EUROSET SACRIFICES BEELINE FOR MTS

CNews, Russia
September 10, 2007, Mon 12:46 AM Moscow

Euroset St. Petersburg outlets experienced decline in Beeline
subscriptions while MTS SIM-card sale grew in August. Euroset has
acknowledged concluding a contract with MTS. St. Petersburg cellular
retailers state cellular subscription fell by 10% in August as compared
to July, which might be accounted for usual summer vacations.

Euroset St. Petersburg outlets experienced decline in Beeline
subscriptions while MTS SIM-card sale grew in August. Euroset has
acknowledged concluding a contract with MTS. St. Petersburg cellular
retailers state cellular subscription fell by 10% in August as compared
to July, which might be accounted for usual summer vacations.

CNews got the August 6 largest St. Petersburg retailers subscription
data. The total number of contracts sold amounted to 186 thousand,
which is a 19 thousand decrease, as compared to July.

Beeline and Tele2 experienced the largest decrease in subscription as
compared to July (minus 12 and 7 thousands, relatively), Beeline main
sales decrease falling to two networks, i.e. Ultra and Euroset. At the
same time, the retailers claim MTS subscription to increase. According
to CNews, Euroset increased MTS contracts sale by 3.5 thousand,
while Ultra by 200.

MegaFon demonstrated the largest fall in the mentioned networks by
2 thousand.

CNews source in one of the cellular operators tells Euroset and Ultra
has concluded contracts with MTS, "that is why the mentioned above
companies are promoting only MTS at present at the expense of other
operators". "We have certain mutual obligations with MTS, while in
July they were renewed, – Euroset explains to CNews. – The growth is
connected with the mentioned factor". Valery Shishkin, Director of
Ultra Digital Technology Center notes MTS subscription increase is
connected with the company’s active marketing policy.

Euroset St. Petersburg outlets increased MTS SIM-cards sail, while
Beeline subscription reduced

It should be noted the subscription decrease affected all the cellular
retail market participants in August.

The highest decrease was experienced by Euroset and Ultra. "The
subscription reduction amounted to 5%, – Mr. Shishkin says. – That
corresponds to our forecasts, as we did not expect the subscription
increase in July". At the same time Euroset possessing the highest
number of outlets in St. Petersburg is the leader by the number of
contracts amounting to 61 thousand which is by 4.5 thousand lower
than in July.

Then Svyaznoy follows with 46 thousand contracts (minus 2 thousand),
Ultra with 33 thousand (minus 7 thousand). Teleforum concluded 32
thousand subscription contracts (minus 4 thousand). Cifrograd and
Betalink had correspondingly 17 thousand (minus 500) and 16 thousand
(minus 1.5 thousand) subscriptions.

Teleforum tells "in August the total sales bulk in the company’s
outlets was approximately equally distributed between the tree
operators, i.e. Beeline, MTS and Tele2. "At the same time Tele2
SIM-cards were sold mainly because of unbiased demand", – our
correspondent notes. – In general our sale expectations were not
approved, though the main tasks having been successfully fulfilled
by retail outlets".

Analysts and market participants account the subscription market
reduction for vacations, being highest in August. According to the
Analyst Denis Kuskov the situation with subscription reduction in
August repeats every year, but in Autumn it usually improves. "The
number of subscriptions to be made by the New Year is to be roughly
the same as in all previous months, – Mr. Kuskov says. – But then the
number of subscribers in St. Petersburg is to reduce, subscriptions
are to fall, so the operators will start struggling to retain the
existing subscribers".

MegaFon North-West Subsidiary confirms CNews data regarding the
insignificant reduction of new subscriptions in August as compared to
July. "That is sure to be connected with the seasonal activity slow
down, repeating from year to year, – the operator’s Press Service
confirms. – Besides, according to statistics, July is occupying the
second place by the rate of subscription after December, while August
is similar to January. In present August, according to roaming data,
subscribers were sure to go on holidays".

"We expect subscriptions to grow up in September, as September is
traditionally the most intensive month as compared to August", –
VimpelCom North-West representation office Press Service says.

Euroset is the largest mobile handset retailer in Russia and one of the
Russia’s leading dealers for major mobile network operators. The main
business activity of the Euroset Group is the retail sale of mobile
handsets, digital cameras, CD, MP3 players and DECT-phones, mobile
handset accessories and subscription to mobile network operators. In
the first half of 2005, the Group estimated its share of the mobile
handset retail market in Russia to be 23%. As of 31 October 2005
Euroset has outlets in 626 Russian cities, as well as in 25 cities in
Kazakhstan, 19 cities in Ukraine and one city in Belarus. Euroset’s
nest goal is to further develop its business in the Commonwealth of
Independent States and the Baltic States.

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VimpelCom Group includes cellular companies operating in Russia,
Kazakhstan, Ukraine, Uzbekistan and Tajikistan, and recently acquired
companies in Georgia and Armenia. The Company operates under the
‘Beeline’ brand. The VimpelCom Group’s license portfolio covers
approximately 240 million people. Geographically it covers 78 regions
of Russia with 136.5 million people, representing 94% of Russia’s
population as well as the entire territories of Kazakhstan, Ukraine,
Uzbekistan, Tajikistan, Georgia and Armenia. The company’s net income
and revenue for Q3 2006 was $268,4mln and $1,358mln respectively.

MTS (Mobile TeleSystems) is the largest mobile phone operator in
Russia and the CIS. Together with its subsidiaries, the Company
services over 72.86 million subscribers. The regions of Russia,
Belarus, Turkmenistan, Ukraine, and Uzbekistan, in which MTS and its
associates and subsidiaries are licensed to provide GSM services, have
a total population of more than 230 million. MTS completed its IPO and
listed its Level III ADRs on the New York Stock Exchange in July 2000,
under the symbol MBT. The Company’s shares have been listed locally on
MICEX since November 2003, under the symbol MTSI. The Company’s GDRs
are also traded in Europe. The free float of the Company’s shares
is approximately 46.7%. MTS is 52.8% majority-owned by Sistema,
the largest private sector consumer services company in Russia and
the CIS. The company’s consolidated revenues in the first quarter of
2007 reached $1,741mln.