MTS situation

Dear colleagues,

Here you may find rough analysis and my forecasts on MTS. Initially you may find some information here: http://www.iks-media.ru/news/2390304.html
and here: http://www.cellular-news.com/story/34739.php

As you may see situation looks like in VimpelCom:

• short-terms debt is >$800mln
• rubble deprecation causes big losses (not meeting previous forecasts)
• debt problems with brother companies in AFK Sistema (Sitronics and Sistema GALS)
• AFK Sistema much more influent on MTS divident payments (than Altimo on VimpelCom) and will try to get as much as possible from MTS to cover its losses in other companies

There are several rumors about future 10% jobs cut in MTS - I think it is about efficiency improvement during crisis. CAPEX on projects isn't frozen but projects are moving very slowly. I'd like to mention MTS's ongoing investments in 3G network - new cities continue to get 3G coverage. It will cause increase in revenues from Mobile Internet traffic but special 3G services are still not anounced.

I'm pretty sure that in 2009 year the most popular reason for buying solution will be cost-cutting (efficiency improvement). Several 3G services should be launched too for marketing purposes.

Thanks,
Denis.