Report on Mobile Retail in Russia, Q1 2012

Mobile handset market in Russia, Q1 2012 (MTS estimates) MTS estimates that during Q1 2012 the sales of handsets in Russia in terms of the units sold increased by 10.1% compared to Q1 2011. Overall 9.5 mln devices were sold.
Mobile handset market in Russia in 2010-2012, 000s of units

9 860 7 216 7 330

10 555 8 599

11 442

11 934 9 467

8 786

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In Q1 2012, the mobile retail market expanded by 12.4% in sales compared to Q1 2011 to reach RUB 44.0 bln.
Mobile handset market in Russia, RUB bln

42 739 32 980 31 593

48 532 39 165 36 686

47 292

54 218 44 017

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2011

The market demonstrated a higher pace of growth in sales in rubles than in units as the share of smartphones in overall handset sales increased. During Q1 2012, the average retail price of mobile phone increased by 2.1% compared to Q1 2011.
Average price of mobile phone in 2010-2012, RUB

4 571 4 310

4 598 4 334

4 554
4 176 4 133

4 543

4 649

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

Report on Mobile Retail in Russia, Q1 2012

Smartphone market in Q1 2012, MTS estimates According to our estimates, in Q1 2012, 2.5 mln smartphones were sold, an increase of 1.7 times year-overyear.
Smartphone market in Russia in 2010-2012, 000s of units

2 879 582 Q1 2010 589 Q2 2010 1 010 1 596 1 493 1 532 2 107

2 528

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In terms of sales the smartphone market has expanded 1.6 times year-over-year to RUB 26.8 billion.
Smartphone market in Russia in 2010-2012, RUB mln

7 668
Q1 2010

7 886 Q2 2010

12 186

18 638

16 737

16 531

22 521

30 514

26 796

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In Q1 2012, smartphones accounted for 26.7% of total handsets sold, an increase of 9.3% year-over-year and of 2.6% quarter-over-quarter. In terms of sales, the share of smartphones went up to 60.9% in Q1 2012, an increase of 18.2% year-over-year and 4.6% quarter-over-quarter.
Share of smartphones in the handset market in Russia in 2010-2012

56.3%

60.9%

38.4%
23.3% 8.1% Q1 2010 25.0% 8.0% Q2 2010 28.5% 10.2% 15.1%

42.7%

45.1%

47.6%

17.4%

17.4%

18.4%

24.1%

26.7%

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

smartphones, units

smartphones, roubles

Source: MTS estimates, preliminary data for Q1 2012

Report on Mobile Retail in Russia, Q1 2012

The average smartphone price in Q1 2012 declined by 5.4% compared to Q1 2011.
Average smartphone price in Russia, RUB

13 176

13 385

12 065

11 678

11 207

10 793

10 691

10 599

10 598

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, *preliminary data for Q1 2012 Share of vendors in smartphone market in Russia in 2010-2012, % of units sold

34.5% 58.7% 35.7% 16.2% 6.6% 6.5% 5.3% 6.7% Others Q1 2011 Apple Sony Ericsson HTC 8.8% 7.2% 5.4% 8.4% Q1 2012 Samsung Nokia

Source: MTS estimates, preliminary data for Q1 2012 Share of vendors in smartphone market in Russia in 2010-2011, % of sales

27.0% 47.5% 32.3% 14.8% 15.6% 10.1% 6.4% 5.6% Q1 2011 14.9% 11.7% 7.9% 6.3% Q1 2012

Others

Sony Ericsson

HTC

Apple

Samsung

Nokia

Report on Mobile Retail in Russia, Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

MTS mobile retail network, Q1 2012 In Q1 2011, MTSs retail network continued to deliver on its strategy aimed at increasing the share of smartphones in the sales mix in order to generate more value for the Groups core networks. The share of smartphones in the total number of handsets sold in the MTS retail network has reached 28%, an increase of 11% compared to Q1 2011 and an increase of 2% compared to Q4 2011. This exceeds average market level by 1.3%. The share of MTS-branded smartphones in total sales in Q1 2012 doubled compared to Q1 2011. Given the focus on promoting sales of smartphones and enhancing overall profitability within the Group, the volume of low-margin wholesale sales continued to decline during the quarter. In Q1 2012, MTSs retail market share (including franchise stores) in terms of units sold was estimated to be roughly 14%. Sales of smartphones accounted for 64.8% of total sales in the MTS retail network, an increase of 18.5% compared to Q1 2011 and of 2.8% compared to Q4 2011. This exceeds average the market level by 3.9%. Symbian, Android and Bada smartphones accounted for over 80% of sales. Sales of smartphones by operating systems in Q1 2012 (in terms of units sold) OS Symbian Android Bada Windows Phone IOS MeeGo Blackberry % of units sold 37.8% 35.1% 11.3% 8.2% 7.3% 0.2 0.1

Source: MTS estimates, preliminary data for Q1 2012

Nokia, Samsung, HTC, Apple and Sony Ericsson were top-5 brands sold in the MTS retail network.
Top 5 most popular models in different pricing categories in the MTS retail network during Q1 2012

<1499 RUB Samsung E1080 Nokia 1616 Nokia 1280 Nokia X1-01 MTS 352

1 500 4999 RUB Nokia C2-01 Samsung C3011 Samsung S5250 Wave 525 Samsung S3600 Nokia X2-00

5 000 9999 RUB Samsung S5830 Galaxy Ace* Nokia C5-00 5 MP* Samsung S5670 Galaxy Fit* Nokia C7-00* Samsung C6712 Star II Duos

>10000 RUB Nokia N8-00* Nokia Lumia 710* HTC Mozart* iPhone 4 16GB black* Nokia Lumia 800*

Source: MTS estimates, preliminary data for Q1 2012, (*smartphones)

In Q1 2012, sales of high-speed 14.4 Mbs USB modems increased 7-fold compared to Q1 2011. Sales of Wi-Fi routers grew 5.7 times.

Report on Mobile Retail in Russia, Q1 2012

At the end of Q1 2012, MTS retail network comprised 4,050 stores, including franchised outlets. During the quarter MTS continued its optimization of its retail network and closed non-efficient points of sale. At the end of the quarter, MTS had 70 flagship stores.

Number of stores in the MTS retail network

3 163 1 045 2118 Q1 2010

3 343 1 134

3 373

3 523 1 196

3 675 1 321

3 835 1 481

4 024 1 632

4 146 1 686

4 050 1 588

1 130

2209

2243

2327

2354

2354

2392

2460

2462

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2012 Total

Q1 2012

Own stores

Franchise stores
Source: MTS estimates, data for Q1 2012

*** For further information, please contact in Moscow: Joshua B. Tulgan Director, Investor Relations Acting Director, Corporate Finance Department of Investor Relations Mobile TeleSystems OJSC Tel: +7 495 223 2025 E-mail: ir@mts.ru Learn more about MTS. Visit the official blog of the Investor Relations Department at www.mtsgsm.com/blog/
*** Mobile TeleSystems OJSC ("MTS") is the leading telecommunications group in Russia, Eastern Europe and Central Asia, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services in one of the world's fastest growing regions. Including its subsidiaries, the Group services over 100 million mobile subscribers. The Group has been awarded GSM licenses in Russia, Ukraine, Uzbekistan, Armenia and Belarus, a region that boasts a total population of more than 230 million. Since June 2000, MTS' Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT). Additional information about the MTS Group can be found at www.mtsgsm.com. *** Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as expect, believe, anticipate, estimate, intend, will, could, may or might, and the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Companys most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned Risk Factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks

Report on Mobile Retail in Russia, Q1 2012

associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks. ***