However, MTS has brought damage claims in the High Court of Justice in the Isle of Man seeking damages for the misappropriation and forced seizure of Bitel and its assets against a number of companies, including Bitel LLC, Fellowes International Holdings Limited, Altimo Holdings and Investments Limited, Altimo LLC, CJSC Reservspetzmet, Lovianco Trading Co Limited, Yuridicheskoe Bureau Pravo, Energia Light LLC, KI-Credit Prive SA JSC, AK Investment Limited CJSC, Sky Mobile LLC.

In the damage claims MTS states that Bitel’s shares were repeatedly sold and reregistered in the names of purportedly independent companies over the past 16 months. These companies will likely assert that they are good faith purchasers, even if this is not the case. It has also become apparent that Bitel’s assets were purportedly sold and transferred to Sky Mobile LLC, another Kyrgyz mobile phone operator. MTS reserves the right to institute legal proceedings against additional parties should further attempts of selling Bitel’s shares or assets are made.

As announced earlier by the Company, MTS Finance S.A., a 100%-owned subsidiary of MTS registered in Luxembourg (“MTS Finance”), at the end of 2005 acquired from Nomihold Securities Inc. a 51% stake in Tarino Limited, which held 100% of Bitel’s shares though its subsidiaries. Bitel’s offices in Bishkek were seized by Reservspetzmet three days after MTS’ official announcement of the acquisition and subsequently MTS has been unable to gain operational control over Bitel.

MTS has recently taken additional steps to vindicate its ownership rights in Bitel although these efforts have thus far not proven successful. It has brought this matter to the Kyrgyz Prosecutor General and asked him to investigate. Unfortunately, on January 15, 2007, the Prosecutor General informed MTS that it sees no grounds to become involved in the ownership dispute over Bitel and additionally stated that MTS had no basis to appeal the decision of the Kyrgyz courts in connection with ownership to Bitel.

An appeal to overturn certain adverse Kyrgyz courts rulings connected with the ownership rights to Bitel was also filed with the Kyrgyz Supreme Court on December 15, 2006, but the time period in which the appeal should have been heard has expired without any action by the court.

“We have almost exhausted all available legal means at our disposal in order to defend our rights in Bitel within the framework of the Kyrgyz legal system. Moreover, since we are currently unable to generate income from Bitel’s operations, as we lack operational control over the company, we have decided to write off the costs relating to the purchase of Bitel. The loss will be reflected in the Company’s financial statements for the year ended December 31, 2006,” commented Leonid Melamed, MTS’ President and Chief Executive Officer.

“At the same time, we will continue fighting to gain compensation for damages related to this illegal misappropriation and seizure of Bitel and its assets,” emphasized Mr. Melamed.