Edgar Filing: MOBILE TELESYSTEMS OJSC

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Issuer

December 17, 2002

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

On December 4, 2002, Mobile TeleSystems OJSC, or MTS, announced that MTS would restate its consolidated financial statements for the year and three months ended December 31, 2001 and the first and second quarters of 2002.

This Form 6-K contains our restated financial statements for the fourth quarter of 2001 and a description of the effect of the restatement on our financial results for such period.

Restatement

The restatement of MTS’ financial statements for the year and the three months ended December 31, 2001 relates primarily to a change in the allocation of the purchase price for the Company’s acquisitions of: an additional 4% stake in ReCom CJSC in April 2001; a 100% stake in Telecom XXI OJSC in May 2001; and an 81% stake in Telecom 900 CJSC in August 2001. As a result of a review of its financial statements by MTS management, MTS has restated approximately $21 million previously allocated to licenses to property, plant and equipment and other intangible assets. This reallocation has resulted in restatements of property, plant and equipment, licenses, depreciation and amortization expense and certain related items of our balance sheet and statement of operations as of and for the year and the three months ended December 31, 2001. Additionally, the Company has reclassified an impairment charge related to its investment in a joint venture with the government of Belarus from other expenses to impairment of investment, which is deducted in determining our net operating income, in order to conform to the US GAAP presentation requirements.

The significant effects of this restatement on financial statements for the year and the three months endedDecember 31, 2001 were as follows (in thousands):

	As previously reported	Adjustments		As restated
At December 31, 2001:
Property plant and equipment, net	841,308	14,748		856,056
Licenses, net	297,490	(20,541	)	276,949
Other intangible assets, net	83,507	738		84,245
Total assets	1,732,547	(5,055	)	1,727,492

Deferred tax liability	72,192	(4,687	)	67,505
Minority interest	12,999	1,445		14,444
Retained earnings	462,628	(1,537	)	461,091
Total liabilities and shareholder’s equity	1,732,547	(5,055	)	1,727,492

For the year ended December 31, 2001:
Depreciation and Amortization	133,143	175		133,318
Net operating income	334,284	(10,175	)	324,109
Currency Exchange and Translation Losses	1,871	393		2,264
Total other expenses (income), net	5,223	(10,000	)	(4,777	)
Provision for Income Taxes	97,414	47		97,461
Minority Interest	6,614	922		7,536
Net income	207,366	(1,537	)	205,829

For the three months ended December, 31 2001
Depreciation and Amortization	39,596	175		39,771
Net operating income	95,543	(10,175	)	95,718
Currency Exchange and Translation Losses	690	393		1,083
Total other income (expenses), net	3,711	(10,000	)	(6,289	)
Provision for Income taxes	23,463	47		23,510
Minority Interest	5,285	922		6,207
Net income	62,744	(1,537	)	61,207

In addition, as a result of the restatement, EBITDA which represents income before provision for income taxes, interest, depreciation and amortization, for the three months ended December 31, 2001 and year ended December 31, 2001 decreased to $124.8 million from the $125.4 originally reported and to $422.8 million from the $424.1 originally reported, respectively.

MOBILE TELESYSTEMS

CONDENSED CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31, 2000 AND 2001

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

	31 December 2000		30 December 2001
			(as restated)
CURRENT ASSETS:
Cash and cash equivalents	75,828		219,629
Short-term investments	170,000		85,304
Trade receivables, net	15,817		24,258
Accounts receivable, related parties	4,937		2,377
Inventory, net	23,551		26,184
Prepaid expenses	11,268		22,712
VAT receivable	17,741		82,216
Deferred tax asset	2,071		12,040
Other current assets	8,771		8,374
Total current assets	329,984		483,094

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $87,676 and $168,989, respectively	439,307		856,056

INTANGIBLE ASSESTS, net of accumulated amortization of $43,913 and $83,528, respectively	57,586		84,245

LICENSES, net of accumulated amortization of $43,913 and $83,528, respectively	204,996		276,949

GOODWILL, net of accumulated amortization of $14,756 and $20,861, respectively	27,984		22,411

SUBSCRIBER ACQUISITION COSTS, net of accumulated amortization of $74,803 and $nil, respectively	27,553		—

DEBT ISSUANCE COSTS, net of accumulated amortization of $900 and $1,210, respectively	450		3,997

INVESTMENTS IN AND ADVANCES TO AFFILIATES	13,472		740

Total assets	$	1,101,332	$	1,727,492

MOBILE TELESYSTEMS

CONDENSED CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31, 2000 AND 2001

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

	31 December 2000			31 December 2001
				(as restated)
CURRENT LIABILITIES:
Accounts payable, related parties	$	5,797		$	6,142
Trade accounts payable	37,860			106,068
Deferred connection fees	14,923			21,419
Subscriber prepayments and deposits	44,610			63,741
Debt, current portion	24,000			18,245
Short term portion of future lease payments	—			14,401
Income tax payable	15,082			23,078
Accrued liabilities	38,175			51,626
Dividends payable	1,038			1,038
Other payables	1,278			2,899
Total current liabilities	182,762			308,657

LONG-TERM LIABILITIES:
Bonds payable, principal	—			248,976
Debt, net of current portion	23,305			30,150
Long term portion of future lease payments	—			7,696
Promissory notes payable	5,468			5,792
Deferred connection fees, net of current portion	16,630			25,993
Deferred taxes	72,083			67,505
Total long-term liabilities	117,486			386,112
Total liabilities	300,248			694,769

MINORITY INTEREST	—			14,444

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 December 31, 2001 and 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	552,030			555,794
Shareholder receivable	(49,519		)	(38,958		)
Retained earnings	258,221			461,091
Total shareholders’ equity	801,084			1,018,279
Total liabilities and shareholders’ equity	$	1,101,332		$	1,727,492

MOBILE TELESYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE FOURTH QUARTER 2001 AND 2000 AND FOR THE YEAR 2000 AND 2001

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

	Three months ended December					Year
	2000		2001			2000			2001
			(as restated)						(as restated)
NET REVENUES
Service revenues, net	156,624		238,284			484,469			830,308
Connection fees	3,928		6,040			14,885			21,066
Equipment sales	6,982		14,167			36,358			41,873
	167,534		258,491			535,712			893,247

COST OF SERVICES AND PRODUCTS (including related party amounts of $4,187 respectively)
Interconnection and line rental	13,051		17,908			41,915			75,278
Roaming expenses	10,229		17,821			41,178			68,387
Cost of equipment	862		13,514			39,217			39,828
	24,142		49,243			122,310			183,493

OPERATING EXPENSES (including related party amounts of $8,379)	37,841		45,956			107,839			131,379

SALES AND MARKETING EXPENSES (including related party amounts of $7,205)	38,544		27,149			76,429			107,729

PROVISION FOR DOUBTFUL ACCOUNTS	98		654			2,403			3,219

DEPRECIATION AND AMORTIZATION	25,896		39,771			87,684			133,318

IMPAIRMENT OF INVESTMENTS									10,000
Net operating income	41,013		95,718			139,047			324,109

CURRENCY EXCHANGE AND TRANSLATION COSTS	803		1,083			1,066			2,264

OTHER EXPENSES (INCOME):
Interest income	(4,285	)	(1,363		)	(7,626		)	(11,829		)
Interest expenses, net of amounts capitalized	3,015		985			11,335			6,944
Loss on disposal of other assets						—			—
Other expense (income)	(242	)	4,089			(502		)	108
Total other expenses (income), net	(1,512	)	3,711			3,207			(4,777		)

Income before provision for income taxes and minority interest	41,722		90,924			134,774			326,622

PROVISION FOR INCOME TAXES	22,366		23,510			51,154			97,461

MINORITY INTEREST			6,207			(6,428		)	7,536
NET INCOME before cumulative effect of change in accounting principles and extraordinary gain	19,356		61,207			90,048			221,625
Cumulative effect of a change in accounting principle, net of income taxes of $9,644									(17,909		)
Extraordinary gain on repayment of debt, net of income taxes of $667									2,113

NET INCOME	19,356		$	61,207		$	90,048		$	205,829
Weighted average number of shares outstanding						1,806,968,096			1,983,326,138

Per common share: basic and diluted
Net income before cumulative effect of a change in accounting principle						0.050			0.112
Cumulative effect on prior years (to December 31, 2000) of a change in accounting principle						—			(0.009		)
Net income						0.050			0.103

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:	/s/ Mikhail Smirnov
		Name: Mikhail Smirnov
		Title: President

Date: December 17, 2002