The development and distribution of applications in partnership with MTS

2

I. About MTSII. Foreign and domestic markets for

applicationsIII. Types of Appstores. Description of JIL &

WACIV. The steps toward partnership

3

Key facts of MTS

69.3

102.4

$9.8

SubscribersNumber, mln

RevenueUSD, bln

Summary, 2009

MTS is largest operator in Eastern Europe, positioned as one of the top-10 mobile operators in the world based on number of subscribers

The brand “MTS” is the most valuable brand in Russia, and is one of the world’s top-100 brand names

MTS is a member of JIL/WAC

Since 2000, MTS is traded on the NYSE

Since 2008, MTS has been an exclusive strategic partner of Vodafone Group Plc

In 2009 MTS entered India market

In 2009 MTS merged with Comstar-OTS, the largest operator of fixed telecommunication service in Russia and CIS

* without India

MTS is largest phone operator in Eastern Europe with subscriber base more than 102mln *

17.61.1

4.6N/A

2.10.2

0.37.1

1.80.1

8.2

4

I. About MTSII. Foreign and domestic market of

applicationsIII. Types of app stores. Description of JIL &

WACIV. The steps toward partnership

5

Foreign developers

Domestic developers

World market

Russia & CIS

Market

Current opportunities

Potential opportunities

The distribution of application via MTS will help developers to extend their market geography

1

2

• More than 2B subscribers

• China

• USA

• India

• Japan

• Italy

• Norway

• UK

• Spain

• Greece

• Austria

• Germany

• Portugal

• Turkey

• More than 102M subscribers

• Russia

• Ukraine

• Belarus

• Armenia

• Uzbekistan

• Turkmenistan

6

16,6

11,1

8,1

6,0

4,7

201220102009

+37%

2011 2013

It’s anticipated that in five years, applications will become the fastest growing segment of mobile market

Source Frost and Sullivan, RBC capital market

Growth of apps market in the worldIn Billions (USD)

Main factors contributing to growing application consumption in the world

Increasing number of smart-phones

• Smart-phone users are the target consumers of apps

• Smartphones share is expected to grow from 14,8% to 28,3% between 2009-13

New sales channels

• The opening of new app stores will push the consumption among smart-phone users

Growing number of applications

• New apps, focused on specific interests of users and smart-phones with high performance

According to experts (Gartner, Booz and Co & others.), the market for applications will grow more than 4 times by 2013 .

1

77

The mobile phone market will grow an average of 5%/yr from 2010 – 2014 mostly due to smartphones

In 2010, more than 1,3bln mobile phones will be sold in the world, and 250mln of them will be smartphones

By 2013, mobile will move ahead of PC’s as the most common way of accessing Internet

In 2014, 3 out of 10 phones sold will be a smartphone

* - By Frost & Sullivan

Smartphones sales will be the only growing segment through 2014

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014

SmartphonesJava phones

Forecast of handsets sales in the world (mln)

1

12.5 14.8 19.8 24.3 27.2 28.3 31.4

Percentage of smartphones in world market12.5

8

The market of mobile apps in Russian is at early stage, but has a huge potential

- More than 215MM users, - Penetration of mobile communication is148,5%- More than 10% users use smartphones, predicted level of penetration of

smartphones in Russia by the end of 2011 will be more 20%- Usage of mobile internet: more than 22%

Market volume

- SPB Software House- More than 50 private developers(Shamrock, Herocraft, Paragon, Intervale)- Internet resources (Yandex, Rambler, VKontakte, Odnoklassniki, Mail.ru)

Major players

Main goals

Distribution channels

- MNO portals and app stores- app stores: Apple, Android Market- Payment: 90% payments done via SMS billing

2

- Creating of efficient environment of collaboration with developers- Creating effective sales channels- Increase the popularity of applications among MTS

The market for mobile applications in Russia and CIS countries has great potential, provided an effective monetization services, and construction of high-quality channels

of sale applications.

9

Mobile games will grow 1.6 times by 2013, resulting in ~ $246MM USD

5%

25%

Java apps

Games

70%

Application of other OSes

106150

151

2009

+63%

2013 Forecast

24622%

17%

61%

The structure of selling games and apps

US & EURussia

• Undeveloped Russian market applications are associated with the following factors:

– Low penetration of smartphones– Insufficient number of applications on the

market– The lack of special app stores

By 2014, the Russian market will be similar to the USA and EU, game and app sales will increase 63%

• Assumptions for 2010-13 – Selling games – natural growth 8-10% year– Selling apps– quick growth ~21% partially due to

removing obstacles preventing market development– Proportion of Java-app reduces as number of smart-

phones grows

Unlike the U.S. and EU, games and Java-based applications account for the majority of sales in Russia

Russian market for games and applications MM USD

Source: estimates of MTS

46

97

2

10

I. About MTSII. Foreign and domestic marketIII. Types of app stores. Description of

JIL & WACIV. The steps toward partnership

11

There are more than 40 app stores in the world, their development is supported by four major participants in mobile market

• Support only their OS • Available only on proprietary phones

• Available only for subscribers

• Collaboration only with some providers

OEM app stores Operator app storesPlatform app stores Independent participants

Existent app stores

All existing app stores have a number of significant restrictions including both the geography of sales and the monetization of applications

• Goal:

Pushing their OS to improve positioning in adjacent areas

• Goal:

Decrease monopolyzation application market by sole participant

• Goal: Increase customer loyalty and reducing churn

• Goal: Distribution of commercial applications

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JIL (Joint Innovation Lab) is an exististing mobile apps development environment integrated into the Vodafone app store

RUSSIA

Development

Technical capabilities

Distribution

JIL provides efficient tools for development and distribution

More than two millions devices in the world

Supports more than 70 device types

Support of TouchScreen, non Touch Screen, QWERTY keyboard, T9 keypad

Usage of Cross Up Sales and Recommendation Engine

Ability to sell applications in 14 countries

Integrated billing

Online statistics www. jil.org

Distribution through WEB / WAP interfaces

Specific SDK

Convenient environment of application downloading and sale statistics analysis www. jil.org

Specific system for testing applications

13

WAC – world-wide association, uniting mobile operators and phone manufacturers to establish uniform rules for the creation of mobile applications

Goals of WAC

WAC members

• More than 24 cell phone operators

• More than 2 users worldwide

• Three phone manufacturers(Sony Ericsson, LG, Samsung)

• Development of SDK based on JIL

• Development of common schema for development and distribution on all phone operators

• Consultation support

• Forums and seminars for developers

• Providing distribution of all operator members of WAC

• Support of a development and distribution platform

• Forming a convenient development environment

• Forming common rules of development, monetization and distribution of apps

App distribution

WAC for developers

Detailed descriptions

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Integration of JIL and WAC will promote common global rules in application development for both operators and application developers

Financial terms

Administrative terms

Logistics terms of distribution

• Revenue share: 70% developer and 30% MTS

• Developers may assign the price of their applications( 0 -500 RUR., including tax)

• Payments to Russian developers will be deposited directly to the developers' bank account

• App developers must sign a contract with Vodafone Sales and Services Ltd (VSSL), that will enable distribution in Russia (MTS) and other countries Vodaphone supports (and than in WAC)

• Developer are expected to assign the target countries

Terms of cooperation JIL &

WAC with developers

• The application will be tested by Vodafone within 14 days

• Contract execution and online metrics for a developer is available on www. jil.org

15

I. About MTSII. Foreign and domestic marketIII. Types of app stores. Описание JIL &

WACIV. Steps toward partnership

16

Gettingdevelopers

into JIL/WAC

Increasing consumption

Developing sales channels

Key factors

Building a friendly coop scheme with the application developers is a key strategy for MTS

Main factor of success: Getting a high degree of penetration on mobile phones that support JIL / WAC

applications

Getting developers into

JIL/WAC

Состав WAC • Users billed directly from their account

• Developing app stores with relevant content

• Advertizing support for the MTS app store

• Integrate app store inks from MTS-customized browsers(Opera Mini)

• Pre-installation of app store application onto every proprietary MTS phones(15% of market in Russia by 2011)

• The use of incentives and price advertising campaigns

• Support of various Operating Systems

• Development of open information system at www. partners.mts.ru

• Consultation support

• app store advertising support

Increasing consumption

Developing sales channels

Detailed description

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The Application Store will be a strategic product for MTS and will be distributed via all possible sales channels

MTS Application

Store

MTS branded phones

Other channels

Customized version of

Opera Mini

Interactive Cell Broadcast

Major sales channels :– Installation of quick access

in mobile browser (Opera Mini)

– Pre-installation of app store application on brand name phones from MTS

• Active ad company via SMS, MMS, ICB for smart-phone users of MTS

MTS has a significant amount of channels it can use for selling selling applications

Sales Channels

WEB

Portal

WAP portals of MTS

Sales Channels

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Developers must fulfill the following requirements to distribute their apps via the MTS App Store:

Step 1.

• Please visit www. developers.mts.ru to review all documentation (available starting 01.01.11)

• Contact the MTS representative and discuss the opportunity to sell your applications through the MTS app store

• Provide a description of your application, screenshots and proposed price point

Step 2.

• Complete the agreement form at developer. vodafone. com with VSSL (Vodafone Sales and Services Limited)

• Upload your Android apps to developer. vodafone.com

• Your apps will be automatically tested by an internal Vodafone system and published to the MTS app store.

Step 3.

• After testing, your apps will be published on the MTS app store

• Metrics are available at developer.vodafone. com

• Payments for your apps will be deposited in any currency (USD, EURO, RUR)

Sign Contract Publishing apps Selling apps

* - before 15.12.2010 only Android apps supportedUploading Symbian и Java apps will be available from 01.02.2011

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The following links provide additional information:

www. developers.mts.ru MTS Partner Developer site (in progress)

http:// developer.vodafone.com Android Platform

http:// developers.vodafone.com/blog

Widget developers Blog

20

Thank You!

Contacts:Roman Savvin– Project Director

e-mail: rpsavvin@mts.ru

Mob: +7 916 056 80 30

Polina Miloshevskaya– Project Manager

e-mail: pimilash@mts.ru

Mob: +7 916 051 16 91