6. Board of Directors' Performance Report

6. Board of Directors' Performance Report
on the Company's Business Priorities


OJSC in 2010 developed on the basis of consistent implementation of "3i" Strategy ľ Integration, Internet, Innovations formulated and approved by the Company's Board of Directors in 2009. The Principle of "Total" telecommunications or provision by the Company of a full range of advanced telecommunication services in all consumer segments by using wire and wireless technologies was implemented during 2010 more fully and energetically in all markets of MTS OJSC's presence.

Key and permanent priorities in the activity of MTS OJSC, a Top company in the telecommunication industry in 2010 are to ensure the best customer experience for subscribers and create maximum additional value for shareholders of the Company. The revenue of the Group exceeded RUB 340 bln, and the number of customers serviced by the Company in the markets of presence exceeded 103 million people.

In order to realize the existing priorities under conditions of recovering markets in Russia and in the world, and given energetic development of telecommunication technologies, the Company focused its efforts not only on voice communication that is in great demand, but on such fast developing market segments as Internet access, digit TV, data transfer services and content services. In accordance with "3" Strategy, the objective of MTS OJSC in 2010 was business development and creation of value in all areas.

Integration and related processes were of great importance in the activity of the Company in 2010. Energetic activity in the area of integration is aimed at satisfying the needs of Company's customers, creating additional value in related segments of telecommunications market and strengthening MTS OJSC's leadership positions both in mobile communications and related telecommunication areas. Among the most important steps it is necessary to mention adopting a decision on full merger of MTS OJSC and COMSTAR-UTS OJSC and buy-back of 9% shares of COMSTAR UTS OJSC minority shareholders. Actually, that means appearance of a strong integrated player in the market that offer better quality services and advanced services to the customers including those beyond the framework of mobile communications.

MTS customers received a full range of high quality services in proprietary retail stores under MTS brand where they can purchase any telecommunication products, e.g. mobile communications, advanced telecommunication equipment and handsets, customer sets for television viewing and connection to high speed Internet and many other services. Currently, MTS retail network consists of more than 3560 retail stores that in 2010 sold about 15% of handsets sold in Russia.

Internet and winning strong leading positions in this most important telecommunication market segment and satisfying the needs of customers in Internet access at home, in the office and en route is another priority of MTS OJSC during the whole 2010 year. In the course of merger of MTS OJSC and COMSTAR UTS OJSC there were launched sales of convergent products under MTS brand. The Company energetically operated in the dynamic market of pay-TV by purchasing 100% of Multiregion CJSC, a leader of broadband Internet access and cable TV services in Russia.

In 2010 MTS customers in Russia, in the key market of the Company, had an opportunity of access to 3G network using HSPA technology at speeds up to 7.2 MBit per second, and 3G network covered more than 900 settlements, demonstrating growth by 3.5 times during the year. MTS is traditionally in the forefront of advanced technologies and pays careful attention to further evolution of mobile communications: LTE networks with roaming functions operate in Armenia and Uzbekistan. Even more energetic construction of high speed networks is scheduled for the year 2011, Company's customers can be sure to receive most advanced and highest quality communication services in any location.

Innovation and ensuring leadership in this most important dynamic area is another big objective achieved by the Company in 2010. It is MTS that was the first in Russia to sell proprietary branded tablet computer based on Android operational system, and sets of MTS-TV were received by MTS retail network under its own brand. In 2010 the multimedia portal "Omlet" offering to its users music, films and other modern entertainment content was visited by 55 million people, including via the mobile interface. In addition, MTS-360 platform was launched that is an innovative set of mobile internet-services together with Vodafone.

Among major achievements of 2010, we should note a turning point of the situation in the market of Ukraine where both the market share of the Company and total satisfaction of customers is growing. There are positive results regarding improving operating efficiency and reduction of costs during 2010 that only in Russia and Corporate Center totaled 2.5% vs. 2009.

Summarizing the work undertaken, it is necessary to note a prestigious international awardጠGSMA Global Mobile Award 2010 which MTS OJSC received first in the history of Russian telecommunications. MTS brand for 3 years in succession has been recognized as the most expensive Russian brand according to the rating of BRANDZጠ$9.7 bln, and the Company for a good reason may be proud of this achievement.

Therefore, consistent implementation by the Company of "3i' Strategy during 2010 provided an opportunity for MTS to retain leadership positions in all areas of telecommunication industry and all customer segments. Further Company development will allow to provide the best customer experience and create maximum additional value for shareholders in 2011.

Ron Sommer,
Chairman of MTS OJSC Board ofáDirectors