Mobile TeleSystems in $340 Million Acquisition of 29% of MGTS

Cleary Gottlieb represented Mobile TeleSystems (MTS), and the Special Committee of its Board of Directors in the $340 million acquisition from JSFC Sistema (Sistema), MTS’ majority shareholder, of 100% in CJSC Sistema-Inventure (Sistema-Inventure), which owns 29% of the ordinary shares in OJSC Moscow City Telephone Network (MGTS). In addition to its stake in MGTS, Sistema-Inventure has approximately $340 million of debt owed to Sistema, and it was agreed as part of the transaction that MTS will procure its repayment by the end of 2011. As a result of the transaction, MTS’ ownership stake in MGTS increased to 99.1% of ordinary shares and 69.7% of preferred shares, which overall total 94.1% of MGTS share capital.

MTS is the largest mobile phone operator in Russia and the CIS and is listed in New York and Moscow. Sistema is the largest public diversified financial corporation in Russia and the CIS and is listed in London and Moscow. MGTS is the monopoly fixed-line provider in the City of Moscow and one of the largest local wire communication companies in Europe and Russia with a listing in Moscow. All three are Russian companies.