% for the year ended December 31, 2009. Similarly, our rent expenses increased due to our retail network expansion. Rent expenses as a percentage of our total revenues grew to 3.0% for the year ended December 31, 2010, from 2.9% for the year ended December 31, 2009. The increase was also attributable to the increase in loss from impairment as a percentage of our total revenues to 1.1% for the year ended December 31, 2010, from 0.8% for the year ended December 31, 2009, due to the impairment of long-lived assets in Turkmenistan.

Russia sundry operating expenses for the year ended December 31, 2010, increased by 7.9% to $2,047.0 million from $1,897.4 million for the year ended December 31, 2009. Russia sundry operating expenses as a percentage of Russia revenues decreased to 21.7% for the year ended December 31, 2010, from 23.5% for the year ended December 31, 2009. The increase in Russia sundry operating expenses was mainly attributable to the acquisition of Multiregion, as well as the increase in consulting expenses paid in connection with the sale of our stake in Svyazinvest. The decrease of Russia sundry operating expenses as a percentage of Russia revenues was primarily caused by the release of tax reserves, except for the income tax reserves, relating to our retail business, by the reduction in the number of top managers in connection with the merger of MTS and Comstar, by the cost-reduction programs and by the improvements in operational efficiencies in the regions through the integration of our regional pay-TV operations.

Ukraine sundry operating expenses for the year ended December 31, 2010, increased by 18.2% to $178.5 million from $151.1 million for the year ended December 31, 2009. Ukraine sundry operating expenses as a percentage of Ukraine revenues increased to 16.6% for the year ended December 31, 2010, from 14.4% for the year ended December 31, 2009. These expenses increased primarily due to increases in salary expenses and related social contributions, repair and maintenance expenses and billing and data processing expenses.

Other countries and business activities sundry operating expenses for the year ended December 31, 2010, increased by 63.1% to $495.0 million from $304.3 million for the year ended December 31, 2009. Other countries and business activities sundry operating expenses as a percentage of other countries and business activities total revenues increased to 57.3% for the year ended December 31, 2010, from 38.5% for the year ended December 31, 2009. This increase was primarily attributable to the impairment of long-lived assets in Turkmenistan.

Sales and marketing expenses

Consolidated sales and marketing expenses for the year ended December 31, 2010, increased by 16.8%, or $122.1 million, to $850.6 million from $728.5 million for the year ended December 31, 2009. This increase was mainly due to the increase in commissions payable to dealers as a result of an overall increase in the commission rates. Advertising and promotion expenses decreased, which was primarily attributable to our cost optimization efforts. Sales and marketing expenses as a percentage of our total revenues remained stable at 7.5% for the years ended December 31, 2010 and 2009.

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Russia sales and marketing expenses for the year ended December 31, 2010, increased to $704.1 million, or 7.5% of Russia revenue, from $582.7 million, or 7.2% of Russia revenue, for the year ended December 31, 2009. The increase in sales and marketing expenses by 20.8% was due to appreciation of the ruble and an increase of dealer commission rates. The increase was partially offset by a decrease of advertising and marketing expenses. Dealer commissions as a percentage of Russia revenues increased to 4.9% for the year ended December 31, 2010, from 4.2% for the year ended December 31, 2009. Advertising and marketing expenses as a percentage of Russia revenues decreased to 2.6% for the year ended December 31, 2010, as compared to 3.1% for the year ended December 31, 2009.

Ukraine sales and marketing expenses for the year ended December 31, 2010, decreased to $81.9 million, or 7.6% of Ukraine revenues, from $92.6 million, or 8.8% of Ukraine revenues, for the year ended December 31, 2009. The decrease in sales and marketing expenses by $10.7 million and as a percentage of Ukraine revenues was primarily due to the reduction of dealer commissions as a result of a decrease in revenue sharing rates.

Other countries and business activities sales and marketing expenses for the year ended December 31, 2010, increased by 19.7% to $70.0 million from $58.5 million for the year ended December 31, 2009. As a percentage of other countries and business activities total revenues, other countries and business activities sales and marketing expenses increased to 8.1% for the year ended December 31, 2010, from 7.4% for the year ended December 31, 2009. The increase was mainly attributable to growth in expenses related to the MTS Bonus loyalty program.

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, 2010, increased by 8.5% to $2,000.5 million from $1,844.2 million for the year ended December 31, 2009. The increase was due to our increased asset base resulting from the continued expansion of our network through build-outs, as well as due to accelerated depreciation of certain equipment. Depreciation and amortization expenses as a percentage of our total revenues decreased to 17.7% for the year ended December 31, 2010, from 18.7% for the year ended December 31, 2009, due to reasons described below.

Russia depreciation and amortization for the year ended December 31, 2010, increased by 8.7% to $1,418.7 million from $1,305.6 million for the year ended December 31, 2009 mainly as a result of the build-out of our 3G networks. Depreciation and amortization expenses as a percentage of Russia revenues decreased to 15.1% for the year ended December 31, 2010, from 16.2% for the year ended December 31, 2009. The decrease was mainly due to the fact that a substantial portion of Russia capital expenditure took place in December 2010, such that the recognition of depreciation and amortization expense for the newly acquired assets started only at the end of 2010.

Ukraine depreciation and amortization for the year ended December 31, 2010, was $354.2 million, or 33.0% of Ukraine revenues, and $352.0 million, or 33.6% of Ukraine revenues, for the year ended December 31, 2009. Depreciation and amortization expense as percentage of Ukraine revenues decreased as our 2009 revenues were affected by the global economic crisis.

Other countries and business activities depreciation and amortization for the year ended December 31, 2010, increased by 22.0% to $227.6 million from $186.6 million for the year ended December 31, 2009, and increased as a percentage of other countries and business activities total revenues to 26.3% from 23.8%. Growth in other countries and business activities depreciation and amortization expense as a percentage of other countries and business activities total revenues was primarily attributable to our operations in Uzbekistan, where we continued expansion of our network.

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Operating Income

Consolidated operating income increased by 7.0% to $2,734.6 million for the year ended December 31, 2010, from $2,555.9 million for the year ended December 31, 2009. Operating income as a percentage of our total revenues decreased to 24.2% for the year ended December 31, 2010, compared to 25.9% for the year ended December 31, 2009. The decrease of operating income by $178.7 million was mainly due to the impairment of our assets in Turkmenistan combined with the other factors described above. The decrease in the operating income margin was due to an increase in salaries and social contributions, rent expenses, dealer commissions, provision for obsolescence and impairment of long-lived assets as a percentage of our total revenues.

Russia operating income for the year ended December 31, 2010, increased by 13.6% to $2,673.6 million from $2,353.4 million for the year ended December 31, 2009. Russia operating income decreased as a percentage of Russia revenues to 28.4% for the year ended December 31, 2010, from 29.1% for the year ended December 31, 2009, mainly due to the expansion of our retail network, which resulted in an increase in salaries and social contributions, rent, provision for obsolescence, accelerated by historically lower margins on sales of handsets and accessories. This decrease was offset by a decrease in impairment of long-lived assets, the release of a VAT provision relating to our retail business and depreciation and amortization expenses. The decrease in Russia operating income margin was also attributable to higher sales and marketing costs. In addition, our operating income was affected by the appreciation of the Russian ruble against the U.S. dollar.

Ukraine operating income for the year ended December 31, 2010, increased by 20.1% to $144.5 million from $120.2 million for the year ended December 31, 2009. Ukraine operating income increased as a percentage of Ukraine revenues to 13.5% for the year ended December 31, 2010, from 11.5% for the year ended December 31, 2009. These increases were largely due to the decrease in sales and marketing expenses, as well as interconnect expenses due to a decrease in interconnect rates with Kyivstar.

Other countries and business activities operating loss for the year ended December 31, 2010 amounted to $84.8 million. The loss resulted from impairment of our assets in Turkmenistan. The effect of the impairment on the operating results of other countries and business activities amounted to $137.8 million.

Currency exchange and transaction gains/losses

Consolidated currency exchange and transaction gains for the year ended December 31, 2010, were $20.2 million, compared to losses of $252.7 million for the year ended December 31, 2009. We conduct our operations within the Russian Federation, Ukraine, Uzbekistan, Turkmenistan and Armenia, and we are therefore subject to currency fluctuations. The local currencies of these countries fluctuated significantly against the U.S. dollar and euro during the years ended December 31, 2010 and 2009, and the currency exchange and transaction gains we incurred were primarily due to the translation effect of our U.S. dollar and euro-denominated debt as of December 31, 2010 and 2009. The gains recognized in 2010 as compared to losses recorded in 2009 were mainly due to the appreciation of the Russian ruble and the Armenian dram against the U.S. dollar and euro during the year ended December 31, 2010, as compared to 2009.

Interest expense

Consolidated interest expense for the year ended December 31, 2010, increased by $205.4 million, or 35.9% to $777.3 million from $571.9 million for the year ended December 31, 2009. In 2010, we voluntarily repaid approximately $1.4 billion of our debt balance outstanding as of December 31, 2009 before the due date, and this resulted in an immediate write-off of the related debt issuance cost in a total amount of $24.3 million. During 2010, we renegotiated the interest rates and maturities of several

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credit facilities, which led to a significant modification of the related debt agreements and the consequent write-off of capitalized issuance costs totaling $26.4 million. The remaining increase is due to the increase in our average balance of indebtedness in 2010.

Impairment of investments

There was no consolidated impairment of investments loss in the year ended December 31, 2010. The consolidated impairment of investments loss for the year ended December 31, 2009, included write offs of investments in Svyazinvest.

Equity in net income of associates

Consolidated equity in net income of associates for the year ended December 31, 2010, increased by $10.3 million, or 17.1% to a gain of $70.6 million, compared to a gain of $60.3 million for the year ended December 31, 2009. Consolidated equity in net income of associates for the year ended December 31, 2009, was affected by a write-off of our investment in Coral/Sistema Strategic Fund.

Other expenses (income), net

Consolidated other expenses for the year ended December 31, 2010, increased to $66.9 million, as compared to $23.3 million for the year ended December 31, 2009. This increase was primarily attributable to accrued damages plus interest relating to the dispute with Nomihold.

Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2010, increased by 2.4% to $517.2 million from $505.0 million for the year ended December 31, 2009. The effective tax rate decreased to 25.0% in the year ended December 31, 2010, from 33.7% in the year ended December 31, 2009. The high effective tax rate in 2009 was caused by the changes in the valuation allowance against tax loss carry-forwards of MGTS Finance S.A. and valuation of investment in Svyazinvest, recognition of deferred tax liability related to potential earnings distributions from/to our subsidiaries, the effect of the disposal of treasury stock by Comstar, and other nondeductible items which took place in 2009.

Net income attributable to the non-controlling interest

Net income attributable to the non-controlling interest for the year ended December 31, 2010, amounted to $167.8 million compared to $20.1 million loss for the year ended December 31, 2009. Net loss attributable to the non-controlling interest for the year ended December 31, 2009, was the result of a decrease in the net income of Comstar due to the impairment of its investment in Svyazinvest, as well as the foreign exchange and transactions losses incurred on the note payable to Access.

Net income attributable to the Group

Net income attributable to the Group for the year ended December 31, 2010, increased by $366.4 million, or 36.1%, to $1,380.6 million, compared to $1,014.2 million for the year ended December 31, 2009. Net income as a percentage of revenues was 12.2% in the year ended December 31, 2010, and 10.3% in the year ended December 31, 2009. Net income attributable to the Group for the year ended December 31, 2010, as compared to the year ended December 31, 2009, increased mainly due to currency exchange rates and transaction gains resulting from appreciation of the Russian ruble against the U.S. dollar and euro, and a decrease in write-offs of investments.

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B.  Liquidity and Capital Resources

        Our borrowings consist of notes and bank loans. Since 2001, we have raised a total of $2.5 billion through seven U.S. dollar-denominated unsecured bond offerings in the international capital markets, as well as ruble-denominated bonds totaling RUB 86 billion (equivalent in aggregate to $2.7 billion as of December 31, 2011). Our bank loans consist of U.S. dollar-, euro- and ruble-denominated borrowings totaling approximately $5.3 billion as of December 31, 2011. We repaid approximately $358.0 million of indebtedness in 2011. As of December 31, 2011, the total amount available to us under our credit facilities amounted to $1,321.3 million. We had total indebtedness of approximately $8.7 billion as of December 31, 2011, including capital lease obligations, compared to approximately $7.2 billion as of December 31, 2010. Our total interest expense for the years ended December 31, 2010 and 2011, was $777.3 million and $656.9 million, net of amounts capitalized, respectively. See Note 16 to our audited consolidated financial statements for a description of our indebtedness.

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 and related interest payments;

•

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 2009, 2010 and 2011 were $2,328.3 million, $2,647.1 million and $2,584.5 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 build-out 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 build-out of our network. We expect our total capital expenditures in 2012 to be approximately 20-22% of our total 2012 revenue. These investments are required to support the growth in our subscriber base (i.e., to improve network capacity), to maintain and modernize our mobile and fixed line networks, to develop our network in the regions and to continue the build-out of our 3G and backbone networks as well as the development of our proprietary retail chain in Russia. We expect that the development of our 3G network and modernization of our fixed line networks will be among our most significant capital expenditures and require considerable management resources. See "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Services Offered—3G Technology" for additional information. Our actual capital expenditures may vary significantly from our estimates.

        In addition to capital expenditures, $1,616.4 million, $934.9 million and $1,083.6 million (net of cash acquired) in 2009, 2010 and 2011, respectively, were spent to acquire businesses. Part of the consideration was paid in connection with our acquisition of Comstar and MGTS. See "Item 3. Key Information—A. Selected Financial Data" and Note 3 to our audited consolidated financial statements. 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

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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, 2011, $865.9 million are due in 2012, $311.8 million are due in 2013 and $423.0 million are due in 2014. Of our bank loans outstanding as of December 31, 2011, $283.0 million is due in 2012, $785.0 million is due in 2013 and $512.4 million is due in 2014. We generally use the proceeds from our financing activities for our corporate purposes and refinancing existing indebtedness.

        Sistema, which currently controls 50.8% of our total charter capital (52.8% 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. Our shareholders approved cash dividends in the amount of $1,265.5 million (including dividends on treasury shares of $45.6 million) for the year 2008, of which $1.1 million remained payable as of December 31, 2009, $991.2 million (including dividends on treasury shares of $38.0 million) for 2009, of which $0.6 million remained payable as of December 31, 2010, and $1,066.8 million (including dividends on treasury shares of $40.0 million) for 2010. Dividends payable as of December 31, 2011, amounted to $0.2 million.

        On April 12, 2012, our Board of Directors recommended that the Annual General Meeting of Shareholders approve annual dividends of RUB 14.71 per ordinary MTS share (approximately $1.01 per ADS as of March 23, 2012) for the 2011 fiscal year, amounting to a total of RUB 30.4 billion (approximately $1.04 billion as of March 23, 2012).

        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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        As of December 31, 2011, our outstanding indebtedness consisted of the following notes and bank loans:

Notes

        As of December 31, 2011, our notes consisted of the following:

	Currency	Annual interest rate (actual rate at December 31, 2011)			Amount
					(in thousands of U.S. dollars)
MTS International Funding Notes due 2020	USD		8.625	%		750,000
MTS Finance Notes due 2012(1)	USD		8.00	%		400,000
MTS OJSC Notes due 2013	RUB		7.00	%		13,318
MTS OJSC Notes due 2014(2)	RUB		7.6	%		422,988
MTS OJSC Notes due 2015	RUB		7.75	%		234,097
MTS OJSC Notes due 2016(3)	RUB		14.25	%		465,895
MTS OJSC Notes due 2017	RUB		8.70	%		310,597
MTS OJSC Notes due 2018(3)	RUB		8.00	%		298,499
MTS OJSC Notes due 2020(3)	RUB		8.15	%		465,895
Plus/less: unamortized premium/(discount)						593
Total notes						3,361,882
Less: current portion						(865,880	)
Total notes, long-term						2,496,002

(1)

Fully repaid on January 25, 2012.

(2)

In May 2011, we announced a new coupon rate of 7.6% for our ruble denominated Notes due 2014. In addition, we repurchased these notes from the eligible noteholders for a total amount of RUB 1.1 billion (approximately $39.3 million as of May 19, 2011). The new coupon rate is valid until these notes mature.

(3)

We are unconditionally obligated to repurchase these notes at par value plus accrued interest at the option of the noteholders subsequent to the announcement of the sequential coupon. The dates of the announcement for each particular note issue are listed below. For additional information, see Note 16 to our audited consolidated financial statements.

        The dates on which the new coupon will be announced for each note issue are as follows:

MTS OJSC Notes due 2016	June 2012
MTS OJSC Notes due 2018	June 2013
MTS OJSC Notes due 2020	November 2015

        Subject to certain exceptions and qualifications, the indentures governing our U.S. dollar-denominated notes due 2020 and 2012 contain covenants limiting our ability to incur debt, create liens, sell or transfer lease properties, enter into loan transactions with affiliates, merge or consolidate or convey our properties and assets to another person, as well as our ability to sell or transfer any of our GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas. In addition, if we experience a change 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 required to take all commercially reasonable steps necessary to maintain a rating of the notes from Moody's or Standard & Poor's. We are also prohibited from having any judgment, decree or order for payment of money in an amount exceeding $10.0 million for MTS Finance Notes and $15.0 million for MTS International Funding

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Notes unsatisfied for more than 60 days without being appealed, discharged or waived. If we fail to comply with these and the other covenants contained in the indentures, after certain notice and cure periods, the noteholders can accelerate the debt to be immediately due and payable.

        On November 11, 2010, an international arbitration tribunal constituted under the rules of the LCIA rendered an award with regards to arbitration commenced by Nomihold Securities Inc. ("Nomihold") in January 2007. The award requires our subsidiary, MTS Finance, to honor Nomihold's option to sell to MTS Finance the remaining 49% stake in Tarino Limited ("Tarino") for $170 million, plus $5.9 million in damages and $34.9 million in interest and other costs to compensate it for related costs. MTS Finance applied to the arbitration tribunal for correction of the award, however the application was rejected and the award became final on January 5, 2011. In connection with the above mentioned restriction concerning the unsatisfied liability arising from any judgment against us, prior to the date these consolidated financial stvatements were issued, we obtained consents from the noteholders of MTS Finance Notes due 2012 and MTS International Notes due 2020 and from the banks to (1) waive certain defaults and events of default which might arise under the loan agreements as a result of and in connection with the award, and (2) agree on certain amendments to the loan agreements to avoid possible future events of default which may arise as a result of the award. Our ruble-denominated notes contain certain covenants limiting our ability to delist the notes from the quotation lists and delay coupon payments.

        We may from time to time seek to repurchase or redeem our outstanding notes through cash purchases and/or exchanges for new debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on market conditions, our liquidity requirements, contractual restrictions and other factors.

        We were in compliance with all our note covenants as of December 31, 2011.

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Bank loans

        As of December 31, 2011, our loans from banks and other financial institutions consisted of the following:

	Maturity		Interest rate (actual at December 31, 2011)	Amount outstanding at December 31, 2011
				(in thousands of U.S. dollars)
USD-denominated
Calyon, ING Bank N.V., Nordea Bank AB, Raiffeisen Zenralbank Osterreich AG		2012 - 2020	LIBOR+1.15% (1.96%)		580,742
Skandinavska Enskilda Banken AB		2012 - 2017	LIBOR+0.23% - 1.8% (1.03% - 2.61%)		204,507
EBRD		2012 - 2014	LIBOR+1.51% - 3.1% (2.32% - 3.91%)		83,333
HSBC Bank plc and ING BHF Bank AG		2012 - 2014	LIBOR+0.3% (1.11%)		51,503
HSBC Bank plc, ING Bank and Bayerische Landesbank		2012 - 2015	LIBOR+0.3% (1.11%)		42,961
Citibank International plc and ING Bank N.V.		2012 - 2013	LIBOR+0.43% (1.23%)		40,688
Commerzbank AG, ING Bank AG and HSBC Bank plc		2012 - 2014	LIBOR+0.3% (1.11%)		36,495
ABN AMRO Bank N.V.		2012 - 2013	LIBOR+0.35% (1.16%)		12,574
Other		2012 - 2013	various		9,356
				$	1,062,159
EUR-denominated
Credit Agricole Corporate Bank and BNP Paribas		2012 - 2018	EURIBOR+1.65% (3.27%)		64,033
LBBW		2012 - 2017	EURIBOR+0.75% (2.37%)		36,215
Bank of China		2012 - 2016	EURIBOR+1.95% (3.57%)		116,812
ABN AMRO Bank N.V.		2012 - 2013	EURIBOR+0.35% (1.97%)		8,958
Other		2012 - 2013	various		8,064
				$	234,082
RUB-denominated
Sberbank(1)		2015 - 2017	8.50%		3,105,967
Bank of Moscow(2)		2013	7.8%		434,835
Gazprombank(3)		2013 - 2015	8.75%		472,107
Other		2012 - 2023	various		25,057
				$	4,037,966
Other
Debt-Related Parties(4)		2012	various		6,799
				$	6,799
Total bank loans				$	5,341,006
Less: current portion					(283,025	)
Total bank loans, long-term				$	5,057,981

(1)

Each of our ruble-denominated Sberbank loan facilities provides that Sberbank may unilaterally change the interest rate including, without limitation, in the event of an increase in the CBR refinance rate. An increase in the interest rate is subject to a minimum 60-day prior notice from Sberbank, and a decrease in the interest rate is subject to a 30-day notice.

(2)

On March 16, 2012, subsequent to the statement of financial position date, we voluntary repaid $310.6 from $434.8 million outstanding under the credit facility of Bank of Moscow with an original maturity in 2013.

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(3)

On February 28, 2012, subsequent to the statement of financial position date, we voluntary repaid the full amount due under credit facilities of Gazprombank drawn by us in December 2009 and December 2010 with an original maturity in 2013-2015.

(4)

A vendor financing agreement between K-Telecom and Intracom, a related party, with total outstanding amount as of December 31, 2011 of $6.8 million is secured by the telecommunication equipment and other assets supplied under the agreement with carrying value of $2.0 million.

        See also Note 16 to our audited consolidated financial statements.

        Our loans are subject to certain restrictive covenants, including, but not limited to, negative pledges, certain financial ratios, limitations on dispositions of assets and limitations on transactions with associates, requirements to maintain ownership in certain subsidiaries, maintain certain contracts or licenses, maintain assets of certain value and to maintain a certain level of deposits in accounts at our creditor banks. In addition, there are restrictions on the granting of loans and guarantees and the incurrence of debt the purpose of which is to facilitate us paying or making any dividend or other payment or distribution of any kind on or in respect of any of our shares or to undertake any form of capital reduction. Most of the loans also include an event of default involving an unsatisfied judgment against us in excess of $10.0 million for a period of over 60 consecutive calendar days. We have obtained the waivers for all facility agreements except for the credit facility of Barclays, where such event of default was in place, to ensure that any events relating to the dispute with Nomihold described above will not be treated as an event of default. We fully repaid the outstanding amount of debt to Barclays on February 2, 2011. We were in compliance with our loan covenants as of December 31, 2011.

        The following table presents the aggregate scheduled maturities of debt principal outstanding as of December 31, 2011:

Payments due in the year ended December 31,	Notes		Bank Loans
	(in thousands of U.S. dollars)
2012	$	865,880	$	283,025
2013		311,817		785,015
2014		422,988		512,403
2015		700,600		1,266,546
2016		—		1,184,419
Thereafter		1,060,597		1,309,598
Total	$	3,361,882	$	5,341,006

        On February 28, 2012, subsequent to the statement of financial position date, we voluntary repaid the full amount due under credit facilities of Gazprombank drawn by us in December 2009 and December 2010 with an original maturity in 2013-2015. In the maturity schedule presented above, the principal outstanding as of December 31, 2011, under these facilities and totaling $472.1 million is included in payments due in the years ended December 31, 2013, 2014 and 2015, in the amounts of $78.7, $314.7 and $78.7 million, respectively, in accordance with their original maturity.

        On March 16, 2012, subsequent to the statement of financial position date, we voluntary repaid $310.6 million from $434.8 million outstanding under the credit facility agreement of Bank of Moscow with an original maturity in 2013 (respectively included as maturing in 2013 in the maturity schedule presented above).

        In addition, we had capital lease obligations in the amount of $19.8 million and $12.3 million as of December 31, 2010 and 2011, respectively. The terms of our material debt obligations are described in Note 16 to our audited consolidated financial statements.

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        Subsequent to December 31, 2011, we repaid approximately $1,308.7 million (based on the ruble and Euro exchange rates as of the payment dates) in short-term and long-term indebtedness.

        In addition, Sistema, which currently controls 50.8% of our total charter capital (52.8% excluding treasury shares) and consolidates our results in its financial statements, is subject to various covenants 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 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."

Consolidated Cash Flow Summary

        A summary of our cash flows and cash outlays for capital expenditures and acquisitions of subsidiaries follows:

	Years Ended December 31,
	2009			2010			2011
	(in thousands of U.S. dollars)
Cash flows:
Net cash provided by operating activities	$	3,592,230		$	3,617,170		$	3,849,005
Net cash used in investing activities		(2,372,171	)		(2,181,627	)		(2,555,039	)
Net cash provided by/(used in) financing activities		130,949			(3,036,442	)		(270,308	)
Effect of exchange rate changes on cash and cash equivalents		42,015			(417	)		(100,526	)
Net increase/(decrease) in cash	$	1,393,023		$	(1,601,316	)	$	923,132
Cash outlays for:
Capital expenditures(1)	$	(2,328,309	)	$	(2,647,117	)	$	(2,584,466	)
Acquisition of subsidiaries, net of cash acquired	$	(270,540	)	$	(195,106	)	$	(219,474	)
Cash payments for the acquisition of subsidiaries from related party and non-controlling interests	$	(1,345,820	)	$	(739,756	)	$	(864,081	)

(1)

Includes acquisitions of property, plant and equipment and intangible assets.

        For the year ended December 31, 2011, net cash provided by operating activities was $3,849.0 million, an increase of 6.4% from the year ended December 31, 2010. This increase was primarily attributable to an increase in total revenues due to the increased usage of mobile services by our subscribers.

	Year Ended December 31, 2010			Year Ended December 31, 2011
Net cash provided by operating activities		3,617.2			3,849.0
(in millions of U.S. dollars)
Less:
Purchases of property, plant and equipment		(1,914.3	)		(2,239.8	)
Purchases of intangible assets		(732.8	)		(344.7	)
Proceeds from sale of property, plant and equipment		6.8			22.6
Proceeds from / (purchases of) other investments		749.7			(44.2	)
Investments in and advances to associates		(2.9	)		3.0
Acquisition of subsidiaries, net of cash acquired		(195.1	)		(219.5	)
Free cash flow		1,528.6			1,026.4

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        Net cash used in investing activities in the year ended December 31, 2011 was $2,555.0 million, an increase of 17.1% from the year ended December 31, 2010. The increase was mainly due to the decrease of proceeds from the sale of other investments, which in 2010 included a one-off effect from the sale of shares in Svyazinvest in the amount of $843.2 million. Net cash used on purchases of property, plant and equipment and intangible assets in the year ended December 31, 2011, decreased by $62.7 million. The cash inflow relating to short term investments in the form of deposits and loans increased by $359.7 million.

        Net cash used in financing activities in the year ended December 31, 2011 was $270.3 million, compared to $3,036.4 million used in the year ended December 31, 2010. The change was due to a significant decrease in proceeds from loans and issuance of notes (by $2,127.8 million), coupled with the increase in cash payments made for the acquisition of non-controlling interest in existing subsidiaries (by $124.3 million) and dividends paid (by $264.0 million), partially offset by the lower amount of loan principal and notes paid (by $5,284.0 million) during the year.

        For the year ended December 31, 2010, net cash provided by operating activities was $3,617.2 million, an increase of 0.7% from the year ended December 31, 2009. This increase was primarily attributable to an increase in total revenues due to the growth of our subscriber base and the resulting increased usage of mobile services by our subscribers.

        Net cash used in investing activities in the year ended December 31, 2010 was $2,181.6 million, a decrease of 8.0% from the year ended December 31, 2009. The change was mainly due to a decrease in cash spent on the acquisition of subsidiaries. Net cash used on purchases of property, plant and equipment and intangible assets in the year ended December 31, 2010 increased by $318.8 million. The cash outflow relating to short term and other investments in the form of deposits and loans also increased by $267.2 million. The effect of higher investing was partially offset by cash inflow from the sale of shares in Svyazinvest, which amounted to $843.2 million.

        Net cash used in financing activities in the year ended December 31, 2010 was $3,036.4 million, compared to $130.9 million provided in the year ended December 31, 2009. The change was due to a significant increase in loan principal and notes paid during the year (by $3,904.3 million), partially offset by lower cash payments made for the acquisition of subsidiaries from related parties (by $606.1 million).

Liquidity

        As of December 31, 2011, we had total cash and cash equivalents of $1,850.8 million ($1,234.2 million in rubles, $423.5 million in U.S. dollars, $28.4 million in euros, $10.9 million in Ukrainian hryvnias, $150.5 million in Uzbek soms, $1.5 million in Turkmenistan manat, $1.6 million in Armenian dram and $0.1 million in other foreign currencies). In addition, as of December 31, 2011, we had short-term investments of $86.2 million, mostly in deposits in various banks. We also had $1,321.3 million available under existing credit facilities as of December 31, 2011. For a description of our outstanding external financing, see Note 16 to our audited consolidated financial statements.

        As of December 31, 2011, we had a working capital surplus of $272.8 million compared to a deficit of $38.5 million as of December 31, 2010. The increase in working capital was mainly attributable to an increase in our total cash and cash equivalents by $923.1 million, increase in other current assets by $23.0 million, trade and VAT receivables by $65.7 and $26.3 million, respectively, and the decrease in accrued expenses and other liabilities by $146.0 million and $26.8 million, respectively, partially offset by an increase of the current debt balance by $400.7 million, by an increase of the trade accounts payable balance by $170.1 million, the decrease in the short term investments by $247.4 million, the decrease in inventories by $28.9 million and the decrease in the current deferred tax asset by $45.0 million.

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        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.

        Russian law requires that 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, 2009, 2010 and 2011 that was distributable under Russian legislation amounted to $1,055.4 million, $903.2 million and $1,731.6 million, respectively.

Credit Rating Discussion

        Our credit ratings impact our ability to obtain short- and long-term financing, and the cost of such financing, and credit rating downgrades may require us to prepay certain loans. 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 our securities."

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 allowance for doubtful accounts, allowance for inventory obsolescence, valuation of assets acquired and liabilities assumed in business combinations, income tax benefits, the recoverability of goodwill, intangible assets and other long-lived assets, certain accrued liabilities and valuation of financial instruments.

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,

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plant and equipment at least on an annual basis. With regard to certain equipment, we cannot predict with certainty how and when developing technology will require us to replace such equipment.

Impairment of Long-lived Assets

        We periodically evaluate the recoverability of the carrying amount of our 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 property, plant and equipment and intangible assets amounted to $75.1 million, $127.9 million and $19.0 for the years ended December 31, 2009, 2010 and 2011, respectively. See also Note 2 to our audited consolidated financial statements.

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. In 2009, we recorded an impairment loss of $349.4 million relating to Comstar's investment in Svyazinvest and a $21.2 million loss relating to our investment in Tammaron Ltd. See Notes 14 to our audited consolidated financial statements.

Impairment of Goodwill

        Goodwill represents an excess of the consideration paid over the fair market value of net identifiable assets acquired in a purchase business combination and is not amortized. 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 the authoritative guidance on intangibles, 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. As of December 31, 2011, the fair value was significantly in excess of the carrying value for all reporting units with the exception of Uzbekistan and Armenia and the carrying value of goodwill attributable to these reporting units is less than 2% of our total assets. See Note 11 to our audited consolidated financial statements.

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 27 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

        There were no accounting pronouncements during the year ended December 31, 2011, that had or may have a material impact on our financial position, operating results and disclosures. See Note 2 to our audited consolidated financial statements.

C.  Research and Development, Patents and Licenses, etc.

        Not applicable.

D.  Trend Information

Sales

        In 2011, our revenues in Russia and Ukraine increased by 12.9% and 6.5%, respectively. Our mobile subscriber base remained stable and amounted to approximately 101.1 million subscribers as of December 31, 2011. We expect our consolidated subscriber base to grow in 2012 as a result of continued marketing and advertising activity. We anticipate our consolidated revenues will increase in 2012 based on growth in voice and data usage, increase in regulated tariffs for MGTS voice services that took effect from March 1, 2012, and the development of our broadband business in the regions. However, foreign exchange volatility could have a negative effect on our U.S. dollar-denominated revenues in 2012.

        Average monthly service revenue per subscriber in Russia increased to $9.3 for the year ended December 31, 2011, from $8.3 for the year ended December 31, 2010. Average monthly minutes of use per subscriber in Russia increased to 269 minutes in 2011 from 234 minutes in 2010 mainly due to marketing campaigns and tariff promotions aimed at increasing voice traffic. We expect average monthly service revenue per subscriber in Russia to increase in 2012 as subscribers adapt to the new conditions following the impact of the economic slowdown during which they migrated to cheaper tariffs and decreased their usage of premium services. We also believe that average monthly minutes of use per subscriber will continue to grow due to our efforts aimed at stimulating on-net traffic.

        In Ukraine, our subscriber base increased to approximately 19.5 million subscribers as of December 31, 2011, from 18.2 million subscribers as of December 31, 2010. In Ukraine, average monthly service revenue per subscriber increased slightly to UAH 38.8 ($4.9 in 2011; $4.8 in 2010). The average monthly minutes of use per subscriber increased from 535 minutes in 2010 to 580 minutes in 2011 due to the introduction and promotion of a wide range of attractive tariffs aimed at stimulating traffic, such as inexpensive on-net calling rates. In 2012, we expect revenues to increase mainly due to robust customer growth. We expect the average monthly minutes of use per subscriber will remain stable in 2012. We expect MTS Ukraine's subscriber base to increase in 2012 due to an attractive price to value ratio, a policy of regionalization and the ongoing development of new customer segments.

        Our subscriber base in Uzbekistan and Armenia grew by 0.4 million to 11.7 million subscribers in 2011, compared to approximately 11.3 million subscribers in 2010. Of these countries, Uzbekistan had the largest subscriber base, with approximately 9.3 million subscribers as of December 31, 2011, as well as the most significant growth, with a 0.5 million increase in its subscriber base in 2011 compared to 2010. We expect that our subscriber base will continue to grow in Uzbekistan, which has low penetration rates relative to Russia and Ukraine. However, the rate of growth may be impacted by continued macroeconomic volatility and increasingly competitive operating environments. The average monthly service revenue per subscriber decreased from $4.7 in 2010 to $4.0 in 2011 for Uzbekistan, and from 2,812.3 dram ($7.5) to 2,541.3 dram ($6.8) in Armenia, 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. We expect the average monthly service revenue per subscriber in Uzbekistan and Armenia to continue declining mainly due to the growth of competition on these markets which may, in turn, lead

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to 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 2011, 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 value-added services. In 2011, business activity increased in Russia and Ukraine, the unemployment rate declined, consumption and spending grew and the ruble appreciated against the U.S. dollar. We expect these macroeconomic trends in Russia and Ukraine to continue throughout 2012.

        We expect a challenging operating environment in 2012 due to continued macroeconomic and market volatility in the countries where we operate, increasing competition and significant changes in the mobile retail market in Russia. We also experienced significant exchange rate volatility and depreciation of local currencies in the countries where we operate against the U.S. dollar. The volatility and 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. For further information on these risks, see "—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Currency Fluctuation," and "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."

        However, considering current macroeconomic conditions, our management believes that we will experience medium- and long-term growth and efficiency. Due to the fact that the Russian and the Ukrainian markets are highly penetrated, we believe the next wave of revenue growth for the overall market is likely to come from customers' increasing use of data, content and other value-added services.

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. Our churn rate in Russia slightly increased to 47.6% during the year ended December 31, 2011, as compared to 45.9% for the year ended December 31, 2010, as consumers became more price sensitive and more likely to switch tariffs and operators for lower-priced tariff plans and offers due to the competitive environment. We expect that the development and expansion of our proprietary monobrand retail network in Russia will enable us to reduce our churn rate in 2012, stimulate value-added services usage and promote subscriber loyalty through superior customer service.

        The churn rate in Ukraine decreased to 30.7% for the year ended December 31, 2011, from 31.0% for the year ended December 31, 2010. This decrease was achieved by adjusting and changing our tariffs in response to changes in the market and economic environment and focusing on subscriber base management.

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E.  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 derivative contracts

Cash flow hedging

        In 2007, 2008 and 2009, we entered into variable-to-fixed interest rate swap agreements to manage the exposure to changes in variable interest rate related to debt obligations. The instruments qualify for cash flow hedge accounting under U.S. GAAP requirements. Each interest rate swap matches the exact maturity dates of the underlying debt allowing for highly-effective hedges. Interest rate swap contracts outstanding as of December 31, 2011, mature in 2012-2015.

        In 2009, we entered into several cross-currency interest rate swap agreements with various banks. These contracts hedge the risk of both interest rate and currency fluctuations and assume periodical exchanges of both principal and interest payments from ruble-denominated amounts to U.S. dollar- and euro-denominated amounts to be exchanged at a specified rate. The rate was determined by the market spot rate upon issuance. These contracts also include an interest rate swap of a fixed U.S. dollar- and euro-denominated interest rate to a fixed ruble-denominated interest rate. The instruments are qualified for cash flow hedge accounting under the U.S. GAAP requirements. Each cross-currency interest swap matches the interest and principal payments of the underlying debt allowing for highly effective hedges. Our cross-currency interest rate swap contracts outstanding as of December 31, 2010, matured in 2011.

Derivative instruments not designated as hedges

Foreign currency contracts

        In 2009 and 2010, we entered into foreign currency option agreements with HSBC and BNP Paribas to manage our exposure to changes in currency exchange rates related to our U.S. dollar-denominated debt obligations. According to the agreements, we have put and call option rights to acquire $330.0 million in U.S. dollars at rates within a range specified in contracts. These contracts were not designated for hedge accounting purposes. These currency option agreements matured in 2011 and 2012.

Option agreements

        On December 23, 2010, simultaneously with the meeting of MTS' shareholders, the meeting of Comstar-UTS' shareholders approved the reorganization of Comstar-UTS through the statutory merger into MTS OJSC. In accordance with Russian legislation, shareholders who voted against or did not vote have the right to sell their shares back to us for cash at a price set by our Boards of Directors, subject to the statutory limit of 10% of our net asset value under Russian Accounting Standards. Eligible shareholders must file a buyout demand no later within no later than 45 (forty five) days after the adoption of the resolution on reorganization. The buy-out of shares shall be carried out within 30 days after the expiry of the period set for the buyout demand being made. The fair value of our liability under the put option as of December 31, 2010, was estimated at $11.6 million using an option pricing model. The put option was exercised in 2011.

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F.  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 obligations. The following table summarizes our future obligations under these contracts due by the periods indicated as of December 31, 2011:

	Payments due by period
	Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
	(amounts in thousands of U.S. dollars)
Contractual Obligations:(1)
Long-Term Principal Debt Obligations		1,148,905		2,032,223		3,151,565		2,370,195		8,702,888
Interest Payments(2)		636,377		1,011,562		694,356		347,409		2,689,704
Capital Lease Obligations		9,825		9,898		71		0		19,794
Operating Lease Obligations		249,334		117,897		28,439		74,525		470,195
Purchase Obligations(3)		607,288		38,985		23		153		646,449
Asset retirement obligation		—		—		—		69,717		69,717
Retirement and post-retirement obligation		2,386		6,810		7,637		20,851		37,684
Payments related to business acquisitions		6,857		—		—		—		6,857
Uncertain Income Tax Position		16,338		—		—		—		16,338
Total		2,677,310		3,217,375		3,882,091		2,882,850		12,659,626

(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, 2011, scheduled maturities for the debt and interest rates effective as of December 31, 2011. We calculate interest payments on ruble-denominated bonds until the dates of their respective put options, as described in Note 16 to our audited consolidated financial statements. Payments under interest rate swap agreements are excluded from the table as their amount and timing cannot be reasonably estimated.

(3)

Includes future payments under purchase agreements to acquire property, plant and equipment, intangible assets, costs related thereto, inventory and services. In August 2008, we entered into an agreement with Apple Sales International to buy 1.5 million iPhone handsets at list prices at the dates of respective purchases over the three year period. As of December 31, 2011, we made 28.6% of our total purchase installment contemplated by the agreement. The amounts in the table do not include our obligation, if any, to purchase iPhones under our agreement with Apple as we are unable to reasonably estimate the amount and timing of such obligation. 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

Key Biographies

        Our directors and executive officers, their dates of birth and positions as of the date of this document were as follows:

Name	Year of Birth		Position
Ron Sommer		1949	Chairman of the Board, Non-Executive Director
Alexei N. Buyanov		1969	Deputy Chairman of the Board, Non-Executive Director
Anton V. Abugov		1976	Non-Executive Director
Charles W. Dunstone(1)		1964	Non-Executive Independent Director
Stanley P. Miller(1)(2)		1958	Non-Executive Independent Director
Paul J. Ostling(1)(2)		1948	Non-Executive Independent Director
Felix V. Evtushenkov		1978	Non-Executive Director
Mikhail V. Shamolin		1970	Non-Executive Director
Andrei A. Dubovskov(3)		1966	Executive Director, President and Chief Executive Officer ("CEO")
Alexey V. Kornya(3)(4)		1975	Vice President—Chief Financial Officer ("CFO")
Andrei E. Ushatskiy(3)		1974	Vice President—Chief Technology Officer
Frederic Vanoosthuyze(3)		1973	Vice President—Information Technology
Alexander V. Popovskiy(3)		1977	Vice President—Chief Operating Officer ("COO")
Vasil I. Latsanych(3)		1972	Vice President—Marketing
Nataliya L. Bereza(3)		1975	Vice President—Human Resources
Oleg Y. Raspopov(3)		1966	Vice President—Director of "MTS Foreign Subsidiaries" Business Unit
Dr. Michael Hecker(3)		1970	Vice President—Strategy, Mergers and Acquisitions (M&A) and Corporate Development
Ruslan S. Ibragimov(3)(4)		1963	Vice President—Corporate and Legal Matters
Vadim E. Savchenko(3)		1974	Vice President—Sales and Customer Service
Valery V. Shorzhin		1963	Director, Procurement Management

(1)

Member of the Remuneration and Nomination Committee.

(2)

Member of Audit Committee.

(3)

Member of Management Board.

(4)

Member of Disclosure Committee.

Ron Sommer has served as Chairman of our Board of Directors since June 2009. Mr. Sommer has served as First Vice President—Head of Telecommunications Assets Operating Unit of Sistema since May 2009 till 2011. He is currently a member of the Board of Directors of Sistema and serves as Chairman of the Board of Directors of various Sistema-affiliated companies, including Sistema Shyam Teleservices Ltd. He is also a member of the Board of Directors of Tata Consultancy Services, a member of the Supervisory Board of Munich Reinsurance, and a member of the International Advisory Board of The Blackstone Group. In 2009, he served as Chairman of the Board of Directors of Comstar. Between May 1995 and July 2002, he was CEO of Deutsche Telekom AG. From 1980 to 1995, he held a number of positions with Sony Corporation, including as CEO of Sony Deutschland, COO of Sony Corporation of America and COO of Sony Europe.

Alexei N. Buyanov has served as one of our Directors since June 2003 and as Deputy Chairman of the Board since June 2009. He served as Chairman of our Board of Directors from June 2007 until

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February 2008. Mr. Buyanov has served as Senior Vice President and Chief of the Finance and Investments Department of Sistema 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 MFB, ANK Bashneft, Ecu Gest Holding S.A. and MBRD (as Chairman of the Board of Directors).

Anton V. Abugov has served as one of our Directors since June 2008. In addition, Mr. Abugov serves on the Board of Directors of various other companies affiliated with Sistema, including ANK Bashneft, Bashkirenergo and NK RussNeft. Since 2006, Mr. Abugov has served as First Vice President and Head of Strategy and Development at Sistema. He is also a member of the Strategy Committee and the Investor Relations Committee at Sistema and is a member of our Strategy Committee. Between 2003 and 2006, he was Managing Director of AKB Rosbank and head of its Corporate Finance Department. Between 1997 and 2006, he was a Strategy Consultant at the TAIF Group of Companies. From 1995 to 2002, he worked for the United Financial Group ("UFG") in different positions, including head of corporate finance from 1999 to 2002.

Charles W. Dunstone has served as one of our Directors since June 24, 2010. Mr. Dunstone is the founder of Carphone Warehouse, one of the largest mobile phone retailers in Europe, where he served as CEO from 1989 to 2010. He was also the founder of TalkTalk Telecom Group PLC (a company formerly part of Carphone Warehouse until the two companies split in March 2010), a provider of residential fixed line telephone and broadband services, where he served as CEO from 2003 to 2010. Mr. Dunstone currently serves as Director General at Royal Parks Foundation and the Fulwood Academy; Chairman of the Board of Directors of Jensen International Automotive Limited; member of the Board of Directors of Daily Mail and General Trust, Allied Developments LTD., Clareville Capital Partners LLP, Best Buy Europe Distributions Limited, TalkTalk Group Limited, Carphone Warehouse Resources Limited, TalkTalk TelecomGroup PLC and other organizations.

Stanley P. Miller has served as one of our Directors since June 24, 2010. From 1998 to 2010, Mr. Miller served as CEO at KPN, Netherlands (since 2005, KPN Mobile International). From 2005 to 2010, he served as CEO and Chairman of the Supervisory Board at E-Plus, a subsidiary of KPN and the third largest provider of mobile telephony services in Germany. From 2001 to 2010, Mr. Miller was CEO and Chairman of the Board at BASE, Belgium, a subsidiary of KPN and the third largest provider of mobile telephony services in Belgium operating under the Simyo and Ortel Mobile brands. From 1998 to 2010, he served as a member of the Board of Directors of Hutchison 3G UK Ltd, IP Global Net NV and VESTA Technologies. Mr. Miller also serves as the Chairman of the Board of Directors of AINMT (AB) Sweden, KPN Royal N.V., E-Plus GmbH Germany, Arrow Creek Investments 75 (PTY) LTD South Africa.

Paul J. Ostling has served as one of our Directors since June 2007. Prior to joining us, Mr. Ostling served as the Global COO 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. Between 2007 and 2009, Mr. Ostling was the CEO of KUNGUR Oilfield Equipment & Services. Mr. Ostling currently serves as the General Director of Phoenix Neftegaz Service. In addition, he serves as a member of the Boards of Directors of Innolume GmbH, East Line—Domodedovo (DME Limited) and OJSC Uralkali, the Vice-Chairman of the Business Council for International Understanding, Chairman of the Board of Directors of Imagine Entertainment Music and the Deputy Chairman of the Board of Directors of Cool NRG.

Felix V. Evtushenkov has served as one of our Directors since June 2011. From 1999 to 2000, he was Executive Director of the industrial department of Sistema. From 2000 to 2003, Mr. Evtushenkov held a number of positions at Sistema-Hals. He headed Sistema-Hals from 2003 to 2008. In June 2008, he

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became Chairman of the Board of Directors of Sistema-Hals. In July 2008 he became Vice President of Sistema and Head of Consumer Assets Business Unit. In April 2011, Mr. Evtushenkov was appointed First Vice President of Sistema, Head of Core Assets Business Unit.

Mikhail V. Shamolin has served as one of our Directors since October 2008. Since March 2011, Mr. Shamolin has also served as President of Sistema. He served as our President and CEO from May 2008 to March 2011. 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, he 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.

Andrei A. Dubovskov has served as our President and CEO since March 2011. From April 2008 to March 2011, he served as the General Director of MTS Ukraine. 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.

Alexey V. Kornya has served as our Vice President—CFO since June 2010. Prior to that, he served as our Acting Vice President—Finance and Investments from August 2008. Mr. Kornya serves as our Chief Financial Officer. He is a member of our Management Board and a member of the Management Board of RTC and a member of the Board of Directors of SOOO CJSC. He is also a member of the Supervisory Board at MTS Ukraine. From March 2007 to December 2009, he served as our Chief Financial Controller. He served as our Financial Planning and Analysis Director from November 2004 to March 2007 and as CFO of our Urals Macro-Region branch from July 2004 to November 2004.

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.

Frederic Vanoosthuyze has served as our Vice President—Information Technology since February 2010. Prior to joining us, Mr. Vanoosthuyze served as Group Chief Information Officer at Millicom International Cellular S.A. (Luxembourg) from 2006 to 2009. From 1995 to 2006, he held various positions at Siemens Atea, Alcatel Bell and KPN Group Belgium.

Alexander V. Popovskiy has served as our Vice President—COO since July 2011. From August 2008 to July 2011, he served as the Director of MTS Russia Business Unit. From June 2007 to August 2008, Mr. Popovskiy served as the head of the South macro-region, and from July 2004 to June 2007, he served as the head of the Povolzhye North-West macro-region. He joined us in April 2001 as director of operations in the town of Kirov.

Vasil I. Latsanych has served as our Vice President—Marketing since September 2011. He served as Acting Head—MTS Ukraine since March 2011 until September 2011. From October 2005 to March 2011, Mr. Latsanych served as Marketing Director of MTS Ukraine. Prior to joining us, Mr. Latsanych served as Marketing Director at Coca-Cola Bottlers Siberia and Coca-Cola Krasnoyarsk. From 1996 to 1999, Mr. Latsanych held various management positions at Coca-Cola Amatil Ukraine Ltd and Coca-Cola Beverages Ukraine.

Nataliya L. Bereza has served as our Vice President—Human Resources since July 2011. Ms. Bereza was appointed to the position of the Director of Human Resources of MTS Ukraine in 2007. She joined MTS in September 2006 when she headed the personnel training and development function. Prior to joining MTS Ukraine, Ms. Bereza worked for four years at Kraft Foods (Ukraine) and more than two years in the British American Tobacco (Ukraine), where she occupied various positions in the field of human resources. She is a member of a number of professional associations in

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the area of human resources management, including the European Business Association and the American Chamber of Commerce in Ukraine.

Oleg Y. Raspopov has served as our Vice President—Director of "MTS Foreign Subsidiaries" Business Unit since January 2008. From June 2006 to March 2007, Mr. Raspopov served as our Director for managing of external resources. From April 2007 to December 2007, he served as our acting Vice President—Director of "MTS Foreign Subsidiaries" Business Unit. In 2004, he founded and managed the insurance brokerage house Energoprotection. From 2002 to 2004, Mr. Raspopov served as an Advisor to the CFO 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, M&A and Corporate Development since January 2010. From April 2008 to January 2010, Dr. Hecker served as our Vice President—Strategy and Corporate Development. From May 2006 to April 2008, 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—Corporate and Legal Matters 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 General 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.

Vadim E. Savchenko has served as our Vice President—Sales and Customer Service since July 2011. In November 2008, Mr. Savchenko became the Director of Sales at MTS Ukraine. Mr. Savchenko first joined MTS in 2005, when he assumed the position of the director of the department in charge of partner relations at macro-region "Ural" until 2007. From 2007 to 2008 he was the director of the Urals branch of OJSC "HARDWARE-Retail." Mr. Savchenko has over 15 years of operational experience in sales—from the coordinator of the sales department to the director of a branch in such companies as Pepsi International Bottlers LLC, Joint Stock Company "JTI" and OJSC "Vienna."

Valery V. Shorzhin has served as Director for Procurement Management, Member of the Management Board at MTS since March 2011 till October 2011. He had also been a Member of the MTS Management Board between 2009 and 2010. From 2008 to 2011, he served as Director of Information Technology. Prior to joining MTS, 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.

        Our directors were elected at the annual general shareholders' meeting on June 27, 2011 and will serve until their terms expire at the next annual shareholders' meeting, which will take place on June 27, 2012. The business address of each of our directors is 4 Marksistkaya Street, Moscow 109147, Russian Federation.

B.  Compensation of Directors and Senior Management

        Our officers and directors were paid during 2011 an aggregate amount of approximately $21.5 million for services in all capacities provided to us; this amount comprised $12.2 million in base salaries and $9.3 million in bonuses paid pursuant to a bonus plan and in other monetary compensations for the management and directors. Bonuses are awarded annually based on our financial performance.

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        Our management and directors are also entitled to monetary remuneration based on the quoted prices of our ADS on the NYSE. Related compensation accrued in 2011 amounted to $16.0 million. For additional information, see Note 2 to our audited consolidated financial statements.

        In 2009, we amended our Regulation on Remuneration and Compensation of the Members of the Board of Directors to provide that only independent non-executive directors receive compensation. Members of the Board of Directors who are independent non-executive directors receive annual base compensation of $250,000 (or $275,000 in the case of an independent non-executive director who serves as Chairman of the Board of Directors).

        Independent non-executive directors who also serve on Board committees receive additional compensation as follows. Members of the Strategy Committee, Remuneration and Nomination Committee, Audit Committee and Committee for Corporate Conduct and Ethics 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 special committees of the Board of Directors, which are committees established for undertaking preliminary consideration and making recommendations to the full Board in relation to certain assigned matters, receive additional annual compensation of $20,000, and a director serving as Chairman of a special committee 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.

        Independent non-executive members of the Board of Directors are also eligible for an annual bonus of up to a maximum of $200,000 based on our performance and average ADR price over a specified period.

        The aggregate amount of compensation received by an independent non-executive director (including annual base compensation, bonus and additional compensation for serving as a Board committee member) should not exceed $500,000. In the event of early termination of a director, such director receives a pro rata share of the base, committee and bonus compensation based on the amount of time the director served on our Board.

        We provide all of our directors with professional liability insurance and reimburse them for all documented expenses incurred in connection with their attendance at Board meetings and other expenses of up to $200,000.

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" for a description of the pro rata payments.

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Audit Committee

        Our Audit Committee consists of two members appointed by the Board of Directors. The current members are Stanley Miller and Paul Ostling, both 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 Nomination Committee

        Our Remuneration and Nomination Committee consists of three members appointed by the Board of Directors. The current members are Charles Dunstone, Stanley Miller and Paul Ostling, who serves as Chairman of the Remuneration and Nomination Committee. The Remuneration and Nomination Committee is primarily responsible for developing a remuneration structure and compensation levels for management executives.

        According to the bylaws, the Remuneration and Nomination Committee shall be convened by the Chairman of the Remuneration and Nomination 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 three years and can be reelected for an unlimited number of terms. 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. On March 4, 2011, Andrei A. Dubovskov was elected as our President and CEO, starting from March 5, 2011, 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.

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Disclosure Committee

        In April 2007, we established an 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. Members of the Disclosure Committee may be nominated by various divisions of MTS, willing to have representatives in the Disclosure Committee. Members are appointed by the President. Alexey Kornya, our CFO, is the Chairman of the Disclosure Committee. Currently, our Disclosure Committee consists of eight members, two of whom are officers of the company.

Information Security Committee

        In July 2010, we created a new advisory body called the Information Security Committee. The Information Security Committee coordinates our activities in respect of trade secrets and data privacy protection. The Committee also supervises the compliance of our information systems and internal procedures with applicable legal requirements concerning data privacy protection. The Information Security Committee consists of 11 members. The Chairman of the Information Security Committee is the Vice President—Chief Security Officer.

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 and Managing Director of the Finance and Investment Complex at Sistema;

•

Aleksandr S. Obermeister, who holds the position of Director of Planning and Management Accounting in Finance and Investment Complex at Sistema; and

•

Natalia V. Demeshkina, who holds the position of Managing Director of the Internal Audit 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 2012.

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, 2011, we had 58,052 employees. Of our 52,300 employees in Russia, we estimate that 599 were executives; 15,587 were technical and maintenance employees; 26,213 were sales, marketing and customer service staff; and 9,901 were administration and finance staff. In addition, of the 52,300 employees in Russia, we estimate that 15,643 were employed in our retail unit.

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        As of December 31, 2011, 3,063 of our employees worked in Ukraine. Of these employees, we estimate that 25 were executives; 1,057 were technical and maintenance employees; 1,239 were sales, marketing and customer service staff; and 742 were administration and finance staff.

        As of December 31, 2011, 1,419 of our employees worked in Uzbekistan. Of these employees, we estimate that 52 were executives; 374 were technical and maintenance employees; 519 were sales, marketing and customer service staff; and 474 were administration and finance staff.

        As of December 31, 2011, 70 of our employees worked in Turkmenistan. Of these employees, we estimate that 12 were executives; 22 were technical and maintenance employees; 3 were sales, marketing and customer service staff; and 33 were administration and finance staff. Since our primary operating license in Turkmenistan was suspended on December 21, 2010, the number of our employees in Turkmenistan decreased significantly. For more information, see "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of Barash Communication Technologies, Inc. to resume its operations in Turkmenistan on commercially acceptable terms or at all may adversely affect our business, financial condition and results of operations." and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan."

        As of December 31, 2011, 1,200 of our employees worked in Armenia. Of these employees, we estimate that 11 were executives; 160 were technical and maintenance employees; 663 were sales, marketing and customer service staff; and 366 were administration and finance staff.

        The following chart sets forth the number of our employees at December 31, 2009, 2010 and 2011:

	At December 31,
	2009		2010		2011
Russia		47,435		52,561		52,300
Ukraine		3,061		3,051		3,063
Uzbekistan		1,324		1,363		1,419
Turkmenistan		760		904		70
Armenia		1,203		1,193		1,200
Total		53,783		59,072		58,052

        Our employees are not unionized, except for 5,830 employees of MGTS, who are members of trade unions. We have not experienced any work stoppages and we consider our relations with employees to be strong.

E.  Share Ownership

        As of April 1, 2012, our directors, senior management and employees owned less than 1% of our outstanding common stock.

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        The following table sets forth information with respect to the beneficial ownership of our common stock as of April 1, 2012, by our current directors and executive officers. All shares of common stock have the same voting rights.

	Beneficial ownership as of April 1, 2012
Directors and Executive officers	Number		%(1)
Andrei A. Dubovskov, Executive Director, President and CEO		15,620		0.00079	%
Alexander V. Popovskiy, COO		20,717		0.00104	%
Ruslan S. Ibragimov, Vice President—Corporate and Legal Matters		19,824		0.00100	%
Andrei E. Ushatsky, Vice President—Chief Technology Officer		14,000		0.00070	%
Konstantin V. Markov		14,395		0.00072	%
Total		84,556		0.00425	%

(1)

Percentage of beneficial ownership of each named director and executive officer is based on 1,988,919,177 ordinary shares outstanding as of April 1, 2012.

Item 7.   Major Shareholders and Related Party Transactions

A.  Major Shareholders

        The following table sets forth, as of April 1, 2012, 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 March 1, 2012
Name	Number		Percentage
Sistema(1)		636,224,752		31.99	%
Sistema Holding Limited		193,509,500		9.73	%
STA(2)		220,467,234		11.08	%
ADR holders(3)		777,396,505		39.09	%
Other Public Float (including our directors and executive officers)(4)		161,321,186		8.11	%
Total(5)		1,988,919,177		100.0	%

(1)

Vladimir P. Evtushenkov 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, and Sistema Telecom Activy ("STA"). Mr. Evtushenkov is also the chairman of the board of directors of Sistema.

(2)

STA is a limited liability company formed under the laws of Russia. Sistema owns 100% of STA, which became a holder of our 11.1% beneficial ownership after VAST LLC ("VAST") and Invest-Svyaz CJSC, the previous beneficial owners of this ownership interest, were merged into STA in 2010 and 2011, respectively.

(3)

Excludes treasury shares held in the form of ADSs, as described below. As of March 1, 2012, the total number of ADSs outstanding (including 33,997,667 ADSs held by our wholly owned subsidiary, MTS-Bermuda Ltd., which are excluded from the table above) was 388,698,252, representing underlying ownership of 777,396,505 shares, or approximately 39.1% of our outstanding common stock. Of these ADSs, approximately 63.0% were held by U.S. investors as of April 6, 2012. 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.

(4)

We believe that our directors and executive officers as a group own less than 1% of our shares.

(5)

Excludes treasury shares, as described below.

        As a result of our merger with Comstar, our subsidiary, MGTS, owned 9,496,163 of our ordinary shares as of March 1, 2012. We did not undertake any repurchases of ADSs in the years ended December 31, 2009, 2010 and 2011. A total of 8,000 MTS ordinary shares representing 0.0004% of our

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issued share capital were repurchased for RUB 1.96 million ($70,000 as of March 31, 2011) as part of our reorganization during 2011. See "Item 3. Key information—A. Selected Financial Data."

        Furthermore, consideration for our acquisition of an additional stake in Comstar in December 2009 comprised cash and 31,816,462 MTS shares.

        As of April 1, 2012, we held a total of 77,494,385 shares, of which approximately 87.7% were held in the form of ADSs. These shares are excluded from the total number of shares presented in the table above.

        The increase in our treasury shares increased Sistema's effective ownership in us from 52.8% at December 31, 2005 to 54.8% at December 31, 2009. As of December 31, 2011, Sistema's effective ownership in us was 52.8%.

B.  Related Party Transactions

Transactions with Sistema and its Affiliates

        During 2010, Sky Link, Sistema-Hals, City Hals, a subsidiary of Sistema-Hals, and Svyazinvest ceased to be related to us. Transactions with these companies and their subsidiaries which took place prior to the dates when they became unrelated are disclosed as transactions with related parties.

Sistema Holding Limited

        In October 2011, Sistema Holding Limited acquired 4,311,019 of our ADSs in a series of purchases.

Sistema

        In November 2009, Sistema issued a promissory note to us as repayment of accrued interest and principal under a loan we had provided to Sistema-Hals, an affiliate of Sistema. The promissory note has an interest rate of 0% and is repayable in 2017. As of December 31, 2011 the amount receivable from Sistema under the promissory note was $19.2 million, and such amount was included under the line item "other investments" in our audited consolidated financial statements.

        In June 2010, we accepted a promissory note from Sistema in exchange for a promissory note of Sky Link. The note is interest free and was repaid upon demand in the year ended December 31, 2011.

Svyazinvest

        We have entered into various agreements with Svyazinvest and its subsidiaries relating to the provision of interconnect and other services. In connection therewith, during the years ended December 31, 2009 and 2010, we incurred expenses of $29.0 million and $29.2 million, respectively, payable to Svyazinvest, and accrued revenues of $33.9 million and $43.2 million, respectively, from Svyazinvest. During the year ended December 31, 2010, Svyazinvest ceased to be related to us.

Moscow Bank of Reconstruction and Development

        We maintain certain number of deposit and loan agreements, with MBRD, a subsidiary of Sistema. As of December 31, 2009, 2010 and 2011, we had cash positions at MBRD in the amount of $963.6 million, $378.7 million and $311.5 million in current accounts, respectively. The interest accrued on the deposits and cash on current accounts for the years ended December 31, 2009, 2010, and 2011, amounted to $25.1 million, $19.7 million and $14.9 million, respectively, and was included as a component of the line item "interest income" in our audited consolidated financial statements.

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        Loans payable by us to MBRD amounted to $1.2 million, $0.3 million and $nil as of December 31, 2009, 2010 and 2011, respectively. The interest expense on these loans for the years ended December 31, 2009, 2010, and 2011 amounted to $0.8 million, $nil and $nil, respectively.

        In February 2012, MBRD announced its renaming into MTS Bank.

Maxima Advertising Agency

        We have contracts for advertising services with Maxima, a subsidiary of Sistema, pursuant to which we incurred expenses of $102.0 million, $76.2 million and $81.9 million for services provided in the years ended December 31, 2009, 2010 and 2011, respectively.

Mediaplanning

        We have contracts for advertising services with Mediaplanning, a subsidiary of Sistema, pursuant to which we incurred expenses of $23.8 million, $59.2 million and $1.0 million for services provided in the years ended December 31, 2009, 2010 and 2011, respectively. In the year ended December 31, 2011, we ceased our relationship with this contractor.

Mezhregion Tranzit Telecom (MTT)

        During the years ended December 31, 2009, 2010 and 2011, we had interconnect and line rental agreements with MTT, an affiliate of Sistema. Revenues accrued thereunder from MTT for the years ended December 31, 2009, 2010 and 2011 amounted to $11.5 million, $nil and $nil, respectively, and expenses incurred to MTT for the years ended December 31, 2009, 2010 and 2011, amounted to $18.1 million, $nil and $nil, respectively. During the year ended December 31, 2009, MTT ceased to be related to us.

Sitronics

        During the years ended December 31, 2009, 2010 and 2011, we purchased telecommunication equipment, software and billing systems from Sitronics, a subsidiary of Sistema, and its subsidiaries, for approximately $190.1 million, $272.6 million and $503.2 million, respectively. In addition, during the years ended December 31, 2009, 2010 and 2011, we purchased SIM cards and prepaid phone cards from Sitronics Smart Technologies, a subsidiary of Sitronics, for approximately $32.4 million, $29.9 million and $79.5 million, respectively, and we incurred expenses of $52.2 million, $56.6 million and $48.0 million, respectively, to Sitronics under an IT consulting agreement. As of December 31, 2009, 2010 and 2011, advances made by us to Sitronics and its subsidiaries amounted to $23.7 million, $144.6 million and $57.6 million, respectively.

Sistema Mass Media ("SMM")

        During the year ended December 31, 2009, we had various loans and promissory notes payable to SMM, a subsidiary of Sistema. As of December 31, 2009, these loans and promissory notes were repaid in full. Interest expense on the loans and promissory notes for the year ended December 31, 2009, amounted to $1.4 million.

City Hals

        During the years ended December 31, 2009 and 2010, City Hals, a subsidiary of Sistema, provided rent, repair, maintenance and cleaning services to us, for which we incurred expenses to City Hals of approximately $10.0 million and $9.5 million, respectively. During the year ended December 31, 2010, City Hals ceased to be related to us.

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Invest-Svyaz-Holding

        We entered into several agreements with Invest-Svyaz-Holding, a subsidiary of Sistema, for the leasing of network equipment and billing system. The leases were recorded as capital leases in compliance with authoritative guidance on leases. The value of leased assets is insignificant.

Alt, Delfa and Finexcort

        In December 2008, we purchased promissory notes issued by Alt and Delfa, both related parties of Sistema, and Finexcort, a subsidiary of Sistema. As of December 31, 2008, the total amount of $221.2 million was included under the line item "short-term investments" in our audited consolidated financial statements in respect of these promissory notes. These promissory notes, together with interest accrued, were redeemed and paid in full in the first quarter of 2009.

AB Safety

        During the years ended December 31, 2009, 2010 and 2011, we paid $5.6 million, $9.3 million and $10.1 million, respectively, to AB Safety, an affiliate of Sistema, for the provision of security services.

Sky Link and subsidiaries

        During the years ended December 31, 2009 and 2010, we accrued revenues from interconnect agreements with Sky Link, an affiliate of Sistema, and its subsidiaries, amounting to $9.9 million and $7.4 million, respectively.

        During the years ended December 31, 2008 and 2009, Sky Link paid $3.4 million and $14.3 million, respectively, to us in respect of outstanding indebtedness which resulted in the partial reversal of a provision for uncollectable loan recorded in 2007 and the recognition of a gain of $4.3 million in our audited consolidated financial statements for the year ended December 31, 2009. As a result of such payments, the amount recorded in our audited consolidated financial statements under the line item "short-term investments" reflecting outstanding loan amount payable by Sky Link was reduced from $10.5 million as of December 31, 2008 to $nil as of December 31, 2009. During the year ended December 31, 2010, Sky Link and its subsidiaries ceased to be related to us.

Sistema-Hals

        In October 2008, we entered into an agreement for the construction of an aerial system in the Moscow metro with Sistema-Hals, an affiliate of Sistema. As of December 31, 2008 and 2009, advances given to Sistema-Hals under this agreement amounted to $11.7 million and $6.7 million, respectively, which was included under the line item "property, plant and equipment" in our audited consolidated financial statements.

        MGTS entered into a series of agreements with Sistema-Hals in connection with the reconstruction and development of buildings housing MGTS's automatic telephone exchanges. As of December 31, 2008 and 2009, as a result of work performed under such agreements, MGTS recorded a liability of $36.8 million and $38.3 million, respectively, payable to Sistema-Hals.

        The amount of $16.7 million was recorded in our audited consolidated financial statements for the year ended December 31, 2008, under the line item "short-term investments" reflecting an outstanding loan between us and Sistema-Hals with an interest rate of 11.0% and maturing in December 2009. In November 2009, the outstanding principal amount and all accrued interest under such loan were deemed satisfied in full by the issuance to us by Sistema of $20.4 million of promissory notes maturing in 2017 with an interest rate of 0%, and the amount recorded in our audited consolidated financial statements for the year ended December 31, 2009, under the line item "short-term investment" in

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respect of Sistema-Hals was reduced to $nil. During the year ended December 31, 2010, Sistema-Hals ceased to be related to us.

Coral/Sistema Strategic Fund

        In the years ended December 31, 2007 and 2008, 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. We exercised significant influence over Coral and therefore the investment was accounted for using the equity method.

        As of December 31, 2009, we determined that the investment was fully impaired. Consequently, the carrying value of the investment was written off in the amount of $7.4 million and recorded in "equity in net income/loss of associates" in our audited consolidated statement of operations for the year ended December 31, 2009. As of December 31, 2009, we did not have any further commitment to invest in Coral.

Sistema-Inventure

        In the year ended December 31, 2010, in connection with the sale of a 25% plus one share stake in Svyazinvest, we incurred consultancy fees for Sistema-Inventure, a subsidiary of Sistema, in the amount of RUB 291.2 million ($9.6 million at average rate for September 2010). In December 2011, we acquired a 100% stake in Sistema-Inventure, which directly owns 29% of the ordinary shares of MGTS.

Investments in certain subsidiaries and affiliates of Sistema

        As of December 31, 2009, 2010 and 2011, we held investments in the share capital of certain subsidiaries and affiliates of Sistema amounting to $10.5 million, $9.8 million and $9.5 million, respectively, which, individually, were and are immaterial. Our main investments are in MBRD, in which we hold 1.8%, and SMM, in which we hold 3.14%, and the value of such investments as of December 31, 2009, 2010 and 2011, amounted to $5.2 million, $5.2 million and $4.9 million for MBRD, and $3.9 million, $3.8 million and $3.6 million for SMM.

Transactions with equity investees

MTS Belarus

        During the years ended December 31, 2009, 2010 and 2011, we accrued revenues from roaming agreements with MTS Belarus, our associate company, amounting to $nil, $2.6 million and $6.5, respectively. At the same time, during the years ended December 31, 2009, 2010 and 2011 we incurred roaming expenses with MTS Belarus amounting to $nil, $5.5 million and $10.5 million, respectively.

Intellect Telecom

        During the year ended December 31, 2009, we provided loans with an interest rate of 11.0%, and maturity date in 2012, to Intellect Telecom, our associate company. As of December 31, 2010, these loans had been fully repaid prior to the maturity date. As of December 31, 2009 and 2010, the amounts outstanding under the loans were $12.8 million and $nil million, respectively.

Transactions with affiliated individuals

Mr Pierre Fattouche and Mr Moussa Fattouche

        In December 2010, we granted a $90.0 million loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche, the holders of a 20% noncontrolling stake in K-Telecom, our subsidiary in Armenia.

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Simultaneously, we signed an amendment to the put and call option agreement for the remaining 20% stake. According to the amendment, the call exercise price shall be reduced by deducting any outstanding balance on the loan amount and all accrued and unpaid interest and any other sums due and outstanding under the loan agreement at the time of exercise. Interest accrued on the loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche for the years ended December 31, 2010 and 2011, amounted to $0.4 million and $4.1 million, respectively, and was included under the line item "interest income" in our consolidated statements of operations.

Accounts receivable and accounts payable

        We had total accounts receivable of $4.5 million, $2.7 million and $16.7 million from, and total accounts payable of $57.0 million, $53.0 million and $80.5 million to, related parties as of December 31, 2011, 2010 and 2009, respectively. We do not have the intent or ability to offset the outstanding accounts payable and/or accounts receivable with related parties under the term of existing agreements with them. See Note 22 to our audited consolidated financial statements for details of our accounts payable and accounts receivable.

C.  Interests of Experts and Counsel

        Not applicable.

Item 8.    Financial Information

A.  Consolidated Statements and Other Financial Information

        8.A.1-3.    See Item 18.

        8.A.4-6.    Not applicable.

8.A.7. Litigation

Bitel

        In December 2005, our wholly owned subsidiary MTS Finance acquired a 51.0% stake in Tarino, from 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, 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. As reflected in our audited annual consolidated financial statements for the year ended December 31, 2006, we wrote off the costs relating to the purchase of the 51.0% stake in Bitel. 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 LCIA in order to compel MTS Finance to purchase the Option Shares. Nomihold sought specific performance of the put option,

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unspecified monetary damages, interest, and costs. In January 2011, the LCIA made an award in favor of Nomihold satisfying Nomihold's specific performance request and ordered MTS Finance to pay to Nomihold $170.0 million for the Option Shares, $5.9 million in damages and $34.9 million in interest and other costs—all representing in total approximately $210.8 million ("Award"). The Award is accruing interest until the Award is satisfied. In addition to the $170.0 million liability related to this case and accrued in the year ended December 31, 2006, we recorded an additional $40.8 million and $3.2 million in the consolidated financial statements for the year ended December 31, 2010 and 2011, respectively (representing interest accrued on the awarded sums).

        On January 26, 2011, Nomihold obtained a freezing order in respect of the Award from the English High Court of Justice ("High Court") which, in part, restricts MTS Finance from dissipating its assets. Additionally, MTS Finance has been granted permission to appeal the Award, but the High Court has imposed conditions upon the appeal. MTS Finance is currently seeking to have the conditions lifted.

        Further on February 1, 2011, Nomihold obtained an order of the Luxembourg District Court enforcing the Award in Luxembourg. This order is in the process of being appealed.

        As an issuer of US $400,000,000 2012 Notes pursuant to an Indenture dated January 28, 2005 (as amended) (the "Notes"), MTS Finance was due to redeem the principal of the Notes and pay the final coupon payment on January 30, 2012. However as a result of the freezing order, we applied to and obtained from the High Court an order authorizing both payments to be made by us instead of by MTS Finance (the "Direct Payments"). The Direct Payments to noteholders by the trustee under the Indenture were made on or around January 28, 2012.

        The Direct Payments were made despite an obligation under an intercompany loan agreement dated January 28, 2005, between MTS Finance and us ("the Intercompany Loan Agreement") to process the payments through MTS Finance. However, because MTS Finance was subject to a freezing order and not capable of transferring out the money to the trustee for distribution, and because we owed obligations to the noteholders as guarantor under the Indenture, we decided to make the Direct Payments to the noteholders pursuant to an order of the High Court.

        In relation to the obligations under the Intercompany Loan Agreement, we and MTS Finance have agreed to refer to arbitration the question of whether under the Intercompany Loan Agreement itself there remains an obligation by us to make any further payments to MTS Finance in light of the Direct Payment. On February 9, 2012, we received a request for arbitration from MTS Finance. The process is underway and will clarify the rights between the parties under the Intercompany Loan Agreement. We deny that any further payments are due under the Intercompany Loan Agreement. The arbitration will be conducted under the Rules of the LCIA and it is expected to last between 6 and 12 months.

        In addition, three Isle of Man companies affiliated with us (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 KFG Companies do not prevail in these lawsuits, they may be liable to Bitel for such claims. Bitel's Isle of Man advocates have recently withdrawn from their representation of Bitel, and Bitel does not appear to be pursuing these claims.

        In January 2007, the KFG Companies asserted counterclaims against Bitel, and claims against other defendants, including Altimo LLC ("Altimo"), Altimo Holdings & Investments Limited ("Altimo Holdings"), CP-Crédit Privé SA and Fellowes International Holdings Limited, for the wrongful misappropriation and seizure of Bitel. The defendants sought to challenge the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies.

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        On March 10, 2011, the Judicial Committee of the UK Privy Council ruled in favor of the KFG Companies and confirmed the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies against various defendants, including Sky Mobile, Altimo and Altimo Holdings, for the wrongful misappropriation and seizure of Kyrgyz telecom operator Bitel and its assets.

        On June 30, 2011, the KFG Companies obtained from the Isle of Man court a general asset freezing injunction over the assets of Altimo and Altimo Holdings. The general freezing injunction against Altimo Holdings was replaced on November 30, 2011, by a specific freezing injunction over (i) Altimo Holding's interest in its Dutch subsidiary, Altimo Coöperatief U.A., and (ii) VimpelCom common shares worth approximately $500 million that Altimo Coöperatief U.A. has lodged with the Isle of Man court. The KFG Companies are proceeding with their counterclaims in the Isle of Man. A trial has been set to commence in May 2013.

        In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited ("KMIC") under the rules of the LCIA, 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. The tribunal is currently deciding whether to stay the damages phase of the LCIA proceedings pending conclusion of the Isle of Man proceedings. 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 27 to our audited consolidated financial statements.

Euroset

        On April 20, 2009, we filed a lawsuit against Euroset Retail seeking RUB 272.3 million ($8.2 million as of April 30, 2009) for breach of contract in relation to iPhone shipments. We entered into a settlement agreement with Euroset Retail, which was approved by the court on November 25, 2009, thus dismissing the case. Under this settlement agreement, Euroset Retail undertook to repay the principal amount of RUB 269.1 million ($9.0 million as of November 30, 2009) in equal installments over a 24 month period. On April 24, 2009, we filed a lawsuit against Torgoviy Dom Euroset ("TD Euroset") seeking recovery of RUB 322.6 million ($9.7 million as of April 30, 2009) for collected subscriber payments not transferred to us in accordance with an agency contract. We entered into a settlement agreement with TD Euroset, which was approved by the court on December 21, 2009, thus dismissing the case. Under this settlement agreement, TD Euroset undertook to repay the principal amount, excluding the offset payments, in equal installments over a 24 month period.

        On April 21, 2009, TD Euroset filed two claims against us, seeking (i) payment of RUB 354.6 million ($10.7 million as of April 30, 2009) in dealer commission bonuses and (ii) payment of RUB 144.5 million ($4.3 million as of April 30, 2009) in general dealer commissions. We entered into a settlement agreement with TD Euroset relating to the claim (i) described above, which was approved by the court on December 30, 2009, thus dismissing the case. Under this settlement agreement, all relevant obligations of the parties were extinguished through offset. On July 13, 2009, the court dismissed the case relating to claim (ii) described above, and on November 24, 2009, we entered into a settlement agreement with TD Euroset, whereby the parties confirmed that all the disputed obligations would be extinguished through offset.

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        See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—The reduction, consolidation or acquisition of independent dealers and our failure to 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 of RUB 840.7 million ($25.3 million as of April 30, 2009) for breach of a loan agreement. On July 30, 2009, the court ruled in our favor, ordering Beta Link to pay to us RUB 836.7 million ($26.3 million as of July 31, 2009).

        In March and April 2009, we filed three additional lawsuits against Beta Link seeking damages amounting in aggregate to RUB 95.7 million ($2.9 million as of April 30, 2009) for breach of three contracts in relation to iPhone shipments. In June and July 2009, the court ruled in our favor in all three cases, ordering Beta Link to pay the aggregate amount of RUB 99.7 million ($3.1 million as of July 31, 2009) to us.

        All of the abovementioned claims were brought in the Moscow Arbitrazh Court.

        On August 12, 2009, Beta Link filed a claim against us, seeking payment of (i) RUB 238.5 million ($7.9 million as of December 31, 2009) in dealer commission, (ii) $10.0 million in penalties for breach of a dealer agreement and (iii) $2.7 million of unrealized potential benefits. On December 11, 2009, the Moscow Arbitrazh Court ruled in favor of Beta Link and ordered us to pay RUB 118.6 million ($3.9 million as of December 31, 2009) and $10.0 million in penalties. We appealed this ruling, and the appellate court ruled in our favor on March 23, 2010, denying Beta Link's claim in full. Beta Link in return, filed a further appeal against MTS. On July 22, 2010, Beta Link withdrew its appeal and the case was dismissed.

        Beta Link is currently bankrupt and we are a party to the bankruptcy proceedings as its creditor. In November and December 2009, the Moscow Arbitrazh Court ordered that our claims, in the aggregate amount of RUB 986.5 million ($32.6 million as of December 31, 2009), be included into Beta Link's register of creditors' claims. On February 18, 2010, the Moscow Arbitrazh Court found Beta Link bankrupt and initiated liquidation proceedings. On April 7, 2011, the Moscow Arbitrazh Court prolonged liquidation proceedings until June 2, 2011, and postponed them again until August 23, 2012.

Turkmenistan

        In June 2005, we commenced operations in Turkmenistan through our wholly owned subsidiary BCTI. By December 2010, our investments in BCTI exceeded $250.0 million and, as a result, BTCI became the largest telecommunications operator in Turkmenistan providing services to more than 2.4 million subscribers. Our annual revenues from providing telecommunications services in Turkmenistan for the years ended December 31, 2008, 2009 and 2010 amounted to $131.4 million, $160.7 million and $207.6 million, respectively.

        In December 2010, our operations in Turkmenistan were suspended following a notice received from the Ministry of Communications of Turkmenistan informing us of a decision by the Turkmenistan government to suspend licenses held by BCTI for a period of one month (starting from December 21, 2010). On January 21, 2011, the period of license suspension expired, however, permission to resume operations was never granted.

        We conducted operations in Turkmenistan under a trilateral agreement signed in November 2005 by BCTI, us and the Ministry of Communications of Turkmenistan, which was due to be automatically extended on December 21, 2010, provided certain terms and conditions were satisfied (the "2005 Agreement"). Under the 2005 Agreement, BCTI shared net profits derived from its operations in the country with the Ministry of Communications of Turkmenistan. The amount of shared net profit was calculated based on the financial statements prepared in accordance with local accounting principles

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subject to certain adjustments. Accordingly, BCTI shared 20% of its net profit commencing December 21, 2005. We at all times were led to believe that the 2005 Agreement would be extended and approached the Ministry of Communications within the required timeframe to formalize the extension. However, the Ministry of Communications and the Turkmenistan government failed to extend the 2005 Agreement in accordance with its terms.

        Following the decision to suspend BCTI's licenses, the Turkmenistan government authorities took further steps, including unilateral termination of interconnect agreements between BCTI and state-owned telecom operators, to prevent us from providing services to our customers.

        We initiated a number of proceedings against Turkmenistan government authorities and state-owned telecom operators to defend our legal rights. On December 21, 2010, BCTI filed three requests for arbitration with the International Court of Arbitration of the International Chamber of Commerce ("ICC") against the Ministry of Communications of Turkmenistan and several state-owned telecom operators requesting specific performance on the respective agreements and compensation of damages. Subsequently, the sovereign state of Turkmenistan was joined as a respondent in the proceedings against the Ministry of Communications of Turkmenistan. An independent appraisal has shown that we have suffered damages amounting to $855 million as a result of breaches committed by the respondents. We have made a claim for this amount in the ICC proceedings. In March 2012, we withdrew the demand for specific performance of the 2005 Agreement from our claim against the Ministry of Communications of Turkmenistan and the sovereign state of Turkmenistan after negotiations with the Turkmenistan government stopped at the end of 2011 and not resumed to date.

        On January 21, 2011, we sent a formal notice to the Government of Turkmenistan requesting to resolve the dispute through negotiations and notifying it of our intention to file a claim pursuant to the provisions of the Bilateral Investment Treaty between the Russian Federation and Turkmenistan. The dispute was not resolved by negotiations and, accordingly, on September 1, 2011, we filed a claim against Turkmenistan in the ICSID. On October 5, 2011, the claim was registered by the ICSID Secretariat.

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 27 to our audited consolidated financial statements.

        In October 2009, the Russian tax authorities completed a tax audit of our subsidiary, Sibintertelecom, for the years ended December 31, 2006, 2007 and 2008. Based on the results of this audit, the Russian tax authorities assessed RUB 174.5 million (approximately $5.8 million as of December 31, 2010) of additional taxes, penalties and fines against Sibintertelecom. We appealed this assessment to the Federal Tax Service, and, further to its refusal to grant the appeal, to the Moscow Arbitrazh Court. In November 2010, the Moscow Arbitrazh Court issued a ruling to grant our claim, which was subsequently confirmed by the Ninth Arbitrazh Appeal Court on February 24, 2011. However, the Russian tax authorities appealed the decision of the Ninth Arbitrazh Appeal Court in the Federal Arbitrazh Court of Moscow Distict, which confirmed previously issued rulings in our favor in June 2011.

        In December 2010, the Russian tax authorities completed a tax audit of MTS OJSC for the years ended December 31, 2007 and 2008. Based on the results of this audit, the Russian tax authorities

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determined that RUB 353.9 million ($11.6 million as of December 31, 2010) in additional taxes, penalties and fines were payable by us. The resolution did not come into force as we prepared and filed a petition with the Federal Tax Service to declare the tax authorities' resolution to be invalid. In September 2011, the Federal Tax Service partially satisfied our petition, decreasing the amount of additional taxes, penalties and fines payable by us by RUB 173.9 million ($5.4 million as of December 31, 2011). We filed an appeal for RUB 84.2 million ($2.6 million as of December 31, 2011) of the remaining RUB 180.0 million ($5.6 million as of December 31, 2011) with the Moscow Arbitrazh Court. A hearing is scheduled for April 26, 2012.

        In February 2012, the Russian tax authorities completed a tax audit of MGTS for the years ended December 31, 2007 and 2008. Based on the results of their audit, the Russian tax authorities assessed RUB 258.1 million ($8.0 million as of December 31, 2011) in additional taxes, penalties and fines payable by us. In February 2012, MGTS challenged the tax authorities' decision with higher authorities within the Federal Tax Service.

        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, 2011, the tax declarations of MTS OJSC and its Russian subsidiaries for the preceding three fiscal years were open for further review.

Antimonopoly Proceedings

        In December 2009, Rostelecom petitioned FAS to investigate the concerted actions of MGTS and Comstar in relation to the intercity and international communications services markets. According to Rostelecom, MGTS and Comstar activities resulted in the restriction of competition and impeding access to the intercity and international communications services markets for other operators, including Rostelecom. On June 3, 2010, FAS dismissed the petition, finding Rostelecom's claim to be without merit.

        In October 2010, FAS determined that we, Vimpelcom and MegaFon violated antimonopoly laws on competition relating to our pricing for roaming services. As a result, FAS imposed an administrative fine on us in the amount of RUB 21.9 million ($0.8 million as of March 28, 2011) which represents 1.0% of the revenues we derived from roaming services in CIS countries in 2009. We paid the fine imposed by FAS on March 28, 2011.

        On November 23, 2010, FAS ordered us to reduce tariffs we charge for national and international roaming telecommunications services in the CIS and further required us to inform our subscribers about the payment procedures for roaming services. We executed the FAS order to reduce such tariffs by December 25, 2010 and the FAS order to inform our subscribers about the roaming payment procedures by March 30, 2011.

        In June 2011, the FAS subdivision in the Republic of Tatarstan determined that we, Vimpelcom, MegaFon and CJSC Smarts violated antimonopoly laws on competition by charging our subscribers higher fees for calls to fixed operators than for calls to other cellular operators. We appealed this decision in the Tatarstan Arbitrazh Court, which confirmed the FAS decision on January 18, 2012. We appealed this decision on March 5, 2012, and the hearing is scheduled for April 27, 2012.

        In October 2011, the FAS subdivision in the Republic of Bashkortostan decided that the agreement on social and economic development in the field of telecommunications between us and the Bashkortostan Ministry of Communications and Mass Media, signed in February 2011, violates antimonopoly laws on competition as certain provisions of this agreement may constrain competition on the Bashkortostan telecommunications market. In December 2011, we appealed this decision in the Bashkortostan Arbitrazh Court, which ruled in our favor in March 2012.

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        In October 2011, FAS began an investigation of our and Vimpelcom's actions, suspecting violation of antimonopoly laws by coordinated pricing of iPhone 4 handsets. The investigation is currently in progress.

        In December 2011, the AMC of Ukraine launched an investigation of our actions suspecting violation of antimonopoly laws in respect to pricing of international roaming. The Investigation is currently in progress.

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.

        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

        On February 28, 2012, subsequent to the statement of financial position date, we voluntarily repaid the full amount due under credit facilities of Gazprombank with an original maturity in 2013-2015. The amount repaid totaled $472.1 million (stated at December 31, 2011 exchange rate).

        On March 16, 2012, subsequent to the statement of financial position date, we voluntarily repaid $310.6 million from $434.8 million outstanding under credit facility of Bank of Moscow with the original maturity in 2013 (both amounts are stated at December 31, 2011 exchange rate).

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 two ordinary shares, have been listed on the NYSE since July 6, 2000 under the symbol "MBT." Our ordinary shares have been listed on the Open Joint Stock Company "MICEX-RTS" since December 2003. In addition, we issued additional ordinary shares in connection with our merger with Comstar, which have been listed on MICEX-RTS since May 2011. The shares of the additional issuance became fully fungible with our previously issued ordinary shares in July 2011.

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Set forth below, for the periods indicated, are the high 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-RTS.

	ADS High		ADS Low		Ordinary Share High		Ordinary Share Low
Monthly High and Low
March 2012	$	19.06	$	17.60		239.8 RUB		221.0 RUB
February 2012	$	18.40	$	16.79		224.9 RUB		212.7 RUB
January 2012	$	16.78	$	14.94		219.5 RUB		186.0 RUB
December 2011	$	16.63	$	14.20		213.0 RUB		177.5 RUB
November 2011	$	17.28	$	13.34		212.0 RUB		181.1 RUB
October 2011	$	15.01	$	11.91		194.9 RUB		169.5 RUB
Quarterly High and Low
First Quarter 2012	$	19.06	$	14.94		239.8 RUB		186.0 RUB
Fourth Quarter 2011	$	17.28	$	11.91		213.0 RUB		169.5 RUB
Third Quarter 2011	$	19.14	$	12.30		244.0 RUB		177.1 RUB
Second Quarter 2011	$	21.54	$	18.68		261.7 RUB		228.5 RUB
First Quarter 2011	$	21.54	$	18.48		263.0 RUB		243.9 RUB
Fourth Quarter 2010	$	23.33	$	19.81		261.0 RUB		249.1 RUB
Third Quarter 2010	$	23.11	$	19.21		258.8 RUB		227.5 RUB
Second Quarter 2010	$	23.55	$	18.43		273.5 RUB		217.6 RUB
First Quarter 2010	$	23.23	$	17.84		255.6 RUB		225.6 RUB
Annual High and Low(1)
2011	$	21.54	$	11.91		263.0 RUB		169.5 RUB
2010	$	23.55	$	17.84		273.5 RUB		217.6 RUB
2009	$	21.82	$	7.44		231.6 RUB		104.8 RUB
2008	$	40.76	$	8.67		379.8 RUB		92.9 RUB
2007	$	40.85	$	18.32		378.0 RUB		217.7 RUB

(1)

Effective May 3, 2010, the ratio of our ADRs changed from 1 ADR per 5 common shares to 1 ADR per 2 common shares. The ADS prices set forth in the table above reflect the new share: ADR ratio for all periods.

C.  Markets

        Our common stock has been listed on the Moscow Interbank Currency Exchange (currently MICEX-RTS) since December 2003. ADSs, each representing two shares of our common stock, have been listed on the New York Stock Exchange under the symbol "MBT" since July 6, 2000. Our U.S. dollar-denominated notes due in 2012 are listed on the Luxembourg Stock Exchange and our U.S. dollar-denominated notes due in 2020 are listed on the Irish Stock Exchange. Our ruble-denominated notes are listed on the Moscow Interbank Currency Exchange.

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.

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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 2,066,413,562 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 100,000,000 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. 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 holding such shares are able to vote and dispose of such shares without any further corporate actions by our shareholders or board of directors. As of April 1, 2012, we had no treasury shares and our wholly owned subsidiaries held a total of 77,494,385 shares, of which approximately 87.7% were held in form of ADSs. See "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders." In our consolidated financial statements prepared in accordance with U.S. GAAP, these shares 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 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

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the company's CEO 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, more than 1% of the voting shares, demand from the holder of register of shareholders to provide information on shareholders of the company and shares held by such shareholders;

•

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 and the review commission;

•

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, and file a lawsuit against the company to convene an extraordinary shareholders' meeting if the board of directors fails to take a decision to convene an extraordinary shareholders' meeting or decides against convening such meeting;

•

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 ("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.

Pre-emptive Rights

        The Joint Stock Companies Law and our charter provide existing shareholders with a pre-emptive 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 shareholders with a pre-emptive 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 pre-emptive 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.

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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 extraordinary 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 within 60 days after 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 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.

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        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 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.

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        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 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 3 days of a decision to reduce our charter capital, we must notify the federal executive body in charge of the state registration of legal entities on the decision taken and publish within the same 3-day period a notice regarding the charter capital reduction, as well as a second notice one month after the first notice is published. Our creditors, whose claims arose before the decision on the charter capital decrease was taken, would then have the right to demand in court, within 30 days of the second publication of the 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;

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•

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.

        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.

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Disclosure of Information

        Russian securities regulations require us to make the following periodic public disclosures and filings:

•

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;

•

publishing any information (including inside 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 corporate events, such as mandatory or voluntary tender offers, record dates, certain changes in ownership and shareholding, filing of any material claim against us, obtainment or revocation of material licenses, entry into certain transactions, as well as shareholder and certain board of directors' resolutions and certain information regarding our material subsidiaries;

•

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;

•

posting on our website a list of our affiliated companies and individuals on a quarterly basis and in case of any changes;

•

posting on our website a List of inside information; 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. 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;

•

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;

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approval of certain interested party transactions and major transactions;

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participation in holding companies, commercial or industrial groups, or other associations of commercial entities;

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approval of certain internal documents and corporate records;

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distribution of profits and losses, including approval of dividends;

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redemption by the company of issued shares in cases provided by the Joint Stock Companies Law; and

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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:

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charter amendments;

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reorganization or liquidation;

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major transactions involving assets in excess of 50% of the balance sheet value of the company's assets calculated under RAS;

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the number, nominal value, and category (type) of authorized shares and the rights granted by such shares;

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repurchase by the company of its issued shares;

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any issuance of shares or securities convertible into shares of common stock by closed subscription;

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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

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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.

        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:

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election of the members of the board of directors;

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approval of the annual report and the annual financial statements, including the balance sheet and profit and loss statement;

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approval of distribution of profits, including approval of dividends, and losses, if any;

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appointment of an independent auditor; and

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appointment of the members of the review commission.

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        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:

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election of the members of the board of directors;

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election of the review commission;

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approval of a company's independent auditor; and

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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.

        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).

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        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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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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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 June 25, 2009. 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 (holders of voting shares) 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 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 determined under RAS 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 determined under RAS require a three-quarters majority vote of a shareholders' meeting.

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.

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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.

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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.

Approval of FAS

        Pursuant to the Federal Law on Competition, FAS 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 or otherwise occupying a dominant position on the 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. See

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also "Item 3. Key Information—D. 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."

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 (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 ("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 FAS, 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 (Dagtelecom LLC has since been merged into MTS) 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 person acquiring, directly or indirectly, 5% or more of our common shares is required to notify us and the FSFM of, and we must then publicly disclose, such acquisition, as well as any subsequent acquisitions or disposals resulting in the crossing of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% thresholds of our outstanding common shares by such person.

        A holder of more than 5% of our common shares is required to file with us and the FSFM information about its controlling shareholder (if any) or notify us and the FSFM about the absence of any such controlling shareholders.

        Our subsidiaries are required to notify us and the FSFM about the acquisition of our common shares. We are required to publicly disclose the acquisition of our common shares by our subsidiaries.

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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.

Eurobonds

        On June 22, 2010, we issued U.S. dollar-denominated Loan Participation Notes in the amount of $750 million with an annual interest rate of 8.625% and a maturity in June 2020. The proceeds will be used to refinance certain existing debt obligations. The notes were issued by MTS International Funding Limited, a private company organized and existing as a private limited company under the laws of Ireland, and are listed on the Irish Stock Exchange. Proceeds were on-lent to us pursuant to a loan agreement between us and MTS International Funding Limited.

        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 matured 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. The notes were fully redeemed in October 2010.

        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. The notes were fully redeemed in January 2012.

        Each of the loan agreements relating to our notes due 2020 and indentures relating to our notes due 2012 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 lender (in the case of our notes due 2020), 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 indentures with respect to our notes due 2012, 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 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

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will automatically become immediately due and payable without any declaration or other act on the part of the lender (in the case of our notes due 2020), holders of notes or the trustee.

        On November 11, 2010, an international arbitration tribunal constituted under the rules of the LCIA rendered an award with regards to the arbitration commenced by Nomihold Securities Inc. in January 2007. The award requires our subsidiary, MTS Finance, to honor Nomihold's option to sell MTS Finance the remaining 49% stake in Tarino Limited for $170 million, plus $5.9 million in damages and $34.9 million in interest and other costs, and to compensate it for related costs. MTS Finance applied to the arbitration tribunal for correction of the award, however, the application was rejected and the award became final on January 5, 2011. In connection with the above mentioned restriction concerning the unsatisfied liability arising from any judgment against us, we have obtained consents from the noteholders of MTS Finance and MTS International Funding to: (1) waive certain defaults and events of default which might arise under the loan agreements as a result of the award, and (2) agree on certain amendments to the loan agreements to avoid possible future events of default which may arise as a result of the award.

        Covenants in the loan agreement relating to our notes due 2020 limit our ability to create liens on our properties, merge or consolidate with another person or convey our properties and assets to another person. Additionally, the indentures relating to our outstanding notes due in 2012 contain covenants limiting our ability to incur debt, create liens on our properties, enter into sale and lease-back transactions, 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.

        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.

        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. Pursuant to the guarantees contained in each indenture with respect to our notes due 2012, 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.

Syndicated Loans

        In 2006, we entered into a 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 allowed us 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 matured 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 the second tranche. The debt issuance costs in respect of this loan of $13.4 million were capitalized. The first tranche was fully repaid by us on May 20, 2009. We fully repaid the second tranche on October 21, 2010.

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        On May 18, 2009, we signed a new syndicated loan facility agreement to refinance the first tranche of the above mentioned syndicated loan facility in the amount of $630.0 million with a number of financial institutions (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, ZAO UniCredit Bank). Part of the funds borrowed (not used to refinance the above mentioned syndicated loan of 2006) are to be used for our general corporate purposes. The facility is available in two tranches of $360.0 million and €238.1 million bearing interest of LIBOR+6.5% per annum and EURIBOR+6.5% per annum, respectively. Both tranches mature on May 18, 2012 and are repayable in three equal installments on May 18, 2011, November 18, 2011 and May 18, 2012. We paid and capitalized arrangement and management fees in the total amount of $14.6 million and €7.3 million under the agreement. Additionally, we were required to pay an agency fee at times set forth in a separate fee letter and in an amount equal to the greater of $1,500 per lender based on the number of lenders as at the relevant payment date and $25,000. As of December 31, 2009, the balance outstanding under the facility amounted to $701.6 million. On February 24, 2010, we voluntary repaid the full amount outstanding under the facility.

ING Bank Evrazia revolving credit facility

        In July 2011, we signed a credit facility agreement with ING Bank Evrasia. The facility is a revolving credit line, which allows us to borrow up to RUB 2.5 billion ($77.6 million as of December 31, 2011). The funds are to be used for the financing of our working capital and are available till July 2012. The facility can be drawn in RUB, EUR or USD. The interest rate is MosPrime, EURIBOR or LIBOR + 1.25%, depending on the currency of the drawn funds. The repayment period is to be agreed with the bank, but cannot exceed 3 months and extend beyond the final maturity date, which is July 2012. The arrangement fee paid under the agreement is RUB 6.2 million ($224,009 as of the date of capitalization). As of December 31, 2011, we have not made use of the facility.

Gazprombank credit facility

        In July 2011, we entered into a credit facility agreement with Gazprombank in the total amount of RUB 2,450 million ($76.1 million as of December 31, 2011). The funds from the facility are to be used for financing of our operating activities. The facility is available till July 2013 and bears an interest rate of MosPrime + 1.425%. Any drawn amount should be repaid within 180 days from the drawing date, but before the final maturity date. We are to pay additional interest of 0.15% p.a. on the drawn amount as a fee for credit account maintenance. As of December 31, 2011, we have not made use of the facility.

EKN Supported facility agreement

        In November 2009, we signed a credit facility agreement with Calyon, ING Bank N.V., Nordea Bank AB, Raiffeisen Zenralbank Oesterreich AG for $1,074.4 million. The facility is available in two tranches of $428.9 million and $645.5 million bearing interest rate of LIBOR +1.15%. The funds from the facility (fistly drawn in November 2011) are used to buy telecommunication equipment from Ericsson AB. The first tranche is repayable in sixteen semi-annual equal installments, commencing from December 2011, and matures in June 2019. The second tranche is repayable in seventeen semi-annual equal installments, commencing from September 2012, and matures in September 2020. We paid and capitalized arrangement fees and EKN insurance fees in the total amount of $2.2 million and $41.1 million under the agreement. Additionally, we are required to pay an agency fee of $10,000 on

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each anniversary of the signing date of the agreement for so long as the facility remains outstanding as well as commiment fee of 0.4% per annum on the undrawn facility amount ($468.7 million as of December 31, 2011). As of December 31, 2011, the balance outstanding under the facility amounted to $580.7 million.

Sberbank Loan Agreements

        In September 2011, we entered into a revolving credit line facility in the amount of RUB 10.0 billion ($313.7 million as of September 30, 2011). The funds under the facility are available till September 30, 2014 and cannot be drawn for more than 91 days. We intend to use the facility to finance our working capital when needed. The facility bears an interest rate of MosPrime +1.325% as published by Thomson Reuters and HBA. In case the specified rate is unavailable for more than two days the fixed rate of 9.825% is set for the facility. The arrangement fee for the facility amounted to RUB 30 million ($0.9 million as of the date of capitalization). The commitment fee is set at 0.1% per annum from the undrawn facility amount. The early redemption fee is 0.75% per annum from the repaid amount. As of December 31, 2011, we have not made use of the facility.

        In December 2010, we entered into two non-revolving credit line facilities in the amount of RUB 60.0 billion ($1,944.2 million as of December 13, 2010) and RUB 40.0 billion ($1,296.2 million as of December 13, 2010), respectively. The funds from the RUB 60.0 billion line of credit were used largely to refinance 2009 Sberbank loans in the aggregate amount of RUB 53.0 ($1,717.4 million as of December 13, 2010) billion which were fully repaid on December 13, 2010. The funds from the RUB 40.0 billion line of credit drawn in July and November 2011 were used to finance our 3G investments, as well as for the purchase of Sistema-Inventure CJSC, which directly owns 29% of ordinary shares in MGTS. Both lines of credit initially carried an annual interest rate of 8.95% with quarterly payments over a 7-year term. The interest rate is fixed for the period until March 20, 2011 and for the period from December 21, 2013 until the final maturity date in December 2017. The interest rate for the period from March 21, 2011 to December 20, 2013 depends on the average quarterly credit turnover on accounts of MGTS, MTS Ukraine and us. If the average credit turnover on accounts of MGTS and Comstar exceeds RUB 22.0 billion ($683.3 million as of December 31, 2011) and the average credit turnover on accounts of MTS Ukraine exceeds RUB 750.0 million ($23.3 million as of December 31, 2011), the interest rate shall remain unchanged. If the average credit turnover on accounts of MGTS, MTS Ukraine and us is below the above stated limits, the interest rate shall be increased by 1%. In addition, Sberbank is entitled to increase or decrease the interest rate for these lines of credit proportionally to the fluctuations of the CBR refinancing rate. In August 2011, the interest rate was decreased from 8.95% to 8.50%, it is valid for both credit lines starting from August 17, 2011. The amount of debt issuance cost capitalized by us is equal to RUB 400.0 million ($13.1 million as of the date of capitalization). A commitment fee of 0.5% p.a. is payable on the undrawn amounts of the loans on a quarterly basis through the end of the availability period. The fee on early redemption of the loans is set at 0.75%. As of December 31, 2011, the total amount outstanding under these loans amounted to RUB 100 billion ($3,106.0 million as of December 31, 2011).

        In September 2009, we entered into two loan agreements with Sberbank in the amount of RUB 22 billion ($731.1 million as of September 30, 2009) and RUB 25.0 billion ($830.8 million as of September 30, 2009), respectively. The funds were used for our investment programs, including for financing our acquisition of a 50.91% stake in Comstar. Both loans bear interest of 16% and are repayable in 7 equal semiannual installments, commencing March 27, 2012. The interest rate is fixed until March 27, 2010; for the subsequent periods (quarters), the rate will be determined as a total of the base rate (16%) plus rate A or rate B. Rate A depends on the average daily bank account balance we maintain with Sberbank for the interest period. If the average daily bank account balance falls below RUB 1.0 billion ($33.2 million as of September 30, 2009), rate A will be set at 0.5%. However,

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rate A will not apply, and no extra interest will be charged, if the average daily bank account balance is equal to or exceeds RUB 1.0 billion ($33.2 million as of September 30, 2009). Rate B depends on the average daily bank account balance maintained by our subsidiary, CJSC Russian Telephone Company, with Sberbank for the interest period. If the average daily bank account balance falls below RUB 0.5 billion ($16.6 million as of September 30, 2009), rate B will be set at 0.5%. However, rate B will not apply, and no extra interest will be charged, if the average daily bank account balance is equal to or exceeds RUB 1.0 billion ($33.2 million as of September 30, 2009). Additionally, we have to pay a commission of 0.25% on the outstanding amounts under the agreements for services related to maintenance of the loan accounts. The agreement for RUB 25 billion ($830.8 million as of September 30, 2009) is secured by pledge of equipment with a net book value of RUB 30 billion or approximately $996.9 million as of September 30, 2009 (assigned pledge value of RUB 21 billion, or approximately $697.9 million as of September 30, 2009) as well as 50.18% stake in Comstar. Related debt issuance cost capitalized by us totaled RUB 1,034.6 million ($33.6 million at the date of capitalization). During 2009 and 2010, we negotiated a reduction in the interest rates from 16% to 9.25%, which led to the immediate write-off of an unamortized debt issuance cost in the amount of $26.7 million. On December 13, 2010, we repaid the full outstanding amount of the loans in the amount of RUB 47.0 billion ($1,523.0 million as of December 13, 2010) to be able to make use of the RUB 60.0 billion ($1,944.2 million as of December 13, 2010) line of credit described above.

        Comstar entered into a non-revolving credit line facility with Sberbank in the amount of RUB 26.0 billion in 2007. In June 2007, Comstar drew down approximately RUB 17.4 billion (equivalent of $675.0 million as of the date of transaction) under this facility and used the proceeds to repay a $675.0 million loan from ABN Amro and Morgan Stanley. In November 2007, Comstar drew down an additional RUB 4.1 billion (equivalent of $167.4 million as of the date of transaction) under the facility to finance the acquisition of a 100% stake in DTN. In December 2008, Comstar drew the remaining RUB 4.5 billion to finance the acquisition of Stream TV. Accordingly, as of December 31, 2008 the facility was fully drawn. The facility originally bore interest at 7.6% per annum, which can be increased by Sberbank in conjunction with, but not exclusively, increases in CBR refinancing rate. The interest rate was increased to 9.5% per annum effective June 28, 2008 and further to 13.35% effective January 1, 2009. Interest is paid monthly. The facility is repayable in equal quarterly installments from September 2009 until June 2012 and is secured by pledge of a 25% plus one share stake in Svyazinvest. As of December 31, 2009, the balance payable under this facility amounted to $859.7 million. In September 2010, Comstar fully repaid its Sberbank loan out of the proceeds received from the sale of 25% plus 1 share ownership stake in Svyazinvest to Rostelecom.

Comstar Acquisition Agreement

        Pursuant to an Agreement dated October 12, 2009 between Sistema, ECU GEST HOLDING S.A., Sistema Telecom LLC and Telekoms Operator LLC, we acquired a 50.91% stake in Comstar, a leading fixed line operator in Russia, from Sistema. Under the terms of the agreement, our wholly owned subsidiary, Telekoms Operator LLC, purchased Sistema's 50.91% stake in Comstar for RUB 39.15 billion ($1.32 billion as of October 12, 2009, the date of the acquisition).

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.

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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 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.

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        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 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

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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 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.

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        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, 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 decreased 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.

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

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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 Russian translation attached to it in advance of receiving the relevant 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

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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 apostilled or pass through a consular legalization. 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.).

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 (the "Code"), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service ("IRS"), all as publicly available and in effect as of the date of this document. These authorities are subject to

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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 an 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 the recently enacted Medicare tax on "net investment income" or 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 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.

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Taxation of Distributions on ADSs

        Subject to the passive foreign investment company rules described below, 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, 2013, 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" with respect to your ADSs (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 actual or constructive 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.

        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, may be 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

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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

        Subject to the passive foreign investment company rules described below, 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 you have held the ADSs for more than one year. If you are a non-corporate U.S. Holder, such recognized 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 recognized 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 non-U.S. corporation generally will be a passive foreign investment company (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, 2011. However, our possible status as a PFIC must be determined annually and may be dependent in part on the market price of our ADSs, which may be volatile. Therefore, our possible status as a PFIC 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. 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.

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Additional Reporting Requirements

        Certain U.S. Holders who are individuals may be required to report information relating to an interest in the ADSs, subject to certain exceptions (including an exception for ADSs held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this requirement on their ownership and disposition of the ADSs.

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 obligations 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, 2011, $1,286.6 million, or 14.8% of our total indebtedness, including capital leases, was variable interest rate debt, while $7,421.8 million, or 85.2% of our total indebtedness, including capital leases, was fixed interest rate debt.

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        The table below presents principal cash flows and related weighted average interest rates for indebtedness by contractual maturity dates as of December 31, 2011.

Contractual Maturity Date as of December 31, 2011.

Indebtedness	Currency	2012			2013			2014			2015			2016			Thereafter			Total			Annual interest rate (Actual interest rate at December 31, 2011)
	(amounts in thousands of U.S. dollars)
Variable debt
Citibank International plc and ING Bank N.V.	USD		19,741			19,741			12,021			—			—			—			51,503			1.11	%
HSBC Bank plc and ING BHF—BANK AG	USD		21,799			18,889			—			—			—			—			40,688			1.23	%
EBRD	USD		18,462			18,462			9,230			—			—			—			46,154			3.91	%
Commerzbank AG, ING Bank AG and HSBC Bank plc	USD		14,790			14,790			6,915			—			—			—			36,495			1.11	%
HSBC Bank plc, ING Bank AG and Bayerische Landesbank	USD		16,609			16,609			8,726			1,017			—			—			42,961			1.11	%
EBRD	USD		14,872			14,872			7,435			—			—			—			37,179			2.32	%
Calyon, ING N.V., Reiffeisen Zentralbank Oesterreich	USD		62,010			74,186			74,186			74,186			74,186			221,988			580,742			1.96	%
ABN AMRO N.V.	USD		6,287			6,287			—			—			—			—			12,574			1.16	%
ABN AMRO N.V.	EUR		4,479			4,479			—			—			—			—			8,958			1.97	%
LBBW	EUR		6,036			6,036			6,036			6,036			6,036			6,035			36,215			2.37	%
BNP Paribas	EUR		8,963			8,963			8,963			8,963			8,963			19,218			64,033			3.27	%
Bank of China	EUR		23,362			23,362			23,362			23,362			23,364			—			116,812			3.57	%
VTB	EUR		998			—			—			—			—			—			998			6.5	%
Intracom	EUR/AMD		6,799			—			—			—			—			—			6,799			4.11	%
Skandinaviska Enskilda Banken AB	USD		31,656			31,656			31,656			31,656			29,242			13,536			169,402			1.03	%
Skandinaviska Enskilda Banken AB	USD		5,851			5,851			5,851			5,851			5,851			5,850			35,105			2.61	%
Total variable debt			262,714			264,183			194,381			151,071			147,642			266,627			1,286,618
Weighted average interest rate			2.06	%		2.06	%		2.09	%		2.09	%		2.07	%		2.03	%		2.06	%
Fixed-rate notes
7.00% notes due 2013	USD		—			13,318			—			—			—			—			13,318			7.00	%
7.75% notes due 2015	USD		—			—			—			234,705			—			—			234,705			7.75	%
8.00% notes due 2012	USD		399,985			—			—			—			—			—			399,985			8.00	%
8.00% notes due 2013	RUB		—			298,499			—			—			—			—			298,499			8.00	%
8.15% notes due 2015	RUB		—			—			—			465,895			—			—			465,895			8.15	%
8.625% notes due 2020	USD		—			—			—			—			—			750,000			750,000			8.63	%
8.70% notes due 2017	RUB		—			—			—			—			—			310,597			310,597			8.70	%
14.25% notes due 2012	RUB		465,895			—			—			—			—			—			465,895			14.25	%
7.60% notes due 2014	RUB		—			—			422,988			—			—			—			422,988			7.60	%
Fixed-rate bank loans
Gazprombank	RUB		—			78,684			314,738			78,685			—			—			472,107			8.75	%
Sberbank	RUB		—			—			—			1,035,322			1,035,322			1,035,323			3,105,966			8.50	%
Bank of Moscow	RUB		—			434,835			—			—			—			—			434,835			7.80	%
Compulink	RUB		11,644			4,865			—			—			—			—			16,509			0.00	%
Ekvant	RUB		4,589			1,235			1,235			1,235			1,235			7,410			16,939			0.00	%
CISCO	RUB		4,062			522			—			—			—			—			4,584			11.25	%
Other	Various		16			691			2,049			233			220			238			3,447			various
Total fixed debt			886,191			832,649			741,010			1,816,075			1,036,777			2,103,568			7,416,270
Weighted average interest rate			8.67	%		8.34	%		8.40	%		7.32	%		8.53	%		8.54	%		8.30	%

        We would have experienced an additional interest expense of approximately $12.3 million on an annual basis as a result of a hypothetical increase in the LIBOR/EURIBOR by 1% over the current

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rate as of December 31, 2011. We would have experienced an additional interest expense of approximately $7.6 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, 2010. We would have experienced an additional interest expense of approximately $26.5 million on an annual basis as a result of a hypothetical increase in the LIBOR/EURIBOR/CBR Refinancing Rate by 1% over the current rate as of December 31, 2009. The increase by 61.8% 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, 2011. In addition, the 8.5% interest rate set for our Sberbank facilities due 2017 totaling RUB 100.0 billion (equivalent of $3,105.9 million as of December 31, 2011) is dependent on the average daily bank account balance maintained by MGTS, MTS Ukraine and us with Sberbank. In case we fail to maintain an average daily bank account balance in any three month period at the minimum levels established, the rate will be increased by 1%. Such rate increase would cause our interest expense to increase by approximately $31.1 million on an annual basis. The fair value of our publicly traded fixed-rate notes as of December 31, 2011, ranged from 95.0% to 107.3% of the notional amount. As of December 31, 2011, 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 16 of 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 have entered into various variable-to-fixed interest rate swap agreements. The table below presents a summary of our variable-to-fixed interest rate swap agreements.

Type of derivative	Maturity	Notional amount (at inception)		Mark to Market Value as of December 31, 2011
		(amounts in millions of U.S. dollars)
Variable-to-fixed Interest Rate Swap Agreements
Swap agreements with ING Bank N.V. to pay a fixed rates of 2.09% to 4.41% and receive a variable interest rate of 6m LIBOR	November 2013 - February 2015		222.2		(4.3	)
Swap agreements with HSBC bank Plc to pay a fixed rates of 2.18% to 4.14% and receive a variable interest rate of 6m LIBOR	October 2013 - September 2014		285.5		(2.2	)
Swap agreement with HSBC bank Plc to pay a fixed rate of 3.29% and receive a variable interest rate of 6m EURIBOR	October 2013		37.2		(0.2	)
Swap agreement with Rabobank to pay a fixed rate of 4.16% and receive a variable interest rate of 6m LIBOR	April 2014		86.1		(1.8	)
Swap agreement with Citibank N.A. to pay fixed rate of 4.29% and receive a variable interest rate of 6m LIBOR	September 2013		53.5		(0.8	)
Swap agreement with ABN AMRO N.V. to pay fixed rate of 2.08% and receive a variable interest rate of 6m LIBOR	April 2013		21.1		(0.1	)
Swap agreement with Calyon to pay fixed rate of 2.07% and receive a variable interest rate of 6m LIBOR	October 2013		28.3		(0.2	)
Swap agreement with Calyon to pay fixed rate of 2.40% and receive a variable interest rate of 3m LIBOR	May 2012		295.0		(0.9	)
Swap agreement with Calyon to pay fixed rate of 2.12% and receive a variable interest rate of 3m EURIBOR	May 2012		307.7		(0.4	)
Swap agreement with Societe General Vostok to pay fixed rate of 2.40% and receive a variable interest rate of 6m LIBOR	June 2014		166.7		(1.9	)

        We have also entered into several cross-currency interest rate swap agreements. These contracts, which hedge the risk of both interest rate and currency fluctuations, assume periodical exchanges of both principal and interest payments from ruble-denominated amounts to U.S. dollar- and

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euro-denominated amounts, to be exchanged at specified rates. The rates were determined with reference to the market spot rates upon issuance. These contracts also include an interest rate swap of a fixed U.S. dollar- and euro-denominated interest rate to a fixed ruble-denominated interest rate. All of our cross-currency interest rate swaps agreements matured in 2011.

        As of December 31, 2011, approximately 21.6% 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.

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 CBR. 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
2007		26.58		24.27		25.49		24.55
2008		29.38		23.13		24.86		29.38
2009		36.43		28.67		31.72		30.24
2010		31.78		28.93		30.37		30.48
2011		32.68		27.26		29.38		32.20

(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
July 2011		28.38		27.44
August 2011		29.45		27.52
September 2011		32.46		28.89
October 2011		32.68		29.90
November 2011		31.58		30.10
December 2011		32.20		30.81
January 2012		31.93		30.36
February 2012		30.41		28.95
March 2012		29.67		28.95

Source: CBR.

        The exchange rate between the ruble and the U.S. dollar quoted by the CBR for April 20, 2012 was 29.51 rubles per U.S. dollar.

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        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
2007		5.05		5.05		5.05		5.05
2008		7.88		4.84		5.27		7.70
2009		8.01		7.61		7.81		7.99
2010		8.01		7.89		7.94		7.96
2011		7.99		7.93		7.97		7.99

(1)

The average of the exchange rates on the last business day of each full month during the relevant period.

	Hryvnias per U.S. dollar
	High		Low
July 2011		7.97		7.97
August 2011		7.97		7.97
September 2011		7.97		7.97
October 2011		7.98		7.97
November 2011		7.99		7.98
December 2011		7.99		7.99
January 2012		7.99		7.99
February 2012		7.99		7.99
March 2012		7.99		7.98

Source: National Bank of Ukraine.

        The exchange rate between the hryvnia and the U.S. dollar quoted by the National Bank of Ukraine for April 20, 2012 was 7.99 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 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.

        In 2009, we entered into two foreign currency option agreements to manage our exposure to changes in currency exchange rates related to our U.S. dollar-denominated debt obligations. Under the agreements, we have put and call option rights to acquire $80.0 million of U.S. dollars at rates within a range specified in the contracts. The first option agreement to acquire $40.0 million expired in 2010 and was not exercised, whereas the second option agreement to acquire $40.0 million expired unexercised in April 2011. In 2010, we additionally entered into foreign currency option agreements to manage our exposure to changes in currency exchange rates related to our U.S. dollar-denominated eurobonds. Under these agreements, we had put and call option rights to acquire $250.0 million at rates within a range specified in the contracts. These contracts were not designated for hedge accounting purposes and expired unexercised in January 2012.

        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 of these functional currencies against the U.S. dollar will result in a translation loss.

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        A significant part of our capital expenditures, borrowings and certain operating costs (roaming expenses, cost of customer equipment and other costs) 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 costs) 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.

        We would experience a currency exchange loss of $362.9 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, 2011. We would experience a currency exchange loss of $20.8 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, 2011. We are unable to estimate future loss of earnings as a result of such changes.

Item 12.    Description of Securities Other Than Equity Securities

        (Only Item 12.D.3-4 are applicable.)

D.  American Depositary Shares

3.

Fees and charges that a holder of American Depositary Receipts may have to pay, either directly or indirectly.

Category	Depositary Actions	Associated Fee
(a) Depositing or substituting the underlying shares	Each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock split declared by the Company, or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the deposited securities	$5.00 for each 100 ADSs (or portion thereof)

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Category	Depositary Actions	Associated Fee
(b) Receiving or distributing dividends	Distribution of stock dividends	$5.00 for each 100 ADSs (or portion thereof)
	Distribution of cash	$0.02 or less per ADS (or portion thereof)
(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	$5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing an underlying security	Acceptance of ADRs surrendered for withdrawal of deposited securities or cancellation or reduction of ADSs for any other reason	$5.00 for each 100 ADSs (or portion thereof)
(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	$1.50 per ADS
(f) General depositary services, particularly those charged on an annual basis	Other services performed by the depositary in administering the ADRs	$0.02 per ADS (or portion thereof) per calendar year which may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADSs as of the record date or record dates set by the depositary during each calendar year and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions
	Custodian and share register related issues, including, without limitation, any inspections of the share register maintained by the Russian share registrar or other confirmation of holdings of deposited securities	$0.01 or less per ADS (or portion thereof) per year which fee shall be assessed against holders of record as of the date set by the depositary not more often than once each calendar year

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Category	Depositary Actions	Associated Fee
(g) Expenses of the depositary	Certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges in connection with:	Charges to be assessed against holders as of the record date or dates set by the depositary and payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions
	• compliance with foreign exchange control regulations or any law or regulation relating to foreign investment;
	• depositary or its custodian's compliance with applicable law, rule or regulation;
	• stock transfer or other taxes and other governmental charges;
	• cable, telex, facsimile transmission or delivery charges;
	• if applicable, transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities (which are payable by persons depositing shares or holders withdrawing deposited securities);
	• expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency);
	• any other charge payable by depositary or its agents including, without limitation, the custodian, or the agents of the depositary's agents in connection with the servicing of the shares or other deposited securities

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4.     All fees and other direct and indirect payments made by the depositary to the foreign issuer of the deposited securities.

        The Depositary has agreed to reimburse to us or pay on our behalf certain reasonable expenses related to our ADS program and incurred by us in connection with the program (such as NYSE listing fees, legal and accounting fees incurred with preparation of Form 20-F and ongoing SEC compliance and listing requirements, investor relations expenses, among others). The Depositary has covered all such expenses incurred by us during 2011 in the amount of $6.45 million. The amounts the Depositary reimbursed or paid are not perforce related to the fees collected by the depositary from ADS holders.

        As part of its service to us, the Depositary has agreed to waive fees for the standard costs associated with the administration of our ADS program, associated operating expenses and investor relations advice estimated to total $0.2 million.

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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

        None.

Item 15.    Controls and Procedures

(a)

Disclosure Controls and Procedures.

        As of the end of the period covered by this Annual Report on Form 20-F, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

        Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective, as of December 31, 2011, to provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions about required disclosure.

        There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

(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. Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO") in Internal Control—Integrated Framework. As a result of management's evaluation of our internal control over financial reporting, management concluded that our internal control over financial reporting as of December 31, 2011 was effective.

        Management excluded from its assessment the internal control over financial reporting at Open Joint-Stock Company "Television and radio broadcasting company 'TVT"' which was acquired in October 2011 and whose financial statements constitute $175.6 million and $183.4 million of net assets and total assets, respectively, $6.3 million of revenues and $0.2 million of net loss attributable to the Group in the consolidated financial statements as of and for year ended December 31, 2011. Such exclusion was in accordance with the Securities and Exchange Commission's guidance that an assessment of a recently acquired business may be omitted in management's report on internal controls over financial reporting ("ICFR") in the year of acquisition.

        There were no changes in our internal control over financial reporting during the year ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

232

        The effectiveness of our internal control over financial reporting as of December 31, 2011, 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        To the Board of Directors and Shareholders of Mobile TeleSystems OJSC:

        We have audited the internal control over financial reporting of Mobile TeleSystems OJSC, a Russian Open Joint-Stock Company, and subsidiaries (the "Group") as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Open Joint-Stock Company "Television and radio broadcasting company 'TVT"' which was acquired in October 2011 and whose financial statements constitute $175.6 million and $183.4 million of net assets and total assets, respectively, $6.3 million of revenues and $0.2 million of net loss attributable to the Group in the consolidated financial statements as of and for year ended December 31, 2011. Accordingly, our audit did not include the internal control over financial reporting at TVT. 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 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

233

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, 2011, 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, 2011 of the Group and our report dated March 6, 2012 expressed an unqualified opinion on those financial statements.

/s/ ZAO Deloitte & Touche CIS
Moscow, Russia
March 6, 2012

(d)

Changes in internal control over financial reporting.

        Management has evaluated, with the participation of our CEO and CFO, 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 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.

        The current version of our Code of Ethics was adopted on December 15, 2011. Whereas we formerly had two codes of ethics—one applicable to senior officers (including our principal executive officer, principal financial officer and principal accounting officer) and one more generally applicable to all employees—the current Code of Ethics applies to all of our officers, directors and employees. The new Code of Ethics did not substantively alter any of its requirements as compared with the code of ethics that was in effect prior to the approval of the new Code of Ethics.

        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 two-year period ended December 31, 2010 and 2011, respectively, for which audited financial statements appear in this Annual Report on Form 20-F. The following table

234

presents the aggregate fees billed for professional services and other services by ZAO Deloitte & Touche CIS and its affiliates in 2010 and 2011, respectively.

	Year ended December 31,
	2010		2011
	(in thousands)
Audit Fees	$	4,809.7	$	4,110.4
Audit-Related Fees		479.1		122.5
Tax Fees		48.7		31.6
All Other Fees		—		68.7
Total	$	5,337.5	$	4,333.2

Audit Fees

        The Audit Fees for the years ended December 31, 2010 and 2011 were for the reviews and integrated audits of our consolidated financial statements prepared in accordance with U.S. GAAP, reviews and audits of the financial statements of our public subsidiaries prepared in accordance with U.S. GAAP, statutory audits and services associated with the documents issued in connection with securities offerings. Integrated audits include all services necessary to form an opinion on our consolidated financial statements and to report on our internal controls over financial reporting.

Audit-Related Fees

        The Audit-Related Fees for the years ended December 31, 2010 and 2011 mainly included fees for agreed-upon procedures related to audited financial statements, attestation dry runs and due diligence related to acquisitions.

Tax Fees

        The Tax Fees for the years ended December 31, 2010 and 2011, respectively, include the fees principally related to tax compliance services.

All Other Fees

        All Other Fees for the year ended December 31, 2011, primarily relate to benchmarking of accounts receivable ratios, indices and internal procedures against industry best practice.

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 and its affiliates for all audit and non-audit services, including tax services. Our Audit Committee pre-approved the engagement terms and fees of ZAO Deloitte & Touche CIS and its affiliates for all services performed for the fiscal year ended December 31, 2011.

Item 16D.    Exemption from the Listing Standards for Audit Committees

        Not Applicable.

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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 through the open market and private block transactions pursuant to Rule 10b5-1 plans, privately negotiated transactions or other means in accordance with the requirements of the Securities and Exchange Commission 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.

        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 RUB 11.1 billion ($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

236

Risks and Uncertainties—Shareholder rights provisions under Russian law could impose additional obligations and costs on us."

        We did not repurchase any ADSs in the year ended December 31, 2009, 2010 and 2011.

        A total of 8,000 MTS ordinary shares representing 0.0004% of our issued share capital were repurchased for RUB 1.96 million ($70,000 as of March 31, 2011) as a part of our reorganization during 2011. See "Item 3. Key information—A. Selected Financial Data."

        See also "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders."

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 the audit committee have a minimum of three members. Russian law does not contain such a requirement. Our audit committee is comprised of two members.

•

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 nomination committee are comprised of 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.

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We have a remuneration and nomination 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 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.

        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.

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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 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2009 AND 2008 AND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009:
Consolidated statements of financial position as of December 31, 2011 and 2010		F-3
Consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009		F-5
Consolidated statements of changes in shareholders' equity for the years ended December 31, 2011, 2010 and 2009		F-6
Consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009		F-9
Notes to the consolidated financial statements		F-11

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OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions and Other Adjustments(1)			Balance at End of Period
	(in thousands)
Year Ended December 31, 2011
Allowance for doubtful accounts	$	120,468	$	101,967	$	(125,474	)	$	96,961
Valuation allowance for deferred tax assets		165,994		—		(2,919	)		163,075
Year Ended December 31, 2010
Allowance for doubtful accounts	$	97,653	$	123,352	$	(100,537	)	$	120,468
Valuation allowance for deferred tax assets		182,308		—		(16,314	)		165,994
Year Ended December 31, 2009
Allowance for doubtful accounts	$	69,603	$	105,260	$	(77,210	)	$	97,653
Valuation allowance for deferred tax assets		26,744		78,761		76,803			182,308

(1)

Includes the impact of foreign currency translation adjustments.

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Item 19.   Exhibits

Exhibits No.		Description
	1.1	Charter of Mobile TeleSystems OJSC, restated version no. 9, as approved by the General Meeting of Shareholders of Mobile TeleSystems OJSC held on June 27, 2011.*
	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).
	2.5	Amendment No. 4 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(5) to Form F-6 (Registration No. 333-166178).
	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.
	4.3	Loan Agreement between Mobile Telesystems Open Joint-Stock Company and MTS International Funding Limited dated June 21, 2010 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, 2009, on Form 20-F.
	4.4	Non-Revolving Credit Facility Agreement No. 9656 between Joint Stock Commercial Savings Bank of the Russian Federation and Mobile TeleSystems Open Joint Stock Company dated September 2009 (English Translation) is incorporated herein by reference to Exhibit 4.4 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, 2009, on Form 20-F.
	4.5	Non-Revolving Credit Facility Agreement No. 9657 between Joint Stock Commercial Savings Bank of the Russian Federation and Mobile TeleSystems Open Joint Stock Company dated September 2009 (English Translation) is incorporated herein by reference to Exhibit 4.5 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, 2009, on Form 20-F.
	4.6	Non-Revolving Credit Facility Agreement No. 9463 between Joint Stock Commercial Savings Bank of the Russian Federation and OAO "COMSTAR—Integrated TeleSystems" dated June 8, 2007 (English Translation) is incorporated herein by reference to Exhibit 4.6 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, 2009, on Form 20-F.

241

Exhibits No.		Description
	4.7	Non-Revolving Credit Facility Agreement No. 5361 between Join Stock Commercial Savings Bank of the Russian Federation and Mobile TeleSystems Open Joint Stock Company dated December 13, 2010 (English Translation) is incorporated herein by reference to Exhibit 4.7 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, 2010, on Form 20-F.
	4.8	Revolving Credit Facility Agreement No. 5455 between Joint Stock Commercial Savings Bank of the Russian Federation and Mobile TeleSystems Open Joint Stock Company dated September 30, 2011 (English Translation).
	4.9	Revolving Credit Facility Agreement No. 2011/83-1 between ING Bank (EURASIA) ZAO (Closed Joint Stock Company) and Mobile TeleSystems Open Joint Stock Company dated July 06, 2011.
	4.10	Revolving Credit Facility Agreement No. 207/11-P between Gazprombank (Open Joint-Stock Company) and Mobile TeleSystems Open Joint Stock Company dated July 29, 2011 (English Translation).
	4.11	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.
	4.12	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 is incorporated herein by reference to Exhibit 4.5 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, 2008, on Form 20-F.
	4.13	Agreement for the acquisition of 155,310,126 shares of Joint Stock Company COMSTAR—United TeleSystems and 6,715,140,080 shares of Closed Joint Stock Company United—TeleSystems dated October 12, 2009 is incorporated herein by reference to Exhibit 4.9 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, 2009, on Form 20-F.
	4.14	MTS License No. 82397 for provision of mobile radiotelephone communication services in the 1800 MHz band in the territory of the Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.11 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, 2010, on Form 20-F.
	4.15	MTS License No. 80185 for provision of mobile radiotelephone communication services in the 900 MHz band in the territory of the Republic of Kalmykia (English translation) is incorporated herein by reference to Exhibit 4.12 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, 2010, on Form 20-F.

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Exhibits No.		Description
	4.16	MTS License No. 75002 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the territory of the Rostov Region (English translation) is incorporated herein by reference to Exhibit 4.13 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, 2010, on Form 20-F.
	4.17	MTS License No. 76585 for provision of mobile radiotelephone communication services in the 900/1800 MHz band in the Altai Territory (English translation) is incorporated herein by reference to Exhibit 4.14 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, 2010, on Form 20-F.
	4.18	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) is incorporated herein by reference to Exhibit 4.12 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, 2008, on Form 20-F.
	4.19	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) is incorporated herein by reference to Exhibit 4.14 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, 2008, on Form 20-F.
	4.20	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.
	4.21	MTS Ukraine 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.
	4.22	MTS Ukraine 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.
	4.23	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.
	4.24	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.

243

Exhibits No.		Description
	4.25	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.
	4.26	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.
	4.27	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.
	4.28	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.
	4.29	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.
	4.30	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.
	4.31	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.
	4.32	MTS License No. 86436 for provision of mobile radiotelephone communication services in the 900 MHz band in the territory of the Penza Region (English translation) is incorporated herein by reference to Exhibit 4.29 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, 2010, on Form 20-F.

244

Exhibits No.		Description
	4.33	MTS License No. 86435 for provision of mobile radiotelephone communication services in the 900 MHz band in the territory of the Ulyanovsk Region (English translation) is incorporated herein by reference to Exhibit 4.30 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, 2010, on Form 20-F.
	4.34	MTS License No. 94561 for provision of wireless telecommunications services in the LTE TDD (time-division duplexing) standard in the 2595-2620 MHz range in the territory of Moscow and the Moscow Region (English translation).
	4.35	MTS License No. 94560 for provision of leased communications circuits services in the territory of the Russian Federation (English translation).
	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.
	101	The following financial statements from the Annual Report on Form 20-F of Mobile TeleSystems OJSC for the year ended December 31, 2011, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated statements of financial position, (ii) consolidated statements of operations, (iii) consolidated statements of changes in shareholders' equity, (iv) consolidated statements of cash flows and (v) notes to the consolidated financial statements.**

*

Approved at the Annual General Meeting of Shareholders on June 27, 2011, and became effective upon registration with the Federal Tax Service on July 28, 2011.

**

Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

245

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.

Date: April 23, 2012	MOBILE TELESYSTEMS OJSC
	By:	/s/ Andrei A. Dubovskov
		Name:	Andrei A. Dubovskov
		Title:	President and Chief Executive Officer

246

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 AND 2010 AND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009:
Consolidated statements of financial position as of December 31, 2011 and 2010		F-3
Consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009		F-5
Consolidated statements of changes in shareholders' equity for the years ended December 31, 2011, 2010 and 2009		F-6
Consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009		F-9
Notes to the consolidated financial statements		F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Mobile TeleSystems OJSC

        We have audited the accompanying consolidated statements of financial position of Mobile TeleSystems OJSC and subsidiaries (the "Group") as of December 31, 2011 and 2010, 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, 2011. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial position of Mobile TeleSystems OJSC and subsidiaries as of December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, 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, 2011 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, 2012 expressed an unqualified opinion on the Group's internal control over financial reporting.

/s/ ZAO Deloitte & Touche CIS

Moscow, Russia
March 6, 2012, except for Note 28,
as to which the date is April 23, 2012

F-2

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2011 AND 2010

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

	December 31,
	2011		2010
CURRENT ASSETS:
Cash and cash equivalents (Note 5)	$	1,850,826	$	927,694
Short-term investments (Note 6)		86,242		333,594
Trade receivables, net (Note 7)		863,808		798,102
Accounts receivable, related parties (Note 22)		4,488		2,673
Inventory and spare parts (Note 8)		291,075		319,956
Prepaid expenses, including related party amounts of $3,031 and $26,722		234,730		232,352
Deferred tax assets (Note 21)		189,622		234,658
VAT receivable		191,039		164,761
Other current assets, including assets held for sale of $2,188 and $10,430		125,818		102,813
Total current assets		3,837,648		3,116,603
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $7,023,556 and $6,196,117 (Note 9), including advances given to related parties of $28,889 and $96,138		8,205,352		7,971,830
LICENSES, net of accumulated amortization of $231,006 and $384,405 (Notes 3 and 10)		227,511		294,728
GOODWILL (Notes 3 and 11)		1,118,530		981,335
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,537,088 and $1,516,949 (Notes 3 and 12), including prepayments to related parties of $28,742 and $48,425		1,362,287		1,541,638
DEBT ISSUANCE COSTS, net of accumulated amortization of $217,755 and $191,453		140,579		104,818
INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Note 13)		188,047		241,792
OTHER INVESTMENTS, including related party amounts of $121,407 and $125,721 (Note 15)		123,442		128,582
OTHER NON-CURRENT ASSETS, including restricted cash of $2,152 and $4,719, deferred tax assets of $62,102 and $81,816 (Note 21)		114,833		96,716
Total assets	$	15,318,229	$	14,478,042

The accompanying notes are an integral part of these consolidated financial statements.

F-3

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)

AS OF DECEMBER 31, 2011 AND 2010

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

	December 31,
	2011			2010
CURRENT LIABILITIES:
Accounts payable, related parties (Note 22)	$	56,982		$	52,984
Trade accounts payable		799,128			629,077
Subscriber prepayments and deposits		529,231			523,464
Debt, current portion (Note 16), including related party amounts of $6,799 and $7,558		283,025			256,052
Notes payable, current portion (Note 16)		865,880			492,176
Deferred connection fees, current portion (Note 18)		49,868			49,212
Capital lease obligation, current portion		6,786			8,882
Income tax payable		27,095			26,071
Accrued liabilities (Note 20)		653,870			799,804
Bitel liability (Note 27)		213,152			210,760
Other payables		79,818			106,659
Total current liabilities		3,564,835			3,155,141
LONG-TERM LIABILITIES:
Notes payable, net of current portion (Note 16)		2,496,002			2,830,676
Debt, net of current portion (Note 16), including related party amounts of $nil and $7,005		5,057,981			3,561,953
Capital lease obligation, net of current portion		5,529			10,873
Deferred connection fees, net of current portion (Note 18)		79,556			106,076
Deferred taxes (Note 21)		227,928			292,070
Retirement and post-retirement obligations		37,597			42,430
Property, plant and equipment contributions		86,072			88,859
Other long-term liabilities		111,503			146,217
Total long-term liabilities		8,102,168			7,079,154
Total liabilities		11,667,003			10,234,295
COMMITMENTS AND CONTINGENCIES (Note 27)
Redeemable noncontrolling interest (Note 24)		80,603			86,944
SHAREHOLDERS' EQUITY:
Common stock (2,096,975,792 shares with a par value of 0.1 rubles authorized and 2,066,413,562 shares issued as of December 31, 2011 and 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, 2010, 777,396,505 of which are in the form of ADS as of December 31, 2011 and 2010) (Note 23)		50,814			50,558
Treasury stock (77,496,725 and 76,456,876 common shares at cost as of December 31, 2011 and 2010)		(992,141	)		(1,054,926	)
Additional paid-in capital		92,720			—
Accumulated other comprehensive loss		(963,992	)		(771,957	)
Retained earnings		5,294,651			4,901,140
Nonredeemable noncontrolling interest		88,571			1,031,988
Total shareholders' equity		3,570,623			4,156,803
Total liabilities and shareholders' equity	$	15,318,229		$	14,478,042

The accompanying notes are an integral part of these consolidated financial statements.

F-4

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, except share and per share amounts)

	Years ended December 31,
	2011			2010			2009
NET OPERATING REVENUES
Services revenue and connection fees (including related party amounts of $13,481, $52,257 and $72,149, respectively)	$	11,430,377		$	10,586,068		$	9,513,353
Sales of handsets and accessories		888,311			707,168			353,900
Total net operating revenues		12,318,688			11,293,236			9,867,253
OPERATING EXPENSES
Cost of services, excluding depreciation and amortization shown separately below (including related party amounts of $15,878, $43,620 and $50,389, respectively)		2,633,434			2,260,888			2,011,332
Cost of handsets and accessories		902,692			727,682			375,444
General and administrative expenses (including related party amounts of $62,717, $83,305 and $66,677, respectively) (Note 25)		2,436,252			2,274,421			1,992,991
Provision for doubtful accounts		111,307			122,550			110,766
Impairment of long-lived assets (Note 2, 4)		19,015			127,875			75,064
Sales and marketing expenses (including related party amounts of $83,183, $135,622 and $127,106, respectively)		878,222			850,584			728,483
Depreciation and amortization expense		2,335,204			2,000,496			1,844,174
Other operating expenses (including related party amounts of $538, $9,796 and $12,207, respectively)		193,677			194,181			173,114
Net operating income		2,808,885			2,734,559			2,555,885
CURRENCY EXCHANGE AND TRANSACTION LOSS/(GAIN)		158,066			(20,238	)		252,694
OTHER EXPENSES/(INCOME)
Interest income (including related party amounts of $19,079, $21,640 and $53,940)		(62,559	)		(84,396	)		(104,566	)
Interest expense, net of capitalized interest (including related party amounts of $423, $608 and $3,613)		656,898			777,287			571,901
Equity in net income of associates (Note 13)		(49,443	)		(70,649	)		(60,313	)
Change in fair value of derivatives (Note 19)		—			—			5,420
Impairment of investments (including related party amounts of $nil, $nil and $349,370) (Notes 14)		—			—			368,355
Other expenses, net		6,571			66,924			23,254
Total other expenses, net		551,467			689,166			804,051
Income before provision for income taxes and noncontrolling interests		2,099,352			2,065,631			1,499,140
PROVISION FOR INCOME TAXES (Note 21)		531,620			517,188			505,047
NET INCOME		1,567,732			1,548,443			994,093
NET INCOME/(LOSS) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST		123,788			167,812			(20,110	)
NET INCOME ATTRIBUTABLE TO THE GROUP		1,443,944			1,380,631			1,014,203
Weighted average number of common shares outstanding—basic and diluted		1,970,953,129			1,916,869,262			1,885,750,147
Earnings per share, basic and diluted	$	0.73		$	0.72		$	0.54

The accompanying notes are an integral part of these consolidated financial statements.

F-5

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, except share amounts)

	Common stock				Treasury stock									Accumulated other comprehensive (loss)									Non- redeemable noncontrolling interest
											Additional paid-in capital						Retained earnings			Total equity attributable to the Group						Total equity			Redeemable noncontrolling interest
	Shares		Amount		Shares			Amount
Balances at January 1, 2009		1,993,326,138	$	50,558		(108,273,338	)	$	(1,426,753	)	$	1,077,107		$	(445,772	)	$	5,624,939		$	4,880,079		$	1,314,784		$	6,194,863		$	145,748
Comprehensive income/(loss):
Net income/(loss)		—		—		—			—			—			—			1,014,203			1,014,203			(24,469	)		989,734			4,359
Currency translation adjustment, net of tax of $7,910		—		—		—			—			—			(196,819	)		—			(196,819	)		(29,478	)		(226,297	)		(4,399	)
Change in fair value of derivatives, net of tax of $5,895 (Note 19)		—		—		—			—			—			(23,579	)		—			(23,579	)		—			(23,579	)		—
Unrecognized actuarial gains, net of tax of $nil		—		—		—			—			—			1,003			—			1,003			1,808			2,811			—
Total comprehensive income/(loss)																					794,808			(52,139	)		742,669
Dividends declared MTS		—		—		—			—			—			—			(1,221,381	)		(1,221,381	)		(1,005	)		(1,222,386	)		—
Dividends Metro-Telecom		—		—		—			—			—			—			(4,371	)		(4,371	)		(231	)		(4,602	)		—
Accrued compensation costs		—		—		—			—			1,173			—			—			1,173			—			1,173			—
Acquisition of Comstar-UTS		—		—		—			—			(1,066,145	)		—			(256,113	)		(1,322,258	)		—			(1,322,258	)		—
Legal acquisition of Stream-TV (Note 3)		—		—		—			—			(1,616	)		43			—			(1,573	)		(1,470	)		(3,043	)		—
Dividends paid to noncontrolling interest of K-Telecom		—		—		—			—			—			—			—			—			—			—			(12,503	)
Change in fair value of noncontrolling interest of K-Telecom		—		—		—			—			—			—			7,495			7,495			—			7,495			(7,495	)
Effect of acquisition of Sistema Telecom		—		—		—			—			—			—			(12,402	)		(12,402	)		—			(12,402	)		—
Increase in ownership in subsidiaries (Note 3)		—		—		31,816,462			371,827			(10,519	)		(83,298	)		(54,908	)		223,102			(238,900	)		(15,798	)		(43,449	)
Balances at December 31, 2009		1,993,326,138	$	50,558		(76,456,876	)	$	(1,054,926	)	$	—		$	(748,422	)	$	5,097,462		$	3,344,672		$	1,021,039		$	4,365,711		$	82,261

The accompanying notes are an integral part of the consolidated financial statements.

F-6

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, except share amounts)

	Common stock				Treasury stock								Accumulated other comprehensive (loss)									Non- redeemable noncontrolling interest
											Additional paid-in capital					Retained earnings			Total equity attributable to the Group						Total equity			Redeemable noncontrolling interest
	Shares		Amount		Shares			Amount
Balances at December 31, 2009		1,993,326,138	$	50,558		(76,456,876	)	$	(1,054,926	)	$	—	$	(748,422	)	$	5,097,462		$	3,344,672		$	1,021,039		$	4,365,711		$	82,261
Comprehensive income/(loss):
Net income		—		—		—			—			—		—			1,380,631			1,380,631			161,214			1,541,845			6,598
Currency translation adjustment, net of tax of $7,528		—		—		—			—			—		(45,257	)		—			(45,257	)		(8,348	)		(53,605	)		940
Change in fair value of derivatives, net of tax of $(6,357) (Note 19)		—		—		—			—			—		25,428			—			25,428			—			25,428			—
Unrecognized actuarial losses, net of tax of $nil		—		—		—			—			—		(3,706	)		—			(3,706	)		(3,445	)		(7,151	)		—
Total comprehensive income																				1,357,096			149,421			1,506,517
Dividends declared MTS		—		—		—			—			—		—			(953,192	)		(953,192	)		(11,552	)		(964,744	)		(14,973	)
Dividends Metro-Telecom		—		—		—			—			—		—			(11,115	)		(11,115	)		—			(11,115	)		—
Gain on transfer of asset from Sistema		—		—		—			—			—		—			2,603			2,603			1,463			4,066			—
Accrued compensation costs		—		—		—			—			—		—			614			614			—			614			—
Change in fair value of noncontrolling interest of K-Telecom		—		—		—			—			—		—			(12,118	)		(12,118	)		—			(12,118	)		12,118
Acquisition of Metro-Telecom		—		—		—			—			—		—			(11,070	)		(11,070	)		—			(11,070	)		—
Acquisition of Sistema Telecom		—		—		—			—			—		—			(439,455	)		(439,455	)		—			(439,455	)		—
Acquisition of Multiregion		—		—		—			—			—		—			—			—			24,244			24,244			—
Recognition of put option in Comstar-UTS		—		—		—			—			—		—			(11,636	)		(11,636	)		—			(11,636	)		—
Increase in ownership in subsidiaries (Note 3)		—		—		—			—			—		—			(141,584	)		(141,584	)		(152,627	)		(294,211	)		—
Balances at December 31, 2010		1,993,326,138	$	50,558		(76,456,876	)	$	(1,054,926	)	$	—	$	(771,957	)	$	4,901,140		$	3,124,815		$	1,031,988		$	4,156,803		$	86,944

The accompanying notes are an integral part of the consolidated financial statements.

F-7

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, except share amounts)

	Common stock				Treasury stock									Accumulated other comprehensive income/(loss)									Non- redeemable noncontrolling interest
											Additional paid-in capital						Retained earnings			Total equity attributable to the Group						Total equity			Redeemable noncontrolling interest
	Shares		Amount		Shares			Amount
Balances at December 31, 2010		1,993,326,138	$	50,558		(76,456,876	)	$	(1,054,926	)	$	—		$	(771,957	)	$	4,901,140		$	3,124,815		$	1,031,988		$	4,156,803		$	86,944
Comprehensive income/(loss):
Net income		—		—		—			—			—			—			1,443,944			1,443,944			116,544			1,560,488			7,244
Currency translation adjustment, net of tax of $(13,988)		—		—		—			—			—			(137,290	)		—			(137,290	)		30,787			(106,503	)		(1,789	)
Change in fair value of derivatives, net of tax of $(1,841) (Note 19)		—		—		—			—			—			7,364			—			7,364			—			7,364			—
Unrecognized actuarial gains, net of tax of $nil		—		—		—			—			—			5,940			—			5,940			464			6,404			—
Total comprehensive income																					1,319,958			147,795			1,467,753
Dividends declared MTS		—		—		—			—			—			—			(1,026,747	)		(1,026,747	)		—			(1,026,747	)
Dividends to noncontrolling interest		—		—		—			—			—			—			—			—			(203,273	)		(203,273	)		(5,741	)
Change in fair value of noncontrolling interest of K-Telecom		—		—		—			—			—			—			6,055			6,055			—			6,055			(6,055	)
Acquisition of own stock		—		—		(8,000	)		(70	)		—			—			—			(70	)		—			(70	)		—
Exercise of put option in Comstar-UTS		—		—		—			—			—			—			11,636			11,636			—			11,636			—
Comstar-UTS merger (Note 3)		73,087,424		256		(1,031,849	)		62,855			366,298			(24,645	)		—			404,764			(393,817	)		10,947
Acquisition of noncontrolling interest in Comstar-UTS		—		—		—			—			—			(4,760	)		(41,377	)		(46,137	)		(119,340	)		(165,477	)
Acquisition of noncontrolling interest in MGTS (Note 3)		—		—		—			—			(272,840	)		(38,644	)		—			(311,484	)		(356,330	)		(667,814	)
Increase in ownership in subsidiaries (Note 3)		—		—		—			—			(738	)		—			—			(738	)		(18,452	)		(19,190	)		—
Balances at December 31, 2011		2,066,413,562	$	50,814		(77,496,725	)	$	(992,141	)	$	92,720		$	(963,992	)	$	5,294,651		$	3,482,052		$	88,571		$	3,570,623		$	80,603

The accompanying notes are an integral part of the consolidated financial statements.

F-8

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars)

	Years ended December 31,
	2011			2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,567,732		$	1,548,443		$	994,093
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,335,204			2,000,496			1,844,174
Currency exchange and transaction loss/(gain)		130,467			(98,706	)		212,510
Impairment of investments		—			—			368,355
Impairment of long-lived assets		19,015			127,875			75,064
Debt issuance cost amortization		28,502			89,244			36,892
Amortization of deferred connection fees		(96,676	)		(95,706	)		(67,057	)
Equity in net income of associates		(49,443	)		(70,649	)		(60,313	)
Provision for doubtful accounts		111,307			122,550			110,766
Inventory obsolescence expense and other provisions		30,160			27,825			12,225
Deferred tax loss/(benefit)		11,548			(45,448	)		101,524
Write-off of non-recoverable VAT receivable		4,535			2,534			9,652
Change in fair value of derivatives		—			—			5,420
Other non-cash items		(13,839	)		57,021			6,265
Changes in operating assets and liabilities:
Increase in accounts receivable		(212,222	)		(301,764	)		(216,654	)
Increase in inventory		(15,356	)		(105,859	)		(111,998	)
(Increase)/decrease in prepaid expenses and other current assets		(37,715	)		141,976			14,299
(Increase)/decrease in VAT receivable		(38,087	)		(53,265	)		8,914
Increase in trade accounts payable, accrued liabilities and other current liabilities		31,545			222,630			222,744
Dividends received		42,328			47,973			25,355
Net cash provided by operating activities		3,849,005			3,617,170			3,592,230
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired		(219,474	)		(195,106	)		(270,540	)
Purchases of property, plant and equipment		(2,239,787	)		(1,914,331	)		(1,942,402	)
Purchases of intangible assets		(344,679	)		(732,786	)		(385,907	)
Proceeds from sale of property, plant and equipment and assets held for sale		22,554			6,790			28,606
Purchases of short-term investments		(522,969	)		(672,286	)		(513,933	)
Proceeds from sale of short-term investments		787,957			577,623			649,483
Purchase of other investments		(51,694	)		(109,448	)		(613	)
Proceeds from sale of shares in Svyazinvest		—			843,158			—
Proceeds from sales of other investments		7,485			15,989			44,003
Investments in and advances to/from associates		3,000			(2,900	)		1,950
Decrease in restricted cash		2,568			1,670			17,182
Net cash used in investing activities		(2,555,039	)		(2,181,627	)		(2,372,171	)

The accompanying notes are an integral part of the consolidated financial statements.

F-9

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars)

	Years ended December 31,
	2011			2010			2009
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash payments for the acquisitions of subsidiaries from related parties and non-controlling interests (Note 3)		(864,081	)		(739,756	)		(1,345,820	)
Contingent consideration paid on acquisition of subsidiaries		(13,532	)		—			—
Proceeds from issuance of notes		228,333			1,560,028			1,003,226
Repurchase of common stock		(67	)		—			—
Proceeds from issuance of common stock		13,442			—			—
Repayment of notes		(49,409	)		(862,403	)		(9,182	)
Notes and debt issuance cost		(70,774	)		(65,697	)		(105,137	)
Capital lease obligation principal paid		(9,348	)		(12,841	)		(15,592	)
Dividends paid		(1,239,828	)		(975,822	)		(1,266,102	)
Proceeds from loans		2,043,521			2,839,644			3,598,100
Loan principal paid		(308,565	)		(4,779,595	)		(1,728,544	)
Net cash (used in)/provided by financing activities		(270,308	)		(3,036,442	)		130,949
Effect of exchange rate changes on cash and cash equivalents		(100,526	)		(417	)		42,015
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		923,132			(1,601,316	)		1,393,023
CASH AND CASH EQUIVALENTS, beginning of the year		927,694			2,529,010			1,135,987
CASH AND CASH EQUIVALENTS, end of the year	$	1,850,826		$	927,694		$	2,529,010
SUPPLEMENTAL INFORMATION:
Income taxes paid	$	511,961		$	400,116		$	432,066
Interest paid		633,116			671,354			510,784
Non-cash investing and financing activities:
Contributed property, plant and equipment	$	6,110		$	2,814		$	3,213
Additions to network equipment and software under capital lease		—			—			830
Equipment acquired through vendor financing		—			—			27,983
Amounts owed for capital expenditures		229,064			180,528			236,364
Payable related to business acquisitions		6,857			23,281			37,985

The accompanying notes are an integral part of the consolidated financial statements.

F-10

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

1. DESCRIPTION OF BUSINESS

        Business of the Group—Open Joint-Stock Company Mobile TeleSystems ("MTS OJSC", or "the Company") was incorporated 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 then began expanding through Russia and the CIS.

        In these notes, "MTS" or the "Group" refers to Mobile TeleSystems OJSC and its subsidiaries.

        The Group provides a wide range of telecommunications services, including voice and data transmission, internet access, various value added services through wireless and fixed lines as well as selling equipment and accessories. The Group's principal operations are located in Russia, Ukraine, Uzbekistan and Armenia.

        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". Since 2003 common shares of MTS OJSC have been traded on the Open Joint Stock Company "MICEX-RTS" ("MICEX-RTS").

        In 2009, the Group started to expand its own retail network, operated by Russian Telephone Company CJSC ("RTC"), a wholly owned subsidiary of MTS OJSC. During 2009 and 2010 the Group, following this strategy, acquired a number of Russian federal and regional mobile retailer operators (Note 3).

        In 2009 through a series of transactions the Group acquired a 61.97% stake in Open Joint-Stock Company Comstar—United TeleSystems ("Comstar-UTS"), a provider of fixed line telecommunication services in Russia and the CIS, from Joint-Stock Financial Corporation Sistema ("Sistema"). The acquisition of Comstar-UTS provided access to important growth markets in commercial and residential broadband which gave rise to the development of convergent telecommunication services (Note 3).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

        Accounting principles—The Group's entities maintain accounting books and records in local currencies of their domicile in accordance with the requirements of respective accounting and tax legislation. 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 accounting principles generally accepted in the United States ("U.S. GAAP") and are expressed in terms of U.S. Dollars.

        The accompanying consolidated financial statements differ from the financial statements used for statutory purposes in that they reflect certain 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.

F-11

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

        Basis of consolidation—Wholly-owned and majority-owned subsidiaries where the Group has operating and financial control are consolidated. All intercompany accounts and transactions are eliminated upon consolidation. Those ventures where the Group exercises significant influence but does not have operating and financial control are accounted for using the equity method. 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 statements of financial position. 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 13. Results of operations of subsidiaries acquired are included in the consolidated statements of operations from the date of their acquisition.

        For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without additional support and (2) the equity holders bear the economic residual risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Group consolidates those entities it controls either through a majority voting interest or otherwise. For entities that do not meet these criteria, commonly known as variable interest entities ("VIEs"), the Group consolidates those entities where the Group has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

F-12

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

        As of December 31, 2011 and 2010, the Company had investments in the following significant legal entities:

		December 31,
	Accounting method
		2011			2010
Barash Communications Technologies, Inc. ("BCTI")	Consolidated		100.0	%		100.0	%
Comstar-Regions	Consolidated		100.0	%		73.3	%
MTS Bermuda(1)	Consolidated		100.0	%		100.0	%
MTS Finance(2)	Consolidated		100.0	%		100.0	%
MTS Ukraine(3)	Consolidated		100.0	%		100.0	%
Multiregion(4)	Consolidated		—			100.0	%
RTC	Consolidated		100.0	%		100.0	%
Sibintertelecom	Consolidated		100.0	%		100.0	%
TVT	Consolidated		100.0	%		—
Infocentr	Consolidated		100.0	%		—
Inteleca Group	Consolidated		100.0	%		—
Altair	Consolidated		100.0	%		—
Sistema Telecom	Consolidated		100.0	%		100.0	%
TS-Retail	Consolidated		100.0	%		96.0	%
Uzdunrobita	Consolidated		100.0	%		100.0	%
Metro-Telecom	Consolidated		95.0	%		95.0	%
Moscow City Telephone Network ("MGTS")	Consolidated		94.1	%		51.3	%
K-Telecom	Consolidated		80.0	%		80.0	%
MTS International Funding Limited ("MTS International")	Consolidated		VIE			VIE
Comstar-UTS(5)	Consolidated		—			73.3	%
Dagtelecom(5)	Consolidated		—			100.0	%
Evrotel(5)	Consolidated		—			100.0	%
Intellect Telecom	Equity		47.0	%		22.5	%
MTS Belarus	Equity		49.0	%		49.0	%

(1)

A wholly-owned subsidiary established to repurchase the Company's ADSs.

(2)

Represents beneficial ownership.

(3)

Legal entity Ukrainian Mobile Communications was renamed to MTS Ukraine in 2010.

(4)

Merged with Comstar-Regions on December 6, 2011.

(5)

Merged with MTS OJSC on April 1, 2011.

        The Group consolidates MTS International, a private company organized and existing as a private limited company under the laws of Ireland, which qualified as a variable interest entity under Financial Accounting Standards Board Accounting Standards Codification ("ASC") 810, Consolidation. The Group is the primary beneficiary of MTS International. MTS International was established for the

F-13

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

purpose of raising capital through the issuance of debt securities on the Irish Stock Exchange followed by transferring the proceeds through a loan facility to the Group. In 2010, MTS International issued $750.0 million 8.625% notes due in 2020 (Note 16). Total liabilities of the consolidated variable interest entity amounted to $751.6 million as of December 31, 2011 and 2010.

        Functional currency translation methodology—As of December 31, 2011, the functional currencies of Group entities were as follows:

•

For entities incorporated in the Russian Federation, MTS Bermuda, MTS Finance and MTS International—the Russian ruble ("RUB");

•

For MTS Ukraine—the Ukrainian hryvnia;

•

For the Turkmen branch of BCTI—the Turkmenian manat;

•

For K-Telecom—the Armenian dram;

•

For MTS Belarus—the Belarusian ruble / U.S. Dollar ("USD");

•

For Uzdunrobita and other entities—the U.S. Dollar.

        Until October 1, 2011, the functional currency for MTS Belarus, the Group's equity investee, was the local country currency. However, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary. The Group reevaluated the functional currency criteria under ASC 830 Foreign Currency Matters, and determined that, starting October 1, 2011, the functional currency of MTS Belarus was the U.S. Dollar. The impact of the change in functional currency of MTS Belarus on the Group's consolidated financial statements was an increase in the carrying value of investments and advances in associates by $88.8 million as of October 1, 2011.

        The Group's reporting currency is U.S. Dollars. Remeasurement of the financial statements into functional currencies, where applicable, and translation of financial statements into U.S. Dollars has been performed as follows:

        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 entities whose records are maintained in their functional currency, which is other than the reporting currency, all year-end assets and liabilities have been translated into U.S. Dollars at the period-end exchange rate. Revenues and expenses have been translated at the average exchange rate for the period. Translation differences resulting from the use of these rates are reported as a component of other comprehensive income.

F-14

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

        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 and inventory obsolescence, valuation allowance for deferred tax assets for which it is more likely than not the assets will not be realized, the valuation of assets acquired and liabilities assumed in business combinations and income tax benefits, the recoverability of investments and the valuation of goodwill, intangible assets, other long-lived assets, certain accrued liabilities and financial instruments.

        Cash and cash equivalents—Cash and cash equivalents represent cash on hand and in bank accounts and short-term investments, including term deposits, having original maturities of less than three months.

        Short-term investments and loans—Short-term investments generally represent investments in promissory notes, loans and time deposits which have original maturities in excess of three months and are repayable in less than twelve months. These investments are being accounted for at amortized cost.

        Long-term investments and loans—Long-term financial instruments consist primarily of long-term investments and loans and long-term debt. Since quoted market price are not readily available for all of its long-term investments and loans, the Group estimates their fair values based on the use of estimates incorporating various unobservable market inputs.

        Property, plant and equipment—Property, plant and equipment, including improvements 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. 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.

        Accounts receivable—Accounts receivable are stated net of allowance for doubtful accounts. Concentrations of credit risk with respect to trade receivables are limited due to a highly diversified customer base, which includes a large number of individuals, private businesses and state-financed institutions.

        Provision for doubtful accounts—The Group provides an allowance for doubtful accounts based on management's periodic review for recoverability of accounts receivable, advances given, loans and other receivables. Such allowance reflects either specific cases, collection trends or estimates based on evidence of collectability. For changes in the provision for doubtful accounts receivable see Note 7.

        Inventory and spare parts—Inventory is 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

F-15

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

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.

        Asset retirement obligations—The Group calculates asset retirement obligations 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 Group's obligations relate primarily to the cost of removing its equipment from sites. The Group recorded the present value of asset retirement obligations as other long-term liabilities in the consolidated statement of financial position.

        License costs—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 varies from three to fifteen years.

        Goodwill—For acquisitions before January 1, 2009 goodwill represents an excess of the consideration paid over the fair market value of net identifiable assets acquired in purchase business combinations and is not amortized. For the acquisitions after January 1, 2009 goodwill is determined as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. 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 the authoritative guidance on 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, the Group recognizes a loss for the difference between the carrying amount and the implied fair value of goodwill.

        Impairment of long-lived assets—The Group periodically evaluates the recoverability of the carrying amount of its long-lived assets. Whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable, the Group 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, the Group 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 $19.0 million, $127.9 million and $75.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. An impairment loss in the amount of $119.6 million for the year ended December 31, 2010 was recognized as a result of license suspension from the Group's subsidiary in Turkmenistan (Note 4).

        Subscriber prepayments—The Group requires the majority of its customers to pay in advance for telecommunications services. All amounts received in advance of services provided are recorded as a

F-16

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

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—Revenue includes all revenues from the ordinary business activities of the Group. Revenues are recorded net of value-added tax. They are recognized in the accounting period in which they are earned in accordance with the realization principle.

        Revenues derived from wireless, local telephone, long distance, data and video services are recognized when services are provided. This is based upon either usage (minutes of traffic processed, volume of data transmitted) or period of time (monthly subscription fees).

        The content revenue is presented net of related costs when the Group acts as an agent of the content providers while the gross revenue and related costs are recorded when the Group is a primary obligor in the arrangement.

        Upfront fees received for connection of new subscribers, installation and activation of wireless, wireline and data transmission services ("connection fees") are deferred and recognized over the estimated average subscriber life, as follows:

Mobile subscribers	1 - 5 years
Residential wireline voice phone subscribers	15 years
Residential subscribers of broadband internet service	1 year
Other fixed line subscribers	3 - 5 years

        The Group calculates an average life of mobile subscribers for each region in which it operates and amortizes regional connection fees.

        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, the Group 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.

        Prepaid cards—The Group sells prepaid cards to subscribers, separately from the handset. Prepaid cards, used as a method of cash collection, are accounted for as customer advances. 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. Revenue from the sale

F-17

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

of prepaid cards is deferred until the service is rendered to the customer uses the airtime or the card expires.

        Roaming discounts—The Group enters into roaming discount agreements with a number of wireless operators. According to the terms of the agreements the Group 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 the authoritative guidance on customer payments and incentives. 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 its consolidated statement of financial position.

        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, 2011, 2010 and 2009, were $305.2 million, $319.7 million and $321.0 million, respectively.

        Retirement benefit and social security costs—The Group contributes to the local state pension and social funds, on behalf of all its employees.

        In Russia all social contributions paid during the year ended December 31, 2011 are represented by payments to governmental social funds, including the Pension Fund of the Russian Federation, the Social Security Fund of the Russian Federation and the Medical Insurance Fund of the Russian Federation.

        A direct contribution to those funds replaced payments of unified social tax ("UST") with the UST being abolished effective January 1, 2010. The contributions are expensed as incurred. The amount of social contributions recognized by the Group in Russia amounted to $200.0 million, $127.6 million and $96.3 million in 2011, 2010 and 2009, respectively.

        MGTS, a subsidiary of the Group, has historically offered its employees certain benefits upon and after retirement. The cost of such benefits includes interest costs, current service costs, amortization of prior service costs, net actuarial loss. The expense is recognized during an employee's years of active service with MGTS. The recognition of expense for retirement pension plans is impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets, future rates of compensation increase and other related assumptions. The Group accounts for pension plans in accordance with the requirements of the Financial Accounting Standards Board ("FASB") authoritative guidance on retirement benefits.

F-18

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

        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 Ukraine amounted to $62.1 million, $70.5 million and $64.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts contributed to the pension funds in Uzbekistan, Turkmenistan and Armenia were not significant.

        Financial instruments and hedging activities—From time to time, to optimize the structure of business acquisitions and to defer payment of the purchase price, the Group enters into put and call option agreements to acquire the remaining noncontrolling stakes in newly acquired subsidiaries. As these put and call option agreements are not freestanding, the underlying shares of such put and call options are classified as redeemable securities and are accounted for at redemption value which is the fair value of redeemable noncontrolling interests as of the reporting date. The fair value of redeemable noncontrolling interests is measured using the discounted future cash flows techniques, subject to applicable caps. The noncontrolling interest is measured at fair value using the discounted cash flow technique utilizing significant unobservable inputs ("Level 3" significant unobservable inputs of the hierarchy established by the U.S. GAAP guidance). Changes in redemption value of redeemable noncontrolling interests are accounted for in the Group's retained earnings. Redeemable noncontrolling interests are presented as temporary equity in the consolidated statement of financial position.

        The Group uses derivative instruments, including swap, forward and option contracts to manage foreign currency and interest rate risk exposures. The Group measures derivatives at fair value and recognizes them as either other current or other non-current assets or liabilities in the consolidated statement of financial position. The Group reviews its fair value hierarchy classifications quarterly. Changes in significant observable valuation inputs identified during these reviews may trigger reclassification of fair value hierarchy levels of financial assets and liabilities. During the years ended December 31, 2011, 2010 and 2009 no reclassifications occurred. The fair value measurement of the Group's derivative instruments is based on the observable yield curves for similar instruments ("Level 2" of the hierarchy established by the U.S. GAAP guidance).

        The Group designates derivatives as either fair value hedges or cash flow hedges in case the required criteria are met. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated statement of operations together with any changes in the fair value of the hedged asset or liability that is attributed to the hedged risk.

        The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in accumulated other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of operations. For derivatives that do not meet the conditions for hedge accounting, gains and losses from changes in the fair value are included in the consolidated statement of operations (Note 19).

        Assets and liabilities related to multiple derivative contracts with one counterparty are not offset by the Group.

F-19

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

        The Group does not use financial instruments for trading or speculative 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. The fair value of issued notes as of December 31, 2011, is disclosed in Note 16 and is based on quoted prices in active markets.

        Based on current market interest rates available to the Group for long-term borrowings with similar terms and maturities, the Group believes the fair value of other fixed rate debt including capital lease obligations and the fair value of variable rate debt approximated its carrying value as of December 31, 2011.

        Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

        Level 1—Quoted prices in active markets for identical assets or liabilities;

        Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities;

        Level 3—No observable pricing inputs in the market.

        Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

        Stock-based compensation—The Group accounts for stock-based compensation under the authoritative guidance on share based compensation. Under the provisions of this guidance companies must calculate and record the cost of equity instruments, such as stock options awarded to employees for services received, in the statements of operation. 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. Compensation cost related to phantom stock options granted to our employees recognized in the Group's consolidated statement of operations as of December 31, 2011, 2010 and 2009 amounted to $16.0 million, $7.8 million, $(0.3) million, respectively

        New and adopted accounting pronouncements—In October 2009, the FASB amended the revenue recognition for multiple deliverable arrangements guidance to require the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This updated guidance is effective prospectively for revenue arrangements entered into or materially modified in

F-20

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

fiscal years beginning on or after June 15, 2010. The adoption of this guidance, effective January 1, 2011, did not have a significant impact on the Group's consolidated financial statements.

        In June 2011, the FASB amended its guidance on the presentation of comprehensive income. Under the amended guidance, an entity has the option to present comprehensive income in either one continuous statement or two consecutive financial statements. A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income. In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option under the current guidance that permits the presentation of components of other comprehensive income as part of the statement of changes in stockholders' equity has been eliminated. The amendment becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. This guidance will not have an impact on the Group's consolidated financial statements as it is disclosure-only in nature.

        In September 2011, the FASB updated the authoritative guidance on testing goodwill for impairment. The update gives entities carrying out goodwill impairment test an option of performing qualitative assessment before calculating the fair value of a reporting unit. If an entity determines, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The guidance is effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Group's consolidated financial statements.

3. BUSINESS ACQUISITIONS AND DISPOSALS

        Increase of stake in MGTS—in December 2011, the Group acquired 29% of the ordinary shares of MGTS from Sistema for RUB 10.56 billion ($336.3 million as of December 1, 2011). In addition the Group assumed debt in the amount of RUB 10.41 billion ($331.5 million as of December 1, 2011) due and payable by the end of 2011. MGTS is the Moscow's incumbent fixed line operator initially joined to the Group as a result of Comstar acquisition. Upon completion of the transaction the Group's ownership stake in MGTS increased to 99.01% of ordinary shares and 69.7% of preferred shares, which overall totals 94.1% of MGTS charter capital. The transaction was accounted for directly in equity.

        Acquisitions of controlling interests in regional fixed line operators—In 2010-2011, as part of its program of regional expansion, the Group acquired controlling interests in a number of alternative fixed-line operators in certain regions of Russia. The purchase price for these acquisitions was paid in cash. The acquisitions were accounted for using the purchase method of accounting.

F-21

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

        The following table summarizes the purchase price allocation for regional fixed line operators acquired during the year ended December 31, 2011:

	Inteleca Group			Infocentr			Altair			TVT			Total
Month of acquisition		April			April			August			October
Region of operations		Sibir region			Ural region			Central region			Volga region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	853		$	2,840		$	3,172		$	7,623		$	14,488
Property, plant and equipment		10,812			2,585			3,739			31,664			48,800
Goodwill		10,662			14,711			12,726			147,591			185,690
Customer base		2,217			4,820			13,025			—			20,062
Other non-current assets		22			17			1,618			1,813			3,470
Current liabilities		(4,491	)		(8,547	)		(5,542	)		(25,510	)		(44,090	)
Non-current liabilities		(875	)		(989	)		(3,148	)		(638	)		(5,650	)
Consideration paid	$	19,200		$	15,437		$	25,590		$	162,543		$	222,770

        The purchase price allocation of TVT was not finalized as of the date of these financial statements as the Group had not completed the valuation of individual assets of the company. The Group's consolidated financial statements reflect the allocation of the purchase price based on a preliminary fair value assessment of the assets acquired and liabilities assumed. The excess of the consideration paid over the value of net assets in the amount of $147.6 million was preliminarily allocated to goodwill and was attributable to the "Russia" segment.

        The purchase price allocation of all other acquired fixed-line operators was finalized as of December 31, 2011. The Group's consolidated financial statements reflect the allocation of the purchase price based on a fair value assessment of the assets acquired and liabilities assumed.

        Customer base recognized as a result of the acquisitions is amortized over a period ranging from 8 to 14 years depending on the type of subscribers.

        The recognition of goodwill in the amount of $38.1 million from the acquisitions for which the purchase price allocations are finalized is due to the economic potential of the markets in which the acquired companies operate and synergies arising from the acquisitions. Goodwill is attributable to the "Russia" segment.

F-22

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

        The following table summarizes the purchase price allocation for regional fixed line operators acquired during the year ended December 31, 2010:

	Tenzor Telecom			Penza Telecom			NMSK			Lanck Telecom			Total
Month of acquisition		February			June			December			December
Region of operations		Central region			Volga region			Sibir region			North-West region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	711		$	1,076		$	2,575		$	1,634		$	5,996
Property, plant and equipment		2,191			2,407			10,625			10,618			25,841
Goodwill		6,616			7,394			14,113			11,119			39,242
Customer base		—			15,603			5,512			6,733			27,848
Other non-current assets		—			—			124			337			461
Current liabilities		(3,142	)		(4,369	)		(8,607	)		(10,936	)		(27,054	)
Non-current liabilities		(130	)		(2,779	)		(944	)		(1,684	)		(5,537	)
Consideration paid	$	6,246		$	19,332		$	23,398		$	17,821		$	66,797

        Customer base recognized as a result of the acquisitions is amortized over a period ranging from 8 to 12 years depending on the type of subscribers.

        Recognition of goodwill in the amount of $39.2 million from the acquisitions is due to the economic potential of the markets in which the acquired companies operate and synergies arising from the acquisitions. Goodwill is attributable to the "Russia" segment.

        Acquisition of Sistema Telecom—In December 2010, the Group acquired 100% of Sistema Telecom from Sistema for RUB 11.59 billion ($378.98 million as of December 27, 2010). The entity's key assets consist of property rights in respect of the group of trademarks, including the distinctive "egg" trademarks of MTS, Comstar-UTS and MGTS, certain promissory notes previously issued by the Group in the amount of RUB 2.00 billion ($65.50 million) and a 45% stake in TS-Retail. As a result of the acquisition, the Group expects to reduce its operating expenses previously incurred to rent the trademarks and to further optimize the management structure of its retail business.

        The acquisition was accounted for as a common control transaction at carrying amount. These consolidated financial statements were retroactively recast to reflect the Group as if Sistema Telecom had been owned since the beginning of the earliest period presented. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

        Acquisition of Metro-Telecom—In August 2010, the Group acquired a 95% stake in Metro-Telecom from Invest-Svyaz, a wholly-owned subsidiary of Sistema, for RUB 339.35 million ($11.01 million as of August 27, 2010). The company operates an optical fiber network in the Moscow metro.

        The acquisition was accounted for as a common control transaction at carrying amount. These consolidated financial statements were retroactively restated to reflect the Group as if Metro-Telecom had been owned since the beginning of the earliest period presented. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

F-23

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

        Acquisition of Multiregion—In July 2010, the Group acquired a 100% stake in Multiregion for cash consideration of $123.6 million. Multiregion and its subsidiaries is a group of broadband and cable TV providers with a presence in 37 cities of the Russian Federation.

        The acquisition was accounted for using the purchase method of accounting. The summary of the purchase price allocation for the acquisition was as follows:

Current assets	$	46,776
Non-current assets		46,732
Customer base		76,376
Goodwill		148,743
Current liabilities		(126,780	)
Non-current liabilities		(44,007	)
Fair value of noncontrolling interests		(24,244	)
Consideration paid	$	123,596

        The fair value of noncontrolling interests was determined based on unobservable inputs ("Level 3" of the hierarchy established by the U.S. GAAP guidance). The fair value was measured as the fair value of Multiregion's net assets using the discounted cash flow technique.

        The excess of the purchase price over the value of net assets acquired was allocated to goodwill which was assigned to the "Russia" segment and is not deductible for income tax purposes. Goodwill is mainly attributable to the synergies from reduction of internet-traffic and administrative expenses of the Group and expected increase of market share as a result of future capital expenditures to be made by the Group.

        In 2011 the Group paid consideration of $23.96 million for the acquisition of noncontrolling interests in several subsidiaries of Multiregion. The difference between the consideration paid and the fair value of noncontrolling interests was recorded in additional paid-in capital.

        Increase of stake in SWEET-COM—In June 2010, the Group acquired the remaining 25.1% stake in SWEET-COM from private investors for $8.5 million. As a result of this transaction, the Group's ownership in the subsidiary increased to 100%. The original 74.9% stake was acquired in February 2005. SWEET-COM holds licenses for provision of telematics communications and data transmission services in the Moscow region and the Russian Federation. The transaction was accounted for directly in equity.

        Increase of stake in TS-Retail—In June 2010, the Group increased its direct ownership in TS-Retail from 25% to 40% for a nominal amount of one U.S. Dollar. MTS subsequently increased its effective ownership interest in TS-Retail to 50.95%, which was achieved through a voluntary tender offer to repurchase Comstar-UTS' shares in September 2010. In December 2010, as a result of acquisition of Sistema Telecom, the Group acquired an additional 45% stake in TS-Retail, resulting in the effective ownership interest reaching 96.04%. Following the merger with Comstar-UTS on April 1, 2011 the Group increased its stake in TS-Retail to 100%.

F-24

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

        Upon obtaining control over TS-Retail, the Group accounted for the acquisition as a common control transaction at carrying amount. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

        Acquisitions of certain retail chains—In 2009, in conjunction with the development of its own retail network, the Group acquired controlling interests in a number of retail chains in Russia. The acquisitions were accounted for using the purchase method of accounting.

        The following table summarizes the purchase price allocation of the retail chains acquired as of the acquisition date:

	Telefon.ru			Eldorado			Teleforum			Total
Month of acquisition		February			March			October
Ownership interest acquired		100	%		100	%		100	%
Current assets	$	48,979		$	2,467		$	2,953		$	54,399
Non-current assets		2,315			911			745			3,971
Brand		—			374			—			374
Goodwill		123,333			29,875			9,050			162,258
Current liabilities		(108,701	)		(12,248	)		(3,614	)		(124,563	)
Non-current liabilities		(5,926	)		(115	)		—			(6,041	)
Fair value of contingent consideration		—			(3,414	)		(6,934	)		(10,348	)
Consideration paid	$	60,000		$	17,850		$	2,200		$	80,050

        The Group's financial statements reflect the allocation of the purchase price based on a fair value assessment of the assets acquired and liabilities assumed. Goodwill was mainly attributable to the synergies arising from the Group's ability to optimize the dealers' compensation structure and to maintain its subscriber market share in Russia. Goodwill is not deductible for income tax purposes and was assigned to the "Russia" segment. Brand components are amortized over periods of 6 months.

        The terms of the individual purchase agreements included the obligation to pay additional consideration as follows:

•

Up to $25 million during the period from 12 to 18 months for Telefon.ru;

•

Up to $5 million in 12 months for Eldorado; and

•

Up to $8.8 million in 12 months for Teleforum.

        The additional consideration could be reduced by the amount of tax liability related to the activities prior to the acquisition dates. The Group could also deduct amounts of any potential losses arising from the loss of control on any of Teleforum's outlets from the amount of contingent consideration. The purchase price allocation as of the acquisition date reflected management's estimate of the fair value of the contingent consideration at the acquisition date.

        In 2010 the Group paid additional consideration in connection with the acquisition of retail chains in full amounts. The difference between the fair value of contingent consideration and the actual

F-25

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

amount paid totaling $41.8 million resulted from events which occurred after the acquisition date and was accounted for as other operating expenses in the consolidated statement of operations.

        Acquisition of Evrotel—In December 2009, the Group acquired a 100% stake in Evrotel, a Russian federal back bone network operator, from a third party. The consideration paid comprised $90 million. Under the terms of agreement the Group shall pay contingent consideration of up to $20 million should Evrotel complete the construction of certain fiber-optic lines and the Group retain control over the technical support agreements in relation to the optic cable lines. At the acquisition date the estimated fair value of this contingent consideration was $20 million.

        The acquisition was accounted for using the purchase method of accounting. The purchase price allocation for the acquisition was as follows:

Current assets	$	14,300
Non-current assets		67,960
Customer base		4,726
Goodwill		98,542
Liabilities		(75,528	)
Fair value of contingent consideration		(20,000	)
Consideration paid	$	90,000

        In 2011 the Group paid a part of the contingent consideration in connection with the acquisition of Evrotel in the amount of $16.1 million. The remaining part of the contingent consideration in the amount of $3.9 million was remeasured to its fair value of $2.4 million as at December 31, 2011. The changes in fair value totaling $1.5 million resulted from events which occurred after the acquisition date and have consequently been accounted for as other operating expenses in the consolidated statement of operations.

        Goodwill is mainly attributable to the synergies from reduction of interconnect and internet-traffic expenses of the Group. Goodwill is not deductible for income tax purposes and was assigned to the "Russia" segment.

        Acquisition of Comstar-UTS—In October 2009, the Group acquired a 50.91% stake in Comstar-UTS, a provider of fixed line communication services in Russia, Ukraine and Armenia, from Sistema. Consideration paid amounted to RUB 39.15 billion ($1.32 billion as of October 12, 2009) or RUB 184.02 ($6.21) per global depositary receipt ("GDR").

        This acquisition has been accounted for as a common control transaction at carrying amount. The excess of consideration over the carrying value of net assets received has been recorded as a decrease in additional paid-in capital of the Group in the amount of $1.07 billion and as a decrease in retained earnings in the amount of $242.7 million.

        Further, in December 2009, in a series of transactions, the Group acquired a 14.2% stake in MGTS in exchange for 31,816,462 ordinary MTS OJSC shares (equal to RUB 7.17 billion based on the MICEX price on December 17, 2009, or RUB 225.4 per share, per the terms of the agreement with

F-26

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

MGTS shareholder), representing 1.6% shares outstanding, previously held in treasury and $7.3 million in cash. The MGTS stake, represented by 2,462,687 ordinary shares and 11,135,428 preferred shares, were held by a wholly owned subsidiary of Comstar-UTS. Simultaneously, MTS received 46,232,000 shares, representing 11.06% of total shares outstanding, of Comstar-UTS from MGTS Finance S.A., a wholly owned subsidiary of MGTS. In addition, MTS paid Comstar-UTS a cash consideration of $8.3 million. The transaction was accounted for directly in equity.

        In September 2010, through a voluntary tender offer the Group acquired 37,614,087 ordinary shares of Comstar-UTS which represents approximately 9.0% of its issued share capital for a total consideration of RUB 8.28 billion (approximately $271.89 million as of October 6, 2010). This brought the Group's total ownership stake in Comstar-UTS to 70.97% (or 73.33% excluding treasury shares). The transaction was accounted for directly in equity.

        Furthermore, on December 23, 2010 an extraordinary general meeting of the Company's shareholders approved the merger of Comstar-UTS and a number of MTS' subsidiaries into MTS OJSC. The Group redeemed Comstar-UTS shares held and put by non-controlling interest shareholders within the limit set forth by the Russian law at a specified price. The amount redeemed to Comstar shareholders in the first quarter 2011 totaled to $168.8 million. The remaining 98,853,996 of Comstar-UTS shares held by non-controlling interest shareholders were converted into existing MTS treasury shares as well as newly issued MTS shares at an exchange ratio of 0.825 MTS ordinary shares for each Comstar-UTS ordinary share. As a result, the charter capital of MTS OJSC increased by 73,087,424 ordinary shares to a total of 2,066,413,562 ordinary shares. The merger was completed on April 1, 2011. The transactions were accounted for directly in equity.

        Acquisition of Kolorit Dizayn—In September 2009, the Group acquired a 100% stake in Kolorit Dizayn, a company providing outdoor advertising services in the territory of Uzbekistan, for $39.7 million in cash.

        The acquisition was accounted for using the purchase method of accounting. The summary of the purchase price allocation for the acquisition was as follows:

Current assets	$	993
Non-current assets		11,788
Brand		2,097
Goodwill		27,109
Current liabilities		(2,098	)
Non-current liabilities		(235	)
Consideration paid	$	39,654

        Goodwill is mainly attributable to synergies from advertising cost optimization. Goodwill is not deductible for income tax purposes and was assigned to the "Uzbekistan" segment.

        Acquisition of Dagtelecom—In January 2009, Glaxen, the minority shareholder of Dagtelecom, exercised its put option over its 25.5% stake in the company. Consideration payable by the Group on

F-27

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

3. BUSINESS ACQUISITIONS AND DISPOSALS (Continued)

the put option agreement comprised $51.3 million. Payment made by the Group was reduced by $12.5 million to offset the loan receivable from Glaxen at the date of acquisition. The transaction was accounted for directly in equity.

        Pro forma results of operations (unaudited)—The following unaudited pro forma financial data for the years ended December 31, 2011 and 2010, gives effect to the 2011 acquisitions of Inteleca Group, Infocentr, Altair and TVT as though these business combinations had been completed at the beginning of 2010.

	2011		2010
Pro forma:
Net revenues	$	12,366,057	$	11,359,640
Net operating income		2,821,182		2,751,082
Net income		1,462,649		1,405,790
Earnings per share, basic and diluted, U.S. Dollars	$	0.74	$	0.73

        The pro forma information is based on various assumptions and estimates. The pro forma information is not necessarily indicative of the operating results that would have occurred if the Group acquisitions had been consummated as of January 1, 2010, nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any potential revenue enhancements or cost synergies or other operating efficiencies that could result from the acquisitions. The actual results of operations of these companies are included in the consolidated financial statements of the Group only from the respective dates of acquisition.

        The following amounts of revenue and earnings of companies acquired from third parties in 2011 since the acquisition date are included in the consolidated statement of operations for the year ended December 31, 2011:

	2011 (unaudited)
Net revenues	$	22,539
Net operating loss		4,883
Net loss		3,353

F-28

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

4. OPERATIONS IN TURKMENISTAN

        In December 2010 the Group suspended its operations in Turkmenistan following a notice received from the Ministry of Communications of Turkmenistan informing of a decision to suspend licenses held by BCTI, the Group's wholly-owned subsidiary in Turkmenistan, for a period of one month starting from December 21, 2010. On January 21, 2011, the period of license suspension expired, however, permission to resume operations was not granted.

        The Group conducted operations in Turkmenistan under a trilateral agreement signed in November 2005 by BCTI, MTS OJSC and the Ministry of Communications of Turkmenistan which expired on December 21, 2010, unless extended pursuant to its terms and conditions. In accordance with certain provisions of this agreement, BCTI shared net profits derived from its operations in the country with the Ministry of Communications of Turkmenistan. The amount of shared net profit was calculated based on the financial statements prepared in accordance with local accounting principles subject to certain adjustments. Under the terms of the agreement, BCTI shared 20% of its net profit commencing December 21, 2005. The Group at all times believed that the agreement would be extended and approached the Ministry of Communications within the required timeframe to formalize the extension. However, the Ministry of Communications failed to extend the agreement in accordance with its terms.

        Following the decision to suspend licenses, Turkmenistan government authorities took further steps, including unilateral termination of interconnect agreements between BCTI and state-owned telecom operators, to prevent the Group from providing services to its customers.

        The Group initiated a number of proceedings against Turkmenistan government authorities and state-owned telecom operators to defend its legal rights. On December 21, 2010 BCTI filed three requests for arbitration with the International Court of Arbitration of the International Chamber of Commerce ("ICC") against the Ministry of Communications of Turkmenistan and several state-owned telecom operators requesting specific performance on the respective agreements and compensation of damages. Later sovereign state Turkmenistan was joined as the respondent in the proceedings against Ministry of Communications of Turkmenistan.

        On January 21, 2011 MTS sent a formal notice to the Government of Turkmenistan requesting to resolve the dispute through negotiations and notifying it of MTS' intention to file a claim pursuant to the provisions of the Bilateral Investment Treaty between the Russian Federation and Turkmenistan. The dispute was not resolved through negotiations and, accordingly, on 1 September 2011 MTS filed a claim against Turkmenistan in the International Centre for the Settlement of Investment Disputes ("ICSID"). On 5 October 2011 the claim was registered by the ICSID Secretariat.

        Considering the adverse impact of such circumstances on the Group's ability to conduct operations in Turkmenistan, the Group determined that all of its long-lived assets attributable to Turkmenistan were impaired and recorded an impairment charge of $119.6 million in the consolidated statement of operations for the year ended December 31, 2010. The Group also assessed the recoverability of the subsidiary's current assets and provided for or wrote down those current assets which were considered

F-29

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

4. OPERATIONS IN TURKMENISTAN (Continued)

to be impaired. The total effect of impairment charges on the Group's statement of operations for the year ended December 31, 2010 is as follows:

Impairment of long-lived assets	$	119,580
Provision for doubtful accounts		11,462
General and administrative expenses		4,280
Other operating expenses		2,500
	$	137,822

5. CASH AND CASH EQUIVALENTS

        Cash and cash equivalents as of December 31, 2011 and 2010 comprised the following:

	December 31,
	2011		2010
Ruble current accounts	$	300,057	$	413,139
Ruble deposit accounts		934,169		93,271
U.S. Dollar current accounts		321,949		215,375
U.S. Dollar deposit accounts		101,600		28,002
Euro current accounts		25,770		17,142
Euro deposit accounts		2,600		11,288
Hryvna current accounts		10,873		9,535
Hryvna deposit accounts		—		35,753
Uzbek som current accounts		150,547		91,236
Turkmenian manat current accounts		1,501		10,568
Armenian dram current accounts		1,616		2,160
Other		144		225
Total cash and cash equivalents	$	1,850,826	$	927,694

6. SHORT-TERM INVESTMENTS

        Short-term investments as of December 31, 2011 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	2.0 - 11.0%	January - October 2012	$	80,291
Belarusian ruble denominated deposits	26.0 - 37.0%	February - April 2012	$	5,933
Other				18
Total			$	86,242

F-30

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

6. SHORT-TERM INVESTMENTS (Continued)

        Short-term investments as of December 31, 2010 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	3.5 - 9.0%	January - July 2011	$	279,663
Funds in trust management	9.2%	June 2011		26,987
Promissory notes	5.5 - 7.0%	April - June 2011		26,701
Other				243
Total			$	333,594

7. TRADE RECEIVABLES, NET

        Trade receivables as of December 31, 2011 and 2010 comprised the following:

	December 31,
	2011			2010
Subscribers	$	351,786		$	384,903
Interconnect		112,751			120,948
Dealers		106,000			108,010
Roaming		283,830			224,687
Other		106,402			80,022
Allowance for doubtful accounts		(96,961	)		(120,468	)
Trade receivables, net	$	863,808		$	798,102

        The following table summarizes the changes in the allowance for doubtful accounts receivable for the years ended December 31, 2011, 2010 and 2009:

	2011			2010			2009
Balance, beginning of year	$	120,468		$	97,653		$	69,603
Provision for doubtful accounts		101,967			123,352			105,260
Accounts receivable written off		(120,673	)		(99,708	)		(76,622	)
Currency translation adjustment		(4,801	)		(829	)		(588	)
Balance, end of year	$	96,961		$	120,468		$	97,653

F-31

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

8. INVENTORY AND SPARE PARTS

        Inventory and spare parts as of December 31, 2011 and 2010, comprised the following:

	December 31,
	2011		2010
Handsets and accessories	$	223,764	$	234,166
Spare parts for telecommunication equipment		28,533		34,687
SIM cards and prepaid phone cards		10,445		21,879
Advertising materials		1,320		2,011
Other materials		27,013		27,213
Total inventory and spare parts	$	291,075	$	319,956

        Obsolescence expense for the years ended December 31, 2011, 2010 and 2009, amounted to $30.2 million, $27.8 million and $4.1 million, respectively, and was included in general and administrative expenses in the accompanying consolidated statements of operations. Spare parts for telecommunication equipment included in inventory are expected to be utilized within the twelve months following the statement of financial position date.

9. PROPERTY, PLANT AND EQUIPMENT

        The net book value of property, plant and equipment as of December 31, 2011 and 2010, was as follows:

		December 31,
	Useful lives, months
		2011			2010
Network, base station equipment and related leasehold improvements (including leased assets of $1.2 million and $1.2 million)	60 - 204	$	11,419,352		$	10,631,101
Office equipment, computers and other	36 - 60		1,231,907			1,102,584
Buildings and related leasehold improvements (including leased assets of $0.8 million and $0.8 million)	240 - 600		758,898			742,263
Vehicles (including leased assets of $31.5 million and $33.7 million)	36 - 60		87,786			81,085
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)			13,497,943			12,557,033
Accumulated depreciation (including leased assets of $11.4 million and $5.6 million)			(7,023,556	)		(6,196,117	)
Construction in progress and equipment for installation			1,730,965			1,610,914
Property, plant and equipment, net		$	8,205,352		$	7,971,830

        Depreciation expense during the years ended December 31, 2011, 2010 and 2009, amounted to $1,811.6 million, $1,521.6 million and $1,380.8 million, respectively.

F-32

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

9. PROPERTY, PLANT AND EQUIPMENT (Continued)

        Depreciation of the assets recorded as capital leases amounted to $9.5 million, $2.8 million and $10.2 million, respectively. Interest expense accrued on capital lease obligations for the years ended December 31, 2011, 2010 and 2009 amounted to $1.8 million, $0.5 million and $1.5 million, respectively.

10. LICENSES

        In connection with providing telecommunication services, the Group has been issued various licenses by the Russian Ministry of Information Technologies and Communications. In addition to the licenses received directly from the Ministry, the Group has gained access to various telecommunications licenses through acquisitions. In foreign subsidiaries, the licenses are granted by the local telecommunications authorities.

        As of December 31, 2011 and 2010, the recorded values of the Group's telecommunication licenses were as follows:

	December 31,
	2011			2010
Russia	$	20,320		$	229,209
Uzbekistan		196,517			196,517
Armenia		192,186			203,993
Ukraine		49,494			49,414
Licenses, at cost		458,517			679,133
Accumulated amortization		(231,006	)		(384,405	)
Licenses, net	$	227,511		$	294,728

        Amortization expense for the years ended December 31, 2011, 2010 and 2009, amounted to $60.1 million, $76.3 million and $78.7 million, respectively.

F-33

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

10. LICENSES (Continued)

        The Group's operating licenses do not provide for automatic renewal. As of December 31, 2011, all licenses covering the territories of the Russian Federation were renewed. The cost to renew the licenses was not significant. Weighted-average period until the next renewal of licenses in the Russian Federation is two years.

        The Group has limited experience with the renewal of its existing licenses covering the territories of the Group's foreign subsidiaries. Licenses for the provision of telecommunication services in MTS Ukraine, Uzdunrobita and K-Telecom are valid until 2013, 2016 and 2019, respectively. The license in Turkmenistan was suspended by the Turkmenistan Ministry of Communications in December 2010 which resulted in cessation of the Group's operational activity in Turkmenistan (Note 4). Management believes that all other 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 such licenses.

        Based solely on the cost of amortizable operating licenses existing as of December 31, 2011 and current exchange rates, the estimated future amortization expenses for the five years ending December 31, 2016 and thereafter are as follows:

Estimated amortization expense in the year ended December 31,
2012	$	36,186
2013		31,016
2014		29,804
2015		29,797
2016		29,791
Thereafter		70,917
Total	$	227,511

        The actual amortization expense to be reported in future periods could differ from these estimates as a result of new license acquisitions, changes in useful lives, exchange rates and other relevant factors.

        Operating licenses contain a number of requirements and conditions specified by legislation. The requirements generally include targets for service start date, territorial coverage and expiration date. Management believes that the Group is in compliance with all material terms of its licenses.

F-34

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

11. GOODWILL

        The change in the net carrying amount of goodwill for 2011 and 2010 by reportable segments was as follows:

	Russia			Ukraine			Other			Total
Balance at January 1, 2010
Gross amount of goodwill	$	598,349		$	5,311		$	248,579		$	852,239
Accumulated impairment loss		(48,466	)								(48,466	)
		549,883			5,311			248,579			803,773
Acquisitions (Note 3)		175,307			—			—			175,307
Currency translation adjustment		(3,328	)		16			5,567			2,255
Balance at December 31, 2010
Gross amount of goodwill		769,958			5,327			254,146			1,029,431
Accumulated impairment loss		(48,096	)								(48,096	)
		721,862			5,327			254,146			981,335
Acquisitions (Note 3)		185,690			—			—			185,690
Finalization of purchase accounting		6,945			—			—			6,945
Currency translation adjustment		(46,988	)		(19	)		(8,433	)		(55,440	)
Balance at December 31, 2011
Gross amount of goodwill		913,037			5,308			245,713			1,164,058
Accumulated impairment loss		(45,528	)		—			—			(45,528	)
	$	867,509		$	5,308		$	245,713		$	1,118,530

F-35

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

12. OTHER INTANGIBLE ASSETS

        Intangible assets as of December 31, 2011 and 2010 comprised the following:

			December 31, 2011							December 31, 2010
	Useful lives, months		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	$	1,668,715	$	(1,042,773	)	$	625,942	$	1,682,959	$	(1,056,324	)	$	626,635
Acquired customer base		60 to 372		262,156		(68,741	)		193,415		343,920		(111,775	)		232,145
Rights to use radio frequencies		24 to 180		353,776		(138,546	)		215,230		314,722		(100,496	)		214,226
Accounting software		13 to 60		141,084		(98,672	)		42,412		118,673		(87,623	)		31,050
Numbering capacity with finite contractual life		24 to 120		75,803		(70,979	)		4,824		90,408		(79,821	)		10,587
Office software		13 to 120		123,452		(72,752	)		50,700		84,343		(50,711	)		33,632
Other		12 to 120		110,913		(44,625	)		66,288		95,179		(30,199	)		64,980
				2,735,899		(1,537,088	)		1,198,811		2,730,204		(1,516,949	)		1,213,255
Prepayments for intangible assets				84,985		—			84,985		273,239		—			273,239
Numbering capacity with indefinite contractual life				78,491		—			78,491		55,144		—			55,144
Total other intangible assets			$	2,899,375	$	(1,537,088	)	$	1,362,287	$	3,058,587	$	(1,516,949	)	$	1,541,638

        As a result of the limited availability of local telephone numbering capacity in Moscow and the Moscow region, the Group entered into agreements for the use of telephone numbering capacity with other telecommunications operators in the region. 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 contracts to acquire such capacity. Numbering capacity with an indefinite contractual life is not amortized.

        Amortization expense for the years ended December 31, 2011, 2010 and 2009 amounted to $454.0 million, $399.8 million and $374.5 million, respectively. Based solely on the cost of amortizable intangible assets existing at December 31, 2011 and current exchange rates, the estimated future amortization expenses for the five years ending December 31, 2016 and thereafter are as follows:

Estimated amortization expense in the year ended December 31,
2012	$	401,450
2013		290,930
2014		175,260
2015		101,250
2016		55,160
Thereafter		174,761
Total	$	1,198,811

F-36

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

12. OTHER INTANGIBLE ASSETS (Continued)

        The actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible assets acquisitions, changes in useful lives, exchange rates and other relevant factors.

        Weighted-average amortization period for billing and telecommunication software acquired during the years ended December 31, 2011 and 2010 is four years.

13. INVESTMENTS IN AND ADVANCES TO ASSOCIATES

        As of December 31, 2011 and 2010, the Group's investments in and advances to associates comprised the following:

	December 31,
	2011		2010
MTS Belarus—equity investment	$	176,659	$	227,130
MTS Belarus—loan receivable		—		3,000
Intellect Telecom—equity investment		11,388		11,662
Total investments in and advances to associates	$	188,047	$	241,792

        MTS Belarus—In April 2008 the Group entered into a credit facility agreement with MTS Belarus valid till March 15, 2009. The facility allowed MTS Belarus to borrow up to $33.0 million and bore annual interest of 10.0%. In the year ended December 31, 2009 the maturity date was extended to March 15, 2010 and the total allowable amount was increased to $46.0 million. In the year ended December 31, 2010 the maturity date was prolonged till March 15, 2011. The credit facility was fully paid upon maturity.

        The financial position and results of operations of MTS Belarus as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	417,555	$	527,609
Total liabilities		92,884		72,533
Net income		107,533		145,707

        Intellect Telecom—In November 2010 MGTS acquired a 43.8% interest in Intellect Telecom from one of the subsidiaries of Sistema for $12.4 million. Intellect Telecom is a research and development innovation center in the field of telecommunications. In March 2011 MGTS acquired a further 6.14% interest in Intellect Telecom in exchange for building of a business center in Moscow City with NBV of $0.8 million, thus increasing its share in Intellect Telecom to 49.95%.

F-37

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

13. INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Continued)

        The financial position and results of operations of Intellect Telecom as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	19,210	$	25,227
Total liabilities		3,110		34,180
Net loss		6,765		6,831

        The Group's share in the total earnings or losses of associates was included in other income in the accompanying consolidated statements of operations. For the years ended December 31, 2011, 2010 and 2009, this share amounted to $49.4 million, $70.6 million and $60.3 million, respectively.

14. INVESTMENT IN SHARES OF SVYAZINVEST

        In December 2006, as a part of its program of regional expansion, the Group acquired a 25% stake plus one share in Telecommunication Investment Joint Stock Company ("Svyazinvest") from Mustcom Limited for a total consideration of approximately $1,390.0 million, including cash of $1,300.0 million and the fair value of a call and put option of $90.0 million. Svyazinvest is a holding company that holds controlling stakes in seven publicly traded incumbent fixed-line operators ("MRKs") based in all seven Federal districts of Russia, Rostelecom, a publicly traded long-distance fixed-line operator operating a Russia-wide network, and several other entities, the majority of which are non-public.

        Based on an analysis of all relevant factors, management determined that the acquisition of 25% plus one share of Svyazinvest does not allow the Group to exercise significant influence over this entity due to its legal structure and certain limitations imposed by Svyazinvest's charter documents. Accordingly, the Group accounted for its investment in Svyazinvest under the cost method.

        In November 2009, the Group, Sistema and Svyazinvest ("the Parties") signed a non-binding memorandum of understanding ("MOU"), under which the Parties agreed to enter into a series of transactions which would ultimately result in (i) disposal of the Group's investment in Svyazinvest to a state-controlled enterprise; (ii) noncash extinguishment of the Group's indebtedness to Sberbank (Note 16); (iii) increase in Sistema's ownership in Sky Link to 100% (Note 22) and disposal of this investment to Svyazinvest; and (iv) disposal of 28% of MGTS' common stock owned by Svyazinvest to Sistema.

        Based on the estimated fair values of the elements of the assets to be exchanged and liabilities to be extinguished under the MOU and other relevant factors, management conducted an impairment analysis of the Group's investment in Svyazinvest as of December 31, 2009. Based on the MOU, the estimated fair value of the investment, which included significant unobservable inputs (Level 3 of the hierarchy established by the U.S. GAAP guidance), was approximately RUB 26.0 billion ($859.7 million as of December 31, 2009) compared to a carrying value of RUB 36.5 billion ($1,205.5 million as of December 31, 2009). As a result, during the year ended December 31, 2009 the Group recorded an impairment loss of RUB 10.5 billion ($349.4 million).

F-38

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

14. INVESTMENT IN SHARES OF SVYAZINVEST (Continued)

        In September 2010, the Group completed the sale of its Svyazinvest stake for cash consideration of RUB 26.0 billion and repaid the outstanding debt to Sberbank in the amount of RUB 26.0 billion with proceeds from the sale. In connection with the sale of the 25% plus one share stake in Svyazinvest the Group incurred consultancy fees due to Sistema-Invenchure, a subsidiary of Sistema, in the amount of RUB 291.2 million ($9.6 million at September 2010 average rate). No gain or loss was recognized upon sale.

15. OTHER INVESTMENTS

        As of December 31, 2011 and 2010, the Group's other investments comprised the following:

			December 31,
	Annual interest rate	Maturity date
			2011		2010
Investments in ordinary shares (Related parties) (Note 22)	—	—	$	9,498	$	9,763
Loan receivable from Mr. P. Fattouche and Mr. M. Fattouche (Note 22)	6%	2015		92,700		91,503
Promissory notes of Sistema (Note 22)	0.0%	2017		19,209		20,293
Promissory notes of Sistema (Note 22)	0.0%	on demand		—		4,162
Other	—	—		2,035		2,861
Total other investments			$	123,442	$	128,582

        The Group does not discount promissory notes and loans granted to related parties, interest rates on which are different from market rates. Accordingly, fair value of such notes and loans may be different from their carrying value.

        In December 2010 the Group granted a $90.0 million loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche, the holders of a 20% noncontrolling stake in K-Telecom, the Group's subsidiary in Armenia. Simultaneously, the Group signed an amendment to the put and call option agreement for the remaining 20% stake (Note 24). According to the amendment, the call exercise price shall be reduced by deducting any outstanding balance on the loan amount and all accrued and unpaid interest and any other sums due and outstanding under the loan agreement at the time of exercise. Interest accrued on the loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche for the years ended December 31, 2011 and 2010, amounted to $4.1 million and $0.4 million, respectively, and was included as a component of interest income in the accompanying consolidated statements of operations.

F-39

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS

        Notes—As of December 31, 2011 and 2010, the Group's notes consisted of the following:

	Currency	Interest rate			2011			2010
MTS International Notes due 2020	USD		8.625	%	$	750,000		$	750,000
MTS OJSC Notes due 2020	RUB		8.15	%		465,895			492,176
MTS OJSC Notes due 2016	RUB		14.25	%		465,895			492,176
MTS OJSC Notes due 2014	RUB		7.60	%		422,988			492,176
MTS Finance Notes due 2012(1)	USD		8.00	%		400,000			400,000
MTS OJSC Notes due 2017	RUB		8.70	%		310,597			328,117
MTS OJSC Notes due 2018	RUB		8.00	%		298,499			315,337
MTS OJSC Notes due 2015	RUB		7.75	%		234,097			39,823
MTS OJSC Notes due 2013	RUB		7.00	%		13,318			13,249
Plus: unamortized premium						608			—
Less: unamortized discount						(15	)		(202	)
Total notes					$	3,361,882		$	3,322,852
Less: current portion						(865,880	)		(492,176	)
Total notes, long-term					$	2,496,002		$	2,830,676

(1)

Fully repaid on January 25, 2012

        The Group has an unconditional obligation to repurchase certain MTS OJSC Notes at par value if claimed by the noteholders subsequent to the announcement of the sequential coupon. The dates of the announcement for each particular note issue are as follows:

MTS OJSC Notes due 2016	June 2012
MTS OJSC Notes due 2018	June 2013
MTS OJSC Notes due 2020	November 2015

        The notes therefore can be defined as callable obligations under the FASB authoritative guidance on debt, as the holders have the unilateral right to demand repurchase of the notes at par value upon announcement of new coupons. The FASB authoritative guidance on debt 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 noteholders. The Group discloses the notes as maturing in 2012 (MTS OJSC Notes due 2016), in 2013 (MTS OJSC Notes due 2018) and in 2015 (MTS OJSC Notes due 2020) in the aggregated maturities schedule as these are the reporting periods when the noteholders will have the unilateral right to demand repurchase.

        In May 2011 the Group changed the coupon rate for MTS OJSC Notes due 2014 from 16.75% to 7.6%. Following the announcement of new coupon rates the Group repurchased MTS OJSC Notes due 2014 at the request of eligible noteholders in the amount of RUB 1.1 billion ($39.3 million as of the date of the transaction). The new coupon rate is valid till the final due dates of the notes.

F-40

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS (Continued)

        The fair values of notes based on the market quotes as of December 31, 2011 at the stock exchanges where they are traded were as follows:

	Stock exchange	% of par		Fair value
MTS International Notes due 2020	Irish stock exchange		107.33	$	804,975
MTS OJSC Notes due 2016	MICEX		103.60		482,667
MTS OJSC Notes due 2020	MICEX		96.90		451,452
MTS OJSC Notes due 2014	MICEX		97.55		412,625
MTS Finance Notes due 2012	Luxembourg stock exchange		100.50		402,000
MTS OJSC Notes due 2018	MICEX		101.50		303,019
MTS OJSC Notes due 2017	MICEX		96.15		298,639
MTS OJSC Notes due 2015	MICEX		97.50		228,245
MTS OJSC Notes due 2013	MICEX		95.00		12,652
Total notes				$	3,396,274

        Bank loans—As of December 31, 2011 and 2010, the Group's loans from banks and financial institutions consisted of the following:

				December 31,
			Interest rate (actual at December 31, 2011)
	Maturity			2011		2010
USD-denominated:
Calyon, ING Bank N.V, Nordea Bank AB, Raiffeisen Zentralbank Osterreich AG		2012 - 2020	LIBOR+1.15% (1.96%)	$	580,742	$	—
Skandinavska Enskilda Banken AB		2012 - 2017	LIBOR+0.23% - 1.8% (1.03% - 2.61%)		204,507		242,013
EBRD		2012 - 2014	LIBOR+1.51% - 3.1% (2.32% - 3.91%)		83,333		116,667
HSBC Bank plc and ING BHF Bank AG		2012 - 2014	LIBOR+0.3% (1.11%)		51,503		71,244
Citibank International plc and ING Bank N.V.		2012 - 2013	LIBOR+0.43% (1.23%)		40,688		62,486
HSBC Bank plc, ING Bank and Bayerische Landesbank		2012 - 2015	LIBOR+0.3% (1.11%)		42,961		59,570
Commerzbank AG, ING Bank AG and HSBC Bank plc		2012 - 2014	LIBOR+0.3% (1.11%)		36,495		51,285
Barclays		Fully repaid in February 2011	—		—		46,047
ABN AMRO Bank N.V.		2012 - 2013	LIBOR+0.35% (1.16%)		12,574		18,861
Other		2012 - 2013	Various		9,356		7,569
				$	1,062,159	$	675,742

F-41

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS (Continued)

				December 31,
			Interest rate (actual at December 31, 2011)
	Maturity			2011			2010
EUR-denominated:
Credit Agricole Corporate Bank and BNP Paribas		2012 - 2018	EURIBOR+1.65% (3.27%)	$	64,033		$	52,159
LBBW		2012 - 2017	EURIBOR+0.75% (2.37%)		36,215			43,201
Bank of China		2012 - 2016	EURIBOR+1.95% (3.57%)		116,812			35,123
ABN AMRO Bank N.V.		2012 - 2013	EURIBOR+0.35% (1.97%)		8,958			13,740
Other		2012 - 2013	Various		8,064			3,060
				$	234,082		$	147,283
RUB-denominated:
Sberbank		2015 - 2017	8.50%(1)	$	3,105,967		$	1,968,704
Bank of Moscow		2013	7.80%		434,835			459,364
Gazprombank		2013 - 2015	8.75%		341,656			360,929
Gazprombank		2013 - 2015	8.75%		130,451			137,809
Sberbank		2011	—		—			19,234
Other		2012 - 2023	Various		25,057			34,377
				$	4,037,966		$	2,980,417
Debt-related parties		2012	Various		6,799			14,563
				$	6,799		$	14,563
Total bank loans				$	5,341,006		$	3,818,005
Less: current portion					(283,025	)		(256,052	)
Total bank loans, long-term				$	5,057,981		$	3,561,953

(1)

Initially the interest rate on the Sberbank RUB-denominated credit facilities due 2015-2017 of 8.95% was valid till March 2011 and for the period from December 2013 till the final maturity date in December 2017. In August 2011 the interest rate for the period from December 2013 till the final maturity date in December 2017 was decreased by 0.45% to 8.5%. The interest rate for the period from March 2011 till August 16, 2011 depended on the volume of turnovers on the bank accounts of certain entities of the Group and in fact was 8.95%. The interest rate for the period starting from August 17, 2011 till December 2013 also depends on the volume of turnovers on the bank accounts of certain entities of the Group. In case the average volume falls below a certain limit, the interest rate is increased by 1% to 9.5%. In addition, Sberbank is entitled to voluntarily revise the interest rate on the lines as a result of and proportionate to the change in the refinancing rate set by the Central Bank of Russia.

        During 2010 and 2011, the Group renegotiated interest rates and maturities schedules for its several credit facilities. The amendments to the agreements, which resulted in the change in the present value of cash flows under the new terms to the present value of cash flows under the original terms exceeding 10%, were treated as substantial modifications of debt with the immediate write off of the related debt issuance costs capitalized by the Group. In 2010 the Group suffered an additional loss of $26.7 million as a result of substantial debt modification. None of the amendments to the credit facilities agreements of the Group signed in 2011 were considered to be substantial.

F-42

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS (Continued)

        Borrowing costs and interest capitalized—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 estimated useful lives of the related assets. The capitalized interest costs for the years ended December 31, 2011, 2010 and 2009 were $52.3 million, $43.9 million and $72.3 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, 2011, 2010 and 2009, were $628.4 million, $688.0 million and $535.0 million, respectively.

        Compliance with covenants—Subject to certain exceptions and qualifications, the indenture governing MTS Finance Notes due 2012 and prospectus governing MTS International Notes due 2020 contain covenants limiting the Group's ability to incur debt, create liens, sell or transfer lease properties, enter into loan transactions with affiliates, merge or consolidate with another person or convey its properties and assets to another person, sell or transfer any of its GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas, be subject to a judgment requiring payment of money in excess of $10.0 million and $15.0 million, respectively, which continue unsatisfied for more than 60 days without being appealed, discharged or waived or the execution thereof stayed.

        Also, the indentures governing MTS Finance Notes due 2012 and prospectus governing MTS International Notes due 2020 give noteholders the right to require the Group to redeem the notes at 101% of their principal amount, plus accrued interest, if the Group experiences certain types of mergers, consolidations or there is change in control. An event of default under the notes may trigger cross default provisions with debt raised by Sistema, the controlling shareholder of the Group. The Group is required to take all commercially reasonable steps necessary to maintain a rating of the notes assigned by Moody's and Standard & Poor's.

        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.

        The prospectus governing MTS OJSC Notes contains certain covenants which limit the Group's ability to delist the notes from the quotation lists and delay the coupon payments.

        Bank loans of the Group 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, requirements to maintain ownership in certain subsidiaries.

        Most of the Group's loans also include an event of default consisting in rendering of judgment requiring payment of money in an amount in excess of $10.0 million and the continuance of any such judgment unsatisfied and in effect for any period of 60 consecutive calendar days without a stay of execution.

        On November 11, 2010 an international arbitration tribunal constituted under the rules of the London Court of International Arbitration rendered an award with regards to arbitration commenced by Nomihold Securities Inc. in January 2007. The award requires the Group's subsidiary, MTS Finance,

F-43

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS (Continued)

to honor Nomihold's option to sell MTS Finance the remaining 49% stake in Tarino Limited for $170 million, plus $5.88 million in damages and $34.0 million in interest to compensate it for related costs. MTS Finance applied to arbitration tribunal for correction of the award, however the application was rejected and the award became final on January 5, 2011. In connection with the above mentioned restriction concerning the unsatisfied liability arising from any judgment against a member of the Group, prior to the date these consolidated financial statements were issued, the Group obtained consents from the noteholders of MTS Finance Notes due 2012 and MTS International Notes due 2020 and from certain banks, except for Barclays Bank (which was fully repaid in February 2011), to (1) waive certain defaults and events of default which might arise under the loan agreements as a result of and in connection with the award, and (2) certain amendments to the loan agreements to avoid possible future events of default which may arise as a result of the award.

        The Group was in compliance with all existing notes and bank loans covenants as of December 31, 2011.

        Pledges—The vendor financing agreement between K-Telecom and Intracom, a related party, with total amount as of December 31, 2011 and 2010 of $6.8 million and $14.3 million, respectively is secured by the telecommunication equipment and other assets supplied under the agreement with carrying value of $2.0 million and $8.2 million, respectively.

        Available credit facilities—As of December 31, 2011, the Group's total available unused credit facilities amounted to $1,321 million and related to the following credit lines:

	Maturity	Interest rate	Commitment fees			Available till	Available amount
Calyon, ING Bank N.V. and Nordea Bank AB	2019/2020	LIBOR + 1.15%		0.40	%	December 2012	$	468,710
Credit Agricole (Finnvera)	2019	EURIBOR + 1.65%		0.825	%	June 2012/ February 2013		388,290
Sberbank	2014	MosPrime 3m+1.325%		0.10	%	September 2014		310,597
ING Bank Eurasia	2012	MosPrime/LIBOR/EURIBOR + 1.25%		—		July 2012		77,649
Gazprombank	2013	MosPrime + 1.425%		—		June 2013		76,096
Total available credit facilities							$	1,321,342

F-44

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

16. BORROWINGS (Continued)

        The following table presents the aggregated scheduled maturities of principal on notes and bank loans outstanding for the five years ending December 31, 2016 and thereafter:

	Notes		Bank loans
Payments due in the year ended December 31,
2012	$	865,880	$	283,025
2013		311,817		785,015
2014		422,988		512,403
2015		700,600		1,266,546
2016		—		1,184,419
Thereafter		1,060,597		1,309,598
Total	$	3,361,882	$	5,341,006

        On February 28, 2012, subsequent to the statement of financial position date, the Group voluntarilly repaid the full amount due under credit facilities of Gazprombank drawn by MTS OJSC in December 2009 and December 2010 with an original maturity in 2013-2015. In the maturity schedule presented above, the principal outstanding as of December 31, 2011 under these facilities and totaling $472.1 million is included in payments due in the years ended December 31, 2013, 2014 and 2015 in the amounts of $78.7 million, $314.7 million and $78.7 million, respectively, in accordance with their original maturity.

17. ASSET RETIREMENT OBLIGATIONS

        As of December 31, 2011 and 2010, the estimated present value of the Group's asset retirement obligations and change in liabilities were as follows:

	2011			2010
Balance, beginning of the year	$	78,039		$	88,683
Liabilities incurred in the current period		9,009			4,066
Accretion expense		6,236			9,776
Revisions in estimated cash flows		(19,242	)		(23,813	)
Currency translation adjustment		(4,325	)		(673	)
Balance, end of the year	$	69,717		$	78,039

        Revisions in estimated cash flows are attributable to the change in the estimated inflation rate.

F-45

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

18. DEFERRED CONNECTION FEES

        Deferred connection fees for the years ended December 31, 2011 and 2010, were as follows:

	2011			2010
Balance at the beginning of the year	$	155,288		$	163,098
Payments received and deferred during the year		76,562			89,030
Amounts amortized and recognized as revenue during the year		(96,676	)		(95,706	)
Currency translation adjustment		(5,750	)		(1,134	)
Balance at the end of the year		129,424			155,288
Less: current portion		(49,868	)		(49,212	)
Non-current portion	$	79,556		$	106,076

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Cash flow hedging

        In 2009, 2008 and 2007 the Group entered into variable-to-fixed interest rate swap agreements to manage the exposure of changes in variable interest rate related to its debt obligations. The instruments qualify for cash flow hedge accounting under U.S. GAAP requirements. Each interest rate swap matches the exact maturity dates of the underlying debt allowing for highly-effective hedges. Interest rate swap contracts outstanding as of December 31, 2011 mature in 2012-2015.

        The Group entered into interest rate swap agreements designated to manage the exposure of changes in variable interest rate for 21.33% of its USD- and Euro-denominated bank loans outstanding as of December 31, 2011.

        Further, in 2009 the Group entered into several cross-currency interest rate swap agreements. These contracts hedged the risk of both interest rate and currency fluctuations and assumed periodic exchanges of both principal and interest payments from RUB-denominated amounts to USD and Euro-denominated amounts to be exchanged at a specified rate. The rate was determined by the market spot rate upon issuance. Cross-currency interest rate swap contracts matured in 2011.

F-46

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        The following table presents the fair value of the Group's derivative instruments designated as hedges in the consolidated statements of financial position as of December 31, 2011 and 2010.

		December 31,
	Statement of financial position location	2011			2010
Asset derivatives
Interest rate swaps	Other non-current assets	$	2,341		$	3,322
Total		$	2,341		$	3,322
Liability derivatives
Interest rate swaps	Other long-term liabilities	$	(14,676	)	$	(31,315	)
Interest rate swaps	Other payables		(1,283	)		—
Cross-currency interest rate swaps	Other payables		—			(3,469	)
Total		$	(15,959	)	$	(34,784	)

        The following table presents the effect of the Group's derivative instruments designated as hedges in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009. The amounts presented include ineffective portion of derivative instruments and amounts reclassified into earnings from accumulated other comprehensive income.

		Year ended December 31,
	Location of loss recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(13,502	)	$	(32,726	)	$	(8,392	)
Cross-currency interest rate swaps	Currency exchange and transaction loss		(1,862	)		(37,820	)		(24,299	)
Total		$	(15,364	)	$	(70,546	)	$	(32,691	)

        The following table presents the amount of ineffective portion of Group's derivative instruments designated as hedges in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009.

		Year ended December 31,
	Location of gain/(loss) recognized	2011			2010		2009
Interest rate swaps	Interest expense	$	7,978		$	3,541	$	(0,976	)
Cross-currency interest rate swaps	Currency exchange and transaction gain/(loss)		(1,862	)		2,011		(4,505	)
Total		$	6,116		$	5,552	$	(5,481	)

        In February 2011 the Group repaid the full amount due under the Barclays bank credit facility granted in 2005 with an original maturity in 2014. The voluntary prepayment of principal and interest

F-47

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

in the amount of $46.3 million resulted in an immediate termination of the hedging relationship between designated interest rate swap agreements and certain credit facility.

        In October 2010 the Group repaid the full amount due under the Syndicated Loan Facility granted to MTS OJSC in 2006 with an original maturity in 2011. The voluntary prepayment of principal and interest of $162.2 million resulted in an immediate termination of the hedging relationship between designated cross-currency interest rate swap agreements and the Syndicated Loan Facility.

        In February 2010 the Group repaid the full amount due under the Syndicated Loan Facility granted to MTS OJSC in 2009 with an original maturity in 2011-2012. The voluntary prepayment of principal and interest in the amount of $707.4 million resulted in an immediate termination of the hedging relationship between designated interest rate swap agreements and the Syndicated Loan Facility.

        After the termination of hedge relationships the amounts accumulated in other comprehensive income and associated with the prepaid debt have been reclassified to earnings, going forward those derivatives are marked to market through earnings. The following table presents the amount of accumulated other comprehensive loss reclassified into earnings (currency exchange and transaction loss and interest expense) during the years ended December 31, 2011, 2010 and 2009 due to termination of hedging relationships.

		Year ended December 31,
	Location of (loss) recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(2,032	)	$	(12,020	)	$	—
Cross-currency interest rate swaps	Currency exchange and transaction (loss)		—			(3,228	)		—
Total		$	(2,032	)	$	(15,248	)	$	—

        The following table presents the effect of the Group's interest rate swap agreements designated as hedges in accumulated other comprehensive income for the years ended December 31, 2011, 2010 and 2009.

	2011			2010			2009
Accumulated derivatives loss, beginning of the year, net of tax of $3,716, $10,073, $4,179, respectively	$	(14,865	)	$	(40,293	)	$	(16,714	)
Fair value adjustments on hedging derivatives, net of tax of $795, $9,939, $7,191, respectively		(3,181	)		(39,757	)		(28,764	)
Amounts reclassified into earnings during the period, net of tax of $(2,636), $(16,296), $(1,296), respectively		10,545			65,185			5,185
Accumulated derivatives loss, end of the year, net of tax of $1,875, $3,716, $10,073	$	(7,501	)	$	(14,865	)	$	(40,293	)

F-48

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        As of December 31, 2011, the outstanding hedge instruments were highly effective. Approximately $9.1 million of net loss is expected to be reclassified into net income during the next twelve months.

        Cash inflows and outflows related to hedge instruments were included in cash flows from operating activities in the consolidated statement of cash flows for the years ended December 31, 2011, 2010 and 2009.

Non-designated derivative instruments

        Foreign currency options—In 2010 and 2009 the Group entered into foreign currency option agreements to manage the exposure to changes in currency exchange rates related to USD-denominated debt obligations. According to the agreements, the Group has a combination of put and call option rights to acquire $330.0 million at rates within a range specified in contracts. These contracts were not designated for hedge accounting purposes. These currency option agreements will mature in 2012.

        Buy-out put option—On December 23, 2010, simultaneously with the meeting of MTS' shareholders (Note 1), a meeting of Comstar-UTS' shareholders approved the reorganization of Comstar-UTS through a statutory merger into MTS OJSC. In accordance with Russian legislation, shareholders who voted against or did not vote on the merger have the right to sell their shares back to Comstar-UTS for cash at a price set by the company's Boards of Directors, subject to a statutory limit of 10% of the company's net asset value under Russian Accounting Standards. Eligible shareholders should file a buyout demand within 45 (forty five) days of the adoption of the resolution on reorganization. The buy-out of shares must be carried out within 30 days after the expiry of the period set for the buyout demand being made. The fair value of the Group's liability under the put option as of December 31, 2010 was estimated at $11.6 million using an option pricing model. The option was exercised in 2011.

        The following table presents the fair value of the Group's derivative instruments not designated as hedges in the consolidated statements of financial position as of December 31, 2011 and 2010.

		December 31,
	Statement of financial position location
		2011		2010
Asset derivatives:
Foreign currency options	Other non-current assets	$	—	$	247
Foreign currency options	Other current assets		894		—
Total		$	894	$	247
Liability derivatives:
Foreign currency options	Other payables	$		$	(92	)
Buy-out put option	Other payables		—		(11,636	)
Foreign currency options	Other long-term liabilities		—		(2,520	)
Total		$	—	$	(14,248	)

F-49

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

        The following table presents the effect of the Group's derivative instruments not designated as hedges on the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009.

		Year ended December 31,
	Location of gain/(loss) recognized	2011		2010		2009
Foreign currency options	Currency exchange and transaction gain/(loss)	$	3,258	$	1,916	$	(4,280	)
Purchased call option	Change in fair value of derivatives		—		—		(5,420	)
Currency forward	Currency exchange and transaction gain		—		—		12,788
Total		$	3,258	$	1,916	$	3,088

Fair value of derivative instruments

        The Group measured assets and liabilities associated with derivative agreements at fair value Level 2 on a recurring basis and there were no assets and liabilities associated with derivative agreements measured at fair value Level 1 and Level 3 as of December 31, 2011 and 2010 (see Note 2).

        The following fair value hierarchy table presents information regarding the Group's assets and liabilities associated with derivative agreements as of December 31, 2011 and 2010:

	Significant other observable inputs (Level 2) as of December 31, 2011			Significant other observable inputs (Level 2) as of December 31, 2010
Assets:
Interest rate swap agreements	$	2,341			3,322
Currency option agreements		894			247
Liabilities:
Interest rate swap agreements	$	(15,959	)		(31,315	)
Buy-out put option		—			(11,636	)
Cross-currency interest rate swap agreements		—			(3,469	)
Currency option agreements		—			(2,612	)

F-50

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

20. ACCRUED LIABILITIES

	December 31,
	2011		2010
Accruals for services	$	308,457	$	365,447
Accruals for taxes		156,451		186,492
Accrued payroll and vacation		90,498		159,171
Interest payable on debt		90,125		76,804
Accruals for payments to social funds		8,339		11,890
Total accrued liabilities	$	653,870	$	799,804

21. INCOME TAX

        Provision for income taxes for the years ended December 31, 2011, 2010 and 2009 was as follows:

	Year ended December 31,
Income before income taxes	2011		2010			2009
Russia	$	1,807,154	$	1,817,583		$	1,220,730
Other jurisdictions		292,198		248,048			278,410
Total	$	2,099,352	$	2,065,631		$	1,499,140
Current income tax expense
Russia	$	448,729	$	456,424		$	304,231
Other jurisdictions		71,343		106,212			99,292
Total	$	520,072	$	562,636		$	403,523
Deferred income tax expense/(benefit)
Russia	$	1,606	$	(35,529	)	$	131,485
Other jurisdictions		9,942		(9,919	)		(29,961	)
Total	$	11,548	$	(45,448	)	$	101,524

        The statutory income tax rates in jurisdictions in which the Group operates for 2011 were as follows: Russia, Armenia—20.0%, Uzbekistan—3.4%. In the first quarter of 2011 the rate of 25% was applied in Ukraine, since April 1, 2011 the rate was decreased to 23%.

F-51

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

21. INCOME TAX (Continued)

        The Russian statutory income tax rate reconciled to the Group's effective income tax rate for the years ended December 31, 2011, 2010 and 2009 as follows:

	2011			2010			2009
Statutory income tax rate for the year		20.0	%		20.0	%		20.0	%
Adjustments:
Expenses not deductible for tax purposes		2.8			3.5			4.9
Currency exchange and transaction loss		—			—			0.5
Unrecognized tax benefits		(0.2	)		0.1			(0.2	)
Settlements with tax authorities		(0.5	)		(1.0	)		(2.9	)
Different tax rate of foreign subsidiaries		(0.2	)		(0.5	)		(2.0	)
Earnings distribution from subsidiaries		2.9			0.7			6.8
Disposal of treasury stock		—			—			(4.1	)
Effect of change in tax rate in Ukraine		0.8			0.7			—
Change in valuation allowance		(0.2	)		(0.2	)		10.3
Comstar corporate reorganization		—			—			0.4
Impairment of long-lived assets		—			1.3			—
Other		(0.1	)		0.4			—
Effective income tax rate		25.3	%		25.0	%		33.7	%

F-52

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

21. INCOME TAX (Continued)

        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, 2011 and 2010:

	December 31,
	2011			2010
Assets/(liabilities) arising from tax effect of:
Deferred tax assets
Depreciation of property, plant and equipment	$	140,371		$	211,307
Other intangible assets		—			1,346
Deferred connection fees		26,063			31,522
Subscriber prepayments		16,755			20,832
Accrued expenses for services		118,103			148,828
Inventory obsolescence		13,650			5,884
Loss carryforward		203,313			196,883
Impairment of property, plant and equipment		2,415			4,438
Other		29,352			22,384
Valuation allowance		(163,075	)		(165,994	)
Total deferred tax assets		386,947			477,430
Deferred tax liabilities
Licenses acquired	$	(35,377	)	$	(62,606	)
Depreciation of property, plant and equipment		(136,465	)		(192,679	)
Customer base		(39,272	)		(34,783	)
Other intangible assets		(42,435	)		(41,011	)
Debt issuance cost		(20,975	)		(11,134	)
Potential distributions from/to Group's subsidiaries/associates		(88,596	)		(105,821	)
Other		(31	)		(4,992	)
Total deferred tax liabilities		(363,151	)		(453,026	)
Net deferred tax asset		23,796			24,404
Net deferred tax asset, current	$	189,622		$	234,658
Net deferred tax asset, non-current	$	62,102		$	81,816
Net deferred tax liability, long-term	$	(227,928	)	$	(292,070	)

F-53

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

21. INCOME TAX (Continued)

        The Group has the following significant balances for income tax losses carried forward and related operating losses as of December 31, 2011 and 2010:

			2011				2010
Jurisdiction	Period for carry-forward		Operating losses		Tax losses		Operating losses		Tax losses
Luxembourg (MGTS Finance S.A.)		Unlimited	$	431,461		125,124	$	429,186		124,464
Russia (Comstar-UTS, RTC and other)		2012-2021		390,945		78,189		362,096		72,419
Total			$	822,406		203,313	$	791,282		196,883

        Management established the following valuation allowances against deferred tax assets where it was more likely than not that some portion of such deferred tax assets will not be realized:

Valuation allowances	2011		2010
Sale of investment in Svyazinvest	$	66,596	$	66,887
Operating loss in Luxemburg (MGTS Finance S.A.)		94,692		94,032
Other		1,787		5,075
Total	$	163,075	$	165,994

        As of December 31, 2011 and 2010 the Group recognized deferred income tax liabilities of $52.5 million and $63.8 million respectively, for income taxes on future dividend distributions from foreign subsidiaries (MTS Ukraine and K-Telecom) which are based on $1,088.2 million and $1,309.4 million cumulative undistributed earnings of those foreign subsidiaries in accordance with local statutory accounting regulations (unaudited) because such earnings are intended to be repatriated.

        No deferred tax liability was recognized on undistributed earnings of Uzdunrobita as of December 31, 2011 and 2010 as the Group plans to indefinitely reinvest earnings in this entity. As of December 31, 2011 and 2010 the amount of undistributed earnings of Uzdunrobita in accordance with local statutory accounting regulations amounted to $647.8 million and $594.6 million, respectively (unaudited) and the related unrecognized deferred tax liability for these earnings in amounted to $117.0 million and $106.4 million respectively.

        As of December 31, 2011, 2010 and 2009, the Group included accruals for uncertain tax positions in the amount of $16.3 million, $14.0 million and $10.6 million, respectively, as a component of income tax payable.

F-54

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

21. INCOME TAX (Continued)

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2011			2010			2009
Balance, beginning of the year	$	13,993		$	10,607		$	12,360
Additions based on tax position related to the current year		9,149			14,590			2,094
Additions based on tax positions related to prior years		2,647			1,504			—
Additions based on tax of acquired entities		5,129			7,587			1,521
Reduction in tax positions related to prior years		(5,213	)		(2,141	)		(1,778	)
Settlements with tax authorities		(8,323	)		(18,109	)		(3,305	)
Currency translation adjustment		(1,044	)		(45	)		(285	)
Balance, end of the year	$	16,338		$	13,993		$	10,607

        Accrued penalties and interest related to unrecognized tax benefits as a component of income tax expense for the years ended December 31, 2011, 2010 and 2009 amounted to a charge of $0.1 million, charge of $3.3 million and reversal of ($0.6) million respectively, and are included in income tax expense in the accompanying consolidated statements of operations. Accrued interest and penalties were included in income tax payable in the accompanying consolidated statements of financial position and totaled $6.1 million and $3.3 million as of December 31, 2011 and 2010, respectively. The Group does not expect the unrecognized tax benefits to change significantly over the next twelve months.

22. RELATED PARTIES

        Related parties include entities under common ownership and control with the Group, affiliated companies and associated companies.

        As of December 31, 2011 and 2010, accounts receivable from and accounts payable to related parties were as follows:

	December 31,
	2011		2010
Accounts receivable:
Sitronics, a subsidiary of Sistema	$	2,736	$	1,320
Intellect Telecom, a subsidiary of Sistema		359		117
Other related parties		1,393		1,236
Total accounts receivable, related parties	$	4,488	$	2,673
Accounts payable:
Sitronics, a subsidiary of Sistema	$	42,715	$	37,007
Maxima, a subsidiary of Sistema		11,986		8,965
Other related parties		2,281		7,012
Total accounts payable, related parties	$	56,982	$	52,984

F-55

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

22. RELATED PARTIES (Continued)

Operating transactions

        For the years ended December 31, 2011, 2010 and 2009, operating transactions with related parties are as follows:

	2011		2010		2009
Revenues from related parties:
MTS Belarus (roaming services)	$	6,520	$	2,589	$	—
Sitronics and subsidiaries (fixed line services)	$	4,218	$	3,577	$	3,656
Svyazinvest and subsidiaries (interconnection, commission for provision of DLD/ILD services to the Group's subscribers and other)	$	—	$	33,869	$	43,174
Sky Link and subsidiaries (interconnection and other)		—		7,395		9,857
Mezhregion Tranzit Telecom (interconnection, line rental, commission for provision of DLD/ILD services to the Group's subscribers, and other)		—		—		11,465
Other related parties		2,743		4,827		3,997
Total revenues from related parties	$	13,481	$	52,257	$	72,149
Operating expenses incurred on transactions with related parties:
RA Maxima, a subsidiary of Sistema (advertising)	$	81,905	$	76,158	$	102,005
Sitronics, a subsidiary of Sistema (IT consulting)		48,023		56,610		52,211
MTS Belarus, an associated company of the Group		10,516		5,539		—
AB Safety, an affiliate of Sistema (security services)		10,075		9,267		5,576
Mediaplanning, a subsidiary of Sistema (advertising)		1,005		59,171		23,782
Svyazinvest and subsidiaries (interconnection and other)		—		29,210		28,997
Sistema-Invenchur, (consulting services related to the sale of Svyazinvest shares (Note 14))		—		11,262		—
City Hals (rent, repair, maintenance and cleaning services)		—		9,542		9,988
Mezhregion Tranzit Telecom (interconnection, line rental and other)		—		—		18,115
Other related parties		10,792		15,584		15,705
Total operating expenses incurred on transactions with related parties	$	162,316	$	272,343	$	256,379

        In December 2011 the Group acquired 100% of Sistema-Invenchur (see Note 3).

        During the year ended December 31, 2010 Sky Link, Sistema-Hals, City Hals, a subsidiary of Sistema-Hals, and Svyazinvest ceased to be related to the Group. Transactions with these companies and their subsidiaries which took place prior to the dates when they became unrelated are disclosed as transactions with related parties.

F-56

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

22. RELATED PARTIES (Continued)

Investing and financing transactions

        During the years ended December 31, 2011 and 2010 the Group made certain investments in and loans to related parties. Respective balances are summarized as follows:

	December 31,
	2011		2010
Loans to, promissory notes and investments in shares of related parties:
Other investments (Note 15)
Sistema	$	19,209	$	24,455
Loan receivable from Mr Pierre Fattouche and Mr Moussa Fattouche		92,700		91,503
Total other investments to related parties	$	111,909	$	115,958
Investments in shares (Note 15)
MBRD, a subsidiary of Sistema		4,930		5,208
Sistema Mass Media, a subsidiary of Sistema		3,622		3,827
Other		946		728
Total investments in shares of related parties	$	9,498	$	9,763

        Moscow Bank of Reconstruction and Development ("MBRD")—The Group maintains certain bank accounts with MBRD, a subsidiary of Sistema, and had a number of loan and deposit agreements prior to the year ended December 31, 2011. As of December 31, 2011 and 2010, the Group's cash position at MBRD amounted to $311.5 million and $378.7 million in current accounts, respectively. Interest accrued on the deposits and cash on current accounts for the years ended December 31, 2011, 2010 and 2009, amounted to $14.9 million, $19.7 million and $25.1 million, respectively, and was included as a component of interest income in the accompanying consolidated statements of operations.

        Sistema—In November 2009, the Group accepted a promissory note from Sistema as repayment of a loan principle and interest accrued to date under the agreement with Sistema-Hals (Note 15). The note is interest free and is repayable in 2017. As of December 31, 2011 and 2010 the amount receivable of $19.2 and $20.3 million was included in other investments in the accompanying consolidated statement of financial position.

        In June 2010, the Group accepted a promissory note from Sistema in exchange for promissory note of Sky Link. The note was interest free and was repaid upon demand in the year ended December 31, 2011. As of December 31, 2011 and 2010 the amount receivable of $nil and $4.2 million was included in other investments in the accompanying consolidated statement of financial position.

        Investments in ordinary shares—As of December 31, 2011 and 2010 the Group had several investments in shares of subsidiaries and affiliates of Sistema totaling $9.5 million and $9.8 million, respectively, included in other investments in the accompanying consolidated statement of financial

F-57

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

22. RELATED PARTIES (Continued)

position. The main investments are 1.8% of MBRD and 3.14% of Sistema Mass-Media ("SMM"), subsidiaries of Sistema.

        Sky Link and subsidiaries—In 2009, Sky Link, an affiliate of Sistema, repaid the Group $14.3 million of outstanding indebtedness, which resulted in partial reversal of a provision for uncollectible loans recorded by the Group in 2007 and recognition of a gain of $4.3 million in the accompanying consolidated statement of operations for the year ended December 31, 2009. In the year ended December 31, 2010, Sky Link and its subsidiaries ceased to be related to the Group.

        Sitronics—During the years ended December 31, 2011, 2010 and 2009, the Group acquired from Sitronics and its subsidiaries telecommunications equipment, software and billing systems (FORIS) for approximately $503.2 million, $272.6 million and $190.1 million, respectively. In addition during the years ended December 31, 2011, 2010 and 2009, the Group purchased SIM cards and prepaid phone cards for approximately $79.5 million, $29.9 million and $32.4 million, respectively, and incurred expenses of $48.0 million, $56.6 million and $52.2 million, respectively, under an IT consulting agreement.

        As of December 31, 2011 and 2010 the advances given to Sitronics and its subsidiaries amounted to $57.6 million and $144.6 million, respectively. These amounts were included into property, plant and equipment and intangible assets in the accompanying consolidated statements of financial position.

        Maxima Advertising Agency ("Maxima")—During the years ended December 31, 2011, 2010 and 2009, the Group had agreements for advertising services with Maxima, a subsidiary of Sistema. Advertising costs related to Maxima for the years ended December 31, 2011, 2010 and 2009, amounted to $81.9 million, $76.2 million and $102.0 million, respectively.

        Mediaplanning—During the years ended December 31, 2011, 2010 and 2009, the Group 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, 2011, 2010 and 2009 amounted to $1.0 million, $59.2 million and $23.8 million, respectively. In the year ended December 31, 2011, the Group ceased its relationship with this contractor.

        Svyazinvest—The Group has entered into various agreements with Svyazinvest and its subsidiaries relating to the provision of interconnect and other services. In connection therewith, during the years ended December 31, 2010 and 2009, we incurred expenses of $29.2 million and $29.0 million, respectively, payable to Svyazinvest, and accrued revenues of $33.9 million and $43.2 million, respectively, from Svyazinvest. During the year ended December 31, 2010 Svyazinvest ceased to be related to the Group (Note 14).

23. STOCKHOLDERS' EQUITY

        Share capital—In April, 2011 as result of the issuance of additional MTS shares for the purposes of conversion of Comstar-UTS shares, the Company's charter capital increased by 73,087,424 ordinary shares to a total of 2,066,413,562 ordinary shares of which 1,988,916,837 were outstanding as of December 31, 2011. The Company' share capital comprises 1,993,326,138 issued common shares with

F-58

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

23. STOCKHOLDERS' EQUITY (Continued)

1,916,869,262 outstanding as of December 31, 2010.The total shares in treasury stock comprised 77,496,725 and 76,456,876 as of December 31, 2011 and 2010, respectively.

        Each ADS initially represented 20 shares of common stock of the Company. Effective January 2005, the ratio was changed to 1 ADS per 5 ordinary shares. Effective May 2010, the ratio was changed to 1 ADS per 2 ordinary shares.

        The Company initially issued a total of 17,262,204 ADSs (172,622,040 ADSs recalculated using the ratio effective May 2010), representing 345,244,080 common shares. As of December 31, 2011 the Group repurchased 13,599,067 ADSs.

        Noncontrolling interest—The Group's equity was affected by changes in the respective subsidiaries' ownership interests as follows:

	December 31,
	2011			2010			2009
Net income attributable to the Group	$	1,443,944		$	1,380,631		$	1,014,203
Transfers from the noncontrolling interest
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in Comstar-UTS		(41,377	)		(115,350	)		45,284
Increase in own equity resulted from exchange of MTS shares for noncontrolling interest in Comstar-UTS		429,409			—			—
Increase in own equity due to exercise of the put option on Comstar-UTS shares		11,636			—			—
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in MGTS		(272,840	)		—			269,281
Change in own equity due to acquisition of noncontrolling interest in TS-Retail		—			(15,932	)		—
(Decrease) in own equity due to acquisition of noncontrolling interest in Dagtelecom		—			—			(7,679	)
(Decrease) in own equity due to acquisition of noncontrolling interest in other subsidiaries		(738	)		(10,302	)		(487	)
Net transfers from the noncontrolling interest		126,090			(141,584	)		306,399
Net income attributable to the Group and transfers from the noncontrolling interest:	$	1,570,034		$	1,239,047		$	1,320,602

F-59

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

23. STOCKHOLDERS' EQUITY (Continued)

        Accumulated other comprehensive income—The following table represents accumulated other comprehensive income balance, net of taxes, for the years ended December 31, 2011, 2010 and 2009:

	Currency translation adjustment			Unrealized gains/loss on derivatives			Unrecognized actuarial losses			Accumulated other comprehensive income/loss
Balance as of January 1, 2009		(434,320	)		(16,714	)		5,262			(445,772	)
Current-period change		(280,074	)		(23,579	)		1,003			(302,650	)
Balance as of December 31, 2009		(714,394	)		(40,293	)		6,265			(748,422	)
Current-period change		(45,257	)		25,428			(3,706	)		(23,535	)
Balance as of December 31, 2010		(759,651	)		(14,865	)		2,559			(771,957	)
Current-period change		(205,339	)		7,364			5,940			(192,035	)
Balance as of December 31, 2011		(964,990	)		(7,501	)		8,499			(963,992	)

        Dividends—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 U.S. GAAP. The dividend can vary 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 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, 2011, 2010 and 2009 that is distributable under Russian legislation totaled RUB 54,675 million ($1,698.2 million) (unaudited), RUB 27,429 million ($903.2 million) and 33,480 million ($1,055.4 million), respectively.

        The following table summarizes the Group's declared cash dividends in the years ended December 31, 2011, 2010 and 2009:

	2011		2010		2009
Dividends declared (including dividends on treasury shares of $40,006, $35,063 and $45,631, respectively)	$	1,066,753	$	991,211	$	1,265,544
Dividends, U.S. Dollars per ADS(1)		1.03		0.99		3.2
Dividends, U.S. Dollars per share		0.516		0.497		0.647

(1)

In 2010 the ratio was changed from 5 to 2 common shares per ADS.

        As of December 31, 2011 and 2010, dividends payable were $0.2 million and $0.6 million, respectively.

F-60

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

23. STOCKHOLDERS' EQUITY (Continued)

        MGTS' preferred stock—MGTS, a subsidiary of Comstar-UTS, had 15,965,850 preferred shares outstanding at December 31, 2011. MGTS' preferred shares carry guaranteed non-cumulative dividend rights amounting to the higher of (a) 10% of MGTS' net profit as determined under Russian accounting regulations and (b) the dividends paid on common shares. No dividends may be declared on common shares before dividends on preferred shares are declared. If the preferred dividend is not paid in full in any year the preferred shares also obtain voting rights, which will lapse after the first payment of the dividend in full. Otherwise, preferred shares carry no voting rights except on resolutions regarding liquidation or reorganization of MGTS and changes/amendments to MGTS' charter restricting the rights of holders of preferred shares. Such resolutions require the approval of 75% of the preferred shareholders. In the event of liquidation, dividends to preferred shareholders that have been declared but not paid have priority over ordinary shareholders.

        In May 2011 MGTS' annual shareholders meeting approved dividends on ordinary and preferred shares totaling RUB 18 961.7 million (approximately $623.9 million) for 2010. In June 2010 MGTS' general shareholders meeting approved dividend on preferred shares totaling RUB 789.4 million (approximately $25.4 million) payment for 2009. As of December 31, 2011 and 2010, dividends payable were $2.1 million and $1.0 million, respectively.

24. REDEEMABLE NONCONTROLLING INTEREST

        In September 2007 the Group acquired an 80% stake in International Cell Holding Ltd, the 100% indirect owner of K-Telecom, Armenia's mobile phone operator, and signed a call and put option agreement to acquire the remaining 20% stake. In December 2010 the Group signed an amendment to the put and call option agreement. According to the amended option agreement, the price for the remaining 20% stake option will be determined by an independent investment bank subject to a cap of EUR 200 million. The put option can be exercised during the period from the next business day following the date of settlement of all liabilities under the loan agreement (Note 16) up to December 31, 2016. The call option can be exercised during the period from July 1, 2010 up to December 31, 2016. If both the call notice and the put notice are served on the same day then the put notice shall be deemed exercised in priority to the call notice. The noncontrolling interest was measured at fair value using a discounted cash flow technique and amounted to $80.6 million and $86.9 million as of December 31, 2011 and 2010 respectively. The fair value was determined based on unobservable inputs ("Level 3" of the hierarchy established by the U.S. GAAP guidance).

F-61

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

25. GENERAL AND ADMINISTRATIVE EXPENSES

        General and administrative expenses for the years ended December 31, 2011, 2010 and 2009, comprised the following:

	2011		2010		2009
Salaries and social contributions	$	1,230,564	$	1,174,482	$	1,004,951
Rent		389,142		338,301		283,957
General and administrative		277,863		251,097		217,847
Repair and maintenance		202,206		180,810		158,165
Taxes other than income		171,778		144,322		181,716
Billing and data processing		62,508		75,960		64,277
Consulting expenses		58,409		61,431		59,000
Provision for obsolescence		30,160		27,825		4,113
Insurance		6,533		7,456		7,612
Business acquisitions related costs		7,089		12,737		11,353
Total	$	2,436,252	$	2,274,421	$	1,992,991

26. SEGMENT INFORMATION

        To reflect the changes in the structure of the internal organization in 2011, the Group combined the Russia Mobile and Russia Fixed segments. Prior period segment presentation has been retrospectively restated for this change. As a result, geographical areas of business activities are now used as a factor in identifying the following reportable segments.

        The Group operates primarily within two countries, Russia and Ukraine. The Group aligns its business into two reportable segments to effectively manage both the mobile and the fixed line operations as an integrated business and to respond to the demands of the Group's customers.

        The reportable segments consist of (1) Russia, which includes operations throughout the country, and provides a wide range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV and various value-added services, i.e. both mobile and fixed line services to customers across multiple regions and (2) Ukraine, which includes operations throughout the country, and currently provides mobile services.

        The "Other" category does not constitute either an operating segment or a reportable segment. Rather, it includes both the results of a number of other operating segments that do not meet the quantitative thresholds for separate reporting, such as Uzbekistan and Armenia, and corporate division.

        Other unallocated expenses such as interest (income)/expense, impairments and currency exchange and transaction loss/(gain) are shown for purposes of reconciling the Group's segment measure, net operating income, to the Group's consolidated total for each of the three years in the period ended December 31, 2011.

        The intercompany eliminations presented below primarily consist of sales transactions between segments conducted under the normal course of operations.

F-62

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

26. SEGMENT INFORMATION (Continued)

        Financial information by reportable segment is presented below:

	December 31,
	2011			2010			2009
Net operating revenues from external customers:
Russia	$	10,597,310		$	9,387,797		$	8,064,474
Ukraine		1,099,537			1,050,639			1,025,374
Other		621,841			854,800			777,405
Total net operating revenues from external customers:	$	12,318,688		$	11,293,236		$	9,867,253
Including revenue from mobile services		10,487,988			9,606,354			8,428,578
Including revenue from fixed line services		1,830,700			1,686,882			1,438,675
Intersegment operating revenues:
Russia	$	34,968		$	27,136		$	10,342
Ukraine		43,020			22,191			23,377
Other		21,189			9,572			10,138
Total intersegment operating revenues:	$	99,177		$	58,899		$	43,857
Depreciation and amortization expense:
Russia	$	1,752,022		$	1,418,727		$	1,305,556
Ukraine		344,709			354,154			352,037
Other		238,473			227,615			186,581
Total depreciation and amortization expense	$	2,335,204		$	2,000,496		$	1,844,174
Operating income:
Russia	$	2,774,422		$	2,673,617		$	2,353,380
Ukraine		203,609			144,473			120,248
Other		(168,572	)		(84,820	)		82,257
Intercompany eliminations		(574	)		1,289			—
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Currency exchange and transaction loss (gain)		158,066			(20,238	)		252,694
Interest income		(62,559	)		(84,396	)		(104,566	)
Interest expense		656,898			777,287			571,901
Change in fair value of derivatives		—			—			5,420
Impairment of investments		—			—			368,355
Equity in net income of associates		(49,443	)		(70,649	)		(60,313	)
Other expense, net		6,571			66,924			23,254
Income before provision for income taxes and noncontrolling interest	$	2,099,352		$	2,065,631		$	1,499,140

F-63

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

26. SEGMENT INFORMATION (Continued)

	2011		2010
Additions to long-lived assets:
Russia	$	2,330,163	$	2,538,926
Ukraine		140,354		117,548
Other		247,140		237,256
Total additions to long-lived assets	$	2,717,657	$	2,893,730
Long-lived assets(1):
Russia	$	8,617,536	$	8,207,457
Ukraine		915,292		1,130,459
Other		1,380,852		1,451,615
Total long-lived assets	$	10,913,680	$	10,789,531
Total assets:
Russia	$	12,420,073	$	11,358,159
Ukraine		1,244,543		1,454,415
Other		1,653,613		1,665,468
Total assets	$	15,318,229	$	14,478,042

(1)

Comprises property, plant and equipment, licenses, goodwill and other intangible assets.

27. COMMITMENTS AND CONTINGENCIES

        Capital commitments—As of December 31, 2011, the Group had executed purchase agreements of approximately $560.3 million to acquire property, plant and equipment, 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 1.5 million iPhone handsets at list prices at the dates of respective purchases over a three year period. Pursuant to the agreement the Group was also required to incur certain iPhone promotion costs. As of December 31, 2011 the Group made 28.6% of its total purchase installment contemplated by the agreement. The total amount paid for handsets purchased under the agreement for the years ended December 31, 2011, 2010 and 2009 amounted to $140.8 million, $79.4 million and $3.4 million, respectively.

        Operating leases—The Group has entered into non-cancellable agreements to lease space for telecommunications equipment, offices and transmission channels, which expire in various years up to 2060. Rental expenses under the operating leases of $389.1 million, $338.3 million and $278.5 million for the years ended December 31, 2011, 2010 and 2009, respectively, are included in operating expenses in the accompanying consolidated statements of operations. Rental expenses under the operating leases of $232.0 million, $182.4 million and $168.7 million for the years ended December 31, 2011, 2010 and 2009, respectively, are included in cost of services in the accompanying consolidated statements of

F-64

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

27. COMMITMENTS AND CONTINGENCIES (Continued)

operations. Future minimum lease payments due under these leases for the five years ending December 31, 2016 and thereafter are as follows:

Payments due in the years ended December 31,
2012	$	249,334
2013		49,426
2014		36,639
2015		31,832
2016		28,439
Thereafter		74,525
Total	$	470,195

        Taxation—Russia and the CIS countries 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 and the CIS countries that are more significant than those typically found in countries with more developed tax systems.

        Generally, according to Russian and Ukrainian tax legislation, tax declarations remain open and subject to inspection for a period of three years following the tax year. As of December 31, 2011, tax declarations of MTS OJSC and other subsidiaries in Russia and Ukraine for the preceding three fiscal years were open for further review.

        In October 2009, the Russian tax authorities completed the tax audit of Sibintertelecom for the years ended December 31, 2006, 2007 and 2008. Based on the results of this audit, the Russian tax authorities assessed RUB 174.5 million ($5.8 million as of December 31, 2009) in additional taxes, penalties and fines. The Group won an appeal in the court of original jurisdiction, which recognized the tax authorities' resolution to be invalid. In February 2011 an arbitration appellate court confirmed the decision of the court of original jurisdiction.

F-65

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

27. COMMITMENTS AND CONTINGENCIES (Continued)

        In December 2010 the Russian tax authorities completed the tax audit of MTS OJSC for the years ended December 31, 2007 and 2008. Based on the results of this audit, the Russian tax authorities assessed RUB 353.9 million ($11.0 million as of December 31, 2011) in additional taxes, penalties and fines were payable by the Group. The resolution did not come into force as the Group prepared and filed a petition with the Federal Tax Service to declare the tax authorities' resolution to be invalid. In September 2011 the Federal Tax Service partially satisfied the Group's petition, decreasing the amount of additional taxes, penalties and fines payable by the Group by RUB 173.9 million ($5.4 million as of December 31, 2011). The Group filed an appeal for RUB 84.2 million ($2.6 million as of December 31, 2011) of the remaining RUB 180.0 million ($5.6 million as of December 31, 2011) with the Moscow Arbitrate Court. A hearing is scheduled for March 12, 2012.

        In February 2012, the Russian tax authorities completed tax audit of MGTS for the years ended December 31, 2007 and 2008. Based on the results of their audit, the Russian tax authorities assessed RUB 258.1 million ($8.0 million as of December 31, 2011) in additional taxes, penalties and fines are payable by the Group. In February 2012 MGTS appealed the tax authorities' decision with the Federal Tax Service.

        The Group purchases supplemental software from foreign suppliers of telecommunications equipment in the ordinary course of business. The Group's management believes that customs duties are calculated in compliance with applicable legislation. However there is a risk that the customs authorities may take a different view and impose additional customs duties. As of December 31, 2011 and 2010, 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 the Group's subscribers in the course of performing its marketing activities might be 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, 2011 and 2010, no provision was recorded in the consolidated financial statements in respect of such additional claims.

        Management believes that it has adequately provided for tax and customs liabilities in the accompanying consolidated financial statements. As of December 31, 2011 and 2010, the provision accrued amounted to $7.1 million and $10.0 million, respectively. In addition, the accrual for unrecognized income tax benefits, potential penalties and interest recorded in accordance with the authoritative guidance on income taxes totaled $16.3 million and $14.0 million as of December 31, 2011 and 2010, respectively. However, the risk remains that the relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant.

        3G license—In May 2007, the Federal Service for Supervision in the Area of Communications and Mass Media awarded MTS a license to provide 3G services in the Russian Federation. The 3G license was granted subject to certain capital and other commitments. The major conditions are that the Group will have to build a certain number of base stations that support 3G standards, will have to start

F-66

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

27. COMMITMENTS AND CONTINGENCIES (Continued)

providing services in the Russian Federation by a certain date, and will have to build a certain number of base stations by the end of the third, fourth and fifth years from the date of granting the license. Management believes that as of December 31, 2011 the Group is in compliance with these conditions.

        Bitel—In December 2005, 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 of Kyrgyzstan 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 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 sought specific performance of the put option, unspecified monetary damages, interest, and costs. In January 2011 the London Court of International Arbitration made an award in favor of Nomihold satisfying Nomihold's specific performance request and ordered MTS Finance to pay to Nomihold $170.0 million for the Option Shares, $5.9 million in damages and $34.9 million in interest and other costs—all representing in total approximately $210.8 million ("Award"). An amount of the Award is bearing an interest until Award is satisfied. In addition to the $170.0 million liability related to this case and accrued in the year ended December 31, 2006, the Group recorded an additional loss in amount of $40.8 million and $3.2 million in the consolidated financial statements for the year ended December 31, 2010 and 2011, respectively, representing interest accrued on the awarded sums.

F-67

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

27. COMMITMENTS AND CONTINGENCIES (Continued)

        On January 26, 2011, Nomihold obtained a freezing order in respect of the Award from the English High Court of Justice which, in part, restricts MTS Finance from dissipating its assets. Additionally, MTS Finance has been granted permission to appeal the Award, but the Court has imposed conditions upon the appeal. MTS Finance is currently seeking to have the conditions lifted.

        Further on February 1, 2011, Nomihold obtained an order of the Luxemburg District Court enforcing the Award in Luxembourg. This order is in the process of being appealed.

        As an issuer of US $400,000,000 2012 Notes pursuant to an Indenture dated January 28, 2005 (as amended) ("the Notes"), MTS Finance was due to redeem the principal of the Notes and pay the final coupon payment on January 30, 2012. However as a result of the freezing order, the Company applied to and obtained from the English Court an order authorizing both payments to be made by the Company on behalf of MTS Finance ("the Direct Payments"). The Direct Payments to noteholders by the trustee under the Indenture were made on or around January 28, 2012.

        The Direct Payments were made despite an obligation under an intercompany loan agreement dated January 28, 2005 between the Company and MTS Finance ("the Intercompany Loan Agreement") to process the payments through MTS Finance. However because MTS Finance was subject to a freezing order and not capable of transferring out the money to the trustee for distribution, and because the Company owed obligations to the noteholders as guarantor under the Indenture, the Company decided to make the Direct Payments to the noteholders pursuant to an order of the English Court.

        In relation to the obligations under the Intercompany Loan Agreement, the Company and MTS Finance have agreed to refer to arbitration the question of whether under the Intercompany Loan Agreement itself there remains an obligation to make any further payments to MTS Finance in light of the Direct Payment. On February 9, 2012, the Company received a request for arbitration from MTS Finance. The process is underway and will clarify the rights between the parties under the Intercompany Loan Agreement. The Company denies that any further payments are due under the Intercompany Loan Agreement. The arbitration will be conducted under the Rules of the London Court of International Arbitration and it is expected to last between 6 and 12 months.

        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. Bitel's Isle of Man advocates have recently withdrawn from their representation of Bitel, and Bitel does not appear to be pursuing these claims.

        In January 2007. the KFG Companies asserted counterclaims against Bitel, and claims against other defendants, including Altimo LLC ("Altimo"), Altimo Holdings & Investments Limited ("Altimo Holdings"), CP-Crédit Privé SA and Fellowes International Holdings Limited, for the wrongful misappropriation and seizure of Bitel. The defendants sought to challenge the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies.

F-68

OJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(Amounts in thousands of U.S. Dollars, unless otherwise stated)

27. COMMITMENTS AND CONTINGENCIES (Continued)

        On March 10, 2011, the Judicial Committee of the UK Privy Council ruled in favor of the KFG Companies and confirmed the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies against various defendants, including Sky Mobile, Altimo and Altimo Holdings, for the wrongful misappropriation and seizure of Kyrgyz telecom operator Bitel and its assets.

        On June 30, 2011, the KFG Companies obtained from the Isle of Man court a general asset freezing injunction over the assets of Altimo and Altimo Holdings. The general freezing injunction against Altimo Holdings was replaced on November 30, 2011 by a specific freezing injunction over (i) Altimo Holding's interest in its Dutch subsidiary, Altimo Coöperatief U.A., and (ii) VimpelCom common shares worth $500 million that Altimo Coöperatief U.A. has lodged with the Isle of Man court. The KFG Companies are proceeding with their counterclaims in the Isle of Man. A trial has been set to commence in May 2013.

        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. The tribunal is currently deciding whether to stay the damages phase of the LCIA proceedings pending conclusion of the Isle of Man proceedings. The Group is not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

        Other litigation—In the ordinary course of business, the Group is a party to various legal, tax and customs proceedings, and subject to claims, certain of which relate to developing markets and evolving fiscal and regulatory environments in which MTS operates. Management believes that 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 the Group.

28. SUBSEQUENT EVENTS

        On February 28, 2012, subsequent to the statement of financial position date, the Group voluntarily repaid the full amount due under credit facilities of Gazprombank with an original maturity in 2013-2015. The amount repaid totaled to $472.1 million (stated at December 31, 2011 exchange rate).

        On March 16, 2012, subsequent to the statement of financial position date, the Group voluntarily repaid $310.6 million from $434.8 million outstanding under credit facility of Bank of Moscow with the original maturity in 2013 (both amounts are stated at December 31, 2011 exchange rate).

F-69

EX-1.1

Exhibit 1.1

APPROVED BY

GENERAL MEETING OF SHAREHOLDERS

OF MOBILE TELESYSTEMS

OPEN JOINT STOCK COMPANY

27 JUNE 2011, MINUTES NO.27

MOBILE TELESYSTEMS

OPEN JOINT STOCK COMPANY

COMPANY CHARTER

(Rev. 9)

MOSCOW

2011

No table of contents entries found.

2

PART 1. THE COMPANY

1. GENERAL PROVISIONS

1.1Mobile TeleSystems Open Joint Stock Company (hereinafter the “Company”) was registered with the State Registration Chamber at the Russian Federation’s Ministry of Justice on March 1, 2000 under registration number of R-7882.16.

1.2On September 2, 2002, an entry was made into the Consolidated State Register of Legal Entities, to include the Company as an entity registered prior to July 1, 2002, and having Primary state registration number of 1027700149124.

1.3The Company was established and acts in accordance with the Civil Code of the Russian Federation, the Federal Law “On Joint Stock Companies”, other normative legal acts of the Russian Federation and with this Charter.

1.4A full trade name of the Company in the Russian language shall be: Открытое акционерное общество “Мобильные ТелеСистемы”.

1.5A short trade name of the Company in the Russian language shall be: ОАО «МТС» or ОАО «Мобильные ТелеСистемы».

1.6A full trade name of the Company in the English language shall be: Mobile TeleSystems Open Joint Stock Company.

1.7An abbreviated trade name of the Company in the English language shall be: MTS OJSC.

1.8 The location of the Company shall be: 4 Marksistskaya St., Moscow 109147, Russian Federation.

1.9The duration of the Company shall be unlimited.

1.10 Information about Company’s reorganizations and legal successions:

(1)  The Company was established by way of reorganization in form of a merger of Mobile TeleSystems Closed Joint Stock Company (registered on October 28, 1993 with the Moscow Registration Chamber, under the number of 027.941, and, on September 21, 1994, with the State Registration Chamber, under the registration number of R-3566.16) and of Russian Telephone Company Closed Joint Stock Company (registered on July 21, 1995 with the Moscow Registration Chamber, under the registration number of 634.535, and, on August 19, 1996, with the State Registration Chamber under the registration number of R-6068.16).

(2) The Company is a legal successor of the Mobile TeleSystems Closed Joint Stock Company and the Russian Telephone Company Closed Joint Stock Company with respect to all rights and obligations.

(3) The Company is a legal successor of all rights and obligations to Rosico Closed Joint Stock Company (registered with Moscow Registration Chamber at the Moscow Government on March 4, 1994 under the number of 005.821 and entered into the Consolidated State Register of Legal Entities on December 18, 2002 by the Moscow Office of the Russian Federation’s Ministry for Taxes and Levies under Primary state registration number of 1027700547126), which, on June 9, 2003 was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(4) The Company is a legal successor of all rights and obligations, to Amur Cellular Communications Closed Joint Stock Company (registered with the Administration of Blagoveshchensk on April 11, 1996 under the number of 189P and entered into the Consolidated State Register of Legal Entities on August 27, 2002 by the Regional Inspectorate No. 1 for Amur Region at Russian Federation’s Ministry for Taxes and Levies under Primary state registration number of 1022800511810), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(5)The Company is a legal successor of all rights and obligations to Dontelecom Closed Joint Stock Company (registered with the Administration of Rostov Region on April 14, 1994 under the number of СП-1160/231 and entered into the Consolidated State Register of Legal Entities on October 25, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Proletarsky District of Rostov-on-Don under Primary state registration number of 1026104143944), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(6) The Company is a legal successor of all rights and obligations to Kuban-GSM Closed Joint Stock Company (registered with the Krasnodar Registration Chamber on May 15, 1997 under number of 6948 and entered into the Consolidated State Register of Legal Entities on July 30, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for Krasnodar under Primary state registration number of 1022301190779), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(7) The Company is a legal successor of all rights and obligations of Mobile TeleSystems-Barnaul Closed Joint Stock Company (registered by the Order of the Administration of the Octyabrsky District of Barnaul on April 25, 2000 under number of 1287 and entered into the Consolidated State

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Register of Legal Entities on September 30, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for Octyabrsky District of Barnaul, Altai Territory under Primary state registration number of 102201506854), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(8) The Company is a legal successor of all rights and obligations to Mobile TeleSystems-Nizhny Novgorod Closed Joint Stock Company (registered with the Nizhny Novgorod Registration Chamber on January 22, 2001 under number of 4583 and entered into the Consolidated State Register of Legal Entities on August 14, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Soviet District of Nizhny Novgorod under Primary state registration number of 1025203721168), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(9) The Company is a legal successor of all rights and obligations to Telecom-900 Closed Joint Stock Company (registered with the Moscow Registration Chamber on September 2, 1999 under number of 001.455.369 and entered into the Consolidated State Register of Legal Entities on September 11, 2002 by the Russian Ministry for Taxes and Levies Interdistrict Inspectorate No. 39 for Moscow under primary state registration number of 1027739174682), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(10) The Company is a legal successor of all rights and obligations to Telecom-XXI Open Joint Stock Company (registered by the Resolution of the Saint Petersburg Registration Chamber on April 4, 1997 under number of 68581 and entered into the Consolidated State Register of Legal Entities on August 21, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Central District of Saint Petersburg under primary state registration number of 1027809176031), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(11) The Company is a legal successor of all rights and obligations to Udmurt Digital Networks-900 Closed Joint Stock Company (registered with the Administration of the Octyabrsky District of Izhevsk, Udmurt Republic on May 21, 1996 under number of 598/1 and entered into the Consolidated State Register of Legal Entities on December 10, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Octyabrsky District of Izhevsk, Republic of Udmurtia under primary state registration number of 1021801168058), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(12) The Company is a legal successor of all rights and obligations to Horizon-RT Open Joint Stock Company (registered with the Russian Ministry for Taxes and Levies Inspectorate for Yakutsk, Sakha Republic (Yakutia) on September 26, 2003 and entered into the Consolidated State Register of Legal Entities on September 26, 2003 by the Russian Ministry for Taxes and Levies Inspectorate for Yakutsk, Sakha Republic (Yakutia) under primary state registration number 1031402065419), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(13) The Company is a legal successor of all rights and obligations to Uraltel Closed Joint Stock Company (registered with the Government of the Sverdlovsk Region on July 23, 1993 under number P-2417.16 and entered into the Consolidated State Register of Legal Entities on October 7, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Verkh-Issetsky District of Ekaterinburg under primary state registration number 1026602321206), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(14) The Company is a legal successor of all rights and obligations to Far East Cellular Systems-900 Closed Joint Stock Company (registered with the Administration of Khabarovsk on July 17, 1996 under number of 002753-АГ and entered into the Consolidated State Register of Legal Entities on July 30, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Central District of Khabarovsk under Primary state registration number of 1022700911122), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(15) The Company is a legal successor of all rights and obligations to Siberian Cellular Systems-900 Closed Joint Stock Company (registered with the Novosibirsk Municipal Registration Chamber on November 29, 1996 under number of 7816 and entered into the Consolidated State Register of Legal Entities on November 23, 2002 by the Russian Ministry for Taxes and Levies’  Inspectorate for the Central District of Novosibirsk under Primary state registration number of 1025402480102), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(16) The Company is a legal successor of all rights and obligations to TAIF-TELCOM Open Joint Stock Company (registered with the State Registration Chamber with the Ministry of Justice of the Republic of Tatarstan on April 4, 2000 under number of 1213/к-1(50-02) and entered into the Consolidated State Register of Legal Entities on July 23, 2002 by the Russian Ministry for Taxes and Levies’  Interdistrict Inspectorate No. 14 for the Republic of Tatarstan under Primary state registration number of 1021602825397), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(17) The Company is a legal successor of all rights and obligations to Tomsk Cellular Communications Closed Joint Stock Company (registered with the Federal Tax Service

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Inspectorate for Tomsk on September 30, 2005 and entered into the Consolidated State Register of Legal Entities on September 30, 2005 by the Federal Tax Service Inspectorate for Tomsk under Primary state registration number of 1057002621280), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(18) The Company is a legal successor of all rights and obligations to SibChallenge Closed Joint Stock Company (registered with the Federal Tax Service Inspectorate for the Central District of Krasnoyarsk on October 3, 2005 and entered into the Consolidated State Register of Legal Entities on October 3, 2005 by the Federal Tax Service Inspectorate for the Central District of Krasnoyarsk under Primary state registration number of 1052466370648), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(19) The Company is a legal successor of all rights and obligations to BM Telecom Closed Joint Stock Company (registered with the Federal Tax Service Inspectorate for the Octyabrsky District of Ufa on October 3, 2005 and entered into the Consolidated State Register of Legal Entities on October 3, 2005 by the Federal Tax Service Inspectorate for the Octyabrsky District of Ufa under Primary state registration number of 1050204327557), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(20) The Company is a legal successor of all rights and obligations to MTS-RTK Closed Joint Stock Company (registered with the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow on October 4, 2005 and entered into the Consolidated State Register of Legal Entities on October 4, 2005 by the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow under Primary state registration number of 1057748460660), which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(21) The Company is a legal successor of all rights and obligations to ReCom Open Joint Stock Company ( registered with the Orel Registration Chamber on February, 26, 1998  under the number of 1244-C and entered into Consolidated State Register of Legal Entities on August 7, 2002 by the Federal Tax Service Inspectorate for the Sovietsky district of Orel city under Primary state registration number of 1025700824544) which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(22) The company is a legal successor of all rights and obligations to Telesot-Alania Closed Joint Stock Company (registered with the local home-rule administration of the Promyshlenny district of Vladikavkaz on May 14, 1997 under the number of 1893 and entered into Consolidated State Register of Legal Entities on December 30, 2002 by the Federal Tax Service Inspectorate for the North-West municipality district of Vladikavkaz city of the North Ossetia/Alania Republic under Primary state registration number of 1021500773546) which was reorganized by way of merger with Mobile TeleSystems Open Joint Stock Company.

(23) The Company is a legal successor of all rights and obligations to Astrakhan Mobile Closed Joint Stock Company (registered with the Department of Foreign Relations and External Economic Relations of Astrakhan Region Administration on January 17, 1995 under No. 1112/081 and entered into the Consolidated State Register of Legal Entities on August 26, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Kirov municipal district of the city of Astrakhan under Primary state registration number 1023000819401), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(24) The Company is a legal successor of all rights and obligations to Mar Mobile GSM Closed Joint Stock Company (registered with the State Registration Chamber under the authority of the Ministry of Justice of the Mari El Republic on November 15, 2000 under No. 4097 and entered into the Consolidated State Register of Legal Entities on July 17, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the city of Ioshkar Ola under Primary state registration number 1021200750702), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(25) The Company is a legal successor of all rights and obligations to Volgograd Mobile Closed Joint Stock Company (registered with the State Registration Chamber under the authority of the RF Ministry of Economy on June 23, 1995 under No. P-5193.16 and entered into the Consolidated State Register of Legal Entities on November 14, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the Central municipal district of the city of Volgograd under Primary state registration number 1023403440147), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(26) The Company is a legal successor of all rights and obligations to PRIMTEFON Closed Joint Stock Company (registered with the State Registration Chamber under the authority of the Ministry of Justice of the Russian Federation on August 02, 2001 under No. P-877.16.6 and entered into the Consolidated State Register of Legal Entities on October 31, 2002 by the Russian Federal Tax Service Inspectorate for the Lenin municipal district of the city of Vladivostok under Primary state registration number 1022501282671), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

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(27) The Company is a legal successor of all rights and obligations to Mobile Communication Systems Open Joint Stock Company (registered with the Omsk City Registration Chamber on September 17, 1996 under No. 38608040 and entered into the Consolidated State Register of Legal Entities on September 02, 2002 by the Russian Ministry for Taxes and Levies Inspectorate No. 2 for the Central municipal district of the city of Omsk under Primary state registration number 1025500973728), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(28) The Company is a legal successor of all rights and obligations to BashCEL Closed Joint Stock Company (registered with the State Registration Chamber under the authority of the Ministry of External Relations of the Bashkortostan Republic on November 28, 1997 under No. 80/083-ю and entered into the Consolidated State Register of Legal Entities on June 28, 2002 by the Russian Ministry for Taxes and Levies Inspectorate for the city of Agidel of the Bashkortostan Republic under Primary state registration number 1020201436639), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(29) The Company is a legal successor of all rights and obligations to Mobile TeleSystems Closed Joint Stock Company (registered with the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow on July 01, 2010 and entered into the Consolidated State Register of Legal Entities on July 01, 2010 by the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow under Primary state registration number 1107746526733), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(30) The Company is a legal successor of all rights and obligations to Capital Closed Joint Stock Company (registered with the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow on July 01, 2010 and entered into the Consolidated State Register of Legal Entities on July 01, 2010 by the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow under Primary state registration number 1107746523521), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(31) The Company is a legal successor of all rights and obligations to Telecom Operator Closed Joint Stock Company (registered with the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow on July 01, 2010 and entered into the Consolidated State Register of Legal Entities on July 01, 2010 by the Federal Tax Service Interdistrict Inspectorate No. 46 for Moscow under Primary state registration number 1107746523543), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(32) The Company is a legal successor of all rights and obligations to United TeleSystems Closed Joint Stock Company (registered with the Russian Ministry for Taxes and Levies Interdistrict Inspectorate No. 46 for Moscow on October 15, 2004 and entered into the Consolidated State Register of Legal Entities on October 15, 2004 by the Russian Ministry of Taxation Interdistrict Inspectorate No. 46 for Moscow under Primary state registration number 1047796779535), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(33) The Company is a legal successor of all rights and obligations to COMSTAR United TeleSystems Open Joint Stock Company (initially incorporated as COMSTAR Joint Venture, on June 14, 1989 entered into the Register of the USSR Ministry of Finance under No. 598, later reregistered as COMSTAR Russian-British Limited Liability Partnership and then reorganized into COMSTAR Closed Joint Stock Company (The State Registration Chamber Certificate No. P—7644  of registration and entering into the Consolidated State Register of Legal Entities the amendments and addenda to foundation documents of 11.05.1999, Certificate of the Moscow State Registration Chamber No. 040.347 of 15.06.1999) entered into the Consolidated State Register of Legal Entities on July 04, 2002 by the Russian Ministry for Taxes and Levies Directorate for Moscow under Primary state registration number 1027700003946), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(34) The Company is a legal successor of all rights and obligations to COMSTAR Direct Closed Joint Stock Company (old name — MTU Intel Closed Joint Stock Company, registered with the Moscow Registration Chamber on March 01, 1993 under No. 474.640 and entered into the Consolidated State Register of Legal Entities on October 07, 2002 by the Russian Ministry for Taxes and Levies Interdistrict Inspectorate No. 39 for Moscow under Primary state registration number 1027700288076), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

(35) The Company is a legal successor of all rights and obligations to Dagtelecom Closed Joint Stock Company (registered with the Russian Federal Tax Service Inspectorate for Sovetsky District, Makhachkala, Republic of Dagestan on December 04, 2009 and entered into the Consolidated State Register of Legal Entities on December 04, 2009 by the Russian Federal Tax Service Inspectorate for Sovetsky District, Makhachkala, Republic of Dagestan under Primary state registration number 1090562002552), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

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(36) The Company is a legal successor of all rights and obligations to Eurotel Open Joint Stock Company (registered with the Moscow Registration Chamber on August 19, 1997 under No. 056.414 and entered into the Consolidated State Register of Legal Entities on August 14, 2002 by the Russian Ministry for Taxes and Levies Interdistrict Inspectorate No. 39 for Moscow under Primary state registration number 1027739071854 under the former name ENIFCOM Open Joint Stock Company ), which was reorganized by way of merger into Mobile TeleSystems Open Joint Stock Company.

2. MISSION, SUBJECT AND TYPES OF COMPANY ACTIVITIES

2.1The purpose of the Company’s economic activity shall be: to make profit by planning, marketing, and operating a radiotelephone mobile cellular network in the regions specified in the licenses issued to the Company by an empowered government body.

2.2To achieve the above stated purposes the Company’s activities shall include:

(1)operations in the area of telecommunications;

(2)operations in the area of telephone communications;

(3)operations in the area of fixed telephone communications;

(4)operations in the area of mobile communications;

(5)operations in the area of data transmission;

(6)operations in the area of telematic services;

(7)other operations in the area of telecommunications;

(8)cooperation with national and international GSM operators inside and outside the territory of the Russian Federation to ensure the optimal level of service for the Company’s customers;

(9)cooperation with certain telephone operators in Moscow and the Russian Federation as well as with international telecom operators;

10)settlement of accounts with customers, commercial and financial management of the network in accordance with accepted international practices;

(11) implementation and marketing of value added mobile telecom services;

(12) importation, sales, leasing, installation and maintenance of terminals and related accessories;

(13) operation and maintenance of monitoring equipment for GSM networks;

(14) protection of state secret data in compliance with the current legislation of the Russian Federation;

(15) carrying out of works with the use of state secret data and (or) provision of services in the area of state secret data protection;

(16) any other activities following decisions of the Board of Directors that further the achievement of the Company’s principal goals.

2.3 The company may carry out any other types of activity to the extent not prohibited by the current RF laws.

2.4 Those types of activity that are subject to licensing shall be carried out on the basis of corresponding licenses.

3. LEGAL STATUS OF THE COMPANY

3.1The Company is a legal entity under the Russian laws, with its own separate property reflected in Company’s own balance sheet, and is entitled to acquire and exercise proprietary and personal non-property rights in its own name; it may accept obligations and to sue and be sued in a court.

3.2The Company shall have a round seal bearing a Company full name in the Russian language and a reference to the Primary state registration number, letterheads with the Company full name as well as trade marks registered as stipulated by laws. The Company may have a seal, stamps and letterheads with the Company full name in the Russian and English languages, as well as an emblem and other means of visual identification.

3.3The Company is entitled to participate, in conformity with relevant regulations, in the establishment of other organizations both within the Russian Federation and abroad, to have subsidiaries and affiliates on the territory of the Russian Federation and abroad, to acquire shares (equities) in their charter capitals, buildings, structures, land and other immobility, securities, as well as any other property which may be an object of the ownership right according to the current laws.

3.4In order to attract additional funds, the Company shall be entitled to issue securities of various classes, whose circulation is permitted by current laws of the Russian Federation, including registered shares, bonds and other securities, and to independently define the conditions of their issue and placement according to laws of the Russian Federation and this Charter.

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3.5The Company shall be entitled to participate in holding companies, financial/industrial groups, associations and other amalgamations of commercial organizations on the terms that are not in contradiction to the current laws of the Russian Federation and this Charter.

3.6The Company shall be entitled to take part in unions, associations and other unions of organizations on the terms that are not in contradiction to current laws of the Russian Federation and this Charter. The Company shall be entitled to cooperate with international financial organizations in any form that is not prohibited by law.

3.7The Company acquires civil rights and assumes liabilities through its bodies, acting in conformity with the law and this Charter.

3.8The Company shall not liable for the obligations of its shareholders, and the shareholders shall not liable for the obligations of the Company and bear the risk of damages, associated with its activities, within the cost of the shares owned by them. The Company shall not be liable for obligations of the state and its bodies, and the state and its bodies shall not be liable for the obligations of the Company.

3.9The Company, in pursuing the state, social, economic and tax policies, shall be responsible for safekeeping of company’s documents (administrative, financial and logistical, concerning the personnel etc.); it ensures the transfer for storage by the state in the Moscow central archives of the documents of scientific and historical importance in compliance with the list of documents agreed with “Mosgorarkhiv” association; documents on personnel shall be kept and used in the established manner.

3.10The Company performs state activities on mobilization preparation according to the current laws of the Russian Federation and Moscow Government regulatory documents.

3.11The Company undertakes to be in compliance with the current legislation of the Russian Federation as of the state secrect concerned.

4. PROPERTY OF THE COMPANY

4.1The Company is the owner of its property, including the property, transferred to the Company by its shareholders. The Shareholders of the Company have no right of ownership for the property contributed to the charter capital of the Company.

4.2The Company shall exercise its right to free possession, use and disposal of property in its ownership in compliance with the Russian laws.

4.3Major transactions and party-related transactions shall be entered into by the Company solely with approval of a General Meeting of the shareholders or of the Board of Directors, according to the procedure stipulated in sub-clauses 27.1.23 — 27.1.29, 32.2.17 — 32.2.18 of this Charter, and following requirements of the current laws of the Russian Federation.

4.4The property of the Company consists of the fixed assets and working capital, as well as of other property, the cost of which is accounted for in the Company own balance. The sources of property build-up, income, balance and net profit of the Company are formed in the way prescribed by the laws of the Russian Federation.

5. BRANCHES AND REPRESENTATIVE OFFICES OF THE COMPANY

5.1The Company may, following the adopted procedure, establish branches and representative offices both on the territory of Russia and abroad that act on the basis of relevant provisions endorsed by the Company’s Board of Directors. Branches and representative offices shall not be deemed legal entities, their heads are appointed by the President and they act within the powers vested in them by a power of attorney issued to them.  The company Charter shall contain information on branches and representative offices of the Company.

5.2   The Company has the following branches;

(1) Branch of Mobile TeleSystems Open Joint Stock Company — The North-West Macro-region. Location of branch: 8, Italyanskaya St., Saint-Petersburg, Russian Federation.

(2) Branch of Mobile TeleSystems Open Joint Stock Company in Syktyvkar, the Republic of Komi. Location of branch: Syktyvkar, Republic of Komi, Russian Federation.

(3) Branch of Mobile TeleSystems Open Joint Stock Company in Pskov. Location of branch: Pskov, Pskov Region, Russian Federation.

(4) Branch of Mobile TeleSystems Open Joint Stock Company in the Archangelsk Region. Location of branch: Archangelsk, Archangelsk Region, Russian Federation.

(5) Branch of Mobile TeleSystems Open Joint Stock Company in the Vologda Region. Location of branch: Vologda, Vologda Region, Russian Federation.

(6) Branch of Mobile TeleSystems Open Joint Stock Company in the Kaliningrad Region. Location of branch: Kaliningrad, Kaliningrad Region, Russian Federation.

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(7) Branch of Mobile TeleSystems Open Joint Stock Company in the Murmansk Region. Location of branch: Murmansk, Murmansk Region, Russian Federation.

(8) Branch of Mobile TeleSystems Open Joint Stock Company in the Novgorod Region. Location of branch: V. Novgorod, Novgorod Region, Russian Federation.

(9) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Karelia. Location of branch: Petrozavodsk, Republic of Karelia, Russian Federation.

(10) Branch of Mobile TeleSystems Open Joint Stock Company in the Leningrad Region. Location of branch: Vyborg, Leningrad Region, Russian Federation.

(11) Branch of Mobile TeleSystems Open Joint Stock Company — The South Macro-region. Location of branch: 61, Gimnazicheskaya St., Krasnodar, Krasnodar Territory, Russian Federation.

(12) Branch of Mobile TeleSystems Open Joint Stock Company in the Stavropol Territory. Location of branch: Stavropol, Stavropol Territory, Russian Federation.

(13) Branch of Mobile TeleSystems Open Joint Stock Company in the Rostov Region. Location of branch: Rostov-on-Don, Rostov Region, Russian Federation.

(14) Branch of Mobile TeleSystems Open Joint Stock Company in Novorossiysk. Location of branch: Novorossiysk, Krasnodar Territory, Russian Federation.

(15) Branch of Mobile TeleSystems Open Joint Stock Company in Sochi. Location of branch: Sochi, Krasnodar Kray, Russian Federation.

(16) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Dagestan. Location of branch: Makhachkala, Republic of Dagestan, Russian Federation.

(17) Branch of Mobile TeleSystems Open Joint Stock Company in the Chechen Republic. Location of branch: Grozny, Chechen Republic, Russian Federation

(18) Branch of Mobile TeleSystems Open Joint Stock Company in the Astrakhan Region. Location of branch: Astrakhan, Astrakhan Region, Russian Federation.

(19) Branch of Mobile TeleSystems Open Joint Stock Company in the Volgograd Region. Location of branch: Volgograd, Volgograd Region, Russian Federation.

(20) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Kabardino-Balkaria. Location of branch: Nalchik, Republic of Kabardino-Balkaria, Russian Federation.

(21) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Karachay-Cherkessia. Location of branch: Cherkessk, Republic of Karachay-Cherkessia, Russian Federation.

(22) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Ingushetia. Location of branch: Magas, Republic of Ingushetia, Russian Federation.

(23) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of North Ossetia-Alania. Location of branch: Vladikavkaz, Republic of North Ossetia-Alania, Russian Federation.

(24) Branch of Mobile TeleSystems Open Joint Stock Company — The Volga Macro-region. Location of branch: 61, Beketova St., Nizhniy Novgorod, Nizhniy Novgorod Region, Russian Federation.

(25) Branch of Mobile TeleSystems Open Joint Stock Company in Orenburg. Location of branch: Orenburg, Orenburg Region, Russian Federation.

(26) Branch of Mobile TeleSystems Open Joint Stock Company in Saratov. Location of branch: Saratov, Saratov Region, Russian Federation.

(27) Branch of Mobile TeleSystems Open Joint Stock Company in Samara. Location of branch: Samara, Samara Region, Russian Federation.

(28) Branch of Mobile TeleSystems Open Joint Stock Company in the Ulyanovsk Region. Location of branch: Ulyanovsk, Ulyanovsk Region, Russian Federation.

(29) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Bashkortostan. Location of branch: Ufa, Republic of Bashkortostan, Russian Federation.

(30) Branch of Mobile TeleSystems Open Joint Stock Company in Kirov. Location of branch: Kirov, Kirov Region, Russian Federation.

(31) Branch of Mobile TeleSystems Open Joint Stock Company in the Chuvash Republic — Chuvashia. Location of branch: Cheboksary, Chuvash Republic — Chuvashia, Russian Federation.

(32) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Mordovia. Location of branch: Saransk, Republic of Mordovia, Russian Federation.

(33) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Mari El. Location of branch: Ioshkar-Ola, Republic of Mari El, Russian Federation.

(34) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Udmurtia. Location of branch: Izhevsk, Republic of Udmurtia, Russian Federation.

(35) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Tatarstan. Location of branch: Kazan, Republic of Tatarstan, Russian Federation.

(36) Branch of Mobile TeleSystems Open Joint Stock Company — The Ural Macro-region. Location of branch: 5, Zhukov St., Yekaterinburg, Sverdlovsk Region, Russian Federation.

(37) Branch of Mobile TeleSystems Open Joint Stock Company in Chelyabinsk. Location of branch: Chelyabinsk, Chelyabinsk Region, Russian Federation.

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(38) Branch of Mobile TeleSystems Open Joint Stock Company in Kurgan. Location of branch: Kurgan, Kurgan Region, Russian Federation.

(39) Branch of Mobile TeleSystems Open Joint Stock Company in the Tyumen Region. Location of branch: Tyumen, Tyumen Region, Russian Federation.

(40) Branch of Mobile TeleSystems Open Joint Stock Company in the Yamalo-Nenets Autonomous Area. Location of branch: Noyabrsk, Yamalo-Nenets Autonomous Area, Russian Federation.

(41) Branch of Mobile TeleSystems Open Joint Stock Company in the Khanty-Mansi Autonomous Area — Yugra. Location of branch: Surgut, Khanty-Mansi Autonomous Area — Yugra, Russian Federation.

(42) Branch of Mobile TeleSystems Open Joint Stock Company in the Perm Territory. Location of branch: Perm, Perm Territory, Russian Federation.

(43) Branch of Mobile TeleSystems Open Joint Stock Company — The Siberia Macro-region. Location of branch: 57/2, Frunze St., Novosibirsk, Novosibirsk Region, Russian Federation.

(44) Branch of Mobile TeleSystems Open Joint Stock Company in the Kemerovo Region. Location of branch: Kemerovo, Kemerovo Region, Russian Federation.

(45) Branch of Mobile TeleSystems Open Joint Stock Company in the Altai Territory. Location of branch: Barnaul, Altai Territory, Russian Federation.

(46) Branch of Mobile TeleSystems Open Joint Stock Company in the Krasnoyarsk Territory. Location of branch: Krasnoyarsk, Krasnoyarsk Territory, Russian Federation.

(47) Branch of Mobile TeleSystems Open Joint Stock Company in the Tomsk Region. Location of branch: Tomsk, Tomsk Region, Russian Federation.

(48) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Tuva. Location of branch: Kyzyl, Republic of Tuva, Russian Federation.

(49) Branch of Mobile TeleSystems Open Joint Stock Company in the Omsk Region. Location of branch: 17, Martynova Blvd, Omsk, Omsk Region, Russian Federation.

(50) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Khakassia. Location of branch: Abakan, Republic of Khakassia, Russian Federation.

(51) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Altai. Location of branch: Gorno-Altaisk, Republic of Altai, Russian Federation.

(52) Branch of Mobile TeleSystems Open Joint Stock Company — The Far East Macro-region. Location of branch: 53-A, Nekrasovskaya St., Vladivostok, Primorsky Territory, Russian Federation.

(53) Branch of Mobile TeleSystems Open Joint Stock Company in Blagoveshchensk. Location of branch: Blagoveshchensk, Amur Region, Russian Federation.

(54) Branch of Mobile TeleSystems Open Joint Stock Company in the Sakhalin Region. Location of branch: Yuzhno-Sakhalinsk, Sakhalin Region, Russian Federation.

(55) Branch of Mobile TeleSystems Open Joint Stock Company in the Khabarovsk Territory. Location of branch: Khabarovsk, Khabarovsk Kray, Russian Federation.

(56) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Sakha (Yakutia). Location of branch: Yakutsk, Republic of Sakha (Yakutia), Russian Federation.

(57) Branch of Mobile TeleSystems Open Joint Stock Company in the Zabaikalsky Territory. Location of branch: Chita, Zabaikalsky Territory, Russian Federation.

(58) Branch of Mobile TeleSystems Open Joint Stock Company in the Irkutsk Region. Location of branch: Irkutsk, Irkutsk Region, Russian Federation.

(59) Branch of Mobile TeleSystems Open Joint Stock Company in the Kamchatka Territory. Location of branch: Petropavlovsk-Kamchatski, Kamchatka Territory, Russian Federation.

(60) Branch of Mobile TeleSystems Open Joint Stock Company in the Magadan Region. Location of branch: Magadan, Magadan Region, Russian Federation.

(61) Branch of Mobile TeleSystems Open Joint Stock Company in the Republic of Buryatia. Location of branch: Ulan-Ude, Republic of Buryatia, Russian Federation.

(62) Branch of Mobile TeleSystems Open Joint Stock Company in Tula. Location of branch: Tula, Tula Region, Russian Federation.

(63) Branch of Mobile TeleSystems Open Joint Stock Company in Smolensk. Location of branch: Smolensk, Smolensk Region, Russian Federation.

(64) Branch of Mobile TeleSystems Open Joint Stock Company in Ryazan. Location of branch: Ryazan, Ryazan Region, Russian Federation.

(65) Branch of Mobile TeleSystems Open Joint Stock Company in Vladimir. Location of branch: Vladimir, Vladimir Region, Russian Federation.

(66) Branch of Mobile TeleSystems Open Joint Stock Company in Kaluga. Location of branch: Kaluga, Kaluga Region, Russian Federation.

(67) Branch of Mobile TeleSystems Open Joint Stock Company in Kostroma. Location of branch: Kostroma, Kostroma Region, Russian Federation.

(68) Branch of Mobile TeleSystems Open Joint Stock Company in Tver. Location of branch: Tver, Tver Region, Russian Federation.

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(69) Branch of Mobile TeleSystems Open Joint Stock Company in Yaroslavl. Location of branch: Yaroslavl, Yaroslavl Region, Russian Federation.

(70) Branch of Mobile TeleSystems Open Joint Stock Company in Ivanovo. Location of branch: Ivanovo, Ivanovo Region, Russian Federation.

(71) Branch of Mobile TeleSystems Open Joint Stock Company in Tambov. Location of branch: Tambov, Tambov Region, Russian Federation.

(72) Branch of Mobile TeleSystems Open Joint Stock Company in the Orel Region. Location of branch: Orel, Orel Region, Russian Federation.

(73) Branch of Mobile TeleSystems Open Joint Stock Company in the Belgorod Region. Location of branch: Belgorod, Belgorod Region, Russian Federation.

(74) Branch of Mobile TeleSystems Open Joint Stock Company in the Lipetsk Region. Location of branch: Lipetsk, Lipetsk Region, Russian Federation.

(75) Branch of Mobile TeleSystems Open Joint Stock Company in the Kursk Region. Location of branch: Kursk, Kursk Region, Russian Federation.

(76) Branch of Mobile TeleSystems Open Joint Stock Company in the Voronezh Region. Location of branch: Voronezh, Voronezh Region, Russian Federation.

(77) Branch of Mobile TeleSystems Open Joint Stock Company in the Bryansk Region. Location of branch: Bryansk, Bryansk Region, Russian Federation.

5.3The Company has the following representative offices:

(1) Representative office of Mobile TeleSystems Open Joint Stock Company in the Republic of Belarus. Location of representative office: Minsk, Republic of Belarus.

6. DIVIDENDS OF THE COMPANY

6.1Based on the results of the first quarter, half-year, nine months of fiscal year and (or) based on the results of fiscal year, the Company has the right to make a decision (declare) on the payment of dividends on placed shares.

6.2Decision on the payment (declaration) of dividends based on the results of the first quarter, half-year, nine months of financial year may be made by an extraordinary General Meeting of shareholders within three months after the end of the corresponding period. Decision on the payment of dividends based on the results of fiscal year shall be made by Annual General Meeting of the shareholders of the Company.

6.3Decision to pay dividends, the amount of dividend and the form of payment shall be taken based on the Board of Directors proposal. The amount of dividend shall not exceed the value recommended by the Board of Directors.

6.4The time period for payment of dividends shall not exceed 60 (sixty) days from the day of taking a decision on payment of dividends.

6.5The Company is obliged to pay the declared dividends on the shares of each category (class).

6.6The amount of dividend is declared as a percentage of the par value of a share, or in rubles per one share.

6.7The dividend may be paid in cash and, if the General Meeting of shareholders so decided, in kind — in shares, bonds, commodities or other property.

6.8The list of individuals, having the right to receive dividends, shall be compiled as of the date of drafting the list of the individuals, having the right to participate in the General Meeting of shareholders that has the issue of paying (declaring) dividends on its agenda.

6.9The current laws stipulate instances where the declaration and payment of dividends shall be restricted.

6.10The Company shall not have the right to give any privileges in terms of dividend payment time to any owners of shares of a certain category (type). Payment of declared dividends on shares of each category (type) shall be made simultaneously to all owners of shares of such category (type). In case during the period of dividend payment as specified in accordance with provisions of this Article of the Charter the declared dividends were not paid to a person included in the list of persons entitled to receive dividends, such person within 3 (three) days upon the expiry of the said period may approach the Company with a request to pay him/her the declared dividends. The time period for the application for payment of declared dividends, in case it is missed, shall not be subject to renewal except for cases when a person entitled to dividends did not submit such application under the influence of force or threat. Upon the expiry of the time period as stipulated in this Article, the declared and unclaimed dividends shall be restored within the undistributed profits of the Company.

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7. FUNDS AND NET ASSETS OF THE COMPANY

7.1  The Company shall establish a reserve fund by annually allocating an amount not less than 5% (five percent) of the net profit, until the reserve fund achieves 15% (fifteen percent) of the Company’s charter capital. This reserve fund is designated to cover the Company losses, as well as to redeem Company bonds and to buy out the Company stock in case of absence of other funds. The reserve fund may not be used for any other purpose. The assets of the reserve fund may be used on the basis of the Board of Directors decision in line with a specific procedure defined by the Board.

7.2  The Company shall be entitled to establish other funds.

7.3  Net assets value (NAV) of the Company shall be evaluated according to the accounting data with the use of the procedure stipulated with the legislation of the Russian Federation.

7.4. In case of Company’s NAV is less than Company’s Charter Capital, the Company shall take actions stipulated with the legislation of the Russian Federation.

8. ACCOUNTING AND REPORTING IN THE COMPANY

8.1  The Company shall organize the Company accounting activity and take steps to ensure that the bookkeeping practice of the Company provides a trustworthy and complete reflection of information concerning all transactions and other facts of economic activity.

8.2  The Company shall keep the documents defined by the current laws.

8.3  The Company shall disclose its financial information according to the procedure established by the current laws and internal documents of the Company.

8.4  The President of the Company shall be liable to the extent set out in the current laws for organization, status and reliability of the Company’s accounting records, for a timely submission of annual reports and other financial statements to overseeing bodies, and for the trustworthiness of information about Company activities submitted to the shareholders of the Company, to its creditors and other persons.

8.5  The annual balance sheet of the Company, supported by Auditor’s and Audit Commission’s report, shall be submitted by the President of the Company to the Board of Directors and the Annual General Meeting of shareholders.

8.6  The annual balance sheet of the Company is subject to a preliminary approval by the Board of Directors of the Company not later than in 30 (thirty) days before the date of holding the Annual General Meeting of the shareholders.

8.7  The Audit Commission of the Company shall certify the trustworthiness of data contained in the annual report of the Company and its balance sheet submitted to the Annual General Meeting of shareholders.

9. INFORMATION ABOUT THE COMPANY

9.1  Information about the Company shall be submitted to Shareholders in accordance with current laws and other legal acts of the Russian Federation.

9.2  The Company shall ensure the shareholders’ access to the documents that should be kept and provided by the Company provide according to this Charter and laws of the Russian Federation. Information about the Company and the copies of the corresponding documents of the Company shall be made available by procedure set forth by current laws of the Russian Federation.

9.3  The Shareholders and the Company shall make all reasonable efforts to prevent an unauthorized disclosure and a leak of such information. The members of the Board of Directors, having access to the confidential information about the Company, may neither disclose such information to any persons, who have no access to such information, nor use it in their own interests or interests of other persons.

9.4  If necessary, the Company may enter into confidentiality agreements with its employees, members of the Board of Directors and the shareholders, while these persons enter in confidentiality agreements among themselves.

9.5  Compulsory disclosure of information shall be made by the Company to the extent and in the manner stipulated by the internal documents of the Company and current laws of the Russian Federation.

9.6  Access to the state secret data shall be prohibited for foreign persons.

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10. REORGANIZATION AND LIQUIDATION OF THE COMPANY

10.1The Company may be voluntarily reorganized by procedure set forth in current RF legislation. As stipulated by law, Company reorganization shall entail the transfer of Company’s rights and obligations to its legal successors.

10.2The reorganization of the Company may be performed in the form of a merger, takeover, divestiture, spin-off and restructuring.

10.3The Company is considered as reorganized, except for the cases of reorganization in the form of a takeover, from the moment of state registration of the newly created legal entities.

10.4In the case of the Company reorganization by way of a take over, the Company is considered as reorganized from the moment of making an entry into the Consolidated State Register of Legal Entities on the termination of activity of a company which had been taken over.

10.5 The Company may be liquidated voluntarily by procedure established by law, or by the court decision on the grounds envisaged by current RF laws.

10.6 The liquidation of the Company entails its termination without transfer of rights and obligations by way of a legal succession to the other individuals.

10.7 Upon the appointment of liquidation commission, the latter shall have all powers to manage the Company activity. The liquidation commission shall appear in the court on behalf of the Company under liquidation.

10.8 Liquidation commission shall place a notice on the liquidation of the Company, on the procedure and terms for its creditors to make their claims, in printed media that publish data on the registration of legal entities. The period for the creditors’ making such claims shall be less than two months from the date of publishing the notice of the Company liquidation.

10.9 Upon the expiration of the period for creditors to make their claims, the liquidation commission shall draw up an interim liquidation balance sheet containing data on the property of the Company being liquidated, claims of its creditors, and the results of the consideration thereof. The interim liquidation balance sheet shall be approved by the General Meeting of the shareholders.

10.10 Upon completion of the settlements with creditors, the liquidation commission shall draw up a liquidation balance sheet subject to approval by the General Meeting of the shareholders.

10.11 The Company’s property that survived the settlement of accounts with creditors, shall be distributed by the liquidation commission among the shareholders in the following order:

·  firstly, payments shall be made on the shares, which the Company is obliged by law to buy out from shareholders;

·  secondly, payments shall be made of accrued but not paid out dividends on the preferred shares and of a liquidation value of preferred shares as defined by the Charter of the Company;

·  thirdly, the property of the Company under liquidation shall be distributed among the shareholders – owners of common shares and all the classes of preferred shares.

10.12 Allocation of the property at each stage shall be performed after the property allocation of the previous stage has been fully completed.

10.13 Liquidation of the Company shall be deemed completed, and the Company no longer existing, from the moment of a corresponding entry has been made in the Consolidated State Register of Legal Entities.

10.14 In the process of reorganization (liquidation) of the Company, as well as after the cessation of work involving the use of data containing RF state secrets, the Company shall protect such data and data medium through development and implementation of procedures for information security and information protection< counterintelligence, safety guard and fire safety.

11. CHARTER OF THE COMPANY

11.1 This Charter is a constituent document of the Company. The requirements of the Charter of the Company are mandatory for execution by all managing and overseeing bodies of the Company and by the shareholders of the Company. This Charter enters into force from the moment of its registration in compliance with the procedure established by the current RF legislation.

11.2 Decisions on amendments and additions to this Charter shall be taken by the General Meeting of the shareholders of the Company or by the Company’s Board of Directors, according to the procedure, envisaged by laws and this Charter, and shall come into effect for third parties after the state registration of the aforementioned modifications.

11.3 Provisions of the Charter shall be applicable in their part that is not in contradiction to the law. Should modifications of the law result in Charter articles and provisions’ entering in conflict with legal acts, such articles and provisions shall be considered null and void until corresponding modifications are made to the Charter.

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PART II. CHARTER CAPITAL OF THE COMPANY

12. CHARTER CAPITAL OF THE COMPANY, GENERAL PROVISIONS

12.1 The charter capital of the Company defines the minimal size of the Company property that ensures the interests of its creditors.

12.2 The Company shall have a Charter Capital equal to 206 641 356  rubles 20 kopecks (two hundred six million six hundred forty one thousand three hundred fifty six rubles twenty kopecks), divided into 2 066 413 562 (two billion sixty six million four hundred thirteen thousand five hundred sixty two ) placed registered common shares with a par value of 0.1 (one-tenth) of one ruble (or 10 (ten) kopecks) each. The Charter Capital of the Company has been fully paid.

12.3 In addition to the placed registered common shares, the Company declares (shall have the right to place) 100 000 000 (one hundred million) registered common shares with a par value of 0.1 (one-tenth) of one ruble each and a total amount of 10 000 000 rubles 00 kopecks (ten million rubles) (declared shares).

Upon placement, declared registered common shares of the Company shall grant the rights to the extent provided for the placed registered shares of the Company.

13. INCREASE OF CHARTER CAPITAL OF THE COMPANY

13.1 The charter capital of the Company may be increased by the raise of par value of the shares, or by the placement of additional shares by decision of a General Meeting of shareholders according to the sub-clauses 27.1.6 - 27.1.10 of this Charter or by decision of the Company’s Board of Directors according to sub-clauses 32.2.33 and 32.2.34 of this Charter.

13.2 The increase of the Company charter capital by raising the par value of the shares may be performed only at the cost of the property of the Company. The increase of the Company charter capital via the placement of additional shares may be performed at the cost of the property of the Company.

13.3 In the case of the Company charter capital’s increase by way of additional share placement, the Company may place such additional shares only within the limits of the amount of declared shares, envisaged by this Charter. Thus, in the case if the amount of declared shares of the Company is not sufficient for the placement of expected amount of additional shares of the Company, then, by procedure and on the terms established by this Charter and the law, the decision to increase the charter capital of the Company may be taken simultaneously with the decision to make amendments to this Charter with respect to the amount of declared shares of the Company, as necessary to take the decision on charter capital increase.

13.4 Additional shares of the Company can be placed by subscription or conversion, as well as by distribution among all shareholders of the Company – in the case where an increase of the Company charter capital is performed at the cost of its property.

13.5 The Company shall be entitled to place additional shares by ether public or private subscription.

13.6 The placing price of the additional shares for the individuals who have a preemptive right of share purchase can be lower than the placing price for other persons, but not more than by 10% (ten percent). The placing price of such additional shares cannot be lower than their par value.

13.7 The payment for the additional shares of the Company, placed by subscription, can be made in cash, securities, other commodities or property rights or other rights, having a pecuniary valuation, according to the decision on the increase of the Company charter capital.

13.8 Additional shares of the Company, placed by subscription, shall be deemed placed upon full payment.

13.9 In the case where an increase of the Company charter capital is done at the cost of its property by placing additional shares, such shares shall be distributed among all shareholders. In doing so, each shareholder shall be offered shares of the same category (class), as he/she owns, on pro rata basis.

13.10 The amount, by which the charter capital of the Company is augmented at the cost of the property of the Company, shall not exceed the difference between the net asset value of the Company and the reserve fund of the Company.

14. DECREASE OF COMPANY CHARTER CAPITAL

14.1 The company shall be entitled, and in the cases, stipulated by the current RF laws, obliged to decrease its charter capital by reducing the par value of shares or by diminishing their total quantity, including an acquisition of a part of the shares in the cases stipulated by current RF laws and by this Charter.

14.2 The decision to decrease the charter capital of the Company by reducing the par value of the shares or by acquisition of a part of the shares with a view to diminish their total quantity, shall be

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taken by the General Meeting of shareholders according to the sub-clauses 27.1.11 – 27.1.12 of this Charter.

14.3 Payment in cash to all shareholders of the Company and (or) transfer to them of equity securities, owned by the Company and placed by other legal entity may be envisaged by the decision to decrease the charter capital of the Company.

14.4 The charter capital of the Company can be decreased by reduction of the total quantity of the placed shares, including the acquisition and cancellation of a part of the shares at the Company disposal in the following cases:

(1) in the case of cancellation of a part of the shares, acquired by the Company following the decision to decrease the charter capital of the Company by acquisition and cancellation of a part of the shares with a view to diminishing their total quantity;

(2) if the shares bought out by the Company on shareholders’ demand have not been sold within one year from the date of their redemption (except for the case of redemption of shares following the decision to reorganize the Company);

(3) redemption of Company shares in the case of its reorganization;

(4) Company reorganization by way of its spin-off at the cost of redemption of converted shares;

(5) if shares, acquired by the Company by decision of a competent body of the Company established by the Company Charter have not been sold within one year from the date of their acquisition;

(6) in other cases specified by current RF laws.

14.5 The decision to decrease the charter capital of the Company by acquisition of a part of the shares with a view to diminishing their total quantity shall be taken by a General Meeting of shareholders.

14.6 Within 3 (three) working days after the date of Company’s decision to decrease its charter capital, the Company shall notify of the decision the authority, that carries out government incorporation of legal entities, and twice with the periodicity of once a month publish in mass media where information on the state incorporation of legal entities are published a notice on reduction of Company’s charter capital. A creditor of the Company, if its rights arose prior to the publication of the notice on Company’s charter capital reduction, shall be entitled within 30 days after the date of the last publication of the notice to demand early performance of the relevant obligation or, if early performance of the obligation is impossible, for reimbursement of the costs related to it.

PART III. SHARES AND OTHER EQUITY SECURUTIES OF THE COMPANY

15. SHARES OF THE COMPANY

15.1 Common share of the Company is registered equity security granting its owner (shareholder) a specific scope of proprietary rights, including the right for participation in the management of the Company, the right to receive a part of Company’s profit in form of dividend, as well as the right to receive a part of property outstanding after liquidation of the Company.

15.2 All issued and placed shares of the Company are common registered shares of the same par value. The value of the shares is expressed in rubles, regardless of the form and the way they have been paid for.

15.3 The Company has a right to place one or more classes of preferred shares of the Company.

15.4 The par value of the shares of the same category (class) shall be the same.

15.5 The par value of placed preferred shares of the Company should not exceed 25% of the charter capital of the Company.

15.6 The procedure of formation and floatation of fractional shares of the Company shall be set forth by this Charter and the current RF laws.

15.7 The scope of rights granted by a share of the Company shall be defined by this Charter and the current RF laws.

15.8 The rights granted by a share of the Company shall be transferred onto their acquirer at the moment of transfer of rights for such security.

16. BONDS AND OTHER EQUITY SECURITIES OF THE COMPANY

16.1 Besides additional shares, the Company shall be entitled to place bonds, options and other equity securities according to the requirement of the current RF laws.

16.2 The Company has no right to place bonds and other equity securities, convertible into the shares of the Company, if the quantity of Company declared shares of specific categories and classes is less than the quantity of shares of such classes and categories, the right for whose purchase is granted by such securities. In such a case, according to the procedure and conditions, stipulated by the law and this Charter, the decision to place equity securities convertible into the shares of the

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Company may be taken simultaneously with the decision to make the amendments to this Charter so that the quantity of declared shares be as necessary to make such decision.

16.3 The placing price of equity securities of the Company convertible into the shares of the Company for the individuals having a preemptive purchase right can be lower than the placing price for other persons, but not more than by 10% (ten percent). The placing price of equity securities of the Company convertible into the shares of the Company may not be lower than the par value of shares, such equity securities are converted into.

16.4 Payment for equity securities placed by the Company (except for the additional shares of the Company placed by subscription) may be made only in cash.

16.5 The equity securities of the Company placed by subscription shall be deemed placed, if fully paid for.

16.6 The redemption of Company bonds may be performed in cash or in kind according to the decision on their issue.

16.7 A bond shall attest the right of its owner to demand the redemption of the bond (payment of the par value, or the par value and interest) within the stated timeframe.

16.8 Placement of bonds and other equity securities (including bonds and other equity securities convertible into shares) shall be performed on the basis of decision of a General Meeting of shareholders and (or) the Board of Directors of the Company.

16.9 The decision to issue bonds shall specify the form, timeframe and other terms of bond redemption.

16.10 A bond shall have a par value. The par value of all bonds issued by the Company shall not exceed the amount of charter capital of the Company or the value of security provided to the Company by a third party for the purpose of issuing bonds. The placement of bonds shall be allowed to the Company upon a full payment of its charter capital.

16.11 The Company may place bonds with flat maturity term or bonds redeemable by series on certain dates.

16.12 The Company shall be entitled to an early redemption of its bonds on demand of bond owners. At the same time, the decision to issue bonds should indicate the cost of redemption and the earliest date when bond may be presented for an early redemption.

16.13 The Company shall be entitled to place bonds secured by pledge of specific property of the Company, or the bonds under security provided to the Company by a third party for the issue of bonds, and debenture bonds.

16.14 The placement of debenture bonds (with no security provided by a third party) shall be permitted not earlier than on the third year of Company’s activity and provided that there is a proper approval of annual balance sheets of the Company for the past two completed fiscal years.

16.15 Bonds can be name bonds and bearer bonds. When issuing name bonds, the Company shall keep the register of their owners. A lost name bond can be renewed by the Company for a reasonable charge. The owner’s rights for a lost bearer bond shall be restored by the court, according to the procedure established by Russian Federation laws on court proceedings.

16.16 Specific details of securities issue, depending on the category of securities and the manner of their placement, are defined by current laws of the Russian Federation.

17. CONSOLIDATION AND SPLITTING OF SHARES

17.1 The Company shall be entitled to perform a consolidation of placed common shares of the Company, which results in conversion of two or more Company common shares into one new common share of the Company by decision of General Meeting of shareholders. In this case, the corresponding modifications shall be made to this Charter with respect to the share’s par value and the quantity of placed and declared common shares of the Company.

17.2 If the purchase of the whole number of shares by a shareholder is not possible during the consolidation, the parts of shares (fractional shares) shall be formed.

17.3 By decision of a General Meeting of shareholders, the Company shall be entitled to perform a splitting of placed shares of the Company, which results in conversion of one share of the Company into two or more shares of the same class (category). In this case, corresponding modifications should be made to this Charter with respect to the share par value and the quantity of placed and declared shares of the Company in corresponding class (category).

18. PAYMENT FOR SHARES AND OTHER EQUITY SECURITIES AT THEIR PLACEMENT

18.1 The shares of the Company placed at the time of its establishment have been completely paid for by the Company founders following the decision on establishing the Company and the terms of agreement on the establishment of the Company.

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18.2 Additional shares and equity securities of the Company, placed by subscription, shall be deemed placed if fully paid for.

18.3 Payment for the additional shares of the Company placed by subscription may be made in cash, securities, other commodities or property rights or other rights, having a pecuniary valuation. Payment for the additional shares with offsetting of Company’s liabilities shall be allowed, in case of private offering.

18.4 The form of payment for additional shares of the Company shall be defined by decision on their placement. The payment for other equity securities shall be made only in cash.

18.5 In the case of payment for additional shares in kind,  a pecuniary valuation of the property used to pay for shares shall be made according to article 77 of Federal law “On joint-stock companies”.

18.6 In the case of payment for shares in kind, an independent appraiser should be assigned to evaluate the market value of such property, if otherwise is not specified by the requirement of RF laws. The amount of property’s pecuniary valuation undertaken by the Board of Directors of the Company may not be higher than the amount of the valuation, performed by an independent appraiser.

19. ACQUISITION OF PLACED SHARES BY THE COMPANY

19.1 The Company shall be entitled to acquire the shares placed by it based on the decision of General Meeting of shareholders with respect to a decrease of charter capital of the Company by acquiring a part of placed shares with a view of diminishing their total quantity. The decision to decrease the charter capital may not be taken, if the nominal value of shares, remaining in circulation would be less than the minimal amount of charter capital stipulated by the current laws of the Russian Federation. Shares acquired by decision of General Meeting of shareholders to decrease the charter capital shall be cancelled upon their acquisition.

19.2 The Company shall be entitled to acquire the placed shares by decision of the Board of Directors. Such a decision may be taken, if the nominal value of the shares remaining in circulation would constitute at least 90 percent of the charter capital of the Company. The acquired shares do not grant the right of vote, they are not taken onto consideration when counting the votes, there are no dividends accrued on such shares. Such shares should be sold at their market price no later than one year after the date of their acquisition. Otherwise, the General Meeting of shareholders should take a decision to decrease the charter capital of the Company by canceling the mentioned shares.

20. REDEMPTION OF COMPANY SHARES AT SHAREHOLDERS’ REQUEST

20.1 Shareholders – owners of the voting shares shall be entitled to request the Company’s redemption of all or a part of the shares owned by them in the following cases:

(1) reorganization of the Company or entering into a major transaction, whose approval is decided upon by General Meeting of shareholders according to the Federal law “On Joint-stock companies”;

(2) introduction of modifications and additions to the Charter of the Company or approval of the revised Charter, if their rights are restricted.

20.2 The request referred to above may be put forward by the shareholders, who voted against adoption of the respective decisions or who did not take part in the voting on such issues no later than 45 (forty five) days from the day of adoption of a respective decision by the general meeting of shareholders. Requests received by the keeper of the Register of the Company’s shareholders (Registrar) or by the Company after the said time period or containing incomplete/unreliable information shall not be taken for consideration.

20.3 The redeemed shares shall be put at the Company’s disposal and be sold at their market price within one year of the date of their redemption.

PART IV. SHAREHOLDERS OF THE COMPANY

21. SHAREHOLDERS OF THE COMPANY

21.1 Shareholder of the Company is any individual, having exercised the ownership of the shares of the Company according to the procedure established by the current laws of the Russian Federation and this Charter. The number of Company’s shareholders is not limited.

21.2  Unless otherwise specified by the law, in the case of legitimate common proprietary right for one or more shares of the Company by two or more individuals, all such individuals are recognized as one shareholder with respect to the Company and shall exercise the rights of the Company’s shareholder thus granted to them, including the voting right at General Meeting of shareholders, by one of them or by their common representative at their discretion. Powers of either of mentioned individuals shall be duly formalized. Co-owners of the share are jointly responsible for all obligations accepted by the shareholders.

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21.3 An individual, having entered into ownership of a fractional share of the Company on the grounds envisaged by current laws of the Russian Federation and this Charter, shall be recognized as Company’s shareholder. A fractional share of the Company grants to the shareholder the rights granted by a whole share of the Company, to the extent corresponding to such part of the whole share that this fractional share represents.

21.4 The shareholder’s legal status is defined by the scope of rights granted to him and obligations assigned to him. The rights of shareholder(s) of the Company in relation to the Company and other shareholders are conditional on the class and category, as well as the quantity of shares, owned by them.

21.5 Access to the state secret information shall be provided for Company’s shareholders under security clearance executed in compliance with the procedure stipulated by the legislation of the Russian Federation.

22. SHAREHOLDER REGISTER OF THE COMPANY

22.1 The rights of shareholders for the shares owned by them are attested in the system of registration – the registrar’s records in the personal accounts – or, in the case of registration of rights in a depositary, – records in the custody accounts in depositaries.

22.2 The right for the Company share shall be transferred to the acquirer from the moment the registrar makes a record on the personal account of the acquirer in the registration system, or, in case of registration of rights in a depositary – from the moment the individual, performing the depositary activity, makes a record on the custody account of the acquirer.

22.3 The Register of shareholders of the Company shall contain data on each registered individual, the quantity and classes (categories) of shares recorded to the name of such individual, as well as other data stipulated by the current laws.

22.4 The Company shall ensure the maintaining and keeping of the Resister of shareholders according to the requirements of the current laws of the Russian Federation.

22.5 In case of functions on maintenance and caring of Company shareholders’ register are transferred to Company’s Registrar, the Company is not released from responsibility for maintenance and caring of the register.

23 SHAREHODERS’ RIGHTS

23.1 Shareholders (shareholder), having 1 (one) whole common share of the Company in the aggregate, have 1 (one) vote at the voting during the General Meeting of shareholders. A fractional common share of the Company shall give its owner a proportional part of the vote.

23.2 Every common registered share of the Company provides shareholder – its owner with the same scope of rights, including:

(1) the right to take part in the management of the Company, and participate personally or via representative in the General Meeting of shareholders with the voting right on all the issues within its terms of reference with the number of votes, corresponding to the quantity of common shares of the Company owned by him;

(2) the right to receive dividend from the net profit of the Company;

(3) the right to receive a part of Company property in the case of its liquidation;

(4) the right to freely alienate all or a part of shares owned by him without prior agreement of other shareholders or the Company;

(5) the right to demand the redemption of all or a part of shares owned by him in the cases and according to the procedure, established by the law;

(6) the preemption right to acquire the shares placed by the Company through public subscription, as well as in the cases stipulated by the current legislation, through a limited subscription, according to the terms and the procedure, of additional common shares and equity securities, convertible into the common shares, in the quantity, proportional to the quantity of the shares of a given category, owned by him;

(7) when exercising the pre-emption right to acquire additional shares, placed by the Company and other equity securities, convertible into the shares of the Company, the right to pay for such placed equity shares in cash, if he/she chooses to do so, provided that the decision, that sets a basis for the placement of such equity securities, foresees their payment in non-monetary funds;

(8) the right to request, by a procedure set by the law, the Company registrar to confirm shareholder’s rights for the shares of the Company in his possession by issuing an extract from the register of Company shareholders, which extract shall not be regarded as a security;

(9) the right to request the Company to issue an extract from the list of individuals entitled to take part in the General Meeting of shareholders containing the data about the requesting shareholder, or a certificate, confirming that he/she is not on the list of the individuals entitled to take part in the General Meeting of shareholders;

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(10) the right to request the Company to issue an extract from the list of individuals entitled to demand the Company to redeem shares in his/her possession, containing the data about the requesting shareholder, or a certificate, confirming that he/she is not included in the list of individuals entitled to demand the Company’s redemption of shares;

(11) the right to request the Company to issue an extract from the list of individuals, having a preemptive right to acquire additional shares and other equity securities placed by the Company, containing the data about the requesting shareholder, or a certificate, confirming that he/she is not on the list of such individuals;

(12) the right of access to the documents of the Company defined by the Federal law “On Joint-stock companies”;

(13) in the time of preparation for the General Meeting of shareholders, the right of free access to information (materials) that should be made available to shareholder in his/her exercising the rate to take part in the General Meeting of shareholders;

(14) the right to appeal to the court that a major transaction or a party-related transaction, which has been entered into by the Company in violation of the procedure established by the law, be recognized invalid;

(15) the right to claim in the court against a decision taken by the General Meeting of shareholders in violation of provision of the law and this Charter (including any decision taken in violation of Charter provisions concerning convening and holding annual and extraordinary General Meetings of shareholders), in the case that the claimant didn’t take part in the General Meeting of shareholders or voted against such a decision, and that such a decision violates his/her rights and legitimate interests;

(16) other rights, envisaged by the current RF legislation.

23.3 Shareholders (shareholder), having at least 1% (one percent) of the voting shares of the Company in aggregate shall also have the right to:

(1) request the Company to provide a list of individuals entitled to take part in the General Meeting of shareholders, if they are included in such a list;

(2) according to the procedure established by the law, to put a claim against the Board of Directors, a member of the Board and the President of the Company to reimburse the damages caused to the Company.

23.4 Shareholder(s) registered in the system of register keeping and having more than 1% (one percent) of the voting shares of the Company in aggregate shall also have the right to request the Company Registrar to provide data from the Register of Company shareholders on the names of share owners entered in the Register of the Company shareholders and on the quantity, category and par value of the securities in their possession.

23.5 Shareholder(s) having at least 2% (two percent) of the voting shares of the Company in aggregate shall also have the right to:

(1) submit items to the agenda of the Annual meeting of shareholders, as well as to propose candidates (including self-nomination) for the Board of Directors of the Company,  Audit Commission and Election Committee of the Company,  and propose a candidate for Auditor of the Company;

(2) submit candidates (including self-nomination) for the Board of Directors of the Company, if the proposed agenda of an extraordinary General Meeting of shareholders includes an item on election of the Board of Directors of the Company;

(3) in case of approval by Company’s Board of Directors of the resolution on refusal to include a certain item into the agenda of the General Meeting of shareholders or of a certain candidate into the list of candidates for election to a respective body of the Company or in case of the Board of Directors’ (Supervisory Board’s) avoidance of taking a corresponding resolution, put a claim for compelling the Company to include the proposed item into the agenda of the General Meeting of shareholders or a candidate into the list of candidates for election to a respective body of the Company. .

23.6  At the same stime, Shareholder(s) having in aggregate at least 10% (ten percent) of the voting shares of the Company, shall also be entitled to:

(1) request a convening of an extraordinary General Meeting of shareholders on any of the issues within the Meeting’s terms of reference;

(2) in case of Board of Directors’ failure to approve within the time provided for with this Charter, Clause 28.9, the resolution on holding of an extraordinary General Meeting of shareholders or in case of the resolution on refusal in holding of an extraordinary General Meeting of shareholders, put a claim for compelling the Company to hold an extraordinary General Meeting of shareholders;

(3) demand a conduct of an interim inspection (revision) of financial and economic activities of the Company by the Audit Commission of the Company;

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(4) demand an independent audit inspection of activities of the Company.

23.7 At the same time, Shareholder(s) having in aggregate at least 25% (twenty-five percent) of the voting shares of the Company, shall also be entitled for a free access to the accounting documents and the minutes of Company’s Management meetings.

24. SHAREHODERS’ OBLIGATIONS

24.1 The obligations of shareholders are determined by the current laws and this Charter. The shareholders of the Company are particularly obliged to:

(1) observe the provisions of this Charter, follow the decisions of the General Meeting of shareholders and other internal documents of the Company;

(2) timely, and following other terms and procedures envisaged by the law, this Charter and internal documents of the Company, make the payment for shares and other equity securities placed by the Company;

(3) timely notify the Board of Directors of the Company, Audit Commission and Auditor of the Company of the transactions made by the Company and expected transactions, where they can be regarded as concerned parties, as well as of legal entities, where they own independently or jointly with an affiliated individual(s) 20% (twenty percent) of the voting equities (shares) or more; and of legal entities, where they hold positions in the management bodies.

(4) not to disclose confidential information on Company activity.

24.2 The shareholders of the Company shall have no right to act on behalf of the Company without special powers vested in accordance with procedure established by the law.

PART V. REGULATORY BODIES OF THE COMPANY

25. THE STRUCTURE OF REGULATORY BODIES OF THE COMPANY

25.1 The Company shall be managed through regulatory bodies of the Company.

25.2 The regulatory bodies of the Company are the General Meeting of shareholders, the Board of Directors, Management (collective executive body of the Company) and the President (sole executive body of the Company).

25.3 Additional internal structural subdivisions (including counsels, committees, commissions) may be established at the corresponding body of the Company.

26. GENERAL MEETING OF COMPANY SHAREHOLDERS

26.1 The General Meeting of shareholders shall be the superior regulatory body of the Company.

26.2 The General Meeting of shareholders shall perform its activity according to the provisions of this Charter, internal documents of the Company approved by decision of the General Meeting of shareholders, and the requirements of RF legislation.

26.3 General Meeting of OJSC MTS Shareholders shall be held in Moscow.

26.4 The Company is obliged to conduct Annual (regular) General Meeting of shareholders.

26.5 The Annual General Meeting of shareholders shall consider issues related to the election of the Board of Directors of the Company, Audit Commission of the Company, approval of Auditor of the Company, issues referred to in sub-clause 27.1.19 of this Charter, and other issues within the terms of reference of the General Meeting of shareholders.

26.6 The General Meetings of shareholders held in addition to annual meetings shall be deemed extraordinary. An extraordinary General Meeting of shareholders may decide on issues concerning an early termination of powers of the Board of Directors members and concerning the election of the Board of Directors of the Company, concerning an early termination of powers of the Audit Commission members and concerning the election of the Audit commission of the Company, approval of Auditor of the Company, and other issues, stipulated by the current legislation.

27. TERMS OF REFERENCE OF GENERAL MEETING OF SHAREHOLDERS

27.1 The following matters are referred to the terms of reference of the General Meeting of shareholders:

(1) modifications and additions to this Charter (with exception of instances, when such a decision is referred to the terms of reference of the Board of Directors of the Company), as well as approval of a new version of the Charter of the Company;

·decision shall be made by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company, who participate in the General Meeting of shareholders

(2) reorganization of the Company;

·the decision to reorganize the Company into a noncommercial partnership shall be made only upon proposal of the Board of Directors of the Company by unanimous decision of all the shareholders of the Company;

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·the decisions to reorganize the Company in other forms shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company, who participate in the General Meeting of shareholders

(3) liquidation of the Company, appointment of liquidation commission and approval of interim and ultimate liquidation balance sheet;

·decision shall be made by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(4) determination of number of members of the Board of Directors of the Company, election of its members and making decision concerning the early termination of powers of all members of the Board of Directors, as well as making decision to pay reward and/or to set a procedure for compensation of expenses to the members of the Board of Directors of the Company during the period of execution of their obligations;

·decision on election of members of the Board of Directors shall be made by cumulative voting. During the cumulative voting the number of votes that belong to each shareholder is multiplied by the number of individuals to be elected in the Board of Directors of the Company, and a shareholder has a right to give the votes, received in such a manner, completely for one candidate or distribute them among two or more candidates. The candidates who received the largest number of votes are considered as elected to the Board of Directors of the Company;

·decision on all other issues shall be made by simple majority (more than a half) of shareholders’ votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(5) determination of quantity, par value and category (class) of authorized shares of the Company and the rights granted by such shares;

·decision shall be made by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company who participate in the General Meeting of shareholders)

(6) increase of charter capital of the Company by augmenting the par value of Company shares;

·decision shall be made only upon proposal of the Board of Directors of the Company by simple majority (more than a half) of shareholders’ votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(7) increase of charter capital of the Company by placement of additional shares only among the shareholders of the Company, in case of increase of charter capital of the Company at the cost of its property;

·(decision shall be made only upon proposal of the Board of Directors of the Company by simple majority (more than a half) of shareholders’ votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(8) increase of charter capital of the Company by placement of additional shares by limited subscription

·decision shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(9) increase of charter capital of the Company by placement of common shares by public subscription, constituting to more than 25% (twenty-five percent) of previously placed common shares of the Company;

·decision shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

(10) in the case if the Company receives a voluntary or mandatory offer to acquire shares, as well as other equity securities convertible into the shares of the Company – increase of charter capital of the Company by placement of additional shares within the quantity and categories (classes) of authorized shares, according to the procedure stipulated by the law;

·decision shall be made by simple majority (more than a half) of shareholders’ votes – owners of voting shares of the Company who participate in the General Meeting of shareholders)

(11) decrease of charter capital of the Company by reducing the par value of Company shares;

·decision shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes – owners of voting shares of the Company who participate in the General Meeting of shareholders

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(12) decrease of charter capital of the Company by acquisition by the Company of a part of the shares on purpose to reduce their total quantity, as well as by redemption of acquired or bought out shares of the Company;

·decision shall be made upon proposal of the Board of Directors of the Company by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(13) placement of equity securities convertible into the common shares of the Company by private subscription;

·decision shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(14) placement of equity securities convertible into the common shares of the Company by public subscription, in the case of placement of equity securities convertible into the common shares of the Company, constituting more than 25% (twenty-five percent) of previously placed common shares of the Company;

·decision shall be made only upon proposal of the Board of Directors of the Company by qualified majority (three fourth) of shareholders votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(15) placement of securities convertible into shares, including options of the Company, in the case if the Company receives a voluntary or mandatory offer to acquire shares, as well as other equity securities convertible into the shares of the Company, according to the procedure, stipulated by the law;

·decision shall be made by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(16) determination of quantitative composition of the Audit Commission of the Company, election of its members and making decision concerning an early termination of powers of all members of Audit Commission, as well as making decision to pay reward and/or to set a procedure for compensation of expenses to the members of the Audit Commission of the Company during the period of execution of their duties;

·decision of election of members of Audit Commission shall be made by simple majority (more than a half) of the shareholders’ votes — owners of voting shares of the Company, except for those are members of the Board of Directors or individuals, holding positions in regulatory bodies of the Company, participating in the General Meeting of shareholders;

·decisions on the rest of the issues shall be made by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders.

(17) appointment of the Auditor for Company;

·decision is made by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(18) dividend payment (declaration) based on the results of the first quarter, half-year, nine months of a fiscal year;

·decision is made by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(19) approval of annual reports, annual accounting statement, including Income and Loss statements (Income and Loss accounts) of the Company, as well as profit distribution (including dividend payment (declaration)), except for the profit distributed as dividends based on the results of the first quarter, half-year, nine months of a fiscal year and losses of the Company according to the results of a fiscal year;

·decision is made by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(20) determination of the General Meeting of shareholders’ conduct procedures;

·decision is made by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(21) determination of quantitative composition by procedure stipulated in the law and in this Charter of the Election Committee, electing members of the Election Committee and early termination of their power;

·decision is made by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(22) consolidation and splitting of shares;

·decision is made only upon proposal of the Board of Directors of the Company by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

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(23) approval of party-related transactions by procedure stipulated in the law and in this Charter, when the subject of a transaction or of several interrelated transactions is a property whose value according to the Company’s books (offer price of the acquired) is equal to 2% (two percent) or more of the Company’s assets book cost according to its accounting statement at the last reporting date, except for transactions referred to in subparagraphs 27.1.24. and 27.1.25. of this Charter;

(24) approval of party-related transactions, by procedure stipulated in the law and in this Charter, when the subject of a transaction or of several interrelated transactions is a placement by subscription or by sale of the shares in value exceeding 2% (two percent) of previously placed Company common shares and common shares, to which the previously placed securities and equity securities may be converted;

(25) approval of party-related transactions, by procedure stipulated in the law and in this Charter, when the subject of a transaction or of several interrelated transactions is a placement by subscription of the shares in value exceeding 2% (two percent) of previously placed Company common shares and common shares, to which the previously placed securities and equity securities may be converted;

(26) approval of party-related transactions, by procedure stipulated in the law and in this Charter, if all members of the Board of Directors of the Company, at the time of taking a decision on the party-related transaction at the Board of Directors’ meeting in all cases other than those stipulated in subparagraphs 27.1.23—27.1.25. of this item of the Charter, have been recognized as concerned persons and/or are not independent directors, and the relevant issue has been referred by the Board of Directors for decision at the General Meeting of shareholders;

(27) if the Company receives voluntary or compulsory offer to purchase shares, as well as any other equity securities, convertible into shares of the Company, the General Meeting of shareholders approves party-related transactions by procedure defined provided by law;

·decisions on the approval of party-related transactions in all cases mentioned above in sub-clauses (23) — (26) shall be taken only upon the proposal of the Company’s Board of Directors by a simple majority (more than one half (1/2)) of votes of all non-concerned shareholders owning voting shares of the Company;

·decisions on the approval of party-related transactions in the case mentioned in sub-clause (27) shall be taken by a simple majority (more than one half (1/2)) of votes of all non-concerned shareholders owning voting shares of the Company

(28) approval of major transactions, in the case, when the subjects of the transaction is a property of a value of more than 50% (fifty percent) of Company’s assets book cost defined according to its accounting statement on the last reporting date;

·decision is made only upon proposal of the Board of Directors of the Company by a special majority (three quarters) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(29) approval of major transactions, by procedure stipulated in the law and in this Charter, in the case, when unanimity of members of the Board of Directors of the Company with respect to the approval of such major transaction, as requested by subparagraph 31.2.19 of this Charter, has not been achieved, and the relevant issue has been referred by the Board of Directors for decision at the General Meeting of shareholders;

·decision is made only upon proposal of the Board of Directors of the Company by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(30) making a decision on participation in financial and industrial groups, associations and other unions of commercial organizations;

·decision is made only upon proposal of the Board of Directors of the Company by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(31) approval of internal documents that regulate Company’s bodies’ activities;

·decision is made only upon proposal of the Board of Directors of the Company by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(32) transferring powers of the sole executive body of the Company by agreement to a commercial organization (managing organization) or to an individual entrepreneur (manager), as well as making a decision on early termination of powers of such Managing organization or Manager;

·decision is made only upon proposal of the Board of Directors of the Company by a simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

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(33) if the Company receives a voluntary or compulsory offer to acquire shares, as well as any other equity securities convertible into shares of the Company, approval of such transaction or several interrelated transactions connected with the acquisition, alienation or an opportunity of alienation by the Company, in direct or indirect way, of any property in value of 10 or more percent of Company’s assets book cost, defined according to its accounting statement on the last reporting date, unless such transactions are entered into in line with the regular business activities of the Company or have been made before the Company has received such voluntary or compulsory offering;

·decision shall be made by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(34) in the case where the Company receives a voluntary or compulsory offer to acquire shares, as well as any other equity securities convertible into shares of the Company, taking a decision on raising the reward for persons occupying positions in the Company managing organs,  on setting terms for terminating their powers and on increase of compensations paid to such persons in the case of termination of their powers;

·decision shall be made by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(35) in the case where the Company receives a voluntary or compulsory offer to acquire shares, as well as any other equity securities convertible into shares of the Company,  approval of Company’s acquiring these outstanding shares;

·decision shall be made by simple majority (more than a half) of shareholders’ votes — owners of voting shares of the Company who participate in the General Meeting of shareholders

(36) Other issues stipulated by law and by this Charter.

27.2 Issues referred to the terms of reference of the General Meeting of shareholders, may not be referred for decision by the Board of Directors of the Company or by an executive body of the Company.

27.3 General Meeting of shareholders shall not be entitled to consider issues not related to its terms of reference and to take decisions on these issues.

27.4 Resolutions approved by the General Meeting of shareholders on issues not included in the agenda of the General Meeting of shareholders (unless all shareholders of Company took participation in the meeting) or approved with violation of competence of the General Meeting of shareholders or approved in the absence of quorum for holding of the General Meeting of shareholders or approved without majority of shareholders’ votes required for approval of resolutions shall be null and void regardless of appeal of such resolutions.

28. PREPARATION AND CALLING OF GENERAL MEETING OF SHAREHOLDERS

28.1 Annual General Meeting of shareholders shall be held not earlier than 2 (two) months and not later than 6 (six) months after the end of the fiscal year. Annual General Meeting of shareholders shall be convened by the Company Board of Directors. Date of Annual Meeting of shareholders shall be defined by the Company Board of Directors.

28.2 Extraordinary General Meeting of shareholders shall be held following a decision of the Company’s Board of Directors on its own initiative, by the request of the Audit Commission of the Company, Auditor of the Company, as well as of shareholders (shareholder), who own at least 10% (ten percent) of voting shares of the Company in aggregate on the date of the demand or on other grounds provided for by the Russian law. An extraordinary General Meeting of shareholders is called by the Board of Directors of the Company or otherwise in cases provided for by the Russian law. In case of Board of Directors’ failure to approve within the time provided for with this Charter, Clause 28.9, the resolution on holding of an extraordinary General Meeting of shareholders or in case of the resolution on refusal in holding of an extraordinary General Meeting of shareholders, a body of the Company or persons who require to hold a meeting shall be entitled to put a claim for compelling the Company to hold an extraordinary General Meeting of shareholders

28.3 The request for convening an annual General Meeting of shareholders shall contain the wording of the items to be included in the meeting agenda. The request for an extraordinary Meeting may contain the wording of draft decisions on each of the items under consideration, as well as the proposal on the form of the meeting conduct.

28.4   Board of Directors’ decision that initiates the calling of extraordinary meeting of Shareholders shall be adopted by a simple majority of votes of members of the Board of Directors present at the meeting. This decision shall include the approval:  (1) of the wording of agenda items; (2) of

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the form of holding the meeting. Minutes of the Board of Director meeting where such decision has been taken shall contain the names of the Board members who voted for the decision, against it or abstained.

28.5 A request of the Audit Commission of the Company to call an extraordinary General Meeting shall be adopted by a simple majority of votes of the members of the Audit Commission present at its meeting and be sent to the Board of Directors. Said request shall be signed by the members of the Audit Commission who voted in favor of its adoption.

28.6 A request by the External Auditor initiating the calling of an extraordinary General Meeting shall be signed by him/her and sent to the Board of Directors.

28.7 Shareholders owning in aggregate at least 10 percent of the voting shares of the Company who initiate the calling of an extraordinary General Meeting of Shareholders shall send to the Board of Directors a written request specifying, in addition to the information indicated in clause 28.3, the following information: (1) the names of the Shareholders, (2)  and information about the voting shares owned by them. Such request shall be signed by the Shareholder or its agent. If the request is signed by an agent,  his/her power of attorney shall be attached. If the request is signed by a representative of the legal entity who acts on its behalf by proxy, the power of attorney shall be attached to the request.

28.8  A request of initiators of calling an extraordinary General Meeting shall be submitted in writing by a registered letter to the Company’s address with delivery confirmation or shall be delivered to the secretary of the Company Board of Directors against the secretary signature or be delivered to the Company expedition office or any other department empowered to receive letter correspondence addressed to the Company.

28.9 Within 5 days of the date of submission of such request, the Board of Directors shall adopt a decision in favor or against the calling of an extraordinary General Meeting. Either decision of the Board shall be brought to meeting initiators’ notice within three days upon its taking.

28.10 The list of persons, who are entitled to take part in the General Meeting of shareholders, is made relying on the data of the Company’s Shareholders Register on a certain date, set by the Board of Directors of the Company in compliance with requirements of the applicable laws and of this Charter.

28.11 Board of Directors while preparing a General Meeting shall define:

·form for the conduct of meeting (joint attendance or absentee voting)

·the date, place, and time of the meeting and/or final date of Company’s accepting voting ballots and the mailing address, which the filled ballots shall be sent to

·the date, place, and start time of registration of meeting participants for a joint attendance meeting

·final date when the list of persons entitled to take part in the General Meeting must be compiled

·General Meeting agenda

·the way in which Shareholders should be notified of the General Meeting of Shareholders

·list of information (materials) to be handed to the persons entitled to take part in the meeting of shareholders and procedure for delivery of such materials.

·form and text of the voting ballots.

28.12 Annual General Meeting of shareholders agenda shall include items for the election of the Board of Directors, Audit Commission, approval of the Auditor, as well as items for approval of annual reports, annual or accounting statement, Company’s profits and losses distribution.

28.13 Board of Directors of the company shall not entitled to amend wordings of items suggested for the inclusion into the agenda of the General Meeting of shareholders, and wordings of decisions on such items.

28.14 Voting at the General Meeting of shareholders shall be carried out by voting ballots. If the Meeting is held in form of joint attendance, the voting ballot shall be sent by registered letter or by messenger or handed in to each person or its representative, entered in the list of persons, who are entitled to take part in the General Meeting of shareholders. Should the General Meeting be held in form of absentee voting or in any other instances stipulated by the law or by this Charter, the voting ballot shall be sent by registered mail or by messenger or delivered by hand against the signature to each person included in the list of persons entitled to take part in the General Meeting of shareholders not later than 20 days before the convening date. Those shareholders shall be deemed to have taken part in the General Meeting of shareholders in form of joint attendance, who have registered for participation in such a meeting, as well as shareholders whose ballots have

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been received at least two days before the convening date. Those shareholders shall be deemed to have taken part in the General Meeting of shareholders in form of absentee voting, whose ballots have been received before the final date of accepting ballots.

28.15 Notification of the General Meeting of shareholders’ convening shall be sent to shareholders included in the list o persons entitled to take part in the General Meeting of shareholders at least 30 days before the convening date, unless otherwise specified by the law, by circulating the notice text by registered mail at the addresses referred to in the list of persons entitled to take part in the General Meeting, or delivered messenger to those persons against their signature.

The notice text on holding the General Meeting shall be published also in mass media (newspapers Rossiyskaya Gazeta and Vedomosty) according to the timeframe set forth for sending such a notice. The date of shareholders’ notification of the General Meeting shall be defined by the mailing date, by the publication date, or by hand delivery date.

Wording of the notice of the Meeting convening may, by Board decision, sent also in electronic form to those Company shareholders who left their electronic addresses with the Company of Registrar.

28.16  If a person registered in the Register of Shareholders of the Company is a nominee holder of shares, the notice of a General Meeting shall be sent to the nominee holder of shares, unless other mailing address is indicated in the list of persons entitled to take part in the General Meeting of shareholders.

28.17 Additional requirements to General Meeting convening and holding procedure are stipulated by the RF laws and Company’s internal documents.

28.18 The list of information and materials concerning the Meeting agenda to be provided to shareholders and the way to provide such materials are defined by requirements of the RF law. By the Board decision, the information that should be made available for persons entitled to take part in the General Meeting of shareholders, unless it is confidential or proprietary, may be partially or fully disclosed on the Company site in Internet.

28.19 Proposals on entering items to the annual General Meeting agenda and proposals on offering candidates for Company bodies elected by General Meeting may be put by Company shareholders who own at least 2 percent of voting shares within 100 days of the fiscal year termination. Proposal on the agenda and candidates to Company bodies shall be sent to the Company address by registered mail with delivery confirmation or handed in to Company secretary or be delivered to the Company expedition office or any other department empowered to receive letter correspondence addressed to the Company.

29. HOLDING OF GENERAL MEETING OF SHAREHOLDERS

29.1 Decisions of the General Meeting of shareholders may be taken by holding a meeting (joint attendance of company shareholders for discussion on agenda items and adopting decisions on issues put to vote).

29.2 Decision of the General Meeting of shareholders may also be taken without holding a meeting, by way of absentee voting.

29.3 The general Meeting of shareholders whose agenda includes such issues as election of the Board of Directors, Auditing Commission of the Company, approval of the Company Auditor as well as issues referred to in 27.1.19 of this Charter may not be held in form of absentee voting.

29.4 the following persons can participate in the General Meeting of shareholders: those included in the list of persons, who are entitled to take part in the General Meeting of shareholders, persons, to whom the property rights for the shares of above said persons have been transferred by way of legal succession or reorganization, or their representatives acting by proxy to vote or by the law. If a General Meeting of shareholders is held in form of joint attendance, persons from the list of those entitled to take part in the General Meeting of shareholders (or their representatives), shall be entitled to take part in such a meeting or to mail the filled voting ballots to the Company.

29.5 Registration of persons, who take part in the General Meeting of shareholders, held as a join attendance meeting, shall be carried out by the Election Commission of the Company. The Election Commission shall be elected by the General Meeting and include at least three persons. If Election Commission has not been established, its functions shall be performed by the Secretary of by the Board of Directors of the Company or by any other person designated by the Board. Functions of the Election Commission may be performed by the Registrar of the Company. In the case where the number of shareholder owing voting shares exceeds 500, the Election Commission’s functions shall be performed by the Company Registrar. The Election Commission in performing its duties shall be an independent permanent body of the General Meeting of shareholders. Its functions shall be to: (1) verify powers of persons who register for participation in the General Meeting of Shareholders, (2) verify power of attorney of shareholder representatives

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for compliance with the RF law, (3)  keep records of powers of attorney and the rights granted thereby, reflecting these in a corresponding journal, (4) hand out and send voting ballots and other information (materials) for the General Meeting and maintain a journal of issued (sent) ballots, (5)  determine a quorum of the General Meeting of Shareholders, (6)  count votes and tally voting results, (7)  perform other functions stipulated by the RF laws, by Company internal documents relative to the Election Commission activity or by an agreement between the Company and person acting as Election Commissions.

29.6 Transfer of rights (powers) to a representative who is entitled to take part in General Meeting of shareholders shall be in form of a power of attorney issued following the requirements of current laws. Shareholder may at any time replace his/her representative and personally exercise the rights granted by the share, by canceling the power of attorney in way prescribed by the law. In the cases where the share is a subject of fractional ownership of several persons, the voting right at the General Meeting of shareholder shall be given, at their decision, to one of the participants of such fractional ownership or to their common representative. Power of each of such persons shall be duly formalized.

29.7 General Meeting of shareholders, held in form of joint attendance is declared open if by the time of its holding there is a quorum with respect to at least one issue on the agenda of this General Meeting. Registration of persons entitled to take part in the General Meeting of shareholders, who failed to register before the opening of the Meeting, shall continue until the discussion has been completed of the last agenda item of the General Meeting for which a quorum is available.

29.8 If agenda of the General Meeting of shareholders includes items to be voted upon by different membership of voters, a quorum necessary to take decisions on these items shall be defined separately for each such item. If there is no quorum allowing decisions to be taken on the items that require a certain composition of voters, it shall not impede the adoption of decisions to be voted upon by a different composition of voters if a quorum is sufficient for taking such decisions.

29.9 Quorum of the General Meeting of shareholders is defined depending on the composition of voters’ audience with respect to the agenda items of the General Meeting of shareholders.

29.10 All shareholders — owners of common shares of the Company shall be deemed as those who vote on any item included in agenda of the General Meeting of shareholders, except for the following items:

· approval of party-related transactions (subparagraphs 27.1.23  — 27.1.27 of this Charter); not included in the number of voters are the shareholders of the Company, who, in the way prescribed by the law, are recognized as a related party with respect to such transaction made by the Company;

· electing members of the Audit Commission of the Company; not included in the number of voters are the shareholders of the Company, who are members of the Board of Directors, and persons, who occupy positions in the Company managing bodies.

29.11 Quorum of the General Meeting of shareholders in the case of a vote taken on the issue of reorganizing the Company in a non-commercial partnership shall be as high as 100% (one hundred percent) of the membership, voting on this issue. Quorum of the General Meeting of shareholders on any other issue included in the agenda of the General Meeting of shareholders, is defined as a simple majority (more than a half) of shareholders’ votes — those who owns shares of the Company, voting on the relevant issue.

29.12 If quorum is satisfied, then the number of votes, necessary to take a corresponding decision at the General Meeting of shareholders, stated in paragraph 27.1 of this Charter, is defined according to the total number of shareholders’ votes — those who possess voting shares of the Company and take part in the General Meeting of shareholders, except for voting the issue of reorganizing the Company in non-commercial partnership and the approval of party-related transaction (subparagraphs 27.1.23 — 27.1.27 of this Charter). In the above stated cases the number of votes, required to make a corresponding decision at the General Meeting of shareholders, is defined according to the total number of shareholders’ votes — those who possess voting shares of the Company, included in the number of voters on the relevant issue.

29.13 If at the assigned beginning of the General Meeting of shareholders quorum is not satisfied for all issues, included in agenda Of the General Meeting, opening General Meeting of shareholders may be postponed to the later time, but not later than 2 (two) hours

29.14 If there is no quorum to hold the annual General Meeting of shareholders, then the second General Meeting of shareholders with the same agenda shall be held. If there is no quorum to hold the extraordinary General Meeting of shareholders the second General Meeting of shareholders with the same agenda shall be held.

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29.15 The second General Meeting of shareholders is law competent (has quorum), if it is attended by shareholders, who possess not less than 30 percent of votes of company’s outstanding voting shares in aggregate.

29.16 For convening a second General Meeting of shareholders called instead of the meeting that failed to take place the way to convene such a meeting is defined following the provisions of Article 28 of the Charter. Sending notification of the second meeting is made according to Clause 28.15 of this Charter. Sending ballots for voting at the second meeting shall follow the rules of applicable laws of Russian Federation.

29.17  In case of failure to have a quorum for holding of an Annual General Meeting of shareholders pursuant to a court decision, the second General Meeting of shareholders with the same agenda shall be held within 60 days at the latest. No additional claim is required for it. The second General Meeting of shareholders shall be called and held by a person or Company’s body specified in the court decision and, if the said person or Company’s body does not hold an Annual General Meeting of shareholders in the time specified in the court decision, the second meeting of shareholders shall be called and held by other persons or Company’s body which put a claim provided that such persons or Company’s body were specified in the court decision.

29.18  If the second General Meeting of shareholders is held less then in 40 days after the postponed General Meeting of shareholders, persons, who are entitled to take part in the General Meeting of shareholders, are defined according to the list of persons, who were entitled to take part in the postponed General Meeting of shareholders.

29.19 Voting at the General Meeting of shareholders is held according to the concept «one voting share of the Company — one vote», except for holding cumulative voting in case, stipulated by law and this Charter.

29.20 Voting on all agenda items at a General Meeting of Shareholders shall be conducted only by voting ballots. The Board of Directors shall approve the ballot form and wording..

29.21 A voting ballot shall be deemed invalid with respect to the agenda item specified thereon in the event that:

(1)     there are corrections to ballot’s original data;

(2)     there are discrepancies between the ballot submitted to the Election Committee and the text and the form of the ballot approved by the Company’s Board of Directors;

(3)     more than one voting option is left; unless the vote is taken in accordance with instructions of persons who had acquired the shares after the date of making up a list of persons entitled to participate in the General Meeting of Shareholders, or in compliance with instructions of the owners of depositary securities.

(4)     no voting option is left in the ballot;

(5)     all voting options have been crossed out;

(6)     the ballot has no Shareholder’s signature;

(7)     the Company, after having received voting ballots signed by a representative acting by proxy, was notified,  not later than two (2) days prior to the date of the General Meeting of Shareholders, that this representative has been replaced (recalled);

(8)     in the course of counting the votes, two or more filled voting ballots of one person have been discovered where for the same item of the agenda of the General Meeting of Shareholders the voter has left different voting options. This rule shall not cover the ballots signed by a person who had issued a proxy for voting with respect to shares that have been transferred after the date of making up a list of persons entitled to participate in the General Meeting of Shareholders, and/or persons acting on the basis of such proxy, where in the boxes used for the indicating a number of votes given for each voting option the number of votes cast for the respective option is indicated and appropriate marks are present as stipulated by the normative acts of the Russian Federation;

(9)     the ballot for voting on the issue of election of members of the Company’s Audit Commission or members of the Election Committee has the “in favor” box left for more candidates than the number of persons that should be elected to the respective body of the Company. This rule shall not cover voting ballots that have been signed by a person voting on shares that have been transferred after the date of making up a list of persons entitled to participate in the General Meeting of Shareholders, in accordance with instructions received from the persons who acquired such shares, and/or a person voting on shares circulating outside the Russian Federation in the form of depositary securities, and that contain appropriate marks stipulated by the normative acts of the Russian Federation;

(10)  the ballot has the votes “in favor” left for alternative versions of decision;

(11)  in the course of cumulative voting, a Shareholder has distributed between the candidates to the Board of Directors a number of votes that exceeds the numbers of votes he have had at his disposal.

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(12) the ballots were submitted to Election Committee after the time when the counting of votes was started.

29.22 Additional requirements to the conduct of a General Meeting of shareholders are set forth in the RF laws and by the Company’s internal Regulations.

30. DOCUMENTS OF THE GENERAL MEETING OF THE COMPANY’S SHAREHOLDERS

30.1 According to results of voting the Election Committee executes the Minutes of results of the voting, which is signed by members of the Election Committee or by a person, who performs its functions. The Minutes of results of the voting is executed not later than in 3 (three) working days after the General Meeting of shareholders is closed or after the day, when the voting papers cease to be accepted any more, if the General Meeting of shareholders is held as distant voting.

30.2 Decisions, made at the General Meeting of shareholders, as well as results of voting are disclosed at the General Meeting of shareholders, during which the voting was held, or delivered not later than in 10 (ten) days after the Minutes of results of the voting is executed if the form of the Report on results of the voting to persons, included in the list of persons, who are entitled to take part in the General Meeting of shareholders, in order, stipulated for notification about the General Meeting of shareholders. The Report on results of the voting at the General Meeting of shareholders is signed by a person, presiding at the General Meeting of shareholders and By the Corporate Secretary. Results of voting on electing the Board of Directors and the Audit Commission of the Company are to be disclosed at the General Meeting of shareholders and take effect since they are disclosed.

30.3 Chairman of the General Meeting of shareholders shall be elected by majority of votes of shareholders present at the meeting. The chairman shall perform the following functions: (1) conducts the General Meeting, (2) enforce compliance with the regulations, (3) signs the minutes of the General Meeting of shareholders.

30.4 Report on voting results shall be attached to the minutes of the General Meeting.

30.5 The Minutes of the General Meeting of shareholders (in two copies) shall be executed within 3 (three) working days of the General Meeting of shareholders’ closure. Both copies are signed by Meeting chairman and by a secretary of the General Meeting of shareholders. Extracts from Minutes of the General Meeting of shareholders shall be signed by the Secretary of the General Meeting of shareholders.

30.6 After the Report on results of the voting is executed and the Minutes of the General Meeting of shareholders are signed, the voting papers are sealed up by the Election Commission and handed over for storage in the Company archives.

30.7 Additional requirements to the form and the way of presenting documents of the General Meeting of shareholders of the Company are set forth by the RF laws and internal documents of the Company.

31. BOARD OF DIRECTORS OF THE COMPANY

31.1 Board of Directors of the company manages activities of the Company more generally, except for solving questions, referred by law and by this Charter to the terms of reference of the General Meeting of shareholders.

31.2 Only individual person is allowed to be a member of the Board of Directors of the Company. Persons, elected in the Board of Directors of the Company, may be reelected unlimited number of times. A member of the Board of Directors of the Company may be not a shareholder of the Company.

31.3 A person, who performs functions of the President of the Company, is not allowed to be the Chairman of the Board of Directors of the Company simultaneously.

31.4 Members of the Board of Directors of the Company are elected by the General Meeting of shareholders in order, stipulated by law and in this Charter, for the term up to the next annual General Meeting of shareholders. If annual General Meeting of shareholders was not held in at a stated time, powers of the Board of Directors of the Company cease to be effective, except for powers to prepare, call and hold the annual General Meeting of shareholders.

31.5 Number of members of the Board of Directors of the Company is defined by the decision of the General Meeting of shareholders and may not be less than 7 (seven). Until a decision is taken setting other number of members, the shareholders, while submitting candidates for the Board positions shall be guided by the existing number of Directors in the Company as defined by General Meeting decision by the time of such submission.

31.6 Organization and managing work of the Board of Directors are performed by the Chairman of the Board of Directors of the Company. The Chairman of the Board of Directors presides at the

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meetings of the Board of Directors of the Company and ensures that minutes be taken at the meetings.

31.7 The Chairman of the Board of Directors and one deputy chairman shall be elected by members of the Board of Directors out of their membership by a simple majority of votes, present at the Board of Directors of the Company. The Board of Directors of the company is entitled to reelect at any time the Chairman of the Board of Directors and his deputy by a simple majority of votes from the total votes of the Board of Directors of the Company.

31.8 The Board of Directors shall adopt decisions and organize work in accordance with the Board of Directors’ regulations approved by General Meeting of Shareholders.

31.9 The Board of Directors members shall act in interests of the Company, conscientiously and reasonably exercise their rights and obligations in relation to the Company.

31.10 The Board of Directors of the Company shall annually report on its activity to General Meeting of Shareholders.

31.11 Duties of the members of the Company’s Board of Directors shall be defined by applicable laws, by this Charter and by internal documents of the Company. Members of the Board of Directors shall, in particular:

(1) comply with requirements of this Charter and decisions General Meeting of shareholders of the Company;

(2) timely provide the Company with their personal data and data about their affiliated persons and notify of any changes of these data by procedure stipulated by law;

(3) timely inform the Board of Directors of the Company, the Audit Commission of the Company and the Auditor of the Company about transactions made the Company and/or anticipated transactions, for which they may be recognized as a related party, as well as about legal entities, in which they have (personally or jointly with their affiliated persons) 20% (twenty percent) or more of voting shares (equities), and about legal entities where they occupy positions in management bodies.

31.12 By the General Meeting of shareholders’ decision, members of the Board of Directors of the Company shall, in the period of performing their duties, receive remuneration and reimbursement of their expenses connected with performing their functions as members of the Board of Directors of the Company. Amounts of such remunerations and reimbursements shall be set by the General Meeting of shareholders decision. Responsibility of the members of the Board of Directors during the performance of their duties may be insured if the Company managing bodies so decide.

32. TERMS OF REFERENCE OF BOARD OF DIRECTORS OF THE COMPANY

32.1 In order to maintain a stable financial status and competitiveness of the Company, the Board of Directors shall establish an effective organizational structure and a management system for the Company, develop basic strategic and tactical goals, and enforce their implementation by the Company.

32.2 Terms of reference of the Board of Directors of the Company shall include the following issues:

(1) identifying priority directions of Company activity, defining development strategy of the Company,  working out the Company investment policy, defining new types of the Company activity, approving the annual budgets (finance plans) of the Company,  examining the principal directions of activity and development strategy of subsidiaries and affiliated companies;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(2) approving the Company organizational structure (in the form of a list showing positions in the Company and structural subdivisions of the Company directly reporting to the President of the Company);

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(3) examining results of financial and economic activity of the Company and its subsidiaries and affiliated companies; preliminary examination of annual reports and annual accounting statements of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(4) calling annual and extraordinary General Meetings of shareholders, except for cases, stipulated in 23.6.2 of this Charter;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(5) approval of the agenda of the General Meeting of shareholders;

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·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(6) setting the final date for closing the list of persons, who are entitled to take part in the General Meeting of shareholders, and resolving other issues, connected with preparation and holding of the General Meeting of shareholders and meetings of the Board of Directors and referred to terms of reference of the Board of Directors of the Company by the applicable laws and by this Charter;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(7) placing bonds and other equity securities by the Company (including equity securities convertible into Company shares), except for cases when the adoption of relevant decision is within the General Meeting’s terms of reference;

·decision on offering of equity securities convertible into Company shares shall be unanimously taken by all members of the Board of Directors exclusive of exiting members of the Board of Directors;

·decision on offering of bonds or other equity securities shall be taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(8) defining, in cases, stipulated by law, the price (pecuniary valuation) of the property subject to transactions effected by the Company, as well as placement and redemption price of equity securities of the Company;

·decision is made by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors. If a related party with respect to one or several transactions when the price (pecuniary value) of the property is defined by the Board of Directors of the company, is a Board member (or Overseeing Board member), the price of the property shall be defined by the decision of Board members (or Overseeing Board members) who are not a related party with respect to such transaction

(9) purchasing shares, bonds and other securities paced by the Company in cases and by procedure stipulated by laws of the Russian Federation, except for the cases, where such a purchase is connected with decrease of the charter capital of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(10) appointing the President of the Company; defining the number of members of the Board of Directors, electing its members; approving terms of engagement agreements with the President and members of the Management of the Company; early termination of power the President of the Company and members of the Management of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(11) recommendations to the General Meeting of shareholders on the value of reward to be paid and/or on procedure of compensating expenses for members of the Audit Commission of the Company, as well as evaluating the payment for the Company Auditor’s services;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(12) recommendations to the General Meeting of shareholders concerning amount of dividend on share and procedure for paying dividends;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(13) use of a reserve fund and other funds of the Company, as well as approval of internal documents guiding the way of setting up and using the funds of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(14) approval of internal documents of the Company, except for internal documents, approval of which is within the terms of reference of the General Meeting of shareholders of the Company, Management of the Company and the President of the Company, regulating business principles of the Company in the following fields: strategy, investments, new types of Company activity, human resource management policy and personnel motivation and loyalty insurance system; corporate management;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(15)approval of a Corporate Code of Ethics;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(16) establishing subsidiaries and opening representative offices of the Company, as well as deciding on their closing; approval of Regulations on subsidiaries and representative

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offices, as well as taking decisions on amending the Charter in connection with establishment of subsidiaries and representative offices of the Company and their liquidation;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(17) approving major transactions involving the property valued at 25% (twenty five percent) to 50% (fifty percent) of the Company’s assets book cost, defined according to its accounting statement on the last reporting date, as well as approving transactions, connected with alienation or an opportunity of alienation of real estate property, which costs more than 10% (ten percent) of the Company’s assets book cost;

·a decision to approve major transactions, stated in this subparagraph, is taken unanimously by all members of the Board of Directors with exception of retired members of the Board of Directors

(18) approval by procedure stipulated by law, of party-related transactions, except for the cases where the adoption of relevant decision is within the terms of reference of the General Meeting of shareholders of the Company in compliance with subparagraphs 27.1.23. — 27.1.27. of this Charter;

·decision is taken by a simple majority (more than one half (1/2)) of votes of all independent members of the Board of Directors who are not a related party.

(19) approval of the Company registrar and terms of his assignment, as well as terminating the assignment;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(20) approval of candidature of Managing organization (Manager) and terms of respective agreement, so that the issue of transferring powers of the sole executive body of the Company to such Managing organization (Manager) be included in the agenda of the General Meeting of shareholders of the Company ;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(21) temporary suspension of powers of Managing organization (Manager), simultaneously with taking a decisions on establishment of the provisional sole executive body of the Company and on holding an extraordinary General Meeting of shareholders to solve the issue of an early termination of powers of the Managing organization (the Manager) and transferring the powers of the sole executive body of the Company to a Managing Organization (Manager);

·decision is taken by a qualified majority in three quarters of votes of all members of the Board of Directors with exception of retired members of the Board of Directors

(22) Taking a decision on purchase of Company shares that have been redeemed and purchased for other reasons and are in the Company possession in compliance with requirements of law and of this Charter;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(23) approval of a decisions on issuing, prospectus, reports on the results of the issue, as well as reports on the results of purchasing Company’ securities by the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(24) including issues in the agenda of the General Meeting of shareholders in the cases, stipulated by law and this Charter;

·decisions on including all mentioned issues in agenda of the General Meeting of shareholders are made by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(25) taking decision on Company participation, changing its share and cutting participation in other organizations (except for the cases where such a decision is within the of terms of reference of the General Meeting of shareholders of the Company in compliance with subparagraph 27.1.30. of this Charter), including those on establishing subsidiaries and associated companies of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(26) approval of President and Board members’ accepting positions in managing bodies of other organizations.

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

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(27) adopting recommendations in relation to voluntary or compulsory offering, received by the Company, in compliance with Chapter XI.1 of the Federal law «On joint-stock companies», which include assessment of the offer price of securities to be purchased and probable change of their market price after the purchase, assessment of plans of the person, who has made such voluntary or compulsory offer, in relation to the Company, including in relation to its personnel;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(28) appointment (if required) of the Corporate Secretary of the Company and termination of his/her powers, as well as approval of principles of assessment of his/her work and of a reward system;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(29) appointment of the secretary for the Board of Directors of the Company and termination of his/her powers, as well as approval of principles for evaluating hi/hers work and of a reward system

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(30) approving specimens of trademark, as well as emblems and other means of visual identification of the Company;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(31) establishing committees, commissions and other internal structural subdivisions at the Board of Directors of the Company, defining their powers and approving their personal composition;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(32) approval of transactions connected with alienation or possible alienation of land, buildings (including those what are objects of incomplete construction), and living and non-living spaces (related to floor space in excess of 1000 sq. meters).

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(33)  increase of charter capital by placing additional shares of the Company by way of an open subscription, except for cases set forth in 27.1.9 of this Charter.

·decision is taken unanimously by all members of the Board of Directors; the votes of retired Board Members are not taken into account

(34) increase of charter capital by placing additional shares of the Company and converting into these shares the previously issued equity securities convertible into such shares;

·decision is taken unanimously by all members of the Board of Directors; the votes of retired Board Members are not taken into account

(35) Approval of transactions involving a property with the price over 100 million USD in ruble equivalent at the RF Central Bank exchange rate as of the date of decision taking but not exceeding 25 percent of the assets value of the Company, assessed by its accounting data on the last reporting date;

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(36) Formulating the Company opinion with respect to corporate conflicts among the Company shareholders.

·decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors

(37) Approval of the candidates to be nominated for election to the Board of Directors (Supervisory Boards) and Auditing Commissions of the Company’s foreign subsidiaries;

·(decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors)

(38)  Approval of the candidates to fill the vacancies of the top officers in the Company, who report directly to the President of the Company;

·(decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors)

(39)  Approval of the general principles of appraisal of the work and remuneration and incentive scheme for the top offices of the Company, who report directly to the President of the company;

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·(decision is taken by a simple majority (more than a half) of votes of those who take part in the meeting of the Board of Directors)

(40) Approval of transactions on the acquisition, alienation and encumbrance of shares and equity stakes in charter capitals of other companies and the approval of material terms and conditions of such transactions, including, but not limited to, provisions specifying the number of acquired, alienated and encumbered shares or provisions specifying the size of the acquired, alienated or encumbered equity stake and the price of the transaction;

·decision is taken by a simple majority (more than one half (1/2)) of votes of the Board members participating in the meeting;

(41) Determination of the Company (Company’s representatives) position on issues concerning the Company (Company’s representatives) participation (non-participation) in voting, voting on draft resolutions “in favour”, “against” or “abstained” on the following issues of agendas for (a) General Meetings of shareholders (participants), (b) Board of Directors meetings, (c) meetings of collective executive bodies as well as (d) position on approval of resolutions by a sole executive management body of subsidiaries and affiliated/associated operating companies of the Company and business enterprises in which Company directly or indirectly participates and/or such subsidiaries and affiliated/associated companies of Company:

on participation of Company’s subsidiaries and affiliated/associated companies in other organizations and/or on participation of enterprises in which Company directly or indirectly participates and/or such subsidiary and affiliated/associated company in other organizations (on either entering as a participant (shareholder) into an existing organization or setting up a new organization), on the change of participation or on termination of such participation, including making transactions on acquisition, alienation or encumbrance of shares and equity stakes in charter capitals of such organizations, including the approval of material terms and conditions of such transactions, including, but not limited to, provisions specifying the number of acquired, alienated or encumbered shares or provisions specifying the size of the acquired, alienated or encumbered equity stake and the transaction value;

HOWEVER provisions of this sub-clause (41) shall not apply to cases of adoption of decisions by the management bodies: (a) on the reorganization of COMSTAR Regions CJSC and MULTIREGION CJSC by merger into COMSTAR Regions CJSC and/or MULTIREGION CJSC of their 100% subsidiaries and the companies where such subsidiary of COMSTAR Regions CJSC or MULTIREGION CJSC participates, directly or indirectly, in the amount of 100% of the charter capital, respectively; (b) on the reorganization of 100% subsidiaries of MTS OJSC, COMSTAR Regions CJSC, MGTS OJSC and MULTIREGION CJSC as well as the companies where a respective subsidiary of MTS OJSC, COMSTAR Regions CJSC, MGTS OJSC or MULTIREGION CJSC participates, directly or indirectly, in the amount of 100% of the charter capital, which is effected by way of reorganization, or merger into each other, or business consolidation; and (c) transactions between COMSTAR Regions CJSC, MULTIREGION CJSC, their 100% subsidiaries and/or the companies where, directly or indirectly, such subsidiaries and companies participate in the amount of 100% of the charter capital.

·(decision is taken by a simple majority (more than one half (1/2)) of votes of the Board of Directors members participating in the meeting);

(42) Consideration of information and reports of the President and the Management Board of the company on the following issues:

a) Company activities;

b) performance by the President and Management Board of their duties and responsibilities;

c) performance by the Company top officers, who report directly to the President, of their duties and responsibilities

d) implementation of the resolution of General Shareholders Meetings and the Board of Directors of the Company;

(43) Approval of the reports the Company executive bodies on effectiveness of the risk management system (process) and internal control system (process) of the Company;

·decision is taken by a simple majority (more than one half (1/2)) of votes of the Board members participating in the meeting

(44) Taking decisions on issues referred to the Boars of Directors’ terms of reference by rules and recommendations of security exchanges, security trading organizers, public organizations and state authorities of foreign countries that regulate the security circulation and listing (including bonds, Depositary receipts, other equity securities convertible into shares) and derivative securities (including debenture notes and other derivative

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instruments) of a Russian issuer on the territory of such foreign countries, applicable to the Company activity, as well as placement of securities by the Company, including problems of limiting the placement price, placement timeframe, essential conditions, placement and circulation parameters for such securities (including derivative securities), setting liability limitations applied by the Company in connection with such issue and/or in connection with the existing contractual obligations of the Company;

(45) Adopting decisions on other issues referred to the Board of Directors’ terms of reference by this Charter, by the law and by Company contractual obligations, as well a by foreign laws applicable to the Company as a security issuer placed outside the Russian Federation.

32.3 Issues referred by the law and this Charter to the Board of Directors’ terms of reference may not be delegated for decision to an executive body of the Company.

33. MEETINGS OF BOARD OF DIRECTORS OF THE COMPANY

33.1 Board of Directors of the company organizes shall carry out its activity in form of joint attendance meetings of members of the Board of Directors held according to the Board of Directors Regulations and based on free discussions of agenda items with a view of taking decisions within the Board’ terms of reference. If meetings are held in the joint attendance form, account shall be taken of written opinions of absent members of the Board of Directors. The Company’s Board of Directors may hold its meetings by means of electronic (telephone) communication facilities. In such case the Secretary of the Board of Directors ensures the magnetic (electronic) tape recording of the Board of Directors meeting to be taken. Participation in the Board of Directors meeting held by means of electronic (telephone) communication facilities shall be deemed equal to personal presence. If necessary, the Board of Directors of the Company may take decisions by absentee voting (polling) in the way prescribed by Regulations of the Board of Directors.  Decision to hold a meeting of the Board of Directors of the Company by absentee voting shall be taken by the Chairman of the Board of Directors.

33.2 Meetings of the Board of Directors of the Company shall be convened as necessary, but at least twice a quarter, and be called by the Chairman of the Board of Directors of the Company on his own initiative, at the request of a member of the Board of Directors of the Company, the Audit Commission of the Company or the Auditor of the Company, as well as at the request of the executive body of the Company.

33.3 Not later than 30 (thirty) days before the annual General Meeting of shareholders of the Company, a meeting of the Board of Directors of the Company shall be held in order to approve preliminary those annual reports, annual accounting statement, including accounts of profits and losses of the Company, Auditor’s report, report of the Audit Commission of the Company covering the results of examination of the annual accounting statement, that should be submitted for approval of the annual General Meeting of shareholders. At the such Board meeting, the Chairman of the Board of Directors of the Company shall present complete current financial information to the Board of Directors, as well as complete report on the current state in the Company, on basic results of its business activity and plans of the Company.

33.4 Meetings of the Board of Directors shall be held at the Company location or at any other place, defined by the Board of Directors.

33.5 Members of the Board of Directors shall be timely notified of the coming meeting of the Board of Directors. Such a notice shall include the meeting agenda.

33.6 A quorum required to hold meetings of the Board of Directors of the Company shall be a half of elected members of the Board of Directors. Should the number of members of the Board of Directors of the Company become less than a number constituting such quorum, the Board of Directors of the Company shall take a decision to hold an extraordinary General Meeting of shareholders in order to elect a new membership of the Board of Directors of the Company. In this case, powers of the Board of Directors of the Company shall terminate, except for powers related to preparation, convening and holding of such extraordinary General Meeting of shareholders.

33.7 When taking decisions at the meeting of the Board of Directors of the Company, each member of the Board of Directors has 1 (one) vote.

33.8 Unless otherwise specified by law or by this Charter, a decision of the Board of Directors shall be deemed accepted, if more than a half of members of the Board of Directors, participating in the meeting of the Board, have voted in its favor. Should the votes be equally split, the Chairman of the Board of Directors shall have a casting vote.

33.9 For the purpose of defining a quorum and of counting results of the vote taken on agenda items of a meeting of the Board of Directors, account shall be taken of a written opinion of an absent

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member of the Board of Directors. A written opinion of member of the Board of Directors shall be attached to the Minutes of the meeting.

33.10 In the cases, stipulated in the Federal law «On joint-stock companies», when voting on relevant issues, the votes of retired members of the Board of Directors of the Company shall be disregarded. The following categories of individuals shall be referred to retired members of the Board of Directors:

(1) a member of the Board of Directors who has submitted to the Company (to the name of Chairman of the Board of Directors) a notice of voluntary resignation as a member of the Board of Directors, as of the date when such notice has been received by the Chairman of the Board of Directors;

(2) the member of the Board of Directors disqualified by a court decision;

(3) a deceased member of the Board of Directors.

If the notice of resignation of a member of the Board of Directors has been received by the Company later than 10 calendar days in advance of the next meeting of the Board of Directors, the notifying member of the Board of Directors shall be deemed retired after the regular meeting of the Board of Directors has been held before which the notice had been submitted. The signature of the member of the Board of Directors on the resignation notice shall be certified by a notary.

33.11 No transfer of the voting right from one member of the Board of Directors of the Company to another shall be permitted.

33.12 The casting vote of the Chairman of the Board of Directors of the Company shall not be used by the Deputy Chairman of the Board of Directors or any other member of the Board of Directors, who performs Chairman’s functions in Chairman absence.

33.13 Minutes of a meeting of the Board of Directors shall be taken by the Secretary of the Board of Directors. Minutes of a meeting of the Board of Directors of the Company shall be executed within 3 (three) days of the meeting date. Minutes of a meeting of the Board of Directors of the Company shall be signed by the Secretary and the Chairman of the Board of Directors. The Minutes shall be accompanied by documents approved by the Board of Directors. Extracts from Minutes of the General Meeting of shareholders shall be signed by the Secretary of the General Meeting of shareholders.

33.14 Additional requirements to procedures of holding meetings of the Board of Directors of the Company are set by applicable laws, by Regulations of the Board of Directors and by other internal documents of the Company.

34. EXECUTIVE BODIES OF THE COMPANY

34.1 Executive bodies of the Company shall be collective executive body — the Board of Directors and the Sole executive body — the President.

34.2 Executive bodies shall manage current activities of the Company and report to the Board of Directors and to the General Meeting of shareholders.

34.3 Terms of reference of executive bodies of the Company shall include the solution of all issues of current activities of the Company, except for those issues, which are referred to terms of reference of General Meeting of shareholders and of the Board of Directors of the Company.

34.4 Executive bodies of the Company shall be established by the Board of Directors of the Company.

34.5 Rights and obligations of Executive bodies shall be regulated by applicable laws, by this Charter and by internal normative documents of the Company.

34.6 Executive bodies of the Company shall organize activities of the Company and be responsible for results of these activities, ensure the enforcement of decisions taken at General Meetings of shareholders and by the Board of Directors.

34.7 Executive bodies of the Company shall be responsible for effective economic, financial, scientific and technical and social policies of the Company.

34.8 Holding an office in managing bodies of other organizations by the President and members of the Board of Directors shall be permitted only with the Board of Directors’ consent.

34.9 Board of Directors of the company is shall be entitled to take decision on an early termination of the President’s powers, as well as powers of an individual member of the Management or of all members of Management and on establishing new executive bodies of the Company.

34.10 If functions of the Sole executive body are performed by a managing organization (an Executive Manager), then such managing organization (Executive Manager) shall not be entitled to exercise identical functions in organization — competitor of the Company.

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35. MANAGEMENT OF THE COMPANY

35.1 The Management of the Company, within its terms of reference, as set forth by this Charter, by decisions of General Meetings of shareholders, of the Board of Directors and by internal documents of the Company endorsed by General Meetings of shareholders, shall be responsible for the following issues:

(1) organizing an efficient management of the Company’s everyday operations;

(2) developing basic principles for planning the Company activity;

(3) development and implementation of the Company current economic policy with a view of increasing the Company’s profitability and competitiveness;

(4) drafting quarterly, annual and advanced plans of the Company’s activity, budget and investment program and overseeing their execution;

(5) drafting and founding proposals on improvement of internal organizational and managerial structure of the Company;

(6) drafting and submitting for approval by the Board of Directors of proposals on strategic organization and planning of the activity of the Company as a whole;

(7) development of financial and investment strategies and lists of specific tasks for the Company’s everyday operations;

(8) drafting and submitting for approval by the Board of Directors of key standards of Corporate ethics including matter of confidentiality and information resources’ management;

(9) developing and enhancing the Company employees’ motivation system;

(10) drafting proposals to the Company President and Board of Directors relative to the annual results to be achieved by the Company in pursuing the general goals of activity;

(11) submitting reports to the Board of Directors, Audit Commission, and Company Auditor;

(12) by a Management Chairman decision, a preliminary consideration of materials to be submitted to members the Board of Directors and the Company shareholders in preparation for meetings of the Board of Directors and General Meetings of shareholders;

(13) supporting the enforcement of decisions taken by General Meetings of shareholders and the Board of Directors;

(14) issues of interaction with Company’s subsidiaries and affiliated companies;

(15) examination of activity results the subsidiaries and affiliated companies;

(16) drafting proposals to the Board of Directors of the Company for approval of the budget and the finance and economic activity plan of the Company as well as for making amendments to the previously approved budget of the Company;

(17) approval of internal documents submitted for the Management consideration by decision of the President of the Company;

(18) participation in resolving labor disputes and appointment of a representative from the administration for an out-of-court settlement of disputed on hand;

(19) development and submission to Company’s Board of Directors of proposals on subjects set forth in Article 32, Clause 2, Sub-clause 41 hereof and in cases, when approval of resolutions by Company’s Board of Directors on reorganization and transactions set forth in Article 32, Clause 2, Sub-clause 41 hereof is not required, preliminary approval of such transactions including approval of material terms and conditions of such transactions, including, but not limited to, provisions specifying the number of acquired, alienated or encumbered shares or provisions specifying the size of the acquired, alienated or encumbered equity stake and the transaction value;

(20) discussion of other issues of the current activities of the Company.

35.2 The President of the Company shall be entitled to submit for Management considerations any issue of the Company’s current activity that is not within the terms of reference of the Company’ General Meeting of shareholders or the Board of Directors.

35.3 Personal and quantitative membership of the Management shall be approved by the Board of Directors at the suggestion of the President of the Company for the term defined by the Board of Directors at the time of establishing the Management. The term of the Management shall not exceed the term of the office for the acting President of the Company. Members of the Management may be reelected for unlimited number of terms.

35.4 A contract with a member of the Management on behalf of the Company shall be signed by the Chairman of the Board of Directors of the Company, or by a person authorized by the Board of Directors. Terms and conditions of such a contract shall be approved by the Board of Directors of the Company. Members of the Management of the Company, who signed the engagement contracts with the Company, are subject to specific labor regulations set forth in chapter 43 of the Labor Code of the Russian Federation.

35.5 The Board of Directors shall be entitled to terminate powers of any member of the Management at any time.

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35.6 When powers a member of the Management are terminated, such member of the Management shall, within the timeframe defined by the engagement contract, present a report on his/her activity to the Board of Directors of the Company.

35.7 The Management shall carry out its activities by holding meetings and taking decisions. Meetings of the Management are conducted according to a plan. Meetings of the Management are called by the Chairman of the Management or by request of any member of the Management, the Board of Directors, Audit Commission or Auditor of the Company. A resolution of the Company’s Management on the issues falling within its terms of reference may be adopted by absentee voting (polling).

35.8 Agenda of a regular meeting of the Management is defined according to the plan of the Management activity, by proposals of the Chairman and members of the Management. At such meetings, a written opinion of an absent member of the Management shall be taken into account when defining a quorum and drawing balance of the vote taken on agenda items.

35.9 The Management shall be entitled to take decisions (has a quorum), if a meeting of the Management is attended by at least a half of its members. If the number of present members of the Management is less than necessary for a quorum, the Board shall take a decision on establishing a new Management.

35.10 Decisions on agenda items at the meetings of the Management are taken by a simple majority of votes of the meeting participants. Should the votes be split equally, the Chairman of the Management shall have a casting vote.

35.11 If a member of the Management disagrees with a decision taken, he/she may request that his/her special opinion be attached to the Minutes of a meeting of the Management; within 2 days of the date of the meeting of the Management, he/she shall submit such special opinion in writing to the Secretary of the Management.

35.12 Members of the Management shall act within the terms of reference defined in this Charter, in internal documents of the Company, by decisions of the General Meetings of shareholders, of the Board of Directors and/or based on powers of attorney of the President of the Company.

36. PRESIDENT OF THE COMPANY

36.1 President of the Company shall be vested with all necessary powers to execute an everyday management of the Company activity and to solve corresponding issues, not referred to the terms of reference of the General Meeting of shareholders, of the Board of Directors and of the Management of the Company.

36.2 The President shall represent the viewpoint of executive bodies at meetings of the Board of Directors and at General Meetings of shareholders.

36.3 The President shall head the Management of the Company and organize its work.

36.4 The President, without any proxy, shall act on behalf of the Company and represent its interests in relationships with any persons on any issues, including representing and defending interests of the Company before state authorities and in court.

36.5 Within his/her terms of reference, the President shall perform the following functions:

(1) disposal, in interest and on behalf of the Company, of the Company property and funds;

(2) entering, on behalf of the Company, into transactions both in the Russian Federation and abroad, except for the cases provided for by the Russian law and this Charter.  Transactions involving property with the value exceeding one hundred million (100,000,000) US dollars in ruble equivalent as well as transactions involving alienation/possible alienation of plots of land or buildings (including objects of uncompleted construction), residential and non-residential premises (involving objects with the total floor space over one thousand (1,000) square meters) shall be made in accordance with requirements of this Charter;

(3) approval of the list of personnel of the Company, hiring and dismissing the Company staff in compliance with applicable laws of the Russian Federation, approval of internal working rules of the Company and setting out the remuneration system, incentives for excelled employees and applying disciplinary sanctions;

(4) definition of a detailed internal structural and functional division of the Company’s main departments directly accounting to the President (blocks, business units and other subdivisions of the same status), as well as endorsement of the organizational structure and the detailed internal structural and functional division of all other Company’s structural elements including departments, divisions and other Company units of the same status;

(5) organizing financial and tax accounting and financial reporting, ensuring safekeeping of accounting documentation, accounting registers and accounting statements;

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(6)  taking measures to ensure state secrecy data privacy with development and usage of measures of keeping data confidentiality, data security, counteractions against foreign technical intelligence, security and fire safety;

(7)  determination of content and volume of data that is a trade secret or other confidential information of the Company as well as security procedures to be in compliance with the legislation of the Russian Federation;

(8) adoption of measures for ensuring the safety of commercial and confidential information, related to Company;

(9) presenting Company interests in court, in arbitrage and in arbitration court;

(10) issuance of powers of attorney for performing any actions on behalf of the Company, including those with power to delegate such power of attorney;

(11) issuing orders, approval of internal documents of the Company to regulate financial and economic activity of the Company, activity of internal structural subdivisions of the Company and other internal documents except for those whose approval referred to the terms of reference of General Meeting of shareholders of the Company, or of the Board of Directors;

(12) submission, at the President’s discretion, of documents indicated in 36.1.9 of this Charter for consideration by the Management of the Company.

(13) exercising any other powers as required for everyday management of the Company’s activity.

36.6 Within powers vested in him, the President shall issue orders and give written and verbal instructions that should be binding upon all Company employees.

36.7 The President is appointed by the Board of Directors of the Company for 3 (three) years, and may be reelected for unlimited number of times.

36.8 An engagement contract with the President on behalf of the Company is signed by the Chairman of the Board of Directors of the Company, or by a person, authorized by the Board of Directors. Terms and conditions of such a contract shall be approved by the Board of Directors of the Company.

36.9 Requirements that should be met by persons elected to the President position may be set forth by Regulations on the President of the Company and/or by a decision of the Board of Directors.

36.10 The President of the Company, in performing functions vested in him/her shall be governed by the laws of the Russian Federation, provisions of this Charter and internal documents of the Company.

PART VI. CONTROL OF FINANCIAL AND ECONOMIC ACTIVITIES OF THE COMPANY

37. AUDITOR OF THE COMPANY

37.1 To carry out examination and approval of the annual financial statements of the Company, the General Meeting of shareholders shall approve, on an annual basis, Auditor of the Company.

37.2 Terms of the Auditor engagement contract shall define the way the financial and economic activity of the Company be examined by the Auditor.

38. AUDIT COMMISSION OF THE COMPANHY

38.1 Monitoring financial and economic activities of the Company (internal audit) shall be carried out by Audit Commission of the Company (hereinafter referred to as Commission), constituted of 3 (three) persons.

38.2 Activity of the Audit Commission shall be regulated by the laws of Russian Federation, by this Charter and by Regulations on the Audit Commission of the Company adopted in accordance with the Charter.

38.3 The Audit Commission shall be elected by General Meeting of shareholders from among the shareholders or candidates nominated by shareholders, provided that they are not members of the Board of Directors, do not hold any position in the executive bodies of the Company, and do not perform functions of the Accountant general of the Company in the period to the next annual General Meeting of shareholders. Members of the Audit Commission may be reelected for the next term. Powers of all and any of members of the Commission may be, on reasonable grounds, terminated earlier by decision of the General Meeting of shareholders taken by a simple majority of votes.

38.4 The Commission activities shall be guided by its Chairman elected at the first meeting of the Commission.

38.5 The Audit Commission shall undertake examinations on its own initiative, by instruction of General Meeting of shareholders, of the Board of Directors or on the request of shareholders owing in aggregate not less than 10% (ten percents) of voting shares of the Company. Planned auditing shall be carried out at least once a year. During the auditing, members of the Audit commission shall be entitled to request the Company officials to make available all necessary

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documents and provide personal explanations. The Audit Commission shall submit the auditing results to General Meeting of shareholders and to the Board of Directors of the Company.

38.6 In addition to the annual audit stipulated by laws of the Russian Federation, the Company may, at the request of shareholders owing in aggregate not less than 10% (ten percent) of voting shares, undergo an additional audit at any time by an organization chosen by requesting shareholder. Such additional audit shall be undertaken on the account of the requesting shareholder. Company officials shall ensure to the corresponding auditing organization a free access to Company accounting documents and to other documents as necessary to perform such an audit.

38.7 Annual report of the Company and annual accounting statement shall be submitted to General Meeting of shareholders only if accompanied by an Audit Commission report.

38.8 Results of document auditing and audits carried out by the Audit Commission shall be formalized in form of protocols signed by the Chairman and by those members of the Audit Commission, who performed the auditing, and shall be discussed at the Commission meetings. Protocols of audit and examinations, as well as Commission reports on annual financial statements and accounting reports of the Company shall be submitted to the Board of Directors.

38.9 Audit Commission shall be entitled, if necessary, to engage experts and independent audit companies on a contractual basis. In this case, additional costs shall be approved by the Board of Directors. Commission’s evaluation of costs shall be coordinated with the Board of Directors. The Audit commission shall be entitled to engage the Company staff without doing damage to a regular working process of the Company.

38.10 Members of the Audit Commission may receive compensation for performing their functions. The amount of such compensation shall be set by a decision of General Meeting of shareholders following a recommendation of the Board of Directors. Technical and financial support of the Audit commission activities shall be a duty of the President of the Company.

38.11 Audit Commission’s terms of reference shall include the following functions:

(1) carrying out documental auditing of financial and economic activity of the Company (comprehensive or selective), its trade, settling, foreign currency and other operations;

(2) checking the compliance with adopted cost evaluations, standards and limits;

(3) checking the timeliness and correctness of payments to suppliers of goods and services, payments to the state budgets, accruing and paying dividends, redemption of other obligations;

(4) checking the observance by the Company of normative and legal acts, as well as decisions of the General Meeting of shareholders and of the Board of Directors, by the Company and by its managing bodies;

(5) checking the reliability of everyday accounting, bookkeeping practice and statistical accounting and recording in the Company;

(6) checking the cash and property status of the Company;

(7) checking the observance of rules of office work and keeping financial documentation;

(8) checking the fulfillment of recommendations issued based on previous audits and checks.

38.12 Members of the Audit Commission shall be entitled to take part in meetings of the Board of Directors with a right of consultative vote.

38.13 Members of the Audit Commission shall be accountable for negligent performance of duties vested in them in accordance with the laws of the Russian Federation and this Charter.

38.14 Members of the Audit commission shall be financially responsible before the Company for any damage incurred by their disclosure of information, which is a subject of commercial secret of the Company.

38.15 Additional requirements with respect to the working procedure as well as to rights and obligations of the Audit Commission shall be set forth by Regulations on Audit Commission of the Company.

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EX-4.8

Exhibit 4.8

БКИ

REVOLVING CREDIT FACILITY AGREEMENT NO. 5455

Moscow September “      ” 2011

Open Joint Stock Company “Sberbank of Russia” (“Sberbank of Russia” OJSC), hereinafter referred to as the “Creditor”, represented by Managing Director and Chief of Credit and Project Financing, Major Clients Department of “Sberbank of Russia” OJSC Sakharova Tatiana Gennadievna, acting under the Charter and the Power of attorney No. 01-1/1776 dated December 17, 2010, as the party of the first part, and Open Joint Stock Company “Mobile TeleSystems”, hereinafter referred to as the “Borrower”, represented by the President of “Mobile TeleSystems” OJSC Dubovskov Andrei Anatolyevich, acting under the Charter, as the party of the other part, collectively the “Parties”, have concluded this agreement, hereinafter referred to as the “Agreement”, as follows:

Article 1. Subject Matter of the Agreement

1.1. The Creditor undertakes to provide the revolving credit facility to the Borrower for the purpose of financing of Borrower’s working capital for the period up to September  “      ”, 2014 with the following credit limit:

Limit validity period	Limit amount
From September “      ” 2011 to September “      ” 2014.	10,000,000,000 (ten billion) rubles

The Borrower shall repay the received credit to the Creditor and pay interest and other payments in the amount and according to the terms and conditions of the Agreement.

During the term of the Agreement the credit indebtedness can not exceed the established limit.

1.2. The Credit is granted in tranches. Each tranche may be granted in any amounts for the period not exceeding 91 (ninety one) calendar days (hereinafter referred to as “Credit Term”) within the available credit limit determined in accordance with paragraph 3.1 of the Agreement.

Several tranches may be outstanding simultaneously, however no more than 10 (ten) tranches.

The Borrower shall inform the Creditor in writing on the credit amount and the Credit Term by sending the notice in accordance with paragraph 3.2 of the Agreement not later than 5 (five) calendar days before the planned date of credit disbursement by the Borrower (not including this date.).

1.3. The Credit Term begins with the dates following the date when the indebtedness occurs on credit accounts opened in accordance with paragraph 3.4 of the Agreement.

The indebtedness under each credit tranche accounted on one of the credit accounts opened in accordance with paragraph 3.4 of the Agreement becomes due and payable, and the Borrower shall repay the entire amount of debt under the relevant credit account on the last day of the relevant Credit Term, but no later than “      ” September 2014.

Article 2. Representations and Warranties

2.1. The Borrower is a legal person duly established and validly existing in accordance with the legislation of the Russian Federation.

2.2. The Borrower confirms that all approvals necessary for concluding the Agreement and other agreements and contracts stipulated by the Agreement, had been received and entered into force, or, if they had not been received, they would be obtained and/or become effective in accordance with established procedure prior to the conclusion of the corresponding agreements and contracts in accordance with applicable legislation of the Russian Federation.

2.3. The Borrower represents that the incidents and events listed in paragraph 7.1.6 of the Agreement did not occur on the date of signing the Agreement, and it will make every effort so that they do not occur within the term of the Agreement.

Creditor Borrower

2.4. All factual information provided by the Borrower to the Creditor in connection with conclusion of the Agreement is true and correct in all material respects as of the date of its provision. No information has been concealed as of the date of concluding the Agreement that could result in making the presented information inaccurate or misleading Creditor in any material respects.

2.5. To the best of the Borrower’s knowledge, no judicial, arbitral or administrative proceeding was initiated in any court, arbitration or legal body in respect of the Borrower, which could lead to Borrower’s inability to properly fulfill its obligations under the Agreement.

2.6. The Borrower has been fulfilling and observing the requirements of the applicable law in all material respects, failure to fulfill or observe which could lead to Borrower’s inability to properly fulfill its obligations under the Agreement.

2.7. The Borrower has valid and legal title or legal right to use and operate its assets which is necessary to carry out its activities.

2.8. To the best of the Borrower’s knowledge, no events or circumstances exist that may affect the performance of its obligations under any other agreements or financial instruments, as well as those that could lead to Borrower’s inability to properly fulfill its obligations under the Agreement.

2.9. Conclusion and execution of the Agreement by the Borrower does not conflict with its constituent documents.

Article 3. The Procedure for Granting the Credit

3.1. Any credit amount is granted within the available credit limit determined using the following formula:

ACL = Lim– CI, where

ACL — available credit limit;

Lim — limit specified in paragraph 1.1 of the Agreement;

CI — actual indebtedness under the credit as on the current date.

3.2. The credit is granted by transferring credit amounts to the settlement account of the Borrower specified in Annex No. 1 to the Agreement, based on the orders of the Borrower executed in accordance with Annex No. 2 to the Agreement.

Transfer of credit amounts is made subject to absence of overdue debt and unpaid penalties under the Agreement and under all other credit agreements (including credit facility agreements) and/or guarantee agreements and/or contracts and/or bank indemnity /counter-indemnity/ guarantee agreements concluded (which may be concluded during the term of the Agreement) between the Creditor and the Borrower.

3.3. The credit is granted in the following way:

3.3.1. After the agreements on Creditor’s right for direct debiting of funds from Borrower’s accounts specified in Annex No. 1 hereto to repay the overdue debt are concluded and provided to the Creditor.

3.3.2. After payment of credit facility origination fee.

3.4. Provision of credit is reflected on individual credit accounts opened by the Creditor under the Agreement, depending on the term from the date of provision (not including that date) to the date of credit repayment specified in paragraph 1.1 of the Agreement (inclusive).

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Article 4. Interest and Commission Charges

4.1. The Borrower shall pay interest on the credit at the floating interest rate.

The interest rate is set as the MosPrime 3M rate on the date of quotation plus 1.325 (one point three hundred twenty-five thousandths) percent per annum (fixed margin).

The interest rate is established at MosPrime 3M rate as of 12:30 Moscow time on the date preceding the date of provision of the relevant credit tranche (hereinafter the “quotation date”), plus 1.325 (one point three hundred twenty-five thousandths) percent per annum for the period from the date of provision of credit tranche (not including that date) through the date of repayment of the relevant credit tranche (hereinafter — the “Interest Period”), in accordance with paragraph 1.3 of the Agreement.

Within the Agreement the MosPrime rate (Moscow Prime Offered Rate) is understood as the indicative rate of ruble credits provided by the leading participants of Russian money market, calculated in accordance with the Regulations on the formation of indicative ruble credit rate MosPrime Rate — Moscow Prime Offered Rate, approved by the National Foreign Exchange Association (NCA), published by Thomson Reuters and NCA on MOSPRIME1 page of Reuters information system.

The amount of MosPrime 3M rate is established in accordance with the information given on MOSPRIME1 page of Reuters information system as of 12:30 Moscow time on the quotation date.

If on the MosPrime 3M quotation date provided for by the Agreement the MosPrime 3M rate is not published on that page (including because of holiday / non-business day), the MosPrime 3M rate is determined based on the nearest previous quotation date. If the period during which MosPrime 3M rate is not published on this page is 2 (two) business days or more (for reasons not related to holidays / non-business days or a temporary technical failure in publication of rates), the floating interest rate shall be replaced with fixed interest rate of 9.825 (nine point eight hundred twenty-five thousandths) percent per annum.

The notice of establishment of interest rate shall be sent by the Creditor to the Borrower not later than the first working day of the next Interest Period. In the event that the Borrower has not received the notice, the interest rate shall be calculated by the Borrower independently in accordance with this paragraph of the Agreement.

4.2. Interest is accrued on the actual amount of outstanding credit indebtedness, beginning from the date following the date when debt appears on credit account(s) (inclusive), and through the date of repayment of credit in full.

The interest shall be paid on quarterly basis on 20th day of the third month of each calendar quarter and on the date of repayment of the relevant credit tranche, as reflected in paragraphs 1.2 and 1.3 of the Agreement, in the amount of interest accrued by the specified date (s) (inclusive).

In case of late payment of credit (payment delay) the interest is not accrued on the corresponding credit tranche amount not paid in time, beginning with the date following the date of repayment of relevant credit tranche established in accordance with paragraph 1.3 of the Agreement (inclusive), or from the date following the date of the credit repayment specified in paragraph 6.1 of the Agreement.

4.3. The Borrower shall pay credit facility origination fee in the amount of 0.3 (zero point three-tenths) percent of the credit facility limit specified in paragraph 1.1 of the Agreement, which amounts to 30,000,000 (thirty million) rubles.

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Credit facility origination fee shall paid by the Borrower to the Creditor as a lump sum prior to the first credit disbursement, however not later than 5 (five) calendar days from the date of signing of the Agreement.

4.4. The Borrower shall pay the commitment fee in the amount of 0.1 (zero point one-tenth) percent per annum from the available credit limit calculated in accordance with paragraph 3.1 of the Agreement.

This fee is charged for the period beginning from the date of commencement of the limit specified in paragraph 1.1 of the Agreement (not including that date) through the date of credit repayment in full, specified in paragraph 1.1 of the Agreement (inclusive).

The commitment fee shall be paid by the Borrower to the Creditor within the interest payment terms specified by the Agreement in the amount accrued by the specified dates (inclusive).

4.5. If tranche amount is repaid (in full or in part) before the dates established in accordance with paragraph 1.3 of the Agreement, the Borrower shall pay to the Creditor the prepayment fee.

The prepayment fee shall be paid at the rate of 0.75 (zero point seventy five hundredths) per cent per annum of the repaid amount of the appropriate credit tranche provided in accordance with paragraph 1.2 of the Agreement, for the period from the actual date of repayment to the nearest scheduled repayment date of the relevant credit tranche.

The Borrower shall send to the Creditor the notice of intention to repay the credit tranche prior to the planned date according to the procedure specified hereby, stating the repayment amount and date not later than 30 (thirty) calendar days before the expected date of early repayment of credit tranche (or the part thereof) (inclusive). The date of notice receipt by the Creditor is not included to the calculation of the number of days.

Prepayment fee shall paid by the Borrower to the Creditor simultaneously with repayment of the credit indebtedness.

Prepayment fee is not charged if funds are received as repayment of credit in accordance with paragraph 8.1.1 of the Agreement.

Article 5. Payment and Settlement Terms

5.1. Repayment of credit, payment of interest and other payments under the Agreement shall be made using payment orders from the accounts of the Borrower or third parties opened with the Creditor or with other banks.

The amount of principal, interest, every payment listed in Article 4 of the Agreement (hereinafter — the “Commission Payments”) and penalties shall be specified in payment orders separately for each of these types of payments.

5.2. The date of granting the credit is the date when the credit indebtedness appears on credit accounts.

5.3. The date of fulfillment of payment obligations under the Agreement is the date of withdrawal of funds from the accounts of the Borrower or third parties opened with the Creditor in repayment of obligations under the Agreement or the date of receipt of funds in repayment of obligations hereunder on the correspondent account of the Creditor, if the repayment is made from the accounts opened with other banks.

5.4. If the interest payment date or the date of other payments under the Agreement falls on non-business day, the obligations must be fulfilled no later than the first business day following the non-business day.

5.5. When calculating interest, Commission Payments and penalties the actual number of calendar days in the month and year shall be used.

Accrual of interest, commitment payments and penalty for late repayment of the credit is carried out separately for each of the credit accounts opened by the Creditor under the Agreement. The sum of the values obtained is the total amount of obligations to pay interest, commitment fee and penalty for late repayment of credit.

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5.6. Funds received in repayment of debt under the Agreement, including those debited directly from the accounts of the Borrower, as well as transferred by third parties, shall be applied primarily for reimbursement of expenses of the Creditor for obtaining the execution, regardless of the payment purpose (taking into account the specific details set out in paragraphs 5.7, 5.10, 5.11, 5.12, 5.13 of the Agreement) specified in the payment document, and then according the following order:

1)	payment of overdue credit facility origination fee;
2)	payment of overdue commitment fee;
3)	payment of overdue interest;
4)	payment of credit facility origination fee due;
5)	payment of overdue commitment fee due;
6)	payment of interest due;
7)	repayment of overdue credit indebtedness;
8)	payment of credit prepayment fee;
9)	repayment of credit indebtedness due;
10)	payment of penalty for failure to fulfill obligations under the Agreement within the established term

Herewith, the credit indebtedness shall be repaid in chronological order, starting with the credit account opened first.

Obligations under the Agreement (repayment of credit indebtedness, payment of interest and Commission Payments) become outstanding and payable on the date of fulfillment thereof in accordance with the terms set forth by paragraph 1.3 of the Agreement (hereinafter — the “Payment Date”).

The overdue obligations under the Agreement are understood as Agreement obligations not fulfilled on Payment Date.

5.7. The funds received in accordance with payment orders as a payment of penalty (penalties) under the Agreement, if this payment purpose is the only one specified in the payment document, shall be applied by the Creditor for payment of penalty (penalties) in accordance with order of penalty payment set forth in paragraph 5.6 of the Agreement.

The excess amount shall be applied by the Creditor for repayment of obligations in accordance with the priority of payments set forth in paragraph 5.6 of the Agreement.

5.8. If the Borrower finances the expenses in the currency other than the currency of the credit using the credit funds, the currency exchange transactions with credit funds are carried with the Creditor at the exchange rate and according to the terms of the Creditor on date of the transaction.

5.9. Obligations on repayment of credit indebtedness may be fulfilled before the Payment Date in accordance with paragraph 6.2 of the Agreement.

Payments received in repayment of credit indebtedness before the dates established in accordance with paragraph 1.3 of the Agreement shall be applied by the Creditor for the repayment of said obligations, with account to the priority of payments established by paragraph 5.6 of the Agreement. In this case, the obligations to repay the credit indebtedness, with the purpose of distribution according to the priority of payments established by paragraph5.6 of the Agreement, become due and payable on the date of receipt of funds in the amount of funds received, but not exceeding the amount of funds remaining after distribution for other payments listed in priority of payments before the payment to repay the credit indebtedness, and not exceeding the principal amount specified in the payment document (if specified).

The amount received from the Borrower in excess pursuant to this paragraph of the Agreement is returned by the Creditor to the Borrower’s account opened with the Creditor not later than the first business day following the date of receipt of funds.

If payment purpose specified in the payment document cannot be identified (the obligation(s) being fulfilled is (are) not specified), the received funds are applied by the Creditor for repayment of credit indebtedness in accordance with this paragraph of the Agreement.

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5.10. Obligations on payment of interest and/or Commission Payments may be fulfilled before Payment Dates in the amount not exceeding the accrued payments as of the date of receipt of funds by the Creditor (inclusive). In this case, all obligations on payment of interest and Commission Payments become due and payable on the date of receipt of funds in the amount of funds received, but no more that those that had been accrued.

At the same time, the funds received from the Borrower as repayment of these obligations, regardless of the payment purpose specified in the payment document, shall be applied by the Creditor to repay obligations on interest and Commission Payments according to the priority of payments established by paragraph 5.6 of the Agreement, except for the payment of penalties.

5.11. If there’re 10 (ten) business days or less left before the Date of payment of interest and/or Commission Payments (hereinafter — the “Early Repayment Period”), the amounts received from the Borrower in excess in accordance with paragraph 5.10 of the Agreement (hereinafter — “Advance Payments”) are applied by the Creditor for the repayment of said obligations of the Borrower in the next Payment Dates in accordance with the payment priority set forth in paragraph 5.6 of the Agreement. In case any obligations on repayment of credit indebtedness under the Agreement are due during the Early Repayment Period and no payments has been received from the Borrower to repay these obligations on the Payment Date established by the Agreement, the Advance Payments are applied for repayment of said obligations.

If there’re more than 10 (ten) business days left before the Date of payment of interest and/or Commission Payments, the Creditor applies Advance Payments to the payment of penalties according to the payment priority set forth in paragraph 5.6 of the Agreement. Herewith, the Advance Payments in the amount exceeding the penalties paid are returned by the Creditor to the Borrower’s account opened with the Creditor, not later than the first business day following the date of receipt of funds.

5.12. During the Early Repayment Period the Borrower may submit to the Creditor the written notice on return of Advance Payments received by the Creditor in accordance with paragraph 5.11 of the Agreement or application of said funds as repayment of credit indebtedness, within 3 (three) business days following the date of receipt of funds by the Creditor and not later than 2 (two) business days (inclusive) to the nearest Payment Date.

The Creditor returns Advance Payments after distribution of payments according to the payment priority established by paragraph 5.6 of the Agreement, or applies these for repayment of credit indebtedness in accordance with paragraph 6.2 of the Agreement and subject to paragraph 5.9 of the Agreement and not later than the first business day following the date of receipt of the written notice of the Borrower.

Advance Payments are returned by the Creditor to the Borrower’s accounts opened with the Creditor.

In case the Advance Payments are applied for repayment of credit indebtedness, the date of repayment of credit indebtedness shall be the date of when the Creditor applies the Advance payment amount for repayment of credit indebtedness.

5.13. If on the Payment Date the payment amount exceeds the amount due in accordance with terms of the Agreement, the amount received from the Borrower in excess is returned by the Creditor to the Borrower’s account opened with the Creditor after distribution according to the payment priority established by paragraph 5.6 of the Agreement, no later than the first business day following the Date of the corresponding payment.

5.14. In case payments under the Agreement are made in currency other than the currency of payment established by the Agreement, the Creditor is entitled to convert the received funds into the payment currency under the Agreement at the rate and under the terms of the Creditor in force on the date of the conversion operation, subsequently applying those funds for repayment of indebtedness under the Agreement.

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Article 6. The Procedure of Credit Repayment

6.1. The Date of complete credit repayment is “      ” September 2014.

Credit repayment is made in any amounts within the specified period.

On the dates when the credit indebtedness becomes due and payable in accordance with paragraph 1.3 of the Agreement, the repayment of the relevant credit tranche on the credit account opened pursuant to paragraph 3.5 of the Agreement shall be made in full.

If the date of repayment of credit tranche is not a business day, the period of credit shall be extended up to and including the first business day following the non-business day when the credit tranche becomes due.

6.2. The Borrower is entitled to make full or partial repayment of the credit tranches granted before the date(s) established in accordance with paragraph 1.3 of the Agreement.

In the case of credit repayment before the date (s) established in accordance with paragraph 1.3 of the Agreement the Borrower shall pay the Creditor the prepayment fee according to the procedure specified in Article 4 of the Agreement.

Article 7. Rights and Obligations of the Creditor

7.1. The Creditor has the following rights:

7.1.1. To change the amount, procedure and terms of determining the interest rate under the Agreement, unilaterally and at its own discretion, resulting in reduction of the value of the fixed component of the interest rate, with notification to the Borrower and not executing the change as an additional agreement.

The change becomes effective after 30 (thirty) calendar days from the date of sending the notice of change by the Creditor, unless the other date of entry into force is specified in the notice.

The Borrower is notified on said changes made to the Agreement according to the procedure specified in the Agreement.

7.1.2. To reduce the amount of penalty and/or establish the time period during which the penalty is not charged, unilaterally and at its own discretion, with notification to the Borrower and not executing the change as an additional agreement.

Reduction of the penalty amount and/or establishing time period during which the penalty is not charged becomes effective after 30 (thirty) calendar days from the date of sending the notice of change by the Creditor, unless the other date of change entry into force is specified in the notice.

Notification of the Borrower on said changes made to the Agreement is carried out according to the procedure specified in the Agreement.

7.1.3. To require from the Borrower to provide information and documents confirming the proper use of credit, including the register of payment documents (in a format agreed by the Creditor) pursuant to which the transfer of credit funds from the settlement account of the Borrower is carried out in accordance with the intended credit purpose.

7.1.4. In case of overdue credit indebtedness and/or overdue interest and/or other payments provided for by the Agreement and/or penalties under the Agreement, write off the funds credited at the Borrower’s accounts opened with the Creditor and other banks with which the agreement on Creditor’s right for direct debiting of funds in accordance with paragraph 3.3.1 of the Agreement is concluded, in the currency of obligations according to direct debiting procedure towards repayment of overdue payments and penalties.

The Creditor shall inform the Borrower in writing of the fact of direct debiting of funds from its accounts towards repayment of overdue payments and penalties according to the procedure specified herein.

7.1.5. In case the funds on the Borrower’s account opened with the Creditor in the currency of the obligation are not sufficient to repay the overdue debt and/or penalties under the Agreement, to debit funds as they are received from the accounts of the Borrower opened with the Creditor and other banks in currency other than the currency of obligation, with subsequent conversion of written off funds at the

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exchange rate and under the terms set by the Creditor and other banks for foreign exchange transactions on the transaction date, with crediting the funds obtained as a result of conversion to the Borrower’s account opened with the Creditor and other banks in currency of the obligation.

The Creditor shall inform the Borrower on the fact of direct debiting of funds from its accounts and conversion of these funds according to the procedure specified herein.

7.1.6. To stop granting credit and/or demand from the Borrower early repayment of the entire credit amount and payment of interest due, penalties and other payments specified under the terms of the Agreement in the following cases:

a) failure to perform or improper performance of Borrower’s payment obligations hereunder or under any of the agreements (including, but not limited to: credit agreement, revolving / non-revolving credit facility agreement, bank indemnity agreement, surety agreement, other types of agreements) and contracts which are concluded (or may be concluded during the term of the Agreement) between the Borrower and the Creditor, lasting 5 (five) business days or more;

b) failure to perform or improper performance of obligations under credit agreements (including revolving / non-revolving credit facility agreements) by any company of MTS Group (as defined below), which are concluded (or may be concluded during the term of the Agreement) between MTS Group companies and any creditor, as well as payment obligations to the Creditor and/or any third party relating to payment of bills, repayment of bonds, coupon payments, mandatory / voluntary offer by operation of Federal Law “On Joint Stock Companies”, lasting 5 (five) business days, that emerged (can emerge during the term of the Agreement), and resulted in demand for early repayment of indebtedness of the company of MTS Group in the amount exceeding 30,000,000 (thirty million U.S. dollars), in connection with the event of default, if such term is defined in the agreement (contract) with such creditor, or if early repayment of indebtedness exceeding 30,000,000 (thirty million U.S. dollars) is required, or under any other circumstances of a similar nature, if the term “event of default” is not specified in the agreement (contract) with the creditor.

The borrower shall provide (furnish provision) to the Creditor the documents confirming compliance (non-compliance) of the unfulfilled obligation to the event of default, within 5 (five) business days from the date of the request for early repayment of indebtedness received from the relevant creditor.

Total obligations in rubles presented for early repayment shall be converted into U.S. dollars at the exchange rate of the Bank of Russia as on the date of submission of demand for early repayment of the credit amount by the relevant creditor.

Total obligations in currencies other than U.S. dollars presented for early repayment shall be converted into U.S. dollars at the exchange rate determined through calculation using currency rates to the ruble of the Russian Federation, established by the Bank of Russia as on the date of submission of demand for early repayment of the credit amount by the relevant creditor.

For the purpose of the Agreement, MTS Group is understood as the Borrower and its Subsidiaries. Herewith, the “Subsidiary” is the company in which the Borrower has the right of control, direct or indirect (through other companies) or owns, directly or indirectly (through other companies) over 50 (fifty) percent of the stock/ share of the authorized capital, or has the right to determine voting procedure in respect of more than 50 (fifty) percent of the stock / shares in the authorized capital of such company;

c) If the statements, documents, confirmations or information provided by the Borrower to the Creditor, including in respect of MTS Group companies in connection with relations of the Parties under the Agreement, are unreliable in any material respect (according to the opinion of the Creditor, acting reasonably) and this inconsistency is not corrected by the Borrower within 10 (ten) calendar days from the date of revealing such inconsistency;

d) the credit is used for purposes other than the intended use;

e) the arbitration court accepts petition on recognizing the Borrower insolvent (bankrupt) in accordance with procedure specified by the applicable legislation, except in case where the bankruptcy case in respect of the Borrower is terminated within 60 (sixty) calendar days following the date of

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accepting such petition by the arbitration court;

f) in case during two consecutive Reporting periods (as defined below), claim(s) for payment of money or requisition of property are filed against the Borrower, the amount of which exceeds 250,000,000 (two hundred and fifty million) U.S. dollars in aggregate or equivalent in the currency of Russian Federation at the exchange rate of the Bank of Russia on the date of the claim(s) and other currency converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established by the Bank of Russia on the day of claim(s), (provided that the amount of at least one of these claims exceeds 25,000,000 (twenty five million) U.S. dollars or equivalent in the currency of Russian Federation at the exchange rate of the Bank of Russia on the date of the claim(s) or equivalent in other currency converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established by the Bank of Russia on the day of claim(s) and the court decision(s) to satisfy the claim(s) has entered into force.

When calculating the amount of claim(s), any claim(s), including claim(s) for the recovery of any amount, claim(s) on the transfer of property, claim(s) to declare transactions null and void, as well as court decisions to satisfy any such claim(s) becoming effective, shall not be taken into account if the subject matter of such claim (s) relates to the acquisition by the Borrower (any affiliate of the Borrower) of participation shares in OOO “Bitel” (location: the Republic of Kyrgyzstan, 720000, Bishkek, 121 Chui Prospekt), or based on such a acquisition or otherwise associated with it, in the amount not exceeding 330.000.000 (three hundred thirty million) U.S. dollars in aggregate.

Amount(s) of claim(s) in rubles shall be converted into U.S. dollars at the exchange rate of the Bank of Russia as of the date of the corresponding claim(s).

Amount(s) of claim(s) in currency other than U.S. dollars shall be converted into U.S. dollars at the exchange rate determined through the exchange rates against Russian Federation ruble, established by the Bank of Russia on the day of corresponding claim(s).

For the purposes of this subparagraph and hereinafter, the Reporting period understood as the period of 6 (six) consecutive months ending on the last day of each respective fiscal year, or the corresponding fiscal quarter of the Borrower;

g) adoption of the decision on reorganization (except for the reorganization in the form of accession of Borrower’s Subsidiaries to the Borrower), liquidation or reduction of authorized capital of the Borrower without prior written consent of the Creditor;

h) recognizing the Borrower insolvent (bankrupt) in accordance with procedure established by the applicable law;

i) provision of statements and/or information by the Borrower to the Creditor in connection with relations of the Parties under the Agreement, which are unreliable and/or different from statements and/or information provided by the Borrower to the public authorities, the Bank of Russia and/or published by the Borrower and/or stored in credit bureau;

j) Borrower’s failure to fulfill obligations specified in paragraphs 8.2.11 and/or 8.2.12 of the Agreement

k) Borrower’s breach of conditions specified in paragraphs 8.2.7, and/or 8.2.8, and/or 8.2.10 of the Agreement;

l) failure to perform or improper performance of Borrower’s obligations under paragraphs 8.2.5, 8.2.6 of the Agreement.

Breaches of the Agreement terms and changes of circumstances mentioned above are essential to the Creditor.

Herewith, the Creditor shall inform the Borrower on its requirements according to the procedure specified herein.

7.1.7. To close the available credit limit under the Agreement unilaterally in the event of termination of credit due to reasons stated in paragraph 7.1.6 of the Agreement, as the Creditor shall notify the Borrower according to the procedure specified herein.

7.1.8. To repudiate the obligation to grant credit in full or in part under the circumstances obviously indicating that the amount of debt will not be repaid by the Borrower within the terms

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specified by the Agreement.

7.1.9. To carry out validity check in respect of the reporting and targets indicators of Borrower’s economic and financial activity provided by the Borrower, in the manner convenient for the Creditor, as well as require other data related to the use of credit funds and fulfillment of obligations under the Agreement.

7.2. The Creditor undertakes the following obligations:

7.2.1. Subject to conditions specified in Article 3 of the Agreement, and in case none of the conditions exist under which the Creditor is entitled to stop granting the credit and demand early repayment of the credit, to transfer the amounts of credit within the available credit facility limit to the settlement account of the Borrower based on Borrower’s orders executed in accordance with the terms of the Agreement.

Article 8. Rights and Obligations of the Borrower

8.1. The Borrower assumes the following obligations:

8.1.1. To repay the credit indebtedness and pay credit interest due, Commission Payments (except for credit prepayment fee) and penalties accrued as of the date of repayment within 5 (five) business days from the Date of delivery of the notice or message containing Creditor’s demand for early repayment of credit in accordance with paragraphs 7.1.6, 12.3 of the Agreement.

8.2.2. To use the credit strictly for the intended purpose in accordance with Article 1 of the Agreement

8.2.3. To provide to the Creditor properly executed payment documents and annexes in accordance with credit purpose (paragraph 1.1 of the Agreement), and, upon the request of the Creditor, provide the register of said payment documents (in the form agreed with the Creditor), not later than the planned date of use the relevant credit amount.

8.2.4. To pay interest at the rate determined in accordance with the terms of the Agreement, regardless of the receipt of Borrower’s notice on the amount of interest rate.

8.2.5. To provide the following documents to the Creditor on a quarterly basis, no later than 15 (fifteen) business days from the last date of period established by the legislation of the Russian Federation for provision of accounting statements to tax authorities:

·accounting statements in full, according to the forms established by the Russian Ministry of Finance, with a note indicating the method of sending the documents to the Russian Federal Tax Service department, certified by the director and seal of the Borrower, accompanied by explanatory note (applicable to annual reporting) and auditor’s report (or its final part) (if audit of accounting statements is mandatory according to the law of the Russian Federation);

·interpretation of accounting statements prepared in accordance with RAS, in part of accounts receivable and payable, indicating the names of creditors, debtors, debt amounts and dates, and debt status (overdue / current);

·interpretation of accounting statements prepared in accordance with RAS, in part of short-and long-term financial investments, stating the types, amounts of investments, names of organizations and enterprises;

·interpretation of accounting statements prepared in accordance with RAS, in part of indebtedness under long-term and short-term credits and loans (including promissory notes and debentures), stating creditors, debt amounts, credit terms, interest rate (coupon yield), repayment schedule and interest payment schedule, the amount of interest overdue;

·interpretation of accounting statements prepared in accordance with RAS, in part of collateral received (indicating the persons from which and to the benefit of which the collateral was received), and collaterals provided (indicating the persons for which and to the benefit of which the collateral was provided, and term of performance of obligations);

·information on all open accounts of the Borrower provided to the tax office, as well as statement on turnover and balances on settlement accounts in the currency of the Russian Federation and foreign

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currency, as well as any claims to the accounts;

·information on the subsidiaries (over 50% of the share capital) and associated companies (more than 20% of the share capital) as of the last reporting date, indicating participatory interest in the authorized capital of subsidiaries or affiliates as a percentage;

·certificate from the Russian Federal Tax Service department on the status of settlements of budgetary payments or budget settlement reconciliation statement (if any overdue tax liabilities to a budget of any level are present — certificate of the taxpayer, indicating the terms, amounts and causes of liabilities overdue);

·copies of amendments and additions to the constituent documents (registered in the manner established by the law), and copies of certificates of recording state registration of changes in constituent documents in the Uniform State Register of Legal Entities, certified by notary or registration body, in case any changes were made to the constituent documents during the preceding calendar quarter;

·information on the membership of collegial and executive management bodies (Supervisory Board / Board of Directors / Management Board / President), on the person who performs the functions of the sole executive body (indicating its position, in case of plural offices - other places of work), if during the past calendar quarter any changes occurred in the membership of executive and/or collegial management bodies, new person acting as the sole executive body was appointed;

·information on the membership of collegial and executive management bodies (Supervisory Board / Board of Directors / Management Board / President), on the person who performs the functions of the sole executive body (indicating its position, in case of plural offices — other places of work), if during the past calendar quarter a contract was with the management company, changes in the membership of executive and/or collegial management bodies of the Management Company occurs, new person acting as the sole executive body was appointed, or the Management company was changed;

·information on the composition of shareholders owning 5.0 percent or more of shares, including information on the shareholders on whose behalf other persons serve as nominees (only if during the last calendar quarter a list of shareholders for annual or extraordinary general meeting of shareholders of the Borrower was created), if any changes in the composition of shareholders owning 5.0 percent or more of the shares occurred during the last calendar quarter.

Besides, the Borrower shall, at the request of the Creditor, provide other reporting and financial documents needed to the Creditor in order to estimate Borrower’s ability to perform its obligations hereunder within 10 (ten) business days from the date of receipt of such request.

8.2.6. The Borrower shall, on a quarterly basis, within 120 (one hundred twenty) days from the last date of each calendar quarter, provide to the Creditor the consolidated financial statements of the Borrower certified by its director and chief accountant compiled in accordance with Generally Accepted Accounting Principles in U.S. (GAAP) (hereinafter the Financial Statements); herewith, the financial statements prepared based on the results of the calendar year and provided to the Creditor, must be confirmed by the auditing company.

8.2.7. In case of reorganization (except for the reorganization in the form of accession of Borrower’s Subsidiaries to the Borrower) or liquidation, reduction of authorized capital, the Borrower shall inform the Creditor at least 10 (ten) business days before the onset of one of these events. Notification of the Creditor shall be made according to the manner specified herein.

8.2.8. To conclude the agreements on Creditor’s right for direct debiting of funds from Borrower’s accounts for repayment of overdue debt from new accounts of the Borrower opened with the Creditor, within 5 (five) business days from the date of Creditor’s notice on new account opening, and, at the request of the Creditor, from Borrower’s accounts opened with other banks, specified in Annex No. 1, according to the form and within the terms set by the Creditor. Notification of the Borrower on this request shall be made according to the manner specified herein.

8.2.9. Notify the Creditor in the manner prescribed by the Agreement on the possible occurrence of incidents and events specified in paragraph 7.1.6 of the Agreement, as well as on actual occurrence

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of these incidents and events not later than 3 (three) business days from the date following the date when the Borrower became aware of the possible (actual) occurrence of the relevant incident (event).

8.2.10. Ensure that the Borrower has operating licenses for provision of mobile communication services in the range GSM 900/1800 MHz in Moscow, the Moscow region and St. Petersburg up to the complete fulfillment of obligations to the Creditor under the Agreement.

8.2.11. Maintain Debt / OIBDA ratio of MTS Group not higher than 3 (three) up to the complete fulfillment of obligations to the Creditor under the Agreement.

For the purposes of this paragraph of the Agreement:

·Debt of MTS Group — means any indebtedness (nominal principal amount / limit for off-balance sheet liabilities) of the Borrower and/or its Subsidiaries (except for the liabilities arising between MTS Group companies) under the following:

1) obtained credit, borrowings, loans, bond issues, financial lease agreements, any other form of raising funds on repayable basis, for consideration/ without consideration,

2) issued sureties and/or guarantees (except for sureties and/or guarantees granted to Subsidiaries under borrowings raised by the Borrower and/or sureties and/or guarantees made by the Borrower on borrowings made by Subsidiaries), bill of exchange issued (avals marked on such bills).

·OIBDA indicator — means in relation to each Reporting the Net Operating Income of MTS Group in this Reporting Period, determined based on the Financial Statements, which:

1)does not include expenses and income according to consolidated statements of operations relating to minority interest, income tax expense, other expenses / income, MTS Group’s equity in the net income of associates, as well as interest expense, interest income, and currency exchange and translation gains/losses;

2)is increased by the amount of depreciation and amortization and impairment loss recognized in operating expenses in this Reporting period;

is multiplied by 2 (two).

The value of Indebtedness of MTS Group and OIBDA are calculated based on Financial Statements of MTS Group and are expressed in U.S. dollars.

8.2.12. Prior to the complete fulfillment of obligations to the Creditor under the Agreement not to enter into transactions or several interrelated transactions associated with pledge of property assets owned by the Borrower, the book value of which exceeds 10 (ten) percent of the total book value of assets of the Borrower determined based on the financial statements (other than Permitted Pledges), under its obligations to third parties or third parties’ obligations.

Herewith, Permitted Pledges are the pledges including:

1)pledges by operation of law and

2)pledges that had been existing at a third party at the time of Borrower’s (any company of MTS Group) acquisition of stock (shares in the authorized capital) of such third party, or accession (merger) of any third party to the Borrower (any company of MTS Group) as well as extension of the duration of such pledges in the case the period of repayment of obligations secured by such pledges is extended, as well as replacement of the subject matter of pledge agreements with assets of comparable appraised value.

Article 9. Responsibility of the Parties

9.1. The Parties are responsible for non-performance or improper performance of obligations hereunder in accordance with the applicable legislation of the Russian Federation.

9.2. In case of late repayment of credit, or late payment of interest or Commission fees, except credit prepayment fee, the Borrower shall pay the Creditor a penalty in the amount of the current floating interest rate set in accordance with the terms of the Agreement, increased by 2 (two) times, calculated from the amount of payment overdue for each day of delay for the period between the date when the overdue debt occurs (excluding that date) and up to and including the date of full repayment of debt overdue, in percent per annum.

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In case debt overdue is present after the date of credit repayment specified in paragraph 6.1 of the Agreement, the current floating interest rate is understood as the floating interest rate set in the last Interest Period.

In case debt overdue is present after the repayment date specified in the Creditor request for early repayment of credit amount, served to the Borrower in accordance with paragraph 7.1.6 of the Agreement, the current floating interest rate is understood as the floating interest rate set in the Interest Period during which the said request was made.

The penalty is calculated on the amount of overdue payment for each day of delay for the period from the date when overdue debt occurs (excluding that date) through the date of repayment of overdue debt in full.

The date when overdue debt occurs within the Agreement is understood as the Payment Date when the Borrower fails to fulfill its obligations pursuant to the Agreement.

9.3. In the event of failure to notify or untimely notification of the Creditor on the changes in the composition and powers of the officials authorized to enter into any transactions on behalf of the Borrower, seal impression and other information necessary for the Creditor for the due performance of its obligations hereunder, the Creditor shall not be liable for the consequences of execution of Borrower’s orders for transfer credit signed by unauthorized persons.

Article 10. Special Conditions

10.1. The Borrower has no objections against provision of information about the Borrower specified by in Article 4 of the Federal Law “On Credit Histories” No. 218-FZ of 30.12.2004 to the credit bureau (registered under the laws of the Russian Federation) by the Creditor.

Article 11. Agreement Duration

11.1. The Agreement shall enter into force on the date of signing and is valid until the Parties fulfill their obligations under the Agreement in full.

Article 12. Other Terms and Conditions

12.1. All amendments and additions to the Agreement, except as specified in paragraphs 4.1, 7.1.1, 7.1.2, 7.1.7 of the Agreement shall be valid only if executed in writing and signed by authorized persons.

12.2. In case one of the Parties changes its location or mailing address, it shall inform the other Party not later than 1 (one) business day from the date of such changes.

In case bank account details of one of the Parties are changed, it shall inform the other party before the change comes into force.

The Borrower shall notify Creditor of the changes in the composition and powers of the officials authorized to enter into any transactions on behalf of the Borrower, seal impression and other information necessary to the Creditor for due performance of its obligations hereunder, no later than the date when the changes become effective, providing copies of duly certified supporting documents within 3 (three) business days.

12.3. Any notice and other communication served by any Party to the other Party hereunder shall be made in writing.

Such notice or communication is considered duly served if it is delivered to the recipient by courier or by registered letter or telegram with delivery notice, to the address specified in the Agreement (or the address specified by the Party in accordance with paragraph 12.2. of the Agreement) and signed by an authorized person.

Notice or other communication of the Creditor is considered duly delivered to the Borrower if it is received by the Borrower, as well as in cases where, despite sending the notice (messages) by the Creditor in accordance with the terms of the Agreement, the Borrower fails to appear to receive it, or refuses to receive it, or the notice (message) hasn’t been not served due to the absence of the addressee at the address specified in the notice (message), and about which fact the delivery agency informed the

13

Creditor. The date of delivery of notice or other communication of the Creditor shall be the date when it is received by the Borrower and if the Borrower fails to appear to receive the notice (message) containing Creditor’s requirement or refuses to receive it, or the notice (message) hasn’t been not served due to the absence of the addressee at the address specified in the notice (message) — the date of the notice informing the Creditor that the requirement of the Creditor hasn’t been served to the Borrower, sent to the Creditor by delivery agency.

12.4. All disputes under the Agreement shall be considered in accordance with the current legislation of the Russian Federation in the Arbitration Court of Moscow.

12.5. Each Party undertakes not to disclose, in any form (including, but not limited to: in the form of interviews, publications, promotions), information concerning the terms of the Agreement without the prior written consent of the other Party.

This condition does not apply to the mandatory provision (disclosure) of information in cases specified by legislation of the Russian Federation or the United States of America, the requirements of Russian and foreign trade organizers and securities market regulators, at the request of state authorities, as well as in the case such information shall be provided by the Borrower under the existing or newly assumed obligations to disclose information to rating agencies or financial institutions.

12.6. The Borrower shall ensure that individuals whose personal data are contained in documents provided by it to the Creditor, provide their consent for examination and processing (including automated processing) of these data by the Creditor in accordance with the requirements of the applicable legislation of the Russian Federation, including the Federal Law No. 152-FZ “On Personal Data” dated 27.07.2006.

12.7. Annex No.  1, Annex No. 2 are the integral parts of the Agreement.

12.8. The agreement is made in two copies having equal legal force, one copy for the Creditor and the Borrower.

Article 13. Parties’ Addresses and Bank Details

13.1. Creditor:

Location and mailing address: 19 Vavilova Street, Moscow, 117997.

INN: 7707083893, OGRN: 1027700132195, KPP: 775001001, OKPO: 00032537

For Russian ruble payments: Account of “Sberbank of Russia” OJSC No. 30301810500001000014,
Corr. account No. 30101810400000000225 with Operational Department of Moscow GTU of the Bank of Russia,
BIC 044525225.

For U.S. dollar payments: Account No. 30301840800001000014 Sberbank, Moscow, SWIFT SABRRUMM. (HEAD OFFICE — ALL OFFICES in RUSSIA)

BANK OF NEW YORK MELLON NEW YORK, NY, SWIFT IRVT US 3N

For EURO payments: Account No. 30301978400001000014 Sberbank, Moscow, SWIFT SABRRUMM. (HEAD OFFICE — ALL OFFICES in RUSSIA)

DEUTSCHE BANK AG FRANKFURT AM MAIN, SWIFT DEUTDEFF.

Phone: (495) 747-37-77. Fax: (495) 957-57-61.

13.2. Borrower:

Location and mailing address: 4 Marksistskaya Street, Moscow, 109147.

INN 7740000076, OGRN 1027700149124, KPP 770901001, OKPO 52686811.

Settlement account in the currency of the Russian Federation No. 40702810100020008293 with OPERATIONAL DEPARTMENT of “Sberbank of Russia” OJSC .

Current account in foreign currency No. 40702840400020008293 with OPERATIONAL DEPARTMENT of “Sberbank of Russia” OJSC .

Phone: (495) 223-21-64. Fax: (495) 223-21-68.

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Signatures of the Parties

Creditor	Borrower
Managing Director and Chief of Credit and Project Financing, Major Clients Department of “Sberbank of Russia” OJSC	President of “Mobile TeleSystems” OJSC
T.G. Sakharova	A.A. Dubovskov
Seal here	Seal here

15

Annex No. 1

To the Revolving Credit Facility Agreement No. 5455

dated September “      ” 2011

The list of settlement accounts of OJSC “Mobile TeleSystems” (in Russian currency and foreign currency)

	Full name of the company — account owner	Account type	Account number	Name of the bank where the account is opened	Bank account agreement No.	Bank account agreement date
Account of the Borrower to which the credit is transferred:
	«Mobile TeleSystems» OJSC	Settlement account in the currency of the Russian Federation	40702810100020008293	Operational Department of “Sberbank of Russia” OJSC, 19 Vavilova Street, Moscow, 117997	40702810100020008293	12.08.2009
Accounts in respect of which the agreements are concluded on the right of Creditor for direct debiting of funds to repay the debt overdue:
1		Settlement account in the currency of the Russian Federation	40702810100020008293	Operational Department of “Sberbank of Russia” OJSC	40702810100020008293	12.08.2009
2	«Mobile TeleSystems»OJSC	Settlement account in the currency of the Russian Federation	40702810738050011729	Maryina Roscha Office No. 7981 of “Sberbank of Russia” OJSC	40702810738050011729	10.03.2009
3		Settlement account in foreign currency	40702840400020008293	Operational Department of “Sberbank of Russia” OJSC	40702840400020008293	12.08.2009
4		Settlement account in foreign currency	40702978000020008293	Operational Department of “Sberbank of Russia” OJSC	40702978000020008293	12.08.2009
5		Settlement account in the currency of the Russian Federation	40702810000000000652	Joint-Stock Commercial Bank “Moscow Bank for Reconstruction and Development” (OJSC)	No.1517	03.07.2000
6		Settlement account in foreign currency	40702840300000000652	Joint-Stock Commercial Bank “Moscow Bank for Reconstruction and Development” (OJSC)	No. 1555	03.07.2000

Signatures of Parties

Creditor		Borrower
Managing Director and Chief of Credit and Project Financing, Major Clients Department of “Sberbank of Russia” OJSC		President of “Mobile TeleSystems” OJSC
	T.G. Sakharova		A.A. Dubovskov
Seal here		Seal here

	Annex No. 2
	to the Revolving Credit Facility Agreement
	No. 5455
	dated September “           ” 2011
To Credit and Project Financing Office of the Major Clients
Department of “Sberbank of Russia” OJSC

Ref. No.                 dated “     ”                        20    .

ORDER FOR TRANSFER OF CREDIT

Hereby we kindly request you to provide credit funds in accordance with the following terms:

1. Name of the Borrower	Joint Stock Company “Mobile TeleSystems”
2. Revolving Credit Facility Agreement	No. 5455 dated “      ” September 2011
3. Date of provision of credit funds	“     ”                            20
4. Credit amount and currency	(                                                        ) rubles
5. Settlement account number

		(Full name)
(Specify the position of the person	(signature)
authorized for administration of credit funds
on behalf of the Borrower)
Chief Accountant of the Borrower		(Full name)
(if any)	(signature)
	Seal here

Signatures of the Parties

Creditor	Borrower
Managing Director and Chief of Credit and Project Financing, Major Clients Department of “Sberbank of Russia” OJSC	President of “Mobile TeleSystems” OJSC
T.G. Sakharova	A.A. Dubovskov
Seal here	Seal here

EX-4.9

Exhibit 4.9

AGREEMENT ON GRANTING OF CREDIT FACILITY No.2011/83-1	ДОГОВОР O ПРЕДОСТАВЛЕНИИ  КРЕДИТНОЙ ЛИНИИ №2011/83-1
THIS AGREEMENT is made the on          day of                            2011 in the City of Moscow	НАСТОЯЩИЙ ДОГОВОРзаключен “        “                                2011 годав городе Москве
BETWEEN:	МЕЖДУ:
Mobile TeleSystems Open Joint Stock Company, a legal entity, established and registered in accordance with the laws of the Russian Federation, having its registered office at 4, Marksistskaya Str, 109147, Moscow, the Russian Federation (hereinafter referred to as the “Borrower”),	Открытым акционерным обществом «Мобильные ТелеСистемы», юридическим лицом, созданным и зарегистрированным в соответствии с законодательством Российской Федерации с местонахождением по адресу: Российская Федерация, 109147, Москва, ул. Марксистская, 4 (далее именуемый - «Заемщик»),
AND	И
“ING BANK (EURASIA) ZAO” (Closed Joint Stock Company), a bank established and registered in accordance with the laws of the Russian Federation having its registered office at 36, Krasnoproletarskaya St., 127473, Moscow, the Russian Federation (hereinafter referred to as the “Bank”),	«ИНГ БАНК (ЕВРАЗИЯ) ЗАО» (ЗАКРЫТОЕ АКЦИОНЕРНОЕ ОБЩЕСТВО), банком, созданным и зарегистрированным в соответствии с законодательством Российской Федерации с местонахождением по адресу: Российская Федерация, 127473 Москва, ул. Краснопролетарская, 36 (далее именуемый - «Банк»),
(jointly referred to as the “Parties” and each as the “Party”)	(далее совместно именуемые «Стороны» и каждый - «Сторона»)
WHEREAS:	ПРИНИМАЯ ВО ВНИМАНИЕ, ЧТО:
(1)   The Borrower has requested from the Bank a revolving credit facility (the “Facility”) for the purposes of	(1)Заемщик запросил у Банка возобновляемую кредитную линию («Линия») в целях
financing of working capital of the Borrower	финансирования оборотного капитала Заемщика
(2)   The Bank is willing to grant the Facility on the terms and conditions set forth in this Agreement;	(2)Банк изъявляет желание предоставить Линию на условиях, изложенных в настоящем Договоре;
THE PARTIES HAVE AGREED ON THE FOLLOWING:	СТОРОНЫ ПРИШЛИ К СОГЛАШЕНИЮ О НИЖЕСЛЕДУЮЩЕМ:

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1. DEFINITIONS AND INTERPRETATIONS	1. ОПРЕДЕЛЕНИЯ И ТОЛКОВАНИЕ
1.1. Definitions	1.1. Определения
In this Agreement, the following terms and expressions shall have the meanings set out below:	В настоящем Договоре следующие термины и выражения имеют значения, указанные ниже:
“Bitel” shall mean a legal entity OOsO Bitel, established and registered in accordance with the laws of Kyrgyz Republic, having its registered office at 121, Chuy avenue, 720000, Kyrgyz Republic;	«Бител» означает юридическое лицо ООсО «Бител», созданное и зарегистрированное в соответствии с законодательством Кыргызской Республики с местонахождением по адресу: Кыргызская Республика, 720000, г. Бишкек, проспект Чуй, д. 121;
“Advance” shall mean, save as otherwise provided herein, an amount in Rubles, Euros, US Dollars (as from time to time may be reduced by repayment or prepayment) made available by the Bank under Clause 3 of this Agreement;	«Выплата» означает, если иное не предусмотрено настоящим Договором, сумму в Рублях, Евро, Долларах США (размер которой может периодически сокращаться в ходе погашения либо досрочного погашения), предоставленную Банком в соответствии со Статьей 3 настоящего Договора;
“US GAAP” shall mean generally accepted accounting principles, standards and practices in the United States of America;	«ГААП США» означает общепринятые принципы, стандарты и практику ведения бухгалтерского учета в Соединенных Штатах Америки;
“Group” shall mean the Borrower and its Subsidiaries for the time being;	«Группа» означает Заемщика и его Дочерние Компании на соответствующий момент времени;
“Repayment Date” in respect of any Advance shall mean the date which is indicated in the Drawdown Request for respective Advance pursuant to Clause 3 hereof;	«Дата Погашения» в отношении любой Выплаты означает дату, указанную в Заявлении о Предоставлении для соответствующей Выплаты в соответствии со Статьей 3 настоящего Договора;
“Interest Payment Date” shall mean the last day of the respective Interest Period;	«Дата Уплаты Процентов» означает последний день соответствующего Процентного Периода;
“Agreement” shall mean this agreement and all attachments hereto;	«Договор» означает настоящий Договор и все приложения к нему;
“US Dollars” and “USD” shall be construed to mean lawful currency of the United States of America;	«Доллары США» и «USD» означают законное платежное средство Соединенных Штатов Америки;
“Available Facility” shall mean an amount equal to Maximum Amount deducting Principal Amount (calculated in the currency of the Maximum Amount);	«Доступная Сумма» означает сумму, равную Максимальной Сумме за вычетом Основного Долга (рассчитанного в валюте Максимальной Суммы);
“Subsidiary” shall mean an entity from time to time of which a person has Сontrol or owns more than 50% of the share capital or similar right of ownership.;	«Дочерняя компания» означает юридическое лицо, над которым Заемщик осуществляет Контроль и/или владеет более чем 50% уставного капитала либо схожего права владения;

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“EURIBOR” shall mean:	«ЕВРИБОР» означает:
(1)  the indicative offered interest rate per annum for deposits (loans) at the European interbank money market, as determined by the Banking Federation of the European Union on the basis of the rates at which active participants in the European interbank money market offer deposits (loans) in Euro for a time period mostly corresponding to the relevant Advance Tenor, as displayed by the company “Reuters Limited” through the service “Reuter Monitor” on the display page designated as “EURIBOR01” two Business Days prior to the first day of the relevant Advance Tenor;	(1) индикативную годовую процентную ставку предоставления депозитов (кредитов) на Европейском межбанковском рынке, формируемую Европейской Банковской Федерацией на основе ставок размещения депозитов (кредитов) в Евро, объявляемых активными участниками Европейского межбанковского рынка на срок, максимально приближенный к соответствующему Сроку Выплаты, публикуемую компанией «Рейтерс Лимитед» (Reuters Limited) через службу «Рейтер Монитор» («Reuter Monitor») на странице «EURIBOR01» за два Рабочих Дня до первого дня соответствующего Срока Выплаты;
or	или
(2)  in case of indeterminacy of the interest rate pursuant to paragraph (1) above or in case the Bank is unable to raise funds in a necessary amount at interbank money market at EURIBOR - the rate per annum (rounded to four decimal places) for deposits (loans) in Euro for a time period mostly corresponding to the relevant Advance Tenor as advised to the Bank at its request by any active participant of the interbank money market selected by the Bank at its sole discretion;	(2) в случае если невозможно определить ставку в соответствии с абзацем (1)выше либо если Банк не может привлечь средства в необходимом размере на межбанковском рынке по ЕВРИБОР - годовая ставка (с округлением до десятитысячных) для депозитов (кредитов) в Евро на срок, максимально приближенный к соответствующему Сроку Выплаты, сообщенная Банку по его просьбе любым активным участником межбанковского денежного рынка, выбранным Банком по своему усмотрению;
“Euro” and “EUR” shall mean the lawful currency of the member states of the European Union that adopt the single currency in accordance with the Treaty Establishing the European Community (Treaty of Rome) with changes and amendments;	«Евро» и «EUR» означает законное платежное средство стран членов Европейского Союза, принявших единую валюту в соответствии с Договором, Создавшим Европейское Сообщество (Римский Договор) с изменениями и дополнениями;
“Drawdown Notice” shall mean, save as otherwise provided for herein, an application of the Borrower requesting an Advance to be prepared substantially in the form of Annex 1 of this Agreement;	«Заявление о Предоставлении» означает, если иное не предусмотрено настоящим Договором, заявление Заемщика с просьбой о предоставлении ему Выплаты, подготовленное по форме Приложения 1 к настоящему Договору;
“ING Bank N.V.” shall mean a legal entity, established and registered in accordance with the laws of The Netherlands, having its registered office at Bijlmerplein 888, 1102 MG Amsterdam, The Netherlands;	«ИНГ Банк Н.В.» означает юридическое лицо, созданное и зарегистрированное в соответствии с законодательством Нидерландов, с местонахождением по адресу: Bijlmerplein 888, 1102 MG, Амстердам, Нидерланды;
“Contracts” means collectively the Export Contract and the Local Contracts, and “Contract” means any of them;	«Контракты» означает совместно Экспортный Контракт и Местные Контракты, и «Контракт» означает любой из этих контрактов;
“Control” (including “under control”) of a legal entity by any person or persons (hereinafter —	«Контроль» (включая «контролируется», «под контролем») любого лица (далее по тексту -

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“Controlling person”) shall be construed as:	«Контролирующее лицо») над юридическим лицом означает:
the possession of the power to direct or cause the direction of the management polices of a person, whether through the ownership of voting securities, by power of attorney, contract or credit arrangement, as trustee or executor, or otherwise, including the right to appoint more than 50% of members of the authorized bodies;	осуществление права определять, либо влиять на принятие решений и давать обязательные для исполнения указания в отношении управления юридического лица, посредством владения голосующими акциями/долями, доверенности, договора, кредитного соглашения, в роли доверительного управляющего, либо иным способом, включая право назначать более 50% состава органов управления;
“Adjustment Ratio” shall mean a ratio (rounded to four decimal places) of 365 to 360 or 366 to 360 (if 29 February falls within the respective year);	«Коэффициент Коррекции» означает отношение (с округлением до десятитысячных) 365 к 360 либо 366 к 360 (если 29 февраля выпадает на соответствующий год);
“LIBOR” shall mean:	«ЛИБОР» означает:
(1)   the indicative offered interest rate per annum for deposits (loans) at the London interbank money market, as calculated by the British Bankers’ Association on the basis of the rates at which active participants in the London interbank money market offer deposits (loans) in a currency of respective Advance for a time period mostly corresponding to the relevant Advance Tenor, as displayed by the company “Reuters Limited” through the service “Reuter Monitor” on the display page designated as “LIBOR01” about 15:00 p.m. (MSK) two Business Days prior to the first day of the relevant Advance Tenor;	(1)   индикативную годовую процентную ставку предоставления депозитов (кредитов) на лондонском межбанковском рынке, формируемую Британской Ассоциацией Банкиров на основе ставок размещения депозитов (кредитов) в валюте соответствующей Выплаты, объявляемых активными участниками лондонского межбанковского денежного рынка на срок, максимально приближенный к соответствующему Сроку Выплаты, публикуемую компанией «Рейтерс Лимитед» (Reuters Limited) через службу «Рейтер Монитор» («Reuter Monitor») на странице «LIBOR01» около 15:00 часов (МСК) за два Рабочих Дня до первого дня соответствующего Срока Выплаты;
or	или
(2)   in case of indeterminacy of the interest rate pursuant to paragraph (1) above or in case the Bank is unable to raise funds in a necessary amount at interbank money market at LIBOR - the rate per annum (rounded to four decimal places) for deposits (loans) in a currency of respective Advance for a time period mostly corresponding to the relevant Advance Tenor as advised to the Bank at its request by any active participant of London interbank money market selected by the Bank at its sole discretion;	(2)в случае если невозможно определить ставку в соответствии с абзацем (1)выше либо если Банк не может привлечь средства в необходимом размере на межбанковском рынке по ЛИБОР - годовая ставка (с округлением до десятитысячных) для депозитов (кредитов) в валюте соответствующей Выплаты на срок, максимально приближенный к соответствующему Сроку Выплаты, сообщенная Банку по его просьбе любым активным участником лондонского межбанковского денежного рынка, выбранным Банком по своему усмотрению;
“Maximum Amount” shall mean	«Максимальная Сумма» означает

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2,500,000,000.00 (Two billion five hundred million) Rubles;	2.500.000.000,00 (Два миллиарда пятьсот миллионов) Рублей;
“Margin” shall mean interest rate of 1.25% (One point twenty-five per cent) per annum;	«Маржа» означает процентную ставку равную 1,25 (Одна целая двадцать пять сотых процента) годовых;
“Local Contracts” shall mean each of:	«Местные Контракты» означает любой из следующих контрактов:
(a)  framework implementation contract no.ECR/KZ 04:152 dated 16 August 2004 (as most recently amended on 31 March 2009 and as further amended from time to time) between the Borrower and Ericsson Russia, as the same may be amended from time to time, together with any purchase order issued pursuant to a Local Contract by the Borrower to Ericsson Russia and confirmed by Ericsson Russia on or after 1 April 2009 or supplement thereto;	(a) рамочный контракт о внедрении №ECR/KZ 04:152 от 16 августа 2004 года (с изменениями от 31 марта 2009 года и с впоследствии внесенными изменениями) между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями, вместе с любым заказом на покупку, согласно Местному Контракту от Заемщика к Эрикссон Россия и подтвержденным Эрикссон Россия 1 апреля 2009 года или позднее; или дополнение к нему;
(b)  framework implementation contract no.ECR/KK-09:191 entered into or to be entered in (as the context requires) between the Borrower and Ericsson Russia, as the same may be amended from time to time, together with any purchase order issued pursuant to a Local Contract by the Borrower to Ericsson Russia and confirmed by Ericsson Russia on or after 1 April 2009 or supplement thereto;	(b) рамочный контракт о внедрении №ECR/KK-09:191, заключенный или подлежащий заключению (в зависимости от обстоятельств) между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями, вместе с любым заказом на покупку, согласно Местному Контракту от Заемщика к Эрикссон Россия и подтвержденным Эрикссон Россия 1 апреля 2009 года или позднее; или дополнение к нему;
(c)  framework implementation contract no. ECR/KZ 09:531 dated 26 June 2009 between the Borrower and Ericsson Russia, as the same may be amended from time to time;	(c)  рамочный контракт о внедрении №ECR/KZ 09:531 от 26 июня 2009 года между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями;
(d)  framework implementation contract no. ECR/KZ 07:365 dated 27 April 2007 between the Borrower and Ericsson Russia, as the same may be amended from time to time;	(d) рамочный контракт о внедрении №ECR/KZ 07:365 от 27 апреля 2007 между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями;
(e)  framework implementation contract no. ECR/KZ 07:396 dated 28 December 2007 between the Borrower and Ericsson Russia, as the same may be amended from time to time; and	(e) контракт №ECR/KZ 07:396 от 28 декабря 2007 года между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями; и
(f)  framework implementation contract no. ECR/KZ 08:490 dated 30 July 2008 between the Borrower and Ericsson Russia, as the same may be amended from time to time,	(f) контракт №ECR/KZ 08:490 от 30 июля 2008 года между Заемщиком и Эрикссон Россия, с время от времени вносимыми изменениями,
in each case together with any purchase order issued pursuant to a Local Contract by the Borrower to Ericsson Russia and confirmed by Ericsson Russia on or after 1 April 2009 or supplement thereto;	в каждом случае вместе с любым заказом на покупку согласно Местному Контракту от Заемщика к Эрикссон Россия и подтвержденным Эрикссон Россия 1 апреля 2009 года или позднее; или дополнение к нему;

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“MosPrime” shall mean:	«МосПрайм» означает:
(1)  the indicative offered interest rate per annum for loans (deposits) at the Moscow interbank money market, as calculated by the National Foreign Exchange Association (NFEA) on the basis of the rates at which active participants in the Moscow interbank money market offer for loans (deposits) in Rubles for a time period mostly corresponding to the relevant Advance Tenor, as displayed by the company “Reuters Limited” through the service “Reuter Monitor” on the display page designated as “MOSPRIME1” or on any other equivalent substitutive display page; in case the mentioned page is replaced or the service “Reuter Monitor” ceases to be available - a relevant rate displayed by the National Foreign Exchange Association on Internet at the web page www.nva.ru; about 12:00 p.m. (MSK) of the Business Day immediately preceding the first day of the relevant Advance Tenor;	(1) индикативную годовую процентную ставку предоставления рублевых кредитов (депозитов) на московском межбанковском денежном рынке, формируемую Некоммерческой организацией «Национальная валютная ассоциация (НВА)» на основе ставок размещения кредитов (депозитов) в Рублях, объявляемых активными участниками московского денежного рынка на срок, максимально приближенный к соответствующему Сроку Выплаты, публикуемую компанией «Рейтерс Лимитед» (Reuters Limited) через службу «Рейтер Монитор» («Reuter Monitor») на странице «MOSPRIME1» или на любой эквивалентной замещающей странице; в случае замены указанной страницы или недоступности службы «Рейтер Монитор» - соответствующая ставка, публикуемая Национальной валютной ассоциацией в сети «Интернет» на странице www.nva.ru; около 12:00 часов (МСК) Рабочего Дня, предшествующего первому дню соответствующего Срока Выплаты;
or	или
(2)  in case of indeterminacy of the interest rate pursuant to paragraph (1) above or in case the Bank is unable to raise funds in a necessary amount at interbank market at MosPrime - the rate per annum (rounded to four decimal places) for loans (deposits) in Rubles for a time period mostly corresponding to the relevant Advance Tenor as advised to the Bank at its request by any bank, participating in quotation of MosPrime Rate in accordance with regulations of National Currency Association of Russia as of the date of this Agreement and selected by the Bank at its sole discretion;	(2) в случае если невозможно определить ставку в соответствии с абзацем (1)выше либо если Банк не может привлечь средства в необходимом размере на межбанковском рынке по МосПрайм - годовая ставка (с округлением до десятитысячных) для кредитов (депозитов) в Рублях на срок, максимально приближенный к соответствующему Сроку Выплаты, сообщенная Банку по его просьбе любым из банков, участвующих в формировании индикативной ставки MosPrime Rate в соответствии с правилами Национальной Валютной Ассоциации России на дату заключения настоящего Договора, выбранным Банком по своему усмотрению;
“MTS Ukraine” shall mean a legal entity Closed joint stock company “Ukraine mobile communication”, established and registered in accordance with the laws of the Ukraine, having its registered office at 15, Leyptsigskaya Str, Kiev, 01015, the Ukraine;	«МТС Украина» означает юридическое лицо Закрытое акционерное общество «Украинская мобильная связь», созданное и зарегистрированное в соответствии с законодательством Украины с местонахождением по адресу: Украина, 01015, г. Киев, ул. Лейпцигская, 15;
“MSK” shall mean Moscow time;	«МСК» означает московское время;
“Encumbrance” shall mean a mortgage, pledge, lien or other encumbrance securing any obligation of any person or any other type	«Обременение» означает ипотеку, залог, право удержания или иное обременение, обеспечивающее любое обязательство какого-

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arrangement having a similar effect;	либо лица, любое соглашение, имеющее аналогичный эффект;
“General Terms and Conditions” shall mean General Terms and Conditions of “ING BANK (EURASIA) ZAO” (Closed Joint Stock Company) in their changed, supplemented or otherwise renewed form;	«Общие Условия» означает Общие условия «ИНГ БАНК (ЕВРАЗИЯ) ЗАО» (ЗАКРЫТОЕ АКЦИОНЕРНОЕ ОБЩЕСТВО) с учетом изменений и дополнений, внесенных в таковые;
“Final Maturity Date” shall mean the date which falls 12 (Twelve) months after the date of this Agreement;	«Окончательная Дата Погашения» означает дату, которая наступает через 12 (Двенадцать) месяцев от даты заключения Договора;
“Principal Amount” shall mean the totality of the Advances made and being outstanding hereunder from time to time (calculated in the currency of the Maximum Amount);	«Основной Долг» означает совокупность Выплат, предоставленных и остающихся непогашенными на тот или иной момент (рассчитанную в валюте Максимальной Суммы);
“Availability Period” shall mean a time period commencing on the date of this Agreement and ending one Business Day prior to the Final Maturity Date;	«Период Предоставления» означает период времени, начинающийся в дату подписания настоящего Договора и заканчивающийся за один Рабочий День до Окончательной Даты Погашения;
“Personal Data” shall mean information described in the Federal Law dated 27.07.2006 # 152-FZ “On personal data” relating to the particular or defined on the basis of such information person (which is a subject of personal data);	«Персональные Данные» означает указанную в Федеральном Законе от 27.07.2006 г. № 152-ФЗ «О персональных данных» информацию, относящуюся к определенному или определяемому на основании такой информации физическому лицу (субъекту персональных данных);
“Interest Period”shall have meaning given to it in the sub-clause 4.1 of Clause 4 of this Agreement;	«Процентный Период» имеет значение, данное этому термину в пункте 4.1 Статьи 4 настоящего Договора;
“Business Day” shall mean any day on which banks in Moscow, London and New York are open for business in accordance with the law of the relevant jurisdiction and banking practice;	«Рабочий День» означает любой день, в который банки в Москве, Лондоне и Нью-Йорке открыты для совершения операций в соответствии с правом соответствующей юрисдикции и банковской практикой;
“Permitted Encumbrance” shall mean	«Разрешенные Обременения» означает
(a)  any Encumbrance on any assets of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or any Encumbrance of the Borrower or becomes a Subsidiary of the Borrower and not created in contemplation of such event, provided that no such Encumbrance shall extend to any other assets;	(a) любое Обременение на какие-либо активы любого юридического лица, существующие на тот момент, когда такое юридическое лицо объединяется или консолидируется с Заемщиком или включается в любое Обременение Заемщика, или становится Дочерней Компанией Заемщика, и которое не было причиной для создания такого события, при условии что такое Обременение не распространяется на любые другие активы;
(b)  any Encumbrance existing on any assets prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower and not	(b) любое Обременение, распространяющееся на какие-либо активы до их приобретения Заемщиком или Дочерней Компанией

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created in contemplation of such acquisition, provided that no such Encumbrance shall extend to any other assets;	Заемщика и которое не было причиной такого приобретения, при условии, что такое Обременение не распространяется на любые другие активы;
(c)  any Encumbrance (other than the assets supplied under the Contract) 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 Encumbrance shall extend to any other assets; (ii) the aggregate principal amount of all Financial Indebtedness secured by such Encumbrance 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 Encumbrance attaches to such assets concurrently with the repair or refurbishing thereof or within 90 days after the acquisition thereof, as the case may be;	(c) любое Обременение (за исключением активов, которые были поставлены по Контракту) на любые активы, которые выступают в качестве обеспечения Финансовой Задолженности Заемщика или Финансовой Задолженности какой-либо Дочерней Компании Заемщика, понесенное или принятое для целей финансирования всех или части расходов на приобретение, ремонт или реконструкцию таких активов, при условии что (i)такое Обременение не распространяется на любые другие активы; (ii)совокупная основная сумма всей Финансовой Задолженности, обеспеченной таким Обременением на такие активы, не должна превышать наименьшей из (x)цены приобретения таких активов и (y)рыночной стоимости таких активов на момент приобретения, ремонта или реконструкции; и (iii)такое Обременение возникает в отношении таких активов одновременно с ремонтом или их реконструкцией или в течение 90 дней после их приобретения, в зависимости от обстоятельств;
(d)  any Encumbrance arising by operation of law, including any Encumbrance (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;	(d) любое Обременение, возникающее в силу закона, в том числе любое Обременение (i)возникающее в ходе обычной хозяйственной деятельности в отношении сумм, которые не уплачены или оспариваются Заемщиком или любой Дочерней Компанией Заемщика добросовестно в соответствующих судебных процессах или (ii)в связи с уплатой налогов, взносов, требованиями или претензиями со стороны государственных органов, включая, но не ограничиваясь, требованиями или претензиями со стороны налоговых органов Российской Федерации;
(e)  any Encumbrance 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;	(e) любое Обременение на активы любой Дочерней Компании Заемщика, обеспечивающее внутригрупповую Финансовую Задолженность такой Дочерней Компании перед Заемщиком или другой Дочерней Компанией;
(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	(f) любой договор о взаимной компенсации требований и обязательств или о зачете требований, заключенный любой компанией Группы с каким-либо банком или иной финансово-кредитной организацией в ходе своей обычной деятельности в целях взаимной

8

institution;	компенсации или зачета дебетовых и кредитовых сумм по соответствующим кредитам, заключенным с таким банком или финансово-кредитной организацией;
(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 (but each time provided it is not an easement, rights-of-way, restriction or any other similar charge or encumbrance on assets supplied under the Contract);	(g) сервитуты, права прохода, ограничения и любые другие подобные сборы или обременения, возникшие в ходе обычной хозяйственной деятельности и не являющиеся существенным вмешательством в обычную хозяйственную деятельность Заемщика или любой Дочерней Компании Заемщика, включая любое обременение или ограничение в отношении доли капитала любого совместного предприятия в соответствии с соглашением о совместном предприятии (но каждый раз, если это не сервитут, права прохода, ограничение или любые другие подобные сборы или обременения на активы, поставленные в соответствии с Контрактами);
(h)  any extension, renewal or replacement of any Encumbrance described in paragraphs (a) to (g) above, provided that (i) such extension, renewal or replacement shall be no more restrictive in any material respect than the original Encumbrance; (ii) the amount of Financial Indebtedness secured by such Encumbrance is not increased; (iii) if the assets securing the Financial Indebtedness subject to such Encumbrance are changed in connection with such refinancing, extension or replacement, the fair market value of the property or assets is not increased and (iv) the Encumbrance is not constituted over assets supplied under any of the Contracts; and	(h) любое расширение, обновление или замена любого Обременения, описанного в пунктах (a)— (g)выше, при условии что (i)такое расширение, обновление или замена не должны быть более ограниченными в любом существенном значении, чем само Обременение; (ii)величина Финансовой Задолженности, обеспеченной таким Обременением, не увеличивается; (iii)если активы, обеспечивающие величину Финансовой Задолженности с учетом Обременения, меняются в связи с таким рефинансированием, расширением или заменой, рыночная стоимость имущества или активов не увеличивается и (iv)если такие Обременения не распространяются на активы, поставленные по Контрактам; и
(i)  any other Encumbrance (excluding any Encumbrance (i) described in (a) to (h) above and (ii) over assets supplied under any of the Contracts) provided that immediately after giving effect to such Encumbrance, the aggregate amount of all secured Financial Indebtedness of the Group secured by Encumbrance under this paragraph (i) does not exceed 10% (Ten per cent) of the Borrower’s total assets as this value is specified in the Borrower’s consolidated audited financial statements prepared in accordance with US GAAP at the end of the respective financial year.	(i) любое иное Обременение (исключая любое (i)Обременение, описанное в (a)- (h)выше, и (ii)Обременение в отношении активов, поставленных по Контрактам), при условии, что сразу же после вступления в силу такого Обременения, общая сумма всей обеспеченной Финансовой Задолженности Группы, обеспеченная Обременением, указанным в настоящем подпункте (i), не превышает 10% (Десять процентов) отвеличиныбалансовой стоимости активов Заемщика, какэтавеличинауказанавконсолидированнойаудированнойфинансовойотчетностиЗаемщика, подготовленнойвсоответствиисГААПСШАнаконецсоответствующегофинансовогогода.
“Break Costs”shall mean the amount (if any)	«Расходы, Связанные с Изменением Сроков»

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calculated by the Bank by which	означает рассчитываемую Банком сумму (если таковая имеется), на которую
(1)   an amount of the interest (excluding the Margin) which the Bank should have received for the period starting on the date of receipt of the relevant Advance (in whole or any part) and ending on the immediately following Interest Payment Date for that Advance, had the respective sum received thereby been paid on such Interest Payment Date	(1)   сумма процентов (за вычетом Маржи), которую Банк получил бы за период, начинающийся в дату получения соответствующей Выплаты (полностью или частично) и заканчивающийся в ближайшую следующую Дату Уплаты Процентов, установленную для такой Выплаты, если бы полученная таким образом сумма была выплачена в такую Дату Уплаты Процентов,
exceeds	Превышает
(2)   the amount which the Bank would be able to obtain by placing an amount equal to the sum received thereby on deposit with a any leading bank in the interbank money market for a period starting on the Business Day following receipt of such sum and ending on the immediately following Interest Payment Date for the relevant Advance;	(2)   сумму, которую Банк смог бы получить в результате размещения суммы, равной полученной таким образом сумме, в виде депозита в каком-либо ведущем банке на межбанковском рынке за период, начинающийся в день получения такой суммы и заканчивающийся в ближайшую следующую Дату Уплаты Процентов, установленную для соответствующей Выплаты;
“RAS” shall mean rules and principals consistently applied for accounting and reporting within the territory of the Russian Federation;	«РСБУ» означает последовательно применяемые правила и принципы бухгалтерского учета и отчетности, действующие на территории Российской Федерации;
“Ruble” shall mean denote lawful currency of the Russian Federation;	«Рубли» означает законное платежное средство Российской Федерации;
“INGClient System” shall mean the duly certified electronic payment system of the Bank intended for the preparation and transfer of instructions, information and other documents in electronic form;	«Система «INGClient»» означает надлежаще сертифицированную электронную систему обмена информацией Банка, предназначенная для подготовки и передачи распоряжений, информации и иных документов в электронном виде;
“Event of Default” shall mean any event referred to as such in Clause 13 of this Agreement subject to the provisions of the subclause 13.1 of Clause 13 hereof;	«Случай Досрочного Истребования» означает любое из обстоятельств, указанных в качестве таковых в Статье 13 настоящего Договора, с учетом положений пункта 13.1 Статьи 13 настоящего Договора;
“Advance Tenor” shall mean a time period commencing on the date of disbursement of the respective Advance and ending on the Repayment Date for such Advance;	«Срок Выплаты» означает период времени, начинающийся в дату предоставления соответствующей Выплаты и заканчивающийся в Дату Погашения для такой Выплаты;
“Cost of Funds” shall mean the annum interest rate offered by the Bank (acting reasonably and in good faith), to be that at which the Bank, from time to time, would have been able to raise funds in a currency of the relevant	«Стоимость Фондирования» означает годовую процентную ставку, предлагаемую Банком (действующим разумно и добросовестно) на основании годовой процентной ставки, по которой Банк, в соответствующий момент

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Advance at the interbank money market in an amount and for a tenor corresponding to the amount of the respective Advance and the relevant Advance Tenor, taking into consideration additional costs and expenses of the Bank for raising funds in order to finance such Advance;	времени, мог бы привлечь денежные средства в валюте соответствующей Выплаты на межбанковском денежном рынке в сумме и на срок, равные сумме такой Выплаты и соответствующему Сроку Выплаты, с учетом дополнительных расходов и затрат Банка на организацию привлечения денежных средств для финансирования такой Выплаты;
“Material Adverse Effect” shall mean a material adverse, in the opinion of the Bank, change in or effect on any of the business, assets, operations, property, or financial condition of the Borrower.	«Существенное Негативное Воздействие» означает неблагоприятное, по разумному и обоснованному мнению Банка, изменение в или воздействие на хозяйственную деятельность, активы, операции, имущество или финансовое состояние Заемщика.
Provided that any losses, expenses, and any payments against the Borrower which the Borrower will have to make under any court proceeding, action or claim in relation to acquisition, reorganization or ownership rights of Bitel by the Borrower (or its affiliates) , such losses, expenses, and any payments not exceeding 330,000,000.00 (Three hundred thirty million) US Dollars or its equivalent in any other currency shall be disregarded when considering the Material Adverse Effect.	При этом любые убытки, расходы, а также любые выплаты, которые Заемщик будет обязан сделать в рамках любого судебного процесса, иска или требования к Заемщику в отношении приобретения, реорганизации или прав собственности Заемщика (его аффилированных лиц) на Бител, не будут приниматься в расчет при определении наличия Существенного Негативного Воздействия, при условии, что такие убытки или расходы (выплаты) не превышают 330.000.000,00 (Триста тридцать миллионов) Долларов США или эквивалент в иной валюте.
“Accounts of the Borrower” shall mean jointly:	«Счета Заемщика» означает совместно:
(1)   Current account of Borrower in Rubles No40702810200001001817 (“Account of the Borrower in Rubles”), opened by the Bank according to Agreement on Opening and Operation of Account dated 04.07.2000, entered into by the Bank and the Borrower (“Agreement on Account of the Borrower in Rubles”);	(1)   Расчетный счет Заемщика в Рублях №40702810200001001817 («Счет Заемщика в Рублях»), открытый Банком на основании договора об открытии и ведении счета от 04.07.2000, заключенного между Банком и Заемщиком («Договор Счета Заемщика в Рублях»);
(2)   Current account of the Borrower in USD No40702840500001001817 (“Account of the Borrower in USD”), opened by the Bank according to Agreement on Opening and Operation of Account dated 04.07.2000, entered into by the Bank and the Borrower (“Agreement on Account of the Borrower in USD”);	(2)Расчетный счет Заемщика в Долларах США №40702840500001001817(«Счет Заемщика в Долларах»), открытый Банком на основании договора об открытии и ведении счета от 04.07.2000, заключенного между Банком и Заемщиком («Договор Счета Заемщика в Долларах США»);
(3)   Current account of the Borrower in EUR No40702978100001001817 (“Account of the Borrower in EUR”), opened by the Bank according to Agreement on	(3)Расчетный счет Заемщика в Евро №40702978100001001817(«Счет Заемщика в Евро»), открытый Банком на основании договора об открытии и

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Opening and Operation of Account dated 23.08.2007, entered into by the Bank and the Borrower (“Agreement on Account of the Borrower in EUR”);	ведении счета от 23.08.2007, заключенного между Банком и Заемщиком («Договор Счета Заемщика в Евро»);
“Account of the Borrower” shall mean any of the above Accounts of the Borrower and “Account Agreement” shall mean any of the above Agreements on Account of the Borrower;	«Счет Заемщика» означает любой из вышеуказанных Счетов Заемщика, и «Договор Счета» означает любой из вышеуказанных Договоров Счета Заемщика;
“Financial Indebtedness” shall mean any indebtedness for or in respect of:	«Финансовая Задолженность» означает любую задолженность в отношении:
(a)moneys borrowed;	(a)заёмных денежных средств;
(b)   any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;	(b)сумм, привлеченных путем акцепта по акцептному или бездокументарному кредиту;
(c)   any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;	(c)сумм, привлечённых по любому кредиту или выпуску любых облигаций, векселей, долговых обязательств или иных аналогичных долговых инструментов;
(d)   the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with US GAAP, be treated as a finance or capital lease;	(d)сумм обязательств в отношении любого договора аренды или покупки в рассрочку, который в соответствии с ГААП США рассматривается как финансовая или капитальная аренда;
(e)   receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);	(e)проданной или уступленной дебиторской задолженности (кроме тех случаев, когда покупатель такой дебиторской задолженности не имеет права требования к лицу, продавшему такую дебиторскую задолженность);
(f)    any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;	(f)сумм денежных средств, привлеченных по какой-либо другой сделке (включая форвардные контракты купли-продажи), имеющей коммерческий эффект денежного заимствования или кредита;
(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);	(g)любых операций с производными финансовыми инструментами, направленных на защиту или получение дохода от колебаний какого-либо курса или цены (и где расчет стоимости любой операции с производными финансовыми инструментами производится только на основании рыночной стоимости);
(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)	(h)акций, которые рассматриваются как подлежащие выкупу по требованию держателя этих акций в или до Окончательной Даты Погашения (но исключая любые накопленные дивиденды)

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(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 reorganization or major transaction (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);	(и во избежание сомнений, в той мере, в которой указанные акции подлежат погашению по требованию держателя этих акций исключительно в результате реорганизации общества или крупной сделки (как эти термины толкуются в соответствии с применимым Российским законодательством), такие акции не учитываются для целей настоящего определения до момента предъявления держателем акций требования выкупить указанные акции);
(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	(i)любого обязательства встречного возмещения по гарантии, обязательству возмещения убытков, долговому обязательству, резервному или документарному аккредитиву или другому инструменту, выпущенному банком или любой кредитной организацией; и
(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.	(j)суммы ответственности по какому-либо обеспечению или возмещению убытков, причиненных любому лицу в отношении любой задолженности, указанной в подпунктах (а) — (i) выше.
“Export Contract” shall mean the supply contract no. FCP 101 8128 dated 31 December 2008 (as most recently amended on 17 June 2009 and as further amended from time to time) between the Borrower and Ericsson Sweden, together with any purchase order issued pursuant to and confirmed by Ericsson Sweden on or after 30 March 2009 for 869,565,000.00 (Eight hundred and sixty nine million five hundred and sixty five thousand) USD and supplement thereto;	«Экспортный Контракт» означает контракт на поставку №FCP 101 8128 от 31 декабря 2008 (с изменениями от 17 июня 2009 года и с впоследствии внесенными изменениями) между Заемщиком и Эрикссон Швеция, вместе с любым заказом на покупку согласно требованию и подтвержденным Эрикссон Швеция 30 марта 2009 года либо позднее на 869.565.000,00 (Восемьсот шестьдесят девять миллионов пятьсот шестьдесят пять тысяч) Долларов и дополнение к нему;
“Ericsson Russia” means Ericsson Corporatia AO, a closed joint stock company established and existing under the laws of the Russian Federation and having its registered address at 12, 8-Marta str., 127083 Moscow, Russian Federation;	«Эрикссон Россия» означает «Эрикссон Корпорация АО», закрытое акционерное общество, созданное и существующее по законодательству Российской Федерации и имеющее адрес места нахождения Ул. 8 Марта, 12, 127083, Москва, Россия;
“Ericsson Sweden” means Ericsson AB, Reg. No. 556056-6258, a limited liability company duly organised under the laws of Sweden, having its head office at Torshamnsgatan 23, 164 40, Kista, Stockholm, Sweden.	«Эрикссон Швеция» означает «EricssonAB», общество с ограниченной ответственностью, созданное и существующее по законодательству Швеции, регистрационный номер 556056-6258, и имеющее адрес места нахождения Torshamnsgatan 23, 164 40, Kista, Stockholm,

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	Sweden.
1.2. Interpretations	1.2. Толкование
Unlessacontraryindicationappears any reference in this Agreement to:	При отсутствии указания об ином, любая ссылка в настоящем Договоре на:
“affiliate” shall be construed as, in respect of a company or corporation, any entity controlled, directly or indirectly, by that company or corporation, any entity which controls that company or corporation either directly or indirectly or any entity which is under common control with another affiliate of the company or corporation;	«аффилированное лицо» истолковывается, в отношении общества или компании, как ссылка на любое лицо, которое контролируется, прямо или косвенно, вышеуказанным обществом или компанией; любое лицо, которое контролирует указанное общество или компанию, прямо или косвенно; любое лицо, которое находится под общим контролем другого аффилированного лица указанного общества или компании;
“month” shall be construed to mean a period starting on one day in a calendar month and ending on the numerically corresponding day of the next calendar month, except that:	«месяц» означает период времени, начинающийся в один день календарного месяца и заканчивающийся в соответствующий в численном выражении день следующего календарного месяца, если не считать того, что:
(1)   (subject to the provisions of the paragraph (2) below) if the numerically corresponding day is not a Business Day, that the aforementioned 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;	(1)(при условии соблюдения положений нижеприведенного пункта (2)) в случае, если соответствующий в численном выражении день не является Рабочим Днем, окончание указанного периода переносится на следующий Рабочий День в том календарном месяце, в каком этот период должен закончиться, если такой следующий Рабочий День имеет место, или на непосредственно предшествующий Рабочий День, если такого следующего Рабочего Дня нет;
(2)   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;	(2)в случае отсутствия соответствующего в численном выражении дня в календарном месяце, в котором указанный период должен закончиться, окончание этого периода устанавливается в последний Рабочий день в таком календарном месяце;
an expression «calculated in the currency of the Maximum Amount» relating to any term or amount shall mean an equivalent of the respective amount in the currency the Maximum Amount is expressed to be in, calculated (as applicable to the relevant currency):	выражение «рассчитанный в валюте Максимальной Суммы» в отношении любого термина или суммы означает эквивалент соответствующей суммы в валюте, в которой выражена Максимальная Сумма, рассчитанный (поскольку применимо к соответствующей валюте):
(1)   at an exchange rate of the respective currency for Ruble, or	(1)по курсу соответствующей валюты к Рублю, либо
(2)   at a cross-rate of the currency, the Maximum Amount is expressed to be in, for the currency, the respective Advance is disbursed in, computed basing on exchange	(2)по кросс-курсу валюты, в которой выражена Максимальная Сумма, к валюте, в которой предоставлена соответствующая Выплата, определенному на основании курсов таких

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rate of such currencies for Ruble,	валют к Рублю,
the calculation shall be made on the basis of official exchange rates of foreign currencies fixed by the Central Bank of the Russian Federation as on the date of such calculation;	расчет производится на основании официальных курсов иностранных валют к Рублю, установленных Центральным Банком Российской Федерации на дату такого расчета;
any word in the singular includes plural and vice versa.	любое слово в единственном числе включает ссылку на множественное и наоборот.
2. SUBJECT OF THE AGREEMENT	2. ПРЕДМЕТ ДОГОВОРА
2.1. Subject to the terms of this Agreement, the Bank agrees to make available to the Borrower the Facility in an aggregate amount not exceeding the Maximum Amount on the terms and conditions herein and the Borrower undertakes to repay the Principal Amount, pay interest accrued thereon and other amounts payable to the Bank under this Agreement, as well as to perform all other obligations hereunder.	2.1. В соответствии с условиями настоящего Договора Банк соглашается предоставить Заемщику Линию в размере, не превышающем Максимальную Сумму, на условиях и положениях, установленных настоящим Договором, а Заемщик обязуется возвратить Основной Долг, уплатить проценты, начисленные на него, и иные суммы, подлежащие уплате в соответствии с настоящим Договором, а также исполнить все иные обязательства по настоящему Договору.
3. AVAILABILITY	3. ПРЕДОСТАВЛЕНИЕ
3.1. The Facility shall be made available to the Borrower in the form of the Advances within the Available Facility. Upon expiry of the Availability Period the Available Facility shall be canceled.	3.1. Линия предоставляется Заемщику в форме Выплат в пределах Доступной Суммы. По истечении Периода Предоставления Доступная Сумма аннулируется.
3.2. Notwithstanding anything herein to the contrary, the availability of the Facility is entirely and solely at the discretion of the Bank and provided that the required funds are available to the Bank at the moment of Drawdown Notice receipt and disbursement of any Advance shall be subject to the Bank’s preliminary approval in each particular case.	3.2. Несмотря на любое положение настоящего Договора об обратном, предоставление Линии осуществляется полностью и исключительно по усмотрению Банка и при условии, что необходимые средства доступны для Банка на момент получения Заявления о Предоставлении, и предоставление любой Выплаты обусловлено предварительным одобрением Банком в каждом конкретном случае.
3.3. The Advance shall be disbursed against Drawdown Notice.	3.3. Выплата предоставляется Заемщику на основании Заявления о Предоставлении.
3.4. The Borrower shall not (save as the Bank may otherwise agree in writing) submit Drawdown Notice to the Bank until the Bank shall have confirmed to the Borrower in writing due fulfillment of Conditions Precedent set forth in Clause 10 hereof.	3.4. Заемщик не вправе (если Банк не согласится на иное в письменной форме) направлять в Банк Заявление о Предоставлении до момента письменного подтверждения Банком Заемщику выполнения всех Предварительных Условий, указанных в Статье 10 настоящего Договора.
3.5. The Drawdown Notice shall be (save as the Bank may otherwise agree in writing) executed	3.5. Заявление о Предоставлении (если Банк не согласится на иное письменно) должно быть

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and submitted to the Bank in accordance with the following requirements:	оформлено и предоставлено в Банк в соответствии со следующими требованиями:
3.5.1 shall be signed by the chief executive officer of the Borrower or by a person, authorised on the Borrower’s behalf by respective power of attorney, and by the chief accountant of the Borrower or by the acting chief accountant of the Borrower on the basis of a respective appointment order;	3.5.1 подписано единоличным исполнительным органом Заемщика либо лицом, уполномоченным соответствующей доверенностью от имени Заемщика, а также главным бухгалтером Заемщика либо лицом, исполняющим обязанности главного бухгалтера Заемщика на основании соответствующего приказа;
3.5.2 shall be submitted to the Bank:	3.5.2 представлено в Банк:
(1)   for Advances in Rubles - not later than 12.00 MSK of the date falling at least 1 (One) Business Days prior to the proposed date for disbursement of such Advance,	(1)для Выплат в Рублях - не позднее 12.00 МСК даты, наступающей не менее чем за 1 (Один) Рабочий День до предполагаемой даты предоставления соответствующей Выплаты,
for Advances in US Dollars or Euro - not later than 12.00 MSK of the date falling at least 2 (Two) Business Days prior to the proposed date for disbursement of such Advance, or	для Выплат в Долларах США или Евро - не позднее 12.00 МСК даты, наступающей не менее чем за 2 (Два) Рабочих Дня до предполагаемой даты предоставления соответствующей Выплаты либо
(2)   subject to obtaining by the Borrower of prior written consent of the Bank - not later than 12.00 MSK of the proposed date for disbursement of such Advance in any currency;	(2)при условии получения Заемщиком предварительного письменного согласия Банка - не позднее 12.00 МСК предполагаемой даты предоставления соответствующей Выплаты в любой валюте;
3.5.3 shall be in form and substance acceptable to the Bank, and shall be in compliance with the terms and conditions of hereof and containing, inter alia:	3.5.3 по форме и содержанию приемлемо для Банка, а также соответствует условиям настоящего Договора и, помимо прочего, содержит:
(1)   proposed date for disbursement of the Advance,	(1)предполагаемую дату предоставления Выплаты,
(2)   proposed amount of such Advance,	(2)предполагаемую сумму такой Выплаты,
(3)   Repayment Date for the relevant Advance,	(3)Дату Погашения данной Выплаты,
(4)   details of an account the respective Advance is to be credited with;	(4)реквизиты счета, на который должна быть перечислена соответствующая Выплата;
3.5.4 the proposed amount of the Advance shall not exceed Available Facility and shall be an integral multiple by:	3.5.4 предполагаемая сумма Выплаты не превышает Доступную Сумму и является целой кратной:
1)    for Advances in Rubles — 100,000,000.00 (One hundred million) Rubles	1)для Выплат в Рублях — 100.000.000,00 (Сто миллионов) Рублей
2)    for Advances in US Dollars — 3,500,000.00 (Three million five hundred thousand) US Dollars;	2)для Выплат в Долларах США — 3.500.000,00 (Три миллиона пятьсот

16

	тысяч) Долларов США;
3)    for Advances in Euro — 2,500,000.00 (Two million five hundred thousand) Euro;	3)для Выплат в Евро — 2.500.000,00 (Два миллиона пятьсот тысяч) Евро;
or if the Available Facility is less than such amount, than the proposed amount of the Advance shall be equal to the Available Facility;	или, если Доступная Сумма меньше такой суммы, то предполагаемая сумма Выплаты должна быть равна Доступной Сумме;
3.5.5 the proposed date for disbursement of the Advance shall be a Business Day and shall fall not later than the Final Maturity Date;	3.5.5 предполагаемая дата предоставления Выплаты является Рабочим Днем и наступает не позднее Окончательной Даты Погашения;
3.5.6 the proposed Advance Tenor shall be:	3.5.6 предполагаемый Срок Выплаты составляет:
1(One) month,	1(Один) месяц,
2 (Two) months,	2(Два) месяца,
3 (Three) months, or	3(Три) месяца, или
any other period agreed with the Bank in writing, not exceeding 3 (Three) months, provided that the Advance Term shall in no case extend below the Final Maturity Date.	любой другой срок, согласованный с Банком в письменной форме, не превышающий 3 (Три) месяца, при этом Срок Выплаты в любом случае не может оканчиваться позже Окончательной Даты Погашения.
3.6. The Drawdown Notice shall be irrevocable once received by the Bank.	3.6. Заявление о Предоставлении является безотзывным с момента его получения Банком.
4. INTEREST	4. ПРОЦЕНТЫ
4.1. The period for which an Advance is outstanding shall be divided into successive periods (each referred to as the “Interest Period”).	4.1. Срок, в течение которого какая-либо Выплата остается непогашенной, разбивается на следующие друг за другом периоды (каждый из которых именуется «Процентный Период»).
Each Interest Period (save as otherwise provided for herein) shall consist of 3 (Three) months.	Каждый Процентный Период (если не указано иное) составляет 3 (Три) месяца..
Interest Periods for Advanceswith Advance Tenor being less than 3 (Three) months shall be equal to the respective Advance Tenor.	Процентный Период для Выплат со Сроком Выплаты менее 3 (Три) месяца равен соответствующему Сроку Выплаты.
4.2. On Interest Payment Date relating to each Advance the Borrower shall pay to the Bank interest accrued on respective Advance during the Interest Period.	4.2. В Дату Уплаты Процентов для каждой Выплаты Заемщик обязуются уплатить Банку проценты, начисленные на соответствующую Выплату в течение Процентного Периода.
4.3. In case the Borrower submits the Drawdown Notice pursuant to paragraph (1) of sub-clause 3.5.2 of this Agreement the rate of interest applicable to the Advance shall be an annual interest rate, calculated as follows:	4.3. В случае предоставления Заемщиком Заявления о Предоставлении в соответствии с абзацем (1) подпункта 3.5.2 настоящего Договора проценты на Выплату начисляются по годовой процентной ставке, рассчитываемой как:
(1)   in respect of Advance made available in Rubles — a sum of the MosPrime and the	(1)в отношении Выплаты, предоставленной в Рублях — сумма МосПрайм и Маржи;

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Margin;
(2)   in respect of Advance made available in US Dollars — a sum of LIBOR, multiplied by the Adjustment Ratio, and the Margin;	(2)в отношении Выплаты, предоставленной в Долларах, — сумма ЛИБОР, умноженной на Коэффициент Коррекции, и Маржи;
(3)   in respect of Advance made available in Euro — a sum of EURIBOR, multiplied by the Adjustment Ratio, and the Margin;	(3)в отношении Выплаты, предоставленной в Евро, — сумма ЕВРИБОР, умноженной на Коэффициент Коррекции, и Маржи;
4.4. In case the Borrower submits the Drawdown Notice pursuant to paragraph (2) of sub-clause 3.5.2 of this Agreement the rate of interest applicable to the Advance shall be an annual interest rate of a sum of the Cost of Funds and the Margin.	4.4. В случае предоставления Заемщиком Заявления о Предоставлении в соответствии с абзацем (2) подпункта 3.5.2 Статьи 3 настоящего Договора проценты на Выплату начисляются по годовой процентной ставке равной сумме Стоимости Фондирования и Маржи.
4.5. Interest shall be calculated daily on the basis of the actual number of days elapsed in a relevant Interest Period and a year of 365 days (or 366 days, if 29 February falls within relevant year).	4.5. Проценты рассчитываются ежедневно на основе фактического количества дней, истекших за соответствующий Процентный Период и 365 дней в году (или 366 дней, если в течение соответствующего года наступает 29 февраля).
4.6. For the avoidance of doubt interest shall accrue on outstanding indebtedness under Principal Amount on the beginning of the Bank’s transactional day, provided that the first and last day of each of the Interest Periods shall be considered as one day.	4.6. Во избежание сомнений, проценты начисляются на остаток задолженности по Основному Долгу на начало операционного дня Банка, при этом первый и последний день каждого Процентного Периода считается за один день.
5. FEES	5. ВОЗНАГРАЖДЕНИЯ
5.1 The Borrower shall pay to the Bank an arrangement fee in an amount equal to 0.25% (Zero point twenty-five per cent) of the Maximum Amount, payable in one installment within 10 (Ten) Business Days after the date hereof but in any case not later than the date on which the first Advance is made under the Agreement.	5.1 Заемщик должен уплатить Банку вознаграждение за предоставление Кредита в размере 0,25% (Ноль целых двадцать пять сотых процента) от Максимальной Суммы, такое вознаграждение должно быть уплачено единовременно в течение 10 Рабочих Дней с даты подписания настоящего Договора, но в любом случае не позднее даты предоставления первый Выплаты по настоящему Договору.
6. REPAYMENT	6. ПОГАШЕНИЕ
6.1. Each Advance granted hereunder shall be repaid on the Repayment Date for such Advance, but in any case not later than on the Final Maturity Date, and on such Repayment Date the Borrower shall repay to the Bank the amount of the principal under such Advance which remains outstanding, and the amount of interest accrued thereon. After repayment of the principal indebtedness under the Advance (in	6.1. Каждая Выплата, предоставленная по настоящему Договору, подлежит погашению в Дату Погашения для такой Выплаты, но в любом случае не позднее Окончательной Даты Погашения, при этом в такую Дату Погашения Заемщик обязуется выплатить Банку сумму основной задолженности по такой Выплате, оставшуюся непогашенной, и сумму начисленных на нее процентов. После

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full or any part) the Borrower shall have right to re-borrow respective amount in accordance with the terms and conditions of this Agreement.	погашения суммы основной задолженности по Выплате (полностью либо частично) Заемщик вправе произвести повторную выборку соответствующей суммы в соответствии с условиями настоящего Договора.
6.2. In case on any date due to fluctuation of currency exchange rate, the Principal Amount (calculated in the currency of the Maximum Amount) exceeds the Maximum Amount by 5% (Five per cent), than the Borrower shall immediately, upon receipt of the relevant notice from the Bank, repay the sum of the mentioned exceeding indicated by the Bank in such notice.	6.2. В случае если в любую дату в результате колебания курсов валют Основной Долг (рассчитанный в валюте Максимальной Суммы) превысит Максимальную Сумму на 5% (Пять процентов), Заемщик обязан немедленно по получении соответствующего уведомления от Банка погасить сумму такого превышения, указанную Банком в упомянутом уведомлении.
6.3. On the Final Maturity Date the Borrower shall repay to the Bank any and all amounts outstanding under this Agreement.	6.3. В Окончательную Дату Погашения Заемщик обязуются выплатить Банку все суммы, невыплаченные по настоящему Договору.
6.4. Prolongation of the Advance Tenor.	6.4. Продление Cрока Выплаты.
6.4.1 Should the Bank receive a written application of the Borrower requesting to repay the Advance on a date occurring later than the Repayment Date for such Advance (the “Extended Repayment Date”) prepared substantially in the form of Annex 1 of this Agreement (the “Prolongation Notice”) and should the Bank agree to satisfy such request, the respective Advance shall be repaid on the mentioned Extended Repayment Date, provided that interest accrued on the respective Advance shall be paid on the original Repayment Date for such Advance.	6.4.1 Если Банк получил от Заемщика письменное заявление с просьбой о погашении Выплаты в дату, более позднюю, чем Дата Погашения для данной Выплаты, («Отсроченная Дата Погашения»), подготовленное по форме Приложения 1 к настоящему Договору, («Заявление о Продлении») и Банк согласился удовлетворить такую просьбу, то такая Выплата подлежит погашению в указанную Отсроченную Дату Погашения, при этом проценты, начисленные на соответствующую Выплату, должны быть уплачены в первоначальную Дату Погашения для такой Выплаты.
6.4.2 Each of the provisions of this Agreement (save as otherwise specially provided for) relating to the Repayment Date shall equally apply to the Extended Repayment Date. For the purposes of Clause 4 prolongation date shall be equated to the drawdown date of the respective Advance.	6.4.2 Каждое из положений настоящего Договора (если иное прямо не предусмотрено), которое относится к Дате Погашения, применяется в равной степени к Отсроченной Дате Погашения. Для целей Статьи 4 дата пролонгации приравнивается к дате предоставления Выплаты.
6.4.3 The Prolongation Notice shall be executed and submitted to the Bank in accordance with the following requirements:	6.4.3 Заявление о Продлении должно быть оформлено и предоставлено в Банк в соответствии со следующими требованиями:
6.4.3.1 shall be signed by the persons indicated in sub-clause 3.5.1 of Clause 3 hereof;	6.4.3.1 подписано лицами, указанными в пункте 3.5.1 Статьи 3 настоящего Договора;
6.4.3.2 shall be submitted to the Bank at least 3 (Three) Business Days prior to the Repayment Date for such Advance;	6.4.3.2 представлено в Банк не менее чем за 3 (Три) Рабочих Дня до Даты Погашения для соответствующей Выплаты;
6.4.3.3 shall be in form and substance acceptable to the Bank and shall contain, inter alia:	6.4.3.3 по форме и содержанию приемлемо для Банка и содержит, помимо прочего:

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	(1) a proposed Extended Repayment Date,		(1) предполагаемую Отсроченную Дату Погашения,
	(2) proposed prolongation date,		(2) дату, в которую предполагается продление,
	(3) the amount of the Advance.		(3) сумму Выплаты.
6.4.4 the proposed tenor of prolongation shall comply with requirements set forth in sub-clause 3.5.6 of Clause 3 hereof for Advance Tenor.		6.4.4 предполагаемый срок продления соответствует требованиям пункта 3.5.6 Статьи 3 настоящего Договора к Сроку Выплаты.
6.4.5 The Prolongation Notice shall be irrevocable once received by the Bank.		6.4.5 Заявление о Продлении является безотзывным с момента его получения Банком.
6.4.6 In case of disagreement with prolongation of the Advance the Bank shall notify the Borrower on rejection of Prolongation Notice at least 2 (Two) Business Days prior to the Repayment Date for such Advance.		6.4.6 В случае несогласия с продлением срока Выплаты Банк уведомляет Заемщика об отклонении Заявления о Продлении не позднее 2 (Двух) Рабочих Дней до Даты Погашения такой Выплаты.
6.5. Prepayment.		6.5. Досрочноепогашение.
6.5.1 The Borrower shall have a right having submitted to the Bank a written application requesting to repay the Advance on a date occurring earlier than the Repayment Date for such Advance prepared substantially in the form of Annex 1 of this Agreement (the “Prepayment Notice”) to partially or wholly prepay any Advance.		6.5.1 Заемщик вправе, направив Банку письменное заявление с просьбой о погашении Выплаты в дату, более раннюю, чем Дата Погашения для данной Выплаты, подготовленное по форме Приложения 1 к настоящему Договору, («Заявление о Досрочном Погашении») частично или полностью погасить любую Выплату.
6.5.2 The Prepayment Notice shall be executed and submitted to the Bank in accordance with the following requirements:		6.5.2 Заявление о Досрочном Погашении должно быть оформлено и предоставлено в Банк в соответствии со следующими требованиями:
6.5.2.1 shall be submitted to the Bank at least 2 (Two) Business Days prior to the proposed date of prepayment;		6.5.2.1 представлено в Банк не менее чем за 2 (Два) Рабочих Дня до предполагаемой даты досрочного погашения,
6.5.2.2 shall be signed by the persons indicated in sub-clause 3.5.1 of Clause 3 hereof;		6.5.2.2 подписано лицами, указанными в пункте 3.5.1 Статьи 3 настоящего Договора,
6.5.2.3 shall be in form and substance acceptable to the Bank and shall contain, inter alia:		6.5.2.3 по форме и содержанию приемлемо для Банка и, помимо прочего, содержит:
	(1) a proposed repayment date,		(1) предполагаемую дату досрочного погашения,
	(2) an amount to be prepaid,		(2) досрочно погашаемую сумму,
	(3) Break Costs incurred by prepayment, calculated by the Bank by the request from the Borrower at least 2 (Two) Business Days prior to the proposed date of prepayment,		(3) Расходы, Связанные с Изменением Сроков, вызванные досрочным погашением, рассчитанные Банком по просьбе Заемщика не менее чем за 2 (Два) Рабочих Дня до предполагаемой даты досрочного погашения,
	(4) the date and number of the Drawdown Notice the prepaying Advance has been made available under;		(4) дату и номер Заявления о

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		Предоставлении, на основании которого выдана досрочно погашаемая Выплата.
6.5.2.4 an amount to be prepaid shall be equal to Principal Amount or, if less, shall be an integral multiple of		6.5.2.4 досрочно погашаемая сумма составляет целое кратное
	1) for Advances in Rubles — 100,000,000.00 (One hundred million) Rubles		1) для Выплат в Рублях — 100.000.000,00 (Сто миллионов) Рублей
	2) for Advances in US Dollars — 3,500,000.00 (Three million five hundred thousand) US Dollars;		2) для Выплат в Долларах США — 3.500.000,00 (Три миллиона пятьсот тысяч) Долларов США;
	3) for Advances in Euro — 2,500,000.00 (Two million five hundred thousand) Euro; or if less shall be equal to outstanding amount of the Advance.		3) для Выплат в Евро — 2.500.000,00 (Два миллиона пятьсот тысяч) Евро;либо, если менее, равна непогашенной сумме Выплаты.
6.5.2.5 the proposed date for the prepayment shall be a Business Day,		6.5.2.5 предполагаемая дата досрочного погашения является Рабочим Днем.
6.5.4 The Prepayment Notice shall be irrevocable once received by the Bank. The Borrower shall repay the amount set forth in the Prepayment Notice on the indicated prepayment date.		6.5.4 Заявление о Досрочном Погашении является безотзывным с момента его получения Банком. Заемщик обязан погасить сумму, указанную в таком Заявлении о Досрочном Погашении, в указанную дату досрочного погашения.
6.5.5 The Borrower shall compensate the Bank for Break Costs simultaneously with the prepayment.		6.5.5 Заемщик обязан компенсировать Банку Расходы, связанные с Изменением Сроков, одновременно с досрочным погашением.
7.PAYMENTS		7.ПЛАТЕЖИ
7.1. All amounts due to the Bank pursuant to this Agreement shall be paid by the Borrower to the Bank, provided that any amount shall be received by the Bank before 4.00 p.m. MSK. Amounts credited in favour of the Bank after 4.00 p.m. MSK shall be considered as received on the next Business Day.		7.1. Все суммы, причитающиеся Банку в соответствии с настоящим Договором, должны быть уплачены Заемщиком Банку, при этом любая сумма должна быть получены Банком до 16.00 МСК. Суммы, зачисленные в пользу Банка позже 16.00 МСК, считаются полученными Банком на следующий Рабочий День.
7.2. Whenever any payment hereunder shall be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day.		7.2. Если какой-либо платеж по настоящему Договору подлежит выплате в день, не являющийся Рабочим Днем, такой платеж должен быть осуществлен в ближайший следующий Рабочий День.
7.3. Unless the Bank otherwise agrees, each Advance shall be repaid by the Borrower in the same currency as that in which such Advance was made, each payment of interest shall be made in the currency of such Advance in respect of which such interest is payable and each payment in respect of costs and expenses shall be made in the currency in which the same		7.3. Если Банк не согласится на иное, каждая Выплата подлежит погашению Заемщиком в той же валюте, в которой она была предоставлена, каждый платеж процентов осуществляется в валюте Выплаты, на сумму которой начисляются такие проценты, и каждый платеж в отношении расходов и затрат осуществляется в

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were incurred.	валюте, в которой таковые были понесены.
7.4. Direct Debit Right.	7.4. Право безакцептного списания.
7.4.1 For the purposes of due payment of any and all amounts due and payable to the Bank by the Borrower under this Agreement the Bank shall have a right (but shall not be obliged to), and the Borrower does hereby authorize the Bank without any further instruction or confirmation on its behalf, to debit directly any Account of the Borrower, with any amount within the credit balance on the respective Account of the Borrower.	7.4.1 В целях своевременной выплаты любых сумм, причитающихся и подлежащих уплате Банку со стороны Заемщика по настоящему Договору, Банк вправе (но не обязан), и Заемщик настоящим уполномочивает Банк без дальнейших распоряжений и подтверждений со стороны Заемщика списывать в безакцептном порядке любые суммы с любого из Счетов Заемщика в пределах положительного остатка на соответствующем Счете Заемщика.
7.4.2 Sub-clause 7.4.1 of the Clause 7 of the Agreement supplements respectively each of the Account Agreements.	7.4.2 Пункт 7.4.1 Статьи 7 настоящего Договора соответственно дополняет каждый из Договоров Счета.
7.4.3 In case the currency of the account is different from the currency the respective payment shall be performed in, the Bank shall have a right without any further instruction or confirmation on behalf of the Borrower to purchase with the moneys standing to the credit of the Account of the Borrower other currencies as may be necessary to effect such payment at the rate of exchange at which the Bank may effect the purchase in the ordinary course of business and allocate the amounts to making such a payment.	7.4.3 В случае, если валюта счета отличается от валюты, в которой должен быть совершен соответствующий платеж, Банк также вправе без дополнительных распоряжений или подтверждений со стороны Заемщика приобрести на денежные средства, находящиеся на таком Cчете Заемщика, соответствующую валюту в сумме, необходимой для совершения любого платежа по настоящему Договору, по обменному курсу, по которому Банк может приобрести таковую в ходе обычной деятельности, и направить данные суммы на осуществление такого платежа.
7.4.4 The Borrower hereby irrevocably and unconditionally authorizes the Bank to perform the above transactions.	7.4.4 Заемщик настоящим дает Банку свое безотзывное и безусловное согласие на совершение Банком указанных выше операций.
7.5. Payments received from the Borrower shall be applied to discharge the indebtedness of the Borrower to the Bank under this Agreement in the following order:	7.5. Платежи, полученные от Заемщика, применяются для погашения задолженности Заемщика перед Банком по настоящему Договору в следующем порядке:
7.5.1 unpaid interest payable pursuant to Clause 4 hereof	7.5.1 невыплаченные проценты, выплачиваемые в соответствии со Статьей 4 настоящего Договора;
7.5.2 Principal Amount;	7.5.2 Основной Долг;
7.5.3 unpaid Penalty payable pursuant to Clause 11 hereof;	7.5.3 невыплаченная Пеня, выплачиваемая в соответствии со Статьей 11 настоящего Договора;
7.5.4 unpaid costs and expenses of the Bank, including the additional amounts that may be due pursuant to Clause 12 hereof;	7.5.4 невыплаченные затраты и расходы Банка, в том числе дополнительные суммы, которые могут подлежать погашению в соответствии со Статьей 12 настоящего Договора;
7.5.5 any other amounts due and unpaid pursuant to this Agreement other than Principal	7.5.5. любые иные суммы, за исключением Основного Долга, подлежащие выплате, но не

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Amount.	выплаченные в соответствии с настоящим Договором.
8.REPRESENTATIONS AND WARRANTIES	8.ЗАВЕРЕНИЯ И ГАРАНТИИ
8.1. The Borrower makes the representations and warranties set out in this Clause 8 and acknowledges that the Bank has entered into this Agreement in reliance on these representations and warranties. Each of the representations and warranties contained in this Clause 8 shall be deemed to be continually repeated by the Borrower on each date of receipt of Drawdown Notice by the Bank and on the first day of each calendar month by reference to the facts and circumstances then existing.	8.1. Заемщик представляет заверения и гарантии, изложенные в настоящей Статье 8, и признает, что Банк заключил настоящий Договор, полагаясь на эти заверения и гарантии. Каждое из заверений и гарантий, изложенных в настоящей Статье 8, считается постоянно возобновляемым Заемщиком на каждую дату получения Банком Заявления о Предоставлении и на первое число каждого календарного месяца на основании существующих на тот момент фактов и обстоятельств.
8.2. The Borrower is an open-joint stock company duly organised and validly existing under the laws of Russia being a separate legal entity, and has the full power, authority and the legal right, and has taken all corporate, legal and other action necessary to authorise the Borrower to execute, deliver, perform and observe the terms and conditions of this Agreement.	8.2. Заемщик является открытым акционерным обществом, должным образом учрежденным и осуществляющим свою деятельность в соответствии с законодательством России, а также является самостоятельным юридическим лицом, наделенным всеми полномочиями и юридическими правами, а также предпринял все корпоративные, правовые и иные действия, необходимые для заключения, совершения и исполнения им условий настоящего Договора.
8.3. All acts, conditions, consents, approvals and authorisations necessary to enable the Borrower to lawfully enter into this Agreement, exercise its rights and perform its obligations hereunder, to ensure that the obligations expressed to be assumed by it are legal, valid and binding and to make this Agreement admissible in evidence in Russia, have been done and obtained and are in full force and effect.	8.3. Были совершены, соблюдены и получены все действия, условия, разрешения и согласования, совершение, соблюдение и получение которых требуется для того, чтобы Заемщик мог на законных основаниях заключить настоящий Договор, осуществлять свои права и выполнять свои обязательства по настоящему Договору; обеспечить правомерность, действительность, юридическую силу обязательств, принятие которых Заемщиком непосредственно предусмотрено в настоящем Договоре, и обеспечить допустимость представления в качестве доказательства настоящего Договора на территории России.
8.4. No provision of law, ordinance, decree, instruction or regulation to which the Borrower is subject, no provision of any charter, by-law or similar instrument of the Borrower and no provision of any agreement or other instrument binding on the Borrower or to which the Borrower or its properties or revenues are subject is or will be contravened by the execution, delivery, performance or observance	8.4. Ни одно из положений закона, распоряжения, указа, инструкции или постановления, регулирующих деятельность Заемщика, устава, внутреннего или аналогичного документа Заемщика, а также любого договора или иного документа, имеющего обязательную силу для Заемщика, или регулирующего его деятельность, имущество или доходы, не нарушается и не

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of terms and conditions of this Agreement such that the rights of the Bank or the obligations of the Borrower thereunder are adversely affected.	будет нарушено в результате заключения, совершения и исполнения условий настоящего Договора таким образом, что будут затрагиваться права Банка или обязательства Заемщика по ним.
8.5. The obligations to be assumed by the Borrower under this Agreement are legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their terms.	8.5. Обязательства, принятие которых Заемщиком непосредственно предусмотрено в настоящем Договоре, являются правомерными, действительными и обязательными к исполнению Заемщиком, имеющими в соответствии с условиями настоящего Договора исковую силу.
8.6. In any proceedings taken in Russia or any other jurisdiction in relation to this Agreement, the Borrower will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.	8.6. В любых разбирательствах, начатых в России или любой другой юрисдикции в отношении настоящего Договора, Заемщик не вправе требовать для себя или любого своего имущества предоставления иммунитета от возбуждения иска, исполнения решения, наложения ареста или иных процессуальных действий.
8.7. The obligations of the Borrower under this Agreement will rank at least pari passu with all other unsecured and unsubordinated obligations of the Borrower, save those claims which are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application.	8.7. Обязательства Заемщика по настоящему Договору имеют, по крайней мере, равную очередность выполнения наравне со всеми иными его необеспеченными и несубординированными обязательствами, кроме обязательств перед кредиторами, требования которых удовлетворяются в преимущественном порядке в силу нормативных актов о банкротстве, несостоятельности, ликвидации или иных подобных нормативных актов общего применения.
8.8. The Borrower has not taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against it for its winding-up, liquidation, external management or supervision or for the appointment of a liquidator, external manager or temporary manager or similar officer of it or of any or all of its assets or revenues.	8.8. Заемщик не предпринимал никаких корпоративных действий, не имеет места и не существует угрозы начала каких-либо иных действий или судебных разбирательств против Заемщика с целью его роспуска, ликвидации, введения внешнего управления или наблюдения, а также назначения ликвидатора, внешнего управляющего, временного управляющего или аналогичного должностного лица в отношении него самого, любых или всех его активов или доходов.
8.9. No action or administrative proceeding of or before any court or agency which may, in the sensible and valid opinion of the Bank, have a Material Adverse Effect on the business or financial condition of the Borrower has been started or threatened.	8.9. Не имеет места и не существует угрозы начала судебных действий или административных разбирательств в каком-либо суде или органе, которые, по разумному и обоснованному мнению Банка, могли бы оказать Существенное Негативное Воздействие на деятельность или финансовое состояние

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	Заемщика.
8.10. The most recent financial statements of the Borrower have been prepared in accordance with Russian legislation.	8.10. Последняя (по времени) финансовая отчетность Заемщика подготовлена в соответствии с российским законодательством.
8.11. The Borrower is conducting its business and operations in compliance with all laws and regulations and all directives of governmental authorities having the force of law applicable or relevant to it.	8.11. Заемщик осуществляет свою деятельность и операции с соблюдением всех законов, нормативных актов и предписаний государственных органов, имеющих силу закона, применимых и относящихся к нему.
8.12. The Borrower does not have any overdue tax indebtedness in excess of 5% (Five per cent) of the value of the fixed assets of the Borrower, as this value is specified in the Borrower’s consolidated unaudited financial statements prepared in accordance with US GAAP at the end of the respective financial quarter or financial year which has not been contested in good faith and disclosed to the Bank.	8.12. Заемщик не имеет никакой просроченной задолженности по налоговым платежам, размер которой превышает 5% (Пять процентов) от величины балансовой стоимости активов Заемщика, как эта величина указана вконсолидированнойнеаудированнойфинансовойотчетностиЗаемщика, подготовленнойвсоответствиисГААПСШАнаконецсоответствующегофинансовогокварталаилифинансовогогода, срок уплаты которой наступил и которая не была бы им добросовестно оспорена и раскрыта Банку.
8.13. That there are occurring no facts or circumstances which constitute an Event of Default on each date the Borrower sends to the Bank Drawdown Notice.	8.13. На каждую дату направления Заемщиком Банку Заявления о Предоставлении не происходит никакое событие или обстоятельство, являющееся Случаем Досрочного Истребования.
9. COVENANTS	9. ОБЯЗАТЕЛЬСТВА
9.1. The Parties shall obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licences and consents required in or by the laws and regulations of Russia to enable it lawfully to enter into and perform and comply with its obligations under this Agreement and to ensure the legality, validity, enforceability or admissibility in evidence in Russia of this Agreement.	9.1. Стороны должны получить, выполнить условия и совершить все необходимые действия для сохранения в полной силе всех санкций, разрешений, регистраций, лицензий и согласий, необходимых в соответствии с законодательными и нормативными актами России для правомерного заключения настоящего Договора и исполнения своих обязательств по нему, а также для обеспечения правомерности, юридической силы, возможности приведения в исполнение или допустимости настоящего Договора в качестве доказательства в России.
9.2. The Borrower shall promptly inform the Bank of the occurrence of any material event which is or may become (with the passage of time or the giving of notice or both) an Event of Default and shall upon the Bank’s request confirm to the Bank that, save as previously notified to the Bank or as notified in such confirmation, no Event of Default has occurred.	9.2. Заемщик должен незамедлительно уведомлять Банк о наступлении любого существенного события, которое является или может стать (по прошествии времени, после направления уведомления или при сочетании указанных условий) Случаем Досрочного Истребования, и должен, по требованию Банка подтвердить последнему, что не произошло

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	никакого Случая Досрочного Истребования за исключением указанных ранее или указанных в таком подтверждении.
9.3. The Borrower shall ensure that at all times the claims of the Bank against it under this Agreement rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application.	9.3. Заемщик должен обеспечить, чтобы в любой момент требования Банка к нему по настоящему Договору имели, по крайней мере, равную очередность выполнения наравне с необеспеченными требованиями всех иных его кредиторов, кроме обязательств перед кредиторами, требования которых удовлетворяются в преимущественном порядке исключительно в силу нормативных актов о банкротстве, несостоятельности, ликвидации или иных подобных нормативных актов общего применения.
9.4. (a) The Borrower shall notcreate or permit to subsist any Encumbrance over any of its assets.	9.4. (a) Заемщик обязуется не создавать или не допускать существования какого-либо Обременения в отношении любых его активов.
(b) The Borrower shall not:	(b) Заемщик обязуется:
(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;	(i) не продавать, передавать или иным образом отчуждать любые его активы в случае, если они передаются или могут быть переданы в аренду или вновь приобретены Заемщиком;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;	(ii) не продавать, передавать или иным образом отчуждать любую часть его дебиторской задолженности на условиях регресса;
(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	(iii) не заключать какие-либо договоры, в соответствии с условиями которых денежные средства или доходы от банковского или иного счета могут быть использованы, зачтены либо сделаны условием совокупности счетов;
(iv) enter into any other preferential arrangement having a similar effect,	(iv) не заключать какие-либо иные преференциальные договоры, имеющие аналогичный эффект;
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.	в тех случаях, когда договор или сделка рассматриваются в первую очередь как способ увеличения величины Финансовой Задолженности или финансирования приобретения активов.
(c) Paragraphs (a) and (b) above do not apply to Permitted Encumbrance.	(c) Вышеописанные пункты (a) и (b) не применимы для Разрешенных Обременений.
9.5. The Borrower undertakes not to change materially the nature of its business (as described in the Charter) it carries on at the date hereof or not to enter into any unrelated business which might have a material affect on its business and financial condition, or not to announce its intention of doing so.	9.5. Заемщик обязуется существенно не изменятьродсвоейдеятельности (указаннойвУставе), которуюоносуществляетнадатуподписаниянастоящегоДоговораили не заниматьсякакой-либонесвязаннойснейдеятельностью, способнойоказатьсущественноевлияниенаегохозяйственнуюдеятельностьилифинансовое

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		состояние, либо не заявлятьосвоемнамерениисделатьэто.
9.6. Under the laws of Russia, the Borrower will not be required to make any deduction or withholding from any payment made hereunder.		9.6. В соответствии с законодательством России Заемщик не должен производить какие-либо вычеты или удержания из суммы любого платежа, произведенного в соответствии с настоящим Договором.
10. CONDITIONS PRECEDENT		10. ПРЕДВАРИТЕЛЬНЫЕ УСЛОВИЯ
10.1. The conditions precedent hereof («Conditions Precedent») are:		10.1. К предварительным условиям для настоящего Договора («Предварительные Условия») относятся следующие:
10.1.1 absence of any Event of Default or any event which may become (with the passage of time or the giving of notice or both) any Event of Default, and disbursement of an Advance will not result in an Event of Default;		10.1.1 отсутствие наступившего Случая Досрочного Истребования или события, которое (по истечении времени или после соответствующего уведомления, или при стечении этих двух обстоятельств) может стать Случаем Досрочного Истребования, и предоставление Выплаты не приведет к возникновению Случая Досрочного Истребования;
10.1.2 receipt by the Bank of the duly signed by the Borrower original copy of this Agreement;		10.1.2 получение Банком надлежащим образом подписанного Заемщиком оригинала настоящего Договора;
10.1.3 receipt by the Bank of notarized copies of constitutive documents of the Borrower;		10.1.3 получение Банком нотариально заверенных копий всех учредительных документов Заемщика;
10.1.4 receipt by the Bank of the duly certified copies or original copies of corporate authorizations of the Borrower necessary for entering into this Agreement (in case such corporate authorizations is required under legislation of the Russian Federation or charter of the Borrower);		10.1.4 получение Банком надлежаще заверенных копий или оригиналов корпоративных одобрений Заемщика на заключение настоящего Договора (если такое одобрение требуется в соответствии с законодательством Российской Федерации и/или уставом Заемщика);
10.1.5 receipt by the Bank of duly certified copies of latest financial statements of the Borrower prepared in accordance with RAS with certification of tax authorities of its acceptance;		10.1.5 получение Банком надлежаще заверенных копии последней финансовой отчетности Заемщика, подготовленной в соответствии с РСБУ с отметкой налоговых органов о принятии;
10.2. In addition to the above, the following shall be considered as Conditions Precedent:		10.2. Помимо указанного выше, следующее также должно являться Предварительными Условиями:
	(1) receipt by the Bank any document which the Bank may require, (including without limitation, in order to assess creditability of the Borrower, to perform “know your customer” procedures, etc.;		(1) получение Банком любых документов, которые вправе потребовать Банк в связи с настоящим Договором (в том числе, без ограничения, для оценки платежеспособности Заемщика, осуществления процедуры «знай своего .

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			клиента» и т.п.)
	(2) receipt by the Bank of duly certified copies of latest financial statements of the Borrower prepared in accordance with US GAAP.		(2) получение Банком надлежаще заверенных копий последней финансовой отчетности Заемщика, подготовленной в соответствии с ГААП США.
11. LIABILITY		11. ОТВЕТСТВЕННОСТЬ
11.1. Any amount which the Borrower fails to pay to the Bank when due shall bear penalty interest (“Penalty”) at the rate calculated as a sum of Cost of Funds and 3.0% (Three per cent) per annum.		11.1. На любую сумму, которую Заемщик не уплатит Банку в установленный срок, начисляется пеня («Пеня») по ставке, равной сумме Стоимости Фондирования и 3,0% (Три процента) годовых.
For the purposes of the subclause 11.1. Clause 11, “Cost of Funds” shall mean the annual interest rate determined by the Bank acting reasonable and in good faith, on the basis of an interest rate at which the Bank, from time to time, would have been able to raise funds in the respective currency at the interbank money market in the respective amount for the overnight tenor, taking into consideration additional extra costs and expenses of the Bank on raising funds for such financing and subject to such interest rate corresponds market interest rates applicable for the similar financing and credit institutions. On a day which is not the Business Day a value of the Cost of Funds designated on the last preceding Business Day shall be applied.		Для целей пункта 11.1. Статьи 11 «Стоимость Фондирования» означает годовую процентную ставку, которую Банк определяет, действуя разумно и добросовестно, на основании процентной ставки, по которой Банк, в соответствующий момент времени, мог бы привлечь денежные средства в соответствующей валюте на межбанковском денежном рынке в соответствующей сумме на срок «овернайт», с учетом дополнительных расходов и затрат Банка на организацию привлечения такого финансирования, а также при условии, что такая ставка соответствует рыночным ставкам, применимым для схожего финансирования или схожих кредитных институтов. В день, не являющийся Рабочим Днем, используется значение Стоимости Фондирования, зафиксированное в последний предшествующий такому дню Рабочий День.
11.2. The Penalty shall accrue instead of the interest stipulated in Clause 4 hereof starting from the day following the date on which the respective amount is due and failed to be paid by the Borrower and until a date of actual receipt by the Bank of such amount inclusively.		11.2. Пеня начисляется вместо процентов, предусмотренных Статьей 4 настоящего Договора, начиная со дня, следующего за датой, в которую соответствующая сумма подлежала уплате и не была выплачена Заемщиком, по дату фактического получения Банком такой суммы включительно.
11.3. The Bank shall be entitled to decrease the Penalty at its sole discretion, provided that such decrease shall not prejudice the Bank’s right to restore the Penalty at any time in full.		11.3. Банк вправе уменьшить Пеню по своему усмотрению, при этом такое уменьшение не должно лишать Банк права восстановить Пеню в любое время полностью.
11.4. The Bank shall not be liable to the Borrower for any action lawfully taken or omitted to be taken by the Bank in connection with its obligations hereunder and for any claim, loss, damage or expense arising in connection with any such action or omission		11.4. Банк не несет ответственности перед Заемщиком за какое-либо правомерное действие или бездействие в связи с обязательствами Банка по настоящему Договору, а также никаких обязательств по какому-либо требованию, убыткам, возмещению убытков или расходов в

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except insofar as the same results from the gross negligence, willful default or fraud of the Bank.	связи с таким действием или бездействием, за исключением случаев, когда таковые возникли в результате грубой небрежности, намеренного неисполнения обязательств или обмана со стороны Банка.
11.5. Liability of the Bank under this Agreement shall in any case be limited to direct loss incurred by the Borrower.	11.5. Ответственность Банка по настоящему Договору в любом случае должна быть ограничена реальным ущербом, понесенным Заемщиком.
12. CHANGE OF CIRCUMSTANCES	12. ИЗМЕНЕНИЕ ОБСТОЯТЕЛЬСТВ
12.1. To the extent that any change in future requirements of applicable law or of governmental or regulatory authorities shall increase the cost to the Bank of, or reduce the return from, maintaining the Facility by an amount which the Bank deems material, the Bank shall notify the Borrower on such changes and the Parties shall on the best effort basis consider terms and conditions hereof and possible amendments hereto on applicable for each of the Parties conditions provided that if within 15 (Fifteen) Business Days the Parties don’t agree amendments hereto, the Borrower shall have no right to submit new Drawdown Notice and the Bank shall have no right to make available new Advances until the expiration date of hereof and the Borrower shall, on such date, the Bank shall have specified, repay each outstanding Advance together with accrued interest thereon and any other amounts due to the Bank hereunder.	12.1. В случае, если по причине любого изменения в будущем требований действующего законодательства, государственных или регулирующих органов происходит увеличение затрат Банка по поддержанию размера Линии на сумму, которую Банк считает существенной, то Банк уведомит Заемщика о таких изменениях и Стороны примут все необходимые действия для обсуждения условий настоящего Договора, а также возможных изменений в него на приемлемых для каждой из Сторон условиях, при этом если в течение 15 (Пятнадцати) Рабочих Дней Стороны не договорятся о внесении изменений в Договор, то Заемщик более будет не вправе направлять новые Заявления о Предоставлении, а Банк не вправе предоставлять новые Выплаты, до истечения срока действия Договора, если Стороны не договорятся об ином, а Заемщик обязан в указанную Банком дату погасить каждую непогашенную Выплату вместе с начисленными на нее процентами и любыми другими суммами, причитающимися Банку по настоящему Договору
12.2. If (1) the Borrower repudiates this Agreement or does or causes to be done any act or thing evidencing an intention to repudiate this Agreement, or this Agreement is terminated for any reason; (2) at any time it is or becomes unlawful in accordance with applicable legislation for the Borrower to perform or comply with any or all of its obligations under this Agreement or any of the obligations of the Borrower thereunder are not or cease to be legal, valid, binding and in full force and effect and enforceable in Russia; (3) at any time it becomes not possible due to substantial change of circumstances or unlawful for the Bank to make, fund (fully or partially) or	12.2. В случае, если (1) ЗаемщикрасторгаетнастоящийДоговор, либосовершаетилидаетраспоряжениеосовершениикаких-либодействий, подтверждающихнамерениерасторгнутьнастоящийДоговор, либонастоящийДоговорпрекращаетсвоедействиепокакой-либоинойпричине; или (2) втотилииноймоментвыполнениеилисоблюдениекаких-либоиливсехобязательствЗаемщикапонастоящемуДоговоруявляетсяилистановитсядлянегонеправомерным, либокакие-либоизобязательствЗаемщикапонастоящемуДоговорунеявляютсяилиперестаютбытьправомерными, юридическидействительными, обязательнымикисполнениюидействующими,

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allow to remain outstanding any Advance (i) the Available Facility shall immediately be reduced to zero and (ii) the Borrower shall, on such date, the Bank shall have specified, provide the Bank with cash cover in the manner, in the amount and in the currency specified by the Bank the Borrower shall have no right to submit new Drawdown Notice and the Bank shall have no right to make available new Advances until the expiration date of hereof and the Borrower shall, on such date, the Bank shall have specified, repay each outstanding Advance together with accrued interest thereon and any other amounts due to the Bank hereunder.	атакжеимеющимиисковуюсилувРоссии; или (3) есливтоилииноевремядляБанкастановитсяневозможнымвсилусущественногоизмененияобстоятельствилинеправомернымпредоставление полностьюиличастичнокакой-либо Выплаты понастоящемуДоговорулибодопущениеимтого, чтобытакая Выплатаоставалась непогашенной, то Заемщик более будет не вправе направлять новые Заявления о Предоставлении до истечения срока действия Договора, а Банк не вправе предоставлять новые Выплаты, если Стороны не договорятся об ином, а Заемщик обязан в указанную Банком дату погасить каждую непогашенную Выплату вместе с начисленными на нее процентами и любыми другими суммами, причитающимися Банку по настоящему Договору.
13. EVENTS OF DEFAULT	13. СЛУЧАИ ДОСРОЧНОГО ИСТРЕБОВАНИЯ
13.1. Each of the circumstance (taking into account a certain period or after notice, or at confluence of these two circumstances (if applicable)) described in this sub-clause 13.1 of Clause 13 shall be an Event of Default for the purposes of this Agreement.	13.1. Каждое из обстоятельств (с учетом определенного срока или после соответствующего уведомления, или при стечении этих двух обстоятельств (если применимо)), перечисленных в настоящем пункте 13.1 Статьи 13, является Случаем Досрочного Истребования для целей настоящего Договора.
13.1.1 The Borrower fails to pay any sum due from it under this Agreement at the time, in the currency and in the manner specified herein, except cases where such failure if capable of being remedied is caused by administrative or technical error and is not duly remedied within 3 (Three) Business Days as of the date of such failure..	13.1.1 Заемщик не выплачивает какую-либо сумму, причитающуюся с него по настоящему Договору, в тот срок, в той валюте и тем способом, которые предусмотрены в настоящем Договоре, за исключением случаев, когда такое нарушение (если его возможно устранить) возникает вследствие административной или технической ошибки и оно устраняется в течение 3 (Трех) Рабочих Дней с момента такого нарушения.
13.1.2 Any representation or statement made by the Borrower in this Agreement or in any notice or other document, certificate or statement delivered by it pursuant hereto or in connection herewith is or proves to have been incorrect or misleading on the date which such representation or statement was made, such representation or statement was not remedied or made true within 10 (Ten) Business Days of the earliest of the following dates: 1) on which the Bank gives notice of the breach to the Borrower, or 2) on which the Borrower becomes aware of such non-compliance..	13.1.2 Любое заверение или заявление, сделанное Заемщиком в настоящем Договоре или в любом уведомлении или ином документе, свидетельстве или отчете, предоставленном им в соответствии с настоящим Договором или в связи с ним, является или оказывается неверным или вводящим в заблуждение на дату, когда такое заверение или заявление было сделано, такое заверение или заявление не было исправлено либо сделано верным в течение 10 (Десяти) Рабочих Дней с 1) даты уведомления Банком Заемщика о таком нарушении или 2) даты, когда Заемщику становится известно о таком нарушении, в зависимости от того, какая

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	дата наступит ранее.
13.1.3 The Borrower fails duly to perform or comply with any of the obligations expressed to be assumed by it in this Agreement, and such failure if capable of being remedied is caused by administrative or technical error and is not duly remedied within 10 (Ten) Business Days of the earliest of the following dates: 1) on which the Bank gives notice of the breach to the Borrower, or 2) on which the Borrower becomes aware of such non-compliance.	13.1.3 Заемщик должным образом не выполняет и не соблюдает какие-либо иные свои обязательства по настоящему Договору, причем такое нарушение (если его возможно устранить) не устраняется в течение 10 (Десяти) Рабочих Дней с 1) даты уведомления Банком Заемщика о таком нарушении или 2) даты, когда Заемщику становится известно о таком нарушении, в зависимости от того, какая дата наступит ранее.
13.1.4 Any Financial Indebtedness is not paid when due (subject to the applicable period) or, any Financial Indebtedness is declared to be or otherwise becomes due and payable prior to its specified maturity (subject to the applicable period) or any financial creditor or creditors of the Borrower become entitled to declare any Financial Indebtedness due and payable prior to its specified maturity (subject to the applicable period), where the principal amount of (i) any single item of the Financial Indebtedness exceeds 10,000,000.00 (Ten million) US Dollars (or the countervalue thereof in any other currency), or (ii) the Financial Indebtedness in the aggregate exceeds 35,000,000.00 (Thirty-five million) US Dollars (or the countervalue thereof in any other currency).	13.1.4 Любая Финансовая Задолженность не оплачена в надлежащий срок (с учетом применимого срока), любая Финансовая Задолженность объявляется (или иным образом становится) подлежащей погашению и оплате до наступления предусмотренного срока (с учетом применимого срока), или какой-либо кредитор Заемщика получает право объявить любую Финансовую Задолженность Заемщика подлежащей погашению и оплате до наступления установленного срока ее погашения (с учетом применимого срока), при этом основная сумма (i) в каждом конкретном случае превышает 10.000.000,00 (Десять миллионов) Долларов США (или эквивалент этой суммы в любой другой валюте), или (ii) в совокупности превышает 35.000.000,00 (Тридцать пять миллионов) Долларов США (или эквивалент этой суммы в любой другой валюте).
13.1.5. The Borrower takes any corporate action or other steps are taken or legal proceedings are started for its winding-up, liquidation, external management or supervision or for an amicable settlement with its creditors or for the appointment of a liquidator, external manager or temporary manager or similar officer of it or of any or all of its revenues and assets in any relevant jurisdiction.	13.1.5 Заемщик принимает решение (либо принимаются иные меры или начинается судебное разбирательство) по его роспуску, ликвидации, введению внешнего управления или наблюдения, либо по заключению мирового соглашения со своими кредиторами или назначению ликвидатора, внешнего управляющего, временного управляющего или аналогичного должностного лица в отношении Заемщика или любых его доходов и активов в любой соответствующей юрисдикции.
13.1.6 Any execution (save for any charge or execution against assets under Permitted Encumbrance) or distress is issued and/or levied against the material property, the total amount which in the aggregate more than 5% (Five per cent) of the value of the total assets of the Borrower, as this value is specified in the Borrower’s consolidated unaudited financial statements prepared in accordance with US	13.1.6 Наимущество, обязательстваилиактивыЗаемщика, общая сумма которых в совокупности превышает 5% (Пять процентов) отвеличиныосновныхсредствЗаемщика, какэтавеличинауказанавконсолидированнойнеаудированнойфинансовойотчетностиЗаемщика, подготовленнойвсоответствиисГААПСШАнаконецсоответствующегофинансовогокварталаилифинансовогогода,

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GAAP at the end of the respective financial quarter or financial year, undertaking or assets of the Borrower taken as a whole and such event is not remedied within 30 (Thirty) calendar days from the date it was arisen.	обращеновзыскание, за исключением обращения взыскания на имущество, находящееся под Разрешенным Обременением, илиналоженарест, и такой арест или взыскание не сняты и не приостановлены в течение 30 (Тридцати) календарных дней с момента возникновения.
13.1.7 Any event occurs which under the laws of any relevant jurisdiction has a similar or analogous effect upon the Borrower to any of those events mentioned in sub-clause 13.1.5 or sub-clause 13.1.6 of this sub-clause 13.1 of Clause 13.	13.1.7 Наступает какое-либо событие, которое согласно законодательству соответствующей юрисдикции имеет аналогичные последствия для Заемщика, как и события, указанные в пункте 13.1.5 или пункте 13.1.6 настоящего пункта 13.1 Статьи 13.
13.1.8 By or under the authority of any relevant government all or a majority of the Borrower’s property is seized, nationalised, expropriated or compulsorily acquired. This subclause 13.1.8 of Clause 13 hereof shall not be applicable to any of the event specified in this subclause 13.1.8 of Clause 13 with regard to: (i) shares or assets of MTS Ukraine owned by the Borrower; or (ii) shares or assets of Bitel owed by the Borrower.	13.1.8 По распоряжению какого-либо соответствующего государственного органа производится конфискация, национализация, экспроприация или принудительное приобретение всего или большей части имущества Заемщика. Настоящий пункт 13.1.8 Статьи 13 настоящего Договора не применяется в случае наступления любого из вышеперечисленных событий в отношении (i) акций либо имущества МТС Украина, принадлежащих Заемщику; либо (ii) акций либо имущества Бител, принадлежащих Заемщику.
13.1.9 Any circumstances arise which give grounds in the reasonable opinion of the Bank for belief that the Borrower may not (or may be unable to) perform or comply with its obligations under this Agreement.	13.1.9 Возникаетсобытие Существенного Негативного Воздействия, которое, пообоснованномумнениюБанка, даетоснованиеполагать, чтоЗаемщикнеможет (илиможетбытьневсостоянии) выполнятьилисоблюдатьсвоиобязательствапонастоящемуДоговору.
13.2. Upon the occurrence of an Event of Default and at any time thereafter, the Bank may by written notice to the Borrower:	13.2. По наступлении Случая Досрочного Истребования и в любой момент впоследствии Банк вправе посредством направления письменного уведомления в адрес Заемщика:
13.2.1 declare the Principal Amount to be immediately due and payable (whereupon the same shall become so payable together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or declare the Principal amount to be due and payable on demand of the Bank; and/or	13.2.1 объявить Основной Долг подлежащим немедленному погашению (после чего Основной Долг подлежит погашению в означенном порядке вместе с начисленными на него процентами и иными суммами, причитающимися с Заемщика по настоящему Договору), либо объявить Основной Долг подлежащим погашению по требованию Банка; и/или
13.2.2 declare that any undrawn portion of the Facility shall be cancelled, whereupon the same shall be cancelled and the Available Facility shall be reduced to zero.	13.2.2 объявить об аннулировании любой неиспользованной части Линии, после чего эта часть Кредита аннулируется и Доступная Сумма сводится к нулю.
13.3. If, pursuant to Clause 13.2 hereof, the Bank	13.3. Если на основании Статьи 13.2 настоящего

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declares the Principal amount to be due and payable on demand of the Bank, then, and at any time thereafter, the Bank may by written notice to the Borrower require repayment of the Principal Amount on such date as it may specify in such notice (whereupon the same shall become due and payable on such date together with accrued interest thereon and any other sums then owed by the Borrower hereunder) or withdraw its declaration with effect from such date as it may specify in such notice.	Договора Банк объявляет о том, что Основной Долг подлежит погашению по требованию Банка, то после этого в любой момент Банк вправе посредством письменного уведомления в адрес Заемщика потребовать погашения Основного Долга в ту дату, которая будет указана им в таком уведомлении (после чего Основной Долг подлежит погашению в эту дату вместе со всеми начисленными на него процентами, а также всеми остальными суммами, причитающимися с Заемщика по настоящему Договору), либо Банк может отозвать свое объявление с даты, указанной Банком в таком уведомлении.
14. TAXES	14. НАЛОГИ
14.1. All payments by the Borrower hereunder shall be made without set-off, counterclaim, withholding, tax or any other deduction whatsoever, except to the extent, if any, required by law.	14.1. Все платежи Заемщика по настоящему Договору производятся без каких-либо зачетов, встречных требований, удержаний, налоговых или иных вычетов, за исключением случаев, когда это требуется согласно законодательству.
14.2. In the event that the Borrower is required by law to withhold amounts of tax on any payments to the Bank, the Borrower shall pay to the Bank such additional amounts as may be necessary to ensure that the Bank receives a net amount equal to the full amount which the Bank would have received if payment had not been made subject to such tax.	14.2. Если Заемщик в силу закона обязан производить удержание налоговых сумм из любых платежей в адрес Банка, то Заемщик выплачивает Банку дополнительные суммы, которые необходимы для того, чтобы Банк получил чистую сумму, равную полной сумме, которую Банк получил бы в случае, если бы налог с этого платежа не взимался.
14.3. Without prejudice to sub-clause 14.2 of this Clause 14, if the Bank is required to make any payment on of or on account of tax on or in relation to any sum received or receivable hereunder or if any liability in respect of any such payment is asserted or levied against the Bank, the Borrower shall, upon demand of the Bank, promptly indemnify the Bank against such payment or liability.	14.3. Несмотря на положения пункта 14.2 Статьи 14 настоящего Договора, если Банк обязан произвести какой-либо платеж в счет любого налога с любой суммы, которую он получил или должен получить по настоящему Договору, либо если на Банк налагается какая-либо ответственность по осуществлению такого платежа, то по требованию Банка Заемщик обязан незамедлительно возместить Банку сумму такого платежа или ответственности.
14.4. The term “tax” (amount of tax) includes all present and future taxes, levies, imposts, duties, withholdings and any restrictions or conditions imposed, assessed or collected by the Borrower’s or any jurisdiction.	14.4. Термин «налог» («налоговая сумма») включает все существующие в настоящее время или в будущем налоги, сборы, пошлины, суммы удержания, взимаемые в любой юрисдикции, в которой находится Заемщик, а также в любой иной применимой юрисдикции, все налагаемые условия и ограничения в такой юрисдикции.

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15. INDEMNITIES	15. ГАРАНТИЯ ВОЗМЕЩЕНИЯ
15.1. The Borrower undertakes to indemnify the Bank against:	15.1. Заемщик обязуется компенсировать Банку:
15.1.1 any loss (expense, claim) or liability together with any VAT thereon (if applicable), which it may sustain or incur as a consequence of the occurrence of any Event of Default or any default by the Borrower in the performance of any of the obligations expressed to be assumed by it in this Agreement;	15.1.1 все убытки (расходы, требования), и любую материальную ответственность вместе с НДС (если применимо), которые Банк может понести вследствие наступления любого Случая Досрочного Истребования или любого неисполнения Заемщиком любых его обязательств, принятие которых Заемщиком непосредственно предусмотрено в настоящем Договоре;
15.1.2 Break Costs.	15.1.2 Расходы, Связанные с Изменением Сроков.
16. SECURITY	16. ОБЕСПЕЧЕНИЕ
Not applicable.	Не применимо.
17. INFORMATION	17.ИНФОРМАЦИЯ
Furnishing of information	Предоставление информации
17.1. The Borrower shall provide the Bank with:	17.1. Заемщик обязан предоставлять Банку:
17.1.1 the following financial statements:	17.1.1 следующую финансовую отчетность:
(i) the Borrower’s consolidated audited annual balance sheets and profit and loss accounts, together with the accompanying notes, contained in an independent auditors’ audit/review report, prepared in accordance with US GAAP, within 180 (One hundred and eighty) calendar days of the end of each financial year;	(i) аудированный годовой баланс и отчет о прибылях и убытках Заемщика (консолидированные), вместе с сопроводительными примечаниями, содержащимися в независимом аудиторском отчете подготовленные в соответствии с ГААП США, в течение 180 (Сто восемьдесят) календарных дней после окончания каждого финансового года;
(ii) the Borrower’s consolidated unaudited balance sheets and profit and loss accounts prepared in accordance with US GAAP, within 60 (Sixty) calendar days after the end of the financial quarter and within 120 (One hundred and twenty) calendar days after the end of the financial year of the Borrower;	(ii) не позднее 60 (Шестьдесят) календарных дней с даты окончания финансового квартала и 120 (Сто двадцать) календарных дней с даты окончания финансового года Заемщика —консолидированные неаудированные балансы и отчеты Заемщика о прибылях и убытках, подготовленные в соответствии с ГААП США;
(iii) the Borrower’s balance sheets and profit and loss accounts prepared in accordance with RAS, stamped by tax authority on receipt, within 35 (Thirty five) calendar days after the end of the financial quarter and within 95 (Ninety-five) calendar days after the end of the financial year.	(iii) не позднее 35 (Тридцать пять) календарных дней с даты окончания финансового квартала и 95 (Девяносто пять) календарных дней с даты окончания финансового года Заемщика — балансы и отчеты Заемщика о прибылях и убытках подготовленные по РСБУ, с отметкой налогового органа о принятии.
17.1.2 the Borrower’s other financial statements	17.1.2 прочую финансовую отчетность

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insofar as they have been prepared or published.	Заемщика по мере ее подготовки или опубликования.
17.1.3 any other documentation or other evidence which the Bank may reasonably request to enable the Bank to carry out and be satisfied with the results of any and all know-your-customer and due-diligence requirements as per applicable law.	17.1.3 любую другую документацию или иные подтверждающие документы, которые Банк может разумно затребовать для целей проведения идентификации и анализа деятельности Заемщика согласно приемлемому закону и получения по ним результатов, удовлетворяющих Банк.
Personal Data	Персональные Данные
17.2. The Bank collects, keeps and processes Personal Data of the representatives, employees of the Borrower and members of the corporate authorities of the Borrower (and their representatives) in accordance with the requirements of Russian legislation and internal policies and procedures of the Bank for the purpose of fulfillment provisions hereof.	17.2. Банк осуществляет сбор, хранение и обработку Персональных Данных представителей и сотрудников Заемщика, а также участников коллегиальных органов управления Заемщика (и их представителей) в соответствии с требованиями российского законодательства, а также внутренних процедур и политик Банка в целях исполнения положений настоящего Договора.
18.COSTS AND EXPENSES	18.РАСХОДЫ И ЗАТРАТЫ
18.1. The Borrower shall, from time to time on sensible and valid demand of the Bank, reimburse the Bank for all duly confirmed costs and expenses (including translation costs, legal fees and tax consultant expenses) together with any VAT thereon (if applicable) incurred in or in connection with the preservation and/or enforcement of any of rights of the Bank under this Agreement. Legal fees shall be preliminary agreed between the Bank and the Borrower within 5 (Five) Business Days as of the date of respective notification of the Bank. If the Borrower presents reasonable objections against the amount of such legal fees, the Parties shall on the best effort basis decrease such amount. If within this period the Parties don’t agree the amount of legal fees, such legal fees shall be deemed to be agreed and payable by the Borrower.	18.1. Заемщик периодически по разумному и обоснованному требованию Банка возмещает Банку все документально подтвержденные расходы и затраты (включая стоимость юридических и переводческих услуг, а также комиссионные налоговых консультантов) вместе с НДС по ним (если применимо), понесенные в связи с защитой и/или реализацией любых прав Банка по настоящему Договору. Расходы и затраты на юридические услуги подлежат предварительному согласованию между Банком и Заемщиком в течение 5 (Пяти) Рабочих Дней с даты направления Банком соответствующего уведомления Заемщику. В случае, если Заемщиком будут предоставлены мотивированные возражения против стоимости указанных юридических услуг, Стороны приложат совместные усилия для снижения такой стоимости. В случае, если в течение указанного срока Стороны не придут к соглашению о размере расходов и затрат на юридические услуги сумма таких расходов и затрат считается согласованной и подлежащей возмещению Заемщиком.
18.2. The Borrower shall pay all stamp, registration and other taxes to which this Agreement.	18.2. Заемщик оплачивает все гербовые, регистрационные и иные сборы, которые взимаются в настоящее время или в любое время впоследствии в отношении настоящего Договора.

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19. CALCULATIONS AND CERTIFICATES	19. РАСЧЕТЫИДОКАЗАТЕЛЬСТВА
19.1. In any litigation or arbitration proceedings arising out of or in connection with this Agreement, the entries in the accounts maintained by the Bank are prima facie evidence of the matters to which they relate.	19.1. В любом судебном или арбитражном разбирательстве, возникающем в связи с настоящим Договором, записи учета Банка являются исчерпывающим подтверждением тех обстоятельств, к которым они относятся.
19.2. Any certification or determination by the Bank of a rate or amount under this Agreement is, in the absence of manifest error, conclusive evidence of the matters to which the respective certification or determination relates.	19.2. Любое подтверждение либо определение Банка относительно ставки или суммы по настоящему Договору является подтверждением тех обстоятельств, к которым соответствующее подтверждение либо определение относится.
20. REMEDIESANDWAIVERS, PARTIALINVALIDITY	20. СРЕДСТВА ПРАВОВОЙ ЗАЩИТЫ И ОТКАЗ ОТ ПРАВ, ЧАСТИЧНАЯ НЕДЕЙСТВИТЕЛЬНОСТЬ
20.1. Neither failure by the Bank to exercise, nor any delay by the Bank in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.	20.1. Неосуществление Банком или задержка в осуществлении им какого-либо права или средства правовой защиты по настоящему Договору не является отказом от прав на их осуществление, равно как никакое разовое или частичное осуществление какого-либо права или реализация средства правовой защиты не препятствует реализации таковых в дальнейшем. Права и средства правовой защиты, предоставляемые по настоящему Договору, являются дополняющими, но не исключающими права и средства правовой защиты, предусмотренные законом.
20.2. If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.	20.2. Если в то или иное время любое из положений настоящего Договора является или становится незаконным, юридически недействительным или не имеющим исковой силы в любом отношении в соответствии с законодательством какой-либо юрисдикции, это ни коим образом не затрагивает и не ущемляет законности, юридической действительности или возможности приведения в исполнение остальных положений настоящего Договора, равно как и законности, юридической действительности или возможности приведения в исполнение такого положения в соответствии с законодательством любой другой юрисдикции.
21.NOTICES	21.УВЕДОМЛЕНИЯ
21.1. Each communication to be made hereunder shall be made in writing and, unless otherwise stated, shall be made by fax, letter,	21.1. Все сообщения, направляемые в соответствии с настоящим Договором, должны быть оформлены в письменном виде и, при

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ING Client System or express mail.			отсутствии указаний об ином, направлены по факсу, по почте по Системе «INGClient» или экспресс почтой.
21.2. Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has by fifteen days’ written notice to the other specified another address) be made or delivered to that other person by e-mail or fax or letter at the address indicated in sub-clause 21.3 of this Clause 21 and shall be deemed to have been made or delivered, in the case of any communication made by fax or ING Client System, when dispatched or, in the case of any communication made by letter or express mail, when left at that address or (as the case may be) five days after being deposited in the post postage prepaid in an envelope addressed to it at that address.			21.2. Любое сообщение или документ, которые должны быть предоставлены одним лицом другому лицу согласно настоящему Договору, должны быть предоставлены (если только такое другое лицо не указало в письменном уведомлении, направленном за пятнадцать дней, другого адреса) такому иному лицу по электронной почте, или по факсу, или письмом по адресу, указанному в пункте 21.3 настоящей Статьи 21, и считается предоставленным при получении (в случае сообщения, сделанного по факсу или по Системе «INGClient») или (в случае сообщения, сделанного письмом или экспресс почтой) когда оно доставлено по указанному адресу или (в зависимости от ситуации) через пять дней после его отправки по почте (с оплаченной доставкой) в конверте, адресованном ему по указанному адресу.
21.3. Details.			21.3. Реквизиты.
(1) TheBank			(1) Банк
Contactdetails			Контактная информация
address:		36, Krasnoproletarskaya St., 127473, Moscow, the Russian Federation	адрес:	Российская Федерация, 127473 Москва, ул. Краснопролетарская, 36
fax:		+7 495 755 54 99	факс:	+7 495 755 54 99
e-mail address:		Victoria.Medvedeva@ingbank.com Tatyana.Noman@ingbank.com	адрес электронной почты:	Victoria.Medvedeva@ingbank.comTatyana.Noman@ingbank.com
Contact persons			Контактные лица
name:	Victoria Medvedeva		Ф.И.О.:	Виктория Медведева
position:	Head of Lending Settlements		должность:	Начальник Отдела Оформления Кредитных Операций
name:	Tatiana Noman		Ф.И.О.:	Татьяна Номан
position:	Заместитель начальника отдела оформления кредитных операций		должность:	Deputy Head of Lending Settlements
(2) The Borrower			(2) Заемщик
Contact details			Контактная информация
address:	8/4a, Vorontsovskaya str., Moscow 109044		адрес:	Российская Федерация, 109147, Москва, ул. Воронцовская д. 8/4а.
fax:	+7 495 2232168		факс:	+7 495 2232168

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e-mail address:		kans@mts.ru, avsmirn3@mts.ru,	адрес электронной почты:	kans@mts.ru, avsmirn3@mts.ru
Contact persons			Контактныелица
name:	Nikita Kapranov		Ф.И.О.:	НикитаКапранов
position:	Head of Division		должность:	Начальник отдела УФРИР
name:	Alexander Smirnov		Ф.И.О.:	Александр Смирнов
position:	Expert of Department		должность:	Эксперт департамента
21.4. Drawdown Notice may be submitted to the Bank through INGClient System. The Drawdown Notice submitted to the Bank through INGClient System shall be in an electronic form, and with regard to the form minor deviations from the form in Annex 1 shall be allowed. The substance of the Drawdown Notice submitted to the Bank through INGClient System shall entirely comply with provisions hereof as to Drawdown Notices and shall be in compliance with requirements of an agreement for the provision of services by means of INGClient System applying to Instructions (as this term is defined in such agreement).			21.4. Заявление о Предоставлении может быть передано в Банк с использованием Системы «INGClient». Заявление о Предоставлении, передаваемые с использованием Системы «INGClient», составляются в электронной форме, при этом в отношении формы допускаются незначительные отклонения от формы в Приложении 1 к настоящему Договору. Содержание Заявления о Предоставлении, передаваемого с использованием Системы «INGClient», должно соответствовать всем требованиям настоящего Договора к Заявлению о Предоставлении, а также требованиям соответствующего договора о предоставлении услуг посредством Системы «INGClient», предъявляемым к Распоряжению (как этот термин определен в таком договоре).
21.5. Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the Russian language or accompanied by a translation thereof into Russian, certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof.			21.5. Любое сообщение, которое должно быть предоставлено одной Стороной другой согласно настоящему Договору, должно быть составлено на русском языке, либо должно сопровождаться переводом на русский язык, заверенным (должностным лицом, направляющим такое сообщение) как верный и точный его перевод.
22. EFFECTIVE PERIOD, PRIOR ARRANGEMENTS			22. СРОК ДЕЙСТВИЯ, ПРЕДШЕСТВУЮЩИЕ ДОГОВОРЕННОСТИ
22.1. This Agreement shall come into force as of the date first written above and shall remain effective until full repayment of the Principal Amount and payment of all amounts due to the Bank under this Agreement in full but in any case not earlier than on the Final Maturity Date.			22.1. Настоящий Договор вступает в силу с даты, указанной на первой странице, и прекращает свое действие в дату полного погашения Заемщиком Основного Долга и выплаты всех сумм, подлежащих уплате по настоящему Договору, но в любом случае не ранее Окончательной Даты Погашения.
22.2. This Agreement constitutes the entire agreement between the Parties and shall supersede and override any prior agreements			22.2. Настоящий Договор представляет собой полное соглашение Сторон, заменяет собой и превалирует над всеми предшествующими

38

or arrangements of the Parties in respect of any relations regulated in this Agreement (including those in respect of the Confidential Information) whether written or verbal.	договоренностями Сторон по поводу любых отношений, регулируемых настоящим Договором, (в том числе по поводу Конфиденциальной Информации) вне зависимости от того были ли они достигнуты Сторонами в письменной или устной форме.
22.3. All amendments and supplements hereto must be agreed in writing, all waivers from the Bank shall be effective only if in writing.	22.3. Все изменения и дополнения в настоящий Договор должны быть совершены в письменной форме, все согласия со стороны Банка имеют силу, только если совершены в письменной форме.
23. GENERAL TERMS AND CONDITIONS	23. ОБЩИЕ УСЛОВИЯ
23.1. Insofar as no specific provisions to the contrary have been made herein, this Agreement shall be subject, besides all, to the General Terms and Conditions of the Bank, a copy of which the Borrower hereby confirms having received.	23.1. При отсутствии в настоящем Договоре специальных указаний об ином, настоящий Договор, помимо прочего, регулируется Общими Условиями Банка. Настоящим Заемщик подтверждает получение копии вышеуказанных Общих условий Банка.
24. ASSIGNMENT	24. УСТУПКА ПРАВ
24.1. The Borrower shall not be entitled without the prior written consent of the Bank to assign or transfer all or any of its rights (claims) under this Agreement.	24.1. Заемщик не имеет права без предварительного письменного согласия Банка уступить или передать свои права (требования) по настоящему Договору ни полностью, ни частично.
24.2. The Bank may at any time assign all or any of its rights (claims) hereunder without any consent of the Borrower:	24.2. Банк вправе в любой момент уступить полностью или частично свои права (требования) по настоящему Договору без согласия Заемщика:
(i) before occurrence of an Event of Default — to any of the Bank’s affiliates, to any national central bank or federal reserve,	(i) до наступления Случая Досрочного Истребования — любому аффилированному лицу Банка, любому национальному центральному банку или федеральному резерву,
(ii) after occurrence of an Event of Default — to any person.	(ii) после наступления Случая Досрочного Истребования — любому лицу.
24.3. The Borrower hereby confirms that the identity of the Bank is not materially significant for it (within the meaning of article 388 of the Civil Code of the Russian Federation).	24.3. Заемщик настоящим подтверждает, что личность Банка не имеет для него существенного значения (в смысле статьи 388 Гражданского кодекса Российской Федерации).
25. NON-DISCLOSURE AND REFERENCES	25. КОНФИДЕНЦИАЛЬНОСТЬ И УПОМИНАНИЯ
25.1. The Parties shall consider the entire content and each provision of this Agreement	25.1. Стороны обязаны рассматривать все содержание и каждое положение настоящего

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as well as any information (including Personal Data) related to concluding, performing or breach of this Agreement (the “Confidential Information”) as confidential information. Neither Party shall, without prior written consent of the other Party, disclose Confidential Information to any third party, unless this Agreement expressly provides for otherwise.	Договора, а также информацию (включая Персональные Данные), связанную с заключением, исполнением или нарушением настоящего Договора («Конфиденциальная Информация»), как конфиденциальную информацию. Каждая из Сторон обязуется без предварительного письменного согласия другой Стороны не раскрывать Конфиденциальную Информацию ни одному третьему лицу, если иное прямо не предусмотрено настоящим Договором.
25.2. The Parties shall have a right to disclose the Confidential Information:	25.2. Стороны вправе раскрывать Конфиденциальную Информацию:
(1) to its own professional consultants (including external lawyers, accountants, auditors) and other persons for the purposes of the subclause 24.2 of Clause 24 hereto, provided that the disclosing Party shall ensure non-disclosure of the Confidential Information by such consultants and/ or persons;	(1) собственным профессиональным консультантам (в том числе, внешним юристам, бухгалтерам, аудиторам), а также иным лицам для целей пункта 24.2 Статьи 24 настоящего Договора, при условии обеспечения раскрывающей Стороной неразглашения Конфиденциальной Информации такими консультантами и/ или лицами;
(2) to its affiliates;	(2) своим аффилированным лицам;
(3) to other persons, in case mandatory disclosure of an information to such persons is stipulated by applicable legislation or such disclosure is required to protect rights and interests of the Bank.	(3) иным лицам, в случаях, когда обязательное раскрытие информации таким лицам предусмотрено применимым законодательством, требованиями бирж и регуляторов.
25.3. In any public announcement relating to this Agreement the Bank shall be referred to as: ING Commercial Banking (official legal name “ING BANK (EURASIA) ZAO” (Closed Joint Stock Company)).	25.3. В любом публичном сообщении, связанном с настоящим Договором, Банк должен упоминаться как: INGCommercialBanking (фирменное наименование - «ИНГ БАНК (ЕВРАЗИЯ) ЗАО» (ЗАКРЫТОЕ АКЦИОНЕРНОЕ ОБЩЕСТВО)).
26. LAWANDJURISDICTION	26. ПРАВО И ЮРИСДИКЦИЯ
26.1. This Agreement shall be governed by and construed in accordance with the laws of the Russian Federation.	26.1. Настоящий Договор регулируется и толкуется в соответствии с законодательством Российской Федерации.
26.2. Any dispute, controversy or claim which may arise out of or in connection with this Agreement, or the execution, breach, termination or invalidity thereof, shall be settled by the State economic court of the City of Moscow (Arbitrazhniy sud goroda Moskvy).	26.2. Все споры, разногласия или требования, возникающие из настоящего Договора или в связи с ним, в том числе касающиеся его исполнения, нарушения, прекращения или недействительности, подлежат разрешению в Арбитражном суде города Москвы.

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27.GOVERNING LANGUAGEAND COUNTERPARTS	27.ЯЗЫК И ЭКЗЕМПЛЯРЫ ДОГОВОРА
27.1. This Agreement shall be executed in the Russian and English languages, whereas the Russian version of this Agreement shall prevail in case of any discrepancies.	27.1. Настоящий Договор составлен на русском и английском языках, при этом русский текст настоящего Договора имеет преимущественную силу в случае каких-либо расхождений.
27.2. Signed in as many originals as Parties to this Agreement.	27.2. Подписано в количестве оригиналов в соответствии с количеством Сторон настоящего Договора.

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SIGNATURES/ПОДПИСИ СТОРОН
On behalf of the Bank:	От имени Банка:
signature/подпись	signature/подпись
name/Ф.И.О.:	name/Ф.И.О.: N.N. Londarenko / Н.Н. Лондаренко
title/должность:	title/должность: Chief Accountant/Главныйбухгалтер
On behalf of the Borrower:	От имени Заемщика:
signature/подпись	signature/подпись
name/Ф.И.О.: A.V. Kornia / А.В.Корня	name/Ф.И.О.: I.R.Borisenkova / И.Р. Борисенкова
title/должность: Vice-president economic and finances / Вице-президентпоэкономикеифинансам	title/должность: Chief Accountant/Главныйбухгалтер
Due to entering into this Agreement the Borrower hereby expresses its explicit consent/refusal for submission of all available to the Bank information, related to this Agreement, to a bureau of credit histories to the extend stipulated by article 4 of the Federal Law dated 30.12.2004 No 218-FZ “On Credit Histories”.	В связи с заключением настоящего Договора Заемщик выражает свое согласие/несогласие на предоставление всей имеющийся у Банка информации, связанной с настоящим Договором, в бюро кредитных историй в пределах, установленных статьей 4 Федерального закона от 30.12.2004г. № 218-ФЗ «О кредитных историях».
oagree/согласенodisagree/не согласен
signature/подпись	signature/подпись
name/Ф.И.О.: A.V. Kornia / А.В.Корня	name/Ф.И.О.: I.R.Borisenkova / И.Р. Борисенкова
title/должность: Vice-president economic and finances / Вице-президентпоэкономикеифинансам	title/должность: ChiefAccountant/Главный бухгалтер

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Приложение 1. ФОРМА Заявления о предоставлении Выплаты / Annex 1. FORM of Drawdown Notice

127473, Москва, ул. Краснопролетарская, 36Российская Федерация		oЗаявление о предоставлении Выплаты/ Drawdown notice № заявки /ref. oЗаявление о продлении Выплаты/ Rollover noticeoИзвещение о погашении/ Repayment notice
Суммы компенсации убытков, понесенныхБанком вследствие досрочного погашениякредита/ Breakage cost	oСуммы основного долга/ Principal amount		oНачисленных процентов/Interest accrued	oЧасти долга/Partial amount		o
		oДосрочнаявыплата/ Pre-payment notice
		Суммы основного долга/ Principal amount	oНачисленных процентов / Interest accrued		oЧасти долга/Partial amount	o

Вниманию/ Attention — Виктории МедведевойКредитныйинспектор/ Loan administration Officer -
Тел./Tel. 7-495-755 54 00Факс/ Fax: 7-495-755 54 99

Название организации/ Client’s name:

Адрес/ Address:

Исполнитель/ Contact person:

Тел./Tel.:

Кредитное соглашение (Номер,Дата,Сумма,Валюта)/
Agreement (Number,Date, Amount, Currency):

СогласновышеуказанномукредитномусоглашениюЗаемщикизвещаетБанкосогласиисосписанием/зачислениемсуммы/ Referring to the above mentioned agreement the Borrower hereby gives the bank a notice that the Borrower irrevocably commits to borrow/repay the following amount:

В соответствии с получением и продлением ссуды/ In respect of Drawdown or Rollover:

Сумма/ Amount     .Валюта/ Currency               ПроцентнаяСтавка/Interest Rate                                    
Датавыдачи (продления) Выплаты/ Start date of drawdown rollover)                                                      
ДатапогашенияВыплаты/ Maturity date of the Advance                                                                                    
Окончательная дата погашения / FinalMaturitydateПросим перечислить на наш текущий (расчетный) счет №/ Account to be credited:_

В соответствии с частичной, досрочной выплатой процентов или основного долга/ In respect of pre-payment, repayment of interest and/or principal amount:

Суммаосновногодолга/ Amount of principal_                                                                              
Суммапроцентов/ Amount of interest_                                                                     
Сумма компенсации расходов, понесенных Банком вследствие досрочного погашения кредита
/Breakage cost                                                    
Валюта/Currency                                                     
Датапогашения/ Payment date_                                                                          
Просим списать с нашего текущего (расчетного) счета№/ Account to be debited:

Заемщик настоящим подтверждает Банку, что на дату подписания настоящего Заявления о предоставлении Выплаты (а) не произошло никакого существенного негативного изменения в финансовом, корпоративном и хозяйственном положении Заемщика, которое может оказать негативное влияние на исполнение им своих платежных обязательств по Договору; (b) Банку были предоставлены все документов согласно Статье 10 Договора; (с) не наступил и не имеет место в настоящий момент никакой Случай неисполнения обязательств, а также не произошло никакого события, которое может стать (по прошествии времени, после направления уведомления или при сочетании указанных условий) Случаем неисполнения обязательств, и заверения и гарантии Заемщика, указанные в Статье 8 настоящего Договора, являются верными по отношению к фактам и обстоятельствам, существующим на дату подписания настоящего Уведомления о предоставлении Выплаты.  /

The Borrower does hereby confirm to the Bank that at the date of this Drawdown Notice (a) there has been no Material Adverse Effect in the financial, corporate and business status of the Borrower which may have a negative impact on its payment obligations under the Agreement; (b) each document referred to in Article 10 of the Agreement has been received by the Bank; (c) no Event of Default has occurred and is continuing, no event has occurred which may become (with the passage of time or the giving of notice or both) an Event of Default and the representations and warranties set out in Article 8 of the Agreement are true with respect to the facts and circumstances existing on the date hereof.

Подпись ответственного лица/ Signature A	Подпись ответственного лица/ Signature B
	STAMP
Дата/ Date

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EX-4.10

Exhibit 4.10

CREDIT FACILITY AGREEMENT

No. 207/11-P

Moscow       July 2011

Gazprombank (Open Joint Stock Company), General license No. 354, hereinafter referred to as “Creditor” or “Bank”, represented by Deputy Chairman of the Board                                                                                                                                             , acting under the Power of Attorney dated                                 20     No.                                   , as the party of the first part, and Mobile TeleSystems Open Joint Stock Company, hereinafter referred to as the “Borrower”, represented by Vice President, Chief Financial Officer Alexey Valeryevich Kornya, acting under the Power of Attorney No. 0530/1 dated 04.06.2010, as the party of the other part, collectively referred to as the “Parties”, have concluded this Agreement as follows:

SECTION I. GENERAL PROVISIONS

1.   INTERPRETATION OF TERMS

For the purposes of the Agreement, the terms listed below have the following meanings:

Credit currency — the currency of the Russian Federation (rubles), in which funds may be granted in accordance with paragraph 6.1 of this Agreement.

MTS Group — means the Borrower and its Subsidiaries at the relevant time moment.

The date of repayment of Credit facility indebtedness — the date of actual repayment of Principal under the Credit Facility in full.

Credit Tranche repayment date — the date of actual repayment of Credit Tranche Principal in full.

Interest payment date — the date by which the Borrower shall pay the interest accrued for the Interest Period.

Monetary obligations of the Borrower — Borrower’s indebtedness under this agreement, including principal, interest, fees and penalties outstanding (not reimbursed, not repaid) on any date when the Agreement is in force.

Subsidiary — legal entity in which another person owns, directly or indirectly, more than 50% of the share capital or similar right, or has the right to determine or control, directly or indirectly, the decisions related to the management of the legal entity through ownership of voting stocks / shares, management contract, being trustee, or otherwise.

Legislation — regulatory legal acts in force in the territory of the Russian Federation, including international agreements ratified by the Russian Federation and valid in the Russian Federation.

Credit facility use — actual provision of funds by the Creditor to the Borrower during the Facility period according to the procedure and terms specified in this Agreement.

Credit facility — a set of Credit Tranches granted by the Creditor to the Borrower according to the procedure and terms specified in this Agreement.

Credit — funds provided by the Creditor to the Borrower to be repaid in accordance with the terms of this Agreement.

Borrower’s obligations — obligations of the Borrower as defined in Article 4 of this Agreement.

Principal — the amount of Credit granted to the Borrower and outstanding (not repaid) on any date of the Agreement, including the amount not reimbursed (not repaid) within the period prescribed by this Agreement.

Credit facility period — the period during which the Borrower, subject to terms set forth in

Article 6.6 of this Agreement, shall have the right to use the Credit facility in accordance with Article 6.3 of this Agreement.

Interest Period — the period for which accrued interest is paid.

Business day — the business day in the country of registration of the Creditor, Borrower and credit institutions, through which settlements under the Agreement are carried out.

Settlement account — bank account of the Borrower in the currency of the Russian Federation opened with the Bank.

Settlement account in foreign currency — bank account of the Borrower in foreign currency, opened with the Bank.

Parties — Gazprombank (Open Joint Stock Company) and the Borrower, separately and collectively, as the context requires.

Credit Tranche — a part of Credit granted under the Credit facility on the terms specified herein.

MosPrime 3M (Moscow Prime Offered Rate) — indicative rate of provision of ruble credits for the term of 3 (three) months at Moscow money market, calculated by the National Foreign Exchange Association, and published on MOSPRIME1 page of REUTERS service (or any other page of REUTERS, which may replace MOSPRIME1 page for these purposes) as of 12:30 pm Moscow time.

2.   SUBJECT MATTER AND SCOPE OF THE AGREEMENT

2.1.   Pursuant to the Agreement, the Creditor shall grant the Credit facility to the Borrower in the amount and under the terms set forth in the Agreement, and the Borrower shall repay the Credit obtained under Credit facility as well as pay interest, fees and fulfill other obligations specified herein.

2.2.   This Agreement governs the relationship regarding granting of Credit by the Creditor to the Borrower and the repayment (reimbursement) of the Credit under the terms set forth herein.

2.3.   This Agreement establishes the order of payment in connection with the provision and repayment (reimbursement) of the Credit.

2.4.   This Agreement establishes the procedure of relationship of the Parties regarding the Bank’s supervision over the use of the Credit provided in accordance with this Agreement.

3.   STATEMENTS AND REPRESENTATIONS OF THE BORROWER

3.1.   The Borrower states that:

3.1.1.     It is a legal entity set up in accordance with established procedure and carrying out its activities in accordance with the Legislation; it has all rights and authorities to own its property, assets and income as well as to carry out its operations in its current form.

3.1.2.     It is entitled to enter into this Agreement, to borrow funds, as well as perform other obligations specified hereunder.

3.1.3.     The Borrower has made all necessary corporate decisions; all necessary permits, approvals, agreements, licenses, exemptions, registrations, notarizations required for the conclusion of this Agreement, borrowing of funds and fulfillment of obligations hereunder have been obtained or made and are valid

3.1.4.     This Agreement is legal, valid and binding for the Borrower and may be enforced against the Borrower in accordance with the terms of this Agreement and provisions of applicable law.

3.1.5.     Undertaking and performing obligations under this Agreement by the Borrower does not result in the following: violation of any provision of constituent documents and internal documents of

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the Borrower, breach of obligations to third parties under contracts where Borrower is a party, or breach of any judicial decision or administrative act; breach of provisions of the Legislation.

3.1.6.     No facts of non-performance or undue performance of Borrower’s credit obligations under any other agreement (contract), where the Borrower is a party, in the scope exceeding 10 (ten) percent of the book value of assets of the Borrower according to the accounting statements as on the last reporting date, which may affect adversely the Borrower’s ability to perform its obligations hereunder, occurred neither do not exist.

3.1.7.     Accounting statements of the Borrower that has been provided or will be provided by the Borrower to the Bank hereunder contain true and accurate information and are prepared or will be prepared in accordance with Legislation.

3.1.8.     No judicial, arbitration or administrative decisions to collect from the Borrower the funds or any other property the amount or value of which exceeds 10 (ten) percent of the book value of assets of the Borrower according to the accounting statements as on the last reporting date, which may affect adversely the Borrower’s ability to perform its obligations hereunder, have been taken and become effective.

3.1.9.     The Borrower doesn’t have any tax arrears overdue, the amount of which exceeds 10 (ten) percent of the book value of assets of the Borrower according to the accounting statements as on the last reporting date, where the delay in payment lasts no less than three months and hasn’t been disputed by it in good faith.

3.1.10.   No court has received petition from a third party to recognize the Borrower insolvent (bankrupt) and/or to institute bankruptcy procedure against the Borrower (except for petitions and claims or bankruptcy proceedings where the court proceedings are terminated within 60 (sixty) calendar days after they have been accepted by the court ), the Borrower didn’t decide to initiate voluntary liquidation (bankruptcy), the appropriate court didn’t decide to initiate liquidation (bankruptcy) of the Borrower, no supervision procedure nor external administration procedure nor financial improvement nor any other similar actions and measures have been introduced in respect to the Borrower.

3.1.11.   All information provided by the Borrower to the Bank in connection with this Agreement is true, complete and accurate, and the Borrower didn’t conceal any circumstances that could, if revealed, affect adversely the Bank’s decision on granting the credit to the Borrower in accordance with the terms of this Agreement.

3.1.12.   The Borrower is informed about criminal liability for unlawful obtaining of credit by providing false information on the economic situation or financial status, provided for in Article 176 of the Criminal Code of the Russian Federation, as well as the liability for evasion of payment of credit indebtedness provided for in Article 177 of the Criminal Code of the Russian Federation.

3.2.   Throughout the whole period of the Agreement, the Borrower shall:

3.2.1.     Inform the Bank without delay, however, not later than 3 (three) Business days, in respect of any fact that could affect adversely the Borrower’s ability to perform its obligations hereunder to the Bank.

3.2.2.     Maintain proper accounting and reporting reflecting all its financial and business transactions.

3.2.3.     Within 3 (three) Business days from the date of occurrence of any default of obligations inform the Bank about this in writing, stating details as well as corrective measures proposed by the Borrower.

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3.2.4.     Refrain from engaging in transactions that result in alienation or possible conditional alienation(1) in favor of third parties (pledge, etc.) (one-time or in parts, free of charge or for disproportionate reimbursement(2) (consideration) to the Borrower) of assets, the book value of which for the period of six consecutive months ending on the last day of each respective fiscal year, or the corresponding fiscal quarter of the Borrower, exceeds 50 (fifty) percent of the book value of assets according to the accounting statements of the Borrower as of the last reporting date.

3.3.   The Borrower acknowledges that the Bank enters into this Agreement completely relying on statements and representations set forth in this Article, and the Borrower is fully responsible for any misstatements contained in provisions of this article (including those resulting in the Agreement to be deemed invalid, fully or partially).

3.4.   The Borrower acknowledges that the statements and representations contained in this article will be valid and represent the facts during the entire term of this Agreement.

4.   BORROWER’S OBLIGATIONS

4.1.   The Borrower shall:

4.1.1.     Use the obtained Credit strictly for the intended purpose in accordance with this Agreement.

4.1.2.     Allow Creditor’s supervision over the current financial status of the Borrower and the intended use of the Credit, including providing the Creditor with the opportunity to review Borrower’s accounting reports, contractual and other documents related to the Credit and its use, providing information on the membership of management bodies of the Borrower, and providing said documents upon Creditor’s reasonable written request submitted to the Borrower not less than 5 (five) Business days in advance.

4.1.3.     Repay (reimburse) the Credit in full within the terms specified herein, including early repayment upon corresponding Creditor’s written request in case the circumstances described in paragraph 7.1 of this Agreement arise, within the time limit specified in paragraph 7.2 of this Agreement.

4.1.4.     Pay to the Creditor in due time and in full the interest, fees and penalties under the Agreement as well as documented expenses incurred by Creditor in connection with the recovery of Borrower’s overdue indebtedness hereunder, including in case of circumstances described by paragraph 7.1 of this Agreement.

4.1.5.     In case the Borrower has any payment documents overdue (List 2 charges, as defined in the Regulation of the Bank of Russia dated March 26, 2007 No. 302-P On the Rules of Accounting in Credit Institutions Located in the Territory of the Russian Federation), take all reasonable measures that may be deemed necessary at the discretion of the Borrower, aimed at execution of payment documents or disputing the actions related to such documents, or other actions, including those aimed at elimination of such requirements.

4.1.6.     In case any changes are made to the constituent documents of the Borrower, provide to the Creditor notarized copies of the corresponding documents within 10 (ten) Business days from the

(1)  The alienation (conditional alienation) is understood as:

·    Transfer of property in circumstances where such transfer is the ground for occurrence of debt or other obligation;

·    Transfer of property in fulfillment of an obligation

(2)  Herewith, the disproportionate reimbursement (consideration) is understood as:

·Receipt of funds in rubles and/or foreign currency to the bank account of the Borrower maintained with the credit institution after such credit institution has ceased to fulfill its monetary obligations.

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date of state registration of changes.

4.1.7.     Provide accounting and other reporting which is prepared by the Borrower pursuant to the Legislation, in accordance with the procedure set forth in Article 8 of this Agreement.

4.1.8.     Inform the Bank in writing about the following circumstances, within 3 (three) Business Days from the date of their occurrence:

4.1.8.1.       Borrower’s debtors default on their monetary obligations, if the amount of claims under each obligation is greater than the sum of the Borrower’s own funds(3) according to the accounting statements as of the last reporting date, or exceeds 50 (fifty) percent of the book value of assets according to the accounting statements of the Borrower as of the last reporting date.

4.1.8.2.       The Borrower fails to perform any of its obligations to its creditors under any other agreement / contract in respect to borrowed funds, exceeding 10 (ten) percent of the book value of assets of the Borrower according to the accounting statements as of the last reporting date, and the creditor under such agreement / contract requires early fulfillment of such obligation.

4.1.8.3.       There is a significant loss of property of the Borrower, the book value of which exceeds 50 (fifty) percent of the book value according to the accounting statements of the Borrower as of the last reporting date, and if such loss of property compromises the fulfillment of obligations to repay the Credit.

4.1.8.4.       There is a change in the shareholders structure, as a result of which a person acquires more than 50 (fifty) percent of the common stock of the Borrower (except in cases where such person is JFC Sistema or any affiliate of JFC Sistema).

4.1.8.5.       The Borrower, during a period of six consecutive months ending on the last day of each respective fiscal year, or the corresponding fiscal quarter of the Borrower, receives a claim (claims) for payment of money or requisition of property, the amount of which exceeds 100,000,000 (one hundred million) U.S. dollars in aggregate or its equivalent in the currency of the Russian Federation at the exchange rate of Bank of Russia on the day of filing the claim and another currency, converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established by the Bank of Russia on the day of the claim (provided that the amount of at least one of such claims exceeds 20,000,000 (twenty million) U.S. dollars or its equivalent in Russian currency at the exchange rate of the Bank of Russia on the day of the claim or its equivalent in another currency, converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established the Bank of Russia on the day of the claim) and the judicial decision on satisfaction of such claim(s) has entered into force.

When calculating the amount of claim(s), any claim(s), including a claim(s) for the recovery of any amount, claim(s) on the transfer of property, claim(s) to declare transactions null and void, as well as court decisions to satisfy any such claim(s) becoming effective are not taken into account, where the subject matter of such claim(s) relates to the acquisition by the Borrower (any affiliate of the Borrower) of participation shares in OsOO Bitel (location: 121, Chui Prospect, Bishkek, 720000, the Republic of Kyrgyzstan), or based on such a purchase, or otherwise associated with it, in the amount not exceeding 330,000,000 (three hundred thirty million) U.S. dollars in aggregate.

4.1.8.6.       A process of liquidation, reorganization of the Borrower (except for the reorganization in the form of accession of Borrower’s Subsidiaries to the Borrower ) starts from the time of adoption of the corresponding decision by the authorized management body of the Borrower or from the time when arbitration court accepts petition of an interested party to recognize the Borrower insolvent

(3)  The Borrower’s own funds are the sum of the capital and reserves stated in line 490 of balance sheet.

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(bankrupt), (except when such petition is rejected (left undecided) within 60 (sixty) calendar days after the accepting the petition).

4.1.8.7.       Other circumstances occur, which, in the opinion of the Borrower, are obviously indicative of Borrower’s inability to perform its obligations hereunder due to a significant deterioration of financial status.

4.1.9. Beginning with the month following the month when the first Credit Tranche was received, and up to the date (day) of repayment (reimbursement) of Credit, ensure monthly receipts (during calendar month) in rubles / foreign currency to Borrower’s Settlement accounts / Settlement account in foreign currency opened with the Bank in the form of sale proceeds (net credit turnover(4)) under subscriber / commission contracts with companies acting as payment agents (CB Platina LLC and others) and/or inter-operator settlements with VimpelCom JSC, MegaFon JSC and other telecommunication operators, totaling at least equivalent of 3,000,000,000.00 (three billion rubles).

4.1.10. Notify the Creditor in advance, but no later than 10 (ten) Business days, if the Borrower grants the right for direct debiting of funds from Borrower’s accounts maintained with the Creditor to third parties (credit institutions or other Creditors), regardless of the grounds for this.

4.1.11. Duly comply with all other terms of this Agreement.

5.   SECURITY FOR BORROWER’S OBLIGATIONS

5.1.   Hereby the Borrower and the Creditor have agreed that no security for Borrower’s obligations under the Agreement shall be provided.

SECTION II. CREDIT FACILITY TERMS AND PAYMENT PROCEDURE
FOR GRANTING AND REPAYMENT OF CREDIT

6.   CREDIT TERMS AND PROCEDURE

6.1.—6.5. GENERAL TERMS

6.1.   Credit limit under the Credit Facility (maximum amount of single indebtedness under the Facility) is: 2,450,000,000.00 (two billion four hundred fifty million) rubles.

6.2.   Credit purpose: financing of financial and economic activities of MTS Group.

6.2.1.     Borrower’s use of funds for the purposes other than those specified in this Agreement is not permitted.

6.2.2.     Following operations are not allowed using Credit funds:

The monthly net credit turnover is understood as the total amount of cash receipts to the Settlement account(s) and Settlement accounts in foreign currency with the Bank during the billing month net of the following receipts:

·Bank’s credits and loans from third parties;

·Erroneously credited (reversed) funds;

·Transfer of funds upon closing of deposit accounts with the Bank;

·Crediting funds received from the sale of bills of exchange of the Bank (except when funds are received as a payment for goods (works, services);

·Receipts reflecting currency conversion transactions on Foreign currency settlement accounts and Settlement accounts with the Bank, followed by crediting of funds to the same account;

·Transfer of Borrower’s funds from one account to the other account opened with the Bank;

·Proceeds from the Borrower’s sale of stock and other securities, participation shares, shares in the authorized (share) capitals of other entities.

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·Borrower’s repayment of other borrowers’ obligations to the Creditor;

·Borrower’s repayment of its own obligations hereunder and under other credit agreements concluded with the Creditor;

·Borrower’s repayment of indebtedness under credits and loans to third parties;

·Granting loans to third parties by the Borrower, except for loans to companies of MTS Group;

·Purchase and redemption of bills of exchange by the Borrower (except for securities issued by the Bank, Bank of Russia, Russian Ministry of Finance and other persons as agreed with the Creditor);

·Purchase and redemption of equity securities (except for securities issued by the Bank, Bank of Russia, Russian Ministry of Finance and other persons as agreed with the Creditor);

·Acquisition of property from the Creditor which was obtained by the Creditor as a result of termination of Borrower’s obligations under previously granted credits as compensation;

·Investments to authorized capitals of third legal entities (including purchase of shares on the secondary market);

·Lease payments.

6.3.   The use of Credit facility:

6.3.1.     The end of Facility period is:        July 2013 (inclusive).

After the end of Facility period the Borrower in accordance with the terms of this Agreement loses its right to receive Credit Tranches.

6.3.2.     The Credit Facility is used in Credit Tranches, each of which is granted for the period not exceeding 180 (one hundred eighty) calendar days (however no later than the date specified in paragraph 6.4 of this Agreement).

6.4.   The Date of repayment of Principal under the Credit Facility is        in July 2013 (inclusive).

6.5.   The Creditor may refuse to grant to the Borrower the next Credit Tranche in full or in part should the circumstances specified in Article 7 arise, as well as in the event of Borrower’s failure to fulfill the conditions precedent established by p. 6.6.1 of this Agreement.

6.6.  CONDITIONS PRECEDENT

6.6.1.     The Credit Facility may be used up to the end of the Facility period subject to Borrower’s fulfillment of the following conditions:

6.6.1.1.       No events specified in Article 7 hereof occur.

6.6.2.     The Creditor is entitled to waive any of the conditions precedent specified in paragraph 6.6.1 of this Agreement unilaterally and at its own discretion.

6.6.3.     In the case before the end of the Facility Period the Borrower fails to fulfill the conditions precedent, except for the conditions waived by the Creditor in accordance with paragraph 6.6.2 hereof, the Creditor’s obligation to grant credit from the end of the Facility Period is terminated.

6.7.  THE PROCEDURE FOR CREDIT FACILITY USE

6.7.1.     The Credit Facility shall be used based on the Request for Credit Facility use (in the format of the Annex No. 1 hereto), hereinafter referred to as “Request”, by transferring funds in the amount of Credit Tranches under the Credit Facility to the Borrower’s Settlement account with the Bank specified in the Request.

The Creditor may grant Credit Tranche under the Credit Facility based on the Request submitted to the Bank via fax / as a scanned copy; herewith the Borrower shall provide to the Bank the original Request not later than2 (two) Business Days after the date (day) of granting Credit specified in

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p. 6.7.5 hereof.

6.7.2.     The Creditor will consider the Request as valid if it contains the following:

·Credit purpose;

·Credit Tranche amount;

·Bank details:

- Settlement account;

·Date when the Credit Tranche is granted;

·Date of Credit Tranche repayment.

6.7.3.     The Request may be submitted by the Borrower to the Creditor up to 12:00 Moscow time, not later than 2 (two) Business Days before the end of Facility Period.

6.7.4.     The Credit is granted by the Creditor within 2 (two) Business Days (but no later than 12:00 Moscow time) after the submission of Request or on the date of the Credit specified in the Request, if this date is within the time range exceeding 2 (two) Business days after the submission of the Request subject to the provisions specified in p. 6.7.3 of the Agreement, subject to compliance of such Request to the requirements of the Agreement.

6.7.5.     The date (day) of the Credit shall be the date (day) when the Credit amount was credited to the Settlement Account in the Bank.

6.8.  CREDIT FACILITY COST TERMS

6.8.1.     Beginning with the date following the date of granting the first Credit Tranche and up to the date of Credit Facility indebtedness repayment date the Borrower unconditionally and irrevocably undertakes to pay interest on the Credit Facility to the Creditor, being accrued on the actual amount of outstanding Principal under Credit Facility for each calendar day at the rate: MosPrime3M (on the business day preceding the date of Credit Tranche provision) plus 1.425% (one point four hundred twenty-five thousandths of a percent) per annum.

6.8.2.     Payment of Credit interest shall be made within the terms taking into account interest periods:

·       First interest period — from the date of the first Credit Tranche granting (not including that date) through the last calendar day of the first quarter of Credit.

Interest payment date — the last Business day of the first quarter of the Credit.

·       Subsequent interest periods — period from the first calendar day of the current quarter through the last calendar day of the current quarter.

Interest payment date — on a quarterly basis, on the last Business day of the current quarter.

·       Last interest period (for each Credit Tranche) — from the first calendar day of the quarter in which the Credit Tranche term ends through the date of Credit Tranche repayment.

Interest payment date — Credit Tranche repayment date.

6.8.3.     Interest is calculated in accordance with the requirements of the Regulation of the Bank of Russia No. 39-∏ dated 26.06.1998 On the Procedure of Accrual of Interest on Transactions Related to Attraction and Placement of Funds by Banks.

6.8.4.     In the case of early repayment of Credit (in full or in part), including in case of Credit acceleration by the Bank, the Borrower shall pay the full amount of accrued interest at once (i.e., pay interest accrued on the outstanding principal amount at the beginning of the trading day on the date of repayment of credit (or its part).

6.8.5.     The Borrower shall pay the Creditor a credit account maintenance fee at the rate of 0.15%

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(zero point fifteen percent) per annum of the actual outstanding amount of Principal under the Credit Facility for each calendar day.

The payment procedure of credit account maintenance fee is similar to the procedure established by paragraph 6.8.2 of this Agreement for payment of interest on the credit.

6.9.   EARLY REPAYMENT OF CREDIT FACILITY

6.9.1.     The Borrower shall have the right to repay early the outstanding Credit indebtedness (in full or in part) and pay the accrued interest for the actual period of Credit by submitting written Notice to the Bank 1 (one) day before transferring the amount of Principal and interest to Bank account, indicating in the Notice the date and the amount of the Credit which is early repaid (reimbursed).

6.10.  OVERDUE DEBT

6.10.1.   If any payment under this Agreement or connected with performance hereof is not received by the Creditor within the time specified in this Agreement, all such non-effected and/or late payments of the Borrower hereunder shall be considered as the Borrower’s overdue debt to the Creditor.

6.10.2.   Beginning with the date following the date when overdue debt under Credit Facility Principal arises, and through the Credit Facility repayment date, the Bank may require payment of penalty in the amount of 0.05 (zero point five hundredths) per cent accrued on the amount of Credit Facility Principal overdue for every day of delay.

6.10.3.   Beginning with the date following the date when interest overdue occurs and through the date of its repayment in full, the Bank may require payment of penalty in the amount of 0.05 (zero point five hundredths) per cent accrued on the amount of Credit Facility interest overdue for every day of delay.

6.10.4.   Beginning with the date following the date when fee(s) overdue occurs and through the date of its repayment in full, the Bank may require payment of penalty in the amount of 0.05 (zero point five hundredths) per cent accrued on the amount of overdue debt for every day of delay.

6.11.    CREDITOR’S RIGHTS AND POWERS

6.11.1.   In order to fulfill obligations to repay the Credit, payment of accrued interest, fees and penalties, in full and in a duly manner, the Borrower hereby grants to the Bank the unconditional and irrevocable right for direct debiting of funds from the Borrower’s accounts opened with the Bank, starting from the day of Credit repayment, payment of accrued interest, fees and penalties, as well as in case the right to demand credit acceleration and interest due emerges, subject to the following order:

·    Settlement account;

·    Settlement account in foreign currency;

·Other accounts of the Borrower opened with the Bank during the term of this Agreement.

6.11.2.   In the event there’re no funds on the Settlement account(s) of the Borrower in the amount sufficient for the proper fulfillment of obligations to repay the Credit, pay accrued interest, fees and penalties, the Borrower shall instruct the Bank to do the following:

6.11.2.1.     To write off funds from the foreign currencies from Borrower’s Settlement accounts in foreign currency in the Bank in the amount necessary for the proper fulfillment of obligations to repay the Credit, pay accrued interest, fees and penalties.

6.11.2.2.      To convert written off foreign currency at the exchange rate of the Bank and on terms set by the Bank for currency exchange operations on the day of the transaction;

6.11.2.3.      The funds in Russian rubles obtained after conversion shall be sent to the Settlement account of the Borrower with the Bank, after which the funds are debited directly as repayment of

9

Credit, payment of accrued interest, fees and penalties.

Herewith, all risks of exchange rate change during currency conversion operations are borne by the Borrower.

6.11.3.   The Borrower hereby unconditionally and irrevocably authorizes the Creditor to pay costs and expenses of the Creditor in accordance with p. 4.1.4. hereof by direct debiting the respective amounts from the Settlement Account / Settlement Account in foreign currency.

6.11.4.   The Borrower hereby unconditionally and irrevocably acknowledges that the rights and powers assigned to the Creditor in accordance with the terms of this Agreement are cumulative and mutually reinforcing. Creditor’s failure to exercise its rights under this Agreement, including the time of the events specified in Article 6.11 of this Agreement, shall not constitute Creditor’s waiver to exercise such rights in the future. Single or partial exercise of Creditor’s rights granted to it hereby shall not constitute grounds for termination of any other rights available to Creditor hereunder.

6.12.    PAYMENT PROCEDURE

6.12.1.   The Borrower shall send all payments under this Agreement, including the repayment (reimbursement) of Principal and interest, possible penalties and fees to the Bank with mandatory indication of payment purpose, date and number of this Agreement in the payment document.

6.12.2.   In case there’re no sufficient funds for the fulfillment of Borrower’s Monetary obligations hereunder in full, the following order of priority for repayment of Credit indebtedness is established (subject to the chronological order of Tranches granting):

·Overdue interest;

·Overdue fees;

·Overdue principal;

·Fees;

·Interest;

·Principal;

·Penalty (fine) charged on the overdue interest and fees;

·Penalty (fine) charged on the overdue principal.

6.12.3.   The Creditor is entitled to change the repayment priority specified by this article unilaterally, to the extent permitted by law, and inform about this the Borrower in writing after making the corresponding decision.

6.12.4.   For the purposes of settlements under this Agreement, on the date of fulfillment of Borrower’s Monetary obligations, the Borrower shall ensure that there’re funds available at its Settlement accounts in the amount sufficient for direct debiting of funds by the Bank, or shall fulfill Monetary obligations of the Borrower hereunder by transferring funds from Borrower’s accounts with the Bank or other credit organizations.

6.12.5.    In case there’re no funds on Borrower’s Bank accounts or the funds are insufficient for fulfillment of all relevant requirements, including the requirements of the Creditor, or inability to write off the money from Borrower’s Bank accounts for other reasons, the Borrower shall fulfill Borrower’s Monetary obligations by transferring funds from its accounts with other credit institutions to the correspondent account of the Bank specified in Article 12 of this Agreement, under payment orders, after conversion of funds to the currency of obligations, if necessary.

6.12.6.   The date of receipt of any payment by the Creditor under this Agreement shall be the date (day) of actual write-off of funds from the Settlement account / Settlement account in foreign currency

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(when payments are made from Bank accounts) or the date (day) of their crediting to the Bank’s correspondent account specified in Article 12 of this Agreement (when payments are made from accounts in other credit institutions).

6.12.7.   If the Borrower has to pay any kind of taxes, fees, etc. for any reason when effecting the payment to the Creditor, the Borrower shall increase the amount of payment so that the Creditor could receive the full amount of payment to be paid by the Borrower pursuant to this Agreement.

6.12.8.    If the date of the next Borrower’s payment hereunder is not a Business Day, the Borrower shall make such payment in the next Business day following the date of this payment established by the Agreement.

SECTION III. THE PROCEDURE FOR SUPERVISION OVER THE GRANTED
CREDIT

7.   CREDIT TERMS CHANGE

7.1.   The Creditor has the unconditional right, at its sole discretion and with prior written notice to the Borrower, to cancel, terminate and/or suspend the use of the Credit Facility or reduce the Debt limit to any amount, or to demand early repayment of indebtedness under the Credit within 30 (thirty) business days from the date of receipt of the corresponding Creditor’s notice in case any of the following events occurs, except when such event has ceased within 10 (ten) Business days from the date when the Borrower became aware of such event:

7.1.1.     Complete or partial default of Borrower’s obligations and terms stipulated in Articles 3 (paragraph 3.2), 4 and 8 of this Agreement.

7.1.2.     Revealing the facts of unreliability of documents submitted by the Borrower to the Creditor when the Credit was obtained or during the term of this Agreement, unreliability of statements made by the Borrower hereunder, inconsistency of accounting to accounting rules.

7.1.3.     Significant deterioration in the financial status of the Borrower which is, according to commercially reasonable and informed opinion of the Bank, obviously compromising the fulfillment of obligations on Credit repayment.

7.1.4.     Arbitration court accepts petition of an interested party to recognize the Borrower insolvent (bankrupt), (except when such petition is rejected (left undecided) within 60 (sixty) calendar days after the accepting the petition).

7.1.5.     The Borrower, during a period of six consecutive months ending on the last day of each respective fiscal year, or the corresponding fiscal quarter of the Borrower, receives a claim (claims) for payment of money or recovery against property or requisition of property, the amount of which exceeds 300,000,000 (three hundred million) U.S. dollars in aggregate or its equivalent in the currency of the Russian Federation at the exchange rate of Bank of Russia on the day of filing the claim and another currency, converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established by the Bank of Russia on the day of the claim (provided that the amount of at least one of such claims exceeds 30,000,000 (thirty million) U.S. dollars or its equivalent in Russian currency at the exchange rate of the Bank of Russia on the day of the claim or its equivalent in another currency, converted into U.S. dollars through currency exchange rates against the Russian Federation ruble, established the Bank of Russia on the day of the claim) and the judicial decision on satisfaction of such claim(s) has entered into force.

When calculating the amount of claim(s), any claim(s), including a claim(s) for the recovery of any amount, claim(s) on the transfer of property, claim(s) to declare transactions null and void, as well as court decisions to satisfy any such claim(s) becoming effective are not taken into account, where the

11

subject matter of such claim(s) relates to the acquisition by the Borrower (any affiliate of the Borrower) of participation shares in OsOO Bitel (location: 121, Chui Prospect, Bishkek, 720000, the Republic of Kyrgyzstan), or based on such a purchase, or otherwise associated with it, in the amount not exceeding 330,000,000 (three hundred thirty million) U.S. dollars in aggregate.

7.1.6.     Material breach of Borrower’s obligations under other agreements (contracts) concluded with the Bank, subject to Bank’s decision on acceleration of amounts due under such obligations breached.

7.1.7.     Adoption of the decision on its reorganization in accordance with the procedure specified by the Legislation (except for the reorganization in the form of accession of Borrower’s Subsidiaries to the Borrower), liquidation of the Borrower.

7.1.8.     Borrower’s request to terminate the bank account contract(s) related to opening and maintenance of the Settlement account / Settlement account in foreign currency.

7.1.9.     In case there is a judicial act which became effective in respect of the Borrower (except for the claims specified in paragraph 7.1.5.) or a decision is made by government agencies, local government bodies, which is, at the reasonable opinion of the Bank, clearly compromising the fulfillment of obligations to repay the Credit.

7.1.10.   There is a loss of significant part of Borrower’s property during the period of six consecutive months ending on the last day of each respective fiscal year, or the corresponding fiscal quarter of the Borrower, the book value of which exceeds 50 (fifty) percent of the book value of Borrower’s assets according to its balance for the last reporting date, and if such loss of property compromises the fulfillment of obligations to repay the Credit.

7.1.11.   Borrower’s debtors default on their monetary obligations of the total amount exceeding 50 (fifty) percent of the book value of assets of the Borrower according to its balance for the last reporting period.

7.1.12.   The Borrower avoids recovery of overdue debt from its debtors if the total amount of debt overdue exceeds 50 (fifty) percent of the book value of the assets of the Borrower in accordance with its balance sheet for the last reporting period.

7.1.13.   In other cases stipulated by the Legislation.

7.2.     Upon occurrence of any of the circumstances specified in paragraph 7.1 of this Agreement, the Creditor is entitled to send to the Borrower a written notice containing the requirements to the Borrower no less than 10 (ten) working days before the date of execution of the requirements. The notice shall be sent to the Borrower by fax +7 495 223-21-68 (fax number of the Borrower), the original notice is sent by courier or registered mail (registered mail with return receipt requested) to the address specified in Article 12 of this Agreement. The Borrower shall fulfill the requirements within the time specified in the notice.

7.3.   Creditor’s failure to exercise its rights hereunder or delay in exercising such rights (in full or in part), shall not constitute Creditor’s waiver to exercise such rights in the future, and single and/or partial exercise of such rights by Creditor shall not constitute grounds for termination of such Creditor’s rights in future.

7.4.   Discharge of obligations of the Borrower and the Creditor hereunder cannot be made by offsetting uniform counter claims arising from other agreements concluded between the Borrower and the Creditor.

8.   REPORTING AND ON-SITE INSPECTIONS

8.1.    The Borrower shall provide to the Creditor copies of the following documents, on a quarterly basis, no later than 10 (ten) Business days after the expiry of the time limits established by the Legislation for submission of corresponding Borrower’s accounting forms of the current year for the last reporting period to authorized state bodies

12

8.1.1.     Accounting forms, including:

· Balance Sheet (Form No. 1);

· Profit and Loss Statement (Form No. 2).

8.1.2.     Information and interpretation for balance sheet, including:

· Details of accounts payable and receivable of the Borrower;

· Bank accounts statements (from servicing banks (other than GPB (OJSC)) / bank account statements certified by the authorized officer of the Borrower;

· Certificates of Borrower’s indebtedness and credit payments, the presence / absence of overdue credits, presence of issued and existing warranties and guarantees / certificate of current liabilities to banks certified by the authorized officer of the Borrower.

8.2.   The Borrower shall provide to the Creditor the copies of the following accounting documents for the last reporting year on an annual basis, until April 10th of the current year:

8.2.1.     Annual accounting forms, including:

· Balance Sheet (Form No. 1);

· Profit and Loss Statement (Form No. 2);

· Statement of Changes in Equity (Form No. 3);

· Statement of Cash Flows (Form No. 4);

· Annex to the Balance Sheet (Form No. 5).

8.2.2.     Explanatory note to the annual financial statements.

8.2.3.     The final part of the auditor’s report confirming the reliability of accounting statements of the Borrower for the last reporting year.

8.2.4.     Information and interpretation to the annual balance sheet.

8.3.   Simultaneously with provision of accounting statements, the Borrower shall submit to the Creditor the certificate containing the following information:

·Accounts opened with other credit institutions;

·Presence (including the amount) / absence of the Borrower’s List 2 charges (settlement documents not paid on time) on all open settlement (current) accounts;

8.4.   The copies of accounting statements submitted shall be duly certified (with the round seal, signed by the director and chief accountant of the Borrower or persons authorized to certify such documents under powers of attorney presented) and bear a mark of receipt by tax authority at the place of Borrower’s state registration, or be accompanied with any other document acknowledging receipt of the reporting by tax authority via electronic communication or by mail.

In the case changes are made to the Borrower’s reporting in accordance with Russian accounting standards, the Borrower shall provide to the Bank the information about the changes no later than 10 (ten) Business days after the date of reporting to authorized state authorities.

Documents containing confidential information shall be provided according to the procedure established for this type of information. The date (day) of Borrower’s submission of accounting documents and other documents required by this Article shall be determined by the date of actual receipt of the above documents by the Creditor.

8.5.   During the whole term of the Agreement, upon the first written request of the Bank and no

13

later than 5 (five) business days before the proposed date of inspection represented by authorized representative of the Bank, the Borrower shall take all reasonable measures to provide the Bank or other person authorized by the latter the possibility(5) to carry out inspection at Borrower’s site, aimed at obtaining information on the condition of property and business operations of the Borrower.

SECTION IV. MISCELLANEOUS

9.   ASSIGNMENT OF RIGHTS AND TRANSFER OF DEBT

9.1.     The Creditor is entitled to assign its rights under the Agreement to a third party with subsequent written notice to the Borrower concerning the effected transfer of rights; herewith, the Creditor shall request written consent of the Borrower for making such a assignment, which consent shall not be withheld by the Borrower without any reasons.

9.2.   The Borrower may assign its rights and transfer obligations under the Agreement to third parties only subject to written consent of the Creditor.

10.  APPLICABLE LAW. SETTLEMENT OF DISPUTES

10.1. The rights and obligations of the Parties not regulated by the provisions of this Agreement shall be governed by the Legislation.

10.2. This Agreement is executed and shall be construed in accordance with the Legislation.

10.3. If any provision of this Agreement becomes or is declared invalid or contrary to the Legislation as a result of changes and amendments to the Legislation, all other provisions of this Agreement shall remain in force.

10.4. Disputes or disagreements shall be resolved in accordance with the procedure provided for by Legislation in the Arbitration Court of Moscow.

11.  AMENDMENTS. MISCELLANEOUS

11.1. Amendments and additions to this Agreement and its termination shall be executed as additional agreements that shall be the integral part hereof. This condition does not apply to unilateral change of the terms of this Agreement by the Bank (including, in accordance with paragraphs 6.12.3 and 7.1 hereof).

11.2.  Any notice or other communication sent by the Parties to each other hereunder shall be made in writing, signed by an authorized person, sent by fax +7 495 223-21-68 (fax number of the Borrower), the original message sent by courier or registered mail (registered mail with return receipt requested) to the address specified in Article 12 of this Agreement.

11.3. This Agreement shall enter into force upon signing and is valid until the date of fulfillment of Borrower’s obligations hereunder.

11.4. This Agreement was signed in Moscow on July        2011, in three copies of equal legal force, one copy for the Borrower, and two copies for the Creditor.

(5) The above possibilities should include, among others:

·Access of authorized representatives of the Bank to the production, storage, administrative, and other premises used by the Borrower in its activities, and the appropriate use rights for which are reflected in its accounting statements;

·Direct meetings and consultations with the officials engaged in management of Borrower business;

·Access to any and all documented information of the Borrower, except the information of limited distribution which is confirmed by the relevant regulations (in case the Bank doesn’t have any relevant legal documents confirming the right of access to such information).

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12.    CORRESPONDENCE AND ADDRESSES OF THE PARTIES

12.1. The official correspondence regarding Agreement matters shall be made in Russian with mandatory indicating the reference Credit Facility Agreement dated July          2011 No. 207/11-P and shall be sent by courier or registered mail (registered mail with return receipt requested), telegraphic message, or fax. Correspondence sent by fax should be necessarily sent by courier or registered mail.

12.2. The Parties shall notify each other in writing on the forthcoming changes in their addresses, telex, fax, phone numbers no less than 10 (ten) calendar days prior to the change.

12.3. Address and payment details of the Parties:

Creditor

16, Nametkina street, bldg. 1, Moscow, 117420, INN 774 400 1497, correspondent account No. 30101 810 2 0000 0000823 with Moscow GTU of the Bank of Russia, customer account No. 47422 810 1 0000 0000051, BIC 044 525 823 U.S. Dollars payment details: DEUTSCHE BANK TRUST COMPANY AMERICAS, NEW YORK 130 Liberty Street, New York, NY 10006 USA SWIFT CODE: BKTR US 33 account N 04414534 in favor of Gazprombank. To be credited to the account 47422840200000000044 Euro payment details: Commerzbank AG, Frankfurt-am-MainSWIFT: COBADEFF account 4008870370 01 EUR. To be credited to the account 47422978800000000044

Borrower

Mobile TeleSystems Open Joint Stock Company,4, Marksistskaya street, Moscow, 109147, INN 7740000076, settlement account No. 40702810100000004460, foreign currency settlement account No. 40702978000000004460 with Gazprombank (Open Joint Stock Company), BIC 044525823.

Signatures of the Parties:

On behalf of the Creditor	On behalf of the Borrower
Seal here	Seal here

15

Annex No. 1

To the Credit Facility Agreement

No. 207/11-P

Dated        July 2011

Our Ref. No.

                               20    

Gazprombank (Open Joint Stock Company)

REQUEST FOR CREDIT

In accordance with the Credit Facility Agreement No.           /11-P dated        July 2011 (hereinafter the “Agreement”), hereby we kindly request                                      to provide on                                20       the funds (Credit) in the amount of                                for the period through                   20       inclusive (the date of Tranche repayment) and credit the funds to our Settlement account No.                      with Gazprombank (Open Joint Stock Company).

The amount of funds (Credit) will be used by us for the purposes specified in paragraph 6.2 of the Agreement.

Terms and concepts used in the Request have the same meaning as in the Agreement, unless otherwise follows from the context of the Request.

This Request for Credit is the integral part of the Agreement.

Hereby we also confirm that as of                              20    , all statements, representations and obligations contained in the Agreement are true and being complied with.

On behalf of the Borrower

	Chief Accountant:
Full name
Signature	Full name
	Signature
Seal here

16

EX-4.34

Exhibit 4.34

Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications

LICENSE

No. 94561 dated December 29, 2011

for the provision of

mobile telephone communications services.

This License is provided to

Open Joint-Stock Company

Mobile TeleSystems

Primary State Registration Number of the legal entity (individual entrepreneur)(OGRN, OGRNIP)

1027700149124

Tax Identification Number (INN)

7740000076

Location (address):

4 Marksistskaya Street, Moscow, 109147

The territory of provision of telecommunications services is specified in the Annex.

This license is granted for the period:

up to December 29, 2016

This license is granted based on the decision of the licensing authority — the Order No. 1206 as of December 29, 2011.

This license is complemented with Annex on two pages (page) being the integral part thereto.

Deputy Director	(signature)	O.A. Ivanov
Seal here	(sealed)

CN 029499

Annex to the license No. 94561

Licensing Requirements

1. Open Joint Stock Company Mobile TeleSystems (licensee) shall comply with the duration of this license.

Short name:

MTS OJSC

OGRN 1027700149124

INN 7740000076

Location:

4 Marksistskaya Street, Moscow, 109147

2. The Licensee shall start providing telecommunications services in accordance with this license no later than 29.12.2013.

3. The Licensee shall provide mobile telephone communications services in the territory of Moscow city and the Moscow Region using radio-frequency spectrum with radio-electronic means of LTE-standard.

4. The Licensee under this license shall ensure the provision of the following services to the subscriber*:

a) access to the network of the licensee;

b) connections via mobile radiotelephone network of the licensee for reception (transfer) of voice and non-voice information, ensuring continuity of the communication during provision of the service regardless of the location of the subscriber, including when in motion;

c) connections to the subscribers and (or) users of fixed telephone network of public communication network;

d) access to telematic communication services and data transmission communication services, except for data transmission communications services for the purpose of voice transmission;

e) access to information and reference services;

f) possibility of free round-the-clock calls to emergency services.

5. The Licensee shall provide telecommunications services in accordance with the rules of communications services approved by the Government of the Russian Federation.

6. When providing communication services, the Licensee shall comply with the rules of connection of electric communications networks and their interaction, as approved by the Government of the Russian Federation, during connection of licensee’s mobile telephone communication network to public communications network, connection of other networks to licensee’s mobile telephone communication network, executing accounting and traffic passage of licensee’s mobile telephone communication network, accounting and traffic passage from (to) traffic networks of other operators.

1

7. This license is issued following the consideration of the application for the license without holding a tender (auction, bidding). No licensing requirements for the licensee to perform obligations undertaken during its participation in the tender (auction, bidding) to obtain the corresponding license are established.

8. The Licensee in the course of providing services under this license shall comply with the terms established during allocation of radio frequencies and assignment (allocation) of radio frequency or radio frequency channel.

9. Licensee shall have the control system in place to manage its communications network, corresponding to the regulatory requirements to communication network control systems established by appropriate Federal Executive Authority in the field of communication.

10. The Licensee shall implement the requirements for networks and communication facilities established by the Federal Executive Authority in the field of communications in consultation with the authorized state authorities executing operational and investigative activities in order to perform operational and investigative measures, as well as to take measures to prevent the disclosure of organizational and tactical methods of these operations.

11. The Licensee shall provide information on the base of calculation of mandatory withholdings (non-tax payments) to the universal service reserve according to the manner and form established by the federal executive authority in the field of communications.

* Provision of services under this license may be accompanied by the provision of other services which are inextricably associated technologically with mobile telecommunications services and aimed at increase of their customer value, if it they do not require a separate license.

2

Laced, numbered and sealed:

3 (three) page(s)

Chief of Radio Frequency and Communication Licenses Register Department

(signature) I.Yu. Zavidnaya

JANUARY 16, 2012

Seal: (sealed)

EX-4.35

Exhibit 4.35

Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications

LICENSE

No. 94560 dated December 29, 2011

for the provision of

telecommunication services for provision of communication channels.

This License is provided to

Open Joint-Stock Company

Mobile TeleSystems

Primary State Registration Number of the legal entity (individual entrepreneur)(OGRN, OGRNIP)

1027700149124

Tax Identification Number (INN)

7740000076

Location (address):

4 Marksistskaya Street, Moscow, 109147

The territory of provision of telecommunications services is specified in the Annex.

This license is granted for the period:

up to December 29, 2016

This license is granted based on the decision of the licensing authority — the Order No. 1206 as of December 29, 2011.

This license is complemented with Annex on two pages (page) being the integral part thereto.

Deputy Director	(signature)	O.A. Ivanov
Seal here	(sealed)

Annex to the license No. 94560

Licensing Requirements

1. Open Joint Stock Company Mobile TeleSystems (the Licensee) shall comply with the duration of this license.

Short name:

MTS OJSC

OGRN 1027700149124

INN 7740000076

Location:

4 Marksistskaya Street, Moscow, 109147

2. The Licensee shall start providing telecommunications services in accordance with this license no later than 29.12.2013.

3. The Licensee shall provide telecommunications services for provision of communication channels outside the Russian Federation in accordance with the license in the Russian Federation.

4. Pursuant to this license, the Licensee shall provide to the user the possibility to send electronic communication messages via communication channels formed by transmission lines of licensee’s communication network*.

5. In the course of providing services under this license, the Licensee shall comply with the terms established during allocation of radio frequency bands and assignment (allocation) of radio frequency or radio frequency channel.

6. The Licensee shall implement the requirements for networks and communication facilities established by the Federal Executive Authority in the field of communications in consultation with the authorized state authorities executing operational and investigative activities in order to perform operational and investigative measures, as well as to take measures to prevent the disclosure of organizational and tactical methods of these operations.

1

7. The Licensee shall provide information on the base of calculation of mandatory withholdings (non-tax payments) to the universal service reserve according to the manner and form established by the federal executive authority in the field of communications.

* Provision of services under this license may be accompanied by the provision of other services which are inextricably associated technologically with the communication services for the provision of communication channels and aimed at increase of their customer value, if they do not require a separate license.

2

Laced, numbered and sealed:

3 (three) page(s)

Chief of Radio Frequency and Communication Licenses Register Department

(signature) I.Yu. Zavidnaya

JANUARY 16, 2012

(Sealed)

EX-8.1

Exhibit 8.1

The table below presents our significant subsidiaries, the places of incorporation and our ownership interests therein as of December 31, 2011.

				Place of
	Accounting	Ownership		Incorporation/
Subsidiary	Method	Interest		Organization
Sibintertelecom	Consolidated	100,0	%	Russia
Russian Telephone Company	Consolidated	100,0	%	Russia
Sistema Telecom	Consolidated	100,0	%	Russia
TS-Retail	Consolidated	100,0	%	Russia
Metro-Telecom	Consolidated	95,0	%	Russia
Comstar-Regions	Consolidated	100,0	%	Russia
MTS Ukraine (Ukrainian Mobile Communications)	Consolidated	100,0	%	Ukraine
MTS Finance(1)	Consolidated	100,0	%	Luxembourg
Uzdunrobita	Consolidated	100,0	%	Uzbekistan
BCTI	Consolidated	100,0	%	USA
MTS Bermuda(2)	Consolidated	100,0	%	Bermuda
MTS International Funding(3)	Consolidated	VIE		Ireland
K-Telecom	Consolidated	80,0	%	Armenia
Teleradiokompania “TVT”	Consolidated	100,0	%	Russia
Infocentr	Consolidated	100,0	%	Russia
Inteleca Group	Consolidated	100,0	%	Russia
Altair	Consolidated	100,0	%	Russia
Moscow City Telephone Network (“MGTS”)	Consolidated	94,1	%	Russia
MTS Belarus	Equity	49,0	%	Belarus
Intellect Telecom	Equity	47,0	%	Russia

(1)	Represents beneficial ownership interest.
(2)	A wholly owned subsidiary established to repurchase our ADSs.
(3)	A private limited company organized and existing under the laws of Ireland for the sole purpose of financing a loan to MTS Group. The company is a variable interest entity of the Group.
	See also Note 2 to our audited consolidated financial statements.

EX-12.1

Exhibit 12.1

I, Andrei A. Dubovskov, 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 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: April 23, 2012
	/s/ Andrei A. Dubovskov
	Andrei A. Dubovskov
	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 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: April 23, 2012
	/s/ Alexey V. Kornya
	Alexey V. Kornya
	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, 2010 (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: April 23, 2012
	/s/ Andrei A. Dubovskov
	Andrei A.Dubovskov
	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, 2010 (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: April 23, 2012
	/s/ Alexey V. Kornya
	Alexey V. Kornya
	Chief Financial Officer

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Tables)

12 Months Ended

Dec. 31, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

Schedule of significant legal entities

		December 31,
	Accounting method
		2011			2010
Barash Communications Technologies, Inc. ("BCTI")	Consolidated		100.0	%		100.0	%
Comstar-Regions	Consolidated		100.0	%		73.3	%
MTS Bermuda(1)	Consolidated		100.0	%		100.0	%
MTS Finance(2)	Consolidated		100.0	%		100.0	%
MTS Ukraine(3)	Consolidated		100.0	%		100.0	%
Multiregion(4)	Consolidated		—			100.0	%
RTC	Consolidated		100.0	%		100.0	%
Sibintertelecom	Consolidated		100.0	%		100.0	%
TVT	Consolidated		100.0	%		—
Infocentr	Consolidated		100.0	%		—
Inteleca Group	Consolidated		100.0	%		—
Altair	Consolidated		100.0	%		—
Sistema Telecom	Consolidated		100.0	%		100.0	%
TS-Retail	Consolidated		100.0	%		96.0	%
Uzdunrobita	Consolidated		100.0	%		100.0	%
Metro-Telecom	Consolidated		95.0	%		95.0	%
Moscow City Telephone Network ("MGTS")	Consolidated		94.1	%		51.3	%
K-Telecom	Consolidated		80.0	%		80.0	%
MTS International Funding Limited ("MTS International")	Consolidated		VIE			VIE
Comstar-UTS(5)	Consolidated		—			73.3	%
Dagtelecom(5)	Consolidated		—			100.0	%
Evrotel(5)	Consolidated		—			100.0	%
Intellect Telecom	Equity		47.0	%		22.5	%
MTS Belarus	Equity		49.0	%		49.0	%

(1)

A wholly-owned subsidiary established to repurchase the Company's ADSs.

(2)

Represents beneficial ownership.

(3)

Legal entity Ukrainian Mobile Communications was renamed to MTS Ukraine in 2010.

(4)

Merged with Comstar-Regions on December 6, 2011.

(5)

Merged with MTS OJSC on April 1, 2011.

Schedule of estimated average subscriber lives

Mobile subscribers	1 - 5 years
Residential wireline voice phone subscribers	15 years
Residential subscribers of broadband internet service	1 year
Other fixed line subscribers	3 - 5 years

XML

DEFERRED CONNECTION FEES (Tables)

12 Months Ended

Dec. 31, 2011

DEFERRED CONNECTION FEES

Schedule of changes in deferred connection fees

	2011			2010
Balance at the beginning of the year	$	155,288		$	163,098
Payments received and deferred during the year		76,562			89,030
Amounts amortized and recognized as revenue during the year		(96,676	)		(95,706	)
Currency translation adjustment		(5,750	)		(1,134	)
Balance at the end of the year		129,424			155,288
Less: current portion		(49,868	)		(49,212	)
Non-current portion	$	79,556		$	106,076

XML

GOODWILL (Tables)

12 Months Ended

Dec. 31, 2011

GOODWILL

Schedule of change in net carrying amount of goodwill by reportable segments

	Russia			Ukraine			Other			Total
Balance at January 1, 2010
Gross amount of goodwill	$	598,349		$	5,311		$	248,579		$	852,239
Accumulated impairment loss		(48,466	)								(48,466	)
		549,883			5,311			248,579			803,773
Acquisitions (Note 3)		175,307			—			—			175,307
Currency translation adjustment		(3,328	)		16			5,567			2,255
Balance at December 31, 2010
Gross amount of goodwill		769,958			5,327			254,146			1,029,431
Accumulated impairment loss		(48,096	)								(48,096	)
		721,862			5,327			254,146			981,335
Acquisitions (Note 3)		185,690			—			—			185,690
Finalization of purchase accounting		6,945			—			—			6,945
Currency translation adjustment		(46,988	)		(19	)		(8,433	)		(55,440	)
Balance at December 31, 2011
Gross amount of goodwill		913,037			5,308			245,713			1,164,058
Accumulated impairment loss		(45,528	)		—			—			(45,528	)
	$	867,509		$	5,308		$	245,713		$	1,118,530

XML

OPERATIONS IN TURKMENISTAN (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended				1 Months Ended	12 Months Ended	61 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2010 BCTI	Dec. 31, 2010 BCTI License suspension and termination of interconnect agreements M	Dec. 31, 2010 BCTI License suspension and termination of interconnect agreements	Dec. 31, 2010 BCTI License suspension and termination of interconnect agreements	Dec. 21, 2010 BCTI License suspension and termination of interconnect agreements request
Operations in Turkmenistan
Period of license suspension (in months)					1
Percentage of net profit shared with the Ministry of Communications of Turkmenistan							20.00%
Number of arbitration requests filed								3
Impairment charges on the statement of operations
Impairment of long-lived assets				$ 119,600		$ 119,580
Provision for doubtful accounts	111,307	122,550	110,766			11,462
General and administrative expenses	2,436,252	2,274,421	1,992,991			4,280
Other operating expenses	193,677	194,181	173,114			2,500
Total impairment charges						$ 137,822

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

12 Months Ended

Dec. 31, 2011

Derivative financial instruments and hedging activities

Effect of interest rate swap agreements designated as hedges in accumulated other comprehensive income

	2011			2010			2009
Accumulated derivatives loss, beginning of the year, net of tax of $3,716, $10,073, $4,179, respectively	$	(14,865	)	$	(40,293	)	$	(16,714	)
Fair value adjustments on hedging derivatives, net of tax of $795, $9,939, $7,191, respectively		(3,181	)		(39,757	)		(28,764	)
Amounts reclassified into earnings during the period, net of tax of $(2,636), $(16,296), $(1,296), respectively		10,545			65,185			5,185
Accumulated derivatives loss, end of the year, net of tax of $1,875, $3,716, $10,073	$	(7,501	)	$	(14,865	)	$	(40,293	)

Schedule of the group's assets and liabilities associated with derivative agreements measured at fair value on a recurring basis

	Significant other observable inputs (Level 2) as of December 31, 2011			Significant other observable inputs (Level 2) as of December 31, 2010
Assets:
Interest rate swap agreements	$	2,341			3,322
Currency option agreements		894			247
Liabilities:
Interest rate swap agreements	$	(15,959	)		(31,315	)
Buy-out put option		—			(11,636	)
Cross-currency interest rate swap agreements		—			(3,469	)
Currency option agreements		—			(2,612	)

Designated as hedges

Derivative financial instruments and hedging activities

Schedule of the fair value of the Group's derivative instruments

		December 31,
	Statement of financial position location	2011			2010
Asset derivatives
Interest rate swaps	Other non-current assets	$	2,341		$	3,322
Total		$	2,341		$	3,322
Liability derivatives
Interest rate swaps	Other long-term liabilities	$	(14,676	)	$	(31,315	)
Interest rate swaps	Other payables		(1,283	)		—
Cross-currency interest rate swaps	Other payables		—			(3,469	)
Total		$	(15,959	)	$	(34,784	)

Schedule of the effect of the Group's derivative instruments on the consolidated statements of operations

		Year ended December 31,
	Location of loss recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(13,502	)	$	(32,726	)	$	(8,392	)
Cross-currency interest rate swaps	Currency exchange and transaction loss		(1,862	)		(37,820	)		(24,299	)
Total		$	(15,364	)	$	(70,546	)	$	(32,691	)

        The following table presents the amount of ineffective portion of Group's derivative instruments designated as hedges in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009.

		Year ended December 31,
	Location of gain/(loss) recognized	2011			2010		2009
Interest rate swaps	Interest expense	$	7,978		$	3,541	$	(0,976	)
Cross-currency interest rate swaps	Currency exchange and transaction gain/(loss)		(1,862	)		2,011		(4,505	)
Total		$	6,116		$	5,552	$	(5,481	)

		Year ended December 31,
	Location of (loss) recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(2,032	)	$	(12,020	)	$	—
Cross-currency interest rate swaps	Currency exchange and transaction (loss)		—			(3,228	)		—
Total		$	(2,032	)	$	(15,248	)	$	—

Not designated as hedges

Derivative financial instruments and hedging activities

Schedule of the fair value of the Group's derivative instruments

		December 31,
	Statement of financial position location
		2011		2010
Asset derivatives:
Foreign currency options	Other non-current assets	$	—	$	247
Foreign currency options	Other current assets		894		—
Total		$	894	$	247
Liability derivatives:
Foreign currency options	Other payables	$		$	(92	)
Buy-out put option	Other payables		—		(11,636	)
Foreign currency options	Other long-term liabilities		—		(2,520	)
Total		$	—	$	(14,248	)

Schedule of the effect of the Group's derivative instruments on the consolidated statements of operations

		Year ended December 31,
	Location of gain/(loss) recognized	2011		2010		2009
Foreign currency options	Currency exchange and transaction gain/(loss)	$	3,258	$	1,916	$	(4,280	)
Purchased call option	Change in fair value of derivatives		—		—		(5,420	)
Currency forward	Currency exchange and transaction gain		—		—		12,788
Total		$	3,258	$	1,916	$	3,088

XML

OTHER INTANGIBLE ASSETS (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Amortized intangible assets
Amortized intangible assets, Gross carrying value	$ 2,735,899,000	$ 2,730,204,000
Amortized intangible assets, Accumulated amortization	(1,537,088,000)	(1,516,949,000)
Amortized intangible assets, Net carrying value	1,198,811,000	1,213,255,000
Other intangible assets
Total other intangible assets, Gross carrying value	2,899,375,000	3,058,587,000
Amortized intangible assets, Accumulated amortization	(1,537,088,000)	(1,516,949,000)
Total other intangible assets, Net carrying value	1,362,287,000	1,541,638,000
Amortization expense	454,000,000	399,800,000	374,500,000
Estimated amortization expense in the year ended December 31,
2012	401,450,000
2013	290,930,000
2014	175,260,000
2015	101,250,000
2016	55,160,000
Thereafter	174,761,000
Total	1,198,811,000
Billing and telecommunication software
Amortized intangible assets
Minimum useful lives (in months/years)	13
Maximum useful lives (in months/years)	240
Amortized intangible assets, Gross carrying value	1,668,715,000	1,682,959,000
Amortized intangible assets, Accumulated amortization	(1,042,773,000)	(1,056,324,000)
Amortized intangible assets, Net carrying value	625,942,000	626,635,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(1,042,773,000)	(1,056,324,000)
Weighted-average amortization period (in years)	4	4
Acquired customer base
Amortized intangible assets
Minimum useful lives (in months/years)	60
Maximum useful lives (in months/years)	372
Amortized intangible assets, Gross carrying value	262,156,000	343,920,000
Amortized intangible assets, Accumulated amortization	(68,741,000)	(111,775,000)
Amortized intangible assets, Net carrying value	193,415,000	232,145,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(68,741,000)	(111,775,000)
Rights to use radio frequencies
Amortized intangible assets
Minimum useful lives (in months/years)	24
Maximum useful lives (in months/years)	180
Amortized intangible assets, Gross carrying value	353,776,000	314,722,000
Amortized intangible assets, Accumulated amortization	(138,546,000)	(100,496,000)
Amortized intangible assets, Net carrying value	215,230,000	214,226,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(138,546,000)	(100,496,000)
Accounting software
Amortized intangible assets
Minimum useful lives (in months/years)	13
Maximum useful lives (in months/years)	60
Amortized intangible assets, Gross carrying value	141,084,000	118,673,000
Amortized intangible assets, Accumulated amortization	(98,672,000)	(87,623,000)
Amortized intangible assets, Net carrying value	42,412,000	31,050,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(98,672,000)	(87,623,000)
Numbering capacity with finite contractual life
Amortized intangible assets
Minimum useful lives (in months/years)	2
Maximum useful lives (in months/years)	10
Amortized intangible assets, Gross carrying value	75,803,000	90,408,000
Amortized intangible assets, Accumulated amortization	(70,979,000)	(79,821,000)
Amortized intangible assets, Net carrying value	4,824,000	10,587,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(70,979,000)	(79,821,000)
Office software
Amortized intangible assets
Minimum useful lives (in months/years)	13
Maximum useful lives (in months/years)	120
Amortized intangible assets, Gross carrying value	123,452,000	84,343,000
Amortized intangible assets, Accumulated amortization	(72,752,000)	(50,711,000)
Amortized intangible assets, Net carrying value	50,700,000	33,632,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(72,752,000)	(50,711,000)
Other
Amortized intangible assets
Minimum useful lives (in months/years)	12
Maximum useful lives (in months/years)	120
Amortized intangible assets, Gross carrying value	110,913,000	95,179,000
Amortized intangible assets, Accumulated amortization	(44,625,000)	(30,199,000)
Amortized intangible assets, Net carrying value	66,288,000	64,980,000
Other intangible assets
Amortized intangible assets, Accumulated amortization	(44,625,000)	(30,199,000)
Prepayments for intangible assets
Unamortized intangible assets
Unamortized intangible assets, Net carrying value	84,985,000	273,239,000
Numbering capacity with indefinite contractual life
Unamortized intangible assets
Unamortized intangible assets, Net carrying value	$ 78,491,000	$ 55,144,000

XML

COMMITMENTS AND CONTINGENCIES (Details 2) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 USD ($) Y	Dec. 31, 2010 USD ($)	Dec. 31, 2009 Sibintertelecom USD ($)	Oct. 31, 2009 Sibintertelecom RUB	Dec. 31, 2011 MTS OJSC USD ($)	Dec. 31, 2011 MTS OJSC RUB	Sep. 30, 2011 MTS OJSC RUB	Dec. 31, 2010 MTS OJSC RUB	Dec. 31, 2011 MGTS USD ($)	Dec. 31, 2011 MGTS RUB
Taxation
Number of years following the tax year for which tax declarations remain open and subject to inspection	3
Tax audit and assessment
Additional taxes, penalties and fines payable			$ 5.8	174.5	$ 11.0			353.9	$ 8.0	258.1
Decrease in amount of additional taxes, penalties and fines payable					5.4		173.9
Amount of appeal filed by the entity					2.6	84.2
Remaining amount of additional taxes, penalties and fines payable					5.6	180.0
Provision for tax and customs liabilities	7.1	10.0
Accrual for unrecognized income tax benefits, potential penalties and interest	$ 16.3	$ 14.0

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2011

PROPERTY, PLANT AND EQUIPMENT

Net book value of property, plant and equipment

		December 31,
	Useful lives, months
		2011			2010
Network, base station equipment and related leasehold improvements (including leased assets of $1.2 million and $1.2 million)	60 - 204	$	11,419,352		$	10,631,101
Office equipment, computers and other	36 - 60		1,231,907			1,102,584
Buildings and related leasehold improvements (including leased assets of $0.8 million and $0.8 million)	240 - 600		758,898			742,263
Vehicles (including leased assets of $31.5 million and $33.7 million)	36 - 60		87,786			81,085
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)			13,497,943			12,557,033
Accumulated depreciation (including leased assets of $11.4 million and $5.6 million)			(7,023,556	)		(6,196,117	)
Construction in progress and equipment for installation			1,730,965			1,610,914
Property, plant and equipment, net		$	8,205,352		$	7,971,830

XML

GENERAL AND ADMINISTRATIVE EXPENSES

12 Months Ended

Dec. 31, 2011

GENERAL AND ADMINISTRATIVE EXPENSES

GENERAL AND ADMINISTRATIVE EXPENSES

25. GENERAL AND ADMINISTRATIVE EXPENSES

        General and administrative expenses for the years ended December 31, 2011, 2010 and 2009, comprised the following:

	2011		2010		2009
Salaries and social contributions	$	1,230,564	$	1,174,482	$	1,004,951
Rent		389,142		338,301		283,957
General and administrative		277,863		251,097		217,847
Repair and maintenance		202,206		180,810		158,165
Taxes other than income		171,778		144,322		181,716
Billing and data processing		62,508		75,960		64,277
Consulting expenses		58,409		61,431		59,000
Provision for obsolescence		30,160		27,825		4,113
Insurance		6,533		7,456		7,612
Business acquisitions related costs		7,089		12,737		11,353
Total	$	2,436,252	$	2,274,421	$	1,992,991

XML

INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Details) (USD $)	12 Months Ended				12 Months Ended				12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Jan. 31, 2009	Dec. 31, 2011 MTS Belarus, an associated company of the Group	Dec. 31, 2010 MTS Belarus, an associated company of the Group	Dec. 31, 2009 MTS Belarus, an associated company of the Group	Apr. 30, 2008 MTS Belarus, an associated company of the Group	Dec. 31, 2011 Intellect Telecom	Dec. 31, 2010 Intellect Telecom	Mar. 31, 2011 Intellect Telecom	Nov. 30, 2010 Intellect Telecom
Schedule of Equity Method Investments
Equity investment					$ 176,659,000	$ 227,130,000			$ 11,388,000	$ 11,662,000
Loan receivable				12,500,000		3,000,000
Total investments in and advances to associates	188,047,000	241,792,000
Maximum borrowing amount for which the group entered into a credit facility agreement							46,000,000	33,000,000
Interest rate on borrowing for which the group entered into a credit facility agreement (as a percent)								10.00%
Equity method ownership interest acquired from Sistema Telecom (as a percent)											6.14%	43.80%
Amount of acquired equity method investment											800,000	12,400,000
Percentage of ownership acquired											49.95%
Financial position and results of operations
Total assets					417,555,000	527,609,000			19,210,000	25,227,000
Total liabilities					92,884,000	72,533,000			3,110,000	34,180,000
Net loss					107,533,000	145,707,000			6,765,000	6,831,000
Total earnings or losses of associates	$ 49,443,000	$ 70,649,000	$ 60,313,000

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TRADE RECEIVABLES, NET (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Trade receivables, net
Allowance for doubtful accounts	$ (96,961)	$ (120,468)
Trade receivables, net	863,808	798,102
Allowance for doubtful accounts receivable
Change in allowance for doubtful accounts receivable
Balance, beginning of year	120,468	97,653	69,603
Provision for doubtful accounts	101,967	123,352	105,260
Accounts receivable written off	(120,673)	(99,708)	(76,622)
Currency translation adjustment	(4,801)	(829)	(588)
Balance, end of year	96,961	120,468	97,653
Subscribers
Trade receivables, net
Trade receivables, gross	351,786	384,903
Interconnect
Trade receivables, net
Trade receivables, gross	112,751	120,948
Dealers
Trade receivables, net
Trade receivables, gross	106,000	108,010
Roaming
Trade receivables, net
Trade receivables, gross	283,830	224,687
Other.
Trade receivables, net
Trade receivables, gross	$ 106,402	$ 80,022

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details 3) (Non-designated derivative instruments, USD $)				1 Months Ended
	Dec. 31, 2010	Dec. 31, 2011 Foreign currency options	Dec. 31, 2010 Buy-out put option	Dec. 31, 2010 Buy-out put option Comstar-UTS D
Non-designated derivative instruments
Amount acquirable through derivative instruments		$ 330,000,000
Statutory limit for price of shares sold back to entity (as a percent)				10.00%
Maximum period to file buyout demand by shareholders (in days)				45
Period within which buy-out of shares should be carried out after the expiry of the period set for the buyout demand (in days)				30
Derivative instruments, fair value of liabilities	$ 14,248,000		$ 11,600,000

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INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2011

INCOME TAX

Schedule of provision for income taxes

	Year ended December 31,
Income before income taxes	2011		2010			2009
Russia	$	1,807,154	$	1,817,583		$	1,220,730
Other jurisdictions		292,198		248,048			278,410
Total	$	2,099,352	$	2,065,631		$	1,499,140
Current income tax expense
Russia	$	448,729	$	456,424		$	304,231
Other jurisdictions		71,343		106,212			99,292
Total	$	520,072	$	562,636		$	403,523
Deferred income tax expense/(benefit)
Russia	$	1,606	$	(35,529	)	$	131,485
Other jurisdictions		9,942		(9,919	)		(29,961	)
Total	$	11,548	$	(45,448	)	$	101,524

Russian statutory income tax rate reconciled to the Group's effective income tax rate

	2011			2010			2009
Statutory income tax rate for the year		20.0	%		20.0	%		20.0	%
Adjustments:
Expenses not deductible for tax purposes		2.8			3.5			4.9
Currency exchange and transaction loss		—			—			0.5
Unrecognized tax benefits		(0.2	)		0.1			(0.2	)
Settlements with tax authorities		(0.5	)		(1.0	)		(2.9	)
Different tax rate of foreign subsidiaries		(0.2	)		(0.5	)		(2.0	)
Earnings distribution from subsidiaries		2.9			0.7			6.8
Disposal of treasury stock		—			—			(4.1	)
Effect of change in tax rate in Ukraine		0.8			0.7			—
Change in valuation allowance		(0.2	)		(0.2	)		10.3
Comstar corporate reorganization		—			—			0.4
Impairment of long-lived assets		—			1.3			—
Other		(0.1	)		0.4			—
Effective income tax rate		25.3	%		25.0	%		33.7	%

Schedule of deferred tax assets and liabilities

	December 31,
	2011			2010
Assets/(liabilities) arising from tax effect of:
Deferred tax assets
Depreciation of property, plant and equipment	$	140,371		$	211,307
Other intangible assets		—			1,346
Deferred connection fees		26,063			31,522
Subscriber prepayments		16,755			20,832
Accrued expenses for services		118,103			148,828
Inventory obsolescence		13,650			5,884
Loss carryforward		203,313			196,883
Impairment of property, plant and equipment		2,415			4,438
Other		29,352			22,384
Valuation allowance		(163,075	)		(165,994	)
Total deferred tax assets		386,947			477,430
Deferred tax liabilities
Licenses acquired	$	(35,377	)	$	(62,606	)
Depreciation of property, plant and equipment		(136,465	)		(192,679	)
Customer base		(39,272	)		(34,783	)
Other intangible assets		(42,435	)		(41,011	)
Debt issuance cost		(20,975	)		(11,134	)
Potential distributions from/to Group's subsidiaries/associates		(88,596	)		(105,821	)
Other		(31	)		(4,992	)
Total deferred tax liabilities		(363,151	)		(453,026	)
Net deferred tax asset		23,796			24,404
Net deferred tax asset, current	$	189,622		$	234,658
Net deferred tax asset, non-current	$	62,102		$	81,816
Net deferred tax liability, long-term	$	(227,928	)	$	(292,070	)

Schedule of significant balances for income tax losses carried forward and related operating losses

			2011				2010
Jurisdiction	Period for carry-forward		Operating losses		Tax losses		Operating losses		Tax losses
Luxembourg (MGTS Finance S.A.)		Unlimited	$	431,461		125,124	$	429,186		124,464
Russia (Comstar-UTS, RTC and other)		2012-2021		390,945		78,189		362,096		72,419
Total			$	822,406		203,313	$	791,282		196,883

Valuation allowances against deferred tax assets

Valuation allowances	2011		2010
Sale of investment in Svyazinvest	$	66,596	$	66,887
Operating loss in Luxemburg (MGTS Finance S.A.)		94,692		94,032
Other		1,787		5,075
Total	$	163,075	$	165,994

Reconciliation of the beginning and ending amount of unrecognized tax benefits

	2011			2010			2009
Balance, beginning of the year	$	13,993		$	10,607		$	12,360
Additions based on tax position related to the current year		9,149			14,590			2,094
Additions based on tax positions related to prior years		2,647			1,504			—
Additions based on tax of acquired entities		5,129			7,587			1,521
Reduction in tax positions related to prior years		(5,213	)		(2,141	)		(1,778	)
Settlements with tax authorities		(8,323	)		(18,109	)		(3,305	)
Currency translation adjustment		(1,044	)		(45	)		(285	)
Balance, end of the year	$	16,338		$	13,993		$	10,607

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LICENSES (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Licenses
Licenses, at cost	$ 458,517,000	$ 679,133,000
Accumulated amortization	(231,006,000)	(384,405,000)
Licenses, net	227,511,000	294,728,000
Estimated amortization expense in the year ended December 31,
2012	401,450,000
2013	290,930,000
2014	175,260,000
2015	101,250,000
2016	55,160,000
Thereafter	174,761,000
Total	1,198,811,000
License costs
Licenses
Amortization expense	60,100,000	76,300,000	78,700,000
Estimated amortization expense in the year ended December 31,
2012	36,186,000
2013	31,016,000
2014	29,804,000
2015	29,797,000
2016	29,791,000
Thereafter	70,917,000
Total	227,511,000
Russia
Licenses
Licenses, at cost	20,320,000	229,209,000
Weighted-average period in for the next renewal of licenses (in years)	2
Uzbekistan
Licenses
Licenses, at cost	196,517,000	196,517,000
Armenia
Licenses
Licenses, at cost	192,186,000	203,993,000
Ukraine
Licenses
Licenses, at cost	$ 49,494,000	$ 49,414,000

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DEFERRED CONNECTION FEES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Change in deferred connection fees
Balance, beginning of the year	$ 155,288	$ 163,098
Payments received and deferred during the year	76,562	89,030
Amounts amortized and recognized as revenue during the year	(96,676)	(95,706)
Currency translation adjustment	(5,750)	(1,134)
Balance, end of the year	129,424	155,288
Less: current portion	(49,868)	(49,212)
Non-current portion	$ 79,556	$ 106,076

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OTHER INVESTMENTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Other investments
Other investments	$ 123,442,000	$ 128,582,000
Mr. P. Fattouche and Mr. M. Fattouche
Other investments
Loan granted		90,000,000
Interest accrued	4,100,000	400,000
Mr. P. Fattouche and Mr. M. Fattouche | K-Telecom
Other investments
Percentage of noncontrolling interest		20.00%
Common stock
Other investments
Other investments	9,498,000	9,763,000
Loans receivable | Mr. P. Fattouche and Mr. M. Fattouche
Other investments
Annual interest rate (as a percent)	6.00%
Other investments	92,700,000	91,503,000
Promissory notes 2009 | Sistema
Other investments
Annual interest rate (as a percent)	0.00%
Other investments	19,209,000	20,293,000
Promissory notes 2010 | Sistema
Other investments
Annual interest rate (as a percent)	0.00%
Other investments		4,162,000
Other investments
Other investments
Other investments	$ 2,035,000	$ 2,861,000

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Variable interest rate for USD-and Euro- denominated bank loans	21.33%
Designated as hedges
Fair value of the derivative instruments designated as hedges
Derivative instruments classified in other noncurrent assets	$ 2,341	$ 3,322
Derivative instruments, fair value of liabilities	(15,959)	(34,784)
Designated as hedges | Interest rate swaps
Fair value of the derivative instruments designated as hedges
Derivative instruments classified in other noncurrent assets	2,341	3,322
Derivative instruments classified in other payables	(1,283)
Derivative instruments classified in other long term liabilities	(14,676)	(31,315)
Designated as hedges | Cross-currency interest rate swaps
Fair value of the derivative instruments designated as hedges
Derivative instruments classified in other payables		$ (3,469)

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GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Change in net carrying value of goodwill by reportable segment
Gross amount of goodwill, balance at the beginning of the period	$ 1,029,431	$ 852,239
Accumulated impairment loss, balance at the beginning of the period	(48,096)	(48,466)
Net amount of goodwill, balance at the beginning of the period	981,335	803,773
Acquisitions (Note 3)	185,690	175,307
Finalization of purchase accounting	6,945
Currency translation adjustment	(55,440)	2,255
Gross amount of goodwill, balance at the end of the period	1,164,058	1,029,431
Accumulated impairment loss, balance at the end of the period	(45,528)	(48,096)
Net amount of goodwill, balance at the end of the period	1,118,530	981,335
Russia
Change in net carrying value of goodwill by reportable segment
Gross amount of goodwill, balance at the beginning of the period	769,958	598,349
Accumulated impairment loss, balance at the beginning of the period	(48,096)	(48,466)
Net amount of goodwill, balance at the beginning of the period	721,862	549,883
Acquisitions (Note 3)	185,690	175,307
Finalization of purchase accounting	6,945
Currency translation adjustment	(46,988)	(3,328)
Gross amount of goodwill, balance at the end of the period	913,037	769,958
Accumulated impairment loss, balance at the end of the period	(45,528)	(48,096)
Net amount of goodwill, balance at the end of the period	867,509	721,862
Ukraine
Change in net carrying value of goodwill by reportable segment
Gross amount of goodwill, balance at the beginning of the period	5,327	5,311
Net amount of goodwill, balance at the beginning of the period	5,327	5,311
Currency translation adjustment	(19)	16
Gross amount of goodwill, balance at the end of the period	5,308	5,327
Net amount of goodwill, balance at the end of the period	5,308	5,327
Other
Change in net carrying value of goodwill by reportable segment
Gross amount of goodwill, balance at the beginning of the period	254,146	248,579
Net amount of goodwill, balance at the beginning of the period	254,146	248,579
Currency translation adjustment	(8,433)	5,567
Gross amount of goodwill, balance at the end of the period	245,713	254,146
Net amount of goodwill, balance at the end of the period	$ 245,713	$ 254,146

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CASH AND CASH EQUIVALENTS (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Cash and cash equivalents
Other	$ 144	$ 225
Total cash and cash equivalents	1,850,826	927,694	2,529,010	1,135,987
Ruble
Cash and cash equivalents
Current accounts	300,057	413,139
Deposit accounts	934,169	93,271
U.S. Dollar
Cash and cash equivalents
Current accounts	321,949	215,375
Deposit accounts	101,600	28,002
Euro
Cash and cash equivalents
Current accounts	25,770	17,142
Deposit accounts	2,600	11,288
Hryvna
Cash and cash equivalents
Current accounts	10,873	9,535
Deposit accounts		35,753
Uzbek som
Cash and cash equivalents
Current accounts	150,547	91,236
Turkmenian manat
Cash and cash equivalents
Current accounts	1,501	10,568
Armenian dram
Cash and cash equivalents
Current accounts	$ 1,616	$ 2,160

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ASSET RETIREMENT OBLIGATIONS

12 Months Ended

Dec. 31, 2011

ASSET RETIREMENT OBLIGATIONS

ASSET RETIREMENT OBLIGATIONS

17. ASSET RETIREMENT OBLIGATIONS

        As of December 31, 2011 and 2010, the estimated present value of the Group's asset retirement obligations and change in liabilities were as follows:

	2011			2010
Balance, beginning of the year	$	78,039		$	88,683
Liabilities incurred in the current period		9,009			4,066
Accretion expense		6,236			9,776
Revisions in estimated cash flows		(19,242	)		(23,813	)
Currency translation adjustment		(4,325	)		(673	)
Balance, end of the year	$	69,717		$	78,039

        Revisions in estimated cash flows are attributable to the change in the estimated inflation rate.

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INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Tables)

12 Months Ended

Dec. 31, 2011

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

Group's investments in and advances to associates

	December 31,
	2011		2010
MTS Belarus—equity investment	$	176,659	$	227,130
MTS Belarus—loan receivable		—		3,000
Intellect Telecom—equity investment		11,388		11,662
Total investments in and advances to associates	$	188,047	$	241,792

Schedule of financial position and results of operations of associates

The financial position and results of operations of MTS Belarus as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	417,555	$	527,609
Total liabilities		92,884		72,533
Net income		107,533		145,707

        Intellect Telecom—In November 2010 MGTS acquired a 43.8% interest in Intellect Telecom from one of the subsidiaries of Sistema for $12.4 million. Intellect Telecom is a research and development innovation center in the field of telecommunications. In March 2011 MGTS acquired a further 6.14% interest in Intellect Telecom in exchange for building of a business center in Moscow City with NBV of $0.8 million, thus increasing its share in Intellect Telecom to 49.95%.

        The financial position and results of operations of Intellect Telecom as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	19,210	$	25,227
Total liabilities		3,110		34,180
Net loss		6,765		6,831

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CASH AND CASH EQUIVALENTS (Tables)

12 Months Ended

Dec. 31, 2011

CASH AND CASH EQUIVALENTS

Schedule of components of cash and cash equivalents

	December 31,
	2011		2010
Ruble current accounts	$	300,057	$	413,139
Ruble deposit accounts		934,169		93,271
U.S. Dollar current accounts		321,949		215,375
U.S. Dollar deposit accounts		101,600		28,002
Euro current accounts		25,770		17,142
Euro deposit accounts		2,600		11,288
Hryvna current accounts		10,873		9,535
Hryvna deposit accounts		—		35,753
Uzbek som current accounts		150,547		91,236
Turkmenian manat current accounts		1,501		10,568
Armenian dram current accounts		1,616		2,160
Other		144		225
Total cash and cash equivalents	$	1,850,826	$	927,694

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PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	$ 13,497,943,000	$ 12,557,033,000
Accumulated depreciation (including leased assets $11.4 million and $5.6 million)	(7,023,556,000)	(6,196,117,000)
Property, plant and equipment, net	8,205,352,000	7,971,830,000
Capital lease
Leased assets, at cost	33,500,000	35,700,000
Accumulated depreciation	11,400,000	5,600,000
Depreciation expense	1,811,600,000	1,521,600,000	1,380,800,000
Depreciation of assets recorded under capital leases obligations	9,500,000	2,800,000	10,200,000
Interest expense accrued on capital lease obligations	1,800,000	500,000	1,500,000
Network, base station equipment and related leasehold improvements
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	11,419,352,000	10,631,101,000
Minimum life of property, plant and equipment (in months)	60
Maximum life of property, plant and equipment (in months)	204
Capital lease
Leased assets, at cost	1,200,000	1,200,000
Office equipment, computers and other
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	1,231,907,000	1,102,584,000
Minimum life of property, plant and equipment (in months)	36
Maximum life of property, plant and equipment (in months)	60
Buildings and related leasehold improvements
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	758,898,000	742,263,000
Minimum life of property, plant and equipment (in months)	240
Maximum life of property, plant and equipment (in months)	600
Capital lease
Leased assets, at cost	800,000	800,000
Vehicles
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	87,786,000	81,085,000
Minimum life of property, plant and equipment (in months)	36
Maximum life of property, plant and equipment (in months)	60
Capital lease
Leased assets, at cost	31,500,000	33,700,000
Construction in progress and equipment for installation
Net book value of property, plant and equipment
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)	$ 1,730,965,000	$ 1,610,914,000

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RELATED PARTIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Related parties
Accounts receivable, related parties	$ 4,488	$ 2,673
Accounts payable, related parties	56,982	52,984
Revenues from related parties	13,481	52,257	72,149
Operating expenses incurred on transactions with related parties	162,316	272,343	256,379
Sitronics, a subsidiary of Sistema
Related parties
Accounts receivable, related parties	2,736	1,320
Accounts payable, related parties	42,715	37,007
Revenues from related parties	4,218	3,577	3,656
Operating expenses incurred on transactions with related parties	48,023	56,610	52,211
Intellect Telecom
Related parties
Accounts receivable, related parties	359	117
Maxima, a subsidiary of Sistema
Related parties
Accounts payable, related parties	11,986	8,965
Other related parties
Related parties
Accounts receivable, related parties	1,393	1,236
Accounts payable, related parties	2,281	7,012
Revenues from related parties	2,743	4,827	3,997
Operating expenses incurred on transactions with related parties	10,792	15,584	15,705
MTS Belarus, an associated company of the Group
Related parties
Revenues from related parties	6,520	2,589
Operating expenses incurred on transactions with related parties	10,516	5,539
Svyazinvest and subsidiaries
Related parties
Revenues from related parties		33,869	43,174
Operating expenses incurred on transactions with related parties		29,210	28,997
Sky Link and subsidiaries
Related parties
Revenues from related parties		7,395	9,857
Mezhregion Tranzit Telecom
Related parties
Revenues from related parties			11,465
Operating expenses incurred on transactions with related parties			18,115
RA Maxima, a subsidiary of Sistema
Related parties
Operating expenses incurred on transactions with related parties	81,905	76,158	102,005
AB Safety, an affiliate of Sistema
Related parties
Operating expenses incurred on transactions with related parties	10,075	9,267	5,576
Mediaplanning, a subsidiary of Sistema
Related parties
Operating expenses incurred on transactions with related parties	1,005	59,171	23,782
Sistema-Invenchur
Related parties
Operating expenses incurred on transactions with related parties		11,262
Percentage of ownership acquired	100.00%
City Hals
Related parties
Operating expenses incurred on transactions with related parties		$ 9,542	$ 9,988

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2011

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions and Other Adjustments(1)			Balance at End of Period
	(in thousands)
Year Ended December 31, 2011
Allowance for doubtful accounts	$	120,468	$	101,967	$	(125,474	)	$	96,961
Valuation allowance for deferred tax assets		165,994		—		(2,919	)		163,075
Year Ended December 31, 2010
Allowance for doubtful accounts	$	97,653	$	123,352	$	(100,537	)	$	120,468
Valuation allowance for deferred tax assets		182,308		—		(16,314	)		165,994
Year Ended December 31, 2009
Allowance for doubtful accounts	$	69,603	$	105,260	$	(77,210	)	$	97,653
Valuation allowance for deferred tax assets		26,744		78,761		76,803			182,308

(1)

Includes the impact of foreign currency translation adjustments.

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BORROWINGS (Tables)

12 Months Ended

Dec. 31, 2011

BORROWINGS

Schedule of the Group's notes

	Currency	Interest rate			2011			2010
MTS International Notes due 2020	USD		8.625	%	$	750,000		$	750,000
MTS OJSC Notes due 2020	RUB		8.15	%		465,895			492,176
MTS OJSC Notes due 2016	RUB		14.25	%		465,895			492,176
MTS OJSC Notes due 2014	RUB		7.60	%		422,988			492,176
MTS Finance Notes due 2012(1)	USD		8.00	%		400,000			400,000
MTS OJSC Notes due 2017	RUB		8.70	%		310,597			328,117
MTS OJSC Notes due 2018	RUB		8.00	%		298,499			315,337
MTS OJSC Notes due 2015	RUB		7.75	%		234,097			39,823
MTS OJSC Notes due 2013	RUB		7.00	%		13,318			13,249
Plus: unamortized premium						608			—
Less: unamortized discount						(15	)		(202	)
Total notes					$	3,361,882		$	3,322,852
Less: current portion						(865,880	)		(492,176	)
Total notes, long-term					$	2,496,002		$	2,830,676

(1)

Fully repaid on January 25, 2012

Dates of announcement of the sequential coupon for notes

MTS OJSC Notes due 2016	June 2012
MTS OJSC Notes due 2018	June 2013
MTS OJSC Notes due 2020	November 2015

Fair value of notes based on market quotes at the stock exchanges where they are traded

	Stock exchange	% of par		Fair value
MTS International Notes due 2020	Irish stock exchange		107.33	$	804,975
MTS OJSC Notes due 2016	MICEX		103.60		482,667
MTS OJSC Notes due 2020	MICEX		96.90		451,452
MTS OJSC Notes due 2014	MICEX		97.55		412,625
MTS Finance Notes due 2012	Luxembourg stock exchange		100.50		402,000
MTS OJSC Notes due 2018	MICEX		101.50		303,019
MTS OJSC Notes due 2017	MICEX		96.15		298,639
MTS OJSC Notes due 2015	MICEX		97.50		228,245
MTS OJSC Notes due 2013	MICEX		95.00		12,652
Total notes				$	3,396,274

Schedule of the Group's loans from banks, financial institutions, and related parties

				December 31,
			Interest rate (actual at December 31, 2011)
	Maturity			2011			2010
USD-denominated:
Calyon, ING Bank N.V, Nordea Bank AB, Raiffeisen Zentralbank Osterreich AG		2012 - 2020	LIBOR+1.15% (1.96%)	$	580,742		$	—
Skandinavska Enskilda Banken AB		2012 - 2017	LIBOR+0.23% - 1.8% (1.03% - 2.61%)		204,507			242,013
EBRD		2012 - 2014	LIBOR+1.51% - 3.1% (2.32% - 3.91%)		83,333			116,667
HSBC Bank plc and ING BHF Bank AG		2012 - 2014	LIBOR+0.3% (1.11%)		51,503			71,244
Citibank International plc and ING Bank N.V.		2012 - 2013	LIBOR+0.43% (1.23%)		40,688			62,486
HSBC Bank plc, ING Bank and Bayerische Landesbank		2012 - 2015	LIBOR+0.3% (1.11%)		42,961			59,570
Commerzbank AG, ING Bank AG and HSBC Bank plc		2012 - 2014	LIBOR+0.3% (1.11%)		36,495			51,285
Barclays		Fully repaid in February 2011	—		—			46,047
ABN AMRO Bank N.V.		2012 - 2013	LIBOR+0.35% (1.16%)		12,574			18,861
Other		2012 - 2013	Various		9,356			7,569
				$	1,062,159		$	675,742
EUR-denominated:
Credit Agricole Corporate Bank and BNP Paribas		2012 - 2018	EURIBOR+1.65% (3.27%)	$	64,033		$	52,159
LBBW		2012 - 2017	EURIBOR+0.75% (2.37%)		36,215			43,201
Bank of China		2012 - 2016	EURIBOR+1.95% (3.57%)		116,812			35,123
ABN AMRO Bank N.V.		2012 - 2013	EURIBOR+0.35% (1.97%)		8,958			13,740
Other		2012 - 2013	Various		8,064			3,060
				$	234,082		$	147,283
RUB-denominated:
Sberbank		2015 - 2017	8.50%(1)	$	3,105,967		$	1,968,704
Bank of Moscow		2013	7.80%		434,835			459,364
Gazprombank		2013 - 2015	8.75%		341,656			360,929
Gazprombank		2013 - 2015	8.75%		130,451			137,809
Sberbank		2011	—		—			19,234
Other		2012 - 2023	Various		25,057			34,377
				$	4,037,966		$	2,980,417
Debt-related parties		2012	Various		6,799			14,563
				$	6,799		$	14,563
Total bank loans				$	5,341,006		$	3,818,005
Less: current portion					(283,025	)		(256,052	)
Total bank loans, long-term				$	5,057,981		$	3,561,953

(1)

Initially the interest rate on the Sberbank RUB-denominated credit facilities due 2015-2017 of 8.95% was valid till March 2011 and for the period from December 2013 till the final maturity date in December 2017. In August 2011 the interest rate for the period from December 2013 till the final maturity date in December 2017 was decreased by 0.45% to 8.5%. The interest rate for the period from March 2011 till August 16, 2011 depended on the volume of turnovers on the bank accounts of certain entities of the Group and in fact was 8.95%. The interest rate for the period starting from August 17, 2011 till December 2013 also depends on the volume of turnovers on the bank accounts of certain entities of the Group. In case the average volume falls below a certain limit, the interest rate is increased by 1% to 9.5%. In addition, Sberbank is entitled to voluntarily revise the interest rate on the lines as a result of and proportionate to the change in the refinancing rate set by the Central Bank of Russia.

Schedule of the Group's total available credit facilities

	Maturity	Interest rate	Commitment fees			Available till	Available amount
Calyon, ING Bank N.V. and Nordea Bank AB	2019/2020	LIBOR + 1.15%		0.40	%	December 2012	$	468,710
Credit Agricole (Finnvera)	2019	EURIBOR + 1.65%		0.825	%	June 2012/ February 2013		388,290
Sberbank	2014	MosPrime 3m+1.325%		0.10	%	September 2014		310,597
ING Bank Eurasia	2012	MosPrime/LIBOR/EURIBOR + 1.25%		—		July 2012		77,649
Gazprombank	2013	MosPrime + 1.425%		—		June 2013		76,096
Total available credit facilities							$	1,321,342

Aggregated scheduled maturities of principal on notes and bank loans

	Notes		Bank loans
Payments due in the year ended December 31,
2012	$	865,880	$	283,025
2013		311,817		785,015
2014		422,988		512,403
2015		700,600		1,266,546
2016		—		1,184,419
Thereafter		1,060,597		1,309,598
Total	$	3,361,882	$	5,341,006

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Details 4) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Sales and marketing expenses
Advertising costs	$ 305.2	$ 319.7	$ 321.0
Mobile subscribers | Minimum
Estimated average subscriber life
Estimated subscriber's life (in years)	1
Mobile subscribers | Maximum
Estimated average subscriber life
Estimated subscriber's life (in years)	5
Residential wireline voice phone subscribers
Estimated average subscriber life
Estimated subscriber's life (in years)	15
Residential subscribers of broadband internet service
Estimated average subscriber life
Estimated subscriber's life (in years)	1
Other fixed line subscribers | Minimum
Estimated average subscriber life
Estimated subscriber's life (in years)	3
Other fixed line subscribers | Maximum
Estimated average subscriber life
Estimated subscriber's life (in years)	5

XML

SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2011

SEGMENT INFORMATION

Financial information by reportable segment

	December 31,
	2011			2010			2009
Net operating revenues from external customers:
Russia	$	10,597,310		$	9,387,797		$	8,064,474
Ukraine		1,099,537			1,050,639			1,025,374
Other		621,841			854,800			777,405
Total net operating revenues from external customers:	$	12,318,688		$	11,293,236		$	9,867,253
Including revenue from mobile services		10,487,988			9,606,354			8,428,578
Including revenue from fixed line services		1,830,700			1,686,882			1,438,675
Intersegment operating revenues:
Russia	$	34,968		$	27,136		$	10,342
Ukraine		43,020			22,191			23,377
Other		21,189			9,572			10,138
Total intersegment operating revenues:	$	99,177		$	58,899		$	43,857
Depreciation and amortization expense:
Russia	$	1,752,022		$	1,418,727		$	1,305,556
Ukraine		344,709			354,154			352,037
Other		238,473			227,615			186,581
Total depreciation and amortization expense	$	2,335,204		$	2,000,496		$	1,844,174
Operating income:
Russia	$	2,774,422		$	2,673,617		$	2,353,380
Ukraine		203,609			144,473			120,248
Other		(168,572	)		(84,820	)		82,257
Intercompany eliminations		(574	)		1,289			—
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Currency exchange and transaction loss (gain)		158,066			(20,238	)		252,694
Interest income		(62,559	)		(84,396	)		(104,566	)
Interest expense		656,898			777,287			571,901
Change in fair value of derivatives		—			—			5,420
Impairment of investments		—			—			368,355
Equity in net income of associates		(49,443	)		(70,649	)		(60,313	)
Other expense, net		6,571			66,924			23,254
Income before provision for income taxes and noncontrolling interest	$	2,099,352		$	2,065,631		$	1,499,140

	2011		2010
Additions to long-lived assets:
Russia	$	2,330,163	$	2,538,926
Ukraine		140,354		117,548
Other		247,140		237,256
Total additions to long-lived assets	$	2,717,657	$	2,893,730
Long-lived assets(1):
Russia	$	8,617,536	$	8,207,457
Ukraine		915,292		1,130,459
Other		1,380,852		1,451,615
Total long-lived assets	$	10,913,680	$	10,789,531
Total assets:
Russia	$	12,420,073	$	11,358,159
Ukraine		1,244,543		1,454,415
Other		1,653,613		1,665,468
Total assets	$	15,318,229	$	14,478,042

(1)

Comprises property, plant and equipment, licenses, goodwill and other intangible assets.

XML

LICENSES (Tables)

12 Months Ended

Dec. 31, 2011

LICENSES

Recorded values of the Group's telecommunication licenses

	December 31,
	2011			2010
Russia	$	20,320		$	229,209
Uzbekistan		196,517			196,517
Armenia		192,186			203,993
Ukraine		49,494			49,414
Licenses, at cost		458,517			679,133
Accumulated amortization		(231,006	)		(384,405	)
Licenses, net	$	227,511		$	294,728

Estimated amortization expense

Estimated amortization expense in the year ended December 31,
2012	$	36,186
2013		31,016
2014		29,804
2015		29,797
2016		29,791
Thereafter		70,917
Total	$	227,511

XML

DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2011

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

1. DESCRIPTION OF BUSINESS

        Business of the Group—Open Joint-Stock Company Mobile TeleSystems ("MTS OJSC", or "the Company") was incorporated 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 then began expanding through Russia and the CIS.

        In these notes, "MTS" or the "Group" refers to Mobile TeleSystems OJSC and its subsidiaries.

        The Group provides a wide range of telecommunications services, including voice and data transmission, internet access, various value added services through wireless and fixed lines as well as selling equipment and accessories. The Group's principal operations are located in Russia, Ukraine, Uzbekistan and Armenia.

        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". Since 2003 common shares of MTS OJSC have been traded on the Open Joint Stock Company "MICEX-RTS" ("MICEX-RTS").

        In 2009, the Group started to expand its own retail network, operated by Russian Telephone Company CJSC ("RTC"), a wholly owned subsidiary of MTS OJSC. During 2009 and 2010 the Group, following this strategy, acquired a number of Russian federal and regional mobile retailer operators (Note 3).

        In 2009 through a series of transactions the Group acquired a 61.97% stake in Open Joint-Stock Company Comstar—United TeleSystems ("Comstar-UTS"), a provider of fixed line telecommunication services in Russia and the CIS, from Joint-Stock Financial Corporation Sistema ("Sistema"). The acquisition of Comstar-UTS provided access to important growth markets in commercial and residential broadband which gave rise to the development of convergent telecommunication services (Note 3).

XML

COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES

Future minimum lease payments due under operating lease

Payments due in the years ended December 31,
2012	$	249,334
2013		49,426
2014		36,639
2015		31,832
2016		28,439
Thereafter		74,525
Total	$	470,195

XML

SHORT-TERM INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2011

SHORT-TERM INVESTMENTS

Short-term investments

Short-term investments as of December 31, 2011 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	2.0 - 11.0%	January - October 2012	$	80,291
Belarusian ruble denominated deposits	26.0 - 37.0%	February - April 2012	$	5,933
Other				18
Total			$	86,242

        Short-term investments as of December 31, 2010 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	3.5 - 9.0%	January - July 2011	$	279,663
Funds in trust management	9.2%	June 2011		26,987
Promissory notes	5.5 - 7.0%	April - June 2011		26,701
Other				243
Total			$	333,594

XML

INCOME TAX

12 Months Ended

Dec. 31, 2011

INCOME TAX

INCOME TAX

21. INCOME TAX

        Provision for income taxes for the years ended December 31, 2011, 2010 and 2009 was as follows:

	Year ended December 31,
Income before income taxes	2011		2010			2009
Russia	$	1,807,154	$	1,817,583		$	1,220,730
Other jurisdictions		292,198		248,048			278,410
Total	$	2,099,352	$	2,065,631		$	1,499,140
Current income tax expense
Russia	$	448,729	$	456,424		$	304,231
Other jurisdictions		71,343		106,212			99,292
Total	$	520,072	$	562,636		$	403,523
Deferred income tax expense/(benefit)
Russia	$	1,606	$	(35,529	)	$	131,485
Other jurisdictions		9,942		(9,919	)		(29,961	)
Total	$	11,548	$	(45,448	)	$	101,524

        The statutory income tax rates in jurisdictions in which the Group operates for 2011 were as follows: Russia, Armenia—20.0%, Uzbekistan—3.4%. In the first quarter of 2011 the rate of 25% was applied in Ukraine, since April 1, 2011 the rate was decreased to 23%.

        The Russian statutory income tax rate reconciled to the Group's effective income tax rate for the years ended December 31, 2011, 2010 and 2009 as follows:

	2011			2010			2009
Statutory income tax rate for the year		20.0	%		20.0	%		20.0	%
Adjustments:
Expenses not deductible for tax purposes		2.8			3.5			4.9
Currency exchange and transaction loss		—			—			0.5
Unrecognized tax benefits		(0.2	)		0.1			(0.2	)
Settlements with tax authorities		(0.5	)		(1.0	)		(2.9	)
Different tax rate of foreign subsidiaries		(0.2	)		(0.5	)		(2.0	)
Earnings distribution from subsidiaries		2.9			0.7			6.8
Disposal of treasury stock		—			—			(4.1	)
Effect of change in tax rate in Ukraine		0.8			0.7			—
Change in valuation allowance		(0.2	)		(0.2	)		10.3
Comstar corporate reorganization		—			—			0.4
Impairment of long-lived assets		—			1.3			—
Other		(0.1	)		0.4			—
Effective income tax rate		25.3	%		25.0	%		33.7	%

        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, 2011 and 2010:

	December 31,
	2011			2010
Assets/(liabilities) arising from tax effect of:
Deferred tax assets
Depreciation of property, plant and equipment	$	140,371		$	211,307
Other intangible assets		—			1,346
Deferred connection fees		26,063			31,522
Subscriber prepayments		16,755			20,832
Accrued expenses for services		118,103			148,828
Inventory obsolescence		13,650			5,884
Loss carryforward		203,313			196,883
Impairment of property, plant and equipment		2,415			4,438
Other		29,352			22,384
Valuation allowance		(163,075	)		(165,994	)
Total deferred tax assets		386,947			477,430
Deferred tax liabilities
Licenses acquired	$	(35,377	)	$	(62,606	)
Depreciation of property, plant and equipment		(136,465	)		(192,679	)
Customer base		(39,272	)		(34,783	)
Other intangible assets		(42,435	)		(41,011	)
Debt issuance cost		(20,975	)		(11,134	)
Potential distributions from/to Group's subsidiaries/associates		(88,596	)		(105,821	)
Other		(31	)		(4,992	)
Total deferred tax liabilities		(363,151	)		(453,026	)
Net deferred tax asset		23,796			24,404
Net deferred tax asset, current	$	189,622		$	234,658
Net deferred tax asset, non-current	$	62,102		$	81,816
Net deferred tax liability, long-term	$	(227,928	)	$	(292,070	)

        The Group has the following significant balances for income tax losses carried forward and related operating losses as of December 31, 2011 and 2010:

			2011				2010
Jurisdiction	Period for carry-forward		Operating losses		Tax losses		Operating losses		Tax losses
Luxembourg (MGTS Finance S.A.)		Unlimited	$	431,461		125,124	$	429,186		124,464
Russia (Comstar-UTS, RTC and other)		2012-2021		390,945		78,189		362,096		72,419
Total			$	822,406		203,313	$	791,282		196,883

        Management established the following valuation allowances against deferred tax assets where it was more likely than not that some portion of such deferred tax assets will not be realized:

Valuation allowances	2011		2010
Sale of investment in Svyazinvest	$	66,596	$	66,887
Operating loss in Luxemburg (MGTS Finance S.A.)		94,692		94,032
Other		1,787		5,075
Total	$	163,075	$	165,994

        As of December 31, 2011 and 2010 the Group recognized deferred income tax liabilities of $52.5 million and $63.8 million respectively, for income taxes on future dividend distributions from foreign subsidiaries (MTS Ukraine and K-Telecom) which are based on $1,088.2 million and $1,309.4 million cumulative undistributed earnings of those foreign subsidiaries in accordance with local statutory accounting regulations (unaudited) because such earnings are intended to be repatriated.

        No deferred tax liability was recognized on undistributed earnings of Uzdunrobita as of December 31, 2011 and 2010 as the Group plans to indefinitely reinvest earnings in this entity. As of December 31, 2011 and 2010 the amount of undistributed earnings of Uzdunrobita in accordance with local statutory accounting regulations amounted to $647.8 million and $594.6 million, respectively (unaudited) and the related unrecognized deferred tax liability for these earnings in amounted to $117.0 million and $106.4 million respectively.

        As of December 31, 2011, 2010 and 2009, the Group included accruals for uncertain tax positions in the amount of $16.3 million, $14.0 million and $10.6 million, respectively, as a component of income tax payable.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2011			2010			2009
Balance, beginning of the year	$	13,993		$	10,607		$	12,360
Additions based on tax position related to the current year		9,149			14,590			2,094
Additions based on tax positions related to prior years		2,647			1,504			—
Additions based on tax of acquired entities		5,129			7,587			1,521
Reduction in tax positions related to prior years		(5,213	)		(2,141	)		(1,778	)
Settlements with tax authorities		(8,323	)		(18,109	)		(3,305	)
Currency translation adjustment		(1,044	)		(45	)		(285	)
Balance, end of the year	$	16,338		$	13,993		$	10,607

        Accrued penalties and interest related to unrecognized tax benefits as a component of income tax expense for the years ended December 31, 2011, 2010 and 2009 amounted to a charge of $0.1 million, charge of $3.3 million and reversal of ($0.6) million respectively, and are included in income tax expense in the accompanying consolidated statements of operations. Accrued interest and penalties were included in income tax payable in the accompanying consolidated statements of financial position and totaled $6.1 million and $3.3 million as of December 31, 2011 and 2010, respectively. The Group does not expect the unrecognized tax benefits to change significantly over the next twelve months.

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ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2011

ACCRUED LIABILITIES

ACCRUED LIABILITIES

20. ACCRUED LIABILITIES

	December 31,
	2011		2010
Accruals for services	$	308,457	$	365,447
Accruals for taxes		156,451		186,492
Accrued payroll and vacation		90,498		159,171
Interest payable on debt		90,125		76,804
Accruals for payments to social funds		8,339		11,890
Total accrued liabilities	$	653,870	$	799,804

XML

REDEEMABLE NONCONTROLLING INTEREST (Details)	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2011 International Cell Holding Ltd EUR (€)	Sep. 30, 2007 International Cell Holding Ltd	Sep. 30, 2007 K-Telecom
Redeemable noncontrolling interest
Percentage of ownership interest acquired				80.00%
Percentage of indirect ownership interest of parent					100.00%
Percentage of noncontrolling interest				20.00%
Cap price of option to acquire remaining 20% stake (in dollars)			€ 200,000,000
Fair value of redeemable noncontrolling interest (in dollars)	$ 80,603,000	$ 86,944,000

XML

ACCRUED LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2011

ACCRUED LIABILITIES

Schedule of components of accrued liabilities

	December 31,
	2011		2010
Accruals for services	$	308,457	$	365,447
Accruals for taxes		156,451		186,492
Accrued payroll and vacation		90,498		159,171
Interest payable on debt		90,125		76,804
Accruals for payments to social funds		8,339		11,890
Total accrued liabilities	$	653,870	$	799,804

XML

TRADE RECEIVABLES, NET (Tables)

12 Months Ended

Dec. 31, 2011

TRADE RECEIVABLES, NET

Schedule of net trade receivables

	December 31,
	2011			2010
Subscribers	$	351,786		$	384,903
Interconnect		112,751			120,948
Dealers		106,000			108,010
Roaming		283,830			224,687
Other		106,402			80,022
Allowance for doubtful accounts		(96,961	)		(120,468	)
Trade receivables, net	$	863,808		$	798,102

Schedule of changes in the allowance for doubtful accounts receivable

	2011			2010			2009
Balance, beginning of year	$	120,468		$	97,653		$	69,603
Provision for doubtful accounts		101,967			123,352			105,260
Accounts receivable written off		(120,673	)		(99,708	)		(76,622	)
Currency translation adjustment		(4,801	)		(829	)		(588	)
Balance, end of year	$	96,961		$	120,468		$	97,653

XML

RELATED PARTIES

12 Months Ended

Dec. 31, 2011

RELATED PARTIES

RELATED PARTIES

22. RELATED PARTIES

        Related parties include entities under common ownership and control with the Group, affiliated companies and associated companies.

        As of December 31, 2011 and 2010, accounts receivable from and accounts payable to related parties were as follows:

	December 31,
	2011		2010
Accounts receivable:
Sitronics, a subsidiary of Sistema	$	2,736	$	1,320
Intellect Telecom, a subsidiary of Sistema		359		117
Other related parties		1,393		1,236
Total accounts receivable, related parties	$	4,488	$	2,673
Accounts payable:
Sitronics, a subsidiary of Sistema	$	42,715	$	37,007
Maxima, a subsidiary of Sistema		11,986		8,965
Other related parties		2,281		7,012
Total accounts payable, related parties	$	56,982	$	52,984

Operating transactions

        For the years ended December 31, 2011, 2010 and 2009, operating transactions with related parties are as follows:

	2011		2010		2009
Revenues from related parties:
MTS Belarus (roaming services)	$	6,520	$	2,589	$	—
Sitronics and subsidiaries (fixed line services)	$	4,218	$	3,577	$	3,656
Svyazinvest and subsidiaries (interconnection, commission for provision of DLD/ILD services to the Group's subscribers and other)	$	—	$	33,869	$	43,174
Sky Link and subsidiaries (interconnection and other)		—		7,395		9,857
Mezhregion Tranzit Telecom (interconnection, line rental, commission for provision of DLD/ILD services to the Group's subscribers, and other)		—		—		11,465
Other related parties		2,743		4,827		3,997
Total revenues from related parties	$	13,481	$	52,257	$	72,149
Operating expenses incurred on transactions with related parties:
RA Maxima, a subsidiary of Sistema (advertising)	$	81,905	$	76,158	$	102,005
Sitronics, a subsidiary of Sistema (IT consulting)		48,023		56,610		52,211
MTS Belarus, an associated company of the Group		10,516		5,539		—
AB Safety, an affiliate of Sistema (security services)		10,075		9,267		5,576
Mediaplanning, a subsidiary of Sistema (advertising)		1,005		59,171		23,782
Svyazinvest and subsidiaries (interconnection and other)		—		29,210		28,997
Sistema-Invenchur, (consulting services related to the sale of Svyazinvest shares (Note 14))		—		11,262		—
City Hals (rent, repair, maintenance and cleaning services)		—		9,542		9,988
Mezhregion Tranzit Telecom (interconnection, line rental and other)		—		—		18,115
Other related parties		10,792		15,584		15,705
Total operating expenses incurred on transactions with related parties	$	162,316	$	272,343	$	256,379

        In December 2011 the Group acquired 100% of Sistema-Invenchur (see Note 3).

        During the year ended December 31, 2010 Sky Link, Sistema-Hals, City Hals, a subsidiary of Sistema-Hals, and Svyazinvest ceased to be related to the Group. Transactions with these companies and their subsidiaries which took place prior to the dates when they became unrelated are disclosed as transactions with related parties.

Investing and financing transactions

        During the years ended December 31, 2011 and 2010 the Group made certain investments in and loans to related parties. Respective balances are summarized as follows:

	December 31,
	2011		2010
Loans to, promissory notes and investments in shares of related parties:
Other investments (Note 15)
Sistema	$	19,209	$	24,455
Loan receivable from Mr Pierre Fattouche and Mr Moussa Fattouche		92,700		91,503
Total other investments to related parties	$	111,909	$	115,958
Investments in shares (Note 15)
MBRD, a subsidiary of Sistema		4,930		5,208
Sistema Mass Media, a subsidiary of Sistema		3,622		3,827
Other		946		728
Total investments in shares of related parties	$	9,498	$	9,763

        Moscow Bank of Reconstruction and Development ("MBRD")—The Group maintains certain bank accounts with MBRD, a subsidiary of Sistema, and had a number of loan and deposit agreements prior to the year ended December 31, 2011. As of December 31, 2011 and 2010, the Group's cash position at MBRD amounted to $311.5 million and $378.7 million in current accounts, respectively. Interest accrued on the deposits and cash on current accounts for the years ended December 31, 2011, 2010 and 2009, amounted to $14.9 million, $19.7 million and $25.1 million, respectively, and was included as a component of interest income in the accompanying consolidated statements of operations.

        Sistema—In November 2009, the Group accepted a promissory note from Sistema as repayment of a loan principle and interest accrued to date under the agreement with Sistema-Hals (Note 15). The note is interest free and is repayable in 2017. As of December 31, 2011 and 2010 the amount receivable of $19.2 and $20.3 million was included in other investments in the accompanying consolidated statement of financial position.

        In June 2010, the Group accepted a promissory note from Sistema in exchange for promissory note of Sky Link. The note was interest free and was repaid upon demand in the year ended December 31, 2011. As of December 31, 2011 and 2010 the amount receivable of $nil and $4.2 million was included in other investments in the accompanying consolidated statement of financial position.

        Investments in ordinary shares—As of December 31, 2011 and 2010 the Group had several investments in shares of subsidiaries and affiliates of Sistema totaling $9.5 million and $9.8 million, respectively, included in other investments in the accompanying consolidated statement of financial position. The main investments are 1.8% of MBRD and 3.14% of Sistema Mass-Media ("SMM"), subsidiaries of Sistema.

        Sky Link and subsidiaries—In 2009, Sky Link, an affiliate of Sistema, repaid the Group $14.3 million of outstanding indebtedness, which resulted in partial reversal of a provision for uncollectible loans recorded by the Group in 2007 and recognition of a gain of $4.3 million in the accompanying consolidated statement of operations for the year ended December 31, 2009. In the year ended December 31, 2010, Sky Link and its subsidiaries ceased to be related to the Group.

        Sitronics—During the years ended December 31, 2011, 2010 and 2009, the Group acquired from Sitronics and its subsidiaries telecommunications equipment, software and billing systems (FORIS) for approximately $503.2 million, $272.6 million and $190.1 million, respectively. In addition during the years ended December 31, 2011, 2010 and 2009, the Group purchased SIM cards and prepaid phone cards for approximately $79.5 million, $29.9 million and $32.4 million, respectively, and incurred expenses of $48.0 million, $56.6 million and $52.2 million, respectively, under an IT consulting agreement.

        As of December 31, 2011 and 2010 the advances given to Sitronics and its subsidiaries amounted to $57.6 million and $144.6 million, respectively. These amounts were included into property, plant and equipment and intangible assets in the accompanying consolidated statements of financial position.

        Maxima Advertising Agency ("Maxima")—During the years ended December 31, 2011, 2010 and 2009, the Group had agreements for advertising services with Maxima, a subsidiary of Sistema. Advertising costs related to Maxima for the years ended December 31, 2011, 2010 and 2009, amounted to $81.9 million, $76.2 million and $102.0 million, respectively.

        Mediaplanning—During the years ended December 31, 2011, 2010 and 2009, the Group 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, 2011, 2010 and 2009 amounted to $1.0 million, $59.2 million and $23.8 million, respectively. In the year ended December 31, 2011, the Group ceased its relationship with this contractor.

        Svyazinvest—The Group has entered into various agreements with Svyazinvest and its subsidiaries relating to the provision of interconnect and other services. In connection therewith, during the years ended December 31, 2010 and 2009, we incurred expenses of $29.2 million and $29.0 million, respectively, payable to Svyazinvest, and accrued revenues of $33.9 million and $43.2 million, respectively, from Svyazinvest. During the year ended December 31, 2010 Svyazinvest ceased to be related to the Group (Note 14).

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2011

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

23. STOCKHOLDERS' EQUITY

        Share capital—In April, 2011 as result of the issuance of additional MTS shares for the purposes of conversion of Comstar-UTS shares, the Company's charter capital increased by 73,087,424 ordinary shares to a total of 2,066,413,562 ordinary shares of which 1,988,916,837 were outstanding as of December 31, 2011. The Company' share capital comprises 1,993,326,138 issued common shares with 1,916,869,262 outstanding as of December 31, 2010.The total shares in treasury stock comprised 77,496,725 and 76,456,876 as of December 31, 2011 and 2010, respectively.

        Each ADS initially represented 20 shares of common stock of the Company. Effective January 2005, the ratio was changed to 1 ADS per 5 ordinary shares. Effective May 2010, the ratio was changed to 1 ADS per 2 ordinary shares.

        The Company initially issued a total of 17,262,204 ADSs (172,622,040 ADSs recalculated using the ratio effective May 2010), representing 345,244,080 common shares. As of December 31, 2011 the Group repurchased 13,599,067 ADSs.

        Noncontrolling interest—The Group's equity was affected by changes in the respective subsidiaries' ownership interests as follows:

	December 31,
	2011			2010			2009
Net income attributable to the Group	$	1,443,944		$	1,380,631		$	1,014,203
Transfers from the noncontrolling interest
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in Comstar-UTS		(41,377	)		(115,350	)		45,284
Increase in own equity resulted from exchange of MTS shares for noncontrolling interest in Comstar-UTS		429,409			—			—
Increase in own equity due to exercise of the put option on Comstar-UTS shares		11,636			—			—
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in MGTS		(272,840	)		—			269,281
Change in own equity due to acquisition of noncontrolling interest in TS-Retail		—			(15,932	)		—
(Decrease) in own equity due to acquisition of noncontrolling interest in Dagtelecom		—			—			(7,679	)
(Decrease) in own equity due to acquisition of noncontrolling interest in other subsidiaries		(738	)		(10,302	)		(487	)
Net transfers from the noncontrolling interest		126,090			(141,584	)		306,399
Net income attributable to the Group and transfers from the noncontrolling interest:	$	1,570,034		$	1,239,047		$	1,320,602

        Accumulated other comprehensive income—The following table represents accumulated other comprehensive income balance, net of taxes, for the years ended December 31, 2011, 2010 and 2009:

	Currency translation adjustment			Unrealized gains/loss on derivatives			Unrecognized actuarial losses			Accumulated other comprehensive income/loss
Balance as of January 1, 2009		(434,320	)		(16,714	)		5,262			(445,772	)
Current-period change		(280,074	)		(23,579	)		1,003			(302,650	)
Balance as of December 31, 2009		(714,394	)		(40,293	)		6,265			(748,422	)
Current-period change		(45,257	)		25,428			(3,706	)		(23,535	)
Balance as of December 31, 2010		(759,651	)		(14,865	)		2,559			(771,957	)
Current-period change		(205,339	)		7,364			5,940			(192,035	)
Balance as of December 31, 2011		(964,990	)		(7,501	)		8,499			(963,992	)

        Dividends—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 U.S. GAAP. The dividend can vary 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 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, 2011, 2010 and 2009 that is distributable under Russian legislation totaled RUB 54,675 million ($1,698.2 million) (unaudited), RUB 27,429 million ($903.2 million) and 33,480 million ($1,055.4 million), respectively.

        The following table summarizes the Group's declared cash dividends in the years ended December 31, 2011, 2010 and 2009:

	2011		2010		2009
Dividends declared (including dividends on treasury shares of $40,006, $35,063 and $45,631, respectively)	$	1,066,753	$	991,211	$	1,265,544
Dividends, U.S. Dollars per ADS(1)		1.03		0.99		3.2
Dividends, U.S. Dollars per share		0.516		0.497		0.647

(1)

In 2010 the ratio was changed from 5 to 2 common shares per ADS.

        As of December 31, 2011 and 2010, dividends payable were $0.2 million and $0.6 million, respectively.

        MGTS' preferred stock—MGTS, a subsidiary of Comstar-UTS, had 15,965,850 preferred shares outstanding at December 31, 2011. MGTS' preferred shares carry guaranteed non-cumulative dividend rights amounting to the higher of (a) 10% of MGTS' net profit as determined under Russian accounting regulations and (b) the dividends paid on common shares. No dividends may be declared on common shares before dividends on preferred shares are declared. If the preferred dividend is not paid in full in any year the preferred shares also obtain voting rights, which will lapse after the first payment of the dividend in full. Otherwise, preferred shares carry no voting rights except on resolutions regarding liquidation or reorganization of MGTS and changes/amendments to MGTS' charter restricting the rights of holders of preferred shares. Such resolutions require the approval of 75% of the preferred shareholders. In the event of liquidation, dividends to preferred shareholders that have been declared but not paid have priority over ordinary shareholders.

        In May 2011 MGTS' annual shareholders meeting approved dividends on ordinary and preferred shares totaling RUB 18 961.7 million (approximately $623.9 million) for 2010. In June 2010 MGTS' general shareholders meeting approved dividend on preferred shares totaling RUB 789.4 million (approximately $25.4 million) payment for 2009. As of December 31, 2011 and 2010, dividends payable were $2.1 million and $1.0 million, respectively.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,567,732	$ 1,548,443	$ 994,093
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,335,204	2,000,496	1,844,174
Currency exchange and transaction loss/(gain)	130,467	(98,706)	212,510
Impairment of investments			368,355
Impairment of long-lived assets	19,015	127,875	75,064
Debt issuance cost amortization	28,502	89,244	36,892
Amortization of deferred connection fees	(96,676)	(95,706)	(67,057)
Equity in net income of associates	(49,443)	(70,649)	(60,313)
Provision for doubtful accounts	111,307	122,550	110,766
Inventory obsolescence expense and other provisions	30,160	27,825	12,225
Deferred tax loss/(benefit)	11,548	(45,448)	101,524
Write-off of non-recoverable VAT receivable	4,535	2,534	9,652
Change in fair value of derivatives			5,420
Other non-cash items	(13,839)	57,021	6,265
Changes in operating assets and liabilities:
Increase in accounts receivable	(212,222)	(301,764)	(216,654)
Increase in inventory	(15,356)	(105,859)	(111,998)
(Increase)/decrease in prepaid expenses and other current assets	(37,715)	141,976	14,299
(Increase)/decrease in VAT receivable	(38,087)	(53,265)	8,914
Increase in trade accounts payable, accrued liabilities and other current liabilities	31,545	222,630	222,744
Dividends received	42,328	47,973	25,355
Net cash provided by operating activities	3,849,005	3,617,170	3,592,230
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired	(219,474)	(195,106)	(270,540)
Purchases of property, plant and equipment	(2,239,787)	(1,914,331)	(1,942,402)
Purchases of intangible assets	(344,679)	(732,786)	(385,907)
Proceeds from sale of property, plant and equipment and assets held for sale	22,554	6,790	28,606
Purchases of short-term investments	(522,969)	(672,286)	(513,933)
Proceeds from sale of short-term investments	787,957	577,623	649,483
Purchase of other investments	(51,694)	(109,448)	(613)
Proceeds from sale of shares in Svyazinvest		843,158
Proceeds from sales of other investments	7,485	15,989	44,003
Investments in and advances to/from associates	3,000	(2,900)	1,950
Decrease in restricted cash	2,568	1,670	17,182
Net cash used in investing activities	(2,555,039)	(2,181,627)	(2,372,171)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash payments for the acquisitions of subsidiaries from related parties and non-controlling interests (Note 3)	(864,081)	(739,756)	(1,345,820)
Contingent consideration paid on acquisition of subsidiaries	(13,532)
Proceeds from issuance of notes	228,333	1,560,028	1,003,226
Repurchase of common stock	(67)
Proceeds from issuance of common stock	13,442
Repayment of notes	(49,409)	(862,403)	(9,182)
Notes and debt issuance cost	(70,774)	(65,697)	(105,137)
Capital lease obligation principal paid	(9,348)	(12,841)	(15,592)
Dividends paid	(1,239,828)	(975,822)	(1,266,102)
Proceeds from loans	2,043,521	2,839,644	3,598,100
Loan principal paid	(308,565)	(4,779,595)	(1,728,544)
Net cash (used in)/provided by financing activities	(270,308)	(3,036,442)	130,949
Effect of exchange rate changes on cash and cash equivalents	(100,526)	(417)	42,015
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	923,132	(1,601,316)	1,393,023
CASH AND CASH EQUIVALENTS, beginning of the year	927,694	2,529,010	1,135,987
CASH AND CASH EQUIVALENTS, end of the year	1,850,826	927,694	2,529,010
SUPPLEMENTAL INFORMATION:
Income taxes paid	511,961	400,116	432,066
Interest paid	633,116	671,354	510,784
Non-cash investing and financing activities:
Contributed property, plant and equipment	6,110	2,814	3,213
Additions to network equipment and software under capital lease			830
Equipment acquired through vendor financing			27,983
Amounts owed for capital expenditures	229,064	180,528	236,364
Payable related to business acquisitions	$ 6,857	$ 23,281	$ 37,985

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REDEEMABLE NONCONTROLLING INTEREST

12 Months Ended

Dec. 31, 2011

REDEEMABLE NONCONTROLLING INTEREST

REDEEMABLE NONCONTROLLING INTEREST

24. REDEEMABLE NONCONTROLLING INTEREST

        In September 2007 the Group acquired an 80% stake in International Cell Holding Ltd, the 100% indirect owner of K-Telecom, Armenia's mobile phone operator, and signed a call and put option agreement to acquire the remaining 20% stake. In December 2010 the Group signed an amendment to the put and call option agreement. According to the amended option agreement, the price for the remaining 20% stake option will be determined by an independent investment bank subject to a cap of EUR 200 million. The put option can be exercised during the period from the next business day following the date of settlement of all liabilities under the loan agreement (Note 16) up to December 31, 2016. The call option can be exercised during the period from July 1, 2010 up to December 31, 2016. If both the call notice and the put notice are served on the same day then the put notice shall be deemed exercised in priority to the call notice. The noncontrolling interest was measured at fair value using a discounted cash flow technique and amounted to $80.6 million and $86.9 million as of December 31, 2011 and 2010 respectively. The fair value was determined based on unobservable inputs ("Level 3" of the hierarchy established by the U.S. GAAP guidance).

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BORROWINGS (Details 2) (USD $)	12 Months Ended					12 Months Ended			12 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended			12 Months Ended						12 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended						12 Months Ended													1 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011 EUR-Denominated Bank Loans	Dec. 31, 2010 EUR-Denominated Bank Loans	Dec. 31, 2011 EUR-Denominated, Credit Agricole Corporate Bank and BNP Paribas which will mature during 2012-2018	Dec. 31, 2010 EUR-Denominated, Credit Agricole Corporate Bank and BNP Paribas which will mature during 2012-2018	Dec. 31, 2011 EUR-Denominated, LBBW which will mature during 2012-2017	Dec. 31, 2010 EUR-Denominated, LBBW which will mature during 2012-2017	Dec. 31, 2011 EUR-Denominated, Bank of China which will mature during 2012-2016	Dec. 31, 2010 EUR-Denominated, Bank of China which will mature during 2012-2016	Dec. 31, 2011 EUR-Denominated, ABN AMRO Bank N.V. which will mature during 2012-2013	Dec. 31, 2010 EUR-Denominated, ABN AMRO Bank N.V. which will mature during 2012-2013	Dec. 31, 2011 EUR-Denominated, Other which will mature during 2012-2013	Dec. 31, 2010 EUR-Denominated, Other which will mature during 2012-2013	Dec. 31, 2011 RUB-Denominated Bank Loans	Dec. 31, 2010 RUB-Denominated Bank Loans	Dec. 31, 2011 Available credit facilities, Sberbank maturing in 2017	Dec. 31, 2010 Available credit facilities, Sberbank maturing in 2017	Dec. 31, 2011 RUB-Denominated, Bank of Moscow maturing in 2013	Dec. 31, 2010 RUB-Denominated, Bank of Moscow maturing in 2013	Dec. 31, 2011 RUB-Denominated, Gazprombank, first loan, maturing during 2013-2015	Dec. 31, 2010 RUB-Denominated, Gazprombank, first loan, maturing during 2013-2015	Dec. 31, 2011 RUB-Denominated, Gazprombank, second loan, maturing during 2013-2015	Dec. 31, 2010 RUB-Denominated, Gazprombank, second loan, maturing during 2013-2015	Dec. 31, 2010 RUB-Denominated, Sberbank which will mature during 2011	Dec. 31, 2011 RUB-Denominated, Other which will mature during 2012-2023	Dec. 31, 2010 RUB-Denominated, Other which will mature during 2012-2023	Dec. 31, 2011 Vendor financing agreement	Dec. 31, 2010 Vendor financing agreement	May 31, 2011 MTS OJSC Notes due 2014	Dec. 31, 2011 MTS OJSC Notes due 2014	Dec. 31, 2010 MTS OJSC Notes due 2014
Bank loans
Debt - related parties	$ 6,799,000	$ 14,563,000																																															$ 6,800,000	$ 14,300,000
Total bank loans	5,341,006,000	3,818,005,000		1,062,159,000	675,742,000	580,742,000	204,507,000	242,013,000	83,333,000	116,667,000	51,503,000	71,244,000	40,688,000	62,486,000	42,961,000	59,570,000	36,495,000	51,285,000	46,047,000	12,574,000	18,861,000	9,356,000	7,569,000	234,082,000	147,283,000	64,033,000	52,159,000	36,215,000	43,201,000	116,812,000	35,123,000	8,958,000	13,740,000	8,064,000	3,060,000	4,037,966,000	2,980,417,000	3,105,967,000	1,968,704,000	434,835,000	459,364,000	341,656,000	360,929,000	130,451,000	137,809,000	19,234,000	25,057,000	34,377,000
Less: current portion	(283,025,000)	(256,052,000)
Total bank loans, long-term	5,057,981,000	3,561,953,000
Interest rate, base rate						LIBOR	LIBOR		LIBOR		LIBOR		LIBOR		LIBOR		LIBOR			LIBOR						EURIBOR		EURIBOR		EURIBOR		EURIBOR
Interest rate added to base rate (as a percent)						1.15%					0.30%		0.43%		0.30%		0.30%			0.35%
Percentage points added to base rate, low end of range							0.23%		1.51%																	1.65%		0.75%		1.95%		0.35%
Percentage points added to base rate, high end of range							1.80%		3.10%
Effective interest rate, minimum (as a percent)							0.0103		0.0232
Effective interest rate, maximum (as a percent)							0.0261		0.0391
Interest rate (as a percent)						1.96%					1.11%		1.23%		1.11%		1.11%			1.16%						3.27%		2.37%		3.57%		1.97%						8.50%		7.80%		8.75%		8.75%								7.60%	16.75%
Percentage decrease in interest rate if the average volume of turnovers on the bank accounts of certain subsidiaries falls below a certain limit (as a percent)																																						0.45%
Percentage increase in interest rate if the average volume of turnovers on the bank accounts of certain subsidiaries falls below a certain limit																																						1.00%
Effective interest rate after revision if the average volume of turnovers on the bank accounts of certain subsidiaries falls below a certain limit (as a percent)																																						9.50%
Minimum percentage of change in present value of cash flows used to measure whether transaction is accounted for as a debt extinguishment (as a percent)	10.00%
Unamortized amount of initially capitalized debt issuance costs		26,700,000
Borrowing costs and interest capitalized
Capitalized interest cost	52,300,000	43,900,000	72,300,000
Interest expense, net of amounts capitalized and amortization of debt issuance costs	628,400,000	688,000,000	535,000,000
Pledges
Carrying value of telecommunication equipment and other assets supplied as collateral																																																	$ 2,000,000	$ 8,200,000
Stated interest rate before negotiated decrease (as a percent)																																																			16.75%

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BUSINESS ACQUISITIONS AND DISPOSALS (Tables)

12 Months Ended

Dec. 31, 2011

Business acquisitions

Pro forma financial data for the acquisitions of Inteleca, Infocentr, Altair and Teleradiokompania TVT

	2011		2010
Pro forma:
Net revenues	$	12,366,057	$	11,359,640
Net operating income		2,821,182		2,751,082
Net income		1,462,649		1,405,790
Earnings per share, basic and diluted, U.S. Dollars	$	0.74	$	0.73

Revenue and earnings of the companies acquired from third parties since the acquisition date included in the consolidated statement of operations

	2011 (unaudited)
Net revenues	$	22,539
Net operating loss		4,883
Net loss		3,353

Regional fixed line operators acquired in 2011

Business acquisitions

Purchase price allocation of acquisition

	Inteleca Group			Infocentr			Altair			TVT			Total
Month of acquisition		April			April			August			October
Region of operations		Sibir region			Ural region			Central region			Volga region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	853		$	2,840		$	3,172		$	7,623		$	14,488
Property, plant and equipment		10,812			2,585			3,739			31,664			48,800
Goodwill		10,662			14,711			12,726			147,591			185,690
Customer base		2,217			4,820			13,025			—			20,062
Other non-current assets		22			17			1,618			1,813			3,470
Current liabilities		(4,491	)		(8,547	)		(5,542	)		(25,510	)		(44,090	)
Non-current liabilities		(875	)		(989	)		(3,148	)		(638	)		(5,650	)
Consideration paid	$	19,200		$	15,437		$	25,590		$	162,543		$	222,770

Regional fixed line operators acquired in 2010

Business acquisitions

Purchase price allocation of acquisition

	Tenzor Telecom			Penza Telecom			NMSK			Lanck Telecom			Total
Month of acquisition		February			June			December			December
Region of operations		Central region			Volga region			Sibir region			North-West region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	711		$	1,076		$	2,575		$	1,634		$	5,996
Property, plant and equipment		2,191			2,407			10,625			10,618			25,841
Goodwill		6,616			7,394			14,113			11,119			39,242
Customer base		—			15,603			5,512			6,733			27,848
Other non-current assets		—			—			124			337			461
Current liabilities		(3,142	)		(4,369	)		(8,607	)		(10,936	)		(27,054	)
Non-current liabilities		(130	)		(2,779	)		(944	)		(1,684	)		(5,537	)
Consideration paid	$	6,246		$	19,332		$	23,398		$	17,821		$	66,797

Multiregion.

Business acquisitions

Purchase price allocation of acquisition

Current assets	$	46,776
Non-current assets		46,732
Customer base		76,376
Goodwill		148,743
Current liabilities		(126,780	)
Non-current liabilities		(44,007	)
Fair value of noncontrolling interests		(24,244	)
Consideration paid	$	123,596

Retail chains

Business acquisitions

Purchase price allocation of acquisition

	Telefon.ru			Eldorado			Teleforum			Total
Month of acquisition		February			March			October
Ownership interest acquired		100	%		100	%		100	%
Current assets	$	48,979		$	2,467		$	2,953		$	54,399
Non-current assets		2,315			911			745			3,971
Brand		—			374			—			374
Goodwill		123,333			29,875			9,050			162,258
Current liabilities		(108,701	)		(12,248	)		(3,614	)		(124,563	)
Non-current liabilities		(5,926	)		(115	)		—			(6,041	)
Fair value of contingent consideration		—			(3,414	)		(6,934	)		(10,348	)
Consideration paid	$	60,000		$	17,850		$	2,200		$	80,050

Evrotel

Business acquisitions

Purchase price allocation of acquisition

Current assets	$	14,300
Non-current assets		67,960
Customer base		4,726
Goodwill		98,542
Liabilities		(75,528	)
Fair value of contingent consideration		(20,000	)
Consideration paid	$	90,000

Kolorit Dizayn

Business acquisitions

Purchase price allocation of acquisition

Current assets	$	993
Non-current assets		11,788
Brand		2,097
Goodwill		27,109
Current liabilities		(2,098	)
Non-current liabilities		(235	)
Consideration paid	$	39,654

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ASSET RETIREMENT OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2011

ASSET RETIREMENT OBLIGATIONS

Estimated present value of the group's asset retirement obligations and change in liabilities

	2011			2010
Balance, beginning of the year	$	78,039		$	88,683
Liabilities incurred in the current period		9,009			4,066
Accretion expense		6,236			9,776
Revisions in estimated cash flows		(19,242	)		(23,813	)
Currency translation adjustment		(4,325	)		(673	)
Balance, end of the year	$	69,717		$	78,039

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SHORT-TERM INVESTMENTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Short-term investments
Short-term investments	$ 86,242	$ 333,594
Deposits
Short-term investments
Annual interest rate, lowest rate (as a percent)	2.00%	3.50%
Annual interest rate, highest rate (as a percent)	11.00%	9.00%
Short-term investments	80,291	279,663
Belarusian ruble denominated deposits
Short-term investments
Annual interest rate, lowest rate (as a percent)	26.00%
Annual interest rate, highest rate (as a percent)	37.00%
Short-term investments	5,933
Other'
Short-term investments
Short-term investments	18	243
Promissory notes
Short-term investments
Annual interest rate, lowest rate (as a percent)		5.50%
Annual interest rate, highest rate (as a percent)		7.00%
Short-term investments		26,701
Funds in trust management
Short-term investments
Annual interest rate (as a percent)		9.20%
Short-term investments		$ 26,987

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
CURRENT ASSETS:
Cash and cash equivalents (Note 5)	$ 1,850,826	$ 927,694
Short-term investments (Note 6)	86,242	333,594
Trade receivables, net (Note 7)	863,808	798,102
Accounts receivable, related parties (Note 22)	4,488	2,673
Inventory and spare parts (Note 8)	291,075	319,956
Prepaid expenses, including related party amounts of $3,031 and $26,722	234,730	232,352
Deferred tax assets (Note 21)	189,622	234,658
VAT receivable	191,039	164,761
Other current assets, including assets held for sale of $2,188 and $10,430	125,818	102,813
Total current assets	3,837,648	3,116,603
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $7,023,556 and $6,196,117 (Note 9), including advances given to related parties of $28,889 and $96,138	8,205,352	7,971,830
LICENSES, net of accumulated amortization of $231,006 and $384,405 (Notes 3 and 10)	227,511	294,728
GOODWILL (Notes 3 and 11)	1,118,530	981,335
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $1,537,088 and $1,516,949 (Notes 3 and 12), including prepayments to related parties of $28,742 and $48,425	1,362,287	1,541,638
DEBT ISSUANCE COSTS, net of accumulated amortization of $217,755 and $191,453	140,579	104,818
INVESTMENTS IN AND ADVANCES TO ASSOCIATES (Note 13)	188,047	241,792
OTHER INVESTMENTS, including related party amounts of $121,407 and $125,721 (Note 15)	123,442	128,582
OTHER NON-CURRENT ASSETS, including restricted cash of $2,152 and $4,719, deferred tax assets of $62,102 and $81,816 (Note 21)	114,833	96,716
Total assets	15,318,229	14,478,042
CURRENT LIABILITIES:
Accounts payable, related parties (Note 22)	56,982	52,984
Trade accounts payable	799,128	629,077
Subscriber prepayments and deposits	529,231	523,464
Debt, current portion (Note 16), including related party amounts of $6,799 and $7,558	283,025	256,052
Notes payable, current portion (Note 16)	865,880	492,176
Deferred connection fees, current portion (Note 18)	49,868	49,212
Capital lease obligation, current portion	6,786	8,882
Income tax payable	27,095	26,071
Accrued liabilities (Note 20)	653,870	799,804
Bitel liability (Note 27)	213,152	210,760
Other payables	79,818	106,659
Total current liabilities	3,564,835	3,155,141
LONG-TERM LIABILITIES:
Notes payable, net of current portion (Note 16)	2,496,002	2,830,676
Debt, net of current portion (Note 16), including related party amounts of $nil and $7,005	5,057,981	3,561,953
Capital lease obligation, net of current portion	5,529	10,873
Deferred connection fees, net of current portion (Note 18)	79,556	106,076
Deferred taxes (Note 21)	227,928	292,070
Retirement and post-retirement obligations	37,597	42,430
Property, plant and equipment contributions	86,072	88,859
Other long-term liabilities	111,503	146,217
Total long-term liabilities	8,102,168	7,079,154
Total liabilities	11,667,003	10,234,295
COMMITMENTS AND CONTINGENCIES (Note 27)
Redeemable noncontrolling interest (Note 24)	80,603	86,944
SHAREHOLDERS' EQUITY:
Common stock (2,096,975,792 shares with a par value of 0.1 rubles authorized and 2,066,413,562 shares issued as of December 31, 2011 and 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, 2010, 777,396,505 of which are in the form of ADS as of December 31, 2011 and 2010) (Note 23)	50,814	50,558
Treasury stock (77,496,725 and 76,456,876 common shares at cost as of December 31, 2011 and 2010)	(992,141)	(1,054,926)
Additional paid-in capital	92,720
Accumulated other comprehensive loss	(963,992)	(771,957)
Retained earnings	5,294,651	4,901,140
Nonredeemable noncontrolling interest	88,571	1,031,988
Total shareholders' equity	3,570,623	4,156,803
Total liabilities and shareholders' equity	$ 15,318,229	$ 14,478,042

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INVENTORY AND SPARE PARTS (Tables)

12 Months Ended

Dec. 31, 2011

INVENTORY AND SPARE PARTS

Schedule of inventory and spare parts

	December 31,
	2011		2010
Handsets and accessories	$	223,764	$	234,166
Spare parts for telecommunication equipment		28,533		34,687
SIM cards and prepaid phone cards		10,445		21,879
Advertising materials		1,320		2,011
Other materials		27,013		27,213
Total inventory and spare parts	$	291,075	$	319,956

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INCOME TAX (Details 3) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Significant balances for income tax losses carried forward
Operating losses	$ 822,406,000	$ 791,282,000
Tax losses	203,313,000	196,883,000
Valuation allowance
Sale of investment in Svyazinvest	66,596,000	66,887,000
Operating loss in Luxemburg (MGTS Finance S.A)	94,692,000	94,032,000
Other	1,787,000	5,075,000
Valuation allowances	163,075,000	165,994,000
Undistributed earning and uncertain tax positions
Deferred income tax liabilities for income taxes on future dividend distributions from foreign subsidiaries - MTS Ukraine and K-Telecom	52,500,000	63,800,000
Cumulative undistributed earnings of foreign subsidiaries (MTS Ukraine and K-Telecom)	1,088,200,000	1,309,400,000
Undistributed earnings of Uzdunrobita	647,800,000	594,600,000
Unrecognized deferred tax liability	117,000,000	106,400,000
Accruals for uncertain tax positions	16,300,000	14,000,000	10,600,000
Reconciliation of the beginning and ending amount of unrecognized tax benefits
Balance, beginning of the year	13,993,000	10,607,000	12,360,000
Additions based on tax position related to the current year	9,149,000	14,590,000	2,094,000
Additions based on tax positions related to prior years	2,647,000	1,504,000
Additions based on tax of acquired entities	5,129,000	7,587,000	1,521,000
Reduction in tax positions related to prior years	(5,213,000)	(2,141,000)	(1,778,000)
Settlements with tax authorities	(8,323,000)	(18,109,000)	(3,305,000)
Currency translation adjustment	(1,044,000)	(45,000)	(285,000)
Balance, end of the year	16,338,000	13,993,000	10,607,000
Penalties and interest related to unrecognized tax benefits
Accrued penalties and interest related to unrecognized tax benefits recognized in earnings	100,000	3,300,000	(600,000)
Accrued interest and penalties	6,100,000	3,300,000
Luxembourg (MGTS Finance S.A.)
Significant balances for income tax losses carried forward
Operating losses	431,461,000	429,186,000
Tax losses	125,124,000	124,464,000
Russia (Comstar-UTS, RTC and other)
Significant balances for income tax losses carried forward
Operating losses	390,945,000	362,096,000
Tax losses	$ 78,189,000	$ 72,419,000

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Total equity attributable to the Group	Common stock	Treasury stock	Additional paid-in capital	Accumulated other comprehensive (loss)	Retained earnings	Nonredeemable noncontrolling interest	Redeemable noncontrolling interest	Comprehensive income/(loss)
Balances at Dec. 31, 2008	$ 6,194,863	$ 4,880,079	$ 50,558	$ (1,426,753)	$ 1,077,107	$ (445,772)	$ 5,624,939	$ 1,314,784	$ 145,748
Balances (in shares) at Dec. 31, 2008			1,993,326,138	(108,273,338)
Comprehensive income/(loss):
Net income/(loss)	989,734	1,014,203					1,014,203	(24,469)	4,359	989,734
Currency translation adjustment, net of tax of $(13,988), $7,528 and $7,910 for 2011, 2010 and 2009, respectively	(226,297)	(196,819)				(196,819)		(29,478)	(4,399)	(226,297)
Change in fair value of derivatives, net of tax of $(1,841), $(6,357) and $5,895 for 2011, 2010 and 2009, respectively (Note 19)	(23,579)	(23,579)				(23,579)				(23,579)
Unrecognized actuarial gains (losses), net of tax of $nil for 2011, 2010 and 2009, respectively	2,811	1,003				1,003		1,808		2,811
Total comprehensive income/(loss)	742,669	794,808						(52,139)		742,669
Dividends declared MTS	(1,222,386)	(1,221,381)					(1,221,381)	(1,005)
Dividends Metro-Telecom	(4,602)	(4,371)					(4,371)	(231)
Accrued compensation costs	1,173	1,173			1,173
Acquisition of Comstar-UTS	(1,322,258)	(1,322,258)			(1,066,145)		(256,113)
Legal acquisition of Stream-TV (Note 3)	(3,043)	(1,573)			(1,616)	43		(1,470)
Dividends to noncontrolling interest									(12,503)
Change in fair value of noncontrolling interest of K-Telecom	7,495	7,495					7,495		(7,495)
Effect of acquisition of Sistema Telecom	(12,402)	(12,402)					(12,402)
Increase in ownership in subsidiaries (Note 3)	(15,798)	223,102		371,827	(10,519)	(83,298)	(54,908)	(238,900)	(43,449)
Increase in ownership in subsidiaries (Note 3) (in shares)				31,816,462
Balances at Dec. 31, 2009	4,365,711	3,344,672	50,558	(1,054,926)		(748,422)	5,097,462	1,021,039	82,261
Balances (in shares) at Dec. 31, 2009			1,993,326,138	(76,456,876)
Comprehensive income/(loss):
Net income/(loss)	1,541,845	1,380,631					1,380,631	161,214	6,598	1,541,845
Currency translation adjustment, net of tax of $(13,988), $7,528 and $7,910 for 2011, 2010 and 2009, respectively	(53,605)	(45,257)				(45,257)		(8,348)	940	(53,605)
Change in fair value of derivatives, net of tax of $(1,841), $(6,357) and $5,895 for 2011, 2010 and 2009, respectively (Note 19)	25,428	25,428				25,428				25,428
Unrecognized actuarial gains (losses), net of tax of $nil for 2011, 2010 and 2009, respectively	(7,151)	(3,706)				(3,706)		(3,445)		(7,151)
Total comprehensive income/(loss)	1,506,517	1,357,096						149,421		1,506,517
Dividends declared MTS	(964,744)	(953,192)					(953,192)	(11,552)	(14,973)
Dividends Metro-Telecom	(11,115)	(11,115)					(11,115)
Gain on transfer of asset from Sistema	4,066	2,603					2,603	1,463
Accrued compensation costs	614	614					614
Change in fair value of noncontrolling interest of K-Telecom	(12,118)	(12,118)					(12,118)		12,118
Acquisition of Metro-Telecom	(11,070)	(11,070)					(11,070)
Effect of acquisition of Sistema Telecom	(439,455)	(439,455)					(439,455)
Acquisition of Multiregion	24,244							24,244
Recognition of put option in Comstar-UTS	(11,636)	(11,636)					(11,636)
Increase in ownership in subsidiaries (Note 3)	(294,211)	(141,584)					(141,584)	(152,627)
Balances at Dec. 31, 2010	4,156,803	3,124,815	50,558	(1,054,926)		(771,957)	4,901,140	1,031,988	86,944
Balances (in shares) at Dec. 31, 2010			1,993,326,138	(76,456,876)
Comprehensive income/(loss):
Net income/(loss)	1,560,488	1,443,944					1,443,944	116,544	7,244	1,560,488
Currency translation adjustment, net of tax of $(13,988), $7,528 and $7,910 for 2011, 2010 and 2009, respectively	(106,503)	(137,290)				(137,290)		30,787	(1,789)	(106,503)
Change in fair value of derivatives, net of tax of $(1,841), $(6,357) and $5,895 for 2011, 2010 and 2009, respectively (Note 19)	7,364	7,364				7,364				7,364
Unrecognized actuarial gains (losses), net of tax of $nil for 2011, 2010 and 2009, respectively	6,404	5,940				5,940		464		6,404
Total comprehensive income/(loss)	1,467,753	1,319,958						147,795		1,467,753
Dividends declared MTS	(1,026,747)	(1,026,747)					(1,026,747)
Dividends to noncontrolling interest	(203,273)							(203,273)	(5,741)
Change in fair value of noncontrolling interest of K-Telecom	6,055	6,055					6,055		(6,055)
Acquisition of own stock	(70)	(70)		(70)
Acquisition of own stock (in shares)				(8,000)
Exercise of put option in Comstar-UTS	11,636	11,636					11,636
Comstar-UTS merger (Note 3)	10,947	404,764	256	62,855	366,298	(24,645)		(393,817)
Comstar-UTS merger (Note 3) (in shares)	73,087,424		73,087,424	(1,031,849)
Acquisition of noncontrolling interest in Comstar-UTS	(165,477)	(46,137)				(4,760)	(41,377)	(119,340)
Acquisition of noncontrolling interest in MGTS (Note 3)	(667,814)	(311,484)			(272,840)	(38,644)		(356,330)
Increase in ownership in subsidiaries (Note 3)	(19,190)	(738)			(738)			(18,452)
Balances at Dec. 31, 2011	$ 3,570,623	$ 3,482,052	$ 50,814	$ (992,141)	$ 92,720	$ (963,992)	$ 5,294,651	$ 88,571	$ 80,603
Balances (in shares) at Dec. 31, 2011			2,066,413,562	(77,496,725)

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INCOME TAX (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended					3 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2011 Russia	Dec. 31, 2011 Armenia	Mar. 31, 2011 Ukraine	Dec. 31, 2011 Ukraine	Dec. 31, 2011 Uzbekistan
Income before income taxes
Russia	$ 1,807,154	$ 1,817,583	$ 1,220,730
Other jurisdictions	292,198	248,048	278,410
Income before provision for income taxes and noncontrolling interests	2,099,352	2,065,631	1,499,140
Current income tax expense
Russia	448,729	456,424	304,231
Other jurisdictions	71,343	106,212	99,292
Current provision for income taxes	520,072	562,636	403,523
Deferred income tax expense/(benefit)
Russia	1,606	(35,529)	131,485
Other jurisdictions	9,942	(9,919)	(29,961)
Deferred income tax expense/(benefit)	$ 11,548	$ (45,448)	$ 101,524
Statutory income tax rates
Statutory income tax rates (as a percent)	20.00%	20.00%	20.00%	20.00%	20.00%	25.00%	23.00%	3.40%

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2011

STOCKHOLDERS' EQUITY

Changes in the Group's equity resulting from changes in the respective subsidiaries' ownership interests

	December 31,
	2011			2010			2009
Net income attributable to the Group	$	1,443,944		$	1,380,631		$	1,014,203
Transfers from the noncontrolling interest
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in Comstar-UTS		(41,377	)		(115,350	)		45,284
Increase in own equity resulted from exchange of MTS shares for noncontrolling interest in Comstar-UTS		429,409			—			—
Increase in own equity due to exercise of the put option on Comstar-UTS shares		11,636			—			—
(Decrease)/Increase in own equity due to acquisition of noncontrolling interest in MGTS		(272,840	)		—			269,281
Change in own equity due to acquisition of noncontrolling interest in TS-Retail		—			(15,932	)		—
(Decrease) in own equity due to acquisition of noncontrolling interest in Dagtelecom		—			—			(7,679	)
(Decrease) in own equity due to acquisition of noncontrolling interest in other subsidiaries		(738	)		(10,302	)		(487	)
Net transfers from the noncontrolling interest		126,090			(141,584	)		306,399
Net income attributable to the Group and transfers from the noncontrolling interest:	$	1,570,034		$	1,239,047		$	1,320,602

Schedule of accumulated other comprehensive income balance, net of taxes

	Currency translation adjustment			Unrealized gains/loss on derivatives			Unrecognized actuarial losses			Accumulated other comprehensive income/loss
Balance as of January 1, 2009		(434,320	)		(16,714	)		5,262			(445,772	)
Current-period change		(280,074	)		(23,579	)		1,003			(302,650	)
Balance as of December 31, 2009		(714,394	)		(40,293	)		6,265			(748,422	)
Current-period change		(45,257	)		25,428			(3,706	)		(23,535	)
Balance as of December 31, 2010		(759,651	)		(14,865	)		2,559			(771,957	)
Current-period change		(205,339	)		7,364			5,940			(192,035	)
Balance as of December 31, 2011		(964,990	)		(7,501	)		8,499			(963,992	)

Schedule of the Group's declared cash dividends

	2011		2010		2009
Dividends declared (including dividends on treasury shares of $40,006, $35,063 and $45,631, respectively)	$	1,066,753	$	991,211	$	1,265,544
Dividends, U.S. Dollars per ADS(1)		1.03		0.99		3.2
Dividends, U.S. Dollars per share		0.516		0.497		0.647

(1)

In 2010 the ratio was changed from 5 to 2 common shares per ADS.

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STOCKHOLDERS' EQUITY (Details)	12 Months Ended									12 Months Ended															1 Months Ended				12 Months Ended			12 Months Ended
	Dec. 31, 2011 USD ($)	Dec. 31, 2011 RUB	Dec. 31, 2010 USD ($)	Dec. 31, 2010 RUB	Dec. 31, 2009 USD ($)	Dec. 31, 2009 RUB	May 31, 2010	Jan. 31, 2005	Dec. 31, 2000	Dec. 31, 2011 Accumulated other comprehensive (loss) USD ($)	Dec. 31, 2010 Accumulated other comprehensive (loss) USD ($)	Dec. 31, 2009 Accumulated other comprehensive (loss) USD ($)	Dec. 31, 2011 Currency translation adjustment USD ($)	Dec. 31, 2010 Currency translation adjustment USD ($)	Dec. 31, 2009 Currency translation adjustment USD ($)	Dec. 31, 2011 Unrealized gains/loss on derivatives USD ($)	Dec. 31, 2010 Unrealized gains/loss on derivatives USD ($)	Dec. 31, 2009 Unrealized gains/loss on derivatives USD ($)	Dec. 31, 2011 Unrecognized actuarial losses USD ($)	Dec. 31, 2010 Unrecognized actuarial losses USD ($)	Dec. 31, 2009 Unrecognized actuarial losses USD ($)	Dec. 31, 2011 Comstar-UTS USD ($)	Dec. 31, 2010 Comstar-UTS USD ($)	Dec. 31, 2009 Comstar-UTS USD ($)	May 31, 2011 MGTS USD ($)	May 31, 2011 MGTS RUB	Jun. 30, 2010 MGTS USD ($)	Jun. 30, 2010 MGTS RUB	Dec. 31, 2011 MGTS USD ($)	Dec. 31, 2009 MGTS USD ($)	Dec. 31, 2010 MGTS USD ($)	Dec. 31, 2010 TS-Retail USD ($)	Dec. 31, 2009 Dagtelecom acquisition USD ($)	Dec. 31, 2011 Other subsidiaries USD ($)	Dec. 31, 2010 Other subsidiaries USD ($)	Dec. 31, 2009 Other subsidiaries USD ($)
Share capital
Increase in charter capital (in shares)	73,087,424	73,087,424
Shares issued	2,066,413,562	2,066,413,562	1,993,326,138	1,993,326,138
Shares issued									345,244,080
Outstanding common shares excluding treasury shares	1,988,916,837	1,988,916,837	1,916,869,262	1,916,869,262
Shares in treasury stock	77,496,725	77,496,725	76,456,876	76,456,876
Number of shares per ADS (in shares)							2	5	20
Number of ADSs initially issued by the entity including ADSs that were issued and repurchased (in shares)									17,262,204
Number of ADSs initially issued as recalculated under the current depository receipt ratio (in shares)									172,622,040
Number of ADSs that have been repurchased (in shares)	13,599,067	13,599,067
Noncontrolling interest
Net income attributable to the Group	$ 1,443,944,000		$ 1,380,631,000		$ 1,014,203,000
Transfers from the noncontrolling interest
(Decrease)/increase in own equity due to acquisition of noncontrolling interest																						(41,377,000)	(115,350,000)	45,284,000					(272,840,000)	269,281,000		(15,932,000)	(7,679,000)	(738,000)	(10,302,000)	(487,000)
Increase in own equity resulted from exchange of MTS shares for noncontrolling interest																						429,409,000
Increase in own equity due to exercise of put option	11,636,000																					11,636,000
Net transfers from the noncontrolling interest	126,090,000		(141,584,000)		306,399,000
Net income attributable to the Group and transfers from the noncontrolling interest:	1,570,034,000		1,239,047,000		1,320,602,000
Accumulated other comprehensive income, net of tax
Balance at beginning of period	(771,957,000)									(771,957,000)	(748,422,000)	(445,772,000)	(759,651,000)	(714,394,000)	(434,320,000)	(14,865,000)	(40,293,000)	(16,714,000)	2,559,000	6,265,000	5,262,000
Current-period change										(192,035,000)	(23,535,000)	(302,650,000)	(205,339,000)	(45,257,000)	(280,074,000)	7,364,000	25,428,000	(23,579,000)	5,940,000	(3,706,000)	1,003,000
Balance at end of period	(963,992,000)		(771,957,000)							(963,992,000)	(771,957,000)	(748,422,000)	(964,990,000)	(759,651,000)	(714,394,000)	(7,501,000)	(14,865,000)	(40,293,000)	8,499,000	2,559,000	6,265,000
Dividends
Dividend policy, minimum annual payments as a percentage of net income under U.S. GAAP	50.00%	50.00%
Net income available for distribution as calculated under Russian statutory accounting regulations	1,698,200,000	54,675,000,000	903,200,000	27,429,000,000	1,055,400,000	33,480,000,000
Declared cash dividends
Dividends declared (including dividends on treasury shares of $40,006, $35,063 and $45,631, respectively)	1,066,753,000		991,211,000		1,265,544,000
Dividends declared on treasury shares	40,006,000		35,063,000		45,631,000
Dividends, U.S. Dollars per ADS (in dollars per unit)	$ 1.03		$ 0.99		$ 3.2
Dividends, U.S. Dollars per share (in dollars per unit)	$ 0.516		$ 0.497		$ 0.647
Dividends payable	200,000		600,000																										2,100,000		1,000,000
MGTS' preferred stock
Preferred shares outstanding (in shares)																													15,965,850
Percentage of net income as determined under Russian accounting regulations used in determining the guaranteed non-cumulative dividend rights on preferred shares																													10.00%
Percentage of preferred shareholders required for approval																													75.00%
Dividend on preferred shares																									$ 623,900,000	18,961,700,000	$ 25,400,000	789,400,000

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

27. COMMITMENTS AND CONTINGENCIES

        Capital commitments—As of December 31, 2011, the Group had executed purchase agreements of approximately $560.3 million to acquire property, plant and equipment, 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 1.5 million iPhone handsets at list prices at the dates of respective purchases over a three year period. Pursuant to the agreement the Group was also required to incur certain iPhone promotion costs. As of December 31, 2011 the Group made 28.6% of its total purchase installment contemplated by the agreement. The total amount paid for handsets purchased under the agreement for the years ended December 31, 2011, 2010 and 2009 amounted to $140.8 million, $79.4 million and $3.4 million, respectively.

        Operating leases—The Group has entered into non-cancellable agreements to lease space for telecommunications equipment, offices and transmission channels, which expire in various years up to 2060. Rental expenses under the operating leases of $389.1 million, $338.3 million and $278.5 million for the years ended December 31, 2011, 2010 and 2009, respectively, are included in operating expenses in the accompanying consolidated statements of operations. Rental expenses under the operating leases of $232.0 million, $182.4 million and $168.7 million for the years ended December 31, 2011, 2010 and 2009, respectively, are included in cost of services in the accompanying consolidated statements of operations. Future minimum lease payments due under these leases for the five years ending December 31, 2016 and thereafter are as follows:

Payments due in the years ended December 31,
2012	$	249,334
2013		49,426
2014		36,639
2015		31,832
2016		28,439
Thereafter		74,525
Total	$	470,195

        Taxation—Russia and the CIS countries 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 and the CIS countries that are more significant than those typically found in countries with more developed tax systems.

        Generally, according to Russian and Ukrainian tax legislation, tax declarations remain open and subject to inspection for a period of three years following the tax year. As of December 31, 2011, tax declarations of MTS OJSC and other subsidiaries in Russia and Ukraine for the preceding three fiscal years were open for further review.

        In October 2009, the Russian tax authorities completed the tax audit of Sibintertelecom for the years ended December 31, 2006, 2007 and 2008. Based on the results of this audit, the Russian tax authorities assessed RUB 174.5 million ($5.8 million as of December 31, 2009) in additional taxes, penalties and fines. The Group won an appeal in the court of original jurisdiction, which recognized the tax authorities' resolution to be invalid. In February 2011 an arbitration appellate court confirmed the decision of the court of original jurisdiction.

        In December 2010 the Russian tax authorities completed the tax audit of MTS OJSC for the years ended December 31, 2007 and 2008. Based on the results of this audit, the Russian tax authorities assessed RUB 353.9 million ($11.0 million as of December 31, 2011) in additional taxes, penalties and fines were payable by the Group. The resolution did not come into force as the Group prepared and filed a petition with the Federal Tax Service to declare the tax authorities' resolution to be invalid. In September 2011 the Federal Tax Service partially satisfied the Group's petition, decreasing the amount of additional taxes, penalties and fines payable by the Group by RUB 173.9 million ($5.4 million as of December 31, 2011). The Group filed an appeal for RUB 84.2 million ($2.6 million as of December 31, 2011) of the remaining RUB 180.0 million ($5.6 million as of December 31, 2011) with the Moscow Arbitrate Court. A hearing is scheduled for March 12, 2012.

        In February 2012, the Russian tax authorities completed tax audit of MGTS for the years ended December 31, 2007 and 2008. Based on the results of their audit, the Russian tax authorities assessed RUB 258.1 million ($8.0 million as of December 31, 2011) in additional taxes, penalties and fines are payable by the Group. In February 2012 MGTS appealed the tax authorities' decision with the Federal Tax Service.

        The Group purchases supplemental software from foreign suppliers of telecommunications equipment in the ordinary course of business. The Group's management believes that customs duties are calculated in compliance with applicable legislation. However there is a risk that the customs authorities may take a different view and impose additional customs duties. As of December 31, 2011 and 2010, 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 the Group's subscribers in the course of performing its marketing activities might be 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, 2011 and 2010, no provision was recorded in the consolidated financial statements in respect of such additional claims.

        Management believes that it has adequately provided for tax and customs liabilities in the accompanying consolidated financial statements. As of December 31, 2011 and 2010, the provision accrued amounted to $7.1 million and $10.0 million, respectively. In addition, the accrual for unrecognized income tax benefits, potential penalties and interest recorded in accordance with the authoritative guidance on income taxes totaled $16.3 million and $14.0 million as of December 31, 2011 and 2010, respectively. However, the risk remains that the relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant.

        3G license—In May 2007, the Federal Service for Supervision in the Area of Communications and Mass Media awarded MTS a license to provide 3G services in the Russian Federation. The 3G license was granted subject to certain capital and other commitments. The major conditions are that the Group will have to build a certain number of base stations that support 3G standards, will have to start providing services in the Russian Federation by a certain date, and will have to build a certain number of base stations by the end of the third, fourth and fifth years from the date of granting the license. Management believes that as of December 31, 2011 the Group is in compliance with these conditions.

        Bitel—In December 2005, 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 of Kyrgyzstan 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 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 sought specific performance of the put option, unspecified monetary damages, interest, and costs. In January 2011 the London Court of International Arbitration made an award in favor of Nomihold satisfying Nomihold's specific performance request and ordered MTS Finance to pay to Nomihold $170.0 million for the Option Shares, $5.9 million in damages and $34.9 million in interest and other costs—all representing in total approximately $210.8 million ("Award"). An amount of the Award is bearing an interest until Award is satisfied. In addition to the $170.0 million liability related to this case and accrued in the year ended December 31, 2006, the Group recorded an additional loss in amount of $40.8 million and $3.2 million in the consolidated financial statements for the year ended December 31, 2010 and 2011, respectively, representing interest accrued on the awarded sums.

        On January 26, 2011, Nomihold obtained a freezing order in respect of the Award from the English High Court of Justice which, in part, restricts MTS Finance from dissipating its assets. Additionally, MTS Finance has been granted permission to appeal the Award, but the Court has imposed conditions upon the appeal. MTS Finance is currently seeking to have the conditions lifted.

        Further on February 1, 2011, Nomihold obtained an order of the Luxemburg District Court enforcing the Award in Luxembourg. This order is in the process of being appealed.

        As an issuer of US $400,000,000 2012 Notes pursuant to an Indenture dated January 28, 2005 (as amended) ("the Notes"), MTS Finance was due to redeem the principal of the Notes and pay the final coupon payment on January 30, 2012. However as a result of the freezing order, the Company applied to and obtained from the English Court an order authorizing both payments to be made by the Company on behalf of MTS Finance ("the Direct Payments"). The Direct Payments to noteholders by the trustee under the Indenture were made on or around January 28, 2012.

        The Direct Payments were made despite an obligation under an intercompany loan agreement dated January 28, 2005 between the Company and MTS Finance ("the Intercompany Loan Agreement") to process the payments through MTS Finance. However because MTS Finance was subject to a freezing order and not capable of transferring out the money to the trustee for distribution, and because the Company owed obligations to the noteholders as guarantor under the Indenture, the Company decided to make the Direct Payments to the noteholders pursuant to an order of the English Court.

        In relation to the obligations under the Intercompany Loan Agreement, the Company and MTS Finance have agreed to refer to arbitration the question of whether under the Intercompany Loan Agreement itself there remains an obligation to make any further payments to MTS Finance in light of the Direct Payment. On February 9, 2012, the Company received a request for arbitration from MTS Finance. The process is underway and will clarify the rights between the parties under the Intercompany Loan Agreement. The Company denies that any further payments are due under the Intercompany Loan Agreement. The arbitration will be conducted under the Rules of the London Court of International Arbitration and it is expected to last between 6 and 12 months.

        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. Bitel's Isle of Man advocates have recently withdrawn from their representation of Bitel, and Bitel does not appear to be pursuing these claims.

        In January 2007. the KFG Companies asserted counterclaims against Bitel, and claims against other defendants, including Altimo LLC ("Altimo"), Altimo Holdings & Investments Limited ("Altimo Holdings"), CP-Crédit Privé SA and Fellowes International Holdings Limited, for the wrongful misappropriation and seizure of Bitel. The defendants sought to challenge the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies.

        On March 10, 2011, the Judicial Committee of the UK Privy Council ruled in favor of the KFG Companies and confirmed the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies against various defendants, including Sky Mobile, Altimo and Altimo Holdings, for the wrongful misappropriation and seizure of Kyrgyz telecom operator Bitel and its assets.

        On June 30, 2011, the KFG Companies obtained from the Isle of Man court a general asset freezing injunction over the assets of Altimo and Altimo Holdings. The general freezing injunction against Altimo Holdings was replaced on November 30, 2011 by a specific freezing injunction over (i) Altimo Holding's interest in its Dutch subsidiary, Altimo Coöperatief U.A., and (ii) VimpelCom common shares worth $500 million that Altimo Coöperatief U.A. has lodged with the Isle of Man court. The KFG Companies are proceeding with their counterclaims in the Isle of Man. A trial has been set to commence in May 2013.

        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. The tribunal is currently deciding whether to stay the damages phase of the LCIA proceedings pending conclusion of the Isle of Man proceedings. The Group is not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

        Other litigation—In the ordinary course of business, the Group is a party to various legal, tax and customs proceedings, and subject to claims, certain of which relate to developing markets and evolving fiscal and regulatory environments in which MTS operates. Management believes that 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 the Group.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Details 2)	12 Months Ended
	Dec. 31, 2011 Y M
Cash and cash equivalents
Maximum term of original maturity to classify an instrument as cash equivalent (in months)	3
Short-term investments and loans
Minimum term of original maturity to classify an instrument as short-term investment (in months)	3
Maximum term of original maturity to classify an instrument as short-term investment (in months)	12
Property, plant and equipment
Minimum useful life of property, plant and equipment required for capitalization at historical cost (in years)	1

XML

INVESTMENT IN SHARES OF SVYAZINVEST

12 Months Ended

Dec. 31, 2011

INVESTMENT IN SHARES OF SVYAZINVEST

INVESTMENT IN SHARES OF SVYAZINVEST

14. INVESTMENT IN SHARES OF SVYAZINVEST

        In December 2006, as a part of its program of regional expansion, the Group acquired a 25% stake plus one share in Telecommunication Investment Joint Stock Company ("Svyazinvest") from Mustcom Limited for a total consideration of approximately $1,390.0 million, including cash of $1,300.0 million and the fair value of a call and put option of $90.0 million. Svyazinvest is a holding company that holds controlling stakes in seven publicly traded incumbent fixed-line operators ("MRKs") based in all seven Federal districts of Russia, Rostelecom, a publicly traded long-distance fixed-line operator operating a Russia-wide network, and several other entities, the majority of which are non-public.

        Based on an analysis of all relevant factors, management determined that the acquisition of 25% plus one share of Svyazinvest does not allow the Group to exercise significant influence over this entity due to its legal structure and certain limitations imposed by Svyazinvest's charter documents. Accordingly, the Group accounted for its investment in Svyazinvest under the cost method.

        In November 2009, the Group, Sistema and Svyazinvest ("the Parties") signed a non-binding memorandum of understanding ("MOU"), under which the Parties agreed to enter into a series of transactions which would ultimately result in (i) disposal of the Group's investment in Svyazinvest to a state-controlled enterprise; (ii) noncash extinguishment of the Group's indebtedness to Sberbank (Note 16); (iii) increase in Sistema's ownership in Sky Link to 100% (Note 22) and disposal of this investment to Svyazinvest; and (iv) disposal of 28% of MGTS' common stock owned by Svyazinvest to Sistema.

        Based on the estimated fair values of the elements of the assets to be exchanged and liabilities to be extinguished under the MOU and other relevant factors, management conducted an impairment analysis of the Group's investment in Svyazinvest as of December 31, 2009. Based on the MOU, the estimated fair value of the investment, which included significant unobservable inputs (Level 3 of the hierarchy established by the U.S. GAAP guidance), was approximately RUB 26.0 billion ($859.7 million as of December 31, 2009) compared to a carrying value of RUB 36.5 billion ($1,205.5 million as of December 31, 2009). As a result, during the year ended December 31, 2009 the Group recorded an impairment loss of RUB 10.5 billion ($349.4 million).

        In September 2010, the Group completed the sale of its Svyazinvest stake for cash consideration of RUB 26.0 billion and repaid the outstanding debt to Sberbank in the amount of RUB 26.0 billion with proceeds from the sale. In connection with the sale of the 25% plus one share stake in Svyazinvest the Group incurred consultancy fees due to Sistema-Invenchure, a subsidiary of Sistema, in the amount of RUB 291.2 million ($9.6 million at September 2010 average rate). No gain or loss was recognized upon sale.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2011

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

28. SUBSEQUENT EVENTS

        On February 28, 2012, subsequent to the statement of financial position date, the Group voluntarily repaid the full amount due under credit facilities of Gazprombank with an original maturity in 2013-2015. The amount repaid totaled to $472.1 million (stated at December 31, 2011 exchange rate).

        On March 16, 2012, subsequent to the statement of financial position date, the Group voluntarily repaid $310.6 million from $434.8 million outstanding under credit facility of Bank of Moscow with the original maturity in 2013 (both amounts are stated at December 31, 2011 exchange rate).

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RELATED PARTIES (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Investing and financing transactions
Other investments to related parties	$ 111,909,000	$ 115,958,000
Investment in shares of subsidiaries and affiliates of Sistema	9,498,000	9,763,000
Cash position	1,850,826,000	927,694,000	2,529,010,000	1,135,987,000
Deposit accounts	86,242,000	333,594,000
Loans payable	5,057,981,000	3,561,953,000
Incurred expenses	162,316,000	272,343,000	256,379,000
Advertising costs	305,200,000	319,700,000	321,000,000
Moscow Bank of Reconstruction and Development ("MBRD")
Investing and financing transactions
Investment in shares of subsidiaries and affiliates of Sistema	4,930,000	5,208,000
Cash position	311,500,000	378,700,000
Interest accrued on the deposits and cash on current accounts	14,900,000	19,700,000	25,100,000
Equity interest owned (as a percent)	1.80%
Sistema
Investing and financing transactions
Other investments to related parties	19,209,000	24,455,000
Sistema | Promissory notes 2009
Investing and financing transactions
Notes and loans receivable	19,200,000	20,300,000
Sistema | Promissory notes 2010
Investing and financing transactions
Notes and loans receivable		4,200,000
Mr. P. Fattouche and Mr. M. Fattouche
Investing and financing transactions
Other investments to related parties	92,700,000	91,503,000
Other related parties
Investing and financing transactions
Investment in shares of subsidiaries and affiliates of Sistema	946,000	728,000
Incurred expenses	10,792,000	15,584,000	15,705,000
Sky Link and subsidiaries
Investing and financing transactions
Repaid outstanding indebtedness			14,300,000
Gain on partial reversal of provision for uncollectible loans			4,300,000
Sitronics, a subsidiary of Sistema
Investing and financing transactions
Incurred expenses	48,023,000	56,610,000	52,211,000
Purchases of telecommunications equipment, software and billing systems (FORIS)	503,200,000	272,600,000	190,100,000
Purchases of SIM cards and prepaid phone cards	79,500,000	29,900,000	32,400,000
Incurred expenses under an IT consulting agreement	48,000,000	56,600,000	52,200,000
Advances to related parties	57,600,000	144,600,000
Maxima, a subsidiary of Sistema
Investing and financing transactions
Advertising costs	81,900,000	76,200,000	102,000,000
Mediaplanning, a subsidiary of Sistema
Investing and financing transactions
Incurred expenses	1,005,000	59,171,000	23,782,000
Advertising costs	1,000,000	59,200,000	23,800,000
Svyazinvest
Investing and financing transactions
Incurred expenses		29,200,000	29,000,000
Accrued revenues		$ 33,900,000	$ 43,200,000

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BORROWINGS

12 Months Ended

Dec. 31, 2011

BORROWINGS

BORROWINGS

16. BORROWINGS

        Notes—As of December 31, 2011 and 2010, the Group's notes consisted of the following:

	Currency	Interest rate			2011			2010
MTS International Notes due 2020	USD		8.625	%	$	750,000		$	750,000
MTS OJSC Notes due 2020	RUB		8.15	%		465,895			492,176
MTS OJSC Notes due 2016	RUB		14.25	%		465,895			492,176
MTS OJSC Notes due 2014	RUB		7.60	%		422,988			492,176
MTS Finance Notes due 2012(1)	USD		8.00	%		400,000			400,000
MTS OJSC Notes due 2017	RUB		8.70	%		310,597			328,117
MTS OJSC Notes due 2018	RUB		8.00	%		298,499			315,337
MTS OJSC Notes due 2015	RUB		7.75	%		234,097			39,823
MTS OJSC Notes due 2013	RUB		7.00	%		13,318			13,249
Plus: unamortized premium						608			—
Less: unamortized discount						(15	)		(202	)
Total notes					$	3,361,882		$	3,322,852
Less: current portion						(865,880	)		(492,176	)
Total notes, long-term					$	2,496,002		$	2,830,676

(1)

Fully repaid on January 25, 2012

        The Group has an unconditional obligation to repurchase certain MTS OJSC Notes at par value if claimed by the noteholders subsequent to the announcement of the sequential coupon. The dates of the announcement for each particular note issue are as follows:

MTS OJSC Notes due 2016	June 2012
MTS OJSC Notes due 2018	June 2013
MTS OJSC Notes due 2020	November 2015

        The notes therefore can be defined as callable obligations under the FASB authoritative guidance on debt, as the holders have the unilateral right to demand repurchase of the notes at par value upon announcement of new coupons. The FASB authoritative guidance on debt 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 noteholders. The Group discloses the notes as maturing in 2012 (MTS OJSC Notes due 2016), in 2013 (MTS OJSC Notes due 2018) and in 2015 (MTS OJSC Notes due 2020) in the aggregated maturities schedule as these are the reporting periods when the noteholders will have the unilateral right to demand repurchase.

        In May 2011 the Group changed the coupon rate for MTS OJSC Notes due 2014 from 16.75% to 7.6%. Following the announcement of new coupon rates the Group repurchased MTS OJSC Notes due 2014 at the request of eligible noteholders in the amount of RUB 1.1 billion ($39.3 million as of the date of the transaction). The new coupon rate is valid till the final due dates of the notes.

        The fair values of notes based on the market quotes as of December 31, 2011 at the stock exchanges where they are traded were as follows:

	Stock exchange	% of par		Fair value
MTS International Notes due 2020	Irish stock exchange		107.33	$	804,975
MTS OJSC Notes due 2016	MICEX		103.60		482,667
MTS OJSC Notes due 2020	MICEX		96.90		451,452
MTS OJSC Notes due 2014	MICEX		97.55		412,625
MTS Finance Notes due 2012	Luxembourg stock exchange		100.50		402,000
MTS OJSC Notes due 2018	MICEX		101.50		303,019
MTS OJSC Notes due 2017	MICEX		96.15		298,639
MTS OJSC Notes due 2015	MICEX		97.50		228,245
MTS OJSC Notes due 2013	MICEX		95.00		12,652
Total notes				$	3,396,274

        Bank loans—As of December 31, 2011 and 2010, the Group's loans from banks and financial institutions consisted of the following:

				December 31,
			Interest rate (actual at December 31, 2011)
	Maturity			2011			2010
USD-denominated:
Calyon, ING Bank N.V, Nordea Bank AB, Raiffeisen Zentralbank Osterreich AG		2012 - 2020	LIBOR+1.15% (1.96%)	$	580,742		$	—
Skandinavska Enskilda Banken AB		2012 - 2017	LIBOR+0.23% - 1.8% (1.03% - 2.61%)		204,507			242,013
EBRD		2012 - 2014	LIBOR+1.51% - 3.1% (2.32% - 3.91%)		83,333			116,667
HSBC Bank plc and ING BHF Bank AG		2012 - 2014	LIBOR+0.3% (1.11%)		51,503			71,244
Citibank International plc and ING Bank N.V.		2012 - 2013	LIBOR+0.43% (1.23%)		40,688			62,486
HSBC Bank plc, ING Bank and Bayerische Landesbank		2012 - 2015	LIBOR+0.3% (1.11%)		42,961			59,570
Commerzbank AG, ING Bank AG and HSBC Bank plc		2012 - 2014	LIBOR+0.3% (1.11%)		36,495			51,285
Barclays		Fully repaid in February 2011	—		—			46,047
ABN AMRO Bank N.V.		2012 - 2013	LIBOR+0.35% (1.16%)		12,574			18,861
Other		2012 - 2013	Various		9,356			7,569
				$	1,062,159		$	675,742
EUR-denominated:
Credit Agricole Corporate Bank and BNP Paribas		2012 - 2018	EURIBOR+1.65% (3.27%)	$	64,033		$	52,159
LBBW		2012 - 2017	EURIBOR+0.75% (2.37%)		36,215			43,201
Bank of China		2012 - 2016	EURIBOR+1.95% (3.57%)		116,812			35,123
ABN AMRO Bank N.V.		2012 - 2013	EURIBOR+0.35% (1.97%)		8,958			13,740
Other		2012 - 2013	Various		8,064			3,060
				$	234,082		$	147,283
RUB-denominated:
Sberbank		2015 - 2017	8.50%(1)	$	3,105,967		$	1,968,704
Bank of Moscow		2013	7.80%		434,835			459,364
Gazprombank		2013 - 2015	8.75%		341,656			360,929
Gazprombank		2013 - 2015	8.75%		130,451			137,809
Sberbank		2011	—		—			19,234
Other		2012 - 2023	Various		25,057			34,377
				$	4,037,966		$	2,980,417
Debt-related parties		2012	Various		6,799			14,563
				$	6,799		$	14,563
Total bank loans				$	5,341,006		$	3,818,005
Less: current portion					(283,025	)		(256,052	)
Total bank loans, long-term				$	5,057,981		$	3,561,953

(1)

Initially the interest rate on the Sberbank RUB-denominated credit facilities due 2015-2017 of 8.95% was valid till March 2011 and for the period from December 2013 till the final maturity date in December 2017. In August 2011 the interest rate for the period from December 2013 till the final maturity date in December 2017 was decreased by 0.45% to 8.5%. The interest rate for the period from March 2011 till August 16, 2011 depended on the volume of turnovers on the bank accounts of certain entities of the Group and in fact was 8.95%. The interest rate for the period starting from August 17, 2011 till December 2013 also depends on the volume of turnovers on the bank accounts of certain entities of the Group. In case the average volume falls below a certain limit, the interest rate is increased by 1% to 9.5%. In addition, Sberbank is entitled to voluntarily revise the interest rate on the lines as a result of and proportionate to the change in the refinancing rate set by the Central Bank of Russia.

        During 2010 and 2011, the Group renegotiated interest rates and maturities schedules for its several credit facilities. The amendments to the agreements, which resulted in the change in the present value of cash flows under the new terms to the present value of cash flows under the original terms exceeding 10%, were treated as substantial modifications of debt with the immediate write off of the related debt issuance costs capitalized by the Group. In 2010 the Group suffered an additional loss of $26.7 million as a result of substantial debt modification. None of the amendments to the credit facilities agreements of the Group signed in 2011 were considered to be substantial.

        Borrowing costs and interest capitalized—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 estimated useful lives of the related assets. The capitalized interest costs for the years ended December 31, 2011, 2010 and 2009 were $52.3 million, $43.9 million and $72.3 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, 2011, 2010 and 2009, were $628.4 million, $688.0 million and $535.0 million, respectively.

        Compliance with covenants—Subject to certain exceptions and qualifications, the indenture governing MTS Finance Notes due 2012 and prospectus governing MTS International Notes due 2020 contain covenants limiting the Group's ability to incur debt, create liens, sell or transfer lease properties, enter into loan transactions with affiliates, merge or consolidate with another person or convey its properties and assets to another person, sell or transfer any of its GSM licenses for the Moscow, St. Petersburg, Krasnodar and Ukraine license areas, be subject to a judgment requiring payment of money in excess of $10.0 million and $15.0 million, respectively, which continue unsatisfied for more than 60 days without being appealed, discharged or waived or the execution thereof stayed.

        Also, the indentures governing MTS Finance Notes due 2012 and prospectus governing MTS International Notes due 2020 give noteholders the right to require the Group to redeem the notes at 101% of their principal amount, plus accrued interest, if the Group experiences certain types of mergers, consolidations or there is change in control. An event of default under the notes may trigger cross default provisions with debt raised by Sistema, the controlling shareholder of the Group. The Group is required to take all commercially reasonable steps necessary to maintain a rating of the notes assigned by Moody's and Standard & Poor's.

        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.

        The prospectus governing MTS OJSC Notes contains certain covenants which limit the Group's ability to delist the notes from the quotation lists and delay the coupon payments.

        Bank loans of the Group 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, requirements to maintain ownership in certain subsidiaries.

        Most of the Group's loans also include an event of default consisting in rendering of judgment requiring payment of money in an amount in excess of $10.0 million and the continuance of any such judgment unsatisfied and in effect for any period of 60 consecutive calendar days without a stay of execution.

        On November 11, 2010 an international arbitration tribunal constituted under the rules of the London Court of International Arbitration rendered an award with regards to arbitration commenced by Nomihold Securities Inc. in January 2007. The award requires the Group's subsidiary, MTS Finance, to honor Nomihold's option to sell MTS Finance the remaining 49% stake in Tarino Limited for $170 million, plus $5.88 million in damages and $34.0 million in interest to compensate it for related costs. MTS Finance applied to arbitration tribunal for correction of the award, however the application was rejected and the award became final on January 5, 2011. In connection with the above mentioned restriction concerning the unsatisfied liability arising from any judgment against a member of the Group, prior to the date these consolidated financial statements were issued, the Group obtained consents from the noteholders of MTS Finance Notes due 2012 and MTS International Notes due 2020 and from certain banks, except for Barclays Bank (which was fully repaid in February 2011), to (1) waive certain defaults and events of default which might arise under the loan agreements as a result of and in connection with the award, and (2) certain amendments to the loan agreements to avoid possible future events of default which may arise as a result of the award.

        The Group was in compliance with all existing notes and bank loans covenants as of December 31, 2011.

        Pledges—The vendor financing agreement between K-Telecom and Intracom, a related party, with total amount as of December 31, 2011 and 2010 of $6.8 million and $14.3 million, respectively is secured by the telecommunication equipment and other assets supplied under the agreement with carrying value of $2.0 million and $8.2 million, respectively.

        Available credit facilities—As of December 31, 2011, the Group's total available unused credit facilities amounted to $1,321 million and related to the following credit lines:

	Maturity	Interest rate	Commitment fees			Available till	Available amount
Calyon, ING Bank N.V. and Nordea Bank AB	2019/2020	LIBOR + 1.15%		0.40	%	December 2012	$	468,710
Credit Agricole (Finnvera)	2019	EURIBOR + 1.65%		0.825	%	June 2012/ February 2013		388,290
Sberbank	2014	MosPrime 3m+1.325%		0.10	%	September 2014		310,597
ING Bank Eurasia	2012	MosPrime/LIBOR/EURIBOR + 1.25%		—		July 2012		77,649
Gazprombank	2013	MosPrime + 1.425%		—		June 2013		76,096
Total available credit facilities							$	1,321,342

        The following table presents the aggregated scheduled maturities of principal on notes and bank loans outstanding for the five years ending December 31, 2016 and thereafter:

	Notes		Bank loans
Payments due in the year ended December 31,
2012	$	865,880	$	283,025
2013		311,817		785,015
2014		422,988		512,403
2015		700,600		1,266,546
2016		—		1,184,419
Thereafter		1,060,597		1,309,598
Total	$	3,361,882	$	5,341,006

        On February 28, 2012, subsequent to the statement of financial position date, the Group voluntarilly repaid the full amount due under credit facilities of Gazprombank drawn by MTS OJSC in December 2009 and December 2010 with an original maturity in 2013-2015. In the maturity schedule presented above, the principal outstanding as of December 31, 2011 under these facilities and totaling $472.1 million is included in payments due in the years ended December 31, 2013, 2014 and 2015 in the amounts of $78.7 million, $314.7 million and $78.7 million, respectively, in accordance with their original maturity.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Details 5) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Stock-based compensation
Compensation cost recognized related to phantom stock options granted	$ 16.0	$ 7.8	$ (0.3)
Russia
Retirement benefit and social security costs
Social contribution expensed	200.0	127.6	96.3
Ukraine
Retirement benefit and social security costs
Payments to the pension fund	$ 62.1	$ 70.5	$ 64.9

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Currency translation adjustment, tax	$ (13,988)	$ 7,528	$ 7,910
Change in fair value of derivatives, tax	$ (1,841)	$ (6,357)	$ 5,895

XML

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011 USD ($)	Dec. 31, 2011 RUB	Dec. 31, 2010 USD ($)	Dec. 31, 2010 RUB
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Prepaid expenses, related party	$ 3,031		$ 26,722
Other current assets, assets held for sale	2,188		10,430
PROPERTY, PLANT AND EQUIPMENT, accumulated depreciation	7,023,556		6,196,117
PROPERTY, PLANT AND EQUIPMENT, advances given to related parties	28,889		96,138
LICENSES, accumulated amortization	231,006		384,405
OTHER INTANGIBLE ASSETS, accumulated amortization	1,537,088		1,516,949
OTHER INTANGIBLE ASSETS, prepayments to related parties	28,742		48,425
DEBT ISSUANCE COSTS, accumulated amortization	217,755		191,453
OTHER INVESTMENTS, related party	121,407		125,721
OTHER NON-CURRENT ASSETS, restricted cash	2,152		4,719
OTHER NON-CURRENT ASSETS, deferred tax assets	62,102		81,816
Debt, current portion, related party	6,799		7,558
Debt, net of current portion, related party			$ 7,005
Common stock, shares authorized (in shares)	2,096,975,792	2,096,975,792	2,096,975,792	2,096,975,792
Common stock, par value (in rubles per share)		0.1		0.1
Common stock, shares issued (in shares)	2,066,413,562	2,066,413,562	1,993,326,138	1,993,326,138
Common stock, in the form of ADS (in shares)	777,396,505	777,396,505	777,396,505	777,396,505
Treasury stock, common shares at cost (in shares)	77,496,725	77,496,725	76,456,876	76,456,876

XML

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2011

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

9. PROPERTY, PLANT AND EQUIPMENT

        The net book value of property, plant and equipment as of December 31, 2011 and 2010, was as follows:

		December 31,
	Useful lives, months
		2011			2010
Network, base station equipment and related leasehold improvements (including leased assets of $1.2 million and $1.2 million)	60 - 204	$	11,419,352		$	10,631,101
Office equipment, computers and other	36 - 60		1,231,907			1,102,584
Buildings and related leasehold improvements (including leased assets of $0.8 million and $0.8 million)	240 - 600		758,898			742,263
Vehicles (including leased assets of $31.5 million and $33.7 million)	36 - 60		87,786			81,085
Property, plant and equipment, at cost (including leased assets of $33.5 million and $35.7 million)			13,497,943			12,557,033
Accumulated depreciation (including leased assets of $11.4 million and $5.6 million)			(7,023,556	)		(6,196,117	)
Construction in progress and equipment for installation			1,730,965			1,610,914
Property, plant and equipment, net		$	8,205,352		$	7,971,830

        Depreciation expense during the years ended December 31, 2011, 2010 and 2009, amounted to $1,811.6 million, $1,521.6 million and $1,380.8 million, respectively.

        Depreciation of the assets recorded as capital leases amounted to $9.5 million, $2.8 million and $10.2 million, respectively. Interest expense accrued on capital lease obligations for the years ended December 31, 2011, 2010 and 2009 amounted to $1.8 million, $0.5 million and $1.5 million, respectively.

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	1 Months Ended	12 Months Ended
	Aug. 31, 2008 handset	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Capital commitments
Purchase agreements to acquire property, plant and equipment, intangible assets and costs related thereto		$ 560,300,000
Agreement with Apple
Number of iPhone handsets to be bought under unconditional purchase agreement with Apple Sales International	1,500,000
Period over which iPhone handsets are to be bought under unconditional purchase agreement with Apple Sales International (in years)	three year
Percentage of total purchase installment made		28.60%
Amount paid for handsets purchased		140,800,000	79,400,000	3,400,000
Operating leases
Rental expenses included in operating expenses		389,100,000	338,300,000	278,500,000
Rental expenses included in cost of services		232,000,000	182,400,000	168,700,000
Future minimum lease payments due for the five years ending December 31,2016 and thereafter
2012		249,334,000
2013		49,426,000
2014		36,639,000
2015		31,832,000
2016		28,439,000
Thereafter		74,525,000
Total		$ 470,195,000

XML

ACCRUED LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
ACCRUED LIABILITIES
Accruals for services	$ 308,457	$ 365,447
Accruals for taxes	156,451	186,492
Accrued payroll and vacation	90,498	159,171
Interest payable on debt	90,125	76,804
Accruals for payments to social funds	8,339	11,890
Total accrued liabilities	$ 653,870	$ 799,804

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details 5) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Gain/(loss) recognized in earnings			$ (5,420)
Non-designated derivative instruments
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Gain/(loss) recognized in earnings	3,258	1,916	3,088
Non-designated derivative instruments | Foreign currency options
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Gain/(loss) recognized in earnings	3,258	1,916	(4,280)
Non-designated derivative instruments | Purchased call option
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Gain/(loss) recognized in earnings			(5,420)
Non-designated derivative instruments | Currency forward
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Gain/(loss) recognized in earnings			$ 12,788

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2011
Document and Entity Information
Entity Registrant Name	MOBILE TELESYSTEMS OJSC
Entity Central Index Key	0001115837
Document Type	20-F
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	1,988,916,837
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

XML

LICENSES

12 Months Ended

Dec. 31, 2011

LICENSES

LICENSES

10. LICENSES

        In connection with providing telecommunication services, the Group has been issued various licenses by the Russian Ministry of Information Technologies and Communications. In addition to the licenses received directly from the Ministry, the Group has gained access to various telecommunications licenses through acquisitions. In foreign subsidiaries, the licenses are granted by the local telecommunications authorities.

        As of December 31, 2011 and 2010, the recorded values of the Group's telecommunication licenses were as follows:

	December 31,
	2011			2010
Russia	$	20,320		$	229,209
Uzbekistan		196,517			196,517
Armenia		192,186			203,993
Ukraine		49,494			49,414
Licenses, at cost		458,517			679,133
Accumulated amortization		(231,006	)		(384,405	)
Licenses, net	$	227,511		$	294,728

        Amortization expense for the years ended December 31, 2011, 2010 and 2009, amounted to $60.1 million, $76.3 million and $78.7 million, respectively.

        The Group's operating licenses do not provide for automatic renewal. As of December 31, 2011, all licenses covering the territories of the Russian Federation were renewed. The cost to renew the licenses was not significant. Weighted-average period until the next renewal of licenses in the Russian Federation is two years.

        The Group has limited experience with the renewal of its existing licenses covering the territories of the Group's foreign subsidiaries. Licenses for the provision of telecommunication services in MTS Ukraine, Uzdunrobita and K-Telecom are valid until 2013, 2016 and 2019, respectively. The license in Turkmenistan was suspended by the Turkmenistan Ministry of Communications in December 2010 which resulted in cessation of the Group's operational activity in Turkmenistan (Note 4). Management believes that all other 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 such licenses.

        Based solely on the cost of amortizable operating licenses existing as of December 31, 2011 and current exchange rates, the estimated future amortization expenses for the five years ending December 31, 2016 and thereafter are as follows:

Estimated amortization expense in the year ended December 31,
2012	$	36,186
2013		31,016
2014		29,804
2015		29,797
2016		29,791
Thereafter		70,917
Total	$	227,511

        The actual amortization expense to be reported in future periods could differ from these estimates as a result of new license acquisitions, changes in useful lives, exchange rates and other relevant factors.

        Operating licenses contain a number of requirements and conditions specified by legislation. The requirements generally include targets for service start date, territorial coverage and expiration date. Management believes that the Group is in compliance with all material terms of its licenses.

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INVESTMENT IN SHARES OF SVYAZINVEST (Details)	1 Months Ended		12 Months Ended
	Sep. 30, 2010 USD ($)	Sep. 30, 2010 RUB	Dec. 31, 2009 USD ($)	Dec. 31, 2009 RUB	Nov. 30, 2009 Sky Link Sistema	Dec. 31, 2011 Svyazinvest district operator	Dec. 31, 2006 Svyazinvest USD ($)	Nov. 30, 2009 Svyazinvest MGTS Sistema
Investment in shares of Svyazinvest
Percentage of stake acquired							25.00%
Share acquired in addition to percentage ownership acquired							1
Total consideration							$ 1,390,000,000
Cash consideration							1,300,000,000
Fair value of the call and put option							90,000,000
Number of publicly traded incumbent fixed-line operators in which Svyazinvest holds controlling stakes						7
Number of Federal districts of Russia in which investees of Svyazinvest are based						7
Percentage ownership of SkyLink transferred from Sistema					100.00%
Percentage of disposal of MGTS' common stock owned by Svyazinvest to Sistema								28.00%
Fair value of the investment, which includes significant unobservable inputs (Level 3 of the hierarchy established by the U.S. GAAP guidance)			859,700,000	26,000,000,000
Carrying value of the investment			1,205,500,000	36,500,000,000
Impairment loss on investment			349,400,000	10,500,000,000
Proceeds from the sale of Svyazinvest stake		26,000,000,000
Repayment of the outstanding debt to Sberbank		26,000,000,000
Consultancy fees incurred to complete the sale	$ 9,600,000	291,200,000

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details 4) (Non-designated derivative instruments, USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Fair value of the derivative instruments designated as hedges
Derivative instruments, fair value of assets	$ 894	$ 247
Derivative instruments, fair value of liabilities		(14,248)
Foreign currency options
Fair value of the derivative instruments designated as hedges
Derivative instruments classified in other noncurrent assets		247
Derivative instruments classified in other current assets	894
Derivative instruments classified in other payables		(92)
Derivative instruments classified in other long term liabilities		(2,520)
Buy-out put option
Fair value of the derivative instruments designated as hedges
Derivative instruments classified in other payables		(11,636)
Derivative instruments, fair value of liabilities		$ (11,600)

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
NET OPERATING REVENUES
Services revenue and connection fees (including related party amounts of $13,481, $52,257 and $72,149, respectively)	$ 11,430,377	$ 10,586,068	$ 9,513,353
Sales of handsets and accessories	888,311	707,168	353,900
Total net operating revenues	12,318,688	11,293,236	9,867,253
OPERATING EXPENSES
Cost of services, excluding depreciation and amortization shown separately below (including related party amounts of $15,878, $43,620 and $50,389, respectively)	2,633,434	2,260,888	2,011,332
Cost of handsets and accessories	902,692	727,682	375,444
General and administrative expenses (including related party amounts of $62,717, $83,305 and $66,677, respectively) (Note 25)	2,436,252	2,274,421	1,992,991
Provision for doubtful accounts	111,307	122,550	110,766
Impairment of long-lived assets (Note 2, 4)	19,015	127,875	75,064
Sales and marketing expenses (including related party amounts of $83,183, $135,622 and $127,106, respectively)	878,222	850,584	728,483
Depreciation and amortization expense	2,335,204	2,000,496	1,844,174
Other operating expenses (including related party amounts of $538, $9,796 and $12,207, respectively)	193,677	194,181	173,114
Net operating income	2,808,885	2,734,559	2,555,885
CURRENCY EXCHANGE AND TRANSACTION LOSS/(GAIN)	158,066	(20,238)	252,694
OTHER EXPENSES/(INCOME)
Interest income (including related party amounts of $19,079, $21,640 and $53,940)	(62,559)	(84,396)	(104,566)
Interest expense, net of capitalized interest (including related party amounts of $423, $608 and $3,613)	656,898	777,287	571,901
Equity in net income of associates	(49,443)	(70,649)	(60,313)
Change in fair value of derivatives			5,420
Impairment of investments (including related party amounts of $nil, $nil and $349,370) (Notes 14)			368,355
Other expenses, net	6,571	66,924	23,254
Total other expenses, net	551,467	689,166	804,051
Income before provision for income taxes and noncontrolling interests	2,099,352	2,065,631	1,499,140
PROVISION FOR INCOME TAXES (Note 21)	531,620	517,188	505,047
NET INCOME	1,567,732	1,548,443	994,093
NET INCOME/(LOSS) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST	123,788	167,812	(20,110)
NET INCOME ATTRIBUTABLE TO THE GROUP	$ 1,443,944	$ 1,380,631	$ 1,014,203
Weighted average number of common shares outstanding - basic (in shares)	1,970,953,129	1,916,869,262	1,885,750,147
Weighted average number of common shares outstanding - diluted (in shares)	1,970,953,129	1,916,869,262	1,885,750,147
Earnings per share, basic (in dollars per share)	$ 0.73	$ 0.72	$ 0.54
Earnings per share, diluted (in dollars per share)	$ 0.73	$ 0.72	$ 0.54

XML

OPERATIONS IN TURKMENISTAN

12 Months Ended

Dec. 31, 2011

OPERATIONS IN TURKMENISTAN

OPERATIONS IN TURKMENISTAN

4. OPERATIONS IN TURKMENISTAN

        In December 2010 the Group suspended its operations in Turkmenistan following a notice received from the Ministry of Communications of Turkmenistan informing of a decision to suspend licenses held by BCTI, the Group's wholly-owned subsidiary in Turkmenistan, for a period of one month starting from December 21, 2010. On January 21, 2011, the period of license suspension expired, however, permission to resume operations was not granted.

        The Group conducted operations in Turkmenistan under a trilateral agreement signed in November 2005 by BCTI, MTS OJSC and the Ministry of Communications of Turkmenistan which expired on December 21, 2010, unless extended pursuant to its terms and conditions. In accordance with certain provisions of this agreement, BCTI shared net profits derived from its operations in the country with the Ministry of Communications of Turkmenistan. The amount of shared net profit was calculated based on the financial statements prepared in accordance with local accounting principles subject to certain adjustments. Under the terms of the agreement, BCTI shared 20% of its net profit commencing December 21, 2005. The Group at all times believed that the agreement would be extended and approached the Ministry of Communications within the required timeframe to formalize the extension. However, the Ministry of Communications failed to extend the agreement in accordance with its terms.

        Following the decision to suspend licenses, Turkmenistan government authorities took further steps, including unilateral termination of interconnect agreements between BCTI and state-owned telecom operators, to prevent the Group from providing services to its customers.

        The Group initiated a number of proceedings against Turkmenistan government authorities and state-owned telecom operators to defend its legal rights. On December 21, 2010 BCTI filed three requests for arbitration with the International Court of Arbitration of the International Chamber of Commerce ("ICC") against the Ministry of Communications of Turkmenistan and several state-owned telecom operators requesting specific performance on the respective agreements and compensation of damages. Later sovereign state Turkmenistan was joined as the respondent in the proceedings against Ministry of Communications of Turkmenistan.

        On January 21, 2011 MTS sent a formal notice to the Government of Turkmenistan requesting to resolve the dispute through negotiations and notifying it of MTS' intention to file a claim pursuant to the provisions of the Bilateral Investment Treaty between the Russian Federation and Turkmenistan. The dispute was not resolved through negotiations and, accordingly, on 1 September 2011 MTS filed a claim against Turkmenistan in the International Centre for the Settlement of Investment Disputes ("ICSID"). On 5 October 2011 the claim was registered by the ICSID Secretariat.

        Considering the adverse impact of such circumstances on the Group's ability to conduct operations in Turkmenistan, the Group determined that all of its long-lived assets attributable to Turkmenistan were impaired and recorded an impairment charge of $119.6 million in the consolidated statement of operations for the year ended December 31, 2010. The Group also assessed the recoverability of the subsidiary's current assets and provided for or wrote down those current assets which were considered to be impaired. The total effect of impairment charges on the Group's statement of operations for the year ended December 31, 2010 is as follows:

Impairment of long-lived assets	$	119,580
Provision for doubtful accounts		11,462
General and administrative expenses		4,280
Other operating expenses		2,500
	$	137,822

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BUSINESS ACQUISITIONS AND DISPOSALS

12 Months Ended

Dec. 31, 2011

BUSINESS ACQUISITIONS AND DISPOSALS

BUSINESS ACQUISITIONS AND DISPOSALS

3. BUSINESS ACQUISITIONS AND DISPOSALS

        Increase of stake in MGTS—in December 2011, the Group acquired 29% of the ordinary shares of MGTS from Sistema for RUB 10.56 billion ($336.3 million as of December 1, 2011). In addition the Group assumed debt in the amount of RUB 10.41 billion ($331.5 million as of December 1, 2011) due and payable by the end of 2011. MGTS is the Moscow's incumbent fixed line operator initially joined to the Group as a result of Comstar acquisition. Upon completion of the transaction the Group's ownership stake in MGTS increased to 99.01% of ordinary shares and 69.7% of preferred shares, which overall totals 94.1% of MGTS charter capital. The transaction was accounted for directly in equity.

        Acquisitions of controlling interests in regional fixed line operators—In 2010-2011, as part of its program of regional expansion, the Group acquired controlling interests in a number of alternative fixed-line operators in certain regions of Russia. The purchase price for these acquisitions was paid in cash. The acquisitions were accounted for using the purchase method of accounting.

        The following table summarizes the purchase price allocation for regional fixed line operators acquired during the year ended December 31, 2011:

	Inteleca Group			Infocentr			Altair			TVT			Total
Month of acquisition		April			April			August			October
Region of operations		Sibir region			Ural region			Central region			Volga region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	853		$	2,840		$	3,172		$	7,623		$	14,488
Property, plant and equipment		10,812			2,585			3,739			31,664			48,800
Goodwill		10,662			14,711			12,726			147,591			185,690
Customer base		2,217			4,820			13,025			—			20,062
Other non-current assets		22			17			1,618			1,813			3,470
Current liabilities		(4,491	)		(8,547	)		(5,542	)		(25,510	)		(44,090	)
Non-current liabilities		(875	)		(989	)		(3,148	)		(638	)		(5,650	)
Consideration paid	$	19,200		$	15,437		$	25,590		$	162,543		$	222,770

        The purchase price allocation of TVT was not finalized as of the date of these financial statements as the Group had not completed the valuation of individual assets of the company. The Group's consolidated financial statements reflect the allocation of the purchase price based on a preliminary fair value assessment of the assets acquired and liabilities assumed. The excess of the consideration paid over the value of net assets in the amount of $147.6 million was preliminarily allocated to goodwill and was attributable to the "Russia" segment.

        The purchase price allocation of all other acquired fixed-line operators was finalized as of December 31, 2011. The Group's consolidated financial statements reflect the allocation of the purchase price based on a fair value assessment of the assets acquired and liabilities assumed.

        Customer base recognized as a result of the acquisitions is amortized over a period ranging from 8 to 14 years depending on the type of subscribers.

        The recognition of goodwill in the amount of $38.1 million from the acquisitions for which the purchase price allocations are finalized is due to the economic potential of the markets in which the acquired companies operate and synergies arising from the acquisitions. Goodwill is attributable to the "Russia" segment.

        The following table summarizes the purchase price allocation for regional fixed line operators acquired during the year ended December 31, 2010:

	Tenzor Telecom			Penza Telecom			NMSK			Lanck Telecom			Total
Month of acquisition		February			June			December			December
Region of operations		Central region			Volga region			Sibir region			North-West region
Ownership interest acquired		100	%		100	%		100	%		100	%
Current assets	$	711		$	1,076		$	2,575		$	1,634		$	5,996
Property, plant and equipment		2,191			2,407			10,625			10,618			25,841
Goodwill		6,616			7,394			14,113			11,119			39,242
Customer base		—			15,603			5,512			6,733			27,848
Other non-current assets		—			—			124			337			461
Current liabilities		(3,142	)		(4,369	)		(8,607	)		(10,936	)		(27,054	)
Non-current liabilities		(130	)		(2,779	)		(944	)		(1,684	)		(5,537	)
Consideration paid	$	6,246		$	19,332		$	23,398		$	17,821		$	66,797

        Customer base recognized as a result of the acquisitions is amortized over a period ranging from 8 to 12 years depending on the type of subscribers.

        Recognition of goodwill in the amount of $39.2 million from the acquisitions is due to the economic potential of the markets in which the acquired companies operate and synergies arising from the acquisitions. Goodwill is attributable to the "Russia" segment.

        Acquisition of Sistema Telecom—In December 2010, the Group acquired 100% of Sistema Telecom from Sistema for RUB 11.59 billion ($378.98 million as of December 27, 2010). The entity's key assets consist of property rights in respect of the group of trademarks, including the distinctive "egg" trademarks of MTS, Comstar-UTS and MGTS, certain promissory notes previously issued by the Group in the amount of RUB 2.00 billion ($65.50 million) and a 45% stake in TS-Retail. As a result of the acquisition, the Group expects to reduce its operating expenses previously incurred to rent the trademarks and to further optimize the management structure of its retail business.

        The acquisition was accounted for as a common control transaction at carrying amount. These consolidated financial statements were retroactively recast to reflect the Group as if Sistema Telecom had been owned since the beginning of the earliest period presented. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

        Acquisition of Metro-Telecom—In August 2010, the Group acquired a 95% stake in Metro-Telecom from Invest-Svyaz, a wholly-owned subsidiary of Sistema, for RUB 339.35 million ($11.01 million as of August 27, 2010). The company operates an optical fiber network in the Moscow metro.

        The acquisition was accounted for as a common control transaction at carrying amount. These consolidated financial statements were retroactively restated to reflect the Group as if Metro-Telecom had been owned since the beginning of the earliest period presented. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

        Acquisition of Multiregion—In July 2010, the Group acquired a 100% stake in Multiregion for cash consideration of $123.6 million. Multiregion and its subsidiaries is a group of broadband and cable TV providers with a presence in 37 cities of the Russian Federation.

        The acquisition was accounted for using the purchase method of accounting. The summary of the purchase price allocation for the acquisition was as follows:

Current assets	$	46,776
Non-current assets		46,732
Customer base		76,376
Goodwill		148,743
Current liabilities		(126,780	)
Non-current liabilities		(44,007	)
Fair value of noncontrolling interests		(24,244	)
Consideration paid	$	123,596

        The fair value of noncontrolling interests was determined based on unobservable inputs ("Level 3" of the hierarchy established by the U.S. GAAP guidance). The fair value was measured as the fair value of Multiregion's net assets using the discounted cash flow technique.

        The excess of the purchase price over the value of net assets acquired was allocated to goodwill which was assigned to the "Russia" segment and is not deductible for income tax purposes. Goodwill is mainly attributable to the synergies from reduction of internet-traffic and administrative expenses of the Group and expected increase of market share as a result of future capital expenditures to be made by the Group.

        In 2011 the Group paid consideration of $23.96 million for the acquisition of noncontrolling interests in several subsidiaries of Multiregion. The difference between the consideration paid and the fair value of noncontrolling interests was recorded in additional paid-in capital.

        Increase of stake in SWEET-COM—In June 2010, the Group acquired the remaining 25.1% stake in SWEET-COM from private investors for $8.5 million. As a result of this transaction, the Group's ownership in the subsidiary increased to 100%. The original 74.9% stake was acquired in February 2005. SWEET-COM holds licenses for provision of telematics communications and data transmission services in the Moscow region and the Russian Federation. The transaction was accounted for directly in equity.

        Increase of stake in TS-Retail—In June 2010, the Group increased its direct ownership in TS-Retail from 25% to 40% for a nominal amount of one U.S. Dollar. MTS subsequently increased its effective ownership interest in TS-Retail to 50.95%, which was achieved through a voluntary tender offer to repurchase Comstar-UTS' shares in September 2010. In December 2010, as a result of acquisition of Sistema Telecom, the Group acquired an additional 45% stake in TS-Retail, resulting in the effective ownership interest reaching 96.04%. Following the merger with Comstar-UTS on April 1, 2011 the Group increased its stake in TS-Retail to 100%.

        Upon obtaining control over TS-Retail, the Group accounted for the acquisition as a common control transaction at carrying amount. The transaction was accounted for in a manner similar to the pooling-of-interests method directly in equity.

        Acquisitions of certain retail chains—In 2009, in conjunction with the development of its own retail network, the Group acquired controlling interests in a number of retail chains in Russia. The acquisitions were accounted for using the purchase method of accounting.

        The following table summarizes the purchase price allocation of the retail chains acquired as of the acquisition date:

	Telefon.ru			Eldorado			Teleforum			Total
Month of acquisition		February			March			October
Ownership interest acquired		100	%		100	%		100	%
Current assets	$	48,979		$	2,467		$	2,953		$	54,399
Non-current assets		2,315			911			745			3,971
Brand		—			374			—			374
Goodwill		123,333			29,875			9,050			162,258
Current liabilities		(108,701	)		(12,248	)		(3,614	)		(124,563	)
Non-current liabilities		(5,926	)		(115	)		—			(6,041	)
Fair value of contingent consideration		—			(3,414	)		(6,934	)		(10,348	)
Consideration paid	$	60,000		$	17,850		$	2,200		$	80,050

        The Group's financial statements reflect the allocation of the purchase price based on a fair value assessment of the assets acquired and liabilities assumed. Goodwill was mainly attributable to the synergies arising from the Group's ability to optimize the dealers' compensation structure and to maintain its subscriber market share in Russia. Goodwill is not deductible for income tax purposes and was assigned to the "Russia" segment. Brand components are amortized over periods of 6 months.

        The terms of the individual purchase agreements included the obligation to pay additional consideration as follows:

• •

  Up to $25 million during the period from 12 to 18 months for Telefon.ru;

  •

  Up to $5 million in 12 months for Eldorado; and

  •

  Up to $8.8 million in 12 months for Teleforum.

        The additional consideration could be reduced by the amount of tax liability related to the activities prior to the acquisition dates. The Group could also deduct amounts of any potential losses arising from the loss of control on any of Teleforum's outlets from the amount of contingent consideration. The purchase price allocation as of the acquisition date reflected management's estimate of the fair value of the contingent consideration at the acquisition date.

        In 2010 the Group paid additional consideration in connection with the acquisition of retail chains in full amounts. The difference between the fair value of contingent consideration and the actual amount paid totaling $41.8 million resulted from events which occurred after the acquisition date and was accounted for as other operating expenses in the consolidated statement of operations.

        Acquisition of Evrotel—In December 2009, the Group acquired a 100% stake in Evrotel, a Russian federal back bone network operator, from a third party. The consideration paid comprised $90 million. Under the terms of agreement the Group shall pay contingent consideration of up to $20 million should Evrotel complete the construction of certain fiber-optic lines and the Group retain control over the technical support agreements in relation to the optic cable lines. At the acquisition date the estimated fair value of this contingent consideration was $20 million.

        The acquisition was accounted for using the purchase method of accounting. The purchase price allocation for the acquisition was as follows:

Current assets	$	14,300
Non-current assets		67,960
Customer base		4,726
Goodwill		98,542
Liabilities		(75,528	)
Fair value of contingent consideration		(20,000	)
Consideration paid	$	90,000

        In 2011 the Group paid a part of the contingent consideration in connection with the acquisition of Evrotel in the amount of $16.1 million. The remaining part of the contingent consideration in the amount of $3.9 million was remeasured to its fair value of $2.4 million as at December 31, 2011. The changes in fair value totaling $1.5 million resulted from events which occurred after the acquisition date and have consequently been accounted for as other operating expenses in the consolidated statement of operations.

        Goodwill is mainly attributable to the synergies from reduction of interconnect and internet-traffic expenses of the Group. Goodwill is not deductible for income tax purposes and was assigned to the "Russia" segment.

        Acquisition of Comstar-UTS—In October 2009, the Group acquired a 50.91% stake in Comstar-UTS, a provider of fixed line communication services in Russia, Ukraine and Armenia, from Sistema. Consideration paid amounted to RUB 39.15 billion ($1.32 billion as of October 12, 2009) or RUB 184.02 ($6.21) per global depositary receipt ("GDR").

        This acquisition has been accounted for as a common control transaction at carrying amount. The excess of consideration over the carrying value of net assets received has been recorded as a decrease in additional paid-in capital of the Group in the amount of $1.07 billion and as a decrease in retained earnings in the amount of $242.7 million.

        Further, in December 2009, in a series of transactions, the Group acquired a 14.2% stake in MGTS in exchange for 31,816,462 ordinary MTS OJSC shares (equal to RUB 7.17 billion based on the MICEX price on December 17, 2009, or RUB 225.4 per share, per the terms of the agreement with MGTS shareholder), representing 1.6% shares outstanding, previously held in treasury and $7.3 million in cash. The MGTS stake, represented by 2,462,687 ordinary shares and 11,135,428 preferred shares, were held by a wholly owned subsidiary of Comstar-UTS. Simultaneously, MTS received 46,232,000 shares, representing 11.06% of total shares outstanding, of Comstar-UTS from MGTS Finance S.A., a wholly owned subsidiary of MGTS. In addition, MTS paid Comstar-UTS a cash consideration of $8.3 million. The transaction was accounted for directly in equity.

        In September 2010, through a voluntary tender offer the Group acquired 37,614,087 ordinary shares of Comstar-UTS which represents approximately 9.0% of its issued share capital for a total consideration of RUB 8.28 billion (approximately $271.89 million as of October 6, 2010). This brought the Group's total ownership stake in Comstar-UTS to 70.97% (or 73.33% excluding treasury shares). The transaction was accounted for directly in equity.

        Furthermore, on December 23, 2010 an extraordinary general meeting of the Company's shareholders approved the merger of Comstar-UTS and a number of MTS' subsidiaries into MTS OJSC. The Group redeemed Comstar-UTS shares held and put by non-controlling interest shareholders within the limit set forth by the Russian law at a specified price. The amount redeemed to Comstar shareholders in the first quarter 2011 totaled to $168.8 million. The remaining 98,853,996 of Comstar-UTS shares held by non-controlling interest shareholders were converted into existing MTS treasury shares as well as newly issued MTS shares at an exchange ratio of 0.825 MTS ordinary shares for each Comstar-UTS ordinary share. As a result, the charter capital of MTS OJSC increased by 73,087,424 ordinary shares to a total of 2,066,413,562 ordinary shares. The merger was completed on April 1, 2011. The transactions were accounted for directly in equity.

        Acquisition of Kolorit Dizayn—In September 2009, the Group acquired a 100% stake in Kolorit Dizayn, a company providing outdoor advertising services in the territory of Uzbekistan, for $39.7 million in cash.

        The acquisition was accounted for using the purchase method of accounting. The summary of the purchase price allocation for the acquisition was as follows:

Current assets	$	993
Non-current assets		11,788
Brand		2,097
Goodwill		27,109
Current liabilities		(2,098	)
Non-current liabilities		(235	)
Consideration paid	$	39,654

        Goodwill is mainly attributable to synergies from advertising cost optimization. Goodwill is not deductible for income tax purposes and was assigned to the "Uzbekistan" segment.

        Acquisition of Dagtelecom—In January 2009, Glaxen, the minority shareholder of Dagtelecom, exercised its put option over its 25.5% stake in the company. Consideration payable by the Group on the put option agreement comprised $51.3 million. Payment made by the Group was reduced by $12.5 million to offset the loan receivable from Glaxen at the date of acquisition. The transaction was accounted for directly in equity.

        Pro forma results of operations (unaudited)—The following unaudited pro forma financial data for the years ended December 31, 2011 and 2010, gives effect to the 2011 acquisitions of Inteleca Group, Infocentr, Altair and TVT as though these business combinations had been completed at the beginning of 2010.

	2011		2010
Pro forma:
Net revenues	$	12,366,057	$	11,359,640
Net operating income		2,821,182		2,751,082
Net income		1,462,649		1,405,790
Earnings per share, basic and diluted, U.S. Dollars	$	0.74	$	0.73

        The pro forma information is based on various assumptions and estimates. The pro forma information is not necessarily indicative of the operating results that would have occurred if the Group acquisitions had been consummated as of January 1, 2010, nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any potential revenue enhancements or cost synergies or other operating efficiencies that could result from the acquisitions. The actual results of operations of these companies are included in the consolidated financial statements of the Group only from the respective dates of acquisition.

        The following amounts of revenue and earnings of companies acquired from third parties in 2011 since the acquisition date are included in the consolidated statement of operations for the year ended December 31, 2011:

	2011 (unaudited)
Net revenues	$	22,539
Net operating loss		4,883
Net loss		3,353

XML

OTHER INVESTMENTS

12 Months Ended

Dec. 31, 2011

OTHER INVESTMENTS

OTHER INVESTMENTS

15. OTHER INVESTMENTS

        As of December 31, 2011 and 2010, the Group's other investments comprised the following:

			December 31,
	Annual interest rate	Maturity date
			2011		2010
Investments in ordinary shares (Related parties) (Note 22)	—	—	$	9,498	$	9,763
Loan receivable from Mr. P. Fattouche and Mr. M. Fattouche (Note 22)	6%	2015		92,700		91,503
Promissory notes of Sistema (Note 22)	0.0%	2017		19,209		20,293
Promissory notes of Sistema (Note 22)	0.0%	on demand		—		4,162
Other	—	—		2,035		2,861
Total other investments			$	123,442	$	128,582

        The Group does not discount promissory notes and loans granted to related parties, interest rates on which are different from market rates. Accordingly, fair value of such notes and loans may be different from their carrying value.

        In December 2010 the Group granted a $90.0 million loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche, the holders of a 20% noncontrolling stake in K-Telecom, the Group's subsidiary in Armenia. Simultaneously, the Group signed an amendment to the put and call option agreement for the remaining 20% stake (Note 24). According to the amendment, the call exercise price shall be reduced by deducting any outstanding balance on the loan amount and all accrued and unpaid interest and any other sums due and outstanding under the loan agreement at the time of exercise. Interest accrued on the loan to Mr. Pierre Fattouche and Mr. Moussa Fattouche for the years ended December 31, 2011 and 2010, amounted to $4.1 million and $0.4 million, respectively, and was included as a component of interest income in the accompanying consolidated statements of operations.

XML

GOODWILL

12 Months Ended

Dec. 31, 2011

GOODWILL

GOODWILL

11. GOODWILL

        The change in the net carrying amount of goodwill for 2011 and 2010 by reportable segments was as follows:

	Russia			Ukraine			Other			Total
Balance at January 1, 2010
Gross amount of goodwill	$	598,349		$	5,311		$	248,579		$	852,239
Accumulated impairment loss		(48,466	)								(48,466	)
		549,883			5,311			248,579			803,773
Acquisitions (Note 3)		175,307			—			—			175,307
Currency translation adjustment		(3,328	)		16			5,567			2,255
Balance at December 31, 2010
Gross amount of goodwill		769,958			5,327			254,146			1,029,431
Accumulated impairment loss		(48,096	)								(48,096	)
		721,862			5,327			254,146			981,335
Acquisitions (Note 3)		185,690			—			—			185,690
Finalization of purchase accounting		6,945			—			—			6,945
Currency translation adjustment		(46,988	)		(19	)		(8,433	)		(55,440	)
Balance at December 31, 2011
Gross amount of goodwill		913,037			5,308			245,713			1,164,058
Accumulated impairment loss		(45,528	)		—			—			(45,528	)
	$	867,509		$	5,308		$	245,713		$	1,118,530

XML

BORROWINGS (Details 3) (USD $)	12 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended			12 Months Ended
	Dec. 31, 2011 D	Dec. 31, 2010	Dec. 31, 2011 MTS Finance Notes due 2012	Dec. 31, 2010 MTS Finance Notes due 2012	Dec. 31, 2011 MTS International Notes due 2020	Dec. 31, 2010 MTS International Notes due 2020	Dec. 31, 2011 MTS Finance Notes due 2012 and MTS International Notes due 2020 D	Dec. 31, 2011 Available credit facilities, Sberbank maturing in 2017	Dec. 31, 2010 Available credit facilities, Sberbank maturing in 2017	Dec. 31, 2011 Available credit facilities, Calyon, ING Bank N.V. and Nordea Bank AB maturing in 2019/2020	Dec. 31, 2011 Available credit facilities, Credit Agricole (Finnvera) maturing in 2019	Dec. 31, 2011 Available credit facilities, Sberbank maturing in 2014	Dec. 31, 2011 Available credit facilities, ING Bank Eurasia maturing in 2012	Dec. 31, 2011 Available credit facilities, Gazprombank maturing in 2013	Dec. 31, 2011 Notes	Dec. 31, 2011 Loans	Nov. 11, 2010 Tarino Limited
Compliance with covenants
Amount of a judgment that the entity may be subject to before it may be considered to be in default of debt covenants, subject to certain exemptions and qualifications	$ 10,000,000		$ 10,000,000		$ 15,000,000
Minimum number of days in which a judgment requiring payment in excess of stated thresholds may continue unsatisfied before the entity is determined to be in default of debt covenants, subject to certain exemptions and qualifications	60						60
Percentage of the principal amount at which the notes are redeemable due to a change of control							101.00%
Remaining percentage of interest acquired in Tarino shares in Option Shares																	49.00%
Payment for option shares																	170,000,000
Damages																	5,880,000
Interest and other costs																	34,000,000
Available credit facilities
Interest rate (as a percent)			8.00%	8.00%	8.625%	8.625%		8.50%
Interest rate, description										LIBOR	EURIBOR	MosPrime3month	MosPrime/LIBOR/EURIBOR	MosPrime
Interest rate added to base rate (as a percent)										1.15%	1.65%	1.325%	1.25%	1.425%
Commitment fees (as a percent)										0.40%	0.825%	0.10%
Available credit facilities, total	1,321,342,000									468,710,000	388,290,000	310,597,000	77,649,000	76,096,000
Payments due in the year ended December 31,
2012															865,880,000	283,025,000
2013														78,700,000	311,817,000	785,015,000
2014														314,700,000	422,988,000	512,403,000
2015														78,700,000	700,600,000	1,266,546,000
2016																1,184,419,000
Thereafter															1,060,597,000	1,309,598,000
Total notes	3,361,882,000	3,322,852,000	400,000,000	400,000,000	750,000,000	750,000,000								472,100,000
Total bank loans	$ 5,341,006,000	$ 3,818,005,000						$ 3,105,967,000	$ 1,968,704,000

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TRADE RECEIVABLES, NET

12 Months Ended

Dec. 31, 2011

TRADE RECEIVABLES, NET

TRADE RECEIVABLES, NET

7. TRADE RECEIVABLES, NET

        Trade receivables as of December 31, 2011 and 2010 comprised the following:

	December 31,
	2011			2010
Subscribers	$	351,786		$	384,903
Interconnect		112,751			120,948
Dealers		106,000			108,010
Roaming		283,830			224,687
Other		106,402			80,022
Allowance for doubtful accounts		(96,961	)		(120,468	)
Trade receivables, net	$	863,808		$	798,102

        The following table summarizes the changes in the allowance for doubtful accounts receivable for the years ended December 31, 2011, 2010 and 2009:

	2011			2010			2009
Balance, beginning of year	$	120,468		$	97,653		$	69,603
Provision for doubtful accounts		101,967			123,352			105,260
Accounts receivable written off		(120,673	)		(99,708	)		(76,622	)
Currency translation adjustment		(4,801	)		(829	)		(588	)
Balance, end of year	$	96,961		$	120,468		$	97,653

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GENERAL AND ADMINISTRATIVE EXPENSES (Tables)

12 Months Ended

Dec. 31, 2011

GENERAL AND ADMINISTRATIVE EXPENSES

Schedule of general and administrative expenses

	2011		2010		2009
Salaries and social contributions	$	1,230,564	$	1,174,482	$	1,004,951
Rent		389,142		338,301		283,957
General and administrative		277,863		251,097		217,847
Repair and maintenance		202,206		180,810		158,165
Taxes other than income		171,778		144,322		181,716
Billing and data processing		62,508		75,960		64,277
Consulting expenses		58,409		61,431		59,000
Provision for obsolescence		30,160		27,825		4,113
Insurance		6,533		7,456		7,612
Business acquisitions related costs		7,089		12,737		11,353
Total	$	2,436,252	$	2,274,421	$	1,992,991

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CASH AND CASH EQUIVALENTS

12 Months Ended

Dec. 31, 2011

CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS

5. CASH AND CASH EQUIVALENTS

        Cash and cash equivalents as of December 31, 2011 and 2010 comprised the following:

	December 31,
	2011		2010
Ruble current accounts	$	300,057	$	413,139
Ruble deposit accounts		934,169		93,271
U.S. Dollar current accounts		321,949		215,375
U.S. Dollar deposit accounts		101,600		28,002
Euro current accounts		25,770		17,142
Euro deposit accounts		2,600		11,288
Hryvna current accounts		10,873		9,535
Hryvna deposit accounts		—		35,753
Uzbek som current accounts		150,547		91,236
Turkmenian manat current accounts		1,501		10,568
Armenian dram current accounts		1,616		2,160
Other		144		225
Total cash and cash equivalents	$	1,850,826	$	927,694

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SHORT-TERM INVESTMENTS

12 Months Ended

Dec. 31, 2011

SHORT-TERM INVESTMENTS

SHORT-TERM INVESTMENTS

6. SHORT-TERM INVESTMENTS

        Short-term investments as of December 31, 2011 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	2.0 - 11.0%	January - October 2012	$	80,291
Belarusian ruble denominated deposits	26.0 - 37.0%	February - April 2012	$	5,933
Other				18
Total			$	86,242

        Short-term investments as of December 31, 2010 comprised the following:

Type of investment	Annual interest rate	Maturity date	Amount
Deposits	3.5 - 9.0%	January - July 2011	$	279,663
Funds in trust management	9.2%	June 2011		26,987
Promissory notes	5.5 - 7.0%	April - June 2011		26,701
Other				243
Total			$	333,594

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INVENTORY AND SPARE PARTS

12 Months Ended

Dec. 31, 2011

INVENTORY AND SPARE PARTS

INVENTORY AND SPARE PARTS

8. INVENTORY AND SPARE PARTS

        Inventory and spare parts as of December 31, 2011 and 2010, comprised the following:

	December 31,
	2011		2010
Handsets and accessories	$	223,764	$	234,166
Spare parts for telecommunication equipment		28,533		34,687
SIM cards and prepaid phone cards		10,445		21,879
Advertising materials		1,320		2,011
Other materials		27,013		27,213
Total inventory and spare parts	$	291,075	$	319,956

        Obsolescence expense for the years ended December 31, 2011, 2010 and 2009, amounted to $30.2 million, $27.8 million and $4.1 million, respectively, and was included in general and administrative expenses in the accompanying consolidated statements of operations. Spare parts for telecommunication equipment included in inventory are expected to be utilized within the twelve months following the statement of financial position date.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Details) (USD $) In Millions, unless otherwise specified																																12 Months Ended							1 Months Ended
	Dec. 31, 2011 BCTI	Dec. 31, 2010 BCTI	Dec. 31, 2011 Comstar-Regions	Dec. 31, 2010 Comstar-Regions	Dec. 31, 2011 MTS Bermuda	Dec. 31, 2010 MTS Bermuda	Dec. 31, 2011 MTS Finance	Dec. 31, 2010 MTS Finance	Dec. 31, 2011 MTS Ukraine	Dec. 31, 2010 MTS Ukraine	Dec. 31, 2010 Multiregion	Dec. 31, 2011 RTC	Dec. 31, 2010 RTC	Dec. 31, 2011 Sibintertelecom	Dec. 31, 2010 Sibintertelecom	Dec. 31, 2011 TVT	Dec. 31, 2011 Infocentr	Dec. 31, 2011 Inteleca Group	Dec. 31, 2011 Altair	Dec. 31, 2011 Sistema Telecom	Dec. 31, 2010 Sistema Telecom	Dec. 31, 2011 TS-Retail	Dec. 31, 2010 TS-Retail	Dec. 31, 2011 Uzdunrobita	Dec. 31, 2010 Uzdunrobita	Dec. 31, 2011 Metrotelecom	Dec. 31, 2010 Metrotelecom	Dec. 31, 2011 Moscow City Telephone Network ("MGTS")	Dec. 31, 2010 Moscow City Telephone Network ("MGTS")	Dec. 31, 2011 K-Telecom	Dec. 31, 2010 K-Telecom	Dec. 31, 2011 MTS International Funding Limited ("MTS International")	Dec. 31, 2010 MTS International Funding Limited ("MTS International")	Dec. 31, 2010 Comstar-UTS	Dec. 31, 2010 Dagtelecom acquisition	Dec. 31, 2010 Evrotel	Dec. 31, 2011 Intellect Telecom	Dec. 31, 2010 Intellect Telecom	Oct. 31, 2011 MTS Belarus, an associated company of the Group	Sep. 30, 2011 MTS Belarus, an associated company of the Group Y	Dec. 31, 2011 MTS Belarus, an associated company of the Group	Dec. 31, 2010 MTS Belarus, an associated company of the Group
Investments in significant legal entities
Ownership interest in equity investment (as a percent)	100.00%	100.00%	100.00%	73.30%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	96.00%	100.00%	100.00%	95.00%	95.00%	94.10%	51.30%	80.00%	80.00%			73.30%	100.00%	100.00%	47.00%	22.50%			49.00%	49.00%
Debt issued by consolidated variable interest entity																																	$ 750.0
Interest rate of debt issued by consolidated variable interest entity (as a percent)																																	8.625%
Total liabilities of consolidated variable interest entity																																751.6	751.6
Cumulative inflation rate period (in year)																																								3
Percentage of cumulative inflation rate																																								100.00%
Increase in carrying value of investments and advances in associates																																							$ 88.8

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ASSET RETIREMENT OBLIGATIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Estimated present value of asset retirement obligations and change in liabilities
Balance, beginning of the year	$ 78,039	$ 88,683
Liabilities incurred in the current period	9,009	4,066
Accretion expense	6,236	9,776
Revisions in estimated cash flows	(19,242)	(23,813)
Currency translation adjustment	(4,325)	(673)
Balance, end of the year	$ 69,717	$ 78,039

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 ImpairmentTest	Dec. 31, 2010	Dec. 31, 2009
Impairment of long-lived assets
Impairment of property, plant and equipment and intangible assets	$ 19,015	$ 127,875	$ 75,064
Goodwill
Minimum number of impairment indicators used to determine whether a review of goodwill should be completed prior to the annual impairment test	1
BCTI
Impairment of long-lived assets
Impairment loss on license suspension in Turkmenistan		$ 119,600
License costs | Minimum
Finite-lived intangible assets
Amortization period	3
License costs | Maximum
Finite-lived intangible assets
Amortization period	15

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SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 Country Segment	Dec. 31, 2010	Dec. 31, 2009
SEGMENT INFORMATION
Number of reportable segments	2
Net operating revenues
Total net operating revenues from external customers:	$ 12,318,688	$ 11,293,236	$ 9,867,253
Total intersegment operating revenues:	99,177	58,899	43,857
Depreciation and amortization expense
Depreciation and amortization expense	2,335,204	2,000,496	1,844,174
Operating income:
Net operating income	2,808,885	2,734,559	2,555,885
CURRENCY EXCHANGE AND TRANSACTION LOSS/(GAIN)	158,066	(20,238)	252,694
Interest income (including related party amounts of $19,079, $21,640 and $53,940)	(62,559)	(84,396)	(104,566)
Interest expense	656,898	777,287	571,901
Change in fair value of derivatives			5,420
Impairment of investments			368,355
Equity in net income of associates	(49,443)	(70,649)	(60,313)
Other expenses, net	6,571	66,924	23,254
Income before provision for income taxes and noncontrolling interests	2,099,352	2,065,631	1,499,140
Additions to long-lived assets:
Additions to long-lived assets	2,717,657	2,893,730
Long-lived assets:
Long-lived assets	10,913,680	10,789,531
Total assets:
Assets	15,318,229	14,478,042
Number of countries	2
Russia
Net operating revenues
Total net operating revenues from external customers:	10,597,310	9,387,797	8,064,474
Total intersegment operating revenues:	34,968	27,136	10,342
Depreciation and amortization expense
Depreciation and amortization expense	1,752,022	1,418,727	1,305,556
Operating income:
Net operating income	2,774,422	2,673,617	2,353,380
Additions to long-lived assets:
Additions to long-lived assets	2,330,163	2,538,926
Long-lived assets:
Long-lived assets	8,617,536	8,207,457
Total assets:
Assets	12,420,073	11,358,159
Ukraine
Net operating revenues
Total net operating revenues from external customers:	1,099,537	1,050,639	1,025,374
Total intersegment operating revenues:	43,020	22,191	23,377
Depreciation and amortization expense
Depreciation and amortization expense	344,709	354,154	352,037
Operating income:
Net operating income	203,609	144,473	120,248
Additions to long-lived assets:
Additions to long-lived assets	140,354	117,548
Long-lived assets:
Long-lived assets	915,292	1,130,459
Total assets:
Assets	1,244,543	1,454,415
Other
Net operating revenues
Total net operating revenues from external customers:	621,841	854,800	777,405
Total intersegment operating revenues:	21,189	9,572	10,138
Depreciation and amortization expense
Depreciation and amortization expense	238,473	227,615	186,581
Operating income:
Net operating income	(168,572)	(84,820)	82,257
Additions to long-lived assets:
Additions to long-lived assets	247,140	237,256
Long-lived assets:
Long-lived assets	1,380,852	1,451,615
Total assets:
Assets	1,653,613	1,665,468
Mobile services
Net operating revenues
Total net operating revenues from external customers:	10,487,988	9,606,354	8,428,578
Fixed line services
Net operating revenues
Total net operating revenues from external customers:	1,830,700	1,686,882	1,438,675
Intercompany eliminations
Operating income:
Net operating income	$ (574)	$ 1,289

XML

DESCRIPTION OF BUSINESS (Details) (Comstar-UTS)	Sep. 30, 2010	Dec. 31, 2009	Oct. 31, 2009
Comstar-UTS
Business acquisitions
Percentage of ownership interest acquired	9.00%	61.97%	50.91%

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details 6) (Significant other observable inputs (Level 2), Fair value measured on recurring basis, USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Interest rate swaps
Assets and liabilities associated with derivative agreements measured at fair value on a recurring basis
Fair value of derivative assets	$ 2,341	$ 3,322
Fair value of derivative liabilities	(15,959)	(31,315)
Currency option agreements
Assets and liabilities associated with derivative agreements measured at fair value on a recurring basis
Fair value of derivative assets	894	247
Fair value of derivative liabilities		(2,612)
Buy-out put option
Assets and liabilities associated with derivative agreements measured at fair value on a recurring basis
Fair value of derivative liabilities		(11,636)
Cross-currency interest rate swaps
Assets and liabilities associated with derivative agreements measured at fair value on a recurring basis
Fair value of derivative liabilities		$ (3,469)

XML

SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT INFORMATION

SEGMENT INFORMATION

26. SEGMENT INFORMATION

        To reflect the changes in the structure of the internal organization in 2011, the Group combined the Russia Mobile and Russia Fixed segments. Prior period segment presentation has been retrospectively restated for this change. As a result, geographical areas of business activities are now used as a factor in identifying the following reportable segments.

        The Group operates primarily within two countries, Russia and Ukraine. The Group aligns its business into two reportable segments to effectively manage both the mobile and the fixed line operations as an integrated business and to respond to the demands of the Group's customers.

        The reportable segments consist of (1) Russia, which includes operations throughout the country, and provides a wide range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV and various value-added services, i.e. both mobile and fixed line services to customers across multiple regions and (2) Ukraine, which includes operations throughout the country, and currently provides mobile services.

        The "Other" category does not constitute either an operating segment or a reportable segment. Rather, it includes both the results of a number of other operating segments that do not meet the quantitative thresholds for separate reporting, such as Uzbekistan and Armenia, and corporate division.

        Other unallocated expenses such as interest (income)/expense, impairments and currency exchange and transaction loss/(gain) are shown for purposes of reconciling the Group's segment measure, net operating income, to the Group's consolidated total for each of the three years in the period ended December 31, 2011.

        The intercompany eliminations presented below primarily consist of sales transactions between segments conducted under the normal course of operations.

        Financial information by reportable segment is presented below:

	December 31,
	2011			2010			2009
Net operating revenues from external customers:
Russia	$	10,597,310		$	9,387,797		$	8,064,474
Ukraine		1,099,537			1,050,639			1,025,374
Other		621,841			854,800			777,405
Total net operating revenues from external customers:	$	12,318,688		$	11,293,236		$	9,867,253
Including revenue from mobile services		10,487,988			9,606,354			8,428,578
Including revenue from fixed line services		1,830,700			1,686,882			1,438,675
Intersegment operating revenues:
Russia	$	34,968		$	27,136		$	10,342
Ukraine		43,020			22,191			23,377
Other		21,189			9,572			10,138
Total intersegment operating revenues:	$	99,177		$	58,899		$	43,857
Depreciation and amortization expense:
Russia	$	1,752,022		$	1,418,727		$	1,305,556
Ukraine		344,709			354,154			352,037
Other		238,473			227,615			186,581
Total depreciation and amortization expense	$	2,335,204		$	2,000,496		$	1,844,174
Operating income:
Russia	$	2,774,422		$	2,673,617		$	2,353,380
Ukraine		203,609			144,473			120,248
Other		(168,572	)		(84,820	)		82,257
Intercompany eliminations		(574	)		1,289			—
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Net operating income	$	2,808,885		$	2,734,559		$	2,555,885
Currency exchange and transaction loss (gain)		158,066			(20,238	)		252,694
Interest income		(62,559	)		(84,396	)		(104,566	)
Interest expense		656,898			777,287			571,901
Change in fair value of derivatives		—			—			5,420
Impairment of investments		—			—			368,355
Equity in net income of associates		(49,443	)		(70,649	)		(60,313	)
Other expense, net		6,571			66,924			23,254
Income before provision for income taxes and noncontrolling interest	$	2,099,352		$	2,065,631		$	1,499,140

	2011		2010
Additions to long-lived assets:
Russia	$	2,330,163	$	2,538,926
Ukraine		140,354		117,548
Other		247,140		237,256
Total additions to long-lived assets	$	2,717,657	$	2,893,730
Long-lived assets(1):
Russia	$	8,617,536	$	8,207,457
Ukraine		915,292		1,130,459
Other		1,380,852		1,451,615
Total long-lived assets	$	10,913,680	$	10,789,531
Total assets:
Russia	$	12,420,073	$	11,358,159
Ukraine		1,244,543		1,454,415
Other		1,653,613		1,665,468
Total assets	$	15,318,229	$	14,478,042

(1)

Comprises property, plant and equipment, licenses, goodwill and other intangible assets.

XML

OTHER INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2011

OTHER INVESTMENTS

Schedule of other investments

			December 31,
	Annual interest rate	Maturity date
			2011		2010
Investments in ordinary shares (Related parties) (Note 22)	—	—	$	9,498	$	9,763
Loan receivable from Mr. P. Fattouche and Mr. M. Fattouche (Note 22)	6%	2015		92,700		91,503
Promissory notes of Sistema (Note 22)	0.0%	2017		19,209		20,293
Promissory notes of Sistema (Note 22)	0.0%	on demand		—		4,162
Other	—	—		2,035		2,861
Total other investments			$	123,442	$	128,582

XML

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

12 Months Ended

Dec. 31, 2011

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

13. INVESTMENTS IN AND ADVANCES TO ASSOCIATES

        As of December 31, 2011 and 2010, the Group's investments in and advances to associates comprised the following:

	December 31,
	2011		2010
MTS Belarus—equity investment	$	176,659	$	227,130
MTS Belarus—loan receivable		—		3,000
Intellect Telecom—equity investment		11,388		11,662
Total investments in and advances to associates	$	188,047	$	241,792

        MTS Belarus—In April 2008 the Group entered into a credit facility agreement with MTS Belarus valid till March 15, 2009. The facility allowed MTS Belarus to borrow up to $33.0 million and bore annual interest of 10.0%. In the year ended December 31, 2009 the maturity date was extended to March 15, 2010 and the total allowable amount was increased to $46.0 million. In the year ended December 31, 2010 the maturity date was prolonged till March 15, 2011. The credit facility was fully paid upon maturity.

        The financial position and results of operations of MTS Belarus as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	417,555	$	527,609
Total liabilities		92,884		72,533
Net income		107,533		145,707

        Intellect Telecom—In November 2010 MGTS acquired a 43.8% interest in Intellect Telecom from one of the subsidiaries of Sistema for $12.4 million. Intellect Telecom is a research and development innovation center in the field of telecommunications. In March 2011 MGTS acquired a further 6.14% interest in Intellect Telecom in exchange for building of a business center in Moscow City with NBV of $0.8 million, thus increasing its share in Intellect Telecom to 49.95%.

        The financial position and results of operations of Intellect Telecom as of and for the year ended December 31, 2011 and 2010 were as follows:

	(unaudited)
	2011		2010
Total assets	$	19,210	$	25,227
Total liabilities		3,110		34,180
Net loss		6,765		6,831

        The Group's share in the total earnings or losses of associates was included in other income in the accompanying consolidated statements of operations. For the years ended December 31, 2011, 2010 and 2009, this share amounted to $49.4 million, $70.6 million and $60.3 million, respectively.

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DEFERRED CONNECTION FEES

12 Months Ended

Dec. 31, 2011

DEFERRED CONNECTION FEES

DEFERRED CONNECTION FEES

18. DEFERRED CONNECTION FEES

        Deferred connection fees for the years ended December 31, 2011 and 2010, were as follows:

	2011			2010
Balance at the beginning of the year	$	155,288		$	163,098
Payments received and deferred during the year		76,562			89,030
Amounts amortized and recognized as revenue during the year		(96,676	)		(95,706	)
Currency translation adjustment		(5,750	)		(1,134	)
Balance at the end of the year		129,424			155,288
Less: current portion		(49,868	)		(49,212	)
Non-current portion	$	79,556		$	106,076

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INCOME TAX (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Russian statutory income tax rate reconciled to the Group's effective income tax rate
Statutory income tax rate for the year (as a percent)	20.00%	20.00%	20.00%
Adjustments:
Expenses not deductible for tax purposes (as a percent)	2.80%	3.50%	4.90%
Currency exchange and transaction loss (as a percent)			0.50%
Unrecognized tax benefits (as a percent)	(0.20%)	0.10%	(0.20%)
Settlements with tax authorities (as a percent)	(0.50%)	(1.00%)	(2.90%)
Different tax rate of foreign subsidiaries (as a percent)	(0.20%)	(0.50%)	(2.00%)
Earnings distribution from subsidiaries (as a percent)	2.90%	0.70%	6.80%
Disposal of treasury stock (as a percent)			(4.10%)
Effect of change in tax rate in Ukraine (as a percent)	0.80%	0.70%
Change in valuation allowance (as a percent)	(0.20%)	(0.20%)	10.30%
Comstar corporate reorganization (as a percent)			0.40%
Impairment of long-lived assets (as a percent)		1.30%
Other (as a percent)	(0.10%)	0.40%
Effective income tax rate (as a percent)	25.30%	25.00%	33.70%
Deferred tax assets
Depreciation of property, plant and equipment	$ 140,371	$ 211,307
Other intangible assets		1,346
Deferred connection fees	26,063	31,522
Subscriber prepayments	16,755	20,832
Accrued expenses for services	118,103	148,828
Inventory obsolescence	13,650	5,884
Loss carryforward	203,313	196,883
Impairment of property, plant and equipment	2,415	4,438
Other	29,352	22,384
Valuation allowance	(163,075)	(165,994)
Total deferred tax assets	386,947	477,430
Deferred tax liabilities
Licenses acquired	(35,377)	(62,606)
Depreciation of property, plant and equipment	(136,465)	(192,679)
Customer base	(39,272)	(34,783)
Other intangible assets	(42,435)	(41,011)
Debt issuance cost	(20,975)	(11,134)
Potential distributions from/to Group's subsidiaries/associates	(88,596)	(105,821)
Other	(31)	(4,992)
Total deferred tax liabilities	(363,151)	(453,026)
Net deferred tax asset	23,796	24,404
Net deferred tax asset, current	189,622	234,658
Net deferred tax asset, non-current	62,102	81,816
Net deferred tax liability, long-term	$ (227,928)	$ (292,070)

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OTHER INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2011

OTHER INTANGIBLE ASSETS

Schedule of intangible assets

			December 31, 2011							December 31, 2010
	Useful lives, months		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	$	1,668,715	$	(1,042,773	)	$	625,942	$	1,682,959	$	(1,056,324	)	$	626,635
Acquired customer base		60 to 372		262,156		(68,741	)		193,415		343,920		(111,775	)		232,145
Rights to use radio frequencies		24 to 180		353,776		(138,546	)		215,230		314,722		(100,496	)		214,226
Accounting software		13 to 60		141,084		(98,672	)		42,412		118,673		(87,623	)		31,050
Numbering capacity with finite contractual life		24 to 120		75,803		(70,979	)		4,824		90,408		(79,821	)		10,587
Office software		13 to 120		123,452		(72,752	)		50,700		84,343		(50,711	)		33,632
Other		12 to 120		110,913		(44,625	)		66,288		95,179		(30,199	)		64,980
				2,735,899		(1,537,088	)		1,198,811		2,730,204		(1,516,949	)		1,213,255
Prepayments for intangible assets				84,985		—			84,985		273,239		—			273,239
Numbering capacity with indefinite contractual life				78,491		—			78,491		55,144		—			55,144
Total other intangible assets			$	2,899,375	$	(1,537,088	)	$	1,362,287	$	3,058,587	$	(1,516,949	)	$	1,541,638

Estimated future amortization expenses for each of the next five years

Estimated amortization expense in the year ended December 31,
2012	$	401,450
2013		290,930
2014		175,260
2015		101,250
2016		55,160
Thereafter		174,761
Total	$	1,198,811

XML

COMMITMENTS AND CONTINGENCIES (Details 3)	12 Months Ended										1 Months Ended		3 Months Ended	12 Months Ended
	Dec. 31, 2009 USD ($)	Dec. 31, 2009 RUB	Dec. 31, 2011 USD ($)	Jun. 30, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2011 Minimum M	Dec. 31, 2011 Maximum M	Jan. 31, 2011 Settlement of Litigation USD ($)	Dec. 31, 2011 MTS Finance Notes due 2012 USD ($)	Dec. 31, 2010 MTS Finance Notes due 2012 USD ($)	Dec. 31, 2005 Tarino Limited USD ($)	Nov. 30, 2006 Tarino Limited USD ($)	Mar. 31, 2005 Bitel LLC USD ($) company	Dec. 31, 2006 Bitel LLC USD ($)	Dec. 31, 2005 Bitel LLC
Business acquisitions
Percentage of stake acquired											51.00%
Cash consideration paid for acquisition											$ 150,000,000
Remaining percentage of interest acquired in Tarino shares in Option Shares											49.00%
Call and put option price											170,000,000
Percentage of investment in Bitel at cost as the Group did not regain operational control															51.00%
Impairment liability	349,400,000	10,500,000,000												170,000,000
Payment for Option Shares								170,000,000				170,000,000
Damages								5,900,000
Interest and other costs								34,900,000
Liability under the arbitration award			213,152,000		210,760,000			210,800,000
Additional liabilities under the arbitration award			3,200,000		40,800,000
Total notes			3,361,882,000		3,322,852,000				400,000,000	400,000,000
Expected term under the Rules of the London Court of International Arbitration						6	12
Worth of VimpelCom common shares that Altimo Cooperatief U.A lodged with the lsle of Man court				500,000,000
Number of Isle of Man companies named defendants in lawsuits filed by Bitel seeking the return of dividends received by them													3
Return of dividends received sought under lawsuits													25,200,000
Losses and accrued interest sought under lawsuits													$ 3,700,000

XML

OPERATIONS IN TURKMENISTAN (Tables)

12 Months Ended

Dec. 31, 2011

OPERATIONS IN TURKMENISTAN

Impairment charges related to suspension of operations in Turkmenistan

Impairment of long-lived assets	$	119,580
Provision for doubtful accounts		11,462
General and administrative expenses		4,280
Other operating expenses		2,500
	$	137,822

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Allowance for doubtful accounts
Movement in valuation allowances and reserves
Balance, beginning of year	$ 120,468	$ 97,653	$ 69,603
Charged to Costs and Expenses	101,967	123,352	105,260
Deductions and Other Adjustments	(125,474)	(100,537)	(77,210)
Balance, end of year	96,961	120,468	97,653
Valuation allowance for deferred tax assets
Movement in valuation allowances and reserves
Balance, beginning of year	165,994	182,308	26,744
Charged to Costs and Expenses			78,761
Deductions and Other Adjustments	(2,919)	(16,314)	76,803
Balance, end of year	$ 163,075	$ 165,994	$ 182,308

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED STATEMENTS OF OPERATIONS
Services revenue and connection fees, related party	$ 13,481	$ 52,257	$ 72,149
Cost of services, excluding depreciation and amortization, related party	15,878	43,620	50,389
General and administrative expenses, related party	62,717	83,305	66,677
Sales and marketing expenses, related party	83,183	135,622	127,106
Other operating expenses, related party	538	9,796	12,207
Interest income, related party	19,079	21,640	53,940
Interest expense, net of capitalized interest, related party	423	608	3,613
Impairment of investments, related party			$ 349,370

XML

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Details 2) (USD $)	1 Months Ended	12 Months Ended			1 Months Ended		12 Months Ended
	Feb. 28, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Feb. 28, 2010 Syndicated Loan Facility granted to MTS OJSC in 2009	Oct. 30, 2010 Syndicated Loan Facility granted to MTS OJSC in 2006	Dec. 31, 2011 Cash flow hedging	Dec. 31, 2010 Cash flow hedging	Dec. 31, 2009 Cash flow hedging	Dec. 31, 2011 Interest rate swaps Cash flow hedging	Dec. 31, 2010 Interest rate swaps Cash flow hedging	Dec. 31, 2009 Interest rate swaps Cash flow hedging	Dec. 31, 2011 Cross-currency interest rate swaps Cash flow hedging	Dec. 31, 2010 Cross-currency interest rate swaps Cash flow hedging	Dec. 31, 2009 Cross-currency interest rate swaps Cash flow hedging
Effect of derivative instruments designated as hedges on the consolidated statements of operations
Loss recognized on derivatives				$ (5,420,000)			$ (15,364,000)	$ (70,546,000)	$ (32,691,000)	$ (13,502,000)	$ (32,726,000)	$ (8,392,000)	$ (1,862,000)	$ (37,820,000)	$ (24,299,000)
Ineffective portion of derivative included in earnings							6,116,000	5,552,000	(5,481,000)	7,978,000	3,541,000	(976,000)	(1,862,000)	2,011,000	(4,505,000)
Voluntary prepayment of principal and interest	46,300,000	308,565,000	4,779,595,000	1,728,544,000	707,400,000	162,200,000
Accumulated other comprehensive loss reclassified into earnings upon termination of hedge							(2,032,000)	(15,248,000)		(2,032,000)	(12,020,000)			(3,228,000)
Changes in derivative instruments designated as hedges in accumulated other comprehensive income
Accumulated derivatives loss, beginning of the year							(14,865,000)	(40,293,000)	(16,714,000)
Fair value adjustments on hedging derivatives		7,364,000	25,428,000	(23,579,000)			(3,181,000)	(39,757,000)	(28,764,000)
Amounts reclassified into earnings during the period							10,545,000	65,185,000	5,185,000
Accumulated derivatives loss, end of the year							(7,501,000)	(14,865,000)	(40,293,000)
Changes in tax effect derivative instruments designated as hedges in accumulated other comprehensive income
Accumulated derivatives loss tax portion, beginning of the year							3,716,000	10,073,000	4,179,000
Fair value adjustments on hedging derivatives net of tax		(1,841,000)	(6,357,000)	5,895,000			795,000	9,939,000	7,191,000
Amounts reclassified into earnings during the period, tax portion							(2,636,000)	(16,296,000)	(1,296,000)
Accumulated derivatives loss tax portion, end of the year							1,875,000	3,716,000	10,073,000
Net loss expected to be reclassified into net income during the next twelve months							$ 9,100,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Dec. 31, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

        Accounting principles—The Group's entities maintain accounting books and records in local currencies of their domicile in accordance with the requirements of respective accounting and tax legislation. 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 accounting principles generally accepted in the United States ("U.S. GAAP") and are expressed in terms of U.S. Dollars.

        The accompanying consolidated financial statements differ from the financial statements used for statutory purposes in that they reflect certain 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. All intercompany accounts and transactions are eliminated upon consolidation. Those ventures where the Group exercises significant influence but does not have operating and financial control are accounted for using the equity method. 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 statements of financial position. 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 13. Results of operations of subsidiaries acquired are included in the consolidated statements of operations from the date of their acquisition.

        For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without additional support and (2) the equity holders bear the economic residual risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Group consolidates those entities it controls either through a majority voting interest or otherwise. For entities that do not meet these criteria, commonly known as variable interest entities ("VIEs"), the Group consolidates those entities where the Group has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

        As of December 31, 2011 and 2010, the Company had investments in the following significant legal entities:

		December 31,
	Accounting method
		2011			2010
Barash Communications Technologies, Inc. ("BCTI")	Consolidated		100.0	%		100.0	%
Comstar-Regions	Consolidated		100.0	%		73.3	%
MTS Bermuda(1)	Consolidated		100.0	%		100.0	%
MTS Finance(2)	Consolidated		100.0	%		100.0	%
MTS Ukraine(3)	Consolidated		100.0	%		100.0	%
Multiregion(4)	Consolidated		—			100.0	%
RTC	Consolidated		100.0	%		100.0	%
Sibintertelecom	Consolidated		100.0	%		100.0	%
TVT	Consolidated		100.0	%		—
Infocentr	Consolidated		100.0	%		—
Inteleca Group	Consolidated		100.0	%		—
Altair	Consolidated		100.0	%		—
Sistema Telecom	Consolidated		100.0	%		100.0	%
TS-Retail	Consolidated		100.0	%		96.0	%
Uzdunrobita	Consolidated		100.0	%		100.0	%
Metro-Telecom	Consolidated		95.0	%		95.0	%
Moscow City Telephone Network ("MGTS")	Consolidated		94.1	%		51.3	%
K-Telecom	Consolidated		80.0	%		80.0	%
MTS International Funding Limited ("MTS International")	Consolidated		VIE			VIE
Comstar-UTS(5)	Consolidated		—			73.3	%
Dagtelecom(5)	Consolidated		—			100.0	%
Evrotel(5)	Consolidated		—			100.0	%
Intellect Telecom	Equity		47.0	%		22.5	%
MTS Belarus	Equity		49.0	%		49.0	%

(1)

A wholly-owned subsidiary established to repurchase the Company's ADSs.

(2)

Represents beneficial ownership.

(3)

Legal entity Ukrainian Mobile Communications was renamed to MTS Ukraine in 2010.

(4)

Merged with Comstar-Regions on December 6, 2011.

(5)

Merged with MTS OJSC on April 1, 2011.

        The Group consolidates MTS International, a private company organized and existing as a private limited company under the laws of Ireland, which qualified as a variable interest entity under Financial Accounting Standards Board Accounting Standards Codification ("ASC") 810, Consolidation. The Group is the primary beneficiary of MTS International. MTS International was established for the purpose of raising capital through the issuance of debt securities on the Irish Stock Exchange followed by transferring the proceeds through a loan facility to the Group. In 2010, MTS International issued $750.0 million 8.625% notes due in 2020 (Note 16). Total liabilities of the consolidated variable interest entity amounted to $751.6 million as of December 31, 2011 and 2010.

        Functional currency translation methodology—As of December 31, 2011, the functional currencies of Group entities were as follows:

• •

  For entities incorporated in the Russian Federation, MTS Bermuda, MTS Finance and MTS International—the Russian ruble ("RUB");

  •

  For MTS Ukraine—the Ukrainian hryvnia;

  •

  For the Turkmen branch of BCTI—the Turkmenian manat;

  •

  For K-Telecom—the Armenian dram;

  •

  For MTS Belarus—the Belarusian ruble / U.S. Dollar ("USD");

  •

  For Uzdunrobita and other entities—the U.S. Dollar.

        Until October 1, 2011, the functional currency for MTS Belarus, the Group's equity investee, was the local country currency. However, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary. The Group reevaluated the functional currency criteria under ASC 830 Foreign Currency Matters, and determined that, starting October 1, 2011, the functional currency of MTS Belarus was the U.S. Dollar. The impact of the change in functional currency of MTS Belarus on the Group's consolidated financial statements was an increase in the carrying value of investments and advances in associates by $88.8 million as of October 1, 2011.

        The Group's reporting currency is U.S. Dollars. Remeasurement of the financial statements into functional currencies, where applicable, and translation of financial statements into U.S. Dollars has been performed as follows:

        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 entities whose records are maintained in their functional currency, which is other than the reporting currency, all year-end assets and liabilities have been translated into U.S. Dollars at the period-end exchange rate. Revenues and expenses have been translated at the 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 and inventory obsolescence, valuation allowance for deferred tax assets for which it is more likely than not the assets will not be realized, the valuation of assets acquired and liabilities assumed in business combinations and income tax benefits, the recoverability of investments and the valuation of goodwill, intangible assets, other long-lived assets, certain accrued liabilities and financial instruments.

        Cash and cash equivalents—Cash and cash equivalents represent cash on hand and in bank accounts and short-term investments, including term deposits, having original maturities of less than three months.

        Short-term investments and loans—Short-term investments generally represent investments in promissory notes, loans and time deposits which have original maturities in excess of three months and are repayable in less than twelve months. These investments are being accounted for at amortized cost.

        Long-term investments and loans—Long-term financial instruments consist primarily of long-term investments and loans and long-term debt. Since quoted market price are not readily available for all of its long-term investments and loans, the Group estimates their fair values based on the use of estimates incorporating various unobservable market inputs.

        Property, plant and equipment—Property, plant and equipment, including improvements 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. 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.

        Accounts receivable—Accounts receivable are stated net of allowance for doubtful accounts. Concentrations of credit risk with respect to trade receivables are limited due to a highly diversified customer base, which includes a large number of individuals, private businesses and state-financed institutions.

        Provision for doubtful accounts—The Group provides an allowance for doubtful accounts based on management's periodic review for recoverability of accounts receivable, advances given, loans and other receivables. Such allowance reflects either specific cases, collection trends or estimates based on evidence of collectability. For changes in the provision for doubtful accounts receivable see Note 7.

        Inventory and spare parts—Inventory is 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.

        Asset retirement obligations—The Group calculates asset retirement obligations 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 Group's obligations relate primarily to the cost of removing its equipment from sites. The Group recorded the present value of asset retirement obligations as other long-term liabilities in the consolidated statement of financial position.

        License costs—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 varies from three to fifteen years.

        Goodwill—For acquisitions before January 1, 2009 goodwill represents an excess of the consideration paid over the fair market value of net identifiable assets acquired in purchase business combinations and is not amortized. For the acquisitions after January 1, 2009 goodwill is determined as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. 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 the authoritative guidance on 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, the Group recognizes a loss for the difference between the carrying amount and the implied fair value of goodwill.

        Impairment of long-lived assets—The Group periodically evaluates the recoverability of the carrying amount of its long-lived assets. Whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable, the Group 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, the Group 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 $19.0 million, $127.9 million and $75.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. An impairment loss in the amount of $119.6 million for the year ended December 31, 2010 was recognized as a result of license suspension from the Group's subsidiary in Turkmenistan (Note 4).

        Subscriber prepayments—The Group requires the majority of its customers to pay in advance for telecommunications services. All amounts received in advance of services provided are recorded as a 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—Revenue includes all revenues from the ordinary business activities of the Group. Revenues are recorded net of value-added tax. They are recognized in the accounting period in which they are earned in accordance with the realization principle.

        Revenues derived from wireless, local telephone, long distance, data and video services are recognized when services are provided. This is based upon either usage (minutes of traffic processed, volume of data transmitted) or period of time (monthly subscription fees).

        The content revenue is presented net of related costs when the Group acts as an agent of the content providers while the gross revenue and related costs are recorded when the Group is a primary obligor in the arrangement.

        Upfront fees received for connection of new subscribers, installation and activation of wireless, wireline and data transmission services ("connection fees") are deferred and recognized over the estimated average subscriber life, as follows:

Mobile subscribers	1 - 5 years
Residential wireline voice phone subscribers	15 years
Residential subscribers of broadband internet service	1 year
Other fixed line subscribers	3 - 5 years

        The Group calculates an average life of mobile subscribers for each region in which it operates and amortizes regional connection fees.

        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, the Group 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.

        Prepaid cards—The Group sells prepaid cards to subscribers, separately from the handset. Prepaid cards, used as a method of cash collection, are accounted for as customer advances. 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. Revenue from the sale of prepaid cards is deferred until the service is rendered to the customer uses the airtime or the card expires.

        Roaming discounts—The Group enters into roaming discount agreements with a number of wireless operators. According to the terms of the agreements the Group 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 the authoritative guidance on customer payments and incentives. 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 its consolidated statement of financial position.

        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, 2011, 2010 and 2009, were $305.2 million, $319.7 million and $321.0 million, respectively.

        Retirement benefit and social security costs—The Group contributes to the local state pension and social funds, on behalf of all its employees.

        In Russia all social contributions paid during the year ended December 31, 2011 are represented by payments to governmental social funds, including the Pension Fund of the Russian Federation, the Social Security Fund of the Russian Federation and the Medical Insurance Fund of the Russian Federation.

        A direct contribution to those funds replaced payments of unified social tax ("UST") with the UST being abolished effective January 1, 2010. The contributions are expensed as incurred. The amount of social contributions recognized by the Group in Russia amounted to $200.0 million, $127.6 million and $96.3 million in 2011, 2010 and 2009, respectively.

        MGTS, a subsidiary of the Group, has historically offered its employees certain benefits upon and after retirement. The cost of such benefits includes interest costs, current service costs, amortization of prior service costs, net actuarial loss. The expense is recognized during an employee's years of active service with MGTS. The recognition of expense for retirement pension plans is impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets, future rates of compensation increase and other related assumptions. The Group accounts for pension plans in accordance with the requirements of the Financial Accounting Standards Board ("FASB") authoritative guidance on retirement benefits.

        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 Ukraine amounted to $62.1 million, $70.5 million and $64.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts contributed to the pension funds in Uzbekistan, Turkmenistan and Armenia were not significant.

        Financial instruments and hedging activities—From time to time, to optimize the structure of business acquisitions and to defer payment of the purchase price, the Group enters into put and call option agreements to acquire the remaining noncontrolling stakes in newly acquired subsidiaries. As these put and call option agreements are not freestanding, the underlying shares of such put and call options are classified as redeemable securities and are accounted for at redemption value which is the fair value of redeemable noncontrolling interests as of the reporting date. The fair value of redeemable noncontrolling interests is measured using the discounted future cash flows techniques, subject to applicable caps. The noncontrolling interest is measured at fair value using the discounted cash flow technique utilizing significant unobservable inputs ("Level 3" significant unobservable inputs of the hierarchy established by the U.S. GAAP guidance). Changes in redemption value of redeemable noncontrolling interests are accounted for in the Group's retained earnings. Redeemable noncontrolling interests are presented as temporary equity in the consolidated statement of financial position.

        The Group uses derivative instruments, including swap, forward and option contracts to manage foreign currency and interest rate risk exposures. The Group measures derivatives at fair value and recognizes them as either other current or other non-current assets or liabilities in the consolidated statement of financial position. The Group reviews its fair value hierarchy classifications quarterly. Changes in significant observable valuation inputs identified during these reviews may trigger reclassification of fair value hierarchy levels of financial assets and liabilities. During the years ended December 31, 2011, 2010 and 2009 no reclassifications occurred. The fair value measurement of the Group's derivative instruments is based on the observable yield curves for similar instruments ("Level 2" of the hierarchy established by the U.S. GAAP guidance).

        The Group designates derivatives as either fair value hedges or cash flow hedges in case the required criteria are met. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated statement of operations together with any changes in the fair value of the hedged asset or liability that is attributed to the hedged risk.

        The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in accumulated other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of operations. For derivatives that do not meet the conditions for hedge accounting, gains and losses from changes in the fair value are included in the consolidated statement of operations (Note 19).

        Assets and liabilities related to multiple derivative contracts with one counterparty are not offset by the Group.

        The Group does not use financial instruments for trading or speculative 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. The fair value of issued notes as of December 31, 2011, is disclosed in Note 16 and is based on quoted prices in active markets.

        Based on current market interest rates available to the Group for long-term borrowings with similar terms and maturities, the Group believes the fair value of other fixed rate debt including capital lease obligations and the fair value of variable rate debt approximated its carrying value as of December 31, 2011.

        Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

        Level 1—Quoted prices in active markets for identical assets or liabilities;

        Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities;

        Level 3—No observable pricing inputs in the market.

        Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

        Stock-based compensation—The Group accounts for stock-based compensation under the authoritative guidance on share based compensation. Under the provisions of this guidance companies must calculate and record the cost of equity instruments, such as stock options awarded to employees for services received, in the statements of operation. 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. Compensation cost related to phantom stock options granted to our employees recognized in the Group's consolidated statement of operations as of December 31, 2011, 2010 and 2009 amounted to $16.0 million, $7.8 million, $(0.3) million, respectively

        New and adopted accounting pronouncements—In October 2009, the FASB amended the revenue recognition for multiple deliverable arrangements guidance to require the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This updated guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance, effective January 1, 2011, did not have a significant impact on the Group's consolidated financial statements.

        In June 2011, the FASB amended its guidance on the presentation of comprehensive income. Under the amended guidance, an entity has the option to present comprehensive income in either one continuous statement or two consecutive financial statements. A single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income. In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option under the current guidance that permits the presentation of components of other comprehensive income as part of the statement of changes in stockholders' equity has been eliminated. The amendment becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. This guidance will not have an impact on the Group's consolidated financial statements as it is disclosure-only in nature.

        In September 2011, the FASB updated the authoritative guidance on testing goodwill for impairment. The update gives entities carrying out goodwill impairment test an option of performing qualitative assessment before calculating the fair value of a reporting unit. If an entity determines, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The guidance is effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Group's consolidated financial statements.

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RELATED PARTIES (Tables)

12 Months Ended

Dec. 31, 2011

RELATED PARTIES

Schedule of accounts receivable from and accounts payable to related parties

	December 31,
	2011		2010
Accounts receivable:
Sitronics, a subsidiary of Sistema	$	2,736	$	1,320
Intellect Telecom, a subsidiary of Sistema		359		117
Other related parties		1,393		1,236
Total accounts receivable, related parties	$	4,488	$	2,673
Accounts payable:
Sitronics, a subsidiary of Sistema	$	42,715	$	37,007
Maxima, a subsidiary of Sistema		11,986		8,965
Other related parties		2,281		7,012
Total accounts payable, related parties	$	56,982	$	52,984

Schedule of operating transactions with related parties

	2011		2010		2009
Revenues from related parties:
MTS Belarus (roaming services)	$	6,520	$	2,589	$	—
Sitronics and subsidiaries (fixed line services)	$	4,218	$	3,577	$	3,656
Svyazinvest and subsidiaries (interconnection, commission for provision of DLD/ILD services to the Group's subscribers and other)	$	—	$	33,869	$	43,174
Sky Link and subsidiaries (interconnection and other)		—		7,395		9,857
Mezhregion Tranzit Telecom (interconnection, line rental, commission for provision of DLD/ILD services to the Group's subscribers, and other)		—		—		11,465
Other related parties		2,743		4,827		3,997
Total revenues from related parties	$	13,481	$	52,257	$	72,149
Operating expenses incurred on transactions with related parties:
RA Maxima, a subsidiary of Sistema (advertising)	$	81,905	$	76,158	$	102,005
Sitronics, a subsidiary of Sistema (IT consulting)		48,023		56,610		52,211
MTS Belarus, an associated company of the Group		10,516		5,539		—
AB Safety, an affiliate of Sistema (security services)		10,075		9,267		5,576
Mediaplanning, a subsidiary of Sistema (advertising)		1,005		59,171		23,782
Svyazinvest and subsidiaries (interconnection and other)		—		29,210		28,997
Sistema-Invenchur, (consulting services related to the sale of Svyazinvest shares (Note 14))		—		11,262		—
City Hals (rent, repair, maintenance and cleaning services)		—		9,542		9,988
Mezhregion Tranzit Telecom (interconnection, line rental and other)		—		—		18,115
Other related parties		10,792		15,584		15,705
Total operating expenses incurred on transactions with related parties	$	162,316	$	272,343	$	256,379

Schedule of investments in and loans to related parties

	December 31,
	2011		2010
Loans to, promissory notes and investments in shares of related parties:
Other investments (Note 15)
Sistema	$	19,209	$	24,455
Loan receivable from Mr Pierre Fattouche and Mr Moussa Fattouche		92,700		91,503
Total other investments to related parties	$	111,909	$	115,958
Investments in shares (Note 15)
MBRD, a subsidiary of Sistema		4,930		5,208
Sistema Mass Media, a subsidiary of Sistema		3,622		3,827
Other		946		728
Total investments in shares of related parties	$	9,498	$	9,763

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BORROWINGS (Details) In Thousands, unless otherwise specified									1 Months Ended
	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2011 MTS International Notes due 2020 USD ($)	Dec. 31, 2010 MTS International Notes due 2020 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2020 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2020 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2016 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2016 USD ($)	May 31, 2011 MTS OJSC Notes due 2014 USD ($)	May 31, 2011 MTS OJSC Notes due 2014 RUB	Dec. 31, 2011 MTS OJSC Notes due 2014 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2014 USD ($)	Dec. 31, 2011 MTS Finance Notes due 2012 USD ($)	Dec. 31, 2010 MTS Finance Notes due 2012 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2017 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2017 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2018 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2018 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2015 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2015 USD ($)	Dec. 31, 2011 MTS OJSC Notes due 2013 USD ($)	Dec. 31, 2010 MTS OJSC Notes due 2013 USD ($)
Notes
Interest rate (as a percent)			8.625%	8.625%	8.15%	8.15%	14.25%	14.25%			7.60%	16.75%	8.00%	8.00%	8.70%	8.70%	8.00%	8.00%	7.75%	7.75%	7.00%	7.00%
Plus: unamortized premium	$ 608
Less: unamortized discount	(15)	(202)
Total notes	3,361,882	3,322,852	750,000	750,000	465,895	492,176	465,895	492,176			422,988	492,176	400,000	400,000	310,597	328,117	298,499	315,337	234,097	39,823	13,318	13,249
Less: current portion	(865,880)	(492,176)
Total notes, long-term	2,496,002	2,830,676
Repurchase of MTS OJSC Notes									39,300	1,100,000
% of par			107.33%		96.90%		103.60%				97.55%		100.50%		96.15%		101.50%		97.50%		95.00%
Fair value	$ 3,396,274		$ 804,975		$ 451,452		$ 482,667				$ 412,625		$ 402,000		$ 298,639		$ 303,019		$ 228,245		$ 12,652

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SUBSEQUENT EVENTS (Details) (Repayment of debt, USD $) In Millions, unless otherwise specified	1 Months Ended
	Feb. 28, 2012 RUB-Denominated, Gazprombank, first loan, maturing during 2013-2015	Mar. 31, 2012 RUB-Denominated, Bank of Moscow maturing in 2013	Mar. 16, 2012 RUB-Denominated, Bank of Moscow maturing in 2013
Subsequent events
Voluntary Repayment of amount due under credit facilities	$ 472.1	$ 310.6
Amount outstanding under credit facility			$ 434.8

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BUSINESS ACQUISITIONS AND DISPOSALS (Details)		12 Months Ended																														1 Months Ended	12 Months Ended																	12 Months Ended			12 Months Ended		12 Months Ended			12 Months Ended		12 Months Ended			1 Months Ended							1 Months Ended	3 Months Ended			1 Months Ended									12 Months Ended
	Jan. 31, 2009 USD ($)	Dec. 31, 2010 Brand M	Dec. 31, 2011 Regional fixed line operators acquired in 2011 USD ($)	Dec. 31, 2010 Regional fixed line operators acquired in 2011 USD ($)	Dec. 31, 2011 Regional fixed line operators acquired in 2011 Acquired customer base Minimum Y	Dec. 31, 2010 Regional fixed line operators acquired in 2011 Acquired customer base Minimum Y	Dec. 31, 2011 Regional fixed line operators acquired in 2011 Acquired customer base Maximum Y	Dec. 31, 2010 Regional fixed line operators acquired in 2011 Acquired customer base Maximum Y	Dec. 31, 2011 Regional fixed line operators acquired in 2011 Customer base USD ($)	Dec. 31, 2011 Inteleca USD ($)	Apr. 30, 2011 Inteleca	Dec. 31, 2011 Inteleca Customer base USD ($)	Dec. 31, 2011 Infocentr USD ($)	Apr. 30, 2011 Infocentr	Dec. 31, 2011 Infocentr Customer base USD ($)	Dec. 31, 2011 Altair USD ($)	Aug. 31, 2011 Altair	Dec. 31, 2011 Altair Customer base USD ($)	Dec. 31, 2011 TVT USD ($)	Oct. 31, 2011 TVT	Dec. 31, 2010 Sistema Telecom USD ($)	Dec. 31, 2010 Sistema Telecom RUB	Dec. 27, 2010 Sistema Telecom USD ($)	Dec. 27, 2010 Sistema Telecom RUB	Apr. 30, 2011 TS-Retail	Dec. 31, 2010 TS-Retail	Sep. 30, 2010 TS-Retail	Jun. 30, 2010 TS-Retail	Aug. 31, 2010 Metro-Telecom	Aug. 27, 2010 Metro-Telecom USD ($)	Aug. 27, 2010 Metro-Telecom RUB	Jul. 31, 2010 Multiregion. USD ($) city	Dec. 31, 2011 Multiregion. USD ($)	Jul. 31, 2010 Multiregion. Acquired customer base USD ($)	Jun. 30, 2010 SWEET-COM USD ($)	Feb. 28, 2005 SWEET-COM	Dec. 31, 2011 Acquisitions where purchase price allocations were not finalized USD ($)	Dec. 31, 2011 Acquisitions where purchase price allocations were finalized USD ($)	Dec. 31, 2010 Regional fixed line operators acquired in 2010 USD ($)	Dec. 31, 2010 Regional fixed line operators acquired in 2010 Customer base USD ($)	Dec. 31, 2010 Tenzor Telecom USD ($)	Feb. 28, 2010 Tenzor Telecom	Dec. 31, 2010 Penza Telecom USD ($)	Jun. 30, 2010 Penza Telecom	Dec. 31, 2010 Penza Telecom Customer base USD ($)	Dec. 31, 2010 NMSK USD ($)	Dec. 31, 2010 NMSK Customer base USD ($)	Dec. 31, 2010 Lanck Telecom USD ($)	Dec. 31, 2010 Lanck Telecom Customer base USD ($)	Dec. 31, 2010 Retail chains USD ($)	Dec. 31, 2009 Retail chains USD ($)	Dec. 31, 2009 Retail chains Brand USD ($)	Dec. 31, 2009 Telefon.ru USD ($) M	Feb. 28, 2009 Telefon.ru	Dec. 31, 2009 Eldorado USD ($) M	Mar. 30, 2009 Eldorado	Dec. 31, 2009 Eldorado Brand USD ($)	Dec. 31, 2009 Teleforum USD ($) M	Oct. 31, 2009 Teleforum	Dec. 31, 2011 Evrotel USD ($)	Dec. 31, 2009 Evrotel USD ($)	Dec. 31, 2009 Evrotel Acquired customer base USD ($)	Sep. 30, 2010 Comstar-UTS	Dec. 31, 2009 Comstar-UTS USD ($)	Oct. 06, 2010 Comstar-UTS USD ($)	Oct. 06, 2010 Comstar-UTS RUB	Oct. 31, 2009 Comstar-UTS USD ($)	Oct. 12, 2009 Comstar-UTS USD ($)	Oct. 12, 2009 Comstar-UTS RUB	Apr. 30, 2011 Comstar UTS merger into MTS	Mar. 31, 2011 Comstar UTS merger into MTS USD ($)	Dec. 31, 2011 Comstar UTS merger into MTS	Apr. 01, 2011 Comstar UTS merger into MTS	Dec. 31, 2009 MGTS USD ($)	Dec. 31, 2011 MGTS	Dec. 30, 2011 MGTS	Dec. 01, 2011 MGTS USD ($)	Dec. 01, 2011 MGTS RUB	Dec. 17, 2009 MGTS RUB	Sep. 30, 2009 Kolorit Dizayn USD ($)	Sep. 30, 2009 Kolorit Dizayn Brand USD ($)	Jan. 31, 2009 Dagtelecom acquisition USD ($)	Dec. 31, 2011 Companies acquired from third parties in 2011 USD ($)
Business acquisitions
Percentage of ownership acquired											100.00%			100.00%			100.00%			100.00%	100.00%	100.00%							95.00%			100.00%				74.90%						100.00%		100.00%		100.00%		100.00%						100.00%		100.00%			100.00%		100.00%		9.00%	61.97%			50.91%							14.20%	29.00%					100.00%
Percentage of ownership acquired																																																																												94.10%
Debt assumed																																																																													$ 331,500,000	10,410,000,000
Purchase price																							378,980,000	11,590,000,000						11,010,000	339,350,000				8,500,000																										90,000,000							1,320,000,000	39,150,000,000								336,300,000	10,560,000,000				51,300,000
Promissory notes previously issued by MTS held by Sistema Telecom on the acquisition date																					65,500,000	2,000,000,000
Voting interest of TS-Retail held by Sistema Telecom on the acquisition date (as a percent)																					45.00%	45.00%
Cash consideration																																123,600,000																												16,100,000	90,000,000			8,300,000										7,300,000						39,700,000
Number of cities in Russian Federation where business has a presence																																37
Purchase price allocation
Current assets			14,488,000							853,000			2,840,000			3,172,000			7,623,000													46,776,000							5,996,000		711,000		1,076,000			2,575,000		1,634,000			54,399,000		48,979,000		2,467,000			2,953,000			14,300,000																			993,000
Property, plant and equipment			48,800,000							10,812,000			2,585,000			3,739,000			31,664,000																				25,841,000		2,191,000		2,407,000			10,625,000		10,618,000
Non-current assets																																46,732,000																			3,971,000		2,315,000		911,000			745,000			67,960,000																			11,788,000
Finite-lived intangible assets									20,062,000			2,217,000			4,820,000			13,025,000																76,376,000						27,848,000					15,603,000		5,512,000		6,733,000			374,000					374,000					4,726,000																			2,097,000
Goodwill			185,690,000							10,662,000			14,711,000			12,726,000			147,591,000													148,743,000					147,600,000	38,100,000	39,242,000		6,616,000		7,394,000			14,113,000		11,119,000			162,258,000		123,333,000		29,875,000			9,050,000			98,542,000																			27,109,000
Other non-current assets			3,470,000							22,000			17,000			1,618,000			1,813,000																				461,000							124,000		337,000
Current liabilities			(44,090,000)							(4,491,000)			(8,547,000)			(5,542,000)			(25,510,000)													(126,780,000)							(27,054,000)		(3,142,000)		(4,369,000)			(8,607,000)		(10,936,000)			(124,563,000)		(108,701,000)		(12,248,000)			(3,614,000)			(75,528,000)																			(2,098,000)
Non-current liabilities			(5,650,000)							(875,000)			(989,000)			(3,148,000)			(638,000)													(44,007,000)							(5,537,000)		(130,000)		(2,779,000)			(944,000)		(1,684,000)			(6,041,000)		(5,926,000)		(115,000)																									(235,000)
Fair value of noncontrolling interest																																(24,244,000)
Fair value of contingent consideration																																																			(10,348,000)				3,414,000			(6,934,000)		(2,400,000)	(20,000,000)
Consideration paid			222,770,000							19,200,000			15,437,000			25,590,000			162,543,000													123,596,000							66,797,000		6,246,000		19,332,000			23,398,000		17,821,000			80,050,000		60,000,000		17,850,000			2,200,000							271,890,000	8,280,000,000														39,654,000
Consideration paid																																123,600,000																												16,100,000	90,000,000			8,300,000										7,300,000						39,700,000
Noncontrolling interest acquired																																	23,960,000
Business acquisitions
Remaining percentage of voting interests acquired																																			25.10%
Ownership interest immediately prior to acquisition (as a percent)																												0.25
Ownership interest after acquisition (as a percent)																									100.00%			40.00%							100.00%																												70.97%												99.01%
Preferred shares ownership interest after acquisition (as a percent)																																																																											69.70%
Effective direct and indirect ownership interests (as a percent)																										96.04%	50.95%
Additional stake in TS-Retail as a result of acquisition of Sistema Telecom (as a percent)																										45.00%
Amortization period		6			8	8	14	12
Contingent consideration																																																					25,000,000		5,000,000			8,800,000			20,000,000
Remaining part of the contingent consideration																																																												3,900,000
Time period for contingent consideration payment, low end of range (in months)																																																					12
Time period for contingent consideration payment, high end of range (in months)																																																					18
Time period for contingent consideration payment (in months)																																																							12			12
Difference between the fair value of contingent consideration and the actual amount paid charged to other operating expenses																																																		41,800,000
Change in fair value of contingent consideration																																																												1,500,000
Consideration paid per global depository receipt ("GDR")																																																																				$ 6.21	184.02
Excess of consideration over the carrying value of net assets recorded as a reduction to additional paid-in capital																																																																			1,070,000,000
Excess of consideration over the carrying value of net assets recorded as a reduction to retained earnings																																																																			242,700,000
Consideration paid in ordinary MTS OJSC shares (in shares)																																																																										31,816,462
Value of ordinary MTS OJSC shares based on the MICEX price																																																																															7,170,000,000
Value of ordinary MTS OJSC shares based on the MICEX price (in RUB per share)																																																																															225.4
MTS shares outstanding issued (as a percent)																																																																										1.60%
Number of preferred shares acquired																																																																										11,135,428
Number of ordinary shares acquired																																																															37,614,087	46,232,000										2,462,687
Percentage of Comstar-UTS shares outstanding received																																																																11.06%
Cash consideration paid to Comstar-UTS																																123,600,000																												16,100,000	90,000,000			8,300,000										7,300,000						39,700,000
Ownership interest after acquisition excluding treasury shares (as a percent)																																																															73.33%
Redeemed amount of shares																																																																							168,800,000
Number of remaining shares held by non-controlling interest shareholders																																																																									98,853,996
Exchange ratio (in shares)																																																																						0.825
Increase in charter capital (in shares)																																																																						73,087,424
Charter capital (in shares)																																																																								2,066,413,562
Glaxen Corp. ownership stake (as a percent)																																																																																		25.50%
Pro forma results of operations
Net revenues			12,366,057,000	11,359,640,000
Net operating income			2,821,182,000	2,751,082,000
Net income			1,462,649,000	1,405,790,000
Earnings per share, basic and diluted			$ 0.74	$ 0.73
Loan receivable from Glaxen at the date of acquisition	12,500,000
Revenue and earnings of the companies acquired from third parties in 2011 since the acquisition date included in the consolidated statement of operations
Net revenues																																																																																			22,539,000
Net operating loss																																																																																			4,883,000
Net loss																																																																																			$ 3,353,000

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2011

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Cash flow hedging

        In 2009, 2008 and 2007 the Group entered into variable-to-fixed interest rate swap agreements to manage the exposure of changes in variable interest rate related to its debt obligations. The instruments qualify for cash flow hedge accounting under U.S. GAAP requirements. Each interest rate swap matches the exact maturity dates of the underlying debt allowing for highly-effective hedges. Interest rate swap contracts outstanding as of December 31, 2011 mature in 2012-2015.

        The Group entered into interest rate swap agreements designated to manage the exposure of changes in variable interest rate for 21.33% of its USD- and Euro-denominated bank loans outstanding as of December 31, 2011.

        Further, in 2009 the Group entered into several cross-currency interest rate swap agreements. These contracts hedged the risk of both interest rate and currency fluctuations and assumed periodic exchanges of both principal and interest payments from RUB-denominated amounts to USD and Euro-denominated amounts to be exchanged at a specified rate. The rate was determined by the market spot rate upon issuance. Cross-currency interest rate swap contracts matured in 2011.

        The following table presents the fair value of the Group's derivative instruments designated as hedges in the consolidated statements of financial position as of December 31, 2011 and 2010.

		December 31,
	Statement of financial position location	2011			2010
Asset derivatives
Interest rate swaps	Other non-current assets	$	2,341		$	3,322
Total		$	2,341		$	3,322
Liability derivatives
Interest rate swaps	Other long-term liabilities	$	(14,676	)	$	(31,315	)
Interest rate swaps	Other payables		(1,283	)		—
Cross-currency interest rate swaps	Other payables		—			(3,469	)
Total		$	(15,959	)	$	(34,784	)

        The following table presents the effect of the Group's derivative instruments designated as hedges in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009. The amounts presented include ineffective portion of derivative instruments and amounts reclassified into earnings from accumulated other comprehensive income.

		Year ended December 31,
	Location of loss recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(13,502	)	$	(32,726	)	$	(8,392	)
Cross-currency interest rate swaps	Currency exchange and transaction loss		(1,862	)		(37,820	)		(24,299	)
Total		$	(15,364	)	$	(70,546	)	$	(32,691	)

        The following table presents the amount of ineffective portion of Group's derivative instruments designated as hedges in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009.

		Year ended December 31,
	Location of gain/(loss) recognized	2011			2010		2009
Interest rate swaps	Interest expense	$	7,978		$	3,541	$	(0,976	)
Cross-currency interest rate swaps	Currency exchange and transaction gain/(loss)		(1,862	)		2,011		(4,505	)
Total		$	6,116		$	5,552	$	(5,481	)

        In February 2011 the Group repaid the full amount due under the Barclays bank credit facility granted in 2005 with an original maturity in 2014. The voluntary prepayment of principal and interest in the amount of $46.3 million resulted in an immediate termination of the hedging relationship between designated interest rate swap agreements and certain credit facility.

        In October 2010 the Group repaid the full amount due under the Syndicated Loan Facility granted to MTS OJSC in 2006 with an original maturity in 2011. The voluntary prepayment of principal and interest of $162.2 million resulted in an immediate termination of the hedging relationship between designated cross-currency interest rate swap agreements and the Syndicated Loan Facility.

        In February 2010 the Group repaid the full amount due under the Syndicated Loan Facility granted to MTS OJSC in 2009 with an original maturity in 2011-2012. The voluntary prepayment of principal and interest in the amount of $707.4 million resulted in an immediate termination of the hedging relationship between designated interest rate swap agreements and the Syndicated Loan Facility.

        After the termination of hedge relationships the amounts accumulated in other comprehensive income and associated with the prepaid debt have been reclassified to earnings, going forward those derivatives are marked to market through earnings. The following table presents the amount of accumulated other comprehensive loss reclassified into earnings (currency exchange and transaction loss and interest expense) during the years ended December 31, 2011, 2010 and 2009 due to termination of hedging relationships.

		Year ended December 31,
	Location of (loss) recognized	2011			2010			2009
Interest rate swaps	Interest expense	$	(2,032	)	$	(12,020	)	$	—
Cross-currency interest rate swaps	Currency exchange and transaction (loss)		—			(3,228	)		—
Total		$	(2,032	)	$	(15,248	)	$	—

        The following table presents the effect of the Group's interest rate swap agreements designated as hedges in accumulated other comprehensive income for the years ended December 31, 2011, 2010 and 2009.

	2011			2010			2009
Accumulated derivatives loss, beginning of the year, net of tax of $3,716, $10,073, $4,179, respectively	$	(14,865	)	$	(40,293	)	$	(16,714	)
Fair value adjustments on hedging derivatives, net of tax of $795, $9,939, $7,191, respectively		(3,181	)		(39,757	)		(28,764	)
Amounts reclassified into earnings during the period, net of tax of $(2,636), $(16,296), $(1,296), respectively		10,545			65,185			5,185
Accumulated derivatives loss, end of the year, net of tax of $1,875, $3,716, $10,073	$	(7,501	)	$	(14,865	)	$	(40,293	)

        As of December 31, 2011, the outstanding hedge instruments were highly effective. Approximately $9.1 million of net loss is expected to be reclassified into net income during the next twelve months.

        Cash inflows and outflows related to hedge instruments were included in cash flows from operating activities in the consolidated statement of cash flows for the years ended December 31, 2011, 2010 and 2009.

Non-designated derivative instruments

        Foreign currency options—In 2010 and 2009 the Group entered into foreign currency option agreements to manage the exposure to changes in currency exchange rates related to USD-denominated debt obligations. According to the agreements, the Group has a combination of put and call option rights to acquire $330.0 million at rates within a range specified in contracts. These contracts were not designated for hedge accounting purposes. These currency option agreements will mature in 2012.

        Buy-out put option—On December 23, 2010, simultaneously with the meeting of MTS' shareholders (Note 1), a meeting of Comstar-UTS' shareholders approved the reorganization of Comstar-UTS through a statutory merger into MTS OJSC. In accordance with Russian legislation, shareholders who voted against or did not vote on the merger have the right to sell their shares back to Comstar-UTS for cash at a price set by the company's Boards of Directors, subject to a statutory limit of 10% of the company's net asset value under Russian Accounting Standards. Eligible shareholders should file a buyout demand within 45 (forty five) days of the adoption of the resolution on reorganization. The buy-out of shares must be carried out within 30 days after the expiry of the period set for the buyout demand being made. The fair value of the Group's liability under the put option as of December 31, 2010 was estimated at $11.6 million using an option pricing model. The option was exercised in 2011.

        The following table presents the fair value of the Group's derivative instruments not designated as hedges in the consolidated statements of financial position as of December 31, 2011 and 2010.

		December 31,
	Statement of financial position location
		2011		2010
Asset derivatives:
Foreign currency options	Other non-current assets	$	—	$	247
Foreign currency options	Other current assets		894		—
Total		$	894	$	247
Liability derivatives:
Foreign currency options	Other payables	$		$	(92	)
Buy-out put option	Other payables		—		(11,636	)
Foreign currency options	Other long-term liabilities		—		(2,520	)
Total		$	—	$	(14,248	)

        The following table presents the effect of the Group's derivative instruments not designated as hedges on the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009.

		Year ended December 31,
	Location of gain/(loss) recognized	2011		2010		2009
Foreign currency options	Currency exchange and transaction gain/(loss)	$	3,258	$	1,916	$	(4,280	)
Purchased call option	Change in fair value of derivatives		—		—		(5,420	)
Currency forward	Currency exchange and transaction gain		—		—		12,788
Total		$	3,258	$	1,916	$	3,088

• Fair value of derivative instruments

        The Group measured assets and liabilities associated with derivative agreements at fair value Level 2 on a recurring basis and there were no assets and liabilities associated with derivative agreements measured at fair value Level 1 and Level 3 as of December 31, 2011 and 2010 (see Note 2).

        The following fair value hierarchy table presents information regarding the Group's assets and liabilities associated with derivative agreements as of December 31, 2011 and 2010:

	Significant other observable inputs (Level 2) as of December 31, 2011			Significant other observable inputs (Level 2) as of December 31, 2010
Assets:
Interest rate swap agreements	$	2,341			3,322
Currency option agreements		894			247
Liabilities:
Interest rate swap agreements	$	(15,959	)		(31,315	)
Buy-out put option		—			(11,636	)
Cross-currency interest rate swap agreements		—			(3,469	)
Currency option agreements		—			(2,612	)

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INVENTORY AND SPARE PARTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
INVENTORY AND SPARE PARTS
Handsets and accessories	$ 223,764	$ 234,166
Spare parts for telecommunication equipment	28,533	34,687
SIM cards and prepaid phone cards	10,445	21,879
Advertising materials	1,320	2,011
Other materials	27,013	27,213
Total inventory and spare parts	291,075	319,956
Obsolescence expense	$ 30,160	$ 27,825	$ 4,113

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Policies)

12 Months Ended

Dec. 31, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

Accounting principles

The Group's entities maintain accounting books and records in local currencies of their domicile in accordance with the requirements of respective accounting and tax legislation. 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 accounting principles generally accepted in the United States ("U.S. GAAP") and are expressed in terms of U.S. Dollars.

        The accompanying consolidated financial statements differ from the financial statements used for statutory purposes in that they reflect certain 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. All intercompany accounts and transactions are eliminated upon consolidation. Those ventures where the Group exercises significant influence but does not have operating and financial control are accounted for using the equity method. 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 statements of financial position. 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 13. Results of operations of subsidiaries acquired are included in the consolidated statements of operations from the date of their acquisition.

        For entities where (1) the total equity investment at risk is sufficient to enable the entity to finance its activities without additional support and (2) the equity holders bear the economic residual risks and returns of the entity and have the power to direct the activities of the entity that most significantly affect its economic performance, the Group consolidates those entities it controls either through a majority voting interest or otherwise. For entities that do not meet these criteria, commonly known as variable interest entities ("VIEs"), the Group consolidates those entities where the Group has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

        As of December 31, 2011 and 2010, the Company had investments in the following significant legal entities:

		December 31,
	Accounting method
		2011			2010
Barash Communications Technologies, Inc. ("BCTI")	Consolidated		100.0	%		100.0	%
Comstar-Regions	Consolidated		100.0	%		73.3	%
MTS Bermuda(1)	Consolidated		100.0	%		100.0	%
MTS Finance(2)	Consolidated		100.0	%		100.0	%
MTS Ukraine(3)	Consolidated		100.0	%		100.0	%
Multiregion(4)	Consolidated		—			100.0	%
RTC	Consolidated		100.0	%		100.0	%
Sibintertelecom	Consolidated		100.0	%		100.0	%
TVT	Consolidated		100.0	%		—
Infocentr	Consolidated		100.0	%		—
Inteleca Group	Consolidated		100.0	%		—
Altair	Consolidated		100.0	%		—
Sistema Telecom	Consolidated		100.0	%		100.0	%
TS-Retail	Consolidated		100.0	%		96.0	%
Uzdunrobita	Consolidated		100.0	%		100.0	%
Metro-Telecom	Consolidated		95.0	%		95.0	%
Moscow City Telephone Network ("MGTS")	Consolidated		94.1	%		51.3	%
K-Telecom	Consolidated		80.0	%		80.0	%
MTS International Funding Limited ("MTS International")	Consolidated		VIE			VIE
Comstar-UTS(5)	Consolidated		—			73.3	%
Dagtelecom(5)	Consolidated		—			100.0	%
Evrotel(5)	Consolidated		—			100.0	%
Intellect Telecom	Equity		47.0	%		22.5	%
MTS Belarus	Equity		49.0	%		49.0	%

(1)

A wholly-owned subsidiary established to repurchase the Company's ADSs.

(2)

Represents beneficial ownership.

(3)

Legal entity Ukrainian Mobile Communications was renamed to MTS Ukraine in 2010.

(4)

Merged with Comstar-Regions on December 6, 2011.

(5)

Merged with MTS OJSC on April 1, 2011.

        The Group consolidates MTS International, a private company organized and existing as a private limited company under the laws of Ireland, which qualified as a variable interest entity under Financial Accounting Standards Board Accounting Standards Codification ("ASC") 810, Consolidation. The Group is the primary beneficiary of MTS International. MTS International was established for the purpose of raising capital through the issuance of debt securities on the Irish Stock Exchange followed by transferring the proceeds through a loan facility to the Group. In 2010, MTS International issued $750.0 million 8.625% notes due in 2020 (Note 16). Total liabilities of the consolidated variable interest entity amounted to $751.6 million as of December 31, 2011 and 2010.

Functional currency translation methodology

As of December 31, 2011, the functional currencies of Group entities were as follows:

• •

  For entities incorporated in the Russian Federation, MTS Bermuda, MTS Finance and MTS International—the Russian ruble ("RUB");

  •

  For MTS Ukraine—the Ukrainian hryvnia;

  •

  For the Turkmen branch of BCTI—the Turkmenian manat;

  •

  For K-Telecom—the Armenian dram;

  •

  For MTS Belarus—the Belarusian ruble / U.S. Dollar ("USD");

  •

  For Uzdunrobita and other entities—the U.S. Dollar.

        Until October 1, 2011, the functional currency for MTS Belarus, the Group's equity investee, was the local country currency. However, the three-year cumulative inflation rate for Belarus exceeded 100 percent as of September 30, 2011, thereby meeting the quantitative requirement under U.S. GAAP for its economy to be considered highly inflationary. The Group reevaluated the functional currency criteria under ASC 830 Foreign Currency Matters, and determined that, starting October 1, 2011, the functional currency of MTS Belarus was the U.S. Dollar. The impact of the change in functional currency of MTS Belarus on the Group's consolidated financial statements was an increase in the carrying value of investments and advances in associates by $88.8 million as of October 1, 2011.

        The Group's reporting currency is U.S. Dollars. Remeasurement of the financial statements into functional currencies, where applicable, and translation of financial statements into U.S. Dollars has been performed as follows:

        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 entities whose records are maintained in their functional currency, which is other than the reporting currency, all year-end assets and liabilities have been translated into U.S. Dollars at the period-end exchange rate. Revenues and expenses have been translated at the 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 and inventory obsolescence, valuation allowance for deferred tax assets for which it is more likely than not the assets will not be realized, the valuation of assets acquired and liabilities assumed in business combinations and income tax benefits, the recoverability of investments and the valuation of goodwill, intangible assets, other long-lived assets, certain accrued liabilities and financial instruments.

Cash and cash equivalents

Cash and cash equivalents represent cash on hand and in bank accounts and short-term investments, including term deposits, having original maturities of less than three months.

Short-term investments and loans

Short-term investments generally represent investments in promissory notes, loans and time deposits which have original maturities in excess of three months and are repayable in less than twelve months. These investments are being accounted for at amortized cost.

Long-term investments and loans

Long-term financial instruments consist primarily of long-term investments and loans and long-term debt. Since quoted market price are not readily available for all of its long-term investments and loans, the Group estimates their fair values based on the use of estimates incorporating various unobservable market inputs.

Property, plant and equipment

Property, plant and equipment, including improvements 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. 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.

Accounts receivable

Accounts receivable are stated net of allowance for doubtful accounts. Concentrations of credit risk with respect to trade receivables are limited due to a highly diversified customer base, which includes a large number of individuals, private businesses and state-financed institutions.

Provision for doubtful accounts

The Group provides an allowance for doubtful accounts based on management's periodic review for recoverability of accounts receivable, advances given, loans and other receivables. Such allowance reflects either specific cases, collection trends or estimates based on evidence of collectability. For changes in the provision for doubtful accounts receivable see Note 7.

Inventory and spare parts

Inventory is 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.

Asset retirement obligations

The Group calculates asset retirement obligations 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 Group's obligations relate primarily to the cost of removing its equipment from sites. The Group recorded the present value of asset retirement obligations as other long-term liabilities in the consolidated statement of financial position.

License costs

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 varies from three to fifteen years.

Goodwill

For acquisitions before January 1, 2009 goodwill represents an excess of the consideration paid over the fair market value of net identifiable assets acquired in purchase business combinations and is not amortized. For the acquisitions after January 1, 2009 goodwill is determined as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. 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 the authoritative guidance on 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, the Group recognizes a loss for the difference between the carrying amount and the implied fair value of goodwill.

Impairment of long-lived assets

The Group periodically evaluates the recoverability of the carrying amount of its long-lived assets. Whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable, the Group 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, the Group 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 $19.0 million, $127.9 million and $75.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. An impairment loss in the amount of $119.6 million for the year ended December 31, 2010 was recognized as a result of license suspension from the Group's subsidiary in Turkmenistan (Note 4).

Subscriber prepayments

The Group requires the majority of its customers to pay in advance for telecommunications services. All amounts received in advance of services provided are recorded as a 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

Revenue includes all revenues from the ordinary business activities of the Group. Revenues are recorded net of value-added tax. They are recognized in the accounting period in which they are earned in accordance with the realization principle.

        Revenues derived from wireless, local telephone, long distance, data and video services are recognized when services are provided. This is based upon either usage (minutes of traffic processed, volume of data transmitted) or period of time (monthly subscription fees).

        The content revenue is presented net of related costs when the Group acts as an agent of the content providers while the gross revenue and related costs are recorded when the Group is a primary obligor in the arrangement.

        Upfront fees received for connection of new subscribers, installation and activation of wireless, wireline and data transmission services ("connection fees") are deferred and recognized over the estimated average subscriber life, as follows:

Mobile subscribers	1 - 5 years
Residential wireline voice phone subscribers	15 years
Residential subscribers of broadband internet service	1 year
Other fixed line subscribers	3 - 5 years

        The Group calculates an average life of mobile subscribers for each region in which it operates and amortizes regional connection fees.

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, the Group 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.

Prepaid cards

The Group sells prepaid cards to subscribers, separately from the handset. Prepaid cards, used as a method of cash collection, are accounted for as customer advances. 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. Revenue from the sale of prepaid cards is deferred until the service is rendered to the customer uses the airtime or the card expires.

Roaming discounts

The Group enters into roaming discount agreements with a number of wireless operators. According to the terms of the agreements the Group 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 the authoritative guidance on customer payments and incentives. 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 its consolidated statement of financial position.

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, 2011, 2010 and 2009, were $305.2 million, $319.7 million and $321.0 million, respectively.

Retirement benefit and social security costs

The Group contributes to the local state pension and social funds, on behalf of all its employees.

        In Russia all social contributions paid during the year ended December 31, 2011 are represented by payments to governmental social funds, including the Pension Fund of the Russian Federation, the Social Security Fund of the Russian Federation and the Medical Insurance Fund of the Russian Federation.

        A direct contribution to those funds replaced payments of unified social tax ("UST") with the UST being abolished effective January 1, 2010. The contributions are expensed as incurred. The amount of social contributions recognized by the Group in Russia amounted to $200.0 million, $127.6 million and $96.3 million in 2011, 2010 and 2009, respectively.

        MGTS, a subsidiary of the Group, has historically offered its employees certain benefits upon and after retirement. The cost of such benefits includes interest costs, current service costs, amortization of prior service costs, net actuarial loss. The expense is recognized during an employee's years of active service with MGTS. The recognition of expense for retirement pension plans is impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets, future rates of compensation increase and other related assumptions. The Group accounts for pension plans in accordance with the requirements of the Financial Accounting Standards Board ("FASB") authoritative guidance on retirement benefits.

        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 Ukraine amounted to $62.1 million, $70.5 million and $64.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts contributed to the pension funds in Uzbekistan, Turkmenistan and Armenia were not significant.

Financial instruments and hedging activities

From time to time, to optimize the structure of business acquisitions and to defer payment of the purchase price, the Group enters into put and call option agreements to acquire the remaining noncontrolling stakes in newly acquired subsidiaries. As these put and call option agreements are not freestanding, the underlying shares of such put and call options are classified as redeemable securities and are accounted for at redemption value which is the fair value of redeemable noncontrolling interests as of the reporting date. The fair value of redeemable noncontrolling interests is measured using the discounted future cash flows techniques, subject to applicable caps. The noncontrolling interest is measured at fair value using the discounted cash flow technique utilizing significant unobservable inputs ("Level 3" significant unobservable inputs of the hierarchy established by the U.S. GAAP guidance). Changes in redemption value of redeemable noncontrolling interests are accounted for in the Group's retained earnings. Redeemable noncontrolling interests are presented as temporary equity in the consolidated statement of financial position.

        The Group uses derivative instruments, including swap, forward and option contracts to manage foreign currency and interest rate risk exposures. The Group measures derivatives at fair value and recognizes them as either other current or other non-current assets or liabilities in the consolidated statement of financial position. The Group reviews its fair value hierarchy classifications quarterly. Changes in significant observable valuation inputs identified during these reviews may trigger reclassification of fair value hierarchy levels of financial assets and liabilities. During the years ended December 31, 2011, 2010 and 2009 no reclassifications occurred. The fair value measurement of the Group's derivative instruments is based on the observable yield curves for similar instruments ("Level 2" of the hierarchy established by the U.S. GAAP guidance).

        The Group designates derivatives as either fair value hedges or cash flow hedges in case the required criteria are met. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated statement of operations together with any changes in the fair value of the hedged asset or liability that is attributed to the hedged risk.

        The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in accumulated other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of operations. For derivatives that do not meet the conditions for hedge accounting, gains and losses from changes in the fair value are included in the consolidated statement of operations (Note 19).

        Assets and liabilities related to multiple derivative contracts with one counterparty are not offset by the Group.

        The Group does not use financial instruments for trading or speculative 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. The fair value of issued notes as of December 31, 2011, is disclosed in Note 16 and is based on quoted prices in active markets.

        Based on current market interest rates available to the Group for long-term borrowings with similar terms and maturities, the Group believes the fair value of other fixed rate debt including capital lease obligations and the fair value of variable rate debt approximated its carrying value as of December 31, 2011.

        Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

        Level 1—Quoted prices in active markets for identical assets or liabilities;

        Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities;

        Level 3—No observable pricing inputs in the market.

        Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Stock-based compensation

The Group accounts for stock-based compensation under the authoritative guidance on share based compensation. Under the provisions of this guidance companies must calculate and record the cost of equity instruments, such as stock options awarded to employees for services received, in the statements of operation. 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. Compensation cost related to phantom stock options granted to our employees recognized in the Group's consolidated statement of operations as of December 31, 2011, 2010 and 2009 amounted to $16.0 million, $7.8 million, $(0.3) million, respectively

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OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2011

OTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS

12. OTHER INTANGIBLE ASSETS

        Intangible assets as of December 31, 2011 and 2010 comprised the following:

			December 31, 2011							December 31, 2010
	Useful lives, months		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	$	1,668,715	$	(1,042,773	)	$	625,942	$	1,682,959	$	(1,056,324	)	$	626,635
Acquired customer base		60 to 372		262,156		(68,741	)		193,415		343,920		(111,775	)		232,145
Rights to use radio frequencies		24 to 180		353,776		(138,546	)		215,230		314,722		(100,496	)		214,226
Accounting software		13 to 60		141,084		(98,672	)		42,412		118,673		(87,623	)		31,050
Numbering capacity with finite contractual life		24 to 120		75,803		(70,979	)		4,824		90,408		(79,821	)		10,587
Office software		13 to 120		123,452		(72,752	)		50,700		84,343		(50,711	)		33,632
Other		12 to 120		110,913		(44,625	)		66,288		95,179		(30,199	)		64,980
				2,735,899		(1,537,088	)		1,198,811		2,730,204		(1,516,949	)		1,213,255
Prepayments for intangible assets				84,985		—			84,985		273,239		—			273,239
Numbering capacity with indefinite contractual life				78,491		—			78,491		55,144		—			55,144
Total other intangible assets			$	2,899,375	$	(1,537,088	)	$	1,362,287	$	3,058,587	$	(1,516,949	)	$	1,541,638

        As a result of the limited availability of local telephone numbering capacity in Moscow and the Moscow region, the Group entered into agreements for the use of telephone numbering capacity with other telecommunications operators in the region. 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 contracts to acquire such capacity. Numbering capacity with an indefinite contractual life is not amortized.

        Amortization expense for the years ended December 31, 2011, 2010 and 2009 amounted to $454.0 million, $399.8 million and $374.5 million, respectively. Based solely on the cost of amortizable intangible assets existing at December 31, 2011 and current exchange rates, the estimated future amortization expenses for the five years ending December 31, 2016 and thereafter are as follows:

Estimated amortization expense in the year ended December 31,
2012	$	401,450
2013		290,930
2014		175,260
2015		101,250
2016		55,160
Thereafter		174,761
Total	$	1,198,811

        The actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible assets acquisitions, changes in useful lives, exchange rates and other relevant factors.

        Weighted-average amortization period for billing and telecommunication software acquired during the years ended December 31, 2011 and 2010 is four years.

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GENERAL AND ADMINISTRATIVE EXPENSES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and social contributions	$ 1,230,564	$ 1,174,482	$ 1,004,951
Rent	389,142	338,301	283,957
General and administrative	277,863	251,097	217,847
Repair and maintenance	202,206	180,810	158,165
Taxes other than income	171,778	144,322	181,716
Billing and data processing	62,508	75,960	64,277
Consulting expenses	58,409	61,431	59,000
Provision for obsolescence	30,160	27,825	4,113
Insurance	6,533	7,456	7,612
Business acquisitions related costs	7,089	12,737	11,353
Total	$ 2,436,252	$ 2,274,421	$ 1,992,991