Edgar Filing: MOBILE TELESYSTEMS OJSC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K/A

REPORT OF FOREIGN ISSUER
October 07, 2003
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

This Form 6-K/A amends the Form 6-K filed by Mobile TeleSystems OJSC (the "Company") on August 27, 2003 (the "Form 6-K"), which contained the Company's financial statements for the second quarter of 2003 and a press release announcing the Company's financial results for such period. Certain information contained in both the press release and the financial statement filed as part of the Form 6-K has been affected by a change in the Company's method of consolidation for its subsidiary TAIF Telcom. This Form 6-K/A contains the Company's adjusted financial statements for the second quarter of 2002 and a description of the effect of the adjustment on the Company's financial results for such period.

MTS REVISES ITS FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 2003

Moscow, Russian Federation—October 7, 2003—Mobile TeleSystems OJSC ("MTS"—NYSE: MBT), the largest mobile phone operator in Russia, today announces that the Company revised its previously released financial information for the six months ended June 30, 2003.

MTS changed its consolidation method for its subsidiary TAIF Telcom, a company providing mobile services in the Tatarstan Republic of Russia. MTS acquired 52.7% of common shares and 50% of preferred shares in TAIF Telcom in April 2003 through a series of transactions for a total of $63.3 million. The Company also signed put and call option agreements in April 2003 to acquire the remaining ownership in TAIF Telcom.

MTS reviewed the accounting treatment of its call options for the remaining interest in TAIF Telcom and determined that these arrangements should be accounted for in accordance with Emerging Issues Task Force ("EITF") Issue No. 00-4, "Majority Owner's Accounting for a Transaction in the Shares of a Consolidated Subsidiary and a Derivative Indexed to the Minority Interest in That Subsidiary." Accordingly, MTS has decided to account for the Company's call option agreements for the remaining 47.3% of common shares and 50.0% of preferred shares in TAIF Telcom as financing derivatives as the risks and rewards of the additional ownership are maintained by MTS for the duration of the derivatives, notwithstanding the legal ownership of the minority interest. As the result of the change, MTS consolidated 100.0% of TAIF Telcom from April 2003 and reflected the call option purchase price of $49.0 million for the common shares and $10.0 million for the preferred shares as current portion of long-term debt as the Company intends to exercise the call options prior to June 30, 2004. MTS also recognized interest expense of approximately $1.0 million related to these options for the six months ended June 30, 2003. MTS can give no assurance that the acquisition of the remaining interest in TAIF Telcom will be completed on the terms described or at all.

The change did not impact net revenues, operating income, net income or cash flows of MTS for the three or six months ended June 30, 2003.

The effects of this change on the financial information for the three and six month periods ended June 30, 2003 were as follows (in thousands of U.S. dollars).

	As previously reported		Adjustments			As adjusted
At June 30, 2003
Licenses and other intangible assets, net	$	742,588	$	65,835		$	808,423
Total assets		3,234,107		65,835			3,299,942

Current portion of long-term debt and capital lease obligations		141,001		59,965			200,966
Total current liabilities		754,564		59,965			814,529
Deferred income taxes		118,347		15,800			134,147
Total long-term liabilities		933,793		15,800			949,593
Total liabilities		1,688,357		75,765			1,764,122
Minority interest		142,454		(9,930	)		132,524
Total liabilities and shareholders' equity	$	3,234,107	$	65,835		$	3,299,942

For the six months ended June 30, 2003
Interest expense	$	41,848	$	965		$	42,813
Total other expenses, net		33,880		965			34,845
Income before provision for income taxes and minority interest		342,564		(965	)		341,599
Minority Interest	$	37,410	$	(965	)	$	36,445

For the three months ended June 30, 2003
Interest expense	$	23,036	$	965		$	24,001
Total other expenses, net		18,050		965			19,015
Income before provision for income taxes and minority interest		208,036		(965	)		207,071
Minority Interest	$	23,569	$	(965	)	$	22,604

For further information contact:


Mobile TeleSystems, Moscow
Investor and Public Relations		tel: +7095 911 6553
Andrey Braginski		e-mail: ir@mts.ru

***

These materials are not an offer for sale of any securities in the United States. Any securities may not be offered or sold in the United Sates absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended.

This communication is not an offer to any person in the United Kingdom, or an invitation to any person in the United Kingdom to make offers, to purchase any securities. This communication is directed only at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the "Order") and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as "relevant persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. Stabilization/FSA.

This press release is not a public offer or advertisement of securities in the Russian Federation, and is not an offer, or an invitation to make offers, to purchase any securities in the Russian Federation.

***

Mobile TeleSystems OJSC (or "MTS") is the largest mobile phone operator in Russia in terms of subscribers. Together with its subsidiaries, the company services over 13.9 million subscribers. The regions of Russia as well as in Belarus and Ukraine in which MTS and its subsidiaries are licensed to provide GSM services have a total population of approximately 185.1 million. Since June 2000, MTS' shares 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. 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.

***

Appendix A

MOBILE TELESYSTEMS

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31, 2002 AND JUNE 30, 2003

			December 31 2002			June 30 2003
			(Amounts in thousands of U.S. dollars, except share amounts)

CURRENT ASSETS:
	Cash and cash equivalents		$	34 661		$	113 561
	Short-term investments			30 000			30 000
	Trade receivables, net			40 501			82 929
	Accounts receivable, related parties			3 569			4 284
	Inventory			41 386			56 443
	Prepaid expenses and other current assets			208 213			279 423

		Total current assets		358 330			566 640
PROPERTY, PLANT AND EQUIPMENT, NET				1 344 633			1 866 543
INTANGIBLE ASSETS, NET				525 009			808 423
INVESTMENTS IN AND ADVANCES TO AFFILIATES				34 034			51 207
OTHER ASSETS				21 290			7 129

		Total assets	$	2 283 296		$	3 299 942

CURRENT LIABILITIES:
	Accounts payable		$	117 623		$	161 077
	Accrued expenses and other			213 291			446 904
	Accounts payable, related parties			4 968			5 582
	Current portion of long-term debt, capital lease and finance obligations			88 330			200 966

		Total current liabilities		424 212			814 529
LONG-TERM LIABILITIES
	Long-term debt			358 914			769 067
	Capital lease and finance obligations			7 241			7 237
	Deferred income taxes			105 818			134 147
	Deferred revenue and other			19 694			39 142

		Total long-term liabilities		491 667			949 593
	Total liabilities			915 879			1 764 122
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST				65 373			132 524
STOCKHOLDERS' 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, 2001 and December 31, 2000, 345,244,080 of which are in the form of ADS)			50 558			50 558
	Treasury stock (9,966,631 common shares at cost)			(10 206	)		(10 206	)
	Additional paid-in capital			558 102			558 762
	Unearned compensation			(212	)		(212	)
	Shareholder receivable			(34 412	)		(31 087	)
	Retained earnings			738 214			835 481

		Total shareholders' equity		1 302 044			1 403 296
	Total liabilities and stockholders' equity		$	2 283 296		$	3 299 942

MOBILE TELESYSTEMS

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2003
AND SIX MONTHS ENDED JUNE 30, 2002 AND 2003

		Three months ended June 30						Six months ended June 30
		2002			2003			2002			2003
		(Amounts in thousands of U.S. dollars, except share and per share data)

OPERATING REVENUES
	Service revenues, net	$	294 314		$	571 375		$	522 386		$	992 673
	Connection fees		5 687			8 852			12 228			16 166
	Equipment revenues		16 297			25 812			29 288			43 295

			316 298			606 039			563 902			1 052 134

OPERATING EXPENSES
	Interconnection and line rental		31 366			44 508			55 081			78 908
	Roaming expenses		11 597			24 726			28 713			45 269
	Cost of equipment		20 001			45 754			38 119			73 639
	Operating expenses		51 826			88 219			91 672			168 944
	Sales and marketing expenses		39 494			77 828			64 795			135 564
	Depreciation and amortization		49 089			99 584			90 678			174 774

			203 373			380 619			369 058			677 098

	Net operating income		112 925			225 420			194 844			375 036
CURRENCY EXCHANGE AND TRANSLATION LOSSES (GAINS)			(141	)		(666	)		690			(1 408	)
OTHER EXPENSES (INCOME):
	Interest income		(2 093	)		(5 591	)		(5 497	)		(8 823	)
	Interest expenses		11 084			24 001			20 687			42 813
	Other expense		864			605			2 721			855

	Total other expenses, net		9 855			19 015			17 911			34 845
	Income before provision for income taxes and minority interest		103 211			207 071			176 243			341 599
PROVISION FOR INCOME TAXES			28 039			55 943			53 954			96 412
MINORITY INTEREST			10 389			22 604			14 688			36 445

NET INCOME		$	64 783		$	128 524		$	107 601		$	208 742

Earnings per share—basic and diluted			0.033			0.065			0.054			0.105

FOR THE SIX MONTHS ENDED JUNE 30 2002 AND JUNE 30, 2003

			Six months ended June 30			Six months ended June 30
			2002			2003
			(Amounts in thousands of U.S. dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	107,601		$	208,742
Adjustments to reconcile net income to net cash provided by operating activities:
	Minority interest			14,688			36,445
	Depreciation and amortization			90,678			174,774
	Amortization of deferred connection fees			(12,228	)		(16,166	)
	Provision for obsolete inventory			1,572			3,278
	Provision for doubtful accounts			2,850			22,851
	Loan interest accrued			20,827			42,813
	Loan interest paid			(19,674	)		(25,969	)
	Deferred taxes			(3,375	)		(17,064	)
	Non-cash expenses associated stock bonus and stock options
Changes in operating assets and liabilities:
	Increase in accounts receivable			(15,465	)		(41,732	)
	Increase in inventory			(4,434	)		(4,255	)
	Increase in prepaid expenses and other current assets			(57,246	)		(31,412	)
	(Decrease) Increase in accounts payable, accrued liabilities and other payables			(18,479	)		43,036

		Net cash provided by operating activities		107,315			395,341

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property, plant and equipment			(234,144	)		(325,843	)
	Purchase of intangible assets			(7,872	)		(57,396	)
	Increase in short-term investments			85,304			—
	Increase in investments in and advances to affiliates			(10,846	)		(17,173	)
	Purchases of businesses, net of cash acquired			(112,113	)		(301,814	)

		Net cash used in investing activities		(279,671	)		(702,226	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from notes issue			50,808			400,000
	Notes issuance cost			(649	)		(3,929	)
	Capital lease obligation principal paid			(6,400	)		(6,982	)
	Proceeds from short-term debt and other payments			23,338			58,144
	Loan principal paid			(1,800	)		(61,895	)

		Net cash used in financing activities		65,297			385,338

Effect of exchange rate changes on cash and cash equivalents				(747	)		447

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS:				(107,806	)		78,900

CASH AND CASH EQUIVALENTS, at beginning of period				219,629			34,661

CASH AND CASH EQUIVALENTS, at end of period			$	111,823		$	113,561

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
Date: October 07, 2003	By:	/s/ VASSILY SIDOROV
	Name:	Vassily Sidorov
	Title:	Acting President/CEO

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MTS REVISES ITS FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 2003
MOBILE TELESYSTEMS CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2002 AND JUNE 30, 2003
MOBILE TELESYSTEMS CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2003 AND SIX MONTHS ENDED JUNE 30, 2002 AND 2003
FOR THE SIX MONTHS ENDED JUNE 30 2002 AND JUNE 30, 2003
SIGNATURES