Rationale behind the terms and conditions and procedures for merging Open Joint Stock Company "COMSTAR United TeleSystems", Closed Joint Stock Company "United TeleSystems", Closed Joint Stock Company "Capital", Closed Joint Stock Company "Operator Svyazi

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Rationale behind the terms and conditions and
procedures for merging Open Joint Stock Company
"COMSTAR United TeleSystems", Closed Joint Stock
Company "United TeleSystems", Closed Joint Stock
Company "Capital", Closed Joint Stock Company
"Operator Svyazi", Closed Joint Stock Company
"Mobile TeleSystems", Closed Joint Stock Company
"COMSTAR Direct" and also Closed Joint Stock
Company "Dagtelecom" and Open Joint Stock Company
"Eurotel" into OJSC "MTS" (including the report
of Board of Directors, containing the evaluation
of necessity of reorganization and measures on
protection of rights and interests if the
shareholders in the course of reorganization)
Materials for MTS OJSC Extraordinary general
meeting of shareholders December 23, 2010
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Disclaimer
Some of the information in this presentation may
contain projections or other forward-looking
statements regarding future events or the future
financial performance of MTS and/or Comstar. 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. In addition, statements
regarding expected operational and cost synergies
in respect of the merger of MTS and Comstar are
forward-looking statements. MTS  wishes to
caution you that these statements are only
predictions and that actual events or results may
differ materially. MTS does not intend to update
these statements to reflect events and
circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated
events. MTS  refers you to the documents MTS
files from time to time with the U.S. Securities
and Exchange Commission, specifically the MTS
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 MTS
projections or forward-looking statements,
including, among others, potential fluctuations
in quarterly results, MTS competitive
environment, dependence on new service
development and tariff structures, rapid
technological and market change, acquisition
strategy, risks associated with
telecommunications infrastructure, risks
associated with operating in Russia and the CIS,
volatility of stock price, financial risk
management and future growth subject to risks.
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Proposed Reorganization of MTS Group of Companies

• The list of companies subject to reorganization /
  merger
• Mobile TeleSystems OJSC (MTS or MTS OJSC)
• Comstar United TeleSystems OJSC (Comstar or
  Comstar OJSC)
• Comstar-Direct CJSC, 100 subsidiary of Comstar
  OJSC
• Capital Ltd, 100 subsidiary of MTS OJSC
• MTS Ltd, 100 subsidiary of MTS OJSC
• Operator Svyazi Ltd, 1001 subsidiary of MTS OJSC
• UTS CJSC, 100 subsidiary of Operator Svyazi Ltd
• Eurotel OJSC, 100 subsidiary of MTS OJSC
• Dagtelecom CJSC, 100 subsidiary of MTS OJSC
• Boards of Directors of MTS and Comstar have
  recommended the merger of MTS and Comstar to
  create largest integrated telecommunications
  provider in Russia and the CIS
• Merger exchange ratio 0.825 MTS ordinary shares
  for one Comstar ordinary share, representing a
  7.7 premium to the three month2 volume
  weighted average exchange ratio between MTS
  ordinary shares and Comstars Global Depositary
  Receipts (GDR)
• MTS and Comstar Extraordinary General Meetings
  expected to be convened on December 23, 2010 for
  shareholders to vote on the proposed merger
• Comstar Board approval and recommendation of the
  transaction is based on the recommendation of
  Comstars Special Committee of Independent Board
  Directors
• The merger is conditional on the approval of 75
  of the shareholders present at each companys
  EGMs, the receipt of regulatory clearance, and
  other closing conditions
• The companies expect to complete the merger
  transaction in the second quarter of 2011
• The Boards of MTS and Comstar also approved the
  plans to merge other wholly-owned MTS and Comstar
  subsidiaries listed above into the combined
  entity as part of the MTS/Comstar merger process

1. Through 99 direct ownership and 1 indirect
   ownership through MTS Ltd.
2. Up to June 22, 2010.

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Consolidation Rationale

• Full consolidation of Comstar into MTS is
  strategically important for both companies
• Significant incremental benefit for MTS to
  address shareholding and legal structure issues
  in a coordinated manner at MTS and Comstar levels
  in order to achieve full consolidation

Current Structure¹
Simplified Ideal Structure
100
Sistema
EurotelOJSC
52.7
MTS
DagtelecomCJSC
Sistema
100
100
100
99
gt50.1
MTS Ltd
Capital Ltd
Operator Svyazi Ltd
37.16
MTS / Comstar
11.06
100
Merged Entity
Comstar
UTS CJSC
13.75
2.75
100
69.93
100
MGTS
MGTS
Comstar- Direct
6.74
Minorities
¹ As of 31-Mar-2010
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Transaction Rationale
The merger is expected to create additional
synergies and cost savings across the combined
entity and strengthen MTS competitive position

• Current Situation
• MTS/Comstar synergies are not fully realised
  inability to share customer lists within the
  group
• Inefficient corporate governance / need for
  separate Boards and related-party approvals
• Inability to implement integrated play strategy
  due to operational and legal constraints
• Lack of operational integration may result in a
  loss of leadership position to an integrated
  competitor
• Rationale for the Merger
• Accelerate the delivery of MTS 3i strategic
  goal of realizing growth through increasing
  customer value by providing its customers with an
  integrated offering of mobile and fixed telephony
• Optimize corporate and legal structure of MTS
  group
• Enable the full integration of the MTS and
  Comstar customer bases
• Streamline common business processes and further
  optimize operating and capital expenditures
• Maximize synergy potential between various
  entities within the group

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Transaction Structure

• Structure Rationale and Merger Procedure
• MTS proposes to acquire the equity interest in
  Comstar that it does not already own by way of a
  merger transaction and a parallel voluntary
  tender offer for up to 9 of Comstar ordinary
  shares that MTS and its affiliates currently do
  not own
• The combined merger and voluntary tender offer
  structure is intended to facilitate a cash and
  stock transaction, whereby the companies can be
  combined after completion of the merger
• The structure provides a mix of stock and cash
  alternatives for Comstar minority shareholders,
  and also enables MTS to retain the financial
  resources and flexibility to invest in the
  combined Group
• Common registered shares of wholly-owned
  subsidiaries of MTS OJSC and Comstar OJSC will
  not be subject to conversion, whereas Comstar
  OJSC shares will be converted into ordinary
  shares of MTS OJSC at the agreed exchange ratio.
  All of the merged companies will be dissolved at
  the end of reorganization with MTS OJSC remaining
  as the sole surviving legal entity

July / mid-October
December-2010 March-2011
May / June
End of April 2010
End of June
Beginning of November
End of March 2011
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Tender Offer Period
Merger closing
VTO is filed with FSFM after Merger terms are
agreed by MTS and Comstar BoDs
MTS initiates merger process with Comstar
Expiry of the VTO period
MTS and Comstar EGMs / Merger vote
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Independent Appraiser Valuation

• As required by Russian Joint Stock Companies Law,
  MTS and Comstar shareholders who vote against or
  do not vote on the merger will have the right to
  sell their shares back to MTS and Comstar,
  respectively, for cash at a price set by the
  respective companies Boards of Directors,
  subject to the statutory limit of 10 of each
  companys Net Asset Value under Russian
  Accounting Standards
• MTS independent appraiser, Ernst Young, has
  performed the valuation analysis for
  determination of market value of one ordinary
  registered share of OJSC MTS within a minority
  interest
• The valuation analysis was performed as of 31
  March 2010 (the Valuation Date)
• In the course of its valuation work, Ernst
  Young applied the following valuation approaches
  in compliance with applicable Russian law
• Discounted Cash Flow Method under the Income
  Approach, and
• Guideline Company Method and Market Quotes under
  the Market Approach
• Based on the valuation analysis performed by
  Ernst Young, the Board of Directors of MTS has
  set the repurchase price at RUR 245.19 per MTS
  ordinary share
• MTS and Comstar shareholders wishing to sell
  their shares back to the respective companies
  will receive a pro rata allocation in the event
  of over-subscription

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Consolidation of MTS and Comstar Subsidiaries in
Proposed Merger

• As part of the merger process, MTS also plans to
  merge other wholly-owned MTS subsidiaries and
  wholly-owned Comstar subsidiaries into the
  combined entity

DagtelecomCJSC
Capital Ltd
100
11.06
100
MTS Ltd
100
1
MTS
Comstar OJSC
Comstar-DirectCJSC
MTS OJSC
Operator SvyaziLtd
100
99
37.16
100
100
UTS CJSC
Eurotel OJSC
13.75
100
Pre-merger ownership
Merger
Note Prior to merger taking place, MTS Ltd.,
Capital Ltd. and Operator Svyazi Ltd. shall be
converted into Joint Stock Companies (JSC).
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Rationale for Reorganization of Eurotel OJSC and
Dagtelecom CJSC

• MTS OJSC holds 100 of the placed shares of
  Eurotel OJSC and Dagtelecom CJSC, which allows
  MTS OJSC full control over the activities of
  these subsidiaries

Eurotel Merger Rationale
Dagtelecom Merger Rationale

• To reduce management expenses
• To reduce expenses on the organization and
  conduct of corporate activities of the subsidiary
  (shareholder decisions, interaction with the
  Federal Antimonopoly Service of Russia and
  Federal Service for Financial Markets of Russia)
• To simplify the management structure and optimize
  decision making procedures
• To integrate Eurotel OJSC into MTS through
  establishing a special Business Unit within the
  newly established organizational structure of MTS
  OJSC
• To address potential risks (e.g., share buyback
  risk, risk of early repayment of liabilities)
  associated with reorganization of MTS Group of
  companies in coordinated manner, all at once
  within the overall MTS and Comstar merger process

• To reduce management expenses
• To reduce business organization and operation
  costs (lack of necessity to sign contracts
  between MTS OJSC and Dagtelecom CJSC on
  equipment supplies, general contracts, use of
  trade marks, commercial representation and other
  business contracts)
• To reduce business organization and operation
  costs of Dagtelecom CJSC (shareholder decisions,
  interaction with the Federal Antimonopoly Service
  of Russia and Federal Service for Financial
  Markets of Russia)
• To simplify the scheme for the services provision
  by MTS OJSCs branches that were established in
  the regions of Dagtelecom CJSCs presence (no
  signing of the commercial representation
  agreements)
• To simplify management structure and optimize
  decision making procedures
• To consolidate Dagtelecom CJSC financial
  indicators into MTS OJSCs RAS accounting
• To integrate Dagtelecom CJSC into the newly
  established organizational management structure
  of MTS OJSC

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Rationale for Reorganization of MTS and Comstar
Other Subsidiaries

• MTS OJSC holds 100 of the placed shares of
  Capital Ltd, MTS Ltd, Operator Svyazi Ltd1 and
  UTS CJSC2, which allows MTS OJSC full control
  over the activities of these subsidiaries
• Comstar OJSC holds 100 of the placed shares of
  Comstar-Direct CJSC, which allows Comstar OJSC
  full control over the activities of
  Comstar-Direct
• The merger of aforementioned MTS and Comstar
  subsidiaries with MTS OJSC is expected to make it
  possible to achieve the following results
• to reduce management expenses
• to reduce expenses on the organization and
  conduct of business operations (it is not
  required to conclude agreements between MTS OJSC
  and its subsidiary on delivery of equipment,
  general sub-contraction, use of the trademark,
  commercial representation and other economic
  agreements)
• to reduce expenses on the organization and
  conduct of corporate activities of the subsidiary
  (shareholder decisions, interaction with the
  Federal Antimonopoly Service of Russia and
  Federal Service for Financial Markets of Russia)
• to simplify the management structure and to speed
  up decision-making procedures
• to consolidate subsidiaries performance
  indicators in the MTS OJSC Russian accounting
  system
• to integrate subsidiaries in the new MTS OJSC
  management organization structure
• to address potential risks (e.g., share buyback
  risk, risk of early repayment of liabilities)
  associated with reorganization of MTS Group of
  companies in coordinated manner, all at once
  within the overall MTS and Comstar merger process

1. Through 99 direct ownership and 1 indirect
   ownership through MTS Ltd.
2. Through 100 direct ownership of Operator Svyazi
   Ltd.

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Measures to Protect Rights and Interests of MTS
Shareholders

• The Board of Directors of MTS has analyzed each
  of the following transactions with respect to the
  reorganization of MTS Group of companies
• Merger of Comstar OJSC into MTS OJSC and
  consolidation of other wholly-owned MTS
  subsidiaries (Capital Ltd, MTS Ltd, Operator
  Svyazi Ltd, UTS CJSC) and wholly-owned Comstar
  subsidiaries (Comstar-Direct CJSC) into the
  combined entity as part of the same merger
  process
• Merger of OJSC Eurotel into MTS OJSC
• Merger of CJSC Dagtelecom into MTS OJSC
• For the reasons outlined in this presentation,
  the Board of Directors of MTS has unanimously
  approved and recommended each of the
  aforementioned transactions on the basis that
• the terms of the transactions are fair and
  reasonable insofar as MTS shareholders are
  concerned
• the transactions will benefit all MTS
  shareholders equally
• Each of the recommended transactions is
  conditional on the approval of 75 of the
  shareholders present at the Extraordinary General
  Meeting (EGM) of MTS
• MTS shareholders as of the record date shall be
  entitled to participate in the EGM and vote on
  each of the aforementioned mergers
• As required by Russian Joint Stock Companies Law,
  MTS shareholders who vote against or do not vote
  on the merger will have the right to sell their
  shares back to MTS for cash at a price set by the
  Boards of Directors of MTS of RUR 245,19 per MTS
  ordinary share, subject to the statutory limit of
  10 of MTS Net Asset Value under Russian
  Accounting Standards1

1. Ernst Young provided the independent statutory
   appraisal to MTS Board of Directors for the
   purposes of its assessment of price in relation
   to the statutory put

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