Financial Overview

The consolidated financial statements for the fiscal year 2015 ended on December 31, 20151, was drawn-up in accordance with IFRS.

This change in financial reporting standards is consistent with the approach of global and European telecommunication companies, most of which draw up their statements as per IFRS. The IFRS reporting is formed in Russian roubles as the core assets and activities of MTS are concentrated in Russia.

Financial indicators of the group

Income of the Group (billion RUB)

1 Information on the consolidated financial and operating results of MTS Group in Q4 2015 and 2015 in general:

Distribution of Group’s income1

1 Without regard to internal group operations

“We are pleased to announce the completion of another successful year of growth for MTS. The Group revenues increased by 5% to more than RUB 431 billion as a result of our 3D strategy implementation. We can see a steady demand for data transfer services in all markets of our operation and we are pleased to be finally able to render high-speed mobile Internet access services to our customers in Ukraine after obtaining a license to render 3G services at the beginning of last year”.

Andrey Dubovskov, MTS PJSC President

Significant increase in the annualized income was caused by:

  • Increase in the income from data transmission and expansion of the subscriber base in Russia due to the price policies and retail development strategies
  • Increase of market shares of BBA and fee-based TV for private customers in Moscow
  • Contribution to business development in Uzbekistan where МТС launched a network in December 2014

Annualized income was also impacted by reduction in the yield in Ukraine due to the weakening of the national currency, terminations of activities in Crimea and business difficulties in the eastern part of the country

Quarterly income reduction was caused by traditional seasonal factors such as decrease in use of roaming services

Adjusted OIBDA1 of the Group (billion RUB)

1 Excluding the income in amount of 6.7 billion RUB (3.6 billion RUB in Q3 2014 and 3.1 billion RUB in Q4 2014) from the resumption of operations in Uzbekistan and the reserves for monetary funds in Ukranian banks subsequently declared insolvent, in amount of 5.1 billion RUB in Q4 2014 and 1.7 billion RUB in Q1 2015.

Adjusted OIBDA margin: factor analysis

“Despite the continuing macroeconomic uncertainty, we finished the year 0.7 percentage points higher than the previously predicted level margin of adjusted OIBDA of 40%. At year-end, the adjusted OIBDA of MTS Group decreased slightly by 2% to RUB 175.5 billion mainly due to negative macroeconomic factors, regulatory changes in Ukraine and aggressive actions committed by our competitors in the Russian retail distribution”.

Andrey Dubovskov, MTS PJSC President

Reduction of annualized OIBDA indicator represents:

  • Higher share of income from sales of phones in the total amount of Group’s income
  • Expenses for building up a retail chain in response to aggressive actions of the competitors
  • Increase in cost of production of roaming services and international calls for the Russian market
  • Increase of inflation impact in the key markets of MTS operation, including rising costs of power, lease of channels and platforms for base stations, maintenance of communication and IT networks, increase of tax payments and payments for use of a radio-frequency spectrum fro Ukranian business
  • Expenses related to resumption of activities in Uzbekistan
  • Volatility of national currents in all the operation markets of the Group

Net income of the Group (billion RUB)

“Net profit of MTS Group decreased by 3.5% per year to RUB 49.5 billion. In addition to the trends impacting the OIBDA, the main factors that influenced reduction in net profit were the growth of depreciation costs associated with the expansion of our network, as well as the increase in fundraising costs. Other market factors include the loss on impairment of assets in Armenia, as well as losses from the resumption of operations in Uzbekistan”.

Alexey Kornya, Vice President, Finance and Investments, Member of the Management Board

Net income indicator in the fourth quarter of 2015 was impacted by:

  • OIBDA dynamics
  • Quarterly increase of the annualized net income was caused by a low base of the previous period
  • Loss from goodwill depreciation in Armenia by 3.5 billion RUB
  • Share in losses of MTS Bank in amount of 2.3 billion RUB
  • Non-monetary losses from exchange rate fluctuations in amount of three billion RUB.

Net income reduction in 2015 was also impacted by depreciation expenses

Unstable macroeconomic indicators of the countries that are vital for MTS business can also impact the financial and operational indicators of the Group in future

Dynamics of subscriber base in mobile business

MTS subscribers
Q4 2015 Q3 2015 Q4 2014 Quaterly, % Annualized, %
Total for mobile subscribers of the Group 107,8 107,1 104,2 +0,7% +3,5%
Russia 77,3 76,9 74,6 +0,5% +3,6%
Ukraine1 20,4 20,3 20,2 +0,7% +1,0%
Turkmenistan 2,1 2,1 2,1
Armenia 1,6 1,6 1,7 –6,3%
Uzbekistan 1,1 0,9 0,2 +25,8 5,8x
Belarus2 5,3 5,3 5,3

1 Including CDMA network subscribers

2 MTS owns 49% of shares in MTS JLLC in Belarus, considered by the share.

In Russia MTS continues to connect and keep high-quality subscribers due to attractive rate offers and management of sales through the home retail chain.

MTS maintains a sustainable growth of the subscriber base through:

  • Great customer service
  • Great communication quality
  • Data plans and retail chain, aimed at migration of subscribers from voice data plans to package plans with the internet traffic included

Capital expenditures of MTS Group (billion RUB)

2014 2015
CAPEX In % of income CAPEX In % of income
Russia1 85 491 22,8% 79 619 20,4%
Ukraine2 4210 12,8% 12 427 44,1%
Armenia 1142 16,0% 1371 15,2%
Turkmenistan 1084 28,4% 500 9,8%
Uzbekistan 1 0,6% 2195 47,6%
Group 91 929 22,4% 96 111 22,3%

1 Excluding expenses for acquisition of 4G licenses in amount of 3.4 billion RUB in 2015

2 Excluding expenses for acquisition of 3G licenses in Ukraine amount of 2.7 billion UAH (7.044 billion RUB) in 2015.

Capital expenditures of MTS Group for 2015 amounted to 96.1 billion RUB, including:

  • Development of data transfer networks in all operation markets
  • Completion of the project on deployment of GPON networks in Moscow
  • Modernization of landline communication networks in Russian regions
  • Resumption of provision of communication services in Uzbekistan

Capital expenditures share against proceeds of the company lessened within the reporting period, primarily in Russia, Armenia and Turkmenistan, after the period of aggressive development of MTS networks in these countries

Increase of capital expenditures in the Ukranian market is a natural effect of obtained licenses for provision of communication services by 3G/UMTS standard:

  • In the first quarter of 2015 MTS won the license on provision of 3G communication services at the entire territory of Ukraine in the ranges of 1950-1965 MHz and 2140-2155 MHz.
  • Capital expenditures of the Group don’t include neither one-time payments for acquisition of 3G licenses in amount of 2.7 billion UAH or 7 billion RUB, not the cost of refarming of frequencies (358 million UAH or 865 million RUB).

Forecast for 2016

Income of the Group : MTS forecast an income increase of the Group at the level of >4% for 2016, caused by:

  • Expansion of mobile internet use and sustainable growth of data users among MTS subscribers
  • Growth of smartphone sales
  • Growth of MTS share in the market of BBA services and fee-based TV for private customers in Moscow
  • Income growth in foreign subsidiaries

OIBDA of the Group: MTS expects that adjusted OIBDA will vary within the range from -2 to +1 % in 2016. Volatility of operation markets is under the following influences:

  • Increase of competition in the retail market due to aggressive actions of the competitors
  • Building up 3G networks in Ukraine and non-market influences that impact our profitability
  • Macroeconomic factors and volatility of national currents in the operation markets

Capital expenditures of the Group: MTS is planning to reduce capital investments in 2016 to 85 billion RUB.

MTS intends to reconsider its forecasts within the framework of future quarterly disclosures of financial and operational indicators, which will allow to provide the up-to-date view of the current financial year to the market.


Financial indicators

Income (billion RUB)

OIBDA (billion RUB)

Net income (billion RUB)

“Over the year, the company’s revenue in Russia increased by 4.4% to more than RUB 391 billion. During this time, we noted the influence of a number of negative macroeconomic factors, but steady mobile business of MTS successfully overcame these difficulties”.

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Annualized income growth due to:

  • Expansion of use of data transfer services
  • Increase of high0quality connections
  • High level of smartphone sales.

Stable level of OIBDA despite:

  • Growth of smartphone sales
  • Retail chain expansion
  • Aggressive retail strategy
  • Impact of rouble depreciation upon the amount of expenses in foreign currencies, including costs of international calls, roaming services and equipment
  • Impact of inflation upon total and administrative expenses.

Net income growth in Russia for the 4th quarter of 2015 against the same period of 2014 due to effective management of exchange rate risks

Net income growth in 2015 against the last year was caused by the rouble devaluation decrease

MTS is an all-time leader in the amount of income and OIBDA in Russia

Structure of mobile Business income in Russia

Mobile business income (billion RUB)

Income from mobile services without regard to sales of phones and equipment (billion RUB)

Income from sales of phones and accessories (billion RUB)

“The MTS mobile business revenue increased by 5.2% due to the growth of the active subscribers and as a result of increased revenue from data transfer services due to the rising penetration of smartphones and transition of users to package data plans”.

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Increase in the annualized income from mobile services was caused by:

  • Increase in consumption of data services and growth of market penetration of smartphones and tablets due to implementation of an aggressive retail strategy
  • Increase in consumption of services by the existing data subscribers
  • Growth of the active subscriber base
  • Continuing growth of sales of equipment due to implementation of the retail strategy of the company aimed at promotion of sales and market penetration of smartphones, and the involvement of high-quality subscribers

MTS is a leader in amount and growth rate of mobile business income in Russia

Operational indicators of the mobile business

Total income from VAS services (billion RUB)

Income from data transfer services (billion RUB)

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015
Subscribers, millon 74,6 74,5 75,4 76,9 77,3 74,6 77,3
Churn, % 11,0% 10,1% 9,1% 9,7% 10,8% 41,1% 39,6%
ARPU (RUB) 337 315 324 341 323 338 326
MOU 393 367 388 386 387 372 381
APPM (RUB) 0,86 0,86 0,83 0,88 0,84 0,91 0,85

Annual growth of income from additional services reflects the focus of the company on a promotion of data transfer services use, promotion of affordable smartphones in the retail chain, ongoing investments in mobile internet networks, successful market offers.

Annualized churn reduction represents an increase is share of sales of the contracts through the home retail chain to 60%

Quarterly change of churn indicator was caused by seasonal influences

Key initiatives:

  • Lauch of LTE networks in all operation areas
  • Implementation of the retail strategy of MTS on offer of affordable smartphones in the retail chain
  • Focus on promotion of package data plans, which provided for three-time growth of the share of package plans in sales

Financial and operational indicators of the mobile business

Income from fixed services (billion RUB)

Structure of the income from fixed services (billion RUB)


1 It includes landline telephony, BBA and TV subscribers and doesn’t include satellite TV subscribers

“In 2015, our fixed-line business revenue decreased slightly by 1.5%. However, we are encouraged by the increase in revenue by 2.9% in Q4 of 2015 compared to Q3 2015. Such growth is driven by a steady increase in the share of our company in the mass market; for the quarter, we increased our subscriber base in the broadband Internet access segment by nearly 100,000 subscribers.”

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Ongoing annualized growth of income in the retail BBA market due to expansion of the subscriber base in Moscow and regions and connection of the subscribers to modernized networks in the regions

Quarterly growth of income from fixed services was caused by seasonal influences, termination of promo campaigns and transfer of the subscribers to new data plans

ARPU growth in the retail market due to the increase of share of several-service packages, migration of fee-based TV subscribers to a digital platform, connecting to modernized networks in the regions and transfer of ADSL subscribers to GPON network in Moscow.

MTS retail chain

Penetration of smartphones in sales and operator networks, 2011–2015

By the end of the 4th quarter of 2015 the retail chain included 5,166 outlets with 1,681 franchising store among them

In the 4th quarter of 2015 the share of smartphones among all the phones sold in MTS retail was 72%

Share of LTE-compatible smartphones reached 38.5% of all smartphones sold in the retail chain of the operator

In the 2nd quarter of 2015 MTS sharply reduced prices for all the models of smartphones in the home retail chain in order to:

  • Counteract to activities of the competitors on expansion of the market share of their own retail chains
  • Involve high-income subscribers and encourage transition of subscribers to package data plans

As a result, the annualized amount of sold smartphones increased by 59%, and penetration of smartphones in the subscriber base amounted to 48.4%

Profit and gross income from sales of phones and accessories


Financial results

Income (million UAH)

Adjusted OIBDA1 (million UAH)

1 Adjusted by the value of reserves for monetary funds in insolvent Ukranian banks in amount of 1.449 billion UAH in the fourth quarter of 2014 and 648 million UAH in the first quarter of 2015

“In Ukraine, the revenue decreased slightly by 0.6% to more than 10 billion hryvnia in 2015. We constructed 3G networks all over Ukraine, launched the networks in all major regional centers under the Vodafone brand and were able to deploy communication networks on a par with our main rival at year-end.”

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Annualized reduction of income due to termination of operations in Crimea, difficulties in provision of communication services in the conflict zone at the east of Ukraine and general deterioration of economic situation in the country

Organic revenue growth in the fourth quarter year-on-year due to the launch of 3G communication services in the second half of 2015, increase of profit from interconnecting and growth of income after raising the prices for tariff options, international roaming and international calls

OIBDA reduction due to increase of the payment for frequencies, increase of expenses for 3G network deployment and maintenance of operations at the east of Ukraine

Market condition

On October 15, 2015 MTS extended the agreement on strategic partnership with Vodafone, which was used by the companies to conduct a re-branding of MTS Ukraine

Vodafone carries out consultations on a construction, management and optimization of networks, launch of services based on 3G network, including package offers, international calls, roaming services by competitive prices, musical and gaming applications for the subscribers

By the end of 2015 MTS covered most of the central cities of regions with its ЗС networks

Operational and financial results

Income from VAS services (million UAH)

Income from data transfer (million UAH)

2014 2015
Subscribers, millon 20,2 20,3 20,3 20,3 20,4 20,2 20,4
Churn, % 17,6% 5,5% 5,6% 6,9% 6,6% 34,2% 24,5%
ARPU 35 43 39 42 39 40 41
MOU 480 508 502 500 523 554 508
SAC (hryvnias) 69,3 69,2 86,7 76,2 83,4 57,6 79,5
APPM (hryvnias) 0,07 0,08 0,08 0,08 0,07 0,07 0,08

Annualized growth of income from additional communication services due to 3G deployment

Growth of income from data transfer due to a rapid increase in amount of users of new services because of the launch of 3G networks.


Financial results

Income (billion drams)

Adjusted OIBDA1 (billion drams)

1 Adjusted to losses from goodwill depreciation in Armenia by 3.5 billion RUB in Q4 2015

“The revenue of our Armenian subsidiary decreased by more than 8% as compared to the previous year due to negative macroeconomic factors that influenced the use of such services as international calls and roaming.”

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Profit dynamics is caused by a significant reduction of the volume of local and international calls and roaming calls due to adverse macroeconomic influences

OIBDA dynamics was influenced by the reduction of profit from high-yield services which are roaming and international voice calls


Financial indicators

Income (million manats)

OIBDA (million manats)

In Turkmenistan, the revenue increased by 3.9% over the year as a result of increased use of communications services.

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

Annulaized reduction of profit was caused by a slight decrease in the amount of subscribers, leading to a reduction of profit from voice communication services

Annualized OIBDA reduction due to the strengthening of USD which influenced the expenditures in foreign currencies, including IT and network maintenance costs, and raised prices of communication channels lease and wage indexation in January 2015


Resumption of MTS operation

Income (billion soms)

OIBDA (billion soms)

Operational indicators

Subscribers, million 0,2 0,4 0,6 0,9 1,1
ARPU (soms) 21 027 23 373 23 976 27 101
MOU (minutes) 356 462 530 527
Churn, % 8,4% 13,0% 14,3% 17,1%

“In Uzbekistan, where the number of our subscribers exceeded one million in Q4 of 2015, we can see an impressive revenue growth of more than 51% compared to Q3 2015”.

Vasyl Latsanych, Vice President, Marketing, Member of the Management Board

MTS attracts new users and provides for a growth of average revenue per one customer

Company reached a positive OIBDA value for the first time in the fourth quarter of 2015

On September 24, 2014 МТС obtained 50.01% in the Joint Russian-Uzbek enterprise Universal Mobile Systems LLC (UMS)

UMS Company, Joint enterprise of MTS and Uzbekistan State obtained licenses for 2G, 3G and LTE communication services, frequencies, numbering capacity and other permits required for the launch of operation

MTS started its operation in the territory of Uzbekistan on December 1, 2014

The Company focused its efforts on involvement of high-yield subscribers due to the high quality of communication and great customer service


Financial indicators

Income (billion BYR)

Adjusted OIBDA1 (billion BYR)

1 Adjusted by the value of reserves for monetary funds in the insolvent Delta Bank in amount of 282 million RUB (69.69 billion BYR) in the first quarter of 2015

Annualized income increase was caused by:

  • Increase of profit from data transfer due to successful strategy of the company aimed at expansion of smartphones penetration and transition of the subscribers to package data plans, and due to rise in tariffs for data transfer services
  • Increase in equipment sales due to company’s efforts on a promotion of smartphone sales
  • Growth of income from data transfer, resulting from raising of tariff rates
  • Launch of services based on LTE networks.

Quarterly growth of income due to increasing sales of subscriber equipment and accessories

OIBDA margin dynamics was impacted by the growth of low-margin sales of equipment

Overview of the Significant Transactions of the Group

Significant Transactions of MTS PJSC

1. Purchase of 100% of the shares of NVision Group JSC, the owner and developer of MTS billing and one of the largest system integrators and suppliers of integrated IT solutions in Russia.

In December 2015, we terminated the purchase of NVision Group JSC and its subsidiaries, the owner and developer of MTS billing and one of the largest system integrators and suppliers of integrated IT solutions in Russia.

Andrey Dubovskov, President of MTS PJSC, said that “The purchase of NVision Group is a part of the long-term MTS 3D strategy aimed at business diversification and innovation development. Unique NVision Group competence will allow us to achieve three main goals: to improve the service of our subscriber base by investing in the billing modernisation, to receive savings on IT costs due to integration and economies of scale and to strengthen our positions in the corporate market. In the near future, MTS can offer its customers integrated solutions in the form of a full range of IT services, telecommunication services and system integration services. We expect that entering the prospective and complementary markets for IT services, IT consulting and system integration will have a positive impact on our business, as today, the size of markets for IT solutions increases and their growth rates are higher than those of the traditional B2B-segment telecommunication markets in Russia and globally.”

2. Extension of the agreement for strategic partnership between MTS PJSC and Vodafone, under which the companies will re-brand MTS-Ukraine PrJSC (100% owned by MTS Group). Under the new agreement, the operator shall work under the Vodafone brand and develop 3G networks.

MTS and Vodafone signed a strategic partnership agreement in 2008 for the first time, which was then extended. Cooperation with Vodafone allowed MTS to gain exclusive access to the best practices, product portfolio and Vodafone marketing development for mass and corporate markets, as well as to receive expert Vodafone support in the stages of selection, launch and promotion of MTS marketing initiatives and the introduction of new technology. The companies are also involved in global joint procurement programs for network and subscriber equipment, which allows increasing the operating efficiency of business processes and strengthen positions in the markets of operation.

“MTS and Vodafone implemented a number of strategic initiatives for the development of mobile Internet services in the countries of their presence within the framework of their partnership. Therefore, the beginning of the formation of a fundamentally new market for 3G services in Ukraine is the optimal time to expand our cooperation, which will allow taking advantage of the opportunities of the growing market in Ukraine efficiently,” – Vasyl Latsanych, Vice President, Marketing.

Essential Affiliates as of December 31, 2015

Russian Telephone Company Closed Joint Stock Company

Location: 5 ul. Vorontsovskaya, bldg. 2, 109147 Moscow, Russia

The share of MTS PJSC in the authorised capital of the affiliate, %: 100

Primary business: implementation of sales of the MTS PJSC services.

>MTS UKRAINE Private Joint Stock Company

Location: 15 ul. Leipzigskaya, 01601 Kiev, Ukraine

The share of MTS PJSC in the authorised capital of the affiliate (indirect participation through subsidiaries Preludium B.V. and Allegretto Holding S.a.r.l., %: 100

Primary business: rendering of cellular radio-telephone communication services under the Vodafone trademark in the territory of Ukraine.

Moscow City Telephone Network Public Joint Stock Company

Location: 25 ul. Bolshaya Ordynka, bldg. 1, 119017 Moscow, Russia

The share of MTS PJSC in the authorised capital of the affiliate, %:

    Directly: 56.01%

    Via affiliates: 38.59%

The share of the affiliate in the authorised capital of MTS PJSC, %: 0.4595

Primary business: rendering of fixed line communication services in the territory of Moscow

Information on Significant Transactions of Affiliates

No such transactions were carried out in 2015.

Credit Ratings of MTS Issuer

Credit agencies Fitch, Moody’s and Standard & Poor’s assigned the following ratings to the Company’s debentures1:

Moody’s Ba1, stable
Standard&Poor's BB+, negative forecast
Fitch ВB+, stable

Changes that occurred after the reporting date

Moody’s Ba1, review for possible downgrade
Standard&Poor's none
Fitch none

1 data as of December 31, 2015