Mobile TeleSystems Announces Financial Results for the Second Quarter Ended June 30, 2015

MOSCOW, August 18, 2015 /PRNewswire/ --

Mobile TeleSystems PJSC ("MTS" - NYSE: MBT), the leading telecommunications provider in Russia and the CIS, today announces its unaudited IFRS financial results for the three months ended June 30, 2015. 

Key Financial Highlights of Q2 2015 

• Consolidated group revenue increased 3.9% y-o-y to RUB 102.7 bln
• Total revenue in Russia rose 4.4% y-o-y to RUB 94.3 bln
• Mobile service revenue in Russia improved 2.8% y-o-y to RUB 72.7 bln
• Data traffic revenue in Russia grew 23.4% y-o-y to RUB 18.9 bln
• Handset sales increased 26.7% y-o-y to RUB 7.6 bln
• Group OIBDA down 2.1% to RUB 42.7 bln
• OIBDA in Russia rose 2.2% y-o-y to RUB 41.2 bln
• MTS reaffirms its Group guidance:
  • Group revenue growth of more than 2%
  • Revenue growth in MTS Russia more than 3%
  • Group OIBDA margin of more than 40%
• MTS revises its FY2015 CAPEX guidance to RUB 92 bln to reflect planned investments in 3G network development in Ukraine

Key Corporate and Industry Highlights 

• Signed a USD 200 mln equivalent term loan facility agreement with China Development Bank Corporation ("CDB") in renminbi and US dollars 
• Completed dividend payment of RUB 19.56 per ordinary MTS share (RUB 39.12 per ADR), or a total of RUB 40.419 bln based on the full-year 2014 financial results
• Semi-annual dividend recommendation by the MTS Board of RUB 5.61 per ordinary MTS share (RUB 11.22 per ADR), or a total of RUB 11.592 bln based on H1 2015 financial results
• Signed binding agreements to acquire 100% of the shares of NVision Group JSC, the developer and owner of the MTS billing system and one of the largest system integrators and complex IT solutions providers in Russia, for a total enterprise value up to RUB 15 billion, including debt

Commentary  

Mr. Andrei Dubovskov, MTS President and CEO, commented, "In Q2 2015, we delivered Group revenue growth of 3.9% to RUB 102.7 bln. Data adoption continues to drive growth in Russia and other markets, while recent changes in our approach to distribution have helped boost handset revenue. Adjusted OIBDA fell year-over-year to RUB 42.7 bln. Our OIBDA margin came in at 41.6%. This reduction from last year is due largely to a lower contribution from our Ukraine business given the cessation of operations in Crimea, ongoing turbulence in the East of Ukraine and hryvna devaluation, as well as to costs related to our re-launch in Uzbekistan."

Mr. Vasyl Latsanych, MTS Vice President for Marketing, said, "For the quarter, total revenue in Russia grew to RUB 94.3 bln rubles or 4.4% year-over-year. Our service revenue grew by 2.8% year-over-year to RUB 72.7 bln driven by a 23.4% increase in data traffic revenues and strong subscriber additions. The growth was boosted by rising smartphone penetration, which reached nearly 45% of the active base. In spite of a slowdown in retail markets, we saw a surge in sales of smartphones in our retail stores following our decision to reduce to further drive data penetration. This initiative is a part of our efforts to enhance our mobile market share by driving foot-traffic to our stores in light of the recent changes in the mobile retail landscape in Russia."

Mr. Alexey Kornya, MTS Vice President for Finance and Investments, said, "In Russia, OIBDA came in at RUB 41.2bln, or 2.2% above Q2 2014. Quarter-over-quarter, OIBDA increased 8.1%, or over twice the pace of revenue growth. While stronger roaming revenues and increase in prices of international calling did contribute to the growth, we also saw OIBDA expansion due to lower dealer commissions as we implement our new retail strategy. Another factor pressuring margins is our increase in handset sales, which translated to a 0.9 percentage point decline in OIBDA margin year-over-year. Group net profit improved during the quarter by 57% to RUB 17.1 bln. Our bottom line was boosted by revenue and OIBDA dynamics, as well as a non-cash RUB 3.6 bln FOREX gain on the value of our non-ruble denominated debt."

Mr. Andrei Dubovskov concluded, "As our Q2 results clearly demonstrate, we were able to sustain the market-leading pace of service revenue growth by increasing high-quality customer additions in our controlled sales channel in spite of changes in distribution in Russia. Given the solid performance in the first half of the year, we believe we are fully on track to meet our annual guidance of the Group revenue growth of at least 2%, revenue growth in Russia of at least 3% and Group OIBDA margin of at least 40%. While we do see upside to revenue performance, we believe it is prudent to reiterate the guidance in light of the uncertain macroeconomic environment and sustained currency volatility in our markets of operation."

Additional Information 

MTS continues to see sustained macroeconomic volatility in its markets of operations that may impact the financial and operational performance throughout the Group.

MTS affirms that the alleged activities related to MTS's business in Uzbekistan have been referenced in a civil forfeiture complaint, filed by US Department of Justice (DOJ) in the U.S. District Court, Southern District of New York (Manhattan), directed at certain assets of an unnamed Uzbek government official. The Complaint alleges among other things that MTS and certain other parties made corrupt payments to the unnamed Uzbek official to assist their entrance and operations in the Uzbekistan telecommunications market. The Complaint is solely directed towards assets held by the unnamed Uzbek official, and none of MTS's assets are affected by the Complaint.

As MTS disclosed in March 2014, both the US Securities and Exchange Commission (SEC) and DOJ are currently conducting an investigation related to MTS's former operations in Uzbekistan. As previously disclosed, the Company has received requests for documents and information from both the SEC and DOJ and continues to cooperate with these investigations in good faith.

This press release provides a summary of some of the key financial and operating indicators for the period ended June 30, 2015. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

* * *

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

* * *

Mobile TeleSystems PJSC ("MTS") is the leading telecommunications group in Russia and the CIS, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services in one of the world's fastest growing regions. Including its subsidiaries, the Group services over 100 million mobile subscribers. The Group has been awarded GSM licenses in Russia, Ukraine, Turkmenistan, Armenia, Belarus, Uzbekistan, a region that boasts a total population of more than 230 million. Since June 2000, MTS' Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT). Additional information about the MTS Group can be found at http://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.

For further information, please contact in Moscow:
Joshua B. Tulgan
Director, Corporate Finance & Investor Relations
Mobile TeleSystems PJSC
Tel: +7-495-223-2025
E-mail: ir@mts.ru