FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
May 30, 2007
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 x 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 x
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PRESS RELEASE |
MTS ANNOUNCES CHANGE TO 2006 REPORTED FINANCIAL RESULTS
MOSCOW, RUSSIAN FEDERATION – MAY 30, 2007 – MOBILE TELESYSTEMS OJSC (“MTS” - NYSE: MBT), THE LARGEST MOBILE PHONE OPERATOR IN RUSSIA AND THE CIS, ANNOUNCES THAT IT WILL RECORD A CHARGE TO NON-OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2006 IN RELATION TO A $170 MILLION PUT OPTION HELD BY NOMIHOLD SECURITIES INC. (“NOMIHOLD”).
As announced previously by the Company, individual shareholders of AFK Sistema, the largest private sector consumer services company in Russia and the CIS and majority shareholder of MTS, have agreed to assist MTS Finance in defending its rights in its on-going dispute with Nomihold. Nomihold is seeking to compel MTS Finance through arbitration proceedings to purchase from Nomihold a 49% stake in Tarino Limited, the former indirect owner of Kyrgyz GSM operator Bitel, for $170 million pursuant to an option agreement. The matter is currently pending, and MTS Finance is vigorously contesting this action and has asked the arbitration tribunal to dismiss Nomihold’s claim. In the event that the arbitration decision regarding the $170 million put option is unfavorable to MTS Finance, shareholders of Sistema have agreed to make a capital contribution to MTS Finance of up to $170 million.
Despite the guarantee, MTS, in agreement with its auditor, believes that it should presently record the charge and include this as a liability for the purposes of its FY 2006 financial statements and disclosure pending resolution of this legal matter. The impact on our financial results for the year ended December 31, 2006, is summarized below, while amended financial statements are attached to this press release.
|
Balance sheet |
|
As previously reported |
|
As amended |
|
|
Accrued expenses and other current liabilities |
|
954,710 |
|
1,124,710 |
|
|
Total current liabilities |
|
1,550,304 |
|
1,720,304 |
|
|
Total liabilities |
|
4,607,358 |
|
4,777,358 |
|
|
Retained earnings |
|
3,324,367 |
|
3,154,367 |
|
|
Total shareholders’ equity |
|
3,921,781 |
|
3,751,781 |
|
|
|
|
For the three months ended |
|
For the year ended |
|
||||
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Statements of operations |
|
As previously |
|
As amended |
|
As previously |
|
As amended |
|
|
Bitel liability and investments write-off |
|
— |
|
320,000 |
|
— |
|
320,000 |
|
|
Other expenses / (income) |
|
168,197 |
|
18,197 |
|
157,830 |
|
7,830 |
|
|
Total other expenses, net |
|
206,448 |
|
376,448 |
|
321,920 |
|
491,920 |
|
|
Income before provision for income taxes and minority interest |
|
453,526 |
|
283,526 |
|
1,835,867 |
|
1,665,867 |
|
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Net income |
|
280,328 |
|
110,328 |
|
1,245,738 |
|
1,075,738 |
|
|
Earnings per share - basic and diluted |
|
0.14 |
|
0.06 |
|
0.63 |
|
0.54 |
|
WWW.MTSGSM.COM
2
|
Statement of cash flows |
|
As previously reported |
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As amended |
|
|
Net income |
|
1,245,738 |
|
1,075,738 |
|
|
Bitel liability and investments write-off |
|
150,000 |
|
320,000 |
|
***
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For further information, please contact: |
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Mobile TeleSystems, Moscow |
Investor |
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Relations |
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Tel: +7 495 223 2025 |
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E-mail: ir@mts.ru |
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***
Mobile TeleSystems OJSC (“MTS”) is the largest mobile phone operator in Russia and the CIS. Together with its subsidiaries, the Company services over 74.52 million subscribers. The regions of Russia, as well as Belarus, Turkmenistan, Ukraine, and Uzbekistan, in which MTS and its associates and subsidiaries are licensed to provide GSM services, have a total population of more than 230 million. Since June 2000, MTS’ Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT). Additional information about MTS can be found on MTS’ website at www1.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,” and the negative of such terms or other similar expressions. These forward looking statements include the Company’s belief concerning the $170 million liability for the put option, which amount is the subject of arbitration and may change as a result of the arbitration proceedings. 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.
***
3
MOBILE TELESYSTEMS
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2006 AND 2005
(Amounts in thousands of U.S. dollars, except share and per share amounts)
|
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Three months ended |
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Three months ended |
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Year ended |
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Year ended |
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|
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December 31, 2006 |
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December 31, 2005 |
|
December 31, 2006 |
|
December 31, 2005 |
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|
|
|
|
|
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|
|
|
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||||
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Net operating revenue |
|
|
|
|
|
|
|
|
|
||||
|
Service revenue and connection fees |
|
$ |
1 781 854 |
|
$ |
1 310 202 |
|
$ |
6 287 100 |
|
$ |
4 942 288 |
|
|
Sales of handsets and accessories |
|
24 008 |
|
22 492 |
|
97 154 |
|
68 730 |
|
||||
|
|
|
1 805 862 |
|
1 332 694 |
|
6 384 254 |
|
5 011 018 |
|
||||
|
Operating expenses |
|
|
|
|
|
|
|
|
|
||||
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Cost of services |
|
354 567 |
|
198 117 |
|
1 223 715 |
|
732 867 |
|
||||
|
Cost of handsets and accessories |
|
55 647 |
|
83 525 |
|
209 260 |
|
254 606 |
|
||||
|
Sales and marketing expenses |
|
165 404 |
|
192 289 |
|
607 835 |
|
608 092 |
|
||||
|
General and administrative expenses |
|
244 828 |
|
206 308 |
|
941 047 |
|
758 729 |
|
||||
|
Depreciation and amortization |
|
289 190 |
|
250 472 |
|
1 095 981 |
|
907 113 |
|
||||
|
Provision for doubtful accounts |
|
20 085 |
|
14 089 |
|
84 858 |
|
50 407 |
|
||||
|
Other operating expenses |
|
27 332 |
|
25 228 |
|
87 822 |
|
67 173 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
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Net operating income |
|
648 809 |
|
362 666 |
|
2 133 736 |
|
1 632 031 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
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Currency exchange and transaction (gains) / losses |
|
(11 165 |
) |
(5 239 |
) |
(24 051 |
) |
(10 319 |
) |
||||
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|
|
|
|
|
|
|
|
|
|
||||
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Other expenses / (income): |
|
|
|
|
|
|
|
|
|
||||
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Interest income |
|
(2 675 |
) |
(2 727 |
) |
(13 055 |
) |
(24 828 |
) |
||||
|
Interest expense |
|
40 926 |
|
38 385 |
|
177 145 |
|
132 474 |
|
||||
|
Bitel liability and investments w/off |
|
320 000 |
|
— |
|
320 000 |
|
— |
|
||||
|
Other expenses / (income) |
|
18 197 |
|
(8 170 |
) |
7 830 |
|
(29 150 |
) |
||||
|
Total other expenses, net |
|
376 448 |
|
27 488 |
|
491 920 |
|
78 496 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
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Income before provision for income taxes and minority interest |
|
283 526 |
|
340 417 |
|
1 665 867 |
|
1 563 854 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Provision for income taxes |
|
167 220 |
|
91 146 |
|
576 103 |
|
410 590 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Minority interest |
|
5 978 |
|
6 626 |
|
14 026 |
|
26 859 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income |
|
110 328 |
|
242 645 |
|
1 075 738 |
|
1 126 405 |
|
||||
|
Weighted average number of common shares outstanding, in thousands |
|
1 986 034 |
|
1 987 084 |
|
1 987 610 |
|
1 986 820 |
|
||||
|
Earnings per share - basic and diluted |
|
0,06 |
|
0,12 |
|
0,54 |
|
0,57 |
|
||||
4
MOBILE TELESYSTEMS
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005
(Amounts in thousands of U.S. dollars, except share amounts)
|
|
|
As of December 31, |
|
As of December 31, |
|
||
|
|
|
2006 |
|
2005 |
|
||
|
CURRENT ASSETS: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
219 989 |
|
$ |
78 284 |
|
|
Short-term investments |
|
56 047 |
|
28 059 |
|
||
|
Trade receivables, net |
|
298 479 |
|
209 320 |
|
||
|
Accounts receivable, related parties |
|
8 434 |
|
7 661 |
|
||
|
Inventory and spare parts |
|
196 265 |
|
156 660 |
|
||
|
VAT receivable |
|
339 614 |
|
398 021 |
|
||
|
Prepaid expenses and other current assets |
|
510 291 |
|
407 018 |
|
||
|
Total current assets |
|
1 629 119 |
|
1 285 023 |
|
||
|
|
|
|
|
|
|
||
|
PROPERTY, PLANT AND EQUIPMENT |
|
5 297 669 |
|
4 482 679 |
|
||
|
|
|
|
|
|
|
||
|
INTANGIBLE ASSETS |
|
1 406 876 |
|
1 439 362 |
|
||
|
|
|
|
|
|
|
||
|
INVESTMENTS IN AND ADVANCES TO ASSOCIATES |
|
141 473 |
|
107 959 |
|
||
|
|
|
|
|
|
|
||
|
OTHER INVESTMENTS |
|
3 856 |
|
150 000 |
|
||
|
|
|
|
|
|
|
||
|
OTHER ASSETS |
|
94 952 |
|
80 757 |
|
||
|
|
|
|
|
|
|
||
|
Total assets |
|
8 573 945 |
|
7 545 780 |
|
||
|
|
|
|
|
|
|
||
|
CURRENT LIABILITIES |
|
|
|
|
|
||
|
Accounts payable |
|
309 712 |
|
363 723 |
|
||
|
Accrued expenses and other current liabilities |
|
1 124 710 |
|
749 600 |
|
||
|
Accounts payable, related parties |
|
135 256 |
|
40 829 |
|
||
|
Current portion of long-term debt, capital lease obligations |
|
150 626 |
|
768 674 |
|
||
|
Total current liabilities |
|
1 720 304 |
|
1 922 826 |
|
||
|
|
|
|
|
|
|
||
|
LONG-TERM LIABILITIES |
|
|
|
|
|
||
|
Long-term debt |
|
2 924 539 |
|
2 078 955 |
|
||
|
Capital lease obligations |
|
3 287 |
|
2 928 |
|
||
|
Deferred income taxes |
|
86 349 |
|
158 414 |
|
||
|
Deferred revenue and other |
|
42 879 |
|
57 824 |
|
||
|
Total long-term liabilities |
|
3 057 054 |
|
2 298 121 |
|
||
|
|
|
|
|
|
|
||
|
Total liabilities |
|
4 777 358 |
|
4 220 947 |
|
||
|
|
|
|
|
|
|
||
|
COMMITMENTS AND CONTINGENCIES |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
MINORITY INTEREST |
|
44 806 |
|
30 744 |
|
||
|
|
|
|
|
|
|
||
|
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, 2006 and 2005, 776,550,625 of which are in the form of ADS as of December 31, 2006 and 763,554,870 - as of December 31, 2005) |
|
50 558 |
|
50 558 |
|
||
|
Treasury stock (15,922,129 and 5,400,486 common shares at cost as of December 31, 2006 and December 31, 2005) |
|
(114 778 |
) |
(5 534 |
) |
||
|
Additional paid-in capital |
|
571 718 |
|
568 104 |
|
||
|
Unearned compensation |
|
— |
|
(1 210 |
) |
||
|
Shareholder receivable |
|
— |
|
(7 182 |
) |
||
|
Accumulated other comprehensive income |
|
89 916 |
|
50 614 |
|
||
|
Retained earnings |
|
3 154 367 |
|
2 638 739 |
|
||
|
Total shareholders’ equity |
|
3 751 781 |
|
3 294 089 |
|
||
|
|
|
|
|
|
|
||
|
Total liabilities and shareholders’ equity |
|
8 573 945 |
|
7 545 780 |
|
||
WWW.MTSGSM.COM
5
MOBILE TELESYSTEMS
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2006 AND 2005
(Amounts in thousands of U.S. dollars)
|
|
|
Year ended |
|
Year ended |
|
||
|
|
|
December 31, 2006 |
|
December 31, 2005 |
|
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Net income |
|
$ |
1 075 738 |
|
$ |
1 126 405 |
|
|
|
|
|
|
|
|
||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
|
Minority interest |
|
14 026 |
|
26 859 |
|
||
|
Depreciation and amortization |
|
1 095 981 |
|
907 113 |
|
||
|
Debt issuance cost amortization |
|
25 041 |
|
14 347 |
|
||
|
Amortization of deferred connection fees |
|
(69 822 |
) |
(44 207 |
) |
||
|
Equity in net income of associates |
|
(58 083 |
) |
(39 522 |
) |
||
|
Inventory obsolescence expense |
|
(3 122 |
) |
9 112 |
|
||
|
Provision for doubtful accounts |
|
84 858 |
|
50 407 |
|
||
|
Deferred taxes |
|
(133 027 |
) |
(64 959 |
) |
||
|
Bitel liability and investments write-off |
|
320 000 |
|
— |
|
||
|
Non-cash expenses associated with stock bonus and stock options |
|
1 675 |
|
1 400 |
|
||
|
|
|
|
|
|
|
||
|
Changes in operating assets and liabilities: |
|
|
|
|
|
||
|
Increase in accounts receivable |
|
(174 790 |
) |
(86 008 |
) |
||
|
Increase in inventory |
|
(36 190 |
) |
(74 557 |
) |
||
|
Decrease / (Increase) in prepaid expenses and other current assets |
|
24 268 |
|
(157 400 |
) |
||
|
Decrease / (Increase) in VAT receivable |
|
58 446 |
|
(125 186 |
) |
||
|
Increase in trade accounts payable, accrued liabilities and other current liabilities |
|
164 903 |
|
259 806 |
|
||
|
Net cash provided by operating activities |
|
2 389 902 |
|
1 803 610 |
|
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
|
Acquisition of subsidiaries, net of cash acquired |
|
(38 188 |
) |
(178 917 |
) |
||
|
Purchases of property, plant and equipment |
|
(1 449 954 |
) |
(1 757 980 |
) |
||
|
Purchases of intangible assets |
|
(272 014 |
) |
(423 367 |
) |
||
|
Purchases of short-term investments |
|
(57 147 |
) |
(37 375 |
) |
||
|
Proceeds from sale of short-term investments |
|
29 159 |
|
82 724 |
|
||
|
Purchase of other investments |
|
(3 856 |
) |
(150 000 |
) |
||
|
Investments in and advances to associates |
|
20 000 |
|
12 798 |
|
||
|
Increase in restricted cash |
|
(18 549 |
) |
(6 230 |
) |
||
|
Net cash used in investing activities |
|
(1 790 549 |
) |
(2 458 347 |
) |
||
|
|
|
|
|
|
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
|
Proceeds from stock options exercised |
|
3 804 |
|
4 256 |
|
||
|
Proceeds from issuance of notes |
|
— |
|
398 944 |
|
||
|
Repurchase of common stock |
|
(109 899 |
) |
— |
|
||
|
Notes and debt issuance cost |
|
(20 686 |
) |
(59 163 |
) |
||
|
Capital lease obligation principal paid |
|
(5 815 |
) |
(8 129 |
) |
||
|
Dividends paid |
|
(558 848 |
) |
(407 212 |
) |
||
|
Proceeds from loans |
|
1 284 296 |
|
1 012 613 |
|
||
|
Loan principal paid |
|
(1 064 100 |
) |
(491 481 |
) |
||
|
Payments from Sistema |
|
7 182 |
|
11 698 |
|
||
|
Net cash (used in) / provided by financing activities |
|
(464 066 |
) |
461 526 |
|
||
|
|
|
|
|
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents |
|
6 418 |
|
(2 656 |
) |
||
|
|
|
|
|
|
|
||
|
NET INCREASE IN CASH AND CASH EQUIVALENTS: |
|
141 705 |
|
(195 866 |
) |
||
|
|
|
|
|
|
|
||
|
CASH AND CASH EQUIVALENTS, at beginning of period |
|
78 284 |
|
274 150 |
|
||
|
|
|
|
|
|
|
||
|
CASH AND CASH EQUIVALENTS, at end of period |
|
219 989 |
|
$ |
78 284 |
|
|
6
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: |
Leonid Melamed |
|
|
|
|
Name: Leonid Melamed |
|
|
|
|
Title: CEO |
|
Date: May 30, 2007
7