Information about the company

MTS was established in October 1993 by Moscow City Telephone Network (MGTS), T-Mobile Deutschland GmbH (T-Mobile), an affiliate of Deutsche Telekom AG, Siemens AG (Siemens) and several other shareholders. In late 1996, Sistema JSFC acquired a majority stake in MTS and has remained the primary owner ever since.

MTS was the first company to launch GSM services in the Moscow region in 1994. In subsequent years, MTS has expanded rapidly in Russia largely through the acquisition of smaller independent players and became the leading national mobile operator

MTS initiated its international expansion in 2002 through the establishment of Mobile TeleSystems LLC, a joint venture with Beltelecom, the national fixed line operator in Belarus.

In 2003, MTS continued to expand in the CIS by acquiring the leading operator UMC in Ukraine, the biggest CIS market outside of Russia.

MTS entered Central Asia in 2004 through the acquisition of the leading mobile phone operator in Uzbekistan, Uzdunrobita. In June 2005, the Company acquired Barash Communications Technologies, Inc., the number one operator in Turkmenistan.

In September 2007, MTS continued its international expansion through the acquisition of the leading mobile operator in Armenia, K-Telecom.

In December 2008, MTS extended its brand outside the CIS borders. MTS and Shyam Telelink Limited, JSFC Sistema's telecommunications subsidiary in India, announced the agreement to allow Shyam Telelink to use MTS brand in India. The decision to introduce the brand to India is reflective of the brand’s success in the Company’s markets of operation since its launch in May 2006.

With mobile penetration well in excess of 100%, MTS began to shift its corporate strategy from one of acquisition to retention at the end of 2008 by developing its own proprietary distribution channels to engage customers more effectively. A number of acquisitions on national and local level MTS to quickly expand its monobrand retail chain

In October 2009, MTS acquired Comstar-UTS, the leading supplier of integrated telecommunication solutions in Russia and the CIS, as part of its 3i Strategy which calls for a focus on integration, the Internet and innovation to enhance its leadership in the telecommunications’ market. The acquisition provided access to important growth markets in commercial and residential broadband and allowed to realize value-accretive synergies in capital and operational expenditures as well as provided a foundation for the development of effective content platforms and services.

Today, Mobile TeleSystems 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. Having been recognized internationally for corporate governance and transparency, MTS is not only a leading Russian blue-chip company, but a truly global organization. The MTS brand continues to be ranked as the most valuable Russian brand occupying the 80th position with a brand value of $10.9 billion for the year 2011.

MTS Russia

With 140 million people and a relatively diverse economic base, Russia is MTS’ largest market. Demand for wireless communications services in Russia has grown rapidly over the last ten years. As of December 31, 2011, overall wireless telecommunications penetration in Russia stood at 156.8% (or 228 million subscribers), according to AC&M-Consulting.

At the end of 2009, MTS adopted the 3i Strategy with the aim of becoming an integrated telecommunications player to capture additional growth in the fixed-line space through provision of broadband Internet, pay-TV and traditional telephony services. In line with the new strategy, the Company acquired Comstar-UTS, the leading supplier of integrated telecommunication solutions in Russia and the CIS, and additional broadband providers throughout Russia. To reinforce these efforts and to strengthen the overall business, MTS has also restructured its retail operations by significantly expanding the Company’s proprietary sales and distribution network both organically and through the acquisition of several national and regional retail chains.

Key growth factors include:

· A growing economy

· Rising disposable incomes and a growing middle class

· Relatively low fixed-line and Internet penetration

· Prevalence of multi SIM card usage

· Retail presence and handset sales

· Rising demand for fixed and mobile broadband Internet access

· Data traffic growth

· Increasing content consumption

· Proliferation of smartphones and other data devices

In recent years competition has evolved to exist primarily between MTS and two other major players, each of which provides significant coverage throughout Russia. In addition, MTS competes with local GSM, D-AMPS and CDMA operators in several Russian regions.

Competition in the market is based upon:

· Local tariff prices

· Data packages

· Network coverage and quality

· Brand perception

· Distribution dynamics

· Level of customer service provided

· Roaming and international tariffs

· Value-added services

· Bundles

· Frequency and license allocation

Horizontal and Vertical Analysis of the balance sheet of the company

Notes to analysis

The analyisis of the balance sheet of OAO “MTS” for 2008-2010 in the Table 1 give us the opportunity to make the following conclutions:

For the years 2008-2009:

The total sum of assets of the company has increased by 38,38% from 280 760 348 thousand rubles to 388 527 797 thousand rubles.

This increase of total assets was influenced by the increase of long-term financial investments by 86,02% from 69 477 889 thousand rubles to 129 240 511 thousand rubles, increase of Short-term investments by 85,70% from 28 828 689 thousand rubles to 53 535 072 thousand rubles and by the increase of monetary assets by 612,41% from 4 359 220 thousand rubles to 31 055 565 thousand rubles.

The total sum of current assets of the company has increased by 62,61% because of the increase of Short-term investments by 85,70% from 28 828 689 thousand rubles to 53 535 072 thousand rubles and by the increase of monetary assets by 612,41% from 4 359 220 thousand rubles to 31 055 565 thousand rubles.

The total sum of Non-current assets of the company has increased by 30,41% because of the increase of long-term financial investments by 86,02% from 69 477 889 thousand rubles to 129 240 511 thousand rubles.

Short-term borrowings were increased by 27,08%. This indicator can be informed about the payments delay, i. e. breach of their liabilities on payments and the presence of arrangement to increase a period of postponement at the result of purchase volume remaining, payment in time, presence of favorable relationships.

Share capital remained to be immutable. It is gone through the changes only in the case of company re-registration connected with increase or decrease of share capital according to some reasons (including the owner replacement).

The presence of long-term investments in assets structure reflects about investment orientation.

For the years 2009-2010:

The total sum of assets of the company has increased only by 0,76% from 388 527 797 thousand rubles to 391 473 055 thousand rubles.

This low increase of total assets was influenced by the increase of long-term financial investments by 20,35% from 129 240 511 thousand rubles to 155 540 680 thousand rubles and increase of long-term liabilities loans and credits by 18,95% from 174 747 609 thousand rubles to 207 867 081 thousand rubles and by the decrise of current assets by 41,03% from 113 086 685 thousand rubles to 66 685 770 thousand rubles.

The total sum of current assets of the company has decrised by 41,03% from 113 086 685 thousand rubles to 66 685 770 thousand rubles because of the decries of Short-term decrised by 50,55% from 53 535 072 thousand rubles to 26 475 687 thousand rubles and by the decrise of monetary assets by 69,09% from 31 055 565 thousand rubles to 9 600 802 thousand rubles.

The total sum of Non-current assets of the company has increased by 17,92% because of the increase of long-term financial investments by 20,35% from 129 240 511 thousand rubles to 155 540 680 thousand rubles and because of the increase of other non-current assets by 119,01% from 18 594 582 thousand rubles to 40 724 038.

Share capital remained to be immutable. It is gone through the changes only in the case of company re-registration connected with increase or decrease of share capital according to some reasons (including the owner replacement).

The presence of long-term investments in assets structure reflects about investment orientation.

Changes of these financial meanings can be observed in the following diagram:

The same analysis is executed on the base of the information of a profit and loss statement of the company:

Total revenues of OAO “MTS” were increased during the analyzing period (2008, 2009, 2010). They have increased by 28,02% (from 147 302 825 thousand rubles to 188 580 221 thousand rubles) in 2009 and by 4,81% (from 188 580 221 thousand rubles to 197 655 625 thousand rubles) in 2010 relatively the previous year, despite the growth of costs. All these financial results are represented in the following diagram:

The dynamics of gross margin, sales profit and net profit is shown in the following diagram:

Analysis of financial ratios

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