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4. Company outlook

4. Company
outlook

MTS

OJSC connects the perspectives of its future operations with implementation of "3i" StrategyጠIntegration, Internet, Innovations that was formulated and approved by the Company's Board of Directors in 2009. This strategy is based on the principle of Total Communications, a concept of providing by the Company of a full range of modern telecommunication services in all customer segments by using wire and wireless technologies. In addition to the voice communication which is in great demand, the following rapidly growing services such as Internet access, digit TV, data transfer services and content services created on the basis thereof are becoming more important for customers and, accordingly, for service providers. In accordance with "3i" Strategy, MTS aims at business development and creation of value in all these areas.

In order to ensure growth in the traditional for MTS mobile communications area, the Company is actively involved in the construction of 3G networks in all markets of presence including Russia and a number of CIS countries where MTS subsidiaries operate. Launching of third generation networks significantly increases the level of mobile data transfer consumption and provides new opportunities connected with development of content products. The Company is closely monitoring and adopting most advanced technological tendencies related to the transfer to new wireless connection generations. The first segments of LTE networks were launched for commercial operation in Yerevan and Tashkent that will be further developed as adequate quantity of subscriber devices supporting this technology will appear in the market.

The development of fixed line business of the Company started when a controlling stock of COMSTAR-UTS OJSC was purchased in October 2009 which allowed MTS to gain leading positions in the segment of fixed telephony, wide band Internet access and digit TV in Moscow. The fundamental step on ensuring regional presence was made by acquiring Multiregion CJSC in July 2010, one of major federal players that operated in 37 Russian cities at that time. The key area of fixed line business development for MTS is further development of regional markets and integration of acquired companies in the MTS organizational structure.

In December 2009 MTS significantly increased the length of its proprietary backbone network after acquisition of Eurotel OJSC, one of the leading federal payers in the backbone market. MTS significantly increased the length of own backbone network which is intended first of all for data transfer at the interregional level given the growing consumption volumes both in the fixed lines and in 3G network which is being constructed energetically. It is a major priority in Company's activity to build its own transport network covering all MTS requirements.

MTS' major competitive advantage is its proprietary monobrand retail network which is currently one of three mobile retail market leaders. Its own retail network allows to ensure a high service level, to reduce churn and costs of dealer's fee. MTS further plans in this area are related to standardization of service range in all retail network points of sale, with increase due to the retail network of sales of products and services developed by the Company, increase of 3G compatible subscriber equipment penetration level, and expansion of MTS brand presence.

We believe that implementation of "3i" Strategy by the Company will provide an opportunity for MTS toácreate value in all areas of telecommunication industry, ináall customer segments; will allow to ensure the best customer experience for customers and create maximum additional value for shareholders.