Report on Mobile Retail in Russia, Q1 2012 Mobile handset market in Russia, Q1 2012 (MTS estimates) MTS estimates that during Q1 2012 the sales of handsets in Russia in terms of the units sold increased by 10.1% compared to Q1 2011. Overall 9.5 mln devices were sold. Mobile handset market in Russia in 2010-2012, 000’s of units

7 216

7 330

Q1 2010

Q2 2010

9 860

10 555

Q3 2010

Q4 2010

11 442 8 599

8 786

Q1 2011

Q2 2011

11 934 9 467

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In Q1 2012, the mobile retail market expanded by 12.4% in sales compared to Q1 2011 to reach RUB 44.0 bln. Mobile handset market in Russia, RUB bln

42 739 32 980

31 593

Q1 2010

Q2 2010

Q3 2010

48 532

Q4 2010

47 292 39 165

36 686

Q1 2011

Q2 2011

Q3 2011

54 218 44 017

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2011

The market demonstrated a higher pace of growth in sales in rubles than in units as the share of smartphones in overall handset sales increased. During Q1 2012, the average retail price of mobile phone increased by 2.1% compared to Q1 2011. Average price of mobile phone in 2010-2012, RUB

4 598

4 571

Q1 2010

4 310

4 334

Q2 2010

Q3 2010

Q4 2010

4 554

Q1 2011

4 176

4 133

Q2 2011

Q3 2011

4 543

4 649

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

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Report on Mobile Retail in Russia, Q1 2012 Smartphone market in Q1 2012, MTS estimates According to our estimates, in Q1 2012, 2.5 mln smartphones were sold, an increase of 1.7 times year-overyear. Smartphone market in Russia in 2010-2012, 000’s of units

2 879 1 010

582

589

Q1 2010

Q2 2010

Q3 2010

1 596

1 493

1 532

Q4 2010

Q1 2011

Q2 2011

2 107

Q3 2011

Q4 2011

2 528

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In terms of sales the smartphone market has expanded 1.6 times year-over-year to RUB 26.8 billion. Smartphone market in Russia in 2010-2012, RUB mln

7 668

7 886

12 186

Q1 2010

Q2 2010

Q3 2010

18 638

16 737

16 531

Q4 2010

Q1 2011

Q2 2011

22 521

Q3 2011

30 514

26 796

Q4 2011

Q1 2012

Source: MTS estimates, preliminary data for Q1 2012

In Q1 2012, smartphones accounted for 26.7% of total handsets sold, an increase of 9.3% year-over-year and of 2.6% quarter-over-quarter. In terms of sales, the share of smartphones went up to 60.9% in Q1 2012, an increase of 18.2% year-over-year and 4.6% quarter-over-quarter. Share of smartphones in the handset market in Russia in 2010-2012

42.7%

45.1%

47.6%

17.4%

17.4%

18.4%

Q1 2011

Q2 2011

Q3 2011

38.4% 23.3%

25.0%

56.3%

60.9%

24.1%

26.7%

Q4 2011

Q1 2012

28.5%

8.1%

8.0%

10.2%

15.1%

Q1 2010

Q2 2010

Q3 2010

Q4 2010

smartphones, units

smartphones, roubles

Source: MTS estimates, preliminary data for Q1 2012

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Report on Mobile Retail in Russia, Q1 2012 The average smartphone price in Q1 2012 declined by 5.4% compared to Q1 2011. Average smartphone price in Russia, RUB

13 176

Q1 2010

13 385

Q2 2010

12 065

11 678

11 207

10 793

10 691

10 599

10 598

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Source: MTS estimates, *preliminary data for Q1 2012 Share of vendors in smartphone market in Russia in 2010-2012, % of units sold

34.5% 58.7% 35.7% 16.2% 8.8% 7.2% 5.4% 8.4%

6.6% 6.5% 5.3% 6.7% Others

Q1 2011 Apple

Sony Ericsson

HTC

Q1 2012 Samsung

Nokia

Source: MTS estimates, preliminary data for Q1 2012 Share of vendors in smartphone market in Russia in 2010-2011, % of sales

27.0% 47.5% 32.3% 14.8% 14.9%

15.6%

Others

10.1% 6.4% 5.6%

11.7%

Q1 2011

Q1 2012

Sony Ericsson

7.9% 6.3%

HTC

Apple

Samsung

Nokia

3

Report on Mobile Retail in Russia, Q1 2012 Source: MTS estimates, preliminary data for Q1 2012

MTS mobile retail network, Q1 2012 In Q1 2011, MTS’s retail network continued to deliver on its strategy aimed at increasing the share of smartphones in the sales mix in order to generate more value for the Group’s core networks. The share of smartphones in the total number of handsets sold in the MTS retail network has reached 28%, an increase of 11% compared to Q1 2011 and an increase of 2% compared to Q4 2011. This exceeds average market level by 1.3%. The share of MTS-branded smartphones in total sales in Q1 2012 doubled compared to Q1 2011. Given the focus on promoting sales of smartphones and enhancing overall profitability within the Group, the volume of low-margin wholesale sales continued to decline during the quarter. In Q1 2012, MTS’s retail market share (including franchise stores) in terms of units sold was estimated to be roughly 14%. Sales of smartphones accounted for 64.8% of total sales in the MTS retail network, an increase of 18.5% compared to Q1 2011 and of 2.8% compared to Q4 2011. This exceeds average the market level by 3.9%. Symbian, Android and Bada smartphones accounted for over 80% of sales. Sales of smartphones by operating systems in Q1 2012 (in terms of units sold) OS Symbian Android Bada Windows Phone IOS MeeGo Blackberry

% of units sold 37.8% 35.1% 11.3% 8.2% 7.3% 0.2 0.1

Source: MTS estimates, preliminary data for Q1 2012

Nokia, Samsung, HTC, Apple and Sony Ericsson were top-5 brands sold in the MTS retail network. Top 5 most popular models in different pricing categories in the MTS retail network during Q1 2012

5 000 – 9999 RUB Samsung S5830 Galaxy Ace* Nokia C5-00 5 MP*

>10000 RUB Nokia N8-00* Nokia Lumia 710*

Nokia 1280

1 500 – 4999 RUB Nokia C2-01 Samsung C3011 Samsung S5250 Wave 525

Samsung S5670 Galaxy Fit*

Nokia X1-01 MTS 352

Samsung S3600 Nokia X2-00

Nokia C7-00* Samsung C6712 Star II Duos

HTC Mozart* iPhone 4 16GB black* Nokia Lumia 800*