FORM 6-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Issuer
August 31, 2004

 

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

 

Commission file number:  333-12032

 

Mobile TeleSystems OJSC

(Exact name of Registrant as specified in its charter)

Russian Federation

(Jurisdiction of incorporation or organization)

 

4, Marksistskaya Street
Moscow 109147
Russian Federation

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F   ý   Form 40-F   o

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes   o   No   ý

 

 



 

 

FINANCIAL RESULTS

 

FOR THE SECOND QUARTER ENDED JUNE 30, 2004

 

Moscow, Russian Federation – August 31, 2004Mobile TeleSystems OJSC (“MTS” - NYSE: MBT), the largest mobile phone operator in Russia and the CIS, today announces excellent financial and operating results demonstrated by increased revenues, net income and free cash-flow for the second quarter of 2004(1).

 

Key Highlights:

 

      Revenues up 52% year-on-year to $918.2 million driven by doubled subscriber base; net income up 108% year-on-year to $267.5 million

 

      Operating income before depreciation and amortization (OIBDA)(2) up 60% year-on-year to $521.5 million (an all-time high OIBDA margin of 56.8%) as a result of growth in revenues and higher efficiency partially due to increased scale and cost control

 

      MTS was free cash-flow(3) positive for both Q2 and H1 2004, generating $293.0 million for the first six months of the year

 

      For H1 2004 value-added service revenues amounted to $154.4 million, representing 9.3% of total consolidated service revenues

 

      Churn rates declined in both Russia and Ukraine compared to the previous quarter due to new loyalty programs and new dealer commission payment scheme

 

      Continued strong subscriber base growth with 8.80 million new customers added since the beginning of the year to reach 25.50 million as of August 30, 2004

 

Financial Highlights (Unaudited)

 

US$ million

 

Q2
2004

 

Q1
2004

 

Change
Q-on-Q

 

Q2
2003

 

Change
Y-on-Y

 

Revenues

 

918.2

 

802.7

(4)

14.4

%

606.0

 

51.5

%

Operating income

 

371.7

 

306.8

 

21.2

%

225.4

 

64.9

%

Operating margin

 

40.5

%

38.2

%

 

37.2

%

 

Net income

 

267.5

 

207.8

 

28.7

%

128.5

 

108.2

%

OIBDA

 

521.5

 

440.7

 

18.3

%

325.0

 

60.5

%

OIBDA margin

 

56.8

%

54.9

%

 

53.6

%

 

 

Commenting on the results, Vassily Sidorov, President and CEO of MTS, said: “We produced strong operating and financial results for the quarter. Our focus on cost efficiency and the increasing economies of scale in our business resulted in an additional improvement in margins. We continue to maintain MTS’ position as the leading mobile operator in Russia and the CIS through profitable organic growth and measured expansion into new markets, as well as by strengthening our brand and providing superior services to our customers.”

 


(1) Based on unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

(2) See Attachment A for definitions and reconciliation of OIBDA and OIBDA margin to their most directly comparable US GAAP financial measures.

(3) See Attachment B for reconciliation of free cash-flow to its most directly comparable US GAAP financial measures.

(4) Number revised in Q2 2004 due to the subsequent reclassification in intercompany balances with no effect on OIBDA and net income amounts.

 

2



 

Subscriber Base Dynamic

 

The robust expansion of the mobile markets in Russia and Ukraine continued during the quarter. Around 7.2 million(5)  new customers signed up to mobile networks in Russia and 1.2 million in Ukraine during Q2 2004. The total mobile population in Russia increased to 49.5 million (a penetration of 34.1%) and to 8.4 million in Ukraine (a penetration of 17.4%). MTS accounted for around 36% of new organic additions in Russia and 67% in Ukraine in Q2 2004, adding 3.37 million customers organically and 0.22 million via the consolidation of its 100% ownership in Primtelefon (as reported earlier, MTS acquired the remaining 50% stake in Primtelefon on June 30, 2004).

 

MTS finished Q2 2004 with a consolidated subscriber base of 22.78 million subscribers (18.14 million in Russia and 4.63 million in Ukraine). The Company successfully retained its 37% leading market share in Russia and further increased its market share in Ukraine from 53% to 55%. After the end of Q2 2004, on August 10, 2004, MTS’ subscriber base in Ukraine exceeded 5 million, a milestone that underlines the strength of the Company’s competitive position in this dynamic market.

 

The growth of the mobile market in Belarus was similar to that in Russia and Ukraine. During Q2 2004, the number of mobile phone users in Belarus increased by 0.3 million to 1.6 million (a penetration of 16%). MTS’ unconsolidated 49%-owned joint venture accounted for around 53% of new additions, bringing the total number of its customers to 0.74 million. The joint venture’s market share continued to increase during the quarter from 44% to 46%.

 

As of June 30, 2004, 65% of MTS’ customers in Russia and 83% of its customers in Ukraine were signed up to pre-paid tariff plans (Jeans in Russia and Jeans and SIM-SIM in Ukraine). The Company’s pre-paid customers accounted for 81% of gross additions in Russia and 90% in Ukraine during Q2 2004.

 

As reported on August 2, 2004, MTS entered another sizable market in the CIS, Uzbekistan, through the acquisition of a majority ownership in the country’s leading GSM operator, Uzdunrobita. In terms of population, Uzbekistan is the third largest country in the CIS after Russia and Ukraine, with 25.2 million inhabitants. Mobile penetration in Uzbekistan is just over 1.5%, providing MTS with potentially significant growth opportunities on this market. This acquisition added 0.21 million users to MTS’ consolidated subscriber base.

 

As of August 30, 2004, the Company’s consolidated subscriber base was at 25.50 million, comprised of 20.00 million in Russia, 5.26 million in Ukraine and 0.25 million in Uzbekistan. In addition, MTS’ joint venture in Belarus provided services to 0.89 million customers.

 

CAPEX and Debt Position

 

MTS’ capital expenditures on property, plant and equipment during Q2 2004 totaled $221.8 million (of which $50.0 million was spent in Ukraine), amounting to $435.2 million for the first half of the year. In addition, MTS spent $21.8 million on purchases of intangible assets during Q2 2004 (of which $12.1 million was spent in Ukraine), bringing the total expenditure for the first half of 2004 to $40.6 million.

 

During the first half of 2004, MTS’ debt position decreased. As of June 30, 2004, the Company’s total debt(6) was $1.40 billion (compared to $1.66 billion at the end of 2003), and its net debt was $1.05 billion (compared to $1.32 billion at the end of 2003).

 


(5) The source for all market information in this press release is AC&M-Consulting.

(6) Total debt is comprised of the current portion of debt, current capital lease obligations, long-term debt and long-term capital lease obligations; net debt is the difference between the total debt and cash and cash equivalents and short-term investments; see Attachment B for reconciliation of net debt to our consolidated balance sheet.

 

3



 

Operational Highlights

 

 

 

Q2 2004

 

Q1 2004

 

Q4 2003

 

Q3 2003

 

Q2 2003

 

Total consolidated subscribers, end of period (mln)

 

22.78

 

19.19

 

16.72

 

13.89

 

11.34

 

Russia (mln)

 

18.14

 

15.34

 

13.37

 

11.34

 

9.32

 

Ukraine (mln)

 

4.63

 

3.85

 

3.35

 

2.55

 

2.02

 

Unconsolidated subsidiaries in Russia(7), thousands

 

11.5

 

163.8

 

123.1

 

114.4

 

 

MTS Belarus(8), thousands

 

744.7

 

592.6

 

464.8

 

308.9

 

170.2

 

Russia

 

 

 

 

 

 

 

 

 

 

 

ARPU (US$)(9)

 

14.1

 

14.1

(10)

16.3

 

18.8

 

18.7

 

MOU (minutes)

 

160

 

147

 

140

 

159

 

162

 

Churn rate (%)

 

7.7

 

10.0

 

12.5

 

12.3

 

11.0

 

SAC per gross additional subscriber (US$)

 

21

 

23

 

24

 

23

 

27

 

Ukraine

 

 

 

 

 

 

 

 

 

 

 

ARPU (US$)

 

14.6

 

14.0

 

15.4

 

17.8

 

17.2

 

MOU (minutes)

 

127

 

111

 

114

 

110

 

97

 

Churn rate (%)

 

5.2

 

6.0

 

6.5

 

4.6

 

5.5

 

SAC per gross additional subscriber (US$)

 

18

 

25

 

26

 

34

 

37

 

 

MTS’ Operations in Russia

 

At $728.3 million(11) in Q2 2004, revenues from MTS’ operations in Russia were up 12.4% compared to Q1 2004 (43.7% year-on-year). OIBDA in Q2 2004 increased by 15.8% compared to Q1 2004 (52.5% year-on-year) to $413.7 million, an OIBDA margin of 56.8%. Net income in Q2 2004 reached $209.1 million, an increase of 26.7% compared to Q1 2004 (86.3% year-on-year).

 

The increase in OIBDA margin in Q2 2004 compared to the previous quarter is partially due to the new dealer commission payment scheme in Moscow introduced in February 2004, whereby commissions to dealers are deferred for up to one year replacing the one-time commission payment scheme. In addition, the size of commission was lowered in certain regions. Another factor that influenced the increase in profitability during the quarter was the reduction in roaming expenses due to the increased share of intra-network roaming.

 

The average monthly minutes of usage per subscriber (MOU) increased in Q2 2004 to 160 minutes compared to 147 minutes in Q1 2004, partially as a result of a number of marketing initiatives aimed at encouraging customers to use their mobile phones more often. However, these initiatives also led to an increased number of calls made by customers within the network (outgoing calls between MTS customers receive discounted rates), resulting in a flat average

 


(7) On June 30, 2004, MTS increased its stake to 100% and began to consolidate Primtelefon, a local mobile operator in the Far Eastern and Siberian parts of Russia, after its acquisition of the remaining 50% stake in the company (previously Primtelefon subscribers had been treated as unconsolidated subscribers). Since Q2 2004, MTS increased its stakes to 100% and began to consolidate Volgograd Mobile and Astrakhan Mobile, local mobile operators in the Volga part of Russia, after its acquisition of the remaining 50% stakes in both on August 24, 2004.

(8) MTS owns a 49% stake in Belarus operator, Mobile TeleSystems LLC, which is not consolidated.

(9) See Attachment C for definitions of ARPU, MOU, Churn and SAC.

(10) Originally released as $14.7. The number was revised due to the subsequent reclassification of intercompany balance with no effect on total service revenues.

(11) Excluding intercompany eliminations of $0.6 million.

 

4



 

monthly revenue per user (ARPU) in Russia compared to the previous quarter of $14.1 in Q2 2004.

 

The decline in MTS’ quarterly churn rate continued, reaching 7.7% in Q2 2004 compared to 10.0% in Q1 2004 and 11.0% in Q2 2003, mainly because of the launch of its new loyalty programs (in particular, discounts to subscribers signing term-contracts) and successful implementation of a new sales strategy.

 

MTS’ Operations in Ukraine

 

At $190.5 million(12) in Q2 2004, revenues from MTS’ operations in Ukraine increased by 23.1% compared to Q1 2004 (89.5% year-on-year). OIBDA in Q2 2004 increased by 29.1% compared to Q1 2004 (100.4% year-on-year) to $107.8 million, an OIBDA margin of 56.6%. The further increase in OIBDA margin in Q2 2004 compared to the previous quarter was largely due to improved economies of scale and cost control. Net income in Q2 2004 reached $58.4 million, an increase of 36.4% compared to Q1 2004 (258.4% year-on-year).

 

Q2 2004 was marked by a positive development in MTS’ ARPU and MOU in Ukraine. During the quarter, the Company’s ARPU was up from $14.0 in Q1 2004 to $14.6, driven mainly by an increase in usage from 111 minutes to 127 minutes. This growth continues the overall trend of increasing usage, following a slight decline in Q1 2004 (seasonally the weakest quarter in terms of usage).

 

MTS’ SAC per gross additional subscriber in Ukraine declined to $18 in Q2 2004 from $25 in Q1 2004. Similar to the trends experienced by the Company in Russia, the SAC decrease in Ukraine was largely attributable to the increasing percentage of pre-paid subscribers in the mix of gross additions and reductions in contract subscriber acquisition costs.

 

Continued emphasis on loyalty during Q2 2004 helped to reduce MTS’ quarterly churn rate in Ukraine even further, to reach 5.2% compared to 6.0% in the previous quarter.

 

***

 

For further information contact:

 

Mobile TeleSystems, Moscow

 

Investor and Public Relations

tel: +7 095 911-65-53

Andrey Braginski

e-mail: ir@mts.ru

 


(12) Excluding intercompany eliminations of $0.6 million.

 

***

 

5



 

***

 

Mobile TeleSystems (“MTS”) is the largest mobile phone operator in Russia and the CIS. Together with its subsidiaries, the company services over 25.5 million subscribers. The regions of Russia, as well as Belarus and Ukraine, in which MTS and its subsidiaries are licensed to provide GSM services, have a total population of approximately 225.8 million. Since June 2000, MTS’ Level 3 ADRs have been listed on the New York Stock Exchange with the ticker symbol MBT. Additional information about MTS can be found on MTS’ website at www.mtsgsm.com.

 

***

 

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might” the negative of such terms or other similar expressions.  We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically, the Company’s most recent Form 20-F/A. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors,” that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures; rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, risks associated with operating in Russia, volatility of stock price, financial risk management, and future growth subject to risks.

 

***

 

6



 

Attachments to the Second Quarter 2004 Earnings Press Release

 

Attachment A

 

Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

 

Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA margin. OIBDA represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of our net revenues. Our OIBDA may not be similar to OIBDA measures of other companies; is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of mobile operators and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA can be reconciled to our consolidated statements of operations as follows:

 

US$ million

 

Q2 2004

 

Q1 2004

 

Q2 2003

 

Operating income

 

371.7

 

306.8

 

225.4

 

Add: depreciation and amortization

 

149.8

 

133.9

 

99.6

 

OIBDA

 

521.5

 

440.7

 

325.0

 

 

OIBDA margin can be reconciled to our operating margin as follows:

 

 

 

Q2 2004

 

Q1 2004

 

Q2 2003

 

Operating margin

 

40.5

%

38.2

%

37.2

%

Add: depreciation and amortization as a percentage  of revenue

 

16.3

%

16.7

%

16.4

%

OIBDA margin

 

56.8

%

54.9

%

53.6

%

 

***

 

7



 

Attachment B

 

Net debt can be reconciled to our consolidated balance sheets as follows:

 

US$ million

 

As of
June 30, 2004

 

As of
December 31, 2003

 

Current portion of long-term debt and of capital lease obligations

 

461.5

 

710.3

 

Long-term debt

 

929.7

 

942.4

 

Capital lease obligations

 

7.1

 

7.6

 

Total debt

 

1 398.3

 

1 660.3

 

Less:

 

 

 

 

 

Cash and cash equivalents

 

(289.9

)

(90.4

)

Short-term investments

 

(59.0

)

(245.0

)

Net debt

 

1 049.4

 

1 324.9

 

 

Free cash-flow can be reconciled to our consolidated net cash provided by operating activities as follows:

 

US$ million

 

For six months
ended
June 30, 2004

 

Net cash provided by operating activities

 

790.8

 

Less

 

 

 

Purchase of property, plant and equipment

 

(435.2

)

Purchase of intangible assets

 

(40.7

)

Investments in and advances to associates

 

(1.1

)

Acquisition of subsidiaries, net of cash acquired

 

(20.8

)

Free cash-flow

 

293.0

 

 

***

 

8



 

Attachment C

 

Definitions

 

Subscriber. We define a “subscriber” as an individual or organization whose account shows chargeable activity within sixty one days, or one hundred and eighty three days in the case of our Jeans brand tariff, and whose account does not have a negative balance for more than this period.

 

Average monthly service revenue per subscriber (ARPU). We calculate our average monthly service revenue per subscriber by dividing our service revenues for a given period, including guest roaming fees, by the average number of our subscribers during that period and dividing by the number of months in that period.

 

Average monthly minutes of usage per subscriber (MOU). MOU is calculated by dividing the total number of minutes of usage during a given period by the average number of our subscribers during the period and dividing by the number of months in that period.

 

Churn. We define our “churn” as the total number of subscribers who cease to be a “subscriber” as defined above during the period (whether involuntarily due to non-payment or voluntarily, at such subscriber’s request), expressed as a percentage of the average number of our subscribers during that period.

 

Subscriber acquisition cost (SAC). We define SAC as total sales and marketing expenses and handset subsidies for a given period. Sales and marketing expenses include advertising expenses and commissions to dealers. SAC per gross additional subscriber is calculated by dividing SAC during a given period by the total number of gross subscribers added by us during the period.

 

***

 

9



 

MOBILE TELESYSTEMS

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003 AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003

 

(Amounts in thousands of U.S. dollars, except share and per share amounts)

 

 

 

Three months ended
June 30, 2004

 

Three months ended
June 30, 2003

 

Six months ended
June 30, 2004

 

Six months ended
June 30, 2003

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

 

 

 

 

 

 

 

 

Service revenue and connection fees

 

$

900 469

 

$

580 227

 

$

1 681 376

 

$

1 008 839

 

Sales of handsets and accessories

 

17 772

 

25 812

 

39 599

 

43 295

 

 

 

918 241

 

606 039

 

1 720 975

 

1 052 134

 

Operating expenses

 

 

 

 

 

 

 

 

 

Cost of services

 

109 143

 

69 234

 

205 686

 

124 177

 

Cost of handsets and accessories

 

43 524

 

45 754

 

86 840

 

73 639

 

Sales and marketing expenses

 

99 043

 

77 828

 

190 864

 

135 564

 

General and administrative expenses

 

134 151

 

76 635

 

251 093

 

140 808

 

Depreciation and amortization

 

149 770

 

99 584

 

283 622

 

174 774

 

Provision for doubtful accounts

 

4 902

 

8 288

 

11 707

 

22 851

 

Other operating expenses

 

6 007

 

3 296

 

12 615

 

5 285

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

371 701

 

225 420

 

678 548

 

375 036

 

 

 

 

 

 

 

 

 

 

 

Currency exchange and translation losses (gains)

 

5 199

 

(666

)

(2 996

)

(1 408

)

 

 

 

 

 

 

 

 

 

 

Other expense (income):

 

 

 

 

 

 

 

 

 

Interest income

 

(4 829

)

(5 591

)

(10 852

)

(8 823

)

Interest expenses, net of amounts capitalized

 

26 109

 

23 036

 

53 709

 

41 848

 

Other expense (income)

 

(6 352

)

605

 

(16 453

)

855

 

Total other expense (income), net

 

14 927

 

18 050

 

26 404

 

33 880

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes and minority interest

 

351 574

 

208 036

 

655 140

 

342 564

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

74 573

 

55 943

 

162 688

 

96 412

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

9 482

 

23 569

 

17 112

 

37 410

 

 

 

 

 

 

 

 

 

 

 

Net income

 

267 519

 

128 524

 

475 340

 

208 742

 

Weighted average number of shares outstanding, in thousands

 

1 983 400

 

1 983 400

 

1 983 400

 

1 983 400

 

Earnings per share - basic and diluted

 

0.135

 

0.065

 

0.240

 

0.105

 

 

10



 

MOBILE TELESYSTEMS

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

AT JUNE 30, 2004 AND DECEMBER 31, 2003

 

(Amounts in thousands of U.S. dollars, except share amounts)

 

 

 

As of June 30
2004

 

As of December 31
2003

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

289 885

 

$

90 376

 

Short-term investments

 

59 002

 

245 000

 

Trade receivables, net

 

130 131

 

99 951

 

Accounts receivable, related parties

 

15 227

 

3 356

 

Inventory, net

 

66 695

 

67 291

 

VAT receivable

 

187 332

 

209 629

 

Prepaid expenses and other current assets

 

132 949

 

124 876

 

Total current assets

 

881 221

 

840 479

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

2 575 119

 

2 256 076

 

 

 

 

 

 

 

INTANGIBLE ASSETS

 

986 142

 

1 015 780

 

 

 

 

 

 

 

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

 

84 439

 

103 585

 

 

 

 

 

 

 

OTHER ASSETS

 

6 982

 

9 431

 

 

 

 

 

 

 

Total assets

 

4 533 903

 

4 225 351

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

 

210 442

 

168 039

 

Accrued expenses and other current liabilities

 

677 036

 

387 756

 

Accounts payable, related parties

 

9 495

 

31 904

 

Current portion of long-term debt, capital lease obligations

 

461 521

 

710 270

 

Total current liabilities

 

1 358 494

 

1 297 969

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Long-term debt

 

929 635

 

942 418

 

Capital lease obligations

 

7 120

 

7 646

 

Deferred income taxes

 

167 581

 

180 628

 

Deferred revenue and other

 

34 296

 

25 177

 

Total long-term liabilities

 

1 138 632

 

1 155 869

 

 

 

 

 

 

 

Total liabilities

 

2 497 126

 

2 453 838

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

MINORITY INTEREST

 

48 329

 

47 603

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

Common stock: (2,096,975,792 shares with a par value of 0.1 rubles authorized and 1,993,326,138 shares issued as of June 30, 2004 and December 31, 2003, 345,244,080 of which are in the form of ADS)

 

50 558

 

50 558

 

Treasury stock (9,929,074 common shares at cost as of June 30, 2004 and December 31, 2003)

 

(10 197

)

(10 197

)

Additional paid-in capital

 

560 475

 

559 911

 

Unearned compensation

 

(551

)

(869

)

Shareholder receivable

 

(23 679

)

(27 610

)

Accumulated other comprehensive income

 

10 805

 

7 595

 

Retained earnings

 

1 401 037

 

1 144 522

 

Total shareholders’ equity

 

1 988 448

 

1 723 910

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

4 533 903

 

4 225 351

 

 

11



 

MOBILE TELESYSTEMS

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003

 

(Amounts in thousands of U.S. dollars)

 

 

 

Six months ended
June 30, 2004

 

Six months ended
June 30, 2003

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

475 340

 

$

208 742

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Minority interest

 

17 112

 

37 410

 

Depreciation and amortization

 

283 622

 

174 774

 

Amortization of deferred connection fees

 

(27 067

)

(16 166

)

Equity in net income (loss) of associates

 

(11 687

)

 

Provision for obsolete inventory

 

6 456

 

3 277

 

Provision for doubtful accounts

 

11 707

 

22 851

 

Deferred taxes

 

(21 372

)

(17 064

)

Non-cash expenses associated with stock bonus and stock options

 

318

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Increase in accounts receivable

 

(52 916

)

(41 732

)

Increase in inventory

 

(4 832

)

(4 255

)

(Increase) / Decrease in prepaid expenses and other current assets

 

(10 424

)

3 783

 

(Increase) / Decrease in VAT receivable

 

26 337

 

(35 195

)

Increase in trade accounts payable, accrued liabilities and other current liabilities

 

98 231

 

58 916

 

Net cash provided by operating activities

 

790 825

 

395 341

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

 

(20 848

)

(301 814

)

Purchase of property, plant and equipment

 

(435 223

)

(325 843

)

Purchase of intangible assets

 

(40 634

)

(57 396

)

Purchase of short-term investments

 

(45 365

)

 

Proceeds from sale of short-term investments

 

230 000

 

 

Investments in and advances to associates

 

(1 114

)

(17 173

)

Net cash used in investing activities

 

(313 184

)

(702 226

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from notes issue

 

 

400 000

 

Repayment of notes

 

(300 000

)

 

Notes issuance cost

 

 

(3 929

)

Capital lease obligaiton principal paid

 

(5 480

)

(6 982

)

Dividends paid

 

(6 795

)

 

Proceeds from loans

 

205 544

 

58 144

 

Loan principal paid

 

(177 498

)

(61 895

)

Payments from AFK Sistema

 

4 496

 

 

Net cash used in financing activities

 

(279 733

)

385 338

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

1 601

 

447

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS:

 

199 509

 

78 900

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at beginning of period

 

90 376

 

34 661

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at end of period

 

289 885

 

113 561

 

 

12



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

MOBILE TELESYSTEMS OJSC

 

 

 

 

 

 

 

By:

Vassily Sidorov

 

 

 

Name:

Vassily Sidorov

 

 

Title:

President/CEO

 

 

 

 

Date:   August 31, 2004

 

13