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13. Human resources andásocial policy

13. Human resources
andásocial policy

Work and compensation

Philanthropy policy

Improvement of the MTS OJSC organizational structure in 2010

Code of ethics and corporate conduct of MTS OJSC employees

Staff development

Environmental protection

Social policy of the Company

Interaction with the interested parties

Work and compensation

As of December 2010 MTS OJSC had 20á519 employees on its payroll list.

At present the Company has a competitive compensation system that consists of fixed and variable portions. The Company employees are provided with a packet of compensations and benefits in line with the current market practice.

The fixed portion (the salary) is determined taking into account the salary ranges established for each grade based on the analysis of the Labour market in the region of presence and the Company's policy on positioning in the remuneration market.

In 2010 the analytic research aimed at assessing the Company's existing grade system was carried out. Taking into account the speed and specifics of Company development as well as the current world trends, the decision to optimize the system and to bring it in line with the world standards was made.

The bonus scheme parameters, which relate to the income structure, were also improved. Based on the analysis of the market situation the decision was made to change the income structure for improving remuneration competitiveness.

The variable portion is provided in the form of the incentive system, which establishes explicit and transparent principles for setting bonus target amounts and calculating their actual amounts on the basis of key performance indicators and individual targets, set in the bonus plans of all employees. In 2010 changes were made in the incentive system to improve it and to strengthen the correlation between the labour remuneration and the performance of each employee.

In addition to abovementioned incentive system the Company has established a bonus system for employees, who are engaged in sales activities and customer care services (S&CC). The basic objective is to provide incentives for achieving specific results and close correlation between the bonus amount and the actual result for the Company. The feature of the S&CC incentive program is the income structure with a larger variable portion and higher payment frequency.

The Company pays special attention to setting up a competitive social package. In 2010 the analysis of the existing compensations and benefits package vs. the market was carried out. Based on the results of the analysis the decision was made to introduce in MTS a number of new benefits, including some additional kinds of personal insurance and special leaves related to specific personal situation.

Actions taken in 2010 allowed to:

  • improve the effectiveness of labour costs;
  • increase the package of compensations and benefits for the employees through strengthening its social component;
  • maintain the image of an attractive employer, recruit and retain the best employees.

Improvement of the MTS OJSC organizational structure iná2010

Action Results of the changes:
12.01.2010
Reorganization of the HR management divisions of BU MTS Russia and the Corporate Centre.
  • Headcount optimization as a result of liquidation of the HR divisions in the MTS Russia BU.
  • Centralization of the HR management function at the MTS GROUP Corporate Centre level.
28.01.2010
Handing over the MTS OJSC own retail stores to RTC CJSC.
  • Handing over the management of MTS OJSC own retail stores with the purpose of building up an effective sales chain based on RTC CJSC.
  • Sales chain expansion to include 3000 points of sale.
01.02.2010
Centralization of procurement activities in the Procurement Management Block of the Corporate Centre.
  • The centralized procurement management system is based on the management of the corresponding procurement categories, which contributes to significant savings, ensures the improvement of the procurement process efficiency and transparency of expenses.
22.06.2010
Reorganization of the subdivisions of the Commercial Block, Corporate Centre.
  • Setting up and development of mobile commerce services: making all types of payments from the a customer's account or from his/her bank card.
  • Generation of additional revenues through selling the applications specially developed for ╠ĎS.
20.09.2010
Uniting the management of the backbone and transport networks.
  • Transfer of the MTS and Eurotel backbone networks planning, development and operation functions to a single subdivision.
01.10.2010
Centralization of the M&A project management functions in the Strategy and Corporate Development Block Ô of the Corporate Centre.
  • Optimization of the M&A project management processes.
04.10.2010
Establishing the Single Help Desk Department in the Volga Macro Region.
  • It became possible to handle the applications from business subdivisions in the 24x7 mode.

In 2010 the basic changes in the MTS OJSC organizational structure were aimed at the centralization of functions in the subdivision at all levels from a Region to the Corporate Centre. The purpose of the changes was to improve the effectiveness of operations of functional subdivisions through combining management functions and avoiding function overlapping.

Staff development

MTS OJSC has a well-developed system training model, based on the company strategic objectives and objectives of HR management. The training system is also based on the MTS Group Competencies model and requirements for professional knowledge and skills of the employees. MTS Group Training System

he Company has a Corporate University, which sets the training standards and coordinates the processes in the field of training and development of employees. The Corporate University's objectives also include building the training systems for various subdivisions of the company. The Corporate University mission is to create conditions for improving employee performance and development of the MTS Group business through the provision of high-quality, innovative and system-based training.

The basic targets of the Staff Training and Development function:

  • To ensure system-based effective development of employees in competences which are key for the Company.
  • Forming skills, expertise, perceptions which are required by employees and managers for improving their performance in their current jobs.
  • Creation of tools for developing the Candidate pool and Successors for key positions.
  • To arrange for the continuity of expertise/unique skills and experience.
  • To create a self-training environment where each manager and each employer is interested in the company's development and involved in the processes of developing, maintaining and expanding the knowledge and skills in the company.

Staff training and development are carried out using the following forms and methods:

  • Induction training. The Company conducts uniform, centralized induction training for all new employees, whose purpose is to ensure the understanding of the Company business, culture and structure, as well as understanding of internal processes and organizational procedures by new employees. For new managers we provide additional programs of introduction to the Company's internal structure, business processes, and established interaction procedures. For existing employees we conduct team-building activities to enhance corporate spirit and strengthen corporate culture. The heads of Company functional sub-divisions carry out training of existing employees according to the rules specified in bylaws. Functional seminars and master classes are conducted for newly implemented processes.
  • Vocational training. The Company has a system of vocational training aimed at ensuring constant development of expertise and skills of the employees. Standards and contents of training programs are set in accordance with the requirements for particular positions as well as in accordance with the requirements for professional knowledge of employees. Vocational training is planned based on the results of appraisal of professional skills and annual performance appraisals and in accordance with the needs of a particular sub-unit. This element of the training system accounts for the major portion of activities and the largest number of employees involved in training. Vocational training for frontline employees is provided mainly through in-house resources according to uniform standards (taking into account regional differences). Functional academies are established for key functions.
  • Managerial training for managers. The basis of this system is the concept of targeted and modular training of managers. Targeted programs are mandatory for selected categories of managers, while modular programs are created based on annual appraisal of managers' competencies. Particular attention is given to training managers in the methods of personnel management (selection, appraisal, grading, feedback, creation of personalized development plans, mentoring, motivation of employees, etc.) and interaction with subordinates on the basis of uniform corporate standards. In addition to ensuring a uniform approach of managers to performance of managerial functions, an important objective of managerial training is to motivate and retain Company managers. The direction and content of managers training programs are determined based on the Company development strategy, the business objectives of the relevant sub-unit, and the level of managers' competencies according to the appraisal results.
  • Training of Candidate pool members and the Successors for management position. The basis of the candidate pool training system is the individual development plans of each employee included in the Candidate Pool. The training program is worked out individually based on the appraisal results and the level of competences.

Staff training and development are carried out using the following forms and methods:

  • Self-education. The Company has created the conditions for the self-education of employees. The internal library of study materials by competences was created. The Smart-Book is available, which helps an individual to develop the required competences.
  • Full-time training, workshops. When conducting such trainings and workshops the internal resources are actively involved, in-house training programs are developed and the Academy of Tutor Excellence for training local tutors was established.
  • Post-training follow-up. Conducting follow up workshops on the subjects of training to sustain employees skills and expertise and to discuss the scope for using the skills and expertise that they acquired, in practice.
  • ─Distance training. Distance forms of training are actively used in the company for all types of training. Theory courses are conducted mainly in the distance form. Distance methods are also actively used to evaluate the effectiveness of training: to test the knowledge gained as result of training and to evaluate satisfaction with training programs, practical usefulness of training programs.
  • On-the-job training is deemed the preferred and most effective method. One of the main objectives of a manager at any level is the professional growth of his or her subordinates. The Company established a mentorship system for all employees: from a probationer to an expert.
  • Master classes of the Company's top managers. The company's top managers actively participate in the training and development of the Company's employees. Master classes of the key managers of the Company are held on a regular basis to give a message to the employees regarding the main objective of the Company and its strategy as well as to discuss the key projects. When holding master classes the top managers can get the feedback from the employees and discuss the prospective changes in their processes. Video records are made of all master classes, distance training courses are developed and are made available in the Distance Training System for testing and training employees. Thus, each Company employee has an opportunity to familiarize himself/herself with information, ask questions and receive responses. All master classes are also recorded on DVDs for their subsequent transfer to remote regions and foreign subsidiaries.
  • Staff rotation and development appointments are regarded as an effective tool for developing, training, and retaining promising employees. The rotation mechanism is actively used to develop reserve personnel and successors.
  • Special tasks, projects. This form of development is actively used in the Company for developing employees of the Candidate Pool within the framework of individual development plans.
  • And other.

As of December 31st, 2010 54 in-house training courses had been developed in the Company, including:

  • Vocational trainingጠ11 courses (in 2010 2 new training courses were developed, 1 training course was excluded for being non-topical).
  • Communicative trainingጠ31 courses (in 2010 7 new training courses were developed, 2 training courses were excluded for being non-topica).
  • Induction trainingጠ12 courses (in 2010 no new courses were developed).
  • Managerial trainingጠ11 courses (in 2010 6ánew training courses were developed).

MTS Internal Training Courses asáofá31.12.2010

MTS Internal Training Courses asáofá31.12.2010

By the end of 2010 the following programs were also implemented in the Company:

  • A modular development program for the Directors of MTS Branches and Successors for these positionsጠthe Academy of Success, 53 employees passed the training in 2010.
  • A development program for key MTS Group managers, "Leadership DNA" , together with SKOLKOVO. 5 program modules were implemented for 50 key MTS Group managers, 7 strategic projects for the company were developed and approved by the Management meeting. MTS's SuperGoal was developed and approved for the period till 2015.
  • The Employee Distance Testing and Training System (DTTO) is being actively developed. As of today 123 distance training courses and 429 professional tests has been developed and are being implemented.
  • The practice of involving the managers for holding master classes was established and is being developed. In 2010 37 master classes were held.
  • Within the scope of the project for Introduction of the Coaching Style in the MTS Group 86.5% of the MTS Group Candidate Pool members passed the training. 685 managers of the Company were trained in Coaching-Style Management, Level 1.

In line with the Company's HR strategy new functional academies were developed and launched:

  • Customer Care School for the employees engaged in servicing the MTS customers.
  • Business Sales Academy and Marketing Academy for Commercial Block employees.
  • IT and Technology Academy was launched and master classes and workshop/case studies were held and distance training courses were developed and launched within its framework.
  • The Academy of Tutor Excellence was introduced for training the MTS Group internal tutors.
  • The concept of the PDMS (point direct management system) Academy was developed for the divisions engaged in the work with the retail market.

For types of training the approved model of competences of the MTS Group as well as various criteria and standards on the number of programs depending on the employee category and the cost of programs, are used as a basis for planning the training programs and for sending employees for training.

Induction training is provided to all new employees, and in the event of introduction of a new regulatory documentጠto all existing Company employees.

The criteria for sending for vocational training are the approved vocational training plans, which are produced by functional managers based on the professional expertise appraisal/annual appraisal results.

The criteria used for sending employees for training in management competencies are the results of management competency appraisals, shaping of the personal development plans and formation of targeted training programs focused on group priorities, which are based of the competency appraisal results for MTS OJSC in general.

The best employees from the Candidate Pool/Successors are selected for long-term development programs and MBAs and mini-MBAs.

Training dynamics in 2006-2010

Dynamics of the number of implemented training programs

Dynamics of the number of implemented training programs

In 2010 the number of training programs increased by 73% compared to 2009. The number of external training programs increased due to the decreased impact of the macro economic crisis; the number of distance training programs increased as a result of developing new courses and implementing targeted programs for Company employees. At the same time, the number of employees who completed training, remained nearly the same (decrease by 3%), which proves the Company's training system stability.





Dynamics of the number of training employees

Dynamics of the number of training employees
Dynamics of training courses of tutors

Dynamics of training courses of tutors

Dynamics of training the internal (on-staff and corporate) tutors

Dynamics of training the internal (on-staff and corporate) tutors

As of December 31st, 2010 502 internal tutors (on-staff and corporate) were working within the in-house training system. The Academy of Tutor Excellence was established for improving the MTS Group in-house training quality as well as for improving the loyalty of the Company employees to training and to the HR function in general. The purpose of the Academy is to develop the professional skills of the corporate and on-staff tutors of the MTS Group and to translate the uniform philosophy/policy/training principles adopted in the Company.

After lifting the moratorium on training, increasing the volume of external training and launch of functional academies the dynamics of in-house training and training of internal tutors, in general, remained on a high level.

The Company's training system meets the Company's business requirements and contributes to achieving its strategic targets. According to the feedback questionnaire results the level of satisfaction with training programs in 2010 made up 95,9% (the ratio of questionnaires with the average score equal to 8 or more (on a scale of 1 to 10) to the total number of questionnaires). The level of satisfaction with training increased by 0.3% compared to 2009; in 2010 the share of manager vacancies filled by appointing internal candidates made up 83,9%, which proves high effectiveness of the training programs.

Social policy of the Company

MTS OJSC, being the major cellular operator in Russia and the CIS countries, believes that its social responsibility is the responsibility for the influence of the MTS OJSC decisions and actions on the society and environment, which, in the event of the Company's ethic and transparent behavior, will:

  • contribute to sustainable development, health promotion and social welfare;
  • take into account the expectations of the parties concerned;
  • comply with the applicable legislation and be in line with the international conduct norms;
  • be integrated in the activities of the Company as a whole and implemented by the Company in its relations with other parties;
  • contribute to the information transparency of the Company and improvement of its corporate governance.

One of the MTS OJSC objectives is the integration of this responsibility into each Company level, including products, services and processes.

The Company determines its development strategy in accordance with the requirements of the society and consumers, and the main objective of this strategy is the improvement of the quality of life of a human being.

By the quality of life MTS OJSC means the combination of social, economic and other criteria that reflect the level and extent of the welfare of a human being achieved in various spheres of life, as a basic precondition for a stable development of the civil society and an individual.

MTS OJSC principles andástrategy of corporate social responsibility

The key MTS OJSC principles of running socially responsible business are aimed at ensuring a sustainable development of the company, growth of its welfare and formation of a competitive economy. The Policy of the corporate social responsibility (CSR) and philanthropy where the principles of social and philanthropy activity were laid down taking into account the expectations of all parties concerned is placed on Company's official site www.mts.ru in the Section "Corporate Social Responsibility". On the same site there were placed Company's social reports and the main projects related to MTS philanthropy and CSR, as well as feedback link. Therefore MTS supports continuous dialogue with the target audience and makes available all information concerning Group social activity.

Running a responsible business

MTS OJSC implements the principle of running a responsible business. The company plans and carries out its activities so that they would contribute to the positive changes in the society, improve social climate, decrease social tension and stimulate the development of the society. For MTS social responsibility means active attitude and maximum possible contribution to the society, state and an individual, wherever the Company can make it.

Responsibility of a telecom operator

MTS OJSC, being the major cellular operator in Russia and the CIS countries, believes that its main objective is the provision of high quality, innovative and affordable telecom products and services to all customers. MTS OJSC, as a telecom operator, is responsible for providing high quality services at fair prices, expanding network coverage and developing new affordable and socially significant telecommunication technologies. Accepting this responsibility, MTS OJSC implements specific social initiatives. One of the initiatives is development and offering of socially oriented tariffs, which would meet the requirements of certain socially vulnerable groups. Moreover, MTS permanently improves quality of provided communication services and customer care services, implements loyalty programs and new (more attractive) tariff plans for mobile and fixed communication services, access to Internet and pay-TV. In 2010 some actions were carried out in order to make Company's services to be in great demand among customers. In 2010 within the frame of MTS and COMSTAR-UTS OJSC integration new convergent communication services were suggested to subscribers of corporate and private sectors thanks to which customers could have savings in telecommunications and receive interesting proposals from a multi-service operator and be in touch any time. MTS undertook further development of MTS Bonus programጠin 2010 fixed communication subscribers were included into this program. During the year MTS expanded services on provision of high-quality licensed content via the portal omlet.ru. As of their Internet and pay-TV customers concerned, MTS Group operators increased Internet-access rates, extended the number of channels in a TV package and made easier the procedure of payment for services. As of QoS concerned, during the last year MTS developed a system allowing improvement of mobile communication in areas of poor radio coverage; the system was implemented in the beginning of 2011.

Equal opportunities

The company makes the largest possible contribution to creation of equal opportunities for everyone through provision of equal access to modern technologies, innovative products and services, which contribute to the fulfillment of personal potential. To the extent of this priority one of the key directions of MTS OJSC activities is the provision of equal conditions and opportunities for both the population of remote areas and large cities.

The advanced technologies are becoming an indispensable part of the present-day society and increasing the level of informatization of the population would directly contribute to improving the living standards. Therefore, provision of all inhabitants of Russia with equal access to modern technologies is particularly important. Digital inequality is a severe problem for the Russian modern society. Low-level penetration of Internet and up-to-date telecommunication services, especially in the Russian regions, is a constraining factor for innovative and more dynamic country development. MTS is very much aware of the social significance of communication service development in regions and actively tries to make such services more available. In particular, in 2010 Group companies implemented some projects on launching of Internet- and TV-access services in remote districts of Russia, launched special social tariffs and increased access rates with no advance in service costs.

Innovations

We believe that the objectives in improving the life quality can be achieved through large-scale introduction of innovative technologies, products and services. Proliferation of innovations, their use in the day-to-day life contributes to formation of innovative way of thinking, which, in its turn, stimulates the development of the society, contributes to the growth of the economy and integration of the country into the world community as well as forms a successful tomorrow's society. In 2010 MTS launched some projects on involving employees into Company innovative development. There were implemented mechanisms allowing discussion of MTS employee's proposals and, if necessary, implementation of them.

Contribution to economic growth and social welfare, responsibility before the country

MTS is one of the telecommunication industry leaders and makes a significant contribution both in economic development of the country as a whole and in some regions of Company's presence as well. The Company growth strategy is based on significant investments in setting-up and development of the country's telecom infrastructure, which is required for successful implementation of key strategic state-wise projects. For example, in 2010 MTS put into operation about 7á300 new base stations 75% of which supported 3G innovative technology. Whereas in 2010 MTS carried out technological works and upgraded 3G network in every Russian region, therefore data transmission rate was possible to be increased up to 7.2 MBit/s on the basis of HSPA (High Speed Packet Access).

The State receives additional funds due to MTS Group increased tax deductions into different budgets, contractors have additional funds due to MTS Group's increased orders for products and services, capital suppliersጠdue to increased financing of MTS Group investment programs. MTS Group efficient activity results in direct financial effect beneficiaries of which are a wide range of economic agents.

MTS OJSC supports the state initiatives aimed at the improvement of the life quality, social welfare in general and the welfare of each individual and contributes to the implementation of these initiatives by the state. For example, in 2010 MTS Group company representatives took participation in different working groups of the communication industry ministry to solve problems related to development of communication services in the country.

MTS OJSC activity in every market of its presence is based only on the current legislation and legislative acts of relevant government authorities, including tax regulation.

Long-term investments

We consider the investments in the development of social sphere to be long-term investments, which contribute not only to the development of the society, but also create the basis for sustainable development of the Company. We are aiming at stable development of our business facilitating social and economic prosperity of the regions and countries where our company operates. Our Company provides its customers with new opportunities for communication, development, work and creativity, making their life productive and diversified.

Drive for results

╬One of the MTS OJSC key principles in the social sphere is the drive for achievable and measurable results. In the company's perception this means the pursue of a policy of well thought through investments with foreseeable results, aimed at solving the most acute social problems for the benefit of the society.

Information openness

We believe that a continuous dialogue with the representatives of all parties concerned is a pre-requisite for effective implementation of the social policy. MTS OJSC is open for such dialogue and is interested in it. Being a public company, we inform the public on all aspects of our activities in compliance with the rules set by the Russian legislation and international norms, which are established for public companies. As a basic tool for informing the public on MTS OJSC social activities we established the practice of annual social reports, which are published using MTS OJSC open access information resources. Our Company makes its non-financial reports on the basis of the international standards. MTS social report for 2009 passed through the procedure of public certification in the Council of Non-Financial Reports of the Russian Union of Industrialists and Entrepreneurs (RUIE). The Council of RUIE acknowledged that MTS OJSC social report for 2009 had demonstrated Company's experience in responsible business practice, including economic freedom and responsibility, partnership in business, human rights, protection of the environment and local community development.

The MTS OJSC strategy in the field of social responsibility is based on continuous analysis of the company's current business processes and the extent of their compliance with the principles of socially responsible business, on planning and implementation of projects, which extend beyond the minimum statutory requirements and are aimed at increasing the positive influence of the Company business on the society.

Philanthropy policy

We believe that philanthropy is one of the components of the Company social responsibility policy. Therefore out activities in this area are governed by the principles similar to the principles of the social policy of MTS OJSC:

  • Projects aimed at the improvement of the life quality of the society have the highest priority.
  • We focus on long-term projects in the sphere of philanthropy, which contribute to solving the most acute social problems faced by broad layers of population and are in line with the priorities of the social policy of the state.
  • In terms of the geography of the charity projects we are mainly interested in the projects that can be implemented on the largest possible scale both within one country and in all countries where MTS OJSC carries out its activities.
  • Pursuant to the MTS OJSC social policy we are interested in implementing the projects aimed at creation of equal conditions and opportunities both for the population of remote areas and large cities.
  • We believe that modern innovative technologies make a significant contribution to improving the life quality and contribute to the implementation of the personal potential of an individual, therefore charity projects, where our technologies, products and services contribute to achieving this objective, are of the highest priority for the Company.
  • Bearing in mind the existing most acute social problems we believe that charity projects aimed at improving health and contributing to the harmonious development of the young generation will be most welcome. The active social position of the business in solving such problems will contribute to formation of a harmonious and successful society in future.
  • We are open to cooperation with federal and regional authorities, nonprofit organizations and representatives of the business community within the framework of implementation of joint charity programs, which are compliant with the MTS OJSC social policy and philanthropy policy, on the terms and conditions of equal partnership and subject to legal and other restrictions applicable to the Company.

Code of ethics and corporate conduct of MTS OJSC employees

The Code of Ethics and Corporate Conduct of MTS OJSC employees is the internal policy (bylaw) of the company whose purpose is to specify various aspects of interaction of MTS OJSC employees with the Company as an employer, corporate conduct standards as well as the rules for interaction of MTS OJSC employees with business partners and external auditors. The Code is binding on all Company's employees irrespective of their position.

The Code guarantees the MTS OJSC employees:

  • Freedom from any discrimination. Recruitment, development, promotion, disciplinary measures, etc. shall be irrespective of sex, race, nationality, language, origin, age, place of residence, religion, political convictions, participation or nonparticipation in public associations, social position or official capacity of an employee.
  • Protection against discriminative behavior towards them, negligence or other forms of harassment.
  • Safe labour conditions.
  • Company commitment to decrease the impact of its activities on the environment.
  • Observance of all statutory norms with respect to the employer- employee relations.
  • Fair and unbiased settlement of all disputes by the Company Management.

At the same time the Code specifies the following aspects:

  • Flat prohibition and disapproval of child and forced labour.
  • Prohibition of jobbery.
  • Prohibition of any actions breaching local anti-corruption laws, the Foreign Corrupt Practices Act (FCPA), as well as MTS OJSC bylaws.
  • Prohibitions of actions breaching customs and tax laws.
  • Aspects of MTS OJSC copyright protection and protection of other copyright holders.
  • Rules of business communication with colleagues and partners.

Environmental protection

While carrying out our activities we try to produce the minimal impact on the environment and to decrease this impact as and when possible. To solve this problem we observe the requirements of the environmental laws and the regulations on running responsible business. All objects, including office buildings, consume electric power. MTS, when using energy-saving equipment and carrying-out energy-saving events, struggles for reduction of its expenses and contributes to protection of the environment as well. In 2010 MTS tested climate cabinets in which base station equipment and power supply units could be installed. Pursuant to the testing results there was made the following decision: such climate cabinets should be used when constructing new sites; tenders were carried out and suppliers were chosen. Pilot operation demonstrated that use of climate cabinets, in comparison with the usual configuration, made possible 40%-saving of the electric power consumed.

MTS OJSC is keen to attract the attention of the business as well as the general public to environmental issues by way of its own example. In 2010 MTS organized "Environmental Force", subbotnik of people involved in telecommunications industry, in the area of Victory Memorial Complex in Moscow Poklonnaya Mountain. This action was supported by the Ministry of Telecommunication and Mass Communications of the Russian Federation, the Ministry of Defense of the Russian Federation and the Moscow Government. Top managers, employees and partners of MTS, COMSTAR-UTS and MGTS took participation in the eco-subbotnik. Moreover, similar actions were carried out in some regions of Group presence.

Interaction with the interested parties

At present time MTS is one of the leaders in the Russian telecommunication industry. In the present-day world telecommunications are presented in all economic activity processes and are, in practice, an integral part of any business activity. Telecommunications are tools of informing, entertainment, sharing of experience and social adaptation in social environment.áTelecommunication networks allow long-distance provision of the said services to a wide range of customers.

Our Company believes that it is responsible before all interested parties, including shareholders and investors, employees, consumers and suppliers, governmental authorities and local communities. MTS is aiming at identification of needs and expectations of each of them. As of relations with the said groups, we are seeking to be in compliance with the balance of interests, we establish the dialogue and co-operation on the basis of principles of mutual respect, partnership and honesty. Dynamic development of business or new strategies or new products and services, receiving of income are impossible unless such co-operation is established.

MTS is a joint stock company in which AFK Sistema OJSC is the main shareholder. Increase in MTS' stock capital value and return on investments to our shareholders are the main objectives of Company. MTS OJSC activity related to disclosure of information and interaction with shareholders is governed by the provisions of the US Securities and Exchange Commission, New York Stock Exchange, Russian legislation, Company Charter and bylaws. We use a strict and thorough approach to preparation of financial statements, which ensures a high level of public information disclosure. All material financial and operating information, published by the Company, is audited by external auditors. Over the past several years MTS OJSC has been declared one of the most transparent companies in Russia and the CIS (according to the Standard & Poor's assessments). We hold our customers in respect and estimation and believe that progressive business advance under conditions of severe competition is possible only in case of high quality of products and services to be provided. Our activity is targeted to improvement of quality of customer care and services as well as to simplifying of interaction with customers.

HR potential is the main value of Company. Care for employees is one of the Group main priorities determining the activity success in the present-day market. Our Company permanently tries to improve social and labour relations. The main efforts are targeted to: safety and health protection of employees, social assistance, opportunities for career and personal development. Due to establishment of corporate skill pool, Company provides all employees of the Group with the possibility to fully realize their talents and creativities and motivates them with the increased salary and responsibility.

Our Company operates in every Russian region and in some countries of the near and far abroad. We care for social and economic development of these regions and the country as a whole, understanding that high indicators of their development are key factors contributing to MTS long-term efficient operation. As of the regions of MTS presence concerned, Company actively co-operates with the governmental authorities and local communities (population, non-governmental organizations and associations, public health authorities, trade unions and mass media).

Our Company is seeking to build its relations with suppliers on the long-term and mutually profitable basis. Efficient co-operation with them allows MTS Group to fulfill itself in the market, improve quality of services provided to customers, update technology. The most important aspect of Company's corporate social responsibility is transparency of relations with suppliers and partners, including purchasing activity.

The dialogue with the users of MTS OJSC services, company employees, representatives of authorities, nonprofit organizations and other stakeholders is carried out via various communication channels, the details of which are available on the corporate site www.mts.ru.

President Mobile TeleSystems OJSC A.A. Dubovskov
Chief Accountant Mobile TeleSystems OJSC I.R.áBorisenkova