CAPEX

CAPEX Lower than Expected in 2007; Excess Funds to be Carried Over to 2008

MTS carried out CAPEX spending of $1.5 billion in 2007, which was approximately $450 million less than anticipated at the outset of the year. This was partially due to lower-than-expected 3G spending as the introduction of 3G services was delayed in Russia due to issues with frequency clearance.

However, these funds – of which approximately $200 million is relating to 3G spectrum clearance – have been allocated to 2008 capital investments. The balance of the difference is mainly derived from the favorable terms that MTS was able to gain from vendors on equipment that the Company took possession of in 2007 – and this money will also be allocated to 2008 spending.

In 2008, the Group will focus investments in capacity and coverage to accommodate rising traffic and demand for voice services. Further investments will be made so that the Company can add more dedicated data channels and roll-out 3G services in countries which it possesses licenses to deliver easier Internet access and faster download speeds.