Mobile TeleSystems PJSC, US6074091090

Mobile TeleSystems PJSC, US6074091090

23.05.2017 - 14:18:32

EQS-News: Mobile TeleSystems PJSC: MTS Announces Financial Results for the First Quarter Ended March 31, 2017

Mobile TeleSystems PJSC 1st Quarter 2017 Financial and Operating Results

Promising beginning to a new year

 

Q1 2017 Financial & Operating Results

 

 

 

Q1 2017 HIGHLIGHTS

MTS Group - Key figures (RUB bln)   Q1 2017   Q1 2016[1]   Change, % Revenue   104.7   105.9   -1.1% of which: Russia   97.1   96.3   0.9% OIBDA   41.8   41.1   1.8% of which: Russia   39.5   38.6   2.4% Operating profit   21.7   21.6   0.4% Profit attributable to owners of the Company:   12.5   14.5   -14.0% Profit from continuing operations   12.5   14.8   -15.8% Loss from discontinued operation   -   -0.3   n/a Operating cash flow   33.3   39.1   -14.8% Cash CAPEX   11.1   18.4   -39.5% Net debt   203.3   198.0   2.6% Net debt / LTM OIBDA   1.2   1.1   n/a Free cash flow   22.9   20.5   11.4%  

Mobile subscribers (mln)   Q1 2016   Q4 2016   Q1 2017   Y-o-Y Change,%   Q-o-Q Change, % Total   106.9   109.9   108.8   1.7%   -1.0% Russia   77.3   80.0   79.0   2.2%   -1.3% Ukraine[2]   20.7   20.9   20.9   0.8%   0.1% Armenia   2.1   2.1   2.1   -1.2%   -0.9% Turkmenistan   1.6   1.7   1.7   4.7%   2.7% Belarus[3]   5.3   5.2   5.2   -1.8%   -1.3%  

Andrei Dubovskov, President and Chief Executive Officer, commented on the results:

"MTS again delivered a strong set of results as we continue to deliver on our 3D strategy of data, digital and dividends. While Group revenue slightly declined for the period, which was shorter than last year due to the leap year, we continue to see positive underlying trends in our core markets in Russia and Ukraine through an overall growth in usage improved profitability. In Russia, the stabilization of our roaming base and an overall increase in usage contributed to a nearly 1% growth in mobile service revenue. In Ukraine, we saw close to 3% revenue growth year-over-year as we continue to develop data customers and build out our 3G networks.

"However, we realized significant profitability gains in both markets. For the Group, OIBDA was up 1.8%, but in Russia, we realized 2.4% growth in OIBDA largely due to the higher-profitability of roaming, as well as relatively less of an impact in our retail business to Q1 2016. In Ukraine, our yearlong focus on profitability has improved our margins to nearly 46% as OIBDA grew 62%. Key factors in Ukraine include scale benefits related to our 3G rollout and rebranding under the Vodafone brand, as well as rebalancing our bundled voice and data tariffs.

"While these results are encouraging to start the year, we reaffirm our Group revenue and OIBDA guidance of -2 to +2%. We may be trending at the upper range of this guidance, but the macroeconomic situation, including currencies throughout our markets, remains volatile, and the competitive outlook - despite steps we took during the period to shut down stores and eliminate unlimited tariff plans - remains uncertain. Overall, however, we see a number of positive underlying trends in our market, which bode well for our outlook."KEY CORPORATE DEVELOPMENTS

CORPORATE NEWS

MTS Board of Directors appointed Andrey Dubovskov the President of MTS for a three-year term and elected the members to the Management Board.

***

MTS Board of Directors set the date for the Company's AGM for June 29, 2017 with the record date to participate in the AGM on May 26, 2017.

***

The Board recommended that the AGM approves annual dividends of RUB 15.6 per ordinary MTS share (RUB 31.2 per ADR), or a total of RUB 31.17 billion (RUB 31,174,752,570), based on the full-year 2016 financial results.

The Board recommended that the AGM sets the record date for shareholders and ADR-holders entitled to receive dividends for the 2016 fiscal year for July 10, 2017.

BOND ISSUANCE

In February, 2017, MTS issued exchange-traded bonds of RUB 10 billion with a maturity of 5 years at a coupon of 9.00% on MICEX.

***

In March, 2017, MTS issued exchange-traded bonds of RUB 10 billion with a maturity of 4 years and a coupon of 8.85% on MICEX.

SHARE REPURCHASE

In addition to the dividend payout, the Board has considered the advisability of a share repurchase program as an additional way to create further shareholder value. As part of such a program, the Group could allocate up to 30bln rubles to be spent over the next three years on the repurchase of shares.

In October and December 2016, the Board of Directors gave approval for MTS to launch two Modified Dutch Tender Offers with the goal of returning a maximum of RUB 10 bln to the Company's Holders of Shares of Common Stock and ADR Holders. Through two tenders, launched in October 2016 and January 2017, MTS acquired 17,532,278 shares for a total consideration of RUB 5.0 bln. In transactions related to the tenders, MTS acquired a number of shares proportional to its aggregate ownership from its majority shareholder, Sistema PJSFC, at prices determined by the tender. In total, MTS spent RUB 10.0 bln to acquire a total of 35,121,665 shares.

NETWORKS DEVELOPMENT

MTS installed new equipment to secure seamless connectivity for passengers in Moscow metro, significantly improving MTS' existing service. MTS equipped approximately 4,000 metro trains with femtocells, or miniature base stations, to boost the signal strength available to MTS subscribers while travelling on Moscow metro trains.

5G TEST

MTS and Ericsson tested 5G technology in motion for the first time in Russia and reached a record data speed of 25 Gbps. Innovative technologies such as Multi-User and Massive MIMO, Beam Tracking and Dynamic TDD, were used for the trials.

MTS MONEY WALLET

MTS launched MTS Money Wallet, an e-wallet that enables users to get easy, 'one-click' access to MTS's financial services and be rewarded with bonuses and loyalty points. The new service combines all payments tools on one platform - electronic wallet, bank cards, and customers' mobile account balances.

INNOVATIVE CAR INSURANCE PROGRAM

MTS and INTOUCH insurance company launched Smart Kilometers, the first IoT-based insurance program available in Russia, which will allow low-mileage or occasional drivers to save up to 25% of the cost of the non-obligatory car insurance.

CLOUD SOLUTIONS FOR LARGE BUSINESS

MTS launched cloud computing services for large corporate clients. The combination of MTS' cloud platform, its own data centers and unrivalled network of backbone and urban channels allow customers to access complex computing and data storage cloud solutions with advanced disaster recovery options. The new services are available throughout Russia.

AWARDS AND GLOBAL RECOGNITION

MTS Compliance Director Julia Romashkina named EMEA Chief Compliance Officer of the Year by C5 Group's Annual Women in Compliance Awards for her success in promoting a compliance culture both within the company and beyond.

***

MTS Corporate University received the silver award in the 'Best Corporate University - Innovation' category at the Global Council of Corporate Universities ("GlobalCCU") Awards 2017. GlobalCCU rewards companies that have used their corporate university structures as a tool to implement broader business strategies.

GROUP BUSINESS PERFORMANCE

Group Highlights (RUB bln)   Q1 2017   Q1 2016   Change % Revenue   104.7   105.9   -1.1% OIBDA   41.8   41.1   1.8% margin   40.0%   38.8%   1.2pp Profit attributable to owners of the Company   12.5   14.5   -14.0% margin   11.9%   13.7%   -1.8pp  

CONSOLIDATED FINANCIAL HIGHLIGHTS

Group revenue decreased 1.1% year-over-year to RUB 104.7 bln. Part of the decrease is attributable to the effect of a leap year in 2016, without which revenue would largely be flat. However, voice and data usage growth in Russia, coupled with slightly higher handset sales, supported revenue growth in this key market. This offset the negative effect of the strengthening ruble in relation to group currencies as the contribution from foreign subsidiaries overall weakened.

Group OIBDA rose 1.8% year-over-year to RUB 41.8 bln. The growth was driven by strong mobile revenue, optimization of costs related to roaming and a positive year-over-year contribution from Ukraine. The strengthening ruble limited the contribution from foreign subsidiaries, but underlying trends in these markets remained stable. Group OIBDA margin stood at 40.0%.

MTS delivered a first-quarter group net profit of RUB 12.5 bln, down from Rub 14.5 bln a year earlier. The drop was attributable smaller non-cash FOREX gain due to relative stability of the ruble and higher depreciation and amortization costs because of our network expansion in key markets like Russia and Ukraine.

Group OIBDA Factor Analysis (RUB bln)

**Please refer to the link below for the full version of the press-release, which includes graphic content**

Group Net Profit Factor Analysis (RUB bln) **Please refer to the link below for the full version of the press-release, which includes graphic content**

LIQUIDITY AND CASH FLOW

Debt & Liquidity (RUB bln)   As of March 31, 2017   As of December 31, 2016 Current portion of LT debt and of finance lease obligations   50.0   47.7 LT debt   221.9   227.7 Finance lease obligations   9.5   10.4 Total debt   281.4   285.8 Less:         Cash and cash equivalents   25.4   18.5 ST investments   44.5   8.7 LT deposits   -   27.1 Effects of hedging of non-ruble denominated debt   8.3   10.7 Net debt   203.3   220.9  

At the end of the reporting period, total debt stood at RUB 271.2 bln (net of financial leases and debt issuance costs). In Q1 2017, MTS issued two exchange-traded bonds for a total amount of RUB 20 bln. The funds were used for general corporate purposes. During the period, MTS paid down RUB 17.4 bln in debt.

Debt Repayment Schedule

**Please refer to the link below for the full version of the press-release, which includes graphic content**

The ratio of net debt to LTM OIBDA was 1.2x, at a comfortable level to preserve the Company's financial strength and investment capacity.

Net Debt (RUB bln) to LTM OIBDA **Please refer to the link below for the full version of the press-release, which includes graphic content**

Non-ruble debt comprises roughly 18% of our gross debt, which largely consists of two outstanding Eurobonds due in 2020 and 2023. MTS actively uses hedging instruments to limit currency exposure to its outstanding bilateral debt. Likewise, MTS uses hard-currency deposits and other liquid instruments, including repurchasing Eurobonds both directly from investors and on the secondary market, to offset its non-ruble debt exposure and limit cash carrying costs.

Gross/Net Debt Structure by Currency[4] **Please refer to the link below for the full version of the press-release, which includes graphic content**

Gross Debt Structure by Type **Please refer to the link below for the full version of the press-release, which includes graphic content**

During the period, the MTS Board of Directors proposed to 2017 Annual General Meeting of Shareholders the payment of dividends in the amount of RUB 15.6 per ordinary MTS share (RUB 31.2 per ADR), or a total of RUB 31.17 billion (RUB 31,174,752,570), based on the full-year 2016 financial results.

Historical Dividend Payout (RUB bln)

**Please refer to the link below for the full version of the press-release, which includes graphic content**

In April 2016, MTS disclosed that it would consider spending up to RUB 30 bln over three years to complement its dividend payout with other ways to enhance shareholder returns. As part of this consideration, MTS launched two modified Dutch auction tenders in Q4 2016 and Q1 2017 to acquire 17.5 mln shares for an overall cost of roughly RUB 5.0 bln. Simultaneously, MTS entered into a binding agreement with Sistema, its controlling shareholder, to acquire number of shares proportional to Sistema's ownership stake at the prices determined by the market. In total, MTS acquired 35.1 mln shares for a consideration of RUB 10.0 bln.

Cash CAPEX Breakdown (RUB bln)   Q1 2017   Q1 2016 Russia[5]   9.7   16.5 as % of revenue   10.0%   17.1% Ukraine   1.3   1.6 as % of revenue   20.9%   19.9% Armenia   0.1   0.1 as % of revenue   3.4%   4.6% Turkmenistan   0.03   0.03 as % of revenue   2.6%   2.4% Group cash CAPEX[6]   11.1   18.4 as % of revenue   10.6%   17.4%  

In Q1 2017, MTS's capital expenditures declined almost 40% year-over-year to RUB 11.1 bln. The ratio of CAPEX to revenue was 10.6%. Investments declined in both Russia and Ukraine as the Company reduced its network investments in LTE and 3G as respective coverage has grown considerably in each market. Overall, MTS aims to reduce CAPEX to RUB 80.0 bln for the year, which will enhance free cash flow, while ensuring that MTS maintains the most capable networks in its markets of operation.

Cash Flow (RUB bln)   For the period ended March 31, 2017   For the period ended March 31, 2016 Net cash provided by operating activities   33.3   39.1 Less:         Purchases of property, plant and equipment   (7.6)   (13.7) Purchases of intangible assets[7]   (3.5)   (4.7) Proceeds from sale of property, plant and equipment   0.7   1.2 Investments in associates   -   (1.3) Free cash flow   22.9   20.5  

Free cash flow amounted to RUB 22.9 bln for Q1 2017. This year-over-year increase was largely attributed to lower overall CAPEX spending.

RUSSIA

Russia Highlights (RUB bln)   Q1 2017   Q1 2016   Change % Revenue[8]   97.1   96.3   0.9% mobile   71.7   71.1   0.8% fixed   15.2   15.4   -1.2% integration   1.4   2.5   -43.7% sales of goods   11.3   10.7   5.9% OIBDA   39.5   38.6   2.4% margin   40.7%   40.1%   0.6pp Net profit   12.4   15.0   -17.7% margin   12.7%   15.6%   -2.9pp  

Total revenue in Russia grew 0.9% year-over-year and amounted RUB 97.1 bln. Despite the effect of a leap year, mobile service revenue grew 0.8% due to higher voice and data usage. Similarly, the decrease in fixed revenue was attributable largely to the leap year, but overall B2C growth continued to offset weakness in other non-consumer segments. Handset sales rose slightly, which also supported revenue performance, while the impact from the integration business was negative.

Russia OIBDA grew 2.4% to RUB 39.5 bln. This reflects the positive revenue dynamics, a relatively stronger ruble and cost optimization in roaming. The OIBDA margin reached 40.7%.

In the mobile business, revenues increased to RUB 71.7 bln driven by continuing growth in mobile data usage. Though overall roaming revenue continued to decline year-over-year, in Q1 2017, MTS witnessed positive signs in international roaming. The recent decline in voice and SMS usage in roaming has seemingly stabilized, and the Company continues to see positive trends in data roaming.

Change in Roaming Traffic Relative to Q1 2015

**Please refer to the link below for the full version of the press-release, which includes graphic content**

Our subscriber base in Russia slightly decreased to 79 mln subscribers due to seasonality.

In MTS's fixed business, revenue decreased slightly by 1.2% year-over-year to RUB 15.2 bln. The decline was attributable to the decrease in revenue in the B2O segment and the subsequent lower contribution from interconnect revenues. The Company's B2C segment showed a marginal increase despite a continuing decline in the fixed-telephony segment. Nevertheless, the Company's B2C broadband and pay-TV markets continued to grow. According to Group estimates, MTS' market shares in Moscow increased in both home broadband and pay-TV to 35% and 31% respectively as we leverage the network capabilities of our fiber-optic networks to offer unmatched speed, quality and services.

Fixed-line revenue (RUB bln)   Q1 2017   Q1 2016   Change %   Total   15.2   15.4   -1.2%   B2C   7.6   7.5   0.4%   B2B+B2G+B2O   7.6   7.8   -2.8%    

Revenue from MTS's integration business fell 43.7% year-over-year to RUB 1.4 bln. This reflects the fact that MTS has completed most of the contracts serviced by NVision prior to its acquisition.

The Company realized a 5.9% increase in sales of goods supported by both sales of handsets and accessories and sales of software products. Sales of handsets and accessories that account for over 90% of total sales of goods grew by 2.1% year-over-year to RUB 10.3 bln due to the further implementation of MTS' retail strategy in Russia. In Q1 2017, MTS continued to reshape its handsets portfolio switching towards more expensive devices due to rising customer demand. With greater access to flexible payment plans and better finance options, customers are increasingly opting for advanced smartphones with a wide range of functionality (e.g. high-quality cameras, LTE-enabled, large screens). Higher handsets pricing, coupled with the strengthening ruble helped to enhance both handset sales and profitability in the reporting period.

Handsets and Accessories Sales and Gross Margin

**Please refer to the link below for the full version of the press-release, which includes graphic content**

MTS continued promoting data usage by stimulating the migration of our customers from feature phones to smartphones and providing best connectivity experience. As a result, smartphone penetration in all mobile phones on MTS network was 56%, while mobile internet penetration reached nearly 50%.

UKRAINE

Ukraine Highlights (UAH bln)   Q1 2017   Q1 2016   Change % Revenue   2.8   2.8   2.9% OIBDA   1.3   0.8   62.0% margin   45.8%   29.1%   16.7pp Net profit   0.5   0.3   92.7% margin   18.7%   10.0%   8.7pp  

The Group continues to actively expand its 3G network coverage in Ukraine. During the reporting period, it installed 366 3G base stations, double the number installed during the same period in 2016. Client adoption of 3G services pushed revenue up by 2.9% to UAH 2.8 bln, while network improvement stimulates higher data consumption. The Group witnessed growth in the number of data users (+18% year-over-year) and the penetration of bundled voice and data tariff plans.

OIBDA rose 62.0% year-over-year to UAH 1.3 bln, while the OIBDA margin reached 45.8%. Throughout 2016, MTS viewed OIBDA growth as part of its key strategic priority in the market, and this marks the fourth consecutive quarter where MTS has realized growth in OIBDA and OIBDA margin. These improvements are largely attributable to higher-margin revenue growth and scale benefits as we expanded its 3G coverage. MTS also rebalanced tariffs introduced in 2016, many of which provided reduced roaming rates for new clients. The Group ended the period with 20.9 mln subscribers in Ukraine.

OTHER FOREIGN MARKETS: ARMENIA, TURKMENISTAN, BELARUS

Armenia Highlights (AMD bln)   Q1 2017   Q1 2016   Change % Revenue   12.9   14.2   -9.1% OIBDA   5.3   5.6   -5.1% margin   41.4%   39.7%   1.7pp Net (loss) / profit   -1.2   0.2   n/a margin   n/a   1.7   n/a  

In Armenia, revenue declined by 9.1% year-over-year to AMD 12.9 bln. Macroeconomic factors continue to dampen usage of services such as international calling and roaming, while a fall in remittance payments continue to affect the market. These factors also weakens usage of core voice and data products.

Increased pressure on the market has also lead to an increase in competition, which is one factor that explains 5.1% year-over-year decline in OIBDA to AMD 5.3 bln. Overall, the OIBDA margin for the reporting period remains strong at 41.4% as the Group continuously focus on ways to improve efficiency in this challenging operating environment.

The Group's subscriber base in Armenia declined slightly to 2.1 mln, which reflects general seasonal trends.

Turkmenistan Highlights (TMT mln)   Q1 2017   Q1 2016   Change % Revenue   65.2   67.3   -3.1% OIBDA   23.0   23.9   -3.8% margin   35.3%   35.5%   -0.2pp Net profit   10.6   11.3   -6.2% margin   16.3%   16.8%   -0.5pp  

In Turkmenistan, revenue declined by 3.1% year-over-year to TMT 65.2 mln. Despite a 4.7% gain in subscribers from the end of 2016 to 1.7 mln, macroeconomic-driven factors, which impact overall voice and data usage, continue to lessen customer value.

OIBDA declined in line with revenue by 3.8% year-over year to TMT 23 mln. Though the Group has made efforts to increase network capacity and accommodate a greater number of customers on its network, macroeconomic and competitive pressures continue to present challenges to significantly increasing scale benefits. Overall, our OIBDA margin in Turkmenistan was 35.3%.

Belarus Highlights (BYN mln)   Q1 2017   Q1 2016   Change % Revenue   169.5   148.9   13.9% OIBDA   79.5   68.1   16.8% margin   46.9%   45.7%   1.2pp Net profit   51.9   39.7   30.7% margin   30.6%   26.7%   3.9pp  

In Belarus, MTS revenue rose nearly 14% year-over-year to BYN 169.5 mln, due to the effect of price increases introduced in 2016 on data services and subscription fees, as well as stronger performance in retail.  

OIBDA grew 16.8% to BYN 79.5 mln backed on growth in data usage due to rising penetration of bundled voice & data tariff plans, as well as the effect of price increases introduced in 2016. OIBDA performance was also supported by a strengthening of the BYN in relation to the USD and EUR. Overall, the OIBDA margin in Belarus remained strong at 46.9%.

2017 OUTLOOK

Group revenue:

For 2017, MTS reiterates its Group revenue outlook at +2% /- 2% growth rate based on developments in the following areas:

- Competitive factors in distribution and tariff policies;

- Consumer sentiment against the backdrop of a volatile macroeconomic environment;

- Handset sales due to optimization of retail distribution channels;

- Service revenue dynamics in Russia; and

- Service revenues in foreign subsidiaries and currency volatility in relation to the Russian ruble.

Group OIBDA:

MTS confirms its outlook on Group OIBDA growth rate at +2% /- 2% in consideration of the following factors:

- Competitive factors and potential optimization in distribution;

- Business/consumer sentiment and usage of high-value products like roaming;

- Developments in foreign subsidiaries; and

- Macroeconomic developments and currency volatility throughout our markets of operation.

Group CAPEX:

FY2017 CAPEX estimated to trend downwards to RUB 80 bln, due to a number of factors:

- Launch of LTE in each region of Russia by the middle of 2016;

- Completion of fiber improvements in key Russian markets;

- Further incremental improvements and enhancements to LTE networks;

- Implementation of infrastructure and spectrum sharing projects;

- Completion of the bulk of the 3G build-out in Ukraine and future development of LTE;

- Evolution of commercial 5G solutions and their introduction into Russian market; and

- Continued investments in digital products and services.

Group CAPEX forecast (RUB bln) **Please refer to the link below for the full version of the press-release, which includes graphic content**

CONFERENCE CALL DETAILS

The conference call will start today at: 18:00 MSK (Moscow) 16:00 GMT (London) 11:00 EST (New York)

To take part in the conference call, please dial one of the following telephone numbers and quote the confirmation code, 8402574

From Russia: + 7 495 213 1767 From the UK: + 44(0)330 336 9105 From the US: + 1 719 457 1036

The conference call will also be available at: http://www.mtsgsm.com/news/reports/ via audio webcast.

The earnings release will be posted at approximately 15:00 MSK/13:00 GMT at: http://www.mtsgsm.com/news/reports/.

A replay of the conference call will be available for seven days on the following telephone numbers:

From the US: +1 719 457 0820 PIN 8402574 From the UK: +44(0)207 984 7568 PIN 8402574 From Russia: 810 800 2702 1012This press release provides a summary of some of the key financial and operating indicators for the period ended March 31, 2017. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/

CONTACT INFORMATION

 

Joshua B. Tulgan Director, Corporate Finance & Investor Relations Mobile TeleSystems PJSC

Tel: +7 495 223 2025 E-mail: ir@mts.ru

Learn more about MTS. Visit the official blog of the Investor Relations Department at www.mtsgsm.com/blog/ and follow us on Twitter: JoshatMTS

* * * Mobile TeleSystems PJSC ("MTS" - NYSE:MBT; MOEX:MTSS), the leading telecommunications group in Russia and the CIS, provides a range of mobile and fixed-line communications services. We serve over 100 million mobile subscribers in Russia, Ukraine, Armenia, Turkmenistan, and Belarus, and about 9 million customers of fixed-line services, including fixed voice, broadband internet, and pay-TV. To keep pace with evolving customer demand, MTS is redefining what telecommunications services are by offering innovative products beyond its core network-related businesses in various tech segments, including Big Data, financial and banking services, internet of things, OTT, cloud computing, systems integration and e-commerce. We leverage our market-leading retail network as a platform for customer services and sales of devices and accessories. For more information, please visit: www.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. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or 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, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, 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, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks.[1] P&L data were retrospectively adjusted on discontinued operation in Uzbekistan[2] Including CDMA subscribers[3] MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated[4] Including financial leasing and including FOREX hedging in the amount of $610.3 mln as of Q1 2017[5] Excluding purchase of 4G license in Russia in the amount of RUB 2.6 bln in Q1 2016[6] Including RUB 157 mln spent on CAPEX in UMS LLC in Q1 2016, while Group Revenue for Q1 2016 doesn't include Revenue from UMS LLC[7] Excluding purchase of 4G license in Russia in the amount of RUB 2.6 bln in Q1 2016[8] Net of elimination

Additional features:Document: http://n.eqs.com/c/fncls.ssp?u=YEJGOREDQIDocument title: MTS Q1 FY 2017 Financial and Operating Results Press-Release

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