Fantastically real
MTS world
Message of the
Board of DC
MTS Group
Today
Main Outcomes
for 2017
2017
Highlights
Management
Report
Corporate
Governance
Sustainable
Development
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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.

Fantastically real MTS world

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Message of the Board of Directors Chairman

Dear shareholders,

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.

Ron Sommer,
Chairman of MTS Board of Directors

MTS Group Today

>70 thousand
employees

60%
MTS LTE coverage in Russia — the populated territory 

>213 thousand
km of fiber-optic lines

>5.6 thousand
MTS outlets

~100
offices of MTS Bank

>9 million
on-line orders per year

Main Outcomes for 2017

Financial Indicators

Consolidated income
442.9 billion RUB

OIBDA
179.8 billion RUB

OIBDA profitability
40,6%

Total net profit
56.0 billion RUB

Net income margin
12.7%

Operational indicators

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
42%

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 completed 2017 with strong financial results and has secured a footing in the new markets. 2017 has become the year of transformation for MTS. The Company has been working successfully on digitization strategy implementation and expanded business in the new areas.
  • In September, MTS entered the market of investment services, having taken part in the capital of Sistema Capital MC LLC, one of the largest management companies in Russia by volume of collective investments.


  • In October, the company acquired 50.82% in the authorized capital of Cloud Retail LLC (LiteBox trademark), the Russian developer of software for retail. The transaction takes MTS to the market of cloud cash registers as a supplier of ready solutions for cash services to business customers.
  • In December, MTS entered the market of cybersport based on one of leading cybersport clubs in the world — Gambit Esports. The teams within Gambit Esports have many times been champions of the world and Europe, and also silver and bronze prize winners of the largest international competitions. MTS strategy in the cybersport market will both combine marketing activities and development of products for gamers.

2017 Highlights

13
February
MTS launched a new service MTS Money Wallet, which makes it possible to get quick and convenient access per single click to financial services of MTS. MTS Money Wallet combines all payment tools — MTS e-wallet account, subscriber’s personal account, bank cards — in a single place for access to wide spectrum of MTS financial services.
2
March
MTS was included into TOP-5 of Russia’s Best Employers according to HeadHunter. The company strengthened its positions in the rating, having climbed up one line compared to the previous year and was awarded the fourth place. Besides, MTS has become the leader of the rating among telecoms.
30
марта
MTS enters the market of cloud services for large business in all regions of presence in Russia. The corresponding cloud platform, and also presence of own DPCs in combination with the branched network of trunk and city communication channels will make it possible for MTS to propose comprehensive and fully disaster-proof solutions for cloud calculations and data storage.
30
марта
Yu.S. Romashkina, Director, Compliance Department, became the winner in the nomination “Best Chief Compliance Officer of the Year in Europe, Middle East and Africa” based on voting results of the expert council of the C5 “Women in compliance Awards 2017”. The award ceremony was held in London.
7
April
The MTS Corporate University was awarded with an international award GlobalCCU Awards Silver in the nomination “Best Innovative Corporate University”. The award ceremony took place in Paris during the GlobalCCU Forum.
20
April
MTS and Ericsson tested fifth generation mobile communication technologies (5G), during which for the first time in Russia the record speed of data transmission up to 25 Gbit/s was achieved on the moving smartphone prototype. Previously all tests of data transmission in this technology were conducted only between stationary devices.
27
April
MTS won four nominations of Effie Awards Russia 2017 — one of the most prestigious awards in the world in the sphere of marketing and communications.
24
May
MTS won the international award Global Telecom Business Innovation Award, which identifies most successful telecommunications projects all over the world, in the nomination Innovation Awards 2017 for Virtual PBX service.
29
June
Vyacheslav Nikolayev was appointed as the Vice President of the MTS Group on marketing. Previously he had been the Director of Mass Market Department in MTS for six years. The candidate was approved by the Board of Directors of MTS PJSC.
27
July
MTS purchased 100% shares of the regional communications provider Cellular Communication of Bashkortostan OJSC (CCB) for 300 million RUB, including net debt. Purchase of the asset made it possible for MTS to expand its presence in the Republic of Bashkortostan and to obtain an additional frequency resource, including bandwidths with frequency of 15 MHz in the range of 2100 MHz and 4.4 MHz in the range of 450 MHz.
11
August
The company started to use Vera robot in recruitment, which is a robot-recruiter that operates on the basis of artificial intelligence technology.
6
September
MTS Board of Directors approved the program of its own common stock and ADA redemption by the plan of shares purchase for the total amount not exceeding 20 billion RUB, which includes funds spent to purchase shares of the company from Sistema Finance, until April 2019.
19
September
MTS started to provide services for cloud processing of large data arrays on the basis of its own DPCs. Use of Big-Data-as-a-Service (BDaaS) infrastructure makes it possible for MTS customers to quickly, flexibly and efficiently organize processing of big data without development of own computing capabilities.
29
September
MTS had to suspend communication services provision in Turkmenistan in connection with actions of the state communication system Turkmentelecom for disconnection of services of international and long-distance zonal communication and services of access to Internet.
29
September
The company entered the market of investment services, having taken part in the capital of Sistema Capital MC LLC, one of the largest management companies in Russia by volume of collective investments.
3
October
MTS purchased the share in the authorized capital of Cloud Retail LLC (LiteBox trademark), the Russian developer of software for retail. The transaction takes MTS to the market of cloud cash registers as a supplier of ready solutions for cash services to business customers.
23
October
MTS and Ericsson signed an agreement to upgrade and prepare MTS network for 5G standard and Internet of Things technologies (IoT), under the framework of which in 2017–2020 Ericsson will supply to MTS the state of the art equipment and software for the backbone network and radio access network in some regions of Russia for the total amount exceeding 400 million EUR.
13
November
Completion of certification audit of MTS Unified Compliance System compliance with international standards ISO19600:2014 “Compliance Management Systems” and ISO37001:2016 “Anti-Corruption Compliance Management Systems”, following the results of which the company received the compliance certificate in 2018.
7
December
MTS launched IoT platform for deployment of solutions based on Internet of Things in business of Russia. The platform for industrial Internet of Things makes it possible to manage any facilities, where it is necessary to track parameters of equipment operation.
18
December
Maria Golyandrina was appointed as the Vice-President, Human Resources, Member of the MTS Group Management Board, who had been the Director of MTS Remunerations, Benefits and HR Administration Department for three years. The candidate was approved by the Board of Directors of MTS PJSC.

Management Report

Dear friends and colleagues!

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.

Yours faithfully,
Alexey Kornya,
President of MTS

Corporate Governance

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

Sustainable Development

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

Information about the Company

Full trade name of the Company:

  • in Russian:
    Публичное акционерное общество «Мобильные ТелеСистемы»
  • in English:
    Mobile TeleSystems Public Joint Stock Company

Short trade name of the Company:

  • in Russian: ПАО «МТС»
  • in English: MTS PJSC

Location of MTS PJSC:
The Russian Federation 109147, Moscow, ul. Marksistskaya, 4

Tel.: (495) 911 6555

Fax: (495) 911 6599

Correspondence address of MTS PJSC:
5 Vorontsovskaya Str., Bld. 2, 109147, Moscow, Russian Federation

E-mail: info@mts.ru

Internet: www.mts.ru