Today we live in the world where products and services that were above a beyond only yesterday are now reality. It is a world of augmented and refined reality where there is no borderline between the ordinary and the virtual and deprived of physical realization. This is the dimension in which MTS is a link between needs and innovative solutions.
While deliberating on the words I may address you with on the pages of this report, I thought that I would inevitably have to speak about things that had become habitual ,ordinary, and even trite to some extent. At the same time I am pleased with the fact that such commonness in our case is of purely positive, joyful nature. Another year has elapsed, when I was fortunate enough to hold in the role of the Chairman of MTS Board of Directors. Again, as a year before and for a few preceding years I may share more good news with you. First of all, I am glad to report that our company has achieved target levels of all main operational indicators. Second, let me note that our leadership in the telecommunications market of Russia remains totally unshakeable, and regarding capitalization, our domination is absolute. Third, in 2017 we made dividend payments in the total amount of 52 billion RUB, which complies with our target benchmarks that we also confirm the current year of 2018. Therefore, the results of our business in 2017 may be called predictably good, and I am not even afraid to be overconfident here.
Having completed this format part, I would like to say a few words on that result of the previous year that in my strong opinion has the same significance as numerical levels of key business indicators. 2017 has become the first full year, when we implemented our new digital 3D strategy: Data. Digital. Dividends, the central element of which is undoubtedly the Digital concept. It is not a secret for anyone that the sphere of telecommunications does not enthuse greatly the investors, and there are objective reasons for it, which we will not discuss in details now. Besides, it is also well-known that the concept of digitalization has recently become a certain pattern, a spell used everywhere, and probably it is losing its initial strength. I may assure you that all our statements related to going beyond telecommunications business through development of Digital areas and digital transformation of the company, have quite a specific embodiment in the form of new products, services, modified business processes, which you will learn about in sections below.
I would like to note that we follow the principles of openness and transparency and speak about all our actions and achievements on a regular basis during the year within quarterly reports, which we summarize here, in the annual report. I am happy to acknowledge that the investment community sees and supports our efforts, which is reflected in the positive dynamics of the company value.
I would like to end my message with acknowledgements for the management of the company, my colleagues in the Board of Directors for work well done and for our dear shareholders, whose continuous support we feel. Now I would like to pass the floor to the management, who will speak in detail on MTS 2017 business results.
Chairman of MTS Board of Directors
MTS LTE coverage in Russia — the populated territory
km of fiber-optic lines
offices of MTS Bank
on-line orders per year
442.9 billion RUB
179.8 billion RUB
Total net profit
56.0 billion RUB
Net income margin
Smartphone penetration in MTS network has grown up to 65% by the end of 2017 in contrast to 54% in the previous year.
MTS platform was launched for industrial IoT: MTS share in the market of SIM-cards for IoT in Russia amounted to
Сumulative effect from the use of Big data
1.6 billion RUB
Кevenue from system integration
5.6 billion RUB
Dividend payments in 2017 in the amount of 26.0 rubles per share + yield of 10.9 rubles per share as a part of redemption program
MTS has completed the year of 2017 with record-setting financial results.
We won both through common price environment and stable growth of Internet consumption in all markets of Group presence. Those efforts taken by the MTS team in the new markets for the company had great impact at overall outcome. We relied in our work on classic telecom services and development of services in the rapidly expanding digital world. And we won to a large extent because of our confident forward movement.
In the markets that are traditional for operators, last year we substantially improved efficiency of retail and launched unique segment offers for the youth. For the second year in a row, largely in virtue of our initiatives, the general boom of sales in the market was dropping — this resulted in improved loyalty and lower churn of clients. We did a lot in the area of controlling the services of our partners, and first of all, in the content, having increased transparency of settlements. We were actively developing our own operator app, which is now used by more than 9.5 million people. The app functionality will further grow, and it will turn into something like a convenient one stop shop for all our subscribers that opens simple access to all MTS services. The quality of customer service remains under our special attention, because we should always remain an operator with the best customer experience.
Thinking about the future, we must think about development of new digital products and entering new markets. The last year has become the year of digital transformation for MTS. In this journey, we reasonably combine organic development with acquisition of leading players, related to promising technologies and areas. Inside the company, we focused at cloud technologies, Internet of Things, big data analytics, system integration, financial technologies, which are the key area of company development. We are actively developing MTS Money services, including MTS Wallet app. We invested into Sistema Capital company, in order to enter the market of retail investments, and also acquired control in LiteBox company — developer of cloud cash registers for corporate customers. MTS Bank demonstrated record-setting annual profit of 2 billion RUB — largely in virtue of promotion through MTS retail chain. The sphere of our interests today includes electronic tickets, cybersport, telemedicine, our own start-up accelerator, online education — we will continue our expansion in this year as well, having strengthened our positions.
We have strong skills of choosing correct directions for development. But it is not the only key to our success. Success depends on quality of products developed by our team and speed of launching these products in the market. On the one hand, we were able to do more as we have started changing internal procedures — to improve efficiency of customer solutions development, we are implementing the strategy for building product verticals, which are aimed at vesting the teams with authorities, accelerating making decisions, increasing transparency and responsibility of the team for the final result. On the other hand, we established several sites to search for and to develop breakthrough digital solutions: Innovation Center, IoT-Laboratory, R&D Center in Innopolis. Such steps rarely give instantaneous profit — this is our contribution to the company’s future.
MTS is ready for new challenges and meets them being rejuvenated. Changes happen both in business and in the management of MTS itself. This also confirms our dynamic development. It is an exclusive honor for me to lead MTS. I perceive this appointment as the sign of shareholders’ trust. A unique opportunity appeared for me and my team to establish a new company, which will overgrow its operator’s past and present, and will become a successful player of the multi-faceted IT market.
This is how we see our future. In the long term of several years, MTS should become a bright innovation business, one of the main suppliers of digital products and services of new economy in the Group markets. We work to make MTS customers, partners and shareholders always one step ahead — so that they could fully use the entire spectrum of opportunities provided by digital technologies.
President of MTS
Finalizing the results of the year, it is important to note that we are able to stay in the group of leaders of the Russian corporate governance, despite the changing external factors. And such awareness makes us stronger to move forward.
Ron Sommer, Chairman of Board of Directors, MTS PJSC
Social responsibility in MTS is focused on a wide spectrum of socially significant objectives, from employees’ engagement into development of products that are in demand for the society, to enabling personnel to personally participate in society development and its support.
Being the largest employer of MTS, we strive to be responsible and attentive to rights of our employees, to provide decent living standards for them and their families, to develop their professional and personal skills and competences, to provide opportunities to them for self-fulfilment both professionally and as volunteers in social projects.
Maria Golyandrina, Member of the Management Board, Vice President, Human Resources, MTS PJSC
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