20-F 1 a2243090z20-f.htm 20-F

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PART III
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-12032

MOBILE TELESYSTEMS PUBLIC JOINT STOCK COMPANY
(Exact name of Registrant as specified in its charter)

RUSSIAN FEDERATION
(Jurisdiction of incorporation or organization)

4 Marksistskaya Street, Moscow 109147 Russian Federation
(Address of principal executive offices)

Polina V. Ugryumova
Director, Investor Relations
5 Vorontsovskaya Street, bldg. 2, 109147 Moscow Russian Federation
Phone: +7 495 223 20 25, E mail: ir@mts.ru
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered

COMMON AMERICAN DEPOSITARY SHARES, EACH COMMON	MBT	NEW YORK STOCK EXCHANGE
ADS REPRESENTING TWO COMMON SHARES COMMON SHARES, PAR VALUE		NEW YORK STOCK EXCHANGE⁽¹⁾
0.10 RUSSIAN RUBLES PER SHARE

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

1,129,245,695 ordinary shares, par value 0.10 Russian rubles each and 391,398,362 American Depositary Shares as of December 31, 2020

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No ý

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o		Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

†: The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP o	International Financial Reporting Standards as issued by	Other o
	the International Accounting Standards Board ý

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

(1): Listed, not for trading or quotation purposes, but only in connection with the registration of common ADSs pursuant to the requirements of the Securities and Exchange Commission.
(2): Listed, not for trading or quotation purposes, but only in connection with the registration of preferred ADSs pursuant to the requirements of the Securities and Exchange Commission.

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SUMMARY RISK FACTORS		1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		3
Item 1.	Identity of Directors, Senior Management and Advisors	5
Item 2.	Offer Statistics and Expected Timetable	5
Item 3.	Key Information	5
A.	Selected Financial Data	5
B.	Capitalization and Indebtedness	8
C.	Reasons for the Offer and Use of Proceeds	8
D.	Risk Factors	8
Item 4.	Information on Our Company	69
A.	History and Development	69
B.	Business Overview	74
C.	Organizational Structure	139
D.	Property, Plant and Equipment	139
Item 4A.	Unresolved Staff Comments	140
Item 5.	Operating and Financial Review and Prospects	140
A.	Operating Results	140
B.	Liquidity and Capital Resources	159
C.	Research and Development, Patents and Licenses, etc.	166
D.	Trend Information	166
E.	Off-balance Sheet Arrangements	168
F.	Tabular Disclosure of Contractual Obligations	168
Item 6.	Directors, Senior Management and Employees	169
A.	Directors and Senior Management	169
B.	Compensation of Directors and Senior Management	174
C.	Board Practices	175
D.	Employees	177
E.	Share Ownership	178
Item 7.	Major Shareholders and Related Party Transactions	179
A.	Major Shareholders	179
B.	Related Party Transactions	180
C.	Interests of Experts and Counsel	183
Item 8.	Financial Information	183
A.	Consolidated Statements and Other Financial Information	183
B.	Significant Changes	186
Item 9.	Offer and Listing Details	187
A.	Market Price Information	187
Item 10.	Additional Information	188
A.	Share Capital	188
B.	Charter and Certain Requirements of Russian Legislation	188
C.	Material Contracts	208
D.	Exchange Controls	208
E.	Taxation	208
F.	Dividends and Paying Agents	217
G.	Statement by Experts	217
H.	Documents on Display	217
I.	Subsidiary Information	218
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	218

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Item 12.	Description of Securities Other Than Equity Securities	222
D.	American Depositary Shares	222
Item 13.	Defaults, Dividend Arrearages and Delinquencies	225
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	225
Item 15.	Controls and Procedures	225
Item 16A.	Audit Committee Financial Expert	227
Item 16B.	Code of Ethics	227
Item 16C.	Principal Accountant Fees and Services	228
Item 16D.	Exemption from the Listing Standards for Audit Committees	229
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	229
Item 16F.	Change in Registrant's Certifying Accountant	231
Item 16G.	Corporate Governance	231
Item 17.	Financial Statements	233
Item 18.	Financial Statements	233
Item 19.	Exhibits	234

Unless otherwise indicated or unless the context requires otherwise, references in this document to (i) "MTS," "the Group," "the Company," "we," "us," or "our" refer to Mobile TeleSystems Public Joint Stock Company and its subsidiaries; (ii) "Vodafone Ukraine" and "VF Ukraine" are to Private Joint Stock Company "VF Ukraine"(formerly PJSC MTS Ukraine) which is our former subsidiary in Ukraine disposed of in December 2019; (iii) "Uzdunrobita" is to our former subsidiary in Uzbekistan, which was deconsolidated in 2013; (iv) "MTS-Turkmenistan" our Turkmenistan subsidiary and "BCTI" are to Barash Communication Technologies, Inc., our former Turkmenistan subsidiary; (v) "Comstar" or "Comstar-UTS" are to COMSTAR—United TeleSystems, our former fixed line subsidiary, which was merged into MTS PJSC in 2011; (vi) "MGTS" is to Public Joint Stock Company Moscow City Telephone Network, our Moscow public switched telephone network ("PSTN") fixed line subsidiary; and (vii) "MTS-Armenia," "K-Telecom" or "VivaCell-MTS" are to our Armenian subsidiary; and (viii) "MTS Bank" is to MTS Bank PJSC, our subsidiary which provides banking services; (ix) "UMS" is to Universal Mobile Systems LLC, our former subsidiary in Uzbekistan which was deconsolidated in 2016; (x) NVision is our subsidiary which provides integration services and (xi) "Sistema" is to Sistema Public Joint Stock Financial Corporation, our majority shareholder. We refer to Mobile TeleSystems LLC, our 49% owned equity investee in Belarus, as "MTS Belarus." As MTS Belarus is an equity investee, our revenues and subscriber data do not include MTS Belarus.

In this document, references to "U.S. dollars," "dollars," "$" or "USD" are to the lawful currency of the United States, "Russian rubles," "rubles" or "RUB" are to the lawful currency of the Russian Federation, "hryvnias" are to the lawful currency of Ukraine, "soms" are to the lawful currency of Uzbekistan, "manats" are to the lawful currency of Turkmenistan, "dram" are to the lawful currency of Armenia and "€," "euro" or "EUR" are to the lawful currency of the member states of the European Union that adopted a single currency in accordance with the Treaty of Rome establishing the European Economic Community, as amended by the treaty on the European Union, signed at Maastricht on February 7, 1992. References in this document to "shares" or "ordinary shares" refers to our ordinary shares, "ADSs" refers to our American depositary shares, each of which represents two ordinary shares, and "ADRs" refers to the American depositary receipts that evidence our ADSs. Prior to May 3, 2010, each ADS represented five ordinary shares of our common stock. "CIS" refers to the Commonwealth of Independent States. "CBR" refers to the Central Bank of Russia.

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The following tables show, for the periods indicated, certain information regarding the exchange rate between the ruble and the U.S. dollar, based on data published by the CBR. These rates may differ from the actual rates used in preparation of our financial statements and other financial information provided herein.

	Rubles per U.S. dollar

Years ended December 31,	High		Low		Average⁽¹⁾		Period End
2016		83.59		60.27		67.03		60.66
2017		60.75		55.85		58.35		57.60
2018		69.97		55.67		62.71		69.47
2019		69.47		61.72		64.74		61.91
2020		80.88		60.95		72.15		73.88

(1): The average of the exchange rates on the last business day of each full month during the relevant period.

	Rubles per U.S. dollar

	High		Low
July 2020		73.36		70.44
August 2020		75.54		72.97
September 2020		79.68		73.58
October 2020		79.33		76.44
November 2020		80.57		75.45
December 2020		76.32		72.93
January 2021		76.25		73.36
February 2021		76.25		73.29
March 2021⁽¹⁾		76.17		72.96

Source: CBR.

(1): For the period from March 1, 2021 to March 29, 2021.

The exchange rate between the ruble and the U.S. dollar quoted by the CBR for March 29, 2021 was 75.76 rubles per U.S. dollar.

iii

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SUMMARY RISK FACTORS

Our business is subject to a number of risks of which you should be aware of before making an investment decision. These risks are discussed more fully in the below "Risk Factors" section of this annual report. The following summarizes some, but not all, of the risks provided below:

Risks Relating to Business Operations in Emerging Markets

•: Emerging markets such as the Russian Federation and other CIS countries are subject to greater risks than more developed markets, including significant legal, economic, social, regulatory, tax and political risks which could have a material adverse effect on our business and could cause the value of our shares and ADSs to fluctuate widely.

Risks Relating to Our Business including, among others, the following risks:

•: The telecommunications and digital services market is characterized by rapid technological change, which could render our services obsolete or non-competitive and result in the loss of our market share and a decrease in our revenues.
•: We are subject to anti-corruption laws in the jurisdictions in which we operate, including anti-corruption laws of Russia and the US Foreign Corrupt Practices Act (the "FCPA"), and we may be subject to the UK Bribery Act 2010 (the "UK Bribery Act"). Our failure to comply therewith could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
•: We have incurred and are continuing to incur costs and related management oversight obligations in connection with our obligations under the DPA and the SEC Order.
•: We could be subject to criminal prosecution or civil sanction if we breach the DPA and the SEC Order, and we may face other potentially negative consequences relating to the investigations by, and agreements with, the DOJ and SEC and other authorities, including additional investigations and litigation.
•: The outbreak of COVID-19 may have a material adverse effect on our business, financial condition, results of operations and prospects.
•: If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices, which may diminish our market share and result in a loss of revenues and margins.
•: We may not realize the benefits we expect to receive from our investments in 4G and 5G wireless services and Internet of Things (IoT) technologies, which could have a material adverse effect on our business and results of operations.
•: If we are unable to successfully develop and/or deploy 4G and 5G wireless services in the countries in which we operate, or if any operators in those markets obtain a significant technological and/or commercial advantage over us in 4G and 5G wireless services, it may have a material adverse effect on our business and results of operations in the long term.
•: Failure to renew our licenses, or receive renewed or new licenses with similar terms to our existing licenses, could have a material adverse effect on our business and results of operations
•: Failure to monitor, manage and prevent MTS Bank's operational and technological risks, could have a material adverse effect on our business, financial condition and results of operations.
•: Changes to the rules and regulations involving roaming charges in Russia may adversely affect our financial condition and results of operations.

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Risks Relating to Our Financial Condition including, among others, the following risks:

•: Continued turmoil in the credit markets could cause our business, financial condition, results of operations and the value of our shares and ADSs to suffer.
•: Our inability to generate sufficient free cash flow to satisfy our debt service obligations or to refinance debt on commercially reasonable terms, could materially adversely affect our business, financial condition, results of operations and prospects.
•: Ruble volatility and regulatory changes in foreign currency regulation could increase our costs, decrease our available funds or make it more difficult for us to comply with financial covenants and to repay our debts and would affect the value of dividends received by holders of ADSs.
•: If we are unable to obtain adequate capital, we may have to limit our operations substantially, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Relating to Our Countries of Operation including, among others, the following risks:

•: Economic instability in the countries where we operate could adversely affect our business.
•: Fluctuations in the global economy may materially adversely affect the economies of the countries where we operate and our business in these countries.
•: A deterioration in relations between Russia and other former Soviet republics, as well as other politically related disagreements and allegations between Russia and other countries and sanctions imposed as a result thereof, could materially adversely affect our business, financial condition, results of operations, prospects and the value of our shares and ADSs.
•: Failure to comply with existing laws and regulations as well as requirements of international and regional standards or to obtain all approvals, authorizations and permits required to transmit television channels or operate telecommunications equipment, or the findings of government inspections or increased governmental regulation of our operations, could result in a disruption in our business and substantial additional compliance costs and sanctions.
•: Russian and foreign legislation on personal data and information security in information systems and communication networks may turn out to be hard to implement and require significant resources. Inability to comply with the requirements may lead to sanctions.
•: The Russian taxation system is underdeveloped and any imposition of significant additional tax liabilities could have a material adverse effect on our business, financial condition or results of operations.

Risks Relating to Our Shares and ADSs and the Trading Market including, among others, the following risks:

•: Government regulations may limit the ability of investors to deposit shares into our ADS facility.
•: The market price of our ADSs has been and may continue to be volatile, making it difficult for investors to resell our ADSs at or above the price paid.
•: Voting rights with respect to the shares represented by our ADSs are limited by the terms of the deposit agreement for our ADSs and relevant requirements of Russian law.
•: ADS holders may be unable to benefit from the United States-Russia income tax treaty.
•: Capital gain from the sale of shares and ADSs may be subject to Russian income tax.
•: Foreign judgments may not be enforceable against us.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this document may constitute forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 (the "U.S. Securities Act"), and Section 21E of the U.S. Securities Exchange Act of 1934 (the "U.S. Exchange Act"). The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their businesses. Forward-looking statements include statements concerning plans, objectives, goals, strategies, risks and their assessment, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

MTS desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation and other relevant law. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "predict," "plan," "may," "should," "could" and similar expressions identify forward-looking statements. Forward-looking statements appear in a number of places including, without limitation, "Item 3. Key Information—D. Risk Factors," "Item 4. Information on our Company—B. Business Overview," "Item 5. Operating and Financial Review and Prospects," and "Item 11. Quantitative and Qualitative Disclosures about Market Risk" and include statements regarding:

•: our strategies, future plans, economic outlook, industry trends and potential for future growth;
•: our liquidity, capital resources and capital expenditures;
•: our payment of dividends;
•: our capital structure, including our indebtedness amounts;
•: our ability to generate sufficient cash flow to meet our debt service obligations;
•: our ability to achieve the anticipated levels of profitability;
•: our ability to timely develop and introduce new products and services;
•: our ability to obtain and maintain interconnect agreements;
•: our ability to secure the necessary spectrum and network infrastructure equipment;
•: our ability to meet license requirements and to obtain and maintain licenses and regulatory approvals;
•: our ability to maintain adequate customer care and to manage our churn rate; and
•: our ability to manage our rapid growth and train additional personnel.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. In addition to these important factors and matters

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discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

•: growth in demand for our services;
•: changes in consumer preferences or demand for our products;
•: availability of external financing on commercially acceptable terms;
•: the developments of our markets;
•: the highly competitive nature of our industry and changes to our business resulting from increased competition;
•: the impact of regulatory initiatives;
•: the rapid technological changes in our industry;
•: cost and synergy of our recent acquisitions;
•: the acceptance of new products and services by customers;
•: the condition of the economies of Russia, and certain other countries of the CIS;
•: risks relating to legislation, regulation and taxation in Russia and certain other CIS countries, including laws, regulations, decrees and decisions governing each of the telecommunications industries in the countries where we operate, currency and exchange controls relating to entities in Russia and other countries where we operate and taxation legislation relating to entities in Russia and other countries where we operate, and their official interpretation by governmental and other regulatory bodies and by the courts of Russia and the CIS;
•: political stability in Russia and certain other CIS countries; and
•: the impact of general business and global economic conditions and other important factors described herein and from time to time in the reports filed by us with the U.S. Securities and Exchange Commission (the "SEC").

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. Except to the extent required by law, neither we, nor any of our respective agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained or incorporated by reference in this document.

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PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

On January 1, 2018 we adopted three new IFRS standards—IFRS 9, "Financial Instruments," IFRS 15, "Revenue from Contracts with Customers," and IFRS 16 "Leases." Prior period comparatives were not restated.

Our results of operations for the financial year ended December 31, 2018 were affected by acquisition of controlling stake in MTS Bank. In 2018, we increased effective ownership share in MTS Bank from 26.6% to 55.4% and obtained control over the entity. In 2019, we subsequently increased our effective ownership stake in MTS Bank to 99.9%. The acquisition was accounted for as a transaction with entities under common control directly in equity.

In December 2019, we sold our business in Ukraine, VF Ukraine, the results of the sold business are reported as discontinued operations for all the reported periods presented in the table below. Ukraine was excluded from operating segments presentation as a result of disposal. The results of operations in Ukraine were reported as discontinued operations in accompanying consolidated statement of profit or loss for the years ended December 31, 2019. The consolidated statements of profit or loss for the years ended December 31, 2018, 2017 and 2016 were retrospectively restated to present operations in Ukraine as discontinued operations. See Note 12 to the consolidated financial statements.

On October 30, 2020, the Group entered into a sale agreement with Sistema to dispose of 100% share in JSC "Nvision Group." Nvision was excluded from "Other" operating segment presentation as a result of this disposal. The results of operations with Nvision were reported as discontinued operations in accompanying consolidated statement of profit or loss for the years ended December 31, 2020. The consolidated statements of profit or loss for the years ended December 31, 2019, 2018, 2017 and 2016 were retrospectively restated to present operations with Nvision as discontinued operations. See Note 12 to the consolidated financial statements.

The selected financial data presented below as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 was derived from the audited consolidated financial statements of the Company, included in this document, "Item 3. Key Information—D. Risk Factors" and "Item 5. Operating and Financial Review and Prospects." The selected financial data presented below as of December 31, 2018, 2017, and 2016 and for the years ended December 31, 2017 and 2016 was derived from the audited consolidated financial statements of the Company restated on effect of

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VF Ukraine and NVision Group disposals, which are not included herein. Certain industry and operating data are also provided below.

	Years Ended December 31,

	2020			2019			2018			2017			2016
	Amounts in millions of Russian rubles, except share and per share amounts, industry and operating data and ratios
Consolidated statements of profit or loss data:
Services revenue		425,448			406,478			382,387			365,593			359,032
Sales of goods		69,478			64,127			63,851			49,696			48,195

Total operating revenues		494,926			470,605			446,238			415,289			407,227
Operating expenses:
Cost of services		121,943			114,057			104,143			114,854			118,023
Cost of goods		63,482			58,872			58,669			42,889			44,589
Selling, general and administrative expenses		87,983			89,933			82,482			89,661			87,492
Depreciation and amortization		100,234			96,195			95,316			73,905			75,295
Operating share of the profit of associates and joint ventures		(5,048	)		(4,583	)		(3,799	)		(3,210	)		(3,115	)
Impairment of non-current assets		2,023			(148	)		149			3,775			—
Impairment of financial assets		11,912			7,723			3,671			—			—
Other operating expenses / (income)⁽¹⁾		(496	)		(7,021	)		(4,637	)		1,825			(22	)

Operating profit		112,893			115,577			110,244			91,591			84,965

Finance income		(3,437	)		(4,352	)		(5,579	)		(5,254	)		(4,731	)
Finance costs		42,084			47,366			36,985			26,010			27,082
Non-operating share of the loss of associates and joint ventures		(273	)		(3,496	)		909			436			1,288
Other non-operating expenses/(income), net⁽²⁾		(3,064	)		7,821			(425	)		89			553

Profit before tax		77,583			68,238			78,354			70,309			60,773

Income tax expense		16,126			15,667			15,345			17,918			14,410

Profit for the period from continuing operations		61,457			52,571			63,009			52,391			46,363

(Profit)/Loss from discontinued operations, net of tax		(616	)		(2,528	)		55,177			(4,197	)		(2,089	)

Profit for the period		62,073			55,099			7,832			56,588			48,452

Attributable to:											—			—
Owners of the company		61,412			54,241			6,848			56,040			48,476
Non-controlling interests		661			858			984			548			(24	)
Dividends declared⁽³⁾		58,948			83,751			51,958			51,958			51,958
Earnings per share, basic, RUB		34.88			30.46			3.65			28.69			24.37
Earnings per share, diluted, RUB		34.86			30.41			3.65			28.66			24.35
Earnings per share from continuing operations, basic, RUB		34.53			29.04			33.10			26.53			23.32
Earnings per share from continuing operations, diluted, RUB		34.51			28.99			33.07			26.51			23.30
Earnings per share from discontinued operations, basic, RUB		0.35			1.42			(29.45	)		2.15			1.05
Earnings per share from discontinued operations, diluted, RUB		0.35			1.42			(29.42	)		2.15			1.05

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	Years Ended December 31,

	2020			2019			2018			2017			2016
	Amounts in millions of Russian rubles, except share and per share amounts, industry and operating data and ratios
Annual Dividends declared per share, RUB		20.57			41.91			26.00			26.00			25.99
Semi-annual Dividends declared per share, RUB		8.93			8.68			2.6			10.4			11.99
Special Dividends declared per share, RUB		13.25			—			—			—			—
Number of common shares outstanding		1,726,902,169			1,772,834,153			1,830,742,676			1,912,042,419			1,986,899,529
Weighted average number of common shares outstanding—basic		1,760,467,519			1,780,935,238			1,873,562,676			1,953,778,999			1,989,281,930
Weighted average number of common shares outstanding—diluted		1,761,777,635			1,783,617,103			1,875,720,966			1,955,558,196			1,990,693,983
Consolidated statement of cash flows data:
Cash provided by operating activities		155,507			106,652			154,390			144,640			130,565
Cash used in investing activities		(81,133	)		(29,554	)		(78,389	)		(81,510	)		(57,302	)
(of which capital expenditures)⁽⁴⁾		(97,838	)		(91,736	)		(99,568	)		(76,431	)		(86,149	)
Cash used in financing activities		(27,360	)		(120,448	)		(25,924	)		(50,445	)		(83,038	)
Consolidated statement of financial position (end of period):
Cash, cash equivalents and short-term investments		108,839			63,688			131,938			81,343			27,127
Property, plant and equipment and investment property, net		286,693			268,465			278,620			263,470			272,841
Right-of-use assets		130,503			138,817			149,007			—			—
Total assets		919,203			823,910			915,993			551,070			544,470
Total debt (long-term and short-term)⁽⁵⁾		429,268			343,319			368,135			291,713			273,274
Total shareholders' equity		32,690			36,394			77,565			124,205			143,948
Common stock less treasury stock		(74,790	)		(59,548	)		(44,608	)		(22,444	)		(548	)
Financial ratios (end of period):
Total debt/total capitalization⁽⁶⁾		92.9	%		90.4	%		82.5	%		70.1	%		65.4	%
Mobile industry and operating data:⁽⁷⁾
Mobile penetration in Russia (end of period)		172	%		178	%		174	%		174	%		179	%
Mobile subscribers in Russia (end of period, thousands)⁽⁸⁾		78,467			79,072			78,011			78,291			80,032
Overall market share in Russia (end of period)		31	%		30	%		31	%		31	%		31	%

(1): "Other operating expenses/(income)" consist mainly of allowance for doubtful accounts, gain/losses on disposal of property, plant and equipment and intangible assets as well as any gain/losses resulting from stock-taking.
(2): "Other non-operating expenses/(income), net" consist mainly of net forex exchange (gains)/losses and net (gains)/losses arising on financial instruments.
(3): Dividends declared in each of the years ended December 31, 2020, 2019, 2018, 2017, 2016 consisted of dividends in respect of the prior fiscal year (i.e., in respect of each of the years ended December 31, 2019, 2018, 2017, 2016, respectively), semiannual dividends in respect of the current fiscal year (RUB 17,842 million, RUB 17,345 million, RUB 5,196 million, RUB 20,783 million and RUB 23,961 million, respectively) and special dividends related to sale of Ukraine business in 2019 (RUB 26,478 million). Amounts include dividends on treasury shares RUB 6,935 million, RUB 9,449 million, RUB 3,037 million, RUB 1,337 million and RUB 220 million, in respect of the years ended December 31, 2020. 2019, 2018, 2017 and 2016 and, respectively.
(4): Capital expenditures are the amounts of property, plant and equipment and intangible assets acquired during respective year.

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(5): Includes notes, payable bank loans and other debt.
(6): Calculated as book value of total debt divided by the sum of the book values of total shareholders' equity and total debt at the end of the relevant period. See footnote 4 above for the definition of "total debt."
(7): Source: AC&M-Consulting and GSMA Intelligence. Operating data is presented for mobile operations only. None of this data is derived from our audited consolidated financial statements.
(8): We define a subscriber as an organization or individual, whose SIM-card shows traffic-generating activity or accrues a balance for services rendered or is replenished of topped off over the course of any three-month period, inclusive within the reporting period, and was not blocked at the end of the period.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

An investment in our securities involves a certain degree of risk. You should carefully consider the following information about these risks, together with other information contained in this document, before you decide to buy our securities. If any of the following risks actually occur, our business, prospects, financial condition or results of operations could be materially adversely affected. In that case, the value of our securities could also decline and you could lose all or part of your investment. In addition, please read "Cautionary Statement Regarding Forward-Looking Statements" where we describe additional uncertainties associated with our business and the forward looking statements included in this document.

Risks Relating to Business Operations in Emerging Markets

Emerging markets such as the Russian Federation and other CIS countries are subject to greater risks than more developed markets, including significant legal, economic, social, regulatory, tax and political risks.

Investors in emerging markets such as the Russian Federation, Armenia, Belarus and other CIS countries should be aware that these markets are subject to greater risk than more developed markets, including in some cases, significant legal, economic, social, regulatory, tax and political risks. Investors should also note that emerging economies such as the economies of the Russian Federation and other CIS countries are subject to rapid change and that the information set out herein may become outdated relatively quickly.

When conducting business in different CIS countries, we may face risks similar to those (and sometime even more substantial) we have in Russia.

There is a number of risks associated with investing in emerging markets, including the following:

•: instability of emerging markets (for more information, see "—Risks Relating to Economic Risks in Our Countries of Operation" and "—Legal Risks and Uncertainties");
•: high volatility of national currencies (for more information, see "—Risks Relating to our Financial Condition");
•: possible geopolitical disputes (for more information, see "—Political and Social Risks"); and
•: possible liquidity constraints (for more information, see "—Risks Relating to Economic Risks in Our Countries of Operation" and "—Risks Relating to our Financial Condition").

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For example, in September 2020, martial law was declared in Armenia due to escalation of the conflict in Nagorno-Karabakh. Continued tensions or further escalation of the conflict could have a negative effect on the Armenian economy as well as our business, financial position and results of operations.

Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is suitable for sophisticated investors who fully appreciate the significance of the risks involved and investors are urged to consult with their own legal and financial advisors before making an investment in our securities.

Risks Relating to Our Business

The telecommunications and digital services market is characterized by rapid technological change, which could render our services obsolete or non-competitive and result in the loss of our market share and a decrease in our revenues.

The telecommunications industry as well as digital services sector are subject to rapid and significant changes in technology and are characterized by the continuous introduction of new products and services. The mobile telecommunications and digital services industries in Russia are also experiencing significant technological change, as evidenced by the constant technological evolution of standards for radio telecommunications, such as Wi-Fi, Enhanced Data Rates for Global Evolution ("EDGE"), Universal Mobile Telecommunications System ("UMTS"), and Long Term Evolution ("LTE"), 5G, as well as ongoing improvements in the capacity and quality of communications, shorter development cycles for new products and enhancements and changes in customer requirements and preferences. Such continuing technological advances make it difficult to predict the extent of the future competition we may face and it is possible that existing, proposed or as yet undeveloped technologies will become dominant in the future and render the technologies we use less profitable or even obsolete. New products and services that are more commercially effective than our products and services may also be developed. Furthermore, we may not be successful in responding in a timely and cost-effective way to keep up with these developments. Changing our products or services in response to market demand may require the adoption of new technologies that could render many of the technologies that we are currently implementing less competitive or obsolete. To respond successfully to technological advances and emerging industry standards, we may require substantial capital expenditure and access to related or enabling technologies in order to integrate the new technology with our existing technology.

We face increasing competition in the markets where we operate, which may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies.

The telecommunication services markets (including the largest for MTS mobile communications market) and digital services markets where we operate, are highly competitive, particularly in Russia.

Competition is generally based on price, product functionality, range of service offerings and customer service.

Generally, increased levels of competition, including potential entry of new companies particularly new mobile operators, government-backed operators, mobile virtual network operators, operators of satellite TV and alternative fixed line operators in the markets where we operate, as well as the strengthening of existing companies, increased use of Internet protocol telephony and other services, provided via the internet, may adversely affect our ability to keep the level of revenue which we receive from our operations on the telecom and other digital markets. This in turn could result in reduced operating margins and a loss of market share, as well as necessitating different pricing, service or marketing policies, which may have a material adverse effect on our business, financial condition and results of our operations.

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Competition in the Russian market

Our principal wireless competitors in Russia are Public Joint Stock Company "Vimpel-Communications" ("VimpelCom"), Public Joint Stock Company MegaFon ("MegaFon"), as well as the federal cellular operator established in 2014 by the combination of Tele2 Russia and the mobile assets of Public Joint Stock Company Long-Distance and International Telecommunications "Rostelecom" ("Rostelecom"). We also face competition from several regional operators.

In addition, we face competition in the fixed line telecommunications business, in particular from Rostelecom. Mass media reported that Rostelecom was determined by the Governmental Decree to be the only provider of Internet services for state and commercial medical institutions. It was also reported that Rostelecom may be the only provider of telecommunications services except mobile communications services for federal state institutions. Implementation of these Decrees requirements could have a material adverse effect on our business and results of operations.

In November 2019, the Board of Directors of Rostelecom approved a transaction to consolidate 100% of LLC "T2 RTK Holding", which may result in increasing competition.

See also "—If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices, which may diminish our market share and result in a loss of revenues and margins" below.

Competition in the foreign markets of our operation

In Belarus, our associate, MTS Belarus, while maintaining its leadership in the market in 2020, faces increasing competition and aggressive pricing from the main competitors—Best CJSC, a subsidiary of System Capital Management and Turkcell Iletisim Hizmetleri A.S. ("Turkcell"), which operates in Belarus under the "life:)" brand and A1 (a subsidiary of A1 Telekom Austria Group) which actively promotes convergent services. Additionally, in 2011, the government of the Republic of Belarus announced its intention to hold a public tender to privatize a 51% stake in MTS Belarus with an opening price of approximately USD 1 billion. The public tender was scheduled to be held on December 23, 2011 but was cancelled due to a lack of bidders. The latest attempt to find an investor for the 51% stake in MTS Belarus took place in February 2014. However, it was unsuccessful for the same reason. A date for the next tender has not yet been specified. The terms of the share disposal have not yet been determined, although it may be conducted either through a public tender or by entering into a direct contract with a prospective purchaser. If we are unable to acquire this ownership interest at a commercially reasonable price, or if it is acquired by one of our competitors, it may impact our competitive position and results of operations in Belarus.

We also face competition in Armenia. In October 2020, Veon telecommunications holding (Beeline trademark) reached an agreement to sell its business in Armenia to the local telecommunications company Team LLC. These changes could potentially lead to increased competition on the Armenian market and have negative effect on our business, financial situation and results of our activities in Armenia.

We are subject to anti-corruption laws in the jurisdictions in which we operate, including anti-corruption laws of Russia and the US Foreign Corrupt Practices Act (the "FCPA"), and we may be subject to the UK Bribery Act 2010 (the "UK Bribery Act"). Our failure to comply therewith could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits, along with various other anti-corruption laws. We may also be subject to the UK Bribery

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Act. The UK Bribery Act is broader in scope than the FCPA in that it directly addresses commercial bribery in addition to bribery of public officials and it does not recognize certain exceptions, notably facilitation payments that are permitted by the FCPA.

We operate primarily in Russia and other countries of the former Soviet Union, many of which pose elevated risks of corruption violations. We and certain of our subsidiaries are in frequent contact with persons who may be considered "foreign public officials" under the FCPA and UK Bribery Act, and therefore, are subject to an increased risk of potential FCPA and UK Bribery Act violations. If we or any third party acting on our behalf or in our interests are not in compliance with the FCPA, the UK Bribery Act and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, results of operations, financial condition and liquidity.

As disclosed in our public filings, in March 2014, we received requests for the provision of information from the United States Securities and Exchange Commission and the United States Department of Justice relating to an investigation of the Group's former subsidiary in Uzbekistan. See also Note 35 to our audited consolidated financial statements. In February 2019, the Group reached a resolution with the SEC and the United States Department of Justice ("DOJ") relating to the previously disclosed investigation of our former subsidiary in Uzbekistan.

We consented to the entry of an administrative cease-and-desist order (the "Order") by the SEC.

The United States District Court for the Southern District of New York approved a deferred prosecution agreement ("DPA") entered by the Group and a plea agreement entered into by our subsidiary in Uzbekistan. Under the agreements with the DOJ, we agreed to pay a total criminal penalty of USD 850 million (RUB 59.1 billion as of December 31, 2018) to the United States. We provided a provision of USD 850 million (RUB 55.8 billion as of the date of accrual), which was recognized as a part of discontinued operations in the consolidated statement of profit or loss for the year ended December 31, 2018.

See also "—We have incurred and are continuing to incur costs and related management oversight obligations in connection with our obligations under the DPA and the SEC Order," "—We could be subject to criminal prosecution or civil sanction if we breach the DPA and the SEC Order, and we may face other potentially negative consequences relating to the investigations by, and agreements with, the DOJ and SEC and other authorities, including additional investigations and litigation" and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Uzbekistan."

We have incurred and are continuing to incur costs and related management oversight obligations in connection with our obligations under the DPA and the SEC Order.

We are subject to the DPA with the DOJ and the SEC Order. See "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Uzbekistan" and Note 35 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 20-F. In conjunction with the DPA and pursuant to the SEC Order, we are required to retain, at our own expense, an independent compliance monitor. Pursuant to the DPA and the SEC Order, the monitorship will continue for a period of three years from the date of appointment and the term of the monitorship may be terminated early or extended depending on certain circumstances, as ultimately determined and approved by the DOJ and the SEC. The monitor assesses and monitors our compliance with the terms of the DPA and the SEC Order as well as reviews and evaluates the effectiveness of our policies, procedures, practices, internal accounting controls, record keeping and financial reporting as they relate to our current and ongoing compliance with the anti-bribery, books and records and internal accounting controls provisions of the FCPA and other applicable anti-corruption laws, and makes recommendations reasonably designed to improve the

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effectiveness of our internal accounting controls and FCPA corporate compliance. See also "—We are subject to anti-corruption laws in the jurisdictions in which we operate, including anti-corruption laws of Russia and the US Foreign Corrupt Practices Act (the "FCPA"), and we may be subject to the UK Bribery Act. Our failure to comply therewith could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations."

We have incurred significant costs in connection with the disposition of the matters covered in the DPA and SEC order, including retention of legal counsel and other advisors and other costs related to the investigations undertaken in connection with these matters. We currently cannot estimate additional costs that we are likely to incur in connection with compliance with the DPA and the SEC Order, including the ongoing obligations relating to the monitorship, our obligations to cooperate with the agencies regarding their investigations of other parties, and the costs of implementing the changes, if any, to our internal controls, policies and procedures required by the monitor. However, such costs could be significant. See also "—We could be subject to criminal prosecution or civil sanction if we breach the DPA and the SEC Order, and we may face other potentially negative consequences relating to the investigations by, and agreements with, the DOJ and SEC and other authorities, including additional investigations and litigation."

We could be subject to criminal prosecution or civil sanction if we breach the DPA and the SEC Order, and we may face other potentially negative consequences relating to the investigations by, and agreements with, the DOJ and SEC and other authorities, including additional investigations and litigation.

Failure to comply with the terms of the DPA, whether such failure relates to alleged improper payments, internal controls failures, or other non-compliance, could result in criminal prosecution by the DOJ, including for the matters addressed in the DPA. Under such circumstance, the DOJ would be permitted to rely upon the admissions and the waiver of certain defenses we made in the DPA. Similarly, breach of the SEC Order could result in additional penalties against the Company.

Criminal prosecution by the DOJ as a result of a breach of the DPA or penalties imposed as a result of noncompliance with the SEC Order could subject us to penalties and other costs and could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.

We may also face other potentially negative consequences relating to the investigations by, and agreements with, the DOJ, SEC, and other authorities. None of the DPA and the SEC Order prevents these or any other authorities from carrying out certain additional investigations with respect to the facts not covered in the agreements or in other jurisdictions, or prevents authorities in other jurisdictions from carrying out investigations related or unrelated to the matters which being investigated. Additionally, on March 19, 2019, a proposed class action complaint, captioned Salim v. Mobile TeleSystems PJSC et al., case number 1:19-cv-01589, was filed in the United States District Court for the Eastern District of New York against us and certain of our managers. The complaint was filed by an individual securities holder on behalf of himself and all similarly situated securities holders alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Exchange Act with respect to certain public disclosures made by us regarding our former business in Uzbekistan and investigations carried out by the SEC and DOJ related thereto. The complaint further alleged that such disclosure omissions led to a decline in the market value of our securities resulting in losses and damages to the plaintiff and other securities holders. The plaintiff was seeking damages in an unspecified amount, prejudgment and post-judgment interest and attorneys' fees, expert fees and other costs and other and further relief. On March 1, 2021 the United States District Court of Eastern District of New York granted MTS's motion to dismiss with prejudice and dismissed the complaint in full.

Any collateral investigations, litigation or other government or third party actions resulting from these, or other, matters could have a material adverse effect on our business, financial condition,

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results of operations, cash flows or prospects. In addition, any ongoing media and governmental interest in the investigations, the agreements and claims could impact the perception of us and result in reputational harm.

The outbreak of COVID -19 may have a material adverse effect on our business, financial condition, results of operations and prospects

A novel strain of the coronavirus, COVID-19, was discovered in Wuhan, China in December 2019 and on 11 March 2020, was declared by the World Health Organization to be a global pandemic. It has adversely affected and continues to affect the economies and financial markets of many countries, including Russia and CIS and has resulted in a series of measures implemented by governments around the world aimed at mitigating the further spread of the virus. These measures include restrictions on travel, closure of national borders, imposition of quarantines, introduction of import restrictions, prolonged closures of workplaces and curfews or other social distancing measures. Since September 2020, Russia and many other countries across the world have been facing the second wave of the COVID-19 pandemic, as evidenced by a significant rise in the numbers of COVID-19 cases and deaths. There is still significant uncertainty regarding the impacts and duration of the COVID-19 pandemic. If the spread of COVID-19 persists for a significant period of time or the infection rates stagnate or increase, this could lead to renewed nationwide lockdowns, which could have a material negative impact on the global and Russian economies.

The COVID-19 outbreak has so far had a limited impact on the Group. However, due to the uncertainty of the duration and impact of the COVID-19 pandemic, we are continually evaluating variety of scenarios with the financial impacts across the Group. We have also carried out risk assessments for each of our business units, considering potential strategic, operational and regulatory related impacts. We have incorporated COVID-19 commentary below, which gives an overview of the related uncertainties and potential impacts on the Group.

Clients and counterparties

Global economic downturn caused by the novel coronavirus pandemic could affect customer spending habits, which could lead to a decreased demand on our products and services, as well as affect financial condition of our counterparties and their ability to fulfill their obligations. In addition, travel restrictions imposed by a number of countries and voluntarily travel limitation may lead to a decrease in roaming services provided and our roaming revenue from our subscribers. See also "—We may be adversely affected by the current economic environment."

Development of Our Network Infrastructure

The lack or limited access to residential buildings, for example, due to COVID-19 impact, may affect these projects on construction and modernization of fixed-line network. For more information, see "—We may be required to make significant investments beyond those that are currently planned to preserve our competitive advantage in response to the rapid evolution of fixed network technology."

Financial Stability of Our Subsidiaries, including MTS Bank

Uncertainty on the international financial market amid COVID-19 pandemic may have material adverse effect on the financial condition of MTS Bank and its customers, in particular, it may result in an increase of non-performing loans and loan provision charges, loan losses and write-offs, an increase in exchange rate risk and losses and etc. For more information, see "—MTS Bank's business entails regulatory and operational risks."

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Personnel

If the COVID-19 pandemic adversely affects our businesses and liquidity in the future, we may fail to retain employees and attract suitable talents to the company. The productivity of our employees may be negatively impacted due to isolated remote working from home. See also "—Our competitive position and future prospects depend on our senior managers and other key personnel and our inability to attract, retain and motivate qualified key personnel could have a material adverse effect on our business, financial condition and results of operations."

Moreover, due to stricter safety standards, our cost of compliance with COVID-19 related safety requirements may increase.

IT Technology and Cyber Security

Despite the fast development of the pandemic and the extremely rapid transfer of our personnel to distant work, we managed to fully maintain operation of our information security units and ensure continuous monitoring of compliance with local regulations on information security. However, no assurance can be given that these measure will be sufficient in the future and no new challenges will emerge. If we are required to develop any additional measures to protect the company and its business processes, it may result in the significant increase in operating costs. See also "—Breach of information confidentiality, integrity and availability may lead to interruption of business critical processes, a loss of market share, and claims from subscribers, regulators, and partners, which could materially adversely affect our reputation, business, financial condition, results of operations and prospects."

The controlling shareholder has a possibility to determine certain decisions of our governing bodies.

Sistema, which is a public company, owns a controlling stake in MTS. According to the applicable Russian legislation, Sistema has a possibility to exercise its controlling rights, which may become decisive during consideration of a number of issues by our General Meeting of Shareholders, including, but not limited to (i) making decisions on the issues, requiring simple majority of votes our shareholders participating at the General Meeting, for example, in case of making decisions on dividends payment or approval of the our annual reports; (ii) appointment of the majority or dismissal of all members of our Board of Directors members and other matters. Sistema can take actions that may conflict with the interests of other security holders. Furthermore, our international, credit, investment and other ratings, which determine, inter alia, peculiarities of our operations, terms of raising debt financing and our other activity can be affected by our controlling shareholder's activity and (or) its ratings. See also "—Risks Relating to our Financial Condition—A change in control could have a material adverse effect on our financial condition and results of operations."

Controlling shareholder as well as other our shareholders has a right to receive dividends at the amount proportionate to the number of our shares belonging to a respective shareholder. For information about dividends see "Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Requirements." The indentures relating to our outstanding notes and other debt do not restrict our ability to pay dividends. As a result of paying dividends, our reliance on external sources of financing may increase, our credit rating may decrease, and our cash flow and ability to repay our debt obligations, or make capital expenditure, investments and acquisitions could be materially adversely affected.

Difficulties with operational management of the acquired businesses could hamper our continued growth and profitability.

Our continued growth depends, in part, on our ability to identify attractive opportunities in markets that will grow and on our ability to manage the operations of acquired or newly established businesses. Our acquisitions may occur in countries and regions that represent new operating

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environments for us. We therefore may have less control over their activities. We may also face uncertainties with respect to the operational and financial needs of those businesses and may, in the course of our acquisitions, incur additional debt to finance the acquisitions and/or take on substantial existing debt of the acquired companies. In addition, it is possible that our activities in the countries of our current presence and counties into which we may expand may be associated with greater political, economic, social and legal risks.

For example, see "—Legal Risks and Uncertainties—An outcome of the proceedings relating to sustaining operations of our subsidiary in Turkmenistan is unpredictable" and "—The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and results of operations." Our failure to identify attractive opportunities for expansion into new markets and to manage the operations of acquired or newly established businesses in these markets could hamper our continued growth and profitability, and have a material adverse effect on our financial condition, results of operations and prospects.

Acquisitions and mergers may pose significant risks to our business.

We have expanded our business through a number of acquisitions. We will continue to evaluate opportunities to acquire, invest in or merge with other existing operators or license holders, as well as other complementary businesses. In 2017-2020, our acquisitions focused on various segments, including communication and software development companies, providers of cloud services, as well as management investment and other non-telecom companies.

These and other business combinations entail a number of risks that could materially and adversely affect our business, financial condition, results of operations and prospects, including the following:

•: assumption of the acquired target's liabilities and contingencies;
•: failure to realize any of the anticipated benefits or synergies from any acquisitions or investments we complete;
•: problems connected with integrating the acquired businesses, technologies or products into our operations;
•: incurrence of debt to finance acquisitions and higher debt service costs related thereto;
•: difficulties in retaining business relationships with suppliers and customers of the acquired companies;
•: risks associated with businesses and markets in which we lack experience, including political, economic, social, legal and regulatory risks and uncertainties;
•: competition risks;
•: potentially incorrect assessment of the value of any acquired target resulting from the facts we could not have known at the time of evaluation (subsequently discovered facts);
•: more onerous government regulation;
•: potential loss of key assets of the acquired company;
•: potential loss of key employees of the acquired company;
•: potential write-offs of acquired assets; and
•: lawsuits arising out of disputes over ownership of acquired assets and/or the enforcement of indemnities relating to the title to such assets.

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See also "—Legal Risks and Uncertainties—The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and results of operations" and "—Risks Relating to our Financial Condition—We may be adversely affected by the current economic environment."

In addition, companies that we acquire may not have internal policies, including accounting policies and internal control procedures that are compatible, compliant or easily integrated with ours.

If any of our future business combinations is structured as a merger with another company, or we merge with or absorb a company subsequent to its acquisition by us, such a merger would be considered a corporate reorganization under Russian law. This would entitle our creditors to file a claim seeking to accelerate their claims or terminate the respective obligations and seek damages. The creditors would need to prove in court that we will not perform our obligations in due course and the amount of damages suffered. Secured creditors would also be required to prove that the security provided by our shareholders, any third parties or us is not sufficient to secure our obligations. Creditors whose claims are secured by pledges do not have the right to claim additional security.

As of December 31, 2017, we held a 26.61% stake in MTS Bank. In 2018, we acquired a 28.63% stake in MTS Bank from Sistema for RUB 8.27 billion, thus increasing our effective ownership in MTS Bank to 55.4%. In February 2019, we acquired a 39.48% stake in MTS Bank for RUB 11.4 billion, as a result of which our effective ownership in MTS Bank reached 94.97%. In December 2019, we increased our stake in MTS Bank up to 99.9% by acquiring it from Sistema. The increase of our share in MTS Bank is in line with our strategy to diversify the business, achieve synergies and develop innovative financial services.

In September 2018, we acquired 100% in the share capital of Avantage LLC for RUB 8.9 billion (including net debt) from a group of private investors. Avantage LLC owns the Avantage data processing center project in Lytkarino, Moscow region, one of the largest data centers in Russia by number of racks.

In September 2018, we acquired a 13.7% stake in Youdo Web Technologies Limited (Cyprus), the owner of YouDo, one of the largest Russian online service providers matching freelance labor demand and supply for everyday and business tasks for USD 12 million.

In December 2018, we acquired 100% in the share capital of IT-Grad 1 Cloud LLC, one of the largest cloud providers on the Russian Infrastructure-as-a-Service market. The company, which holds all IT-Grad group's cloud assets, was bought through our Dutch subsidiary Vostok Mobile B.V. from a group of private investors for a total of RUB 2,491 million, including net debt.

In 2019-2020, we also acquired certain companies such as United Russian Studios JSC, JUST AI Limited, Zelenaya Tochka Group and others. See "Item 4—Information on Our Company—A. History and Development" for further information.

These acquisitions have allowed us to diversify our business. However, additional risks relating to acquired companies' liabilities and non-achievement of initial financial and operational targets may arise in connection with these acquisitions. See also Note 5 to our audited consolidated financial statements.

We may also be involved in various litigation to protect our title or other rights related to acquired businesses and incur loss.

In addition, a merger or any corporate reorganization or business combination that constitutes a "major transaction" under Russian law would trigger the right of our shareholders who abstain from voting on or vote against such reorganization or transaction to sell, and our obligation to buy, their shares in an amount representing up to 10% of our net assets as calculated under Russian Accounting Standards. See "—Legal Risks and Uncertainties—Shareholder rights provisions under Russian law

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could impose additional obligations and costs on us, which could have a material adverse effect on our business, financial condition, results of operations and prospects."

If we cannot successfully develop our network or integrate the acquired companies, we will be unable to expand our subscriber base and maintain our profitability.

Our ability to increase our subscriber base depends upon the success of our network expansion (including fixed-line networks).

We have expended considerable amounts of resources to enable both organic expansion and expansion through acquisitions, and we plan to continue to do so. Limited information regarding the markets into which we have or are considering expanding, through either acquisitions or new licenses, complicates accurate forecasts of future revenues from those regions, increasing the risk that we may overestimate these revenues. In addition, we may not be able to integrate previous or future acquisitions successfully or operate them profitably. Any difficulties encountered in the transition and integration process and in the operation of acquired companies could have a material adverse effect on our results of operations.

The build-out of our network is also subject to risks and uncertainties, which could delay the introduction of services in some areas and increase the cost of network construction, including difficulties in obtaining base station sites on commercially attractive terms. Further, telecommunications equipment used in Russia and other CIS countries is subject to governmental certification and periodic renewals of the same. We are also required to obtain permits and governmental certification for the operation of telecommunications equipment and/or permission for the import and export of certain network equipment, which can result in procurement delays and slower network development. The failure of any equipment we use to receive timely certification or re-certification, as applicable, could hinder our expansion plans. See also "—Risks Relating to our Financial Condition—If we are unable to obtain adequate capital, we may have to limit our operations substantially, which could have a material adverse effect on our business, financial condition, results of operations and prospects." In particular, in 2019 considerable changes to the Federal law No. 412 "On Accreditation in the National Accreditation System" dated December 28, 2013, which increased powers (authority) of Rosaccreditation relating to control over unfairly accredited persons, came into force. These changes introduced stricter requirements to accredited persons' activities and accreditation experts and provide for additional basis for suspension and termination of accreditation. As a result, these changes may lead to an increased cost of certification services and increase time needed for acquiring certifications, which may affect delivery time of certified equipment in Russia.

For example, the import and export of products containing cryptographic hardware is subject to special documentation requirements and approvals. As telecommunications networks comprise various components with cryptographic hardware, we must comply with these requirements in order to import such components. Moreover, where imported equipment does not contain cryptographic hardware, the federal customs service requires manufacturers to provide written confirmation regarding the absence of such hardware. The range of goods requiring the provision of such "certificates of conformance" by suppliers and manufactures prior to their import into Russia has also been expanded to cover most of our key network components, and imported radioelectronic equipment is required to be licensed by the Russian Ministry of Industry and Trade.

Our inability to develop additional sources of revenue and competitive services could have a material adverse effect on our business, financial condition, results of operations and prospects.

Until recently, customer growth has been our principal source of revenue growth. Currently, however, increasing competition, market saturation and technological development lead to the increased importance of data services in the markets in which we operate. As a result, data services

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became the key driver of our revenue growth and we will therefore need to continue to develop new competitive services, including value-added, 3G, LTE, and others, and to consider vertical integration opportunities through the development or acquisition of dealers in order to provide us with sources of revenue in addition to standard voice services. We invest in new businesses, such as artificial intelligence, financial technologies, Big Data, IoT (in particular, we participate in realization of national program "Digital Economy of the Russian Federation"), cloud services and others. Decrease or absence of demand for new services, as well as competition increase on current markets, or new companies' entries may lead to revenue decrease and necessity to revise our strategy regarding new businesses, which may require additional investments. Our inability to develop additional sources of revenue could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices, which may diminish our market share and result in a loss of revenues and margins.

Our ability to provide commercially viable services depends on our ability to continue to interconnect cost-effectively with zonal, intercity and international fixed-line and mobile operators in Russia and other countries in which we operate. Interconnect fees are established by agreements with network operators and vary depending on the network used, the nature of the call and the call destination.

Although Russian legislation requires that operators of public switched telephone networks that are deemed to be "substantial position operators" cannot refuse to provide interconnect services or discriminate against one operator over another, we believe that, in practice, some operators attempt to impede wireless operators by delaying interconnect applications and establishing technical conditions for interconnecting that can be met only by certain operators.

Any difficulties or delays in interconnecting cost-effectively with other networks could hinder our ability to provide services at competitive prices, or at all, causing us to lose our market share and revenues, which would have a material adverse effect on our business and results of operations. See also "—If we or any of our mobile network operator subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

In addition, as part of the restructuring of Svyazinvest, a fourth national mobile operator in Russia was established by the combination of "Tele2 Russia" and the mobile assets of Rostelecom in 2014, which started its operations in 2015 under the "Tele2" brand. As Svyazinvest controlled regional fixed-line operators in all regions of Russia (other than Moscow), a mobile operator established as part of the Svyazinvest group (mobile assets were consolidated into LLC "T2 RTK Holding") may receive preferential terms for interconnecting with these operators, which would allow it greater flexibility in setting tariffs and could put us at a competitive disadvantage. See also "—We face increasing competition in the markets where we operate, which may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies."

We may not realize the benefits we expect to receive from our investments in 4G and 5G wireless services and Internet of Things (IoT) technologies, which could have a material adverse effect on our business and results of operations.

In July 2012, the Federal Service for Supervision in the Area of Communications and Mass Media awarded MegaFon, VimpelCom, Rostelecom (under Tele2 brand) and us a license to provide 4G services in the Russian Federation.

In December 2017, the State Commission for Radio Frequencies issued a decision allowing the use of frequency bands previously allocated for LTE mobile communications for NB-IoT technology. In the

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second half of 2018 and March 2020, the State Commission for Radio Frequencies awarded additional frequencies and determined the procedure for the use of radio electronic means, operating in the range of 800 MHz under LPWAN group of standards (Low-power Wide-area Network) relating to IoT technology. In March 2020, the State Commission for Radio Frequencies allowed indefinite range of persons and entities to use the 24.25-24.65 GHz frequency band under the 5G standard for radio electronic means. This decision allows the construction of local communication networks under the 5G/IMT-2020 standard, which could lead to increased competition in our certain business areas. In July 2020, we received the first license to provide 5G-based services in this frequency band. In November 2020, the State Commission for Radio frequencies clarified the terms regarding mandatory use of Russian-produced equipment in the 24.25-24.65 GHz frequency band, which may affect the possibility of using these frequencies.

The 4G wireless services provide faster, higher quality data transfer and/or streaming capabilities, as compared to 2G and 3G, and 5G wireless services pose a similar advantage over 4G. Historically, mobile operators that are developing 4G networks experienced various difficulties and challenges, including a limited supply of compatible handsets, limited international roaming capabilities, as well as various software and network related problems. We may experience similar problems or encounter new difficulties when developing our 4G and 5G networks (including NB-IoT) and may be unable to fully resolve them. For example, we cannot be certain that:

•: we will be able to build-out our 4G (including NB-IoT) and 5G networks in a timely manner or within the time frame stipulated by the license terms;
•: our 4G (including NB-IoT) and 5G networks will deliver the quality and level of service that our customers demand or expect;
•: we will be able to provide all contemplated 4G services (including NB-IoT) and 5G at reasonable prices and within a reasonable timeframe;
•: manufacturers and content providers will develop and offer new marketable products and services for our 4G and 5G networks (including NB-IoT) on a timely basis;
•: demand for our 4G services (including NB-IoT) will not be lower than expected;
•: our 4G and 5G networks will be commercially viable in all of the locations we are required to operate pursuant to our licenses;
•: our competitors will not offer similar services at lower prices; and
•: changes in governmental policies, rules, regulations or practices will not affect our network rollout or our business operations.

See also "—If we cannot successfully develop our network or integrate the acquired companies, we will be unable to expand our subscriber base and maintain our profitability."

In addition, Russian military and other authorities also use frequencies in the 4G and 5G spectrum, which may limit the availability of 4G and 5G frequencies for commercial use in certain areas. During the construction of our networks, there is also a risk that the frequencies assigned to us for commercial use may overlap with those used by the Russian military and other authorities. For example, conflicts over the availability of frequency reserved for military use in Moscow caused delay in the commercial launch of 3G services by all 3G license-holders in Moscow, despite the fact that some of these frequencies were cleared for commercial use in 2009. If a similar conflict were to occur, it could cause problems or delays in the development and operation of our 3G and 4G networks in Russia.

Potential competition from other 4Gand LPWAN providers, together with any problems relating to the rollout of our 4G and 5G networks and provision of 4G and 5G services in the future, could materially adversely affect our business, financial condition and results of operations.

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In December 2013, July 2014 and in July 2017, the State Commission for Radio Frequencies introduced several modifications to the conditions of using the frequency band for mobile radio communication networks. These changes resulted in the implementation of the principle of technological neutrality for frequency bands 900 MHz (UMTS and LTE), 1800 MHz (LTE) and 2100 MHz (LTE), and included the imposition of certain additional obligations on network operators. Pursuant to these modifications, in case of using frequencies on the terms of technological neutrality principle, we are, inter alia, obliged to provide network coverage to settlements with lower subscriber numbers, where the commercial rationale for doing so may otherwise be limited. Such changes lead to additional costs for the construction of our 3G and 4G wireless networks and may therefore adversely affect our business, financial condition and results of operations. Moreover, the rules on the Russian-produced telecommunication equipment usage, which require to operate only equipment included in the Unified Register of the Russian Radio-Electronic Products, could affect implementation of the Internet of things (IoT) technology and 5G networks deployment.

If we are unable to successfully develop and/or deploy 4G and 5G wireless services in the countries in which we operate, or if any operators in those markets obtain a significant technological and/or commercial advantage over us in 4G and 5G wireless services, it may have a material adverse effect on our business and results of operations in the long term.

The next step in the development of telecommunications in the countries where we operate is the evolution of 4G/LTE mobile telecommunication technology. The cost of 4G/LTE network deployment and quality of services (including data speed and quality of radio coverage) depends on the band and the width of frequency range given to an operator.

In 2012 outside of the auction process, the State Commission for Radio Frequencies granted Scartel (operating the "Yota" retail brand) a paired range of LTE frequencies (2x30 MHz) in the 2.5 2.7 GHz band for use in the entire territory of Russia. The remaining frequencies, 40 MHz of the 2.5 2.7 GHz band, were allocated evenly during the auction among four major market participants (VimpelCom, MegaFon, Rostelecom and us). Initially, it was planned that all operators would receive equal access to the Scartel infrastructure, which would allow each operator to reduce its 4G/LTE network development costs.

On October 1, 2013, MegaFon acquired Maxiten Co Limited, which had acquired 100% of shares in Scartel and Yota Ltd. from Garsdale. The transaction was approved by a general shareholders' meeting of MegaFon and by the Federal Antimonopoly Service (the "FAS"). As a result of this transaction, MegaFon obtained a competitive advantage in terms of LTE network development costs and may also obtain an advantage in LTE network performance. In addition, as a result of this deal, MegaFon consolidated the financial and operational indicators of Scartel/Yota, which increased its formal market share in the mobile communications market.

Significant material resources for the introduction of such technologies may be required, which could have a material adverse effect on our business and results of operations. Furthermore, the limited number of available frequencies may prevent us from realizing the full benefits we expect to receive from the development of a 4G network, because our network capacity would be constrained and our ability to expand limited.

In 2019, Rosletelcom PJSC received a LTE frequency in the 2.3-2.4 GHz band outside of the auction process. In July 2020, the State Commission for Radio Frequencies allowed Rostelecom PJSC to share this frequency band with T2 Mobile LLC (Tele2), which gave an advantage to these operators. However, in December 2020, the State Commission for Radio Frequencies changed its decision relating to permission for the commercial use of this range. These developments reflect ongoing discussions on allocation frequencies in order to construct 5G network in Russia, deployment of which has been actively negotiated by operators and regulators since 2017. The greater part of frequency spectrum

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suitable for 5G network in Russia, is partially or fully occupied by other users (for example, satellite communication companies use the most suitable frequencies for 5G in 3.5 GHz band), including state-owned companies. Significant expenses and time may be required to clear frequencies, however the frequency conversion mechanism has not been fully defined yet and if it will be realized, there is no assurance that sufficient frequencies optimal for 5G deployment will be cleared in low-band spectrum ("sub-6").

As a solution, the regulator is considering creation of a Single Infrastructure Operator, which will be assigned with the 5G frequencies, and, as one of the discussed variants, will construct a single 5G network in Russia mainly using equipment produced in Russia and will maintain this network. It is planned that the Single Infrastructure Operator will operate as a technological platform based on which independent market players will develop and provide a wide range of services to clients. According to market players and certain industry experts, this solution has variety of advantages as well as some disadvantages and risks as compared to traditional network deployment by operators on a free and non-discriminatory basis.

Final regulator decision on frequency allocation for 5G will significantly affect process of mobile communication market development and may lead to occurrence of certain difficulties, including extension of time needed for putting 5G network into operation, increase in capital and operating expenditures, failure to realize all 5G technological advantages caused by separation of 5G and earlier generation network infrastructure, realization of market advantages by certain players due to non-equal frequency allocation or obtaining of other technological advantages connected with frequency allocation. All of these factors may affect our ability to develop 5G network, which in turn may have a material adverse effect on our business.

Moreover, if we cannot develop a commercially viable 4G network, and one of our competitors does, that competitor would have an advantage over us, which in turn may have a material adverse effect on our business.

Disruptions on our networks and information systems could lead to a loss of subscribers, damage to our reputation, violations of the terms of our licenses and subscriber contracts, penalties and have material adverse effect on our business and financial condition.

We are able to maintain our operations only to the extent that our network infrastructure, information systems and data processed therein is protected from unlawful actions, including hacker and targeted attacks, technical malfunctions, power failures and natural disasters. Any failure, accident or network or information systems security breach, that causes interruptions in our operations could impair our ability to provide services to our customers or may influence other business processes, any of which could materially adversely affect our reputation, business and results of operations.

In addition, to the extent that any disruption or network or elements of information systems security breach results in a loss of or damage to customers' personal data, or inappropriate disclosure of confidential information, we may incur liability as a result, including costs to remedy the damage caused by these business-interruptions or elements of information systems security breaches.

While we maintain backup systems for our telecommunications and infrastructure equipment, network and data management, operations and maintenance systems, these systems may not ensure recovery in the event of a network or information systems failures. In particular, in the event of extensive software and/or hardware failures, significant disruptions to our systems could occur, leading to our inability to provide services in full. The quality of our services in roaming (including roaming between networks) also depends, inter alia, on the network quality of our roaming partners, which is out of our control. Disruptions in our provision of services could lead to a loss of subscribers, damage to our reputation, violations of the terms of our licenses and subscriber contracts and penalties.

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Our computer and communications hardware is protected through technical and software safeguards. However, it is still vulnerable to fire, storm, flood, loss of power, telecommunications failures, physical or software break-ins, viruses and similar events. Although our computer and communications hardware is insured against fire, storm and flood, we do not have business interruption insurance to protect us in the event of a catastrophe, even though such an event could have a material adverse effect on our business.

Failure to fulfill the terms of our licenses could result in their suspension or termination, which could have a material adverse effect on our business and results of operations.

Each of our mobile licenses requires service to be offered by a specific date and some contain further requirements as to territorial coverage to be reached by specified dates.

In addition, all of our mobile licenses require us to comply with various telecommunications regulations relating to the use of radio frequencies and numbering capacity allocated to us, network construction, interconnect rules and technical requirements relating to compliance with law enforcement authorities' requests, among others. If we fail to comply with the requirements of Russian or other applicable legislation or meet any terms of our licenses, our licenses and other authorizations necessary for our operations may be suspended or terminated, which could significantly limit our operations. In addition to the impact on our operations, the suspension or loss of certain licenses could also constitute an event of default under certain of our debt obligations and cause certain of our debt to be accelerated.

Moreover, applicable licensing requirements are subject to constant changes. For example, the Russian government enacted Decree No. 2385 dated December 30, 2020, which came into force starting from January 1, 2021 and which revised the regulation on licensing activities in communication services sector including mandatory licensing requirements and grounds for license termination.

A suspension or termination of our licenses or other necessary governmental authorizations could therefore have a material adverse effect on our business and results of operations.

Failure to renew our licenses, or receive renewed or new licenses with similar terms to our existing licenses, could have a material adverse effect on our business and results of operations.

Our telecommunications licenses have their expiration dates in various years. For a list of the telecommunications licenses held by us, see "Item 4. Information on Our Company—B. Business Overview—Licenses."

These licenses may be renewed upon application to the relevant governmental authorities. Government officials in Russia and the other countries in which we operate consider the compliance with license requirements and the conditions of using the allocated frequency range when deciding whether to renew a license.

Additionally, new mandatory conditions, which relate to the need for further development of the communication network in order to provide licensed communication services for potential users of the communication service in sparsely populated residential areas, may be introduced when deciding whether to renew a license. These new conditions will require additional investment. Moreover, we may be subject to penalties or our licenses may be suspended or terminated for non-compliance with any such new license requirements. The suspension or loss of certain licenses could significantly limit our operations and cause certain of our debt to be accelerated.

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If frequencies currently assigned to us are revoked, or if we fail to obtain renewals of our frequency allocations, our network capacity will be constrained and our ability to expand limited, resulting in a loss of market share and revenues.

There is a limited radio frequency spectrum available for wireless operators in each of the regions in which we operate or hold licenses to operate. We are dependent on access to adequate spectrum allocation in each market in which we operate in order to maintain and expand our subscriber base. If frequencies are not allocated to us in the future in the required quantities, with the geographic span and for time periods that would allow us to provide wireless services on a commercially feasible basis throughout all of our license areas, our business, financial condition, results of operations and prospects may be materially adversely affected.

According to the decision of the State Commission for Radio Frequencies No. 13-22-01 dated December 11, 2013, the terms of radio frequency bands usage by radio electronic facilities for mobile communication were supplemented with a requirement to provide the settlements of over 1,000 people with communication services within seven years (depending on the used frequency range and radio technology). If we are not able to fulfill these requirements, our authorizations for the use of radio frequency spectrum might be either terminated or not prolonged in extrajudicial procedure.

A loss of allocated spectrum, which is not replaced by other adequate allocations, could also have a substantial adverse impact on our network capacity. In addition, frequency allocations are often issued for periods that are shorter than the terms of the licenses, and such allocations may not be renewed in a timely manner, or at all. If our frequencies are revoked, or if we are unable to renew our frequency allocations, our network capacity would be constrained and our ability to expand limited, resulting in a loss of market share and revenues.

An increase in the fees for frequency spectrum usage could have a negative effect on our financial results.

The Russian and the CIS legislation requires us to make payments for frequency spectrum usage. A number of projects implemented by MTS in 2016 - 2018, as well as a number of normative acts previously adopted by the Ministry of Communications, resulted in expansion of the range of frequencies that have to be paid for.

The fees for frequency spectrum usage are calculated based on the total frequency band allocated to each operator in each region with such frequency spectrum usage determined with reference to the decision of the State Commission for Radio Frequencies, frequency allocation decisions or to the license conditions.

Fees are directly calculated according to the "Methodology of calculation of a single fee and annual fee for the use of the radio spectrum of the Russian Federation" approved by the order of the Ministry of Communications dated June 30, 2011 No. 164. The rates and coefficients of the aforementioned Methodology are subject to revision at least once every two years. For example, in December 2017 the State Duma approved the Law on federal budget for 2018 and the planned period of 2019 and 2020, which resulted in the increase in rent payments for the radio spectrum usage both in the third quarter of 2018 and in the fourth quarter of 2018. In 2019 the rates turned back to the level of the beginning of 2018. In July 2019, the Ministry of Communications developed and circulated for discussion a draft order "On Amendments to the Methodology for establishing of single fee and annual fee for the use of radio frequency spectrum in the Russian Federation". The order provides for, inter alia, imposition of payment for radio frequency spectrum usage for 5G technology. Currently, key coefficients, which define the payment amount for using 5G technology, have not been approved. Any increase in payments for the radio spectrum will likely increase our costs and may adversely affect our results of operations.

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Any significant increase in the fees payable for the frequency channels that we use or additional frequency channels that we need in Russia or the CIS could have a negative effect on our financial results.

If we are unable to maintain our favorable brand image, we may be unable to attract new subscribers and retain existing subscribers, which may lead to a loss of market share and revenues.

Developing and maintaining awareness of our brands is critical to informing and educating the public about our current and future services and is an important element in attracting new subscribers.

We believe that the importance of brand recognition is increasing as our markets become more competitive. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful products and services at competitive prices. Brand promotion activities may not yield increased operating revenues and, even if they do, such operating revenues may not offset the operating expenses we incur in building our brands.

Furthermore, our ability to attract new subscribers and retain existing subscribers depends, in part, on our ability to maintain what we believe to be our favorable brand image. Negative publicity or rumors regarding our company, our shareholders and affiliates or our services could negatively affect our brand image, which could lead to a loss of market share and revenues. Failure to successfully and efficiently promote and maintain our brands may limit our ability to attract new subscribers and retain our existing subscribers and materially adversely affect our business and results of operations.

MTS Bank's business entails regulatory and operational risks.

MTS Bank's operations are subject to regulation by various government and banking authorities in connection with obtaining and renewing various licenses and permits, as well as with ongoing compliance with existing laws and regulations and with the terms and conditions of MTS Bank's licenses and permits. MTS Bank has the required license in connection with its banking activities issued by the CBR.

Requirements imposed by regulators, including capital adequacy requirements, which are designed to ensure the integrity of the financial markets and to protect customers and other third parties with whom MTS Bank deals, may limit MTS Bank's activities, including its lending, and may increase MTS Bank's costs of doing business, or require MTS Bank to seek additional capital in order to maintain CBR capital adequacy requirements or different varieties of funding to satisfy the CBR's liquidity requirements. The CBR may also amend the capital adequacy requirements and increase the capital adequacy ratios applicable to Russian banks at any time and, in such circumstances, MTS Bank may be forced to seek additional capital or alternative sources of financing to comply with these requirements. Such additional capital or alternative sources of financing may not be available or may only be available on commercially unacceptable terms.

If MTS Bank's capital position were to decline below the minimum statutorily required levels of capital adequacy, its banking licenses could be suspended or revoked and it could encounter difficulties in continuing to operate its business and obtaining funding, which could materially adversely affect its business, financial condition, results of operations and prospects. MTS Bank's capital adequacy level may decrease organically with the growth of business or the payment of dividends. In addition, any breach of regulatory requirements in the Russian Federation could expose MTS Bank to potential liability and other sanctions, including the loss of general banking license. If the CBR were to suspend or revoke MTS Bank's general banking license, then this would render MTS Bank unable to perform any banking operations and/or would lead to winding-up of its business. Our shareholding in MTS Bank may require us to make subsequent investments in the share capital of the bank in order to sustain growth of MTS Bank's business as well as to comply with the capital adequacy requirements and relevant banking regulations.

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Uncertainty in the international financial markets, further tightening in credit conditions and contraction of the global economy and markets in which MTS Bank operates (including the impact of COVID-19 outbreak), has adversely impacted, and could adversely impact, should the market conditions continue to worsen, MTS Bank's business and operating results due to:

•: decreases in MTS Bank's net interest income;
•: decreases in the demand for MTS Bank's credit products as a result of higher interest rates;
•: significantly increased non-performing loans and loan provision charges, loan losses and write-offs;
•: decreases in the business activity of Russian companies and the credit-worthiness of Russian companies and individuals;
•: increases in borrowing costs and reduced, or zero, access to the capital markets due to unfavourable market conditions;
•: currency volatility;
•: liquidity constraints;
•: outflows of deposits from accounts;
•: significant declines in the market values of securities held in MTS Bank's trading and available for sale portfolios; and
•: deterioration of capital adequacy.

Any of the factors discussed in the preceding paragraphs could adversely affect the financial condition of MTS Bank and its customers and may result, among other things, in a reduction in MTS Bank's capital adequacy ratios and profits, pressure on credit risk concentration levels, an increase in exchange rate risk and losses, higher funding costs, a change in the strategy of MTS Bank or curtailment of some business operations due to increased risks. Moreover, any of these factors may cause a decrease in customer funds, a reduction in the demand for loans, foreign currency, investment and other banking transaction services that customers carry out with MTS Bank, as well as a general deterioration in the quality of MTS Bank's loan book and/or a reduction in the market values of securities or other assets held on MTS Bank's balance sheet, leading to possible defaults of such loans and/or the need for increased loan provisions. Should any of this take place, this could materially adversely affect our business, financial condition and results of operations.

Failure to monitor, manage and prevent MTS Bank's operational and technological risks, could have a material adverse effect on our business, financial condition and results of operations.

MTS Bank is exposed to technological risks as banking business requires the development of sufficient communication channels and software, the creation of large automated systems and considerable computer capacity located throughout the Russian Federation. MTS Bank invests considerable time and money in order to upgrade its technologies in a timely manner, centralize its information systems, create appropriate reserves and duplicate capacities, develop internal audit functions and control the operation of its hardware and software, however MTS Bank's IT systems are significantly less developed in certain respects than those of banks in more developed countries. The lack of immediately available consolidated financial and operating data may hinder the ability of MTS Bank's management to make decisions, to react promptly to changes in market conditions and to detect fraud and non-compliance with internal procedures. In addition, insufficient integration of the IT system increases MTS Bank's operational risks and the costs of further business development.

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MTS Bank's ability to operate its business depends on its ability to protect the computer systems and databases which MTS Bank operates and uses from the intrusion of third parties who may attempt to gain access to MTS Bank's computer systems, networks or databases through the Internet or otherwise. In addition, MTS Bank is exposed to risk of fraud by employees or outsiders, mismanagement, unauthorized transactions by employees and operational errors, including clerical or record keeping errors or errors resulting from faulty computer or telecommunications systems. Given MTS Bank's high volume of transactions, errors may be repeated or compounded before they are discovered or rectified. In addition, a number of transactions at MTS Bank are processed manually, which may further increase the risk that human error or employee tampering or manipulation will result in losses that are difficult to detect. There can be no assurance that MTS Bank will be able at all times to successfully monitor, prevent and manage its operational and technological risks in the future. Any failure to do so could materially adversely affect our business, financial condition and results of operations.

MTS is a part of the Sistema group and may potentially enter into agreements with other members of the group (i.e. related parties transactions) on terms, which are different from those that would be obtainable on an arm's length basis.

We have purchased interests in the following companies from Sistema: United Russian Film Studios JSC and MTS Bank. We are entering into agreements with other companies within the Sistema group for supply of switching and subscriber network equipment, power supply devices, medical services, license agreements, agreements on providing access to the infrastructure for installation of communication equipment, leasing of non-residential real-estate, rent of cloud services and other services. According to the applicable Russian legislation and notwithstanding MTS' effective control procedures in respect of related parties transactions, such as verification whether such transactions comply with the terms on a market, including mandatory procedures with respect to consideration of related parties transactions with the companies within the Sistema group by the Audit Committee, a number of transactions with the companies within the Sistema group may potentially be concluded on terms, which are different from those that would be obtainable on an arm's length basis.

See "Item 7—Major Shareholders and Related Party Transactions—B. Related Party Transactions" and Note 32 to our audited consolidated financial statements.

In the event that our past or future interested party transactions are successfully challenged, our business, financial condition, results of operations and prospects could be materially adversely affected.

We own less than 100% of the equity interests in some of our subsidiaries. In addition, certain of our wholly owned subsidiaries have had other shareholders in the past. We and our subsidiaries in the past have entered into, and continue to enter into, transactions that may be considered to be "interested party transactions" for the purposes of Russian law, requiring in some cases consent or approval by disinterested directors, disinterested independent directors, disinterested shareholders or owners of voting shares, depending on the nature of the transaction and parties involved. The provisions of Russian law No. 208 "On Joint-Stock Companies" dated December 26, 1995, as amended (the "Joint Stock Companies Law") relating to "interested party transactions" was amended in 2016 and may be subject to different interpretations taking into account, inter alia, the insufficiency of court practice in respect of the new amendments. As a result, it is possible that our and our subsidiaries' interpretation and application of these provisions could be subject to challenge. Any such challenge, if successful, could result in the invalidation of transactions, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

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In the event that our minority shareholders or the minority shareholders of our subsidiaries do not consent to or approve certain transactions or other matters requiring their consent or approval we could be limited in our operational flexibility, and our business, financial condition, results of operations and prospects could be materially adversely affected.

Russian law requires a three-quarters majority vote of the holders of voting stock present at a shareholders' meeting to consent to or approve certain transactions and other matters, including, for example, charter amendments, major transactions involving assets in excess of 50% of the total assets of the company, purchase of offered shares by the company and certain share issuances. In addition, a 95% or a unanimous vote is required to approve certain matters, for example, certain charter amendments regarding shareholders' rights. A majority of disinterested shareholders participating in the voting is required to consent to or approve an "interested party transaction" in certain cases. In the event that our minority shareholders or minority shareholders of our subsidiaries do not consent to or approve such transactions or other matters requiring their consent or approval, we could be limited in our operational flexibility, and our business, financial condition, results of operations and prospects could be materially adversely affected.

Our competitive position and future prospects depend on our senior managers and other key personnel and our inability to attract, retain and motivate qualified key personnel could have a material adverse effect on our business, financial condition and results of operations.

Our ability to maintain our competitive position and to implement our business strategy is dependent to a large degree on the services of our senior management team and other key personnel.

Moreover, competition in Russia and in the other countries where we operate for personnel with relevant expertise is intense due to the relatively small number of qualified individuals. The loss of any our senior management team members or an inability to attract, retain and motivate qualified key personnel could have a material adverse effect on our business, financial condition and results of operations. We structure our compensation packages in a manner consistent with the evolving standards of the labor markets in these countries. We are not insured against the detrimental effects to our business resulting from the loss, dismissal, or unavailability of our key personnel, resulting from a number of reasons, including but not limited to COVID-19 outbreak (for more information see "—The outbreak of COVID-19 may have a material adverse effect on our business, financial condition, results of operations and prospects "). In addition, it is not common practice in Russia and the other countries where we operate to purchase key-man insurance policies, and we do not carry such policies for our senior management and other key personnel.

The entry of mobile virtual network operators into the Russian mobile communications market could increase competition and subscriber churn, resulting in a possible loss of our market share and decreased revenue.

On December 29, 2008, the Ministry of Communications and Mass Media adopted an order establishing the requirements for mobile virtual network operators ("MVNOs"). In 2017, new requirements relating to services of mobile radio communication and telephone communications while using business models of mobile radio communication and telephone communications virtual networks were adopted. MVNOs are companies that provide mobile communications services but do not own the radio frequencies and, in some cases, the network infrastructure required to do so. According to the order, MVNOs in Russia must be licensed, and their use of frequencies and infrastructure and rendering of services is to be done pursuant to agreements entered into between MVNOs and existing frequency holders. However, existing frequency holders are under no obligation to enter into such agreements with the MVNOs.

By introducing this regime, the Ministry aims to increase competition in the Russian mobile services market, which is currently dominated by MTS, VimpelCom and MegaFon. The existing

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frequency holders, including us, may receive revenues from MVNOs for the use of our frequencies and network infrastructure. However, in the event we lose either subscribers to MVNOs that lease their frequencies and infrastructure from other operators or MVNOs that lease their frequencies and infrastructure from us, we will be deprived of the revenue streams from both the subscribers and the MVNOs. The MVNOs may also establish aggressive tariffs, which could result in increased subscriber churn and/or driving down the tariffs of all mobile operators.

For example, Skartel (under the "Yota" brand), Rostelecom, Tinkoff Bank operate as MVNOs in the Russian mobile communications market.

It is currently unclear how the emergence of new MVNOs in the market or any of the foregoing trends might affect market competition and subscriber churn, but this could have a material adverse effect on our business, financial condition, results of operations and prospects.

A finding by the FAS that we have acted in contravention of antimonopoly legislation could have a material adverse effect on our business, financial condition and results of operations.

Our businesses have grown substantially through the acquisition and formation of companies, many of which required the prior approval of, or subsequent notification to, the FAS or its predecessor agencies.

In part, relevant legislation in certain cases restricts the acquisition or formation of companies by groups of companies or individuals acting in concert without such prior the FAS approval. While we believe that we have complied with the applicable legislation for our acquisitions and formation of new companies, this legislation is sometimes vague and subject to varying interpretations. If the FAS were to conclude that our acquisition or formation of a new company was done in contravention of applicable legislation, or find prescriptions of the FAS, issued as part of the transaction approval, not fulfilled, it could impose administrative sanctions and require the divestiture of such company or other assets, which could have a material adverse effect on our business, financial condition and results of operations.

In recent years, the FAS has been investigating mobile operators, including MTS, for suspected violations of antimonopoly laws. For example, see "Item 8—Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Antimonopoly Proceedings" and "—Changes to the rules and regulations involving roaming charges in Russia may adversely affect our financial condition and results of operations."

If the FAS finds that we have violated or otherwise acted in contravention of antimonopoly legislation, this could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are found to have a dominant position in the markets where we operate and are determined to have abused this position, the FAS may be entitled to regulate our subscriber tariffs and impose certain restrictions on our operations.

Under Russian legislation, a company controlling over 35% of a market may be found by the FAS to hold a dominant position in such market. In case of collective dominance of legal entities and in certain instances provided by law, a company could be also categorized by the FAS as dominant under certain conditions even if its share of the corresponding market is less than 35%, but equals to or is higher than 8%. Current Russian legislation does not clearly define "market" in terms of the types of services or the geographic area. In 2016, as a result of certain amendments to the Federal Law No. 135 "On the Protection of Competition," the register of business entities having more than 35% of a certain commodity market or otherwise occupying a dominant position in the markets in which they operate, which previously listed MTS as occupying a dominant position in certain markets, was

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repealed. At the same time, the FAS continues to conduct market analysis in order to identify entities holding a dominant position in the markets in which they operate.

Companies recognized as natural monopolies are also considered to have a dominant position in their respective markets. One of our subsidiaries, MGTS, is categorized as a natural monopoly in the Moscow telecommunications market. As a result, MGTS' tariffs are now subject to regulation by the FAS. In addition, as a natural monopoly, MGTS is obliged to comply with the rules of non-discriminatory third party access to its infrastructure. See also "—Change of regulated tariffs may lag behind MGTS' real expenses growth, which may negatively impact profitability of our business."

In the event that we are found in the future to have a dominant position in the markets where we operate and are either determined to have abused the dominant position or found to have committed concerted actions in the market and/or concluded anti-competitive agreements, the FAS will have a right to impose certain restrictions on our operations in such markets. See "Item 4—Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation—Regulation in the Russian Federation—Competition, Interconnect and Pricing" for additional information.

If we are found to have violated antimonopoly legislation, an order requiring us to transfer any illegally obtained revenue to the federal budget may be issued in relation to such violations.

According to the Code of Administrative Offences of the Russian Federation, a company may be subject to either fixed penalty fine up to RUB 1 million or fine based on total turnover in the market where the violation is conducted, depending on the nature of violation of antimonopoly legislation. The level of fine ranges from 3% to 15% of revenue in the market where the violation is conducted for cartel agreements, from 1% to 15% of revenue for abuse of dominant position, from 1% to 5% of revenue for other anticompetitive agreements and from 1% to 3% of revenue for coordinated actions. Moreover, if the FAS finds actions of a company insufficient to rectify past violations of antimonopoly laws, it could file a claim for liquidation of this company or its reorganization in the form of division or separation.

If we or any of our subsidiaries were found by the competition authority to be business entities occupying a dominant market position, the competition authority would have a power to impose certain restrictions on our or our subsidiaries' businesses. In particular, the authorities may impose on us tariffs at levels that could be competitively disadvantageous. If we or any of our subsidiaries were found by the FAS to be business entities occupying a dominant market position with a market share exceeding 70% and determined to abuse such dominant position, the Russian government would have a right to determine the rules of non-discriminatory access to goods or services offered by us. Additionally, geographic restrictions on our expansion could reduce our subscriber base and prevent us from fully implementing our business strategy, which may materially adversely affect our business, financial condition, results of operations and prospects.

If we or any of our mobile network operator subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations.

In addition to the regulation of dominant operators by the FAS, the Federal Law on Communications provides for the special regulation of telecommunications operators occupying a "substantial position" (i.e., operators which, together with their affiliates, have 25% or more of installed capacity or capacity to carry out transmission of not less than 25% of traffic in a geographically defined zone within the Russian Federation). These regulations provide for governmental regulation of the key terms of such operators' interconnect agreements, including the interconnect tariffs. In addition, such operators are required to develop standard key terms of interconnect agreements and publish them as a public offer made to all operators who intend to interconnect to the networks of those operators.

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Refusal of such operators to conduct an interconnect agreement is prohibited, except in cases where such agreement would contradict the terms of their license or other regulatory acts in respect of the unified communications network in the Russian Federation.

For additional information, see "Item 4—Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation—Regulation in the Russian Federation."

At present, the foregoing regulations apply only to fixed-line operators in Russia, including our fixed-line business. Draft legislation was introduced in 2008 that would extend the law to apply to mobile operators. Although the proposed law was not adopted, the risk that similar legislation will be proposed and adopted in the future remains. If any legislation that extends the foregoing regulations to mobile operators is adopted, and we and any of our mobile network operator subsidiaries operating in Russia are identified as operators occupying a "substantial position," regulators may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our revenues, financial condition and results of operations.

In addition, MGTS is categorized as fixed-line operator occupying a substantial position in the Moscow telecommunications market and its interconnect tariffs are therefore subject to state regulation. In February 2013, Comstar-UTS was removed from the list of "substantial operators" in Moscow and MTS was not included therein. There is however a possibility that we could be categorized as fixed-line operator occupying a "substantial position" in Moscow due to our affiliation with MGTS and because of our integration with Comstar-UTS. As a result of the state regulation of the relevant interconnect rates, we, as "substantial operators," may be unable to increase these in line with economic developments or any increases of our relevant costs, resulting in a material adverse effect on our financial condition and results of operations. See also "—Change of regulated tariffs may lag behind MGTS' real expenses growth, which may negatively impact profitability of our business."

Change of regulated tariffs may lag behind MGTS' real expenses growth, which may negatively impact profitability of our business.

In addition to holding a "substantial position" in the Moscow telecommunications market, MGTS is included in the register of natural monopolies in the telecommunications market. Consequently, tariffs for basic services rendered to public switched telephone networks subscribers (fees for providing access to a local telecommunications network, monthly fees for granting subscriber line in a constant use and monthly fees for providing a local telephone connection) are subject to regulation.

Although MGTS is permitted to petition the FAS for increases in tariffs based on such criteria as inflation, increased costs and the need for network investments, it is possible that future requested increases may not be granted or that the FAS may not adequately take such factors into account in setting tariffs. If the permissible tariffs applicable to MGTS do not adequately compensate MGTS for the costs of providing services, our business and results of operations could be materially adversely affected. See also "—If we or any of our mobile network operator subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

Changes to the rules and regulations involving roaming charges in Russia may adversely affect our financial condition and results of operations.

In September 2018, the Board of sectoral ministries of communications of the Russian Federation and the Republic of Belarus approved a Roadmap aimed at reducing roaming charges between two countries. In December 2018, the Russian party drafted a new project of the Roadmap aimed at cancellation of international roaming in the territory of the Union State in 2019. Later, as a result of negotiations between Russia and Belarus a new project of Roadmap, which assumes cancellation of

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roaming charges in the territory of the Union State in 2020, was developed. In December 2019, a new version of Roadmap was approved, according to which, cancellation of roaming charges in the territory of the Union State will take place in September 2020. In order to implement the Roadmap, we significantly reduced roaming charges in November 2020. This affected our revenues from roaming charges in Belarus.

In July 2017, the FAS sent a warning to mobile operators, in which it demanded to cancel intra-network roaming. In March 2018, the FAS opened an antimonopoly case against VimpelCom, MTS and MegaFon (in connection with the non-fulfilment of the warning). In August 2018, the FAS found MTS, VimpelCom and MegaFon to have violated the antimonopoly legislation. In December 2018, the FAS imposed a fine in the amount of RUB 737,500 on each of MTS, VimpelCom and MegaFon. As of September 30, 2018 MTS changed charging principles for communication services outside "home" region for all subscribers.

In August 2017, the FAS opened an antimonopoly case against VimpelCom, MTS, MegaFon and T2 Mobile LLC on the grounds of establishing and maintenance of monopolistically high prices for communication services in national roaming and inter-operator roaming agreements. On February 22, 2018 the FAS rendered a decision and found MTS responsible for establishing monopolistically high prices for subscribers for communication services in national roaming. VimpelCom, MegaFon and T2 Mobile were also found guilty for establishing monopolistically high prices for subscribers for communication services in national roaming. In September 2018, following the examination of the case, the FAS imposed administrative fines in respect of each of the operators. The case related to inter-operator roaming agreements against MTS was canceled due to the fact that there had been no violation. See also "—A finding by the FAS that we have acted in contravention of antimonopoly legislation could have a material adverse effect on our business, financial condition and results of operations."

On December 27, 2018, the Federal Law No. 527 was adopted, under which the intra-network roaming is cancelled, and MTS is obliged to provide subscribers with communication services on its network under the same conditions, regardless of whether a subscriber is in or outside the bounds of his "home network" when moving across the country. In addition, this law excludes the possibility of charging subscribers for incoming calls in intra-network and national roaming. The law came into force on June 1, 2019 and affected our revenue from intra-network and national roaming charges. Any similar regulatory changes which could limit our ability to charge fees for the services provided could have material adverse effect on our business and financial condition.

Any material fines imposed on us or changes to the roaming charges may adversely affect our financial condition and result of operations.

Compliance with the new regulations on IMEI numbers may present us with technical difficulties and may lead to the expenditure of significant resources.

A draft law that provides obligatory registration of a user terminal on an International Mobile Equipment Identity ("IMEI") numbers database was rejected.

If similar initiatives are proposed in the future, we may be required to develop a system to monitor IMEI numbers and may need to establish and maintain a database of IMEI numbers, which would necessitate the expenditure of significant technical and financial resources.

However, the Federal Law No. 533 dated December 30, 2020, which will come into force starting from June 1, 2021, introduced amendments to the Law "On Communications", including the IMEI concept. According to the law, the subscriber has a right to add information on his number and/or the IMEI in the Integrated Identification and Authentication System (IIAS). If the subscriber lost his device, he may report this to the operator through the IIAS. Subject to the confirmation of an IMEI number, the operator should stop providing services for such device.

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Currently, there are no requirements for an IMEI number, including its uniqueness, criteria and a verification process. In addition, the procedure of entering the identifier in the IIAS and binding it with a subscriber number as well as verification of the identifier uniqueness by an operator or an authorized body is still unclear. There is a risk that these gaps in regulation would not be eliminated by the effective date of the amendments.

It is currently unclear how these amendments might affect our activities, but this could have a material adverse effect on our business, financial condition and results of operations.

The accession of Russia to the World Trade Organization (the "WTO") may lead to legislative and business changes.

On August 22, 2012, the Russian Federation became a member of the WTO. This may lead to potentially significant changes in Russian legislation including, among others, regulation of foreign investments in Russian companies, competition laws, telecommunications laws, changes in the taxation system and customs regulations in Russia. In addition, the implementation of the WTO rules may lead to increased competition in the markets where we operate. During the period of 2012 to 2020, Russia adopted certain changes to its legislation related to the accession to the WTO, for example, regarding intellectual property laws, tax legislation; however, it is still unclear if, and when, all necessary legislative changes related to the WTO accession will take place. If further new legislation is implemented in Russia as a result of its accession to the WTO, this could have a material adverse effect on our financial condition and results of operations.

We may be required to make significant investments beyond those that are currently planned to preserve our competitive advantage in response to the rapid evolution of fixed network technology.

One of our subsidiaries, MGTS, has devised a number of projects aimed at developing communications networks and expanding availability of telecommunications services for customers. The likely shortage of free cash flow during the current economic downturn could halt such investment programs for the development of new products and services, and possibly lead to a decrease in the number of projects and cutbacks in development programs in the New Moscow and Moscow regions.

The company completed its project on connection of its subscribers to broadband optical networks employing the Gigabit-capable Passive Optical Network ("GPON") technology in Moscow, however, the network development still continues in Moscow and Moscow region. In addition, transition to a single converged network and BRAS (Broadband Remote Access Server) expansion are being performed. See "Item 4—Information on Our Company—A. History and Development—Capital Expenditure" for further information. The lack or limited access to residential buildings, for example, due to COVID-19 impact, may affect these projects on construction and modernization of fixed-line network. For more information see "—The outbreak of COVID-19 may have a material adverse effect on our business, financial condition, results of operations and prospects."

We attract contractors for the construction and upgrade of our network. Due to the currently unfavorable market conditions, some of our contractors may face a lack of own current assets and/or external finance sources, as well as other reasons, which may lead to the contractor's inability to fulfill contract obligations or, in some cases, lead to bankruptcy. This may negatively affect the terms of our projects' implementation and lead to higher costs. If we are not able to expand and upgrade our network infrastructure in a timely manner and offer new services, or if it is required to make significant investments beyond those that are currently planned, our business, financial condition, results of operations and prospects could be materially adversely affected.

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Our intellectual property rights are costly and difficult to protect.

We regard our copyrights, trademarks, patents and similar intellectual property rights, including our rights to certain domain names, as essential to our continued success. We rely upon legislation on intellectual property, trade secret protection laws, as well as confidentiality and/or license agreements or contracts with our employees, customers, partners and others, to protect our proprietary rights. Nonetheless, intellectual property rights are particularly difficult to protect in the markets where we operate. In these markets, the regulatory agencies responsible for the protection of intellectual property rights are inadequately funded, legislation is underdeveloped, piracy and infringement are commonplace, and enforcement of court decisions is problematic.

Litigation may be necessary to enforce our intellectual property rights, to determine the validity and scope of rights of others, or to defend against claims of infringement. Any such litigation may result in substantial costs and diversion of resources and, if decided unfavorably to us, could have a material adverse effect on our business. We also may incur substantial acquisition or settlement costs to the extent that it would strengthen or expand our intellectual property rights or limit our exposure to intellectual property claims of third parties.

Breach of information confidentiality, integrity and availability may lead to interruption of business critical processes, a loss of market share and claims from subscribers, regulators, and partners which could materially adversely affect our reputation, business, financial condition, results of operations and prospects.

We ensure the security of restricted information processing in corporate information systems, including when working remotely (for example, distant work period). However, unauthorized actions of our employees and partners that violate information security policy, as well as illegal actions of third parties may lead to breach of information confidentiality, integrity and availability, including subscriber data leakage, and, as a result, to interruption of business-critical processes, a loss of market share, claims from subscribers, regulators, and partners what could materially adversely affect our reputation, business, financial condition, results of operations and prospects.

For example, in January 2003, part of our database of subscribers, containing private subscriber information, was illegally copied and stolen. In addition, in May 2003, certain subscriber databases of several operators in the North-West Region, including those of MTS, MegaFon, Delta Telecom and two other operators, were stolen. In each case, the stolen databases were thereafter available for sale in Russia. Despite the measures taken, we cannot completely exclude the possibility of such incidents occurring in the future. See also "—Legal Risks and Uncertainties—Russian and foreign legislation on personal data and information security in information systems and communication networks may turn out to be hard to implement and require significant resources. Inability to comply with the requirements may lead to sanctions."

Alleged medical risks of cellular technology may subject us to negative publicity or risk of litigation, decrease our access to base station sites, diminish subscriber usage and hinder access to additional financing.

Electromagnetic emissions from transmitter masts and mobile handsets may harm the health of individuals exposed for long periods of time to such emissions. The actual or perceived health risks of transmitter masts and mobile handsets could materially adversely affect us or our subsidiaries by reducing subscriber growth, reducing usage per subscriber, increasing the number of product liability lawsuits, increasing the difficulty of obtaining or maintaining sites for base stations and/or reducing the financing available to the wireless communications industry. Each of these potential risks may adversely affect our business, financial condition, results of operations and prospects.

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Risks Relating to our Financial Condition

We may be adversely affected by the current economic environment.

As a result of the macroeconomic challenges, resulting from a number of reasons, including but not limited to, COVID-19 outbreak, credit market crisis (including uncertainties with respect to financial institutions and the global capital markets), decreased prices for major export commodities (including oil and metals) and other factors currently affecting many of the markets in which we operate, our clients' disposable incomes and our vendors' cash flows may be adversely impacted. See also "—Ruble volatility and regulatory changes in foreign currency regulation could increase our costs, decrease our available funds or make it more difficult for us to comply with financial covenants and to repay our debts and would affect the value of dividends received by holders of ADSs".

Consequently, customers may modify or decrease their usage of our services and products or fail to pay the outstanding balances on their accounts, and vendors may significantly increase their prices, eliminate vendor financing, reduce their output or fail to supply equipment, subscriber devices and services on a timely basis.

We may also experience increases in accounts receivable and bad debt among corporate subscribers, some of whom may face liquidity problems and potential bankruptcy, as well as the potential bankruptcy of our corporate partners. The deterioration of economies in the countries of our operation may lead, inter alia, to insolvency of financial institutions, which in turn may impact our business and financial condition.

A decline in subscriber usage, an increase in bad debts, material changes in equipment pricing or financing terms or the potential bankruptcy of our corporate subscribers or partners may have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, a further deterioration in macroeconomic conditions could require us to reassess the value of goodwill on certain of our assets, recorded as a difference between the fair value of the assets of business acquired and its purchase price. This goodwill is subject to impairment tests on an ongoing basis. The weakening macroeconomic conditions in the countries in which we operate and/or a significant difference between the performance of an acquired company and the business case assumed at the time of acquisition could require us to write down the value of the goodwill or portion of such value. Future write-downs relating to the value of the goodwill or portion of such value could have a material adverse effect on our financial condition and results of operations.

Continued turmoil in the credit markets could cause our business, financial condition, results of operations and the value of our shares and ADSs to suffer.

Sanctions introduced by the United States and the European Union with respect to the Russian Federation coupled with an economic downturn and decline in global oil prices caused a significant capital outflow, ruble depreciation, a rise of credit rates in the domestic market and a lack of available financing.

For example, certain Russian banks have in the past experienced difficulties that have caused them to become insolvent and have their licenses revoked, such as Bank Yugra, or to recognize large loan impairment provision losses that required steps to replenish their capital, as in the case of the Promsvyazbank, Bin Bank and Otkritie Bank.

During the period from 2016 and 2017 the cost of funding was decreasing, as the Central Bank of Russia periodically cut the key rate. However, in 2018, the rate cut cycle ended taking into account the dynamics of inflation and inflation expectations, as well as risks posed by external conditions and the reaction of financial markets. In September 2018 (for the first time since 2014), the Board of Directors of the Central Bank of Russia decided to raise the key rate by 0.25 p.p. (up to 7.5%). In December

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2018, the key rate was further raised up to 7.75%. In June 2019 the Central Bank of Russia has decided to decrease the key rate by 0.25 p.p. (down to 7.5%), and taking into account decrease of inflation rate key rate decrease continued and in July 2020 reached 4.25%. In March 2021 the key rate grew up to 4.5%. Should the key rate grow in the future, this may negatively affect the cost of funding. A continuation or repetition of the downturn in the global financial markets as well as a toughening or extension of international sanctions against Russia and the resulting volatility of the trading price of our shares and ADSs may negatively impact our ability to obtain financing on commercially reasonable terms, either domestically or overseas, and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our inability to generate sufficient free cash flow to satisfy our debt service obligations or to refinance debt on commercially reasonable terms, could materially adversely affect our business, financial condition, results of operations and prospects.

We have an amount of outstanding indebtedness, primarily consisting of the obligations we entered into in connection with our notes and bank loans. For information about our debt and finance cost, see "Item 5—Operating and Financial Review and Prospects—A. Operating Results."

Our ability to service, repay and refinance our indebtedness and to fund planned capital expenditure will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, we may default under the terms of our financial indebtedness, and the holders of our indebtedness would be able to accelerate the maturity of such indebtedness, potentially causing cross-defaults under and acceleration of our other indebtedness. The existing debt servicing is becoming more difficult due to our dependence on floating interest rates in the financial markets.

We may not be able to generate sufficient cash flow or access domestic or international capital markets, or incur additional loans to enable us to service or repay our indebtedness or to fund our other liquidity needs. We may be required to refinance all or a portion of our indebtedness on or before maturity for a number of reasons. For example, the terms of some of our loan agreements may require us to prepay the loan in certain circumstances, such as a deterioration in our credit rating, a delisting of our shares or a drop in our retained earnings below a certain level. This, in turn, may force us to sell assets, reduce or delay capital expenditure or seek additional capital. Refinancing or additional financing may not be available on commercially reasonable terms or at all, and we may not be able to sell our assets or, if sold, the proceeds therefrom may not be sufficient to meet our debt service obligations. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance debt on commercially reasonable terms, would materially adversely affect our business, financial condition, results of operations and prospects. See "Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources."

Ruble volatility and regulatory changes in foreign currency regulation could increase our costs, decrease our available funds or make it more difficult for us to comply with financial covenants and to repay our debts and would affect the value of dividends received by holders of ADSs.

The ruble has weakened significantly against the U.S. dollar during the period of 2014 to 2016, which can be explained by external geopolitical factors, limited financial markets, decrease in oil prices, international ratings agencies' downgrades of Russia's sovereign rating, reduction in internal consumption and other factors.

The ruble remained under pressure in 2018, against the backdrop of geopolitical tensions as well as investors outflow from the emerging markets. As of December 31, 2018, ruble amounted to 69.47

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per one U.S. dollar. As of December 31, 2019, ruble amounted to 61.91 per one U.S. dollar. The ruble suffered steep drop in the beginning of 2020 from 61.91 rubles per U.S. dollar as at January 1, 2020 to 80.88 rubles per U.S. dollar as at March 24, 2020 as a result of the COVID-19 outbreak and drop in oil prices with Brent Crude oil price reaching a low of $22.76 per barrel on March 30, 2020. As of December 31, 2020, the ruble exchange rate was RUB 73.88 per 1 US dollar. See also "—Fluctuations in the global economy may materially adversely affect the economies of the countries where we operate and our business in these countries."

See also "—Changes in the exchange rate of local currencies in the countries where we operate against the Russian ruble, as well as changes in the exchange rate of the Russian ruble and local currencies against the U.S. dollar and/or euro could adversely impact our financial results."

The stability of the ruble will depend on many political and economic factors. These include the ability of the government to finance the deficit of the state budget without recourse to monetary emissions and to control the level of interest rates and inflation. Furthermore, changes in foreign currency regulation may affect our ability to fund payments denominated in foreign currency and result in us entering into supplementary agreements with our foreign counterparts.

A significant portion of our capital expenditure and liabilities and borrowings are either denominated in or tightly linked to the U.S. dollar. Conversely, a majority of our revenues are denominated in rubles. As a result, devaluation of the ruble against the U.S. dollar can adversely affect us by increasing our costs in rubles, both in absolute terms and relative to our revenues, and make it more difficult to comply with the financial ratios contained in our various loan agreements or fund cash payments on our indebtedness on time. It also reduces the U.S. dollar value of tax savings arising from tax incentives for capital investment and the depreciation of our property, plant and equipment, since their basis for tax purposes is denominated in rubles at the time of the investment. Increased tax liability would also increase total expenses, which would have an adverse impact on our results.

We also anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of the ADSs. Accordingly, the value of dividends received by holders of ADSs will be subject to fluctuations in the exchange rate between the ruble and the U.S. dollar. Any further depreciation of the ruble against the U.S. dollar could therefore materially adversely affect our financial condition, results of operations and prospects and the value of our ADSs. See also "Item 11—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

Changes in the exchange rate of local currencies in the countries where we operate against the Russian ruble, as well as changes in the exchange rate of the Russian ruble and local currencies against the U.S. dollar and/or euro could adversely impact our financial results.

A significant portion of our expenditure and liabilities, including capital expenditure and borrowings (including our U.S. dollar denominated notes), are either denominated in, or closely linked to, the U.S. dollar and/or euro, while substantially all of our revenues are denominated in local currencies of the countries where we operate. If the local currencies of the countries where we operate decline against the U.S. dollar and/or euro and our costs increase so that we cannot keep pace, we could have difficulty repaying or refinancing our U.S. dollar and/or euro-denominated indebtedness, including our U.S. dollar denominated notes. At the same time, the devaluation of local currencies against the Russian ruble can adversely affect our revenues reported in Russian rubles and increase our costs in terms of local currencies. In addition, local regulatory restrictions on the purchase of hard currency in the majority of countries where we operate may delay our ability to purchase equipment and services necessary for network expansion which, in turn, may cause difficulty in expanding our subscriber base in those countries. Further, a portion of our cash balances is held in jurisdictions

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outside Russia, and as a result of currency exchange controls in those jurisdictions, these cash balances may not always be readily available for our use.

On July 1, 2016, Belarus redenominated its currency on a scale of 10,000:1. As of December 31, 2018 and December 31, 2019, the official exchange rate published by the National Bank of the Republic of Belarus amounted to 2.16 and 2.10 Belarusian rubles per one U.S. dollar, respectively. The possible devaluation of the Belarusian ruble in the future may adversely affect our revenues from this market. As of December 31, 2020, the official exchange rate was 2.58 Belarusian rubles per 1 U.S. dollar.

See also "—Inflation could increase our costs and adversely affect our results of operations" and "Item 11—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

If we are unable to obtain adequate capital, we may have to limit our operations substantially, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We have to make significant capital expenditure, particularly in connection with the development, construction and maintenance of, and the purchasing of necessary software for, our mobile and fixed-line networks. For information about our capital expenditures, see "Item 4—Information on Our Company—A. History and Development—Capital Expenditure." Further, the acquisition of 3G and 4G licenses and frequency allocations and the build-out of our 3G, 4G and broadband Internet networks will require additional capital expenditure.

However, future financings and cash flow from our operations may not be sufficient to meet our planned needs in the event of various unanticipated potential developments, including the following:

•: a lack of external financing sources;
•: changes in the terms of existing financing arrangements;
•: construction of the wireless networks at a faster rate or higher capital cost than anticipated;
•: pursuit of new business opportunities or investing in existing businesses that require significant investment;
•: acquisitions or development of any additional wireless licenses;
•: slower than anticipated subscriber growth;
•: slower than anticipated revenue growth;
•: regulatory developments;
•: changes in existing interconnect arrangements; or
•: a deterioration in the economies of the countries where we operate.

During the period from 2014 to 2020, the United States and the European Union announced sanctions applying to a number of Russian and Ukrainian individuals and associated institutions. The sanctions may be extended and our ability to gain external funding may be affected. See also "—Political and Social Risks—A deterioration in relations between Russia and other former Soviet republics as well as other politically related disagreements and allegations between Russia and other countries and sanctions imposed as a result thereof, could materially adversely affect our business, financial condition, results of operations, prospects and the value of our shares and ADSs."

Our indebtedness and the limits imposed by covenants in our debt obligations could limit our ability to obtain additional financing and thereby constrain our ability to invest in our business and place us at a possible competitive disadvantage. In addition, we are currently unable to raise equity financing through newly issued depositary receipts, such as ADSs, due to Russian securities regulations

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providing that no more than 25% of a Russian company's shares may be circulated abroad through sponsored depositary receipt programs. Prior to December 31, 2005 and at the time of our initial public offering, this threshold was 40% and our current ADSs program is near its full capacity. If we cannot obtain adequate funds to satisfy our capital requirements, we may need to limit our operations significantly, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Inflation could increase our costs and adversely affect our results of operations.

The Russian economy has been characterized by high rates of inflation, which over the past few years have been mainly driven by weakening of national currencies, restrictions on foreign trade and acceleration in food prices.

In 2014, the Bank of Russia implemented an inflation targeting program. As a result of this, inflation in Russia reached 4.3% in 2018, 3.0% in 2019 and 4.9% in 2020. The Bank of Russia plans to maintain inflation at the 4% target level in the long-term. To achieve this target, the Bank of Russia will more likely change main parameters of monetary policy. However, despite its plans to maintain inflation at the target level, there are risks of inflation increase due to the following factors:

•: possible unfreezing of monopolies' tariffs. During last 10 years tariffs of infrastructure monopolies significantly affected inflation parameters, and contributed more than 40% to the total price volatility in certain years;
•: import of inflation due to exchange rate of the Russian ruble. Cumulative effect of domestic prices change in response to change of exchange rate of the Russian ruble is defined as an effect of transferring dynamics of an exchange rate to prices, it has been salient during rubble depreciation in 2014 and 2015; and
•: low monetization of the Russian economy. The degree of monetization of the Russian economy is lower than in developed countries and in countries of the Eastern Europe. Attempts to increase the monetization of the Russian economy by raising money supply will likely lead to an increase in inflation due to the lack of confidence on the part of residents and non-residents in the Russian banking system.

In addition, a further decline in global oil prices coupled with capital outflow from growing markets and depreciation of national currencies might cause a rise in inflation. High inflation levels may lead, inter alia, to market instability, reductions in consumer purchasing power and an erosion of consumer confidence as well as increased marketing expenditure that could, in turn, affect our operating margins and profitability.

At the end of 2018 and 2019, inflation in Belarus amounted to 5.6% and 4.7%, respectively. For the year ended 31 December 2020, the annual rise of consumer prices published by the National Bank of the Republic of Belarus amounted to 7.4%.

High rates of inflation in Russia and other countries of our operation could increase our costs and decrease our operating margins. See also "Item 5—Operating and Financial Review and Prospects—A. Operating Results—Certain Factors Affecting our Financial Position and Results of Operations—Inflation."

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Indentures relating to some of our notes contain, and some of our loan agreements and Sistema's loan agreements contain, restrictive covenants, which limit our ability to incur debt and to engage in various activities.

Covenants in the agreement relating to our Eurobonds due 2023 limit our ability to create liens on our properties, merge or consolidate with another person or convey our properties and assets to another person.

Some of our loan agreements contain similar and other covenants, including, in relation to the incurrence of indebtedness, creation of liens and disposal of assets. We may also incur additional credit obligations providing for similar covenants. Failure to comply with these covenants may cause a default and result in the debt becoming immediately due and payable, which would materially adversely affect our business, financial condition and results of operations.

In addition, Sistema, which owns a controlling stake in MTS and consolidates our results in its financial statements, is subject to various covenants in its credit facilities. These covenants impose restrictions on Sistema and its restricted subsidiaries (including us) with respect to, inter alia, incurrence of indebtedness, creation of liens and disposal of assets. In its indentures, Sistema undertakes that it will not, and will not permit its restricted subsidiaries (including us) to, incur indebtedness unless a certain indebtedness level / EBITDA ratio is met. In addition to us, Sistema has various other businesses that require capital and, therefore, the consolidated Sistema group's capacity to incur indebtedness otherwise available to us could be diverted to its other businesses. Sistema may also enter into other agreements in the future that may further restrict it and its subsidiaries (including us) from engaging in these and other activities. We expect Sistema to exercise control over us in order for Sistema, as a consolidated group, to meet its obligations under its current and future financings and other agreements, which could materially limit our ability to obtain additional financing required for the implementation of our business strategy. The inability to implement our business strategy may have a material adverse effect on our financial condition and results of operations.

A change in control could have a material adverse effect on our financial condition and results of operations.

Under the terms of our outstanding notes, if a change in control occurs, our noteholders will have the right to require us to redeem notes not previously called for redemption. The price we will be required to pay upon such event will be 101% of the principal amount of the notes, plus interest accrued prior to the redemption date. A change in control will be deemed to have occurred in any of the following circumstances:

•: with respect to the notes due 2023, any person acquires beneficial or legal ownership of, or control over, more than 50% of our issued shares, ownership of or control over more than 50% of the voting interests in our share capital or obtains the power to elect not less than half of our directors, provided that the following transactions would not be deemed to result in a change of control:
•: any acquisition by Sistema or its subsidiaries that results in the 50% threshold being exceeded;
•: any acquisition by us, our subsidiary or our employee benefit plan; and
•: a contribution by Sistema of all or part of its ownership interest in us into a partnership, joint venture or other indirect holding vehicle as long as any other person who is an owner of or party interested in that partnership, joint venture or other indirect holding vehicle does not acquire beneficial ownership of or control over more than 50% of our issued shares, does not acquire ownership of or control over more than 50% of the voting interests in our share capital and does not obtain the power to elect not less than half of our directors.

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Some of our loan agreements contain similar change of control provisions. If a change in control occurs, and our noteholders and other debt holders exercise their right to require us to redeem all of their notes or debt, such event could have a material adverse effect on our financial condition and results of operations.

In addition, under certain of our debt agreements, an event of default may be deemed to have occurred and/or we may be required to make a prepayment if Sistema disposes of its stake in our company and a third party takes a controlling position in our company. The occurrence of any such event of default or failure to make any required prepayment, which leads to an event of default, could trigger cross default / cross acceleration provisions under certain of our other debt agreements. In such event, our obligations under one or more of these agreements could become immediately due and payable, which would have a material adverse effect on our business and our shareholders' equity. If Sistema were to dispose of its stake in us, our company may be deprived of the benefits and resources that it derives from Sistema, which could harm our business.

Risks Relating to Economic Risks in Our Countries of Operation

Economic instability in the countries where we operate could adversely affect our business.

Since the dissolution of the Soviet Union in 1991, the economies of Russia and other countries where we operate have experienced periods of considerable instability. For example, GDP level significantly impacted basic commodity prices as was detected during the crisis in 2008 and 2009.

In 2017, the GDP growth amounted to 1.8%, according to the Federal State Statistics Service. The Federal State Statistics Service estimated that the Russian economy grew by 2.5% in 2018 and by 1.3% in 2019. However, the Russian GDP decreased by 3.1% in 2020 due to COVID-19 outbreak as well as a drop in global demand for energy resources.

Any future economic downturns in Russia or the other countries where we operate, could lead to a decrease in demand for our services and, consequently, in our revenues, and negatively affect our liquidity position and ability to obtain further debt financing, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

The Russian banking system remains underdeveloped, the number of creditworthy banks in Russia is limited and another banking crisis could place severe liquidity constraints on our business.

Russia's banking and financial services systems are less developed or regulated as compared to other countries, and Russian legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent application. The August 1998 financial crisis resulted in the bankruptcy and liquidation of many Russian banks and almost entirely eliminated the developing market for commercial bank loans at that time. Many Russian banks currently do not meet international banking standards, and the transparency of the Russian banking sector in some respects still lags far behind internationally accepted norms. Aided by inadequate supervision by the regulators, certain banks do not follow existing CBR regulations with respect to lending criteria, credit quality, loan loss reserves or diversification of exposure. Furthermore, in Russia, bank deposits made by corporate entities are generally not insured.

In recent years, there has been a rapid increase in lending by Russian banks, which has been accompanied by a deterioration in the credit quality of the borrowers. In addition, a robust domestic corporate debt market is leading Russian banks (including the banks with which we conduct banking transactions) to hold increasingly large amounts of Russian corporate ruble bonds in their portfolios, which is further deteriorating the risk profile of Russian bank assets. The serious deficiencies in the Russian banking sector, combined with the deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to market downturns or economic slowdowns,

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including due to Russian corporate defaults that may occur during any such market downturn or economic slowdown. In addition, the CBR has from time to time revoked the licenses of certain Russian banks, which resulted in market rumors about additional bank closures and many depositors withdrawing their savings. Recently, a number of banks and credit institutions have lost their licenses due to the deficiency of capital and failure to meet the CBR requirements. In 2014-2018, for instance, the CBR revoked the licenses of a number of Russian banks for reasons associated with implementing high-risk lending policies, loss of liquidity and non-compliance with anti-money laundering legislation. A combination of these factors may result in a significant deterioration in the financial fundamentals of Russian banks, notably liquidity, asset quality and profitability. In addition, the Russian banking sector may experience instability and weaker financial results due to the ongoing volatility in the global financial and commodity markets, as well as any decline in the Russian economy as a result of COVID-19 outbreak and the decline in oil prices.

There is currently a limited number of sufficiently creditworthy Russian banks and few ruble denominated financial instruments in which we can invest our excess ruble cash. We hold the bulk of our excess ruble and foreign currency cash in Russian banks, including subsidiaries of foreign banks.

In the event of a banking crisis, Russian companies may be subject to severe liquidity constraints due to the limited supply of domestic savings and the withdrawal of foreign funding sources that may occur during such crisis. Another banking crisis or the bankruptcy or insolvency of the banks from which we receive or with which we hold our funds could result in the loss of our deposits or affect our ability to complete banking transactions in Russia, which could have a material adverse effect on our business, financial condition and results of operations.

The physical infrastructure in Russia and the other countries where we operate is generally in poor condition, which could disrupt our normal business activities and adversely impact our results.

The physical infrastructure in Russia and the other countries where we operate does not always meet modern technical requirements, has not been always funded and maintained over the past years.

Particularly affected are the rail and road networks, power generation and transmission systems, communication systems and building stock. For example, in August 2009, a major accident occurred at Russia's largest power plant, the Sayano-Shushenskaya hydroelectric power station, resulting in flooding of the engine and turbine rooms and the death of 75 people. Power generation from the station ceased completely following the incident, which led to a major power outage in the nearby residential areas and at certain industrial facilities as well as pollution of the rivers and soil as a result of an oil spill from the transformer.

In addition, the road conditions throughout our countries of operation may be poor with many roads not meeting minimum quality standards, causing disruptions and delays in the transportation of goods to and within these countries. The governments of the countries where we operate are actively considering plans to reorganize their national rail, electricity and communications systems. Any such reorganization may result in increased charges and tariffs while failing to generate the anticipated capital investment needed to repair, maintain and improve these systems. The deterioration or insufficient renewal of the physical infrastructure in the countries where we operate harms the national economies, adds costs to doing business in these countries and impedes companies to operate effectively. These difficulties can impact us directly; for example, we keep portable electrical generators to help us maintain base station operations in the event of power outages. Further deterioration of the physical infrastructure in Russia and the other countries where we operate could have a material adverse effect on our business, financial condition and results of operations. In addition, the increased charges and tariffs that may result from the government reorganization may also have a material adverse effect on our business, financial condition and results of operations.

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Fluctuations in the global economy may materially adversely affect the economies of the countries where we operate and our business in these countries.

The economies of the countries where we operate are vulnerable to market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Russia and the other countries where we operate, and businesses in these countries could consequently face severe liquidity constraints. Additionally, as Russia produces and exports large amounts of oil and gas, the Russian economy is especially vulnerable to the price of oil and gas on the world market and a decline in the price of oil and gas could negatively impact its economy. See also "—Ruble volatility and regulatory changes in foreign currency regulation could increase our costs, decrease our available funds or make it more difficult for us to comply with financial covenants and to repay our debts and would affect the value of dividends received by holders of ADSs". In addition, recent military conflicts and international terrorist activity have significantly impacted the oil and gas prices globally, and pose additional risks to the Russian economy. Russia is also a major producer and exporter of metal products and its economy is vulnerable to world commodity prices and the imposition of tariffs and/or anti-dumping measures by the United States, the European Union or other principal export markets.

Although our results have not been materially affected by the pandemic to date, there can be no assurance that our business could be materially affected. For more information see "—The outbreak of COVID-19 may have a material adverse effect on our business, financial condition, results of operations and prospects ."

The disruptions recently experienced in the domestic and international capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing. Companies located in emerging markets, including us, may be particularly susceptible to these disruptions and reductions in the availability of credit or increases in financing costs. To the extent that the current market downturn continues or worsens, it may lead to constraints on our liquidity and ability to obtain debt financing, which may have a material adverse effect on our business, financial conditions and results of operations.

Political and Social Risks

Political and governmental instability in Russia and other countries of our operations could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

The political and economic situation in Russia has been negatively affected by the global financial crisis, the economic sanctions imposed by the United States and the European Union, the ongoing volatile economic conditions as well as the continuing impact of COVID-19 pandemic. Other countries where we operate may pose similar challenges. Current and possible future political changes in Russia and other countries where we operate, major policy shifts or a lack of consensus between the various branches of power and powerful economic groups could disrupt or reverse economic and regulatory reforms. This could, in turn, lead to further political instability or conflicts among powerful economic groups, which could have a material adverse effect on our business, financial condition, results of operations, prospects and the value of our shares and ADSs. For example, after the presidential elections, which took place on August 9, 2020, protests began in Belarus. Further destabilization of the political and social situation can negatively affect our business, financial position and operations. A deterioration of the socio-political situation in Russia could also trigger an event of default under some of our loan agreements.

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On July 4, 2020, the Law of the Russian Federation on Amendment to the Constitution of the Russian Federation came into force which implemented a number of constitutional reforms aimed at altering the balance of power between the legislative, executive and judicial branches and introducing certain other changes to the Constitution of the Russian Federation. This Law, among other things, prioritizes the Constitution of the Russian Federation over international treaties and the decisions of international bodies, strengthens the Russian State Council as an advisory board to the Russian President and grants the Russian Federal Council with authority to terminate the powers of the judges of the Constitutional Court of Russia upon the recommendation of the Russian President. These amendments to the Constitution may have a significant impact on the Russian political landscape and regulatory environment and lead to other changes that are currently difficult to predict.

Potential conflict between central and regional authorities could create an uncertain operating environment hindering our long-term planning ability.

The Russian Federation is a federation of units, consisting of republics, territories, regions, cities of federal importance and autonomous regions and districts. The delineation of authority and jurisdiction among the members of the Russian Federation and the federal government is, in many instances, unclear and remains contested. A lack of consensus between the federal government and local or regional authorities could result in the enactment of conflicting legislation at various levels and may lead to political instability. In particular, conflicting laws have been enacted in the areas of privatization, land legislation and licensing. Some of these laws, as well as governmental and administrative decisions implementing them and certain transactions consummated pursuant to them, have in the past been challenged in the courts, and such challenges may occur in the future. This lack of consensus may hinder our long-term planning efforts and create uncertainties in our operating environment, both of which may prevent us from effectively and efficiently implementing our business strategy.

Additionally, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases, military conflict, which can halt normal economic activity and disrupt the economies of neighboring regions. The further intensification of violence, including terrorist attacks and suicide bombings, or its spread to other parts of Russia, could have significant political consequences, including the imposition of a state of emergency in some parts or the whole of Russia. Moreover, any terrorist attacks and the resulting heightened security measures are likely to cause disruptions to domestic commerce and exports from Russia. Any of these factors could materially adversely affect our business and the value of our shares and ADSs.

A deterioration in relations between Russia and other former Soviet republics, as well as other politically related disagreements and allegations between Russia and other countries and sanctions imposed as a result thereof, could materially adversely affect our business, financial condition, results of operations, prospects and the value of our shares and ADSs.

Relations between Russia and certain other former Soviet republics are or have in the past been strained. For example, in August 2008, an armed conflict erupted between Russia and Georgia over the self-appointed republics South Ossetia and Abkhazia, culminating in Russia's recognition of their independence from Georgia. The political and economic relationships between Ukraine and Russia have also been strained in recent years. On March 16, 2014, a referendum in favor of joining the Russian Federation was held in Crimea with the consequent declaration of independence Crimea from Ukraine and the accession to the Russian Federation by the parliament of Crimea. The armed conflict in Eastern Ukraine that has taken place since April 2014 has destabilized the region. These events have resulted in heightened tensions between Ukraine and the Russian Federation and have strained relationships of the Russian Federation with the United States and the European Union, which may adversely impact our business.

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The United States and the European Union have imposed sanctions on certain Russian and Ukrainian persons and entities. No individual or entity within our group has been designated with sanctions introduced by either the United States or the European Union. However, additional designations may be made, or additional categories of sanctions may be created, at any time, and we can give no assurance that any member of our group, or individuals holding positions within our group as well as our counterparties, will not be affected by future sanctions designations. There are multiple discussions relating to potential additional sanctions against the Russian Federation, Russian individuals and Russian enterprises, however it is currently unclear at which point, if at all, any of these sanctions could be introduced and what would be the scope of any new sanctions that may be imposed.

Non-compliance with any potential sanctions could result in, among other things, the inability of the relevant group entities to contract with the governmental authorities of the United States or the decision-making and executive bodies of the European Union, or their agencies, potential civil or criminal liability for the sanctioned individuals and entities and their associates under the US and/or EU law, the imposition of significant fines and reputational damage.

Further tensions between Russia and other countries and any escalation of the existing tensions, the imposition of further sanctions, or continued uncertainty regarding the scope thereof, could have a negative effect on the Russian economy, the financial condition of our partners and suppliers, the financial condition of partners and suppliers of our subsidiaries, our ability to conduct trade and financial transactions, our ability to obtain financing on commercially reasonable terms (or at all), and the level and volatility of the trading price of our shares and ADSs. See also "—Risks Relating to our Financial Condition—Changes in the exchange rate of local currencies in the countries where we operate against the Russian ruble, as well as changes in the exchange rate of the Russian ruble and local currencies against the U.S. dollar and/or euro could adversely impact our financial results."

Crime and corruption could disrupt our ability to conduct our business and thus materially adversely affect our operations.

The political and economic changes in recent years in the countries where we operate have resulted in significant dislocations of authority. In addition, the local and international press have reported high levels of corruption, including the bribing of officials for the purpose of initiating investigations by government agencies. Press reports have also described instances in which government officials engaged in selective investigations and prosecutions to further the commercial interests of certain government officials or certain companies or individuals. Additionally, some members of the media in the countries we operate in regularly publish disparaging articles in return for payment. The depredations of organized or other crime or demands of dishonest officials could result in negative publicity, disrupt our ability to conduct our business and could thus materially adversely affect our business, financial condition, results of operations and prospects. Any actions which could result in a negative effect on investor confidence in Russia's business and legal environment could have a further material adverse effect on the Russian securities market and prices of Russian securities or securities issued or backed by Russian entities, including the shares.

Actions of fraudsters aimed against subscribers cause additional risks for operators. Despite our efforts to detect and prevent fraud, some forms of rendering services (for example, offering payments via external Internet sources) might entail risks of fraudulent charge-offs from subscribers' personal accounts. Such fraud actions could negatively affect our reputation and lead to an increase in subscriber churn, which could materially adversely affect our business, financial condition, results of operations and prospects.

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Social instability could increase support for renewed centralized authority, nationalism or violence and thus materially adversely affect our operations.

The failure of the government and many private enterprises to pay full salaries on a regular basis and the failure of salaries and benefits generally to keep pace with the rapidly increasing cost of living have led in the past, and could lead in the future, to labor and social unrest. Labor and social unrest may have political, social and economic consequences, such as increased support for a renewal of centralized authority; increased nationalism, including restrictions on foreign involvement in the economies of the countries where we have operations; and increased violence. An occurrence of any of the foregoing events could restrict our operations and lead to the loss of revenues, materially adversely affecting our operations.

Legal Risks and Uncertainties

Weaknesses relating to the legal system and legislation in the countries where we operate create an uncertain environment for investment and business activity, which could have a material adverse effect on the value of our shares and ADSs.

Each of the countries we operate in is still developing the legal framework required to support the market economy. The following risk factors relating to these legal systems create uncertainties with respect to the legal and business decisions that we make, many of which do not exist in countries with more developed market economies:

•: inconsistencies between and among the constitution, federal and regional laws and subordinate legislation (presidential decrees and governmental, ministerial and local orders, decisions and resolutions) and other acts;
•: legislation ambiguities which do not allow to predict how these provisions should be followed and how an authorized body or a court will interpret these provisions;
•: the lack of judicial and administrative guidance on interpreting certain legislation as well as conflicting interpretations of supreme general jurisdiction and arbitrazh courts;
•: the lack of necessary legislation in the reality of digital economy and rapid developing of new technologies;
•: the relative inexperience of judges and courts in interpreting certain aspects of legislation;
•: the lack of an independent judiciary;
•: a high degree of discretion on the part of governmental authorities, which could result in arbitrary actions such as suspension or termination of our licenses; and
•: poorly developed bankruptcy and liquidation procedures and court practice that create possibilities of abuse.

The recent nature of much of the legislation in the CIS countries, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of these legal systems in ways that may not always coincide with market developments place the enforceability and underlying constitutionality of laws in doubt and result in ambiguities, inconsistencies and anomalies. In addition, legislation in these countries often contemplates implementing regulations that have not yet been promulgated, leaving substantial gaps in the regulatory infrastructure. All of these weaknesses could affect our ability to enforce our rights under our licenses and contracts, or to defend ourselves against claims by others. Moreover, it is possible that regulators, judicial authorities or third parties may challenge our internal procedures and bylaws, as well as our compliance with applicable laws, decrees and regulations.

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The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and results of operations.

If we are unable to protect our business entities in the countries in which we operate from the withdrawal or suspension or regulatory scrutiny, this may adversely affect our business, financial condition and results of operations. For example, in June 2012, the authorities of the Republic of Uzbekistan began audits of the financial and operating activities of our wholly owned subsidiary, Uzdunrobita. Further various claims for violation of tax, antimonopoly and industry legislation were made against Uzdunrobita, which resulted in significant amounts of fines and penalties, revocation of all licenses and suspension of services. Total amount of damages was calculated and determined on the basis of all the aforementioned claims against Uzdunrobita and amounted to approximately RUB 18,375 million payable in equal installments over eight months.

Uzdunrobita paid two scheduled installments in November and December 2012 totaling approximately RUB 4,583.4 million. On January 14, 2013, further to its partial payment of the third installment due in January 2013 totaling approximately RUB 481 million and constituting the remaining amount of cash held in its bank accounts, Uzdunrobita filed a petition for voluntary bankruptcy to the Tashkent Economic Court on the grounds of its inability to meet further obligations.

On April 22, 2013, the Tashkent Economic Court declared Uzdunrobita bankrupt and initiated a liquidation process. Uzdunrobita was later liquidated. In 2012, we filed a claim against the Republic of Uzbekistan in the International Center for Settlement of Investment Disputes ("ICSID"), part of the World Bank Group, in Washington, D.C.

On July 31, 2014, we and the Republic of Uzbekistan signed a settlement agreement (the "Settlement Agreement") and MTS agreed to reenter the Uzbekistan market through a joint enterprise with MTS holding a 50.01% in the charter capital of the joint enterprise, while the remaining 49.99% belongs to a state-owned unitary enterprise established and managed by the State Committee for Communications, Development of Information Systems and Telecommunications Technologies of the Republic of Uzbekistan. The Settlement Agreement is governed by English law and provides for the resolution of any disputes arising out of the Settlement Agreement in the International Court of Arbitration under International Chamber of Commerce in Paris.

On September 24, 2014, in accordance with the Settlement Agreement, the authorities of the Republic of Uzbekistan granted the joint enterprise 2G, 3G and LTE licenses, provided necessary frequencies and numbering capacity, fostered entrance into lease agreements for communication channels and issued all permissions required to the joint enterprise so it could operate and offer full telecommunications services throughout Uzbekistan. The joint enterprise has also received guaranties for investment protection and return of investments in accordance with the laws of the Republic of Uzbekistan.

In November 2014, ICSID discontinued international arbitration proceedings between MTS and the Republic of Uzbekistan following the submission of a joint application by both parties.

On December 1, 2014, the joint enterprise, named UMS, launched sales of SIM cards through its proprietary network of 20 stores and through another 230 independent locations throughout Uzbekistan and started provision of 2G/3G telecommunications services on the entire territory of Uzbekistan. On August 5, 2016, we sold our 50.01% stake in UMS to the State Unitary Enterprise Centre of Radio Communication Radio Broadcasting and Television of the Ministry of Development of Information Technologies and Communications of the Republic of Uzbekistan. The loss on disposal of investment in Uzbekistan was recorded in the financial report for the third quarter of 2016.

See also "—Political and Social Risks—A deterioration in relations between Russia and other former Soviet republics as well as other politically related disagreements and allegations between Russia and other countries and sanctions imposed as a result thereof, could materially adversely affect

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our business, financial condition, results of operations, prospects and the value of our shares and ADSs".

An outcome of the proceedings relating to sustaining operations of our subsidiary in Turkmenistan is unpredictable.

In December 2010, the Group suspended its operations in Turkmenistan following notification by the Ministry of Communications of Turkmenistan of a decision to suspend licenses held by BCTI, the Group's wholly owned subsidiary in Turkmenistan, initially for a period of one month starting from December 21, 2010, and then permanently.

On May 24, 2012, we concluded an agreement with the state-owned telecom operator Turkmentelekom relating to our terms of operations in Turkmenistan, which resulted from negotiations between the Turkmenistan government and ministries. The agreement had a five-year term and could be extended for the following five years, provided certain terms and conditions are satisfied. Under this agreement, we were obliged to pay Turkmentelekom a monthly amount calculated as 30% of our net profit in Turkmenistan based on accounting rules of Turkmenistan.

On July 25, 2012, we, our subsidiary BCTI, the Republic of Turkmenistan, the Ministry of Communications of Turkmenistan, the state-owned company, Turkmentelecom, and a mobile operator, Altyn Asyr, signed a settlement agreement (which included the dismissal of all international lawsuits) concerning the suspension of our operations in Turkmenistan in December 2010.

In August 2012, we restarted our mobile communication network in Turkmenistan and resumed providing services to subscribers who had not canceled their contracts. Since October 1, 2012 we resumed our operations in Turkmenistan entirely and started entering into contracts with new subscribers.

MTS-Turkmenistan was compelled to suspend communication services in Turkmenistan from 00:00 September 29, 2017, due to the actions of the Government of Turkmenistan, the Ministry of Communications of Turkmenistan, the state-owned telecommunications company, Turkmentelekom, and its wholly-owned subsidiary, Altyn Asyr, the state owned mobile operator in Turkmenistan. These actions resulted in the disconnection of international and long-distance zonal communication services and Internet access.

In July 2018, we filed a Request for Arbitration against the Sovereign State of Turkmenistan with the ICSID in order to protect its legal rights and investments in Turkmenistan. The Tribunal for these proceedings was constituted on December 18, 2018 and the Company subsequently filed its Memorial (statement of claim) with ICSID on March 29, 2019. See also Note 11 to our audited consolidated financial statements and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Turkmenistan.".

Unless resolved to our satisfaction, we intend to vigorously pursue our claims in arbitration and seek all available remedies.

Russian companies can be forced into liquidation on the basis of formal non-compliance with certain legal requirements.

Certain provisions of Russian law may allow government authorities to seek a court order for the liquidation of a Russian legal entity on the basis of its formal non-compliance with certain requirements during formation, reorganization or during its operation.

For example, under Russian corporate law, if the net assets of a Russian joint stock company calculated on the basis of Russian accounting standards are lower than its charter capital as at the end of its third or any subsequent financial year, the company must either decrease its charter capital or be

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placed in liquidation. If the company fails to comply with these requirements, governmental or local authorities can seek the involuntary liquidation of such company in court, and the company's creditors will have the right to accelerate their claims or demand early performance of the company's obligations as well as demand compensation of any damages.

The existence of negative assets may not accurately reflect the actual ability to pay debts as they fall due. Many Russian companies have negative net assets due to very low historical asset values reflected on their Russian accounting standards balance sheets; however, their solvency, i.e., their ability to pay debts as they fall due, is not otherwise adversely affected by such negative net assets. Some Russian courts, in deciding whether or not to order the liquidation of a company for having negative net assets, have looked beyond the fact that the company failed to fully comply with all applicable legal requirements and have taken into account other factors, such as the financial standing of the company and its ability to meet its tax obligations, as well as the economic and social consequences of its liquidation. Nonetheless, creditors have the right to accelerate claims, and file damages claims, and governmental or local authorities may seek the liquidation of a company with negative net assets.

Courts have, on rare occasions, ordered the involuntary liquidation of a company for having net assets less than the minimum charter capital required by law, even if the company had continued to fulfill its obligations and had net assets in excess of the minimum charter capital at the time of liquidation.

The amount of net assets in accordance with the local accounting standards of some of our subsidiaries is less than the minimum charter capital required by law. Although these subsidiaries continue to meet all of their obligations to creditors, there is a minimal risk of their liquidation while the net assets remain below the minimum legal requirements.

There have also been cases in the past in which formal deficiencies in the establishment process of a Russian legal entity or non-compliance with provisions of Russian law have been used as a basis to seek the liquidation of a legal entity. Weaknesses in the Russian legal system create an uncertain legal environment, which makes the decisions of a Russian court or a governmental authority difficult, if not impossible, to predict. If involuntary liquidation were to occur, such liquidation could lead to significant negative consequences for our group.

Insufficient adherence to the independence and competitiveness of the judicial process, the difficulty of enforcing court decisions and governmental discretion in enforcing claims could prevent us or holders of our securities from obtaining effective redress in a court proceeding.

The judicial bodies in the countries where we operate are not always completely independent or immune from economic and political influences, and are often understaffed and underfunded. Judges and courts are often inexperienced in the area of business, corporate and industry (telecommunications) law. Judicial precedents generally have no binding effect on subsequent decisions, and not all court decisions are readily available to the public or organized in a manner that facilitates understanding. The judicial systems in these countries can also be slow or unjustifiably swift.

Enforcement of court orders can, in practice, be very difficult to achieve. All of these factors make judicial decisions in these countries difficult to predict and effective redress uncertain. Additionally, court claims are often used in furtherance of political and commercial aims or infighting. We may be subject to such claims and may not be able to receive a fair hearing. Additionally, court orders are not always enforced or followed by law enforcement agencies. Furthermore, recognition and enforcement of arbitral awards in countries where we operate is subject to compliance with corresponding rules of civil procedure and applicable laws, and courts in the countries where we operate may interpret applicable regulations in a manner which would result in denial of such recognition and enforcement.

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These uncertainties also extend to property rights. For example, during Russia transformation from centrally planned economy to market economy, legislation has been enacted in the country to protect private property against uncompensated expropriation and nationalization.

However, there is a risk that due to the lack of experience in enforcing these provisions and due to political factors, these protections would not be enforced in the event of an attempted expropriation or nationalization. Expropriation or nationalization of any of our entities, their assets or portions thereof, potentially without adequate compensation, would have a material adverse effect on our business, financial condition, results of operations and prospects.

Selective or arbitrary government action could have a material adverse effect on our business, financial condition, results of operations and prospects.

Governmental authorities in the countries where we operate have a high degree of discretion and, at times, act selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner that is inconsistent with legislation or influenced by political or commercial considerations.

Selective or arbitrary governmental actions have reportedly included the denial or withdrawal of licenses, sudden and unexpected tax audits and claims, criminal prosecutions and civil actions. Federal and local government entities have also used ordinary defects in matters surrounding share issuances and registration as pretexts for court claims and other demands to invalidate such issuances and registrations or to void transactions. Moreover, the government also has the power in certain circumstances, by regulation or government acts, to interfere with the performance of, nullify or terminate contracts.

In addition, the Russian tax authorities have brought tax evasion claims relating to Russian companies' use of tax-optimization schemes, and press reports have speculated that these enforcement actions have been selective. Selective or arbitrary government action, if directed at us, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Failure to comply with existing laws and regulations as well as requirements of international and regional standards or to obtain all approvals, authorizations and permits required to transmit television channels or operate telecommunications equipment, or the findings of government inspections or increased governmental regulation of our operations, could result in a disruption in our business and substantial additional compliance costs and sanctions.

Our operations and properties are subject to regulation by various government entities and agencies in connection with obtaining and renewing various licenses, approvals, authorizations and permits, as well as with ongoing compliance with existing laws, regulations and standards. Regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses, approvals, authorizations and permits and in monitoring licensees' compliance with the terms thereof. Russian authorities have the right to, and frequently do, conduct periodic inspections of our operations and properties throughout the year. Any such future inspections may conclude that we or our subsidiaries have violated laws, decrees or regulations, and we may be unable to refute such conclusions or remedy the violations. See also "—The regulatory environment for telecommunications in Russia and other countries where we operate or may operate in the future is uncertain and subject to political influence or manipulation, which may result in negative and arbitrary regulatory and other decisions against us on the basis of other than legal considerations and in preferential treatment for our competitors."

Primarily due to delays in the issuance of permits, approvals and authorizations by regulatory authorities, it is frequently not possible to procure all of the permits for each of our base stations or other aspects of our network before we put the base stations into commercial operation or to amend or maintain all of the permits when we make changes to the location or technical specifications of our

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base stations. At times, there can be a significant number of base stations or other communications facilities and other aspects of our networks for which we do not have final permits to operate and there can be delays in obtaining the final permits, approvals and authorizations for particular base stations or other communications facilities and other aspects of our networks.

We are constantly in the process of registration and re-registration of ownership over certain infrastructure facilities. For example, MGTS carries out measures aimed at registration of ownership rights to the cable line structures (CLS). At the same time, MGTS is not insured against the risks of challenging the ownership rights by third parties. MGTS performs legal registration of its ownership rights to minimize the risk. In case of receiving reasonable claims, MGTS reconciles cable line objects to distinguish the ownership rights. MGTS is ready to assert its rights to CLS in court when necessary.

In addition, we may be unable to transmit certain television channels if entities that provide television content to us do not possess the requisite licenses. In case such providers of television content do not obtain the required licenses, or have their existing licenses suspended or terminated, our selection of potential television channels for transmission could be significantly limited. The Federal Law No. 257 "On Amending Federal Law "On Mass Media" and Federal Law "On Communications" dated July 13, 2015 introduced a number of amendments to the national mandatory free television channels list. Requirements on sequence of channels, sound and image quality and signal reception points of national mandatory free television channels were adopted in September 2015. In October 2020, the Ministry of Digital Development, Communications and Mass Media adopted its Order dated July 31, 2020 No. 369 "On Determining the Requirements for the Quality of Sound and (or) Image of Mandatory Public TV and (or) Radio Channels" which updated the existing quality requirements. The inability of operators to comply with such requirements may lead to suspension or termination of a license.

Furthermore, we could be subject to fines and other penalties, including forced suspension of our cable network operators' activity for up to 90 days. In some cases of our service provision (for example, those employing GPON technology) power failures in subscribers' households may lead to non-compliance with rules regulating local telephony communication services. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.

On June 1, 2018, Federal Law No. 245 "On Amendments to the Federal Law" On Communications" entered into force and is aimed at further aligning the process of entering into a contract for the provision of mobile radiotelephone communication services without appropriate identification of a subscriber (i.e., a user) of communication services. Operators may be subject to penalties and other sanctions, including the suspension of an operator's activity for up to 90 days, for non-compliance with the Law.

Our failure to comply with existing laws and regulations of the countries where we operate as well as requirements of international and regional standards or to obtain all approvals, authorizations and permits required to operate telecommunications equipment, or the findings of government inspections including the State Labor Inspection Service may result in the imposition of fines or penalties or more severe sanctions including the suspension, amendment or termination of our licenses, approvals, authorizations and permits, or in requirements that we cease certain of our business activities, or in criminal and administrative penalties applicable to our officers. We have also engaged in certain disputes, which could require us to pay damages or settlements. We may incur expenses in defending these lawsuits. See "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation".

Moreover, an agreement or transaction entered into in violation of law may be invalidated and/or unwound by a court decision. Any such decisions, requirements or sanctions, or any increase in governmental regulation of our operations, could result in a disruption of our business and substantial

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additional compliance costs and could materially adversely affect our business, financial condition, results of operations and prospects. In addition, we may assume risks of potential claims from subscribers and regulating authorities regarding former activities of the acquired or merged businesses.

Generally, communication networks are vulnerable to physical or software break-ins, viruses, unauthorized interferences and similar events. Should such events occur with respect to our network elements, we may become subject for additional inspection by the regulatory authorities. Although we obtain all necessary permissions and certificates for the operation of our equipment and provide measures to protect confidential information, our failure to fully comply with all legislation requirements could result in the imposition of fines or penalties, additional government regulations, substantial additional compliance costs, disruption of our business including its suspension or termination, and other adverse effects.

We provide certain common contractual protections to the purchaser under the VF Ukraine Sale Agreement and are subject to certain post-closing obligations.

In December 2019, we sold our telecommunication business in Ukraine under an agreement entered into with Telco Solutions and Investments LLC, as purchaser, an entity affiliated with telecommunication company Bakcell LLC, which is a part of the NEQSOL Holding international group of companies (the "Sale Agreement"), see "Item 4—Information on our Company—A. History and Development" and Note 12 to our audited consolidated financial statements for details of the transaction. We provide certain common contractual protections to the purchaser and are subject to certain post-closing obligations under the Sale Agreement. Further, the Sale Agreement contains a post-completion price adjustment mechanism. As a result of applying this mechanism, the purchase price was adjusted in our favor so we were not required to pay any sum to the purchaser.

Although we do not anticipate any further material price adjustments or other liability under the Sale Agreement, there can be no assurance that a liability will not emerge in the future, in which case it could have an adverse effect on our financial position and results of operations.

There is insufficient minority shareholder protection in Russia.

Minority shareholder protection under Russian law principally derives from (a) supermajority shareholder approval requirements for certain corporate actions, (b) the ability of a shareholder to demand that the company purchase the shares held by that shareholder if that shareholder voted against or did not participate in voting on certain types of actions, (c) the ability of a shareholder to sell his shares at a fair price when the control is changed, the company is acquired at a price determined in accordance with the requirements of the current legislation, (d) shareholders' right to challenge decisions of the company's management bodies in certain circumstances, and (e) shareholders' right to challenge transactions which caused company's loss. Companies are also required under Russian law to obtain the approval of disinterested shareholders for certain transactions with interested parties. In practice, enforcement of these protections has not always been effective. Shareholders of some companies have suffered as a result of fraudulent bankruptcies initiated by hostile creditors.

The supermajority shareholder approval requirement is met by a vote of 75% of all voting shares that are present at a shareholders' meeting. Thus, controlling shareholders owning slightly less than 75% of outstanding shares of a company may have a 75% or more voting power if certain minority shareholders are not present at the meeting. In situations where controlling shareholders effectively have 75% or more of the voting power at a shareholders' meeting, they are in a position to approve amendments to the charter of the company or significant transactions including asset transfers, which could be prejudicial to the interests of minority shareholders. It is possible that our controlling

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shareholder in the future may not operate us and our subsidiaries for the benefit of minority shareholders, and this could have a material adverse effect on the value of our shares and ADSs.

While the Federal Law on Joint Stock Companies provides that shareholders owning not less than 1% of the company's outstanding common stock may bring an action for damages caused to a company by its CEO, member of the Board of Directors or its Management Board and certain other officials acting on behalf of the company, minority shareholders may have difficulties with proving such damages with the court and as a consequence their claims may be denied by the court. In 2009, legislation was adopted which contemplates class action litigation, in 2015 mechanism of class action regarding corporate disputes was introduced and in 2019 this mechanism was updated and specified. Although there have been several disputes in the past few years, Russian courts do not have a clear and consistent approach in regards to class action litigation. In addition, the issue of claims by shareholders against the company to compensate the shareholders for their losses is not clearly regulated by the current legislation.

Accordingly, your ability to pursue legal redress against us may be limited, reducing the protections available to you as a holder of our shares and ADSs.

According to Russian legislation, shareholders/participants of Russian companies have an opportunity to demand either liquidation of a company in a judicial proceeding or exclusion of other shareholder/ participant (except for public joint stock companies) from the company.

According to the amendments to the Civil Code of the Russian Federation, which came into effect on September 1, 2014, shareholders and participants of Russian companies have, inter alia, the following rights, which can be executed via judicial proceedings:

•: to demand the liquidation of a company in case of failure to achieve a corporate purpose for which it was created, including a case when an operation of a company becomes impossible or is substantially hampered; and
•: to demand exclusion of a shareholder or a participant (except for the public joint stock companies, including MTS) whose actions/inactivity either cause significant harm or hampers the company's operations.

In this regard, we cannot rule out the possibility of such claims being filed against us. Should such claims be brought, this may have a negative impact on our business, financial condition and results of operations.

Shareholder liability under Russian legislation could cause us to become liable for both obligations of our subsidiaries and losses of the legal entities in which we have a practical possibility of determining actions.

The Civil Code of the Russian Federation, the Joint Stock Companies Law and the Federal Law "On Limited Liability Companies" generally provide that shareholders in a Russian joint stock company or members of a limited liability company are not liable for the obligations of the company and bear only the risk of loss of their investment. This may not be the case, however, when one entity is capable of determining decisions made by another entity. The entity capable of determining such decisions is deemed an "effective parent." The entity whose decisions are capable of being so determined is deemed an "effective subsidiary." The effective parent bears joint and several liability for transactions concluded by the effective subsidiary in carrying out its decisions or decisions made with its consent. However, joint and several responsibility of the effective parent is excluded in case of voting of the effective parent on the approval of the transaction at a general shareholders' meeting of the effective subsidiary, as well as the approval of the transaction by the body of the effective parent, if the need for such approval is envisaged in the charter of the effective subsidiary and/or the effective parent. In addition, an effective parent is secondarily liable for an effective subsidiary's debts if an

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effective subsidiary becomes insolvent or bankrupt resulting from the action or failure to act of an effective parent. This is the case no matter how the effective parent's ability to determine decisions of the effective subsidiary arises.

Accordingly, we could be liable in some cases for debts of our subsidiaries and losses of the legal entities to the extent that we had any power of determining such subsidiaries' actions that caused such losses. This liability could have a material adverse effect on our business, results of operations and financial condition.

Shareholder rights provisions under Russian law could impose additional obligations and costs on us, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Russian law provides that shareholders that vote against or did not participate in voting on certain matters have the right to sell their shares to the company at market value in accordance with Russian law. The decisions that trigger this right to sell shares include:

•: decisions with respect to a reorganization;
•: the approval by shareholders of a "major transaction," which involves property in excess of 50% of the balance sheet value of the company's assets calculated according to Russian accounting standards, regardless of whether the transaction is actually consummated (including those which are simultaneously interested-party transactions), except for transactions undertaken in the ordinary course of business;
•: the amendment of our charter in a manner that limits shareholder rights;
•: the amendment of our charter in a manner that excludes reference to the entity's public status, approved simultaneously with a decision on applying to the CBR on release from obligation to disclose information under the laws of the Russian Federation on securities; and
•: a decision on applying for delisting of shares and convertible securities from a stock exchange.

For example, during 2015-2020 we repurchased MTS ordinary shares, for more details see "Item 16E—Purchases of Equity Securities by the Issuer and Affiliated Purchasers." Our obligation to purchase shares in these circumstances, which is limited to 10% of the company's net assets calculated in accordance with Russian accounting standards at the time the matter at issue is voted upon, could have a material adverse effect on our business, financial condition, results of operations and prospects. Under Russian law, if we are unable to sell the repurchased shares at a price equal to or exceeding the market price within one year of the date of repurchase, we will have to reduce our charter capital accordingly.

The Strategic Foreign Investment Law imposes certain restrictions on us and our existing and potential foreign shareholders, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

On May 7, 2008, the Federal Law "On the Procedure for Foreign Investment in Commercial Organizations of Strategic Importance for the Defense and Security of the State," or the Strategic Foreign Investment Law, came into force in Russia. This law sets forth certain restrictions relating to foreign investments in Russian companies of "strategic importance." Among others, companies with a dominant position in the Russian telecommunications market are considered to be strategically important and foreign investments in such companies are subject to regulations and restrictions to these companies set out by the Strategic Foreign Investment Law. For purposes of the Strategic Foreign Investment Law, a mobile telecommunications provider is deemed to be dominant if its market share in the Russian market exceeds 25%, as may be determined by the FAS. In addition, a company may be considered to be strategically important due to our offering of services involving the use of cryptographic technologies.

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Starting from the effective date of the Strategic Foreign Investment Law, a foreign investor (including Russian citizens having foreign citizenship according to the amendments which came in force on July 1, 2017) seeking to obtain direct or indirect control over a strategically important company is required to have the respective transaction pre-approved by a special governmental commission on control of foreign investments. On December 6, 2014, the amendments to the Strategic Foreign Investment Law came into effect. The law stipulates that foreign investors are obliged to obtain prior approval of transactions envisaging the acquisition of right of ownership, possession or use of property classified as the fixed production assets of a strategic company and the value of which represents 25% or more of the balance sheet value of the assets of such company as of the last reporting date, according to accounts. In addition, foreign investors are required to notify this authorized governmental body about any transactions undertaken by them resulting in the acquisition of 5% or more of the charter capital of strategically important companies. Within 180 days from the effective date of the Strategic Foreign Investment Law, foreign investors having 5% or more of the charter capital of strategically important companies were required to notify the authorized governmental body about their current shareholding in such companies.

Commencing December 6, 2014, a foreign investor is also obliged to notify the authorized governmental body about the fact of conducting the pre-approved transactions. With effect from July 1, 2017, according to the amendments, offshore companies (and companies under their control) are prohibited from obtaining control over a strategically important company and are obliged to have any acquisition of 25% or more of right of ownership of voting shares pre-approved. According to the amendments that came into force on July 1, 2017, certain sanctions may be imposed in respect of such transactions conducted without notification, for example, a deprivation of the foreign investor of any voting rights at a shareholders' meeting of strategically important companies through judicial proceedings brought by an authorized governmental body.

As we are classified as a strategically important company, our current and future foreign investors are subject to the notification requirements described above and our current and potential investors may be limited in their ability to acquire a controlling stake in, or otherwise gain control over, us. Such increase in governmental control or limitation on foreign investment could impair the value of your investment and could hinder our access to additional capital.

Regulatory changes in Russia as well as regulatory changes at the international level may have a material adverse effect on our financial condition and results of operations.

Following an amendment to the Federal Law on Communications, which became effective July 1, 2006, fixed-line operators began charging their subscribers for calls to mobile phone users and started to transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to mobile operators is established by the regulator and is known as the "settlement rate."

The Ministry of Communications and Mass Media is considering altering the approach to inter-carrier settlements in Russia and the subsequent lowering of the settlement rate. Any reduction of the settlement rate by the regulator could have a negative impact on our average monthly service revenues per subscriber and margins. Over the past few years the government authorities developed a number of new initiatives, which have not yet been implemented or were implemented recently and a lack of law enforcement practice may cause difficulties in interpreting these developments and lead to additional burden for telecommunications operators. In December 2018, the Ministry of Communications developed new initiatives relating to the reframing of interaction between operators. It is unclear yet how this proposal may be implemented, however it may potentially lead to a reduction in traffic transmission revenues and margin. The final decision on the implementation of this proposal has not been made yet. The agreement on the conditions of inter-carrier mutual settlements while delivering international communication services in CIS-countries was signed on the CIS Heads of Government Council meeting held in Dushanbe on October 30, 2015 (the "Agreement"). The enforcement of certain

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provisions of the Agreement may adversely affect our operation in terms of the execution of inter-carrier mutual settlements among CIS-operators. In order to be implemented, the corresponding provisions should be introduced to the Russian legislation. To date, the provisions have not been implemented yet.

According to Government Regulation No. 1240 dated November 24, 2014, starting from January 1, 2015, federal public bodies were vested with a right to make decisions on using data transmission network of government bodies, which is a part of infrastructure ensuring information and technological interaction with the information systems used for rendering state and municipal electronic services for the purposes of exercising public functions. To date, the single operator of infrastructure of electronic state services is Rostelecom. Adoption of the Regulation may adversely affect our revenues with regard to the B2G market segment due to competitive disadvantage.

With the entry into force of the Treaty on the Eurasian Economic Union (the "EEU") on January 1, 2015, a supra-national antimonopoly body empowered to control compliance with general competition rules on cross-border markets and to apply antitrust measures was established. Should violations with respect to companies operating on cross-border markets be identified, this might lead both, to imposition of fines in accordance with the legislation of the EEU and adoption of the decisions for compulsory execution.

The amendments introduced to Article 5 of the Federal Law No. 115 "On Combating Legalization (Laundering) of Criminally Gained Income and Financing of Terrorism" dated August 7, 2001, entered into force on March 1, 2015. The list of organizations carrying out cash/other property operations, to whom the law requirements are applied, was expanded according to those amendments. In addition to telecommunications operators entitled to independently render mobile radio telecommunications services, the telecommunications operators occupying "substantial position" in public switched telephone networks entitled to independently provide data transmission services and render services on the basis of contracts with individual subscribers, have been also included in the list. A telecommunications operator which meets the specified criteria is obliged to provide the Federal Financial Monitoring Service with the information on cash/other property operations (that is subject to compulsory control or that seems suspicious while implementing the rules of internal control), as well as to take measures for freezing of cash assets / other property (in case there is an information on its involvement in extremist activities or terrorism). Lack of law enforcement practice may cause difficulties in interpreting the above-mentioned amendments and lead to additional burden for telecommunications operators.

On July 8, 2017, the Federal Law No. 110 "On Amendments to Article 66 of the Federal Law "On Communications" and Article 35 of the Federal Law "On Mass Media" dated June 7, 2017 came into force, which requires operators to transmit warning signals to telecommunications services users or inform them about dangers arisen by threat of occurrence of emergencies or occurrence of emergencies. Expenditure related to the transmission of warning signals is not compensated to operators.

On April 4, 2016, the Ministry of Communications of the Russian Federation adopted the order No. 135 "On the Approval of Requirements for Communication Networks Operation With Respect to the Use of Services Provided by Third Parties." The order came into force on July 26, 2017.

According to the requirements, a telecommunications operator is obliged (on a quarterly basis) to provide authorities with data on foreign companies and foreign citizens that are engaged to provide works or services related to exploitation and management of its communication network. In addition, a telecommunications operator is obliged to store information concerning all actions on communication facilities executed by servicing staff or third parties engaged in exploitation and management of communication networks both from workplaces and with the use of a remote access.

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The Federal Law No. 374 "On the Introduction of Amendments to Certain Legislative Acts of the Russian Federation with Respect to Setting up of Additional Counter-terrorism Measures and Public Security Enforcement" was adopted on July 6, 2016. Pursuant to that law, operators are obliged to store information on the facts of receiving, transferring, delivery and/or processing of voice information and text messages, as well as images, sounds, video- and other messages of telecommunications services users (for a three-year period) and the contents of such communications, including voice data, text messages, pictures, sounds, video or other communications (for up to six months). The requirement relating to the storage of messages contents entered into force on July 1, 2018. The Government regulation "On Rules, Terms and Volume of Voice Information, Text Messages, Images, Sounds, Video-and Other Messages of Telecommunications Services Users to be Stored" was adopted on April 12, 2018 (the "Rules on Storage"). According to this regulation, commencing July 1, 2018, communication operators that render intercity and international communication services (as well as personal radio call services, mobile radio services in a public communication network, mobile radiotelephone and satellite communication services, data transmission services for the purposes of transferring voice information, zonal and local telephone communication services) are required to store voice information and text messages, for a period of six months from the moment of the end of their receipt, transfer, delivery and/or processing. Starting from October 1, 2018, operators that render telematics services, as well as data transmission services (except for data transmission services for the purposes of transferring voice information) are obliged to store telecommunication messages by using data storage technical equipment in the volume of electronic communication messages sent and received by the operator's subscribers (the actual traffic) during 30 days before the commissioning date of the technical equipment. Moreover, the capacity of the data traffic storage system is required to be increased by 15% annually during 5 years from the date the data storage technical equipment was put into operation. Significant additional costs will be required in order to comply with these requirements.

With effect from October 1, 2019 the Federal Law No. 191 "On Introduction of Changes to Certain Legislative Acts of the Russian Federation" dated July 18, 2019 came into force and assumes important changes to the procedural legislation regarding class actions in Russia. According to the law, consumers have a right to file class action lawsuits with the courts of general jurisdiction. Moreover, the law provides changes relating to class actions in arbitration proceeding, specifically, a "group" is defined as those having common or homogeneous rights. The law is aimed at harmonization of civil and arbitration proceedings as well as boosting the effectiveness of the Arbitration Procedure Code ("APC") clauses, therefore the changes are generally consistent with the Civil Procedure Code ("CPC") developments. These changes allow mass consumer claims in case the amount of each individual claim is small, but the total amount of all claims is significant, that could additionally motivate to initiate lawsuits, inter alia, by using litigation funding (investment) tools. The law expanded the list of persons who can advocate the interests of a group of persons. Claims might be filed by, inter alia, Rospotrebnadzor, FAS, Bank of Russia, stakeholders and other persons as well as by a group of consumers, whose interests are suffered as a result of violation of competition legislation. Any class actions filed against us could have a material adverse effect on our business, financial condition and results of operations.

In November 2019, the Federal Law No. 90 "On certain amendments to the Federal Law "On communications" and the Federal Law "On information, information technologies and information protection" dated May 1, 2019 (the "Sovereign Internet Law") aimed at ensuring stable, secure and integral functioning of the Internet in the territory of the Russian Federation, came into force. Under the Sovereign Internet Law, operators may be required to, inter alia, install new equipment on their networks, which could adversely affect the networks' stability and the quality of provided communication services. The Sovereign Internet Law is broadly drafted, and although the Russian authorities have already adopted material implementing acts, practical issues may require further subordinate legislation to be adopted further clarifying the provisions of the law. Furthermore, additional costs for maintenance and operation of this equipment may be required from the operators.

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On January 14, 2019, the Government of the Russian Federation published a list of instructions aimed at encouraging the procurement of telecommunication equipment of Russian origin. According to the document, ministries should prepare proposals by May 1, 2019, relating to an increase in the import customs duty rate to a level of up to 20% with respect to telecommunication equipment. Currently, there can be no certainty as to the form of the implementation of these initiatives; therefore, it is difficult to assess how such changes will affect the company's operations. Should the import customs duty rate increase in respect of the equipment we purchase, this may have a material adverse effect on our financial condition and results of operations.

The Federal Law No. 533 dated December 30, 2020, which will come into effect from June 1, 2021, introduced amendments to the Law "On Communications" clarifying the contracting process with subscribers, including the following changes:

•: the possibility to conclude contract with subscribers using a simple electronic signature obtained in operator's offices is excluded;
•: a contract for devices with eSIM can be concluded via the Internet only using a unified biometric system and an advanced qualified electronic signature;
•: rendering services for corporate clients is possible only if data on individuals using a subscriber's numbers is entered into the Integrated Identification and Authentication System (IIAS). Operators will have the obligation to check if such information is present in the IIAS starting from December 1, 2021 and stop providing services to clients in case the information is inaccurate;
•: rendering telecommunication services to corporate clients for M2M devices is possible only if data on a subscriber's number, address of a corporate client or device location as well as other information is entered into the IIAS. This may affect the M2M services development, including IoT projects;
•: Roskomnadzor is responsible for developing an information system for monitoring the contracting process between operators and their subscribers. An operator will have the obligation to report certain information via this system unilaterally. Modification of business processes and IT systems for connection to the monitoring system may be required from operators.

According to the order of the Ministry of Communications No. 148 dated March 31, 2020, during the period from April 1, 2020 to July 1, 2020, an experiment was conducted to provide free access to socially significant internet services and web resources. The experiment period was further prolonged till the end of June 2021. List of significant internet services and web resources includes, amongst other, social networks, news and information agencies web resources, online shops, websites of banks and delivery services. Currently, there is no clarity about the consequences in connection with implementation of this order including possible costs required from operators; there can be no certainty as to the form of free access to socially significant information resources, how it will be implemented in the future and when this initiative will be adopted, however it could potentially have a material adverse effect on our business, financial condition and results of operations.

Currently, the Russian Civil Code is undergoing the process of substantial revisions with new provisions being introduced relating to a number of sectors. At present, the potential interpretation of these amendments by state authorities (including the courts), along with their impact on our activities are unknown.

A roadmap for 2018-2020, for the development of competition in economic sectors of the Russian Federation and the transition of particular sectors from the state of natural monopolies to the competitive market was approved by the Order of the Government of the Russian Federation

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No. 1697-r dated August 16, 2018. The roadmap provides for the adoption of a number of regulatory legal acts, inter alia, in the telecommunication sphere. Currently, it is difficult to assess how such changes and their interpretation by state bodies, particularly by courts, may affect our operation.

Russian companies are obliged to pay various and significant taxes including income tax, VAT, real estate tax, excise tax, payroll tax and others. Along with tax liabilities there are different obligatory non-tax payments. These include payments into Universal Service Fund, which currently amounts to 1.2% of our annual revenue on telecommunications services. Furthermore, potential regulatory changes that may be enacted in the future, such as the introduction of new rules regulating MVNOs, new rules concerning our pricing policy and others, could weaken our competitive position in the mobile telecommunications market. Changes in tax laws and non-tax regulations may lead to the growth of our tax burden and increase of our costs and may, as a result, materially adversely affect our financial condition and results of operations.

The failure of our subsidiaries that are subject to regulations as natural monopolies to comply with the requirements of the Federal Law No. 223 "On Procurement Process," inter alia, in case of collective tendering can lead to application of certain liability measures with respect to our subsidiaries.

One of our subsidiaries, MGTS, is categorized as a natural monopoly in the Moscow telecommunications market. According to the Federal Law No. 223 "On Procurement Process," natural monopolies are obliged to conduct the procurement process in accordance with the principles of transparency and non-discrimination and unjustified limitation of competition. If our subsidiaries that are under additional regulations as natural monopolies are found failing to comply with the law on procurement process, inter alia in case of collective tendering with us, our subsidiaries can be subject to certain liability measures, according to Russian legislation. See also "—Risks Relating to Our Business—If we are found to have a dominant position in the markets where we operate and are determined to have abused this position, the FAS may be entitled to regulate our subscriber tariffs and impose certain restrictions on our operations."

Russian and foreign legislation on personal data and information security in information systems and communication networks may turn out to be hard to implement and require significant resources. Inability to comply with the requirements may lead to sanctions.

Communication operator activity in the sphere of information security in the Russian Federation is represented by the following legal acts: Federal laws "On Communication," "On Information, Information Technologies and Information Protection," "On Personal Data," "On Trade Secret," "On Electronic Signature," by-laws of the Government, FSTEC, FSS, Ministry of Communication and The Federal Service for Supervision of Communications, Information Technology and Mass Media of the Russian Federation, among others. Main risks, posed by organization of processing and providing security of personal data include the following factors:

•: ambiguity of applicability of legislation on communication, personal data, trade secret, etc. to a single object of legal regulation. Data may be simultaneously attributed to different categories of limited access information, which fall under different information security requirements under different sections of the Russian legislation;
•: responsibility of personal data operators for the actions of the third parties, processing personal data at the request of personal data operators;
•: ambiguity of the criteria for determining personal data protection level during its processing in the information systems (for example, in case undocumented possibilities in system and/or applied software exist), set by Government Decree No. 1119, dated November 1, 2012;
•: high level of requirements to the personal data protection;

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•: significant costs on creation of information protection system and support of protection level;
•: necessity to use the means of information protection, which have undergone a special conformity assessment procedure; replacement of the existing means of information protection with the ones, certified by FSTEC and FSS of Russia may require additional costs on certification of the existing means of information protection and later on certificates renewal (because of the limited period of certificates validity);
•: in case of failure to comply with requirements for confirmation of licenses for the technical and cryptographic protection activity of confidential information by FSTEC of Russia or FSS of Russia, the company would not be able to provide the corresponding commercial services to the third parties; and
•: ambiguity of the requirement of Federal law No. 152 to localize processing of the Russian citizens personal data on the territory of Russia, keeping the possibility of cross-border transfer of this data.

In case of non-compliance with the Russian legislation on information security and personal data protection, the company cannot rule out the possibility of imposing sanctions by the regulatory bodies in the form of fines, confiscation of uncertified means of information protection, suspension of business processes for 90 days as well as suspension or withdrawal of the license, allowing to provide communication services, technical and cryptographic protection of confidential information.

In addition, it is possible that subscribers will file legal claims, seeking to reimburse tangible and moral damage in connection with the violation of the legislation requirements.

With effect from May 25, 2018, the General Data Protection Regulation came into force in the European Union. Our basic business processes and our subsidiaries were audited in order to determine applicability and compliance with the GDPR requirements. In addition, a control mechanism for determination of compliance with the specified requirements was proposed to be established for new business processes (if they are initiated). In case of launching services and products, to which the GDPR will apply, we must ensure these services and products comply with the GDPR requirements.

Federal Law No. 519-FZ dated December 30, 2020, which came into force from March 1, 2021, established specific regulation for processing of personal data, permitted by the personal data subject for distribution. The Law established certain consent requirements for such personal data processing. For example, the consent should be obtained separately from other consents. An operator must provide the opportunity for the subject to determine the list of personal data for each personal data category specified in such consent. Lack of response or inaction of the personal data subject cannot be considered as consent to the processing of personal data, authorized by him for disclosing. The personal data subject has a right to request any personal data operator to remove his personal data from public access without additional proving the fact of illegal processing of his personal data.

If the resources required to maintain, develop and implement data protection and information security systems meeting the legislation requirement are greater than expected, or we fail to comply with the data protection laws despite our best efforts to do so, our business, financial condition and results of operations could be materially adversely affected.

The Ministry of Digital Development, Communications and Mass Media of the Russian Federation prepared draft amendments to the Federal Law No. 149-FZ "On Information, Information Technology and Data Protection" dated July 27, 2006 aimed at unifying the approach to big data processing. Currently there is no clarity as to the requirements to the big data processing and when the announced draft law and subordinate legislation may be adopted, hence we are not able to estimate their potential impact on the Group.

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The Russian taxation system is underdeveloped and any imposition of significant additional tax liabilities could have a material adverse effect on our business, financial condition or results of operations.

The discussion below provides general information regarding the Russian tax regime and is not intended to be inclusive of all issues. Investors should seek advice from their own tax advisors as to these tax matters before investing in our shares and ADSs. See also "Item 10—Additional Information—E. Taxation."

In general, taxes payable by Russian companies are substantial and numerous. These taxes include, among others, corporate income tax, value added tax, property taxes, excise duties, payroll-related taxes and other taxes.

In addition, intercompany dividends are subject to a withholding tax of 0% or 13% (depending on whether the recipient of dividends qualifies for Russian participation exemption rules), if being distributed to Russian companies, and 15% (or lower, subject to benefits provided by relevant double tax treaties), if being distributed to foreign companies.

Lately the Russian government has taken measures aimed at revising the existing structure and practice of applying agreements on avoidance of double taxation in order to limit the taxpayer's ability to apply reduced rate (exemptions) when paying dividends and interest in certain jurisdictions. The terms of the agreements are already being revised with a number of jurisdictions in order to increase tax rate on dividends and interest. Limitation of the taxpayer's ability to apply reduced rate (exemptions) might lead to higher tax rates, and thus increase our costs.

The Russian tax authorities may take a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in the past may nonetheless be subject to challenges in the future. The foregoing factors raise the risk of the imposition of arbitrary or onerous taxes on us, which could adversely affect the value of our shares and ADSs.

Current Russian tax legislation is, in general, based upon the formal manner in which transactions are documented, looking to form rather than substance. However, the Russian tax authorities are increasingly taking a "substance and form" approach, which may cause additional tax exposures to arise in the future. Moreover, the Russian Tax Code was amended with direct provisions which prohibit tax benefits, if achieved without real business activities, or the main aim of the transaction was tax benefits. Additional tax exposures could have a material adverse effect on our business, financial condition, results of operations and prospects.

It is expected that Russian tax legislation will become more sophisticated, which may result in the introduction of additional revenue raising measures. Although it is unclear how any new measures would operate, any such introduction may affect our overall tax efficiency and may result in significant additional taxes becoming payable. Additional tax exposures could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions. For example, tax laws are unclear with respect to deductibility of certain expenses. This uncertainty could possibly expose us to significant fines and penalties and to enforcement measures, despite our best efforts at compliance, and could result in a greater than expected tax burden.

See also "Item 8—Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Tax Audits and Claims."

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Lack of law enforcement practice of the Russian anti-offshore policy may have adverse impact on our business, financial condition and results of operations.

In the past few years, the Russian Federation like a number of other countries in the world has been actively involved in a discussion of measures against tax evasion by the use of low tax jurisdictions as well as aggressive tax planning structures.

The rules of controlled foreign companies (CFC) came into force on January 1, 2015. The rules oblige Russian taxpayers being controlling persons of a foreign company to submit to the tax authorities both standard notifications on participation in CFC and tax declarations in certain cases. Profit generated commencing in 2015, including retained earnings, is subject to taxation in the Russian Federation. The innovations could impose additional tax on the undistributed profits of any foreign entity controlled by us (in proportion to such controlling stake) at the rate of 20%. These innovations caused amendments to the Tax Code providing for liability in case of non-disclosure or incomplete disclosure of information on CFCs and the non-payment or underpayment of relevant tax.

In addition, implementation of new concept of beneficial ownership, with regard to taxation of payment of passive income (dividends, royalty, interest, capital gain), may negatively affect possibility to apply benefits set by the double tax treaties, in case such payments pass through intermediary entities.

This may potentially lead to increase of tax burden with regard to such payments.

On November 4, 2014, the President of the Russian Federation signed the Federal law No. 325 "On Ratification of the Convention on Mutual Administrative Assistance in Tax Matters." Ratification of this Convention will enable the Russian Federation to receive tax information from all participating countries, which include a number of offshore jurisdictions.

Lack of law enforcement practice may cause difficulties in interpreting the above-mentioned laws by the Russian tax authorities. It is also currently unclear how the enacted laws could affect our counterparties, which may be registered in off shore jurisdictions.

In case the impact of legislative initiatives is significant for some of our counterparties it may also impact our results of operations.

Vaguely drafted Russian transfer pricing rules, and lack of reliable pricing information may impact our business and results of operations.

Russian transfer pricing legislation became effective in the Russian Federation on January 1, 1999.

This legislation allowed the tax authorities to make transfer pricing adjustments and impose additional tax liabilities with respect to all "controlled" transactions, provided that the transaction price differed from the market price by more than 20%. "Controlled" transactions included transactions with related parties, barter transactions, foreign trade transactions and transactions with significant price fluctuations (i.e., if the price with respect to such transactions differs from the prices on similar transactions conducted within a short period of time by more than 20%). Special transfer pricing provisions were established for operations with securities and derivatives. Russian transfer pricing rules were vaguely drafted, generally leaving wide scope for interpretation by Russian tax authorities and courts. There has been very little guidance (although some court practice is available) as to how these rules should be applied. These transfer pricing rules apply with respect to transactions that occurred before January 1, 2012.

New transfer pricing rules became effective on January 1, 2012. The implementation of these new rules should help to align domestic rules with OECD principles. The new rules are expected to considerably toughen the previously effective law by, among other things, effectively shifting the burden of proving market prices from the tax authorities to the taxpayer and obliging the taxpayer to keep specific documentation.

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If the Russian tax authorities were to impose significant additional tax liabilities through the introduction of transfer pricing adjustments, they could have a material adverse impact on our business, financial condition and results of operations. The adoption of the new transfer pricing rules may increase the risk of transfer pricing adjustments being made by the tax authorities. In addition to the usual tax risks and tax burden imposed on Russian taxpayers, the uncertainties of the new transfer pricing rules complicate tax planning and related business decisions. It will also require us to ensure compliance with the new transfer pricing documentation requirements proposed in such rules. Uncertainty of the new rules may also require us to expend significant additional time and material resources for implementation of our internal compliance procedures. Tax authorities could impose additional tax liability as well as 40% penalties on the underpaid tax in case the prices or profitability are outside the market range and if the required transfer pricing documentation has not been prepared, which could have a material adverse effect on our results of operations and financial condition.

The regulatory environment for telecommunications in Russia and other countries where we operate or may operate in the future is uncertain and subject to political influence or manipulation, which may result in negative and arbitrary regulatory and other decisions against us on the basis of other than legal considerations and in preferential treatment for our competitors.

We operate in an uncertain regulatory environment. The legal framework with respect to the provision of telecommunications services in Russia and the other countries where we operate or may operate in the future is not well developed, and a number of conflicting laws, decrees and regulations apply to the telecommunications sector.

Moreover, regulation is conducted largely through the issuance of licenses and instructions, and governmental officials have a high degree of discretion. In this environment, political influence or manipulation could be used to affect regulatory, tax and other decisions against us on the basis of other than legal considerations. In addition, some of our competitors may receive preferential treatment from the government, potentially giving them an advantage over us.

We are subject to currency control regulations.

The Currency Control Law provides a framework and establishes general rules within which the government of Russia and the Bank of Russia are authorized to introduce certain measures of currency regulation, in connection with which there may be some uncertainty in the process of our implementation of foreign exchange operations when importing equipment.

The change in the currency regulation may negatively affect our performance of obligations under contracts previously concluded with Russian and foreign counterparties, requiring us to make payments on them in foreign currency and necessitating the conclusion of additional agreements in relation to the relevant contracts. As a result, we are exposed to the risks of changes in the currency regulation and foreign exchange control in Russia.

The regulation of critical information infrastructure in the Russian Federation may lead to additional costs which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Federal Law No. 187 "On the Security of the Critical Information Infrastructure of the Russian Federation" which came into force on January 1, 2018 (the "Law on CII") provides for the creation of a register of significant critical information infrastructure (CII) objects, to which the communication networks elements may be assigned (after the classification of CII objects). Both state-owned and non-state-owned organizations are classified as subjects of the CII.

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The law envisages criminal penalties if the security requirements in respect of such significant CII objects are not met and damage is incurred. CII subjects, including communication operators, are required to, among other things:

•: categorize CII objects;
•: sent the results of CII objects categorization with the authorized bodies;
•: create a security system for significant CII objects and implement measures targeted at significant CII protection and protection of information, belonging to the corresponding category;
•: set up and provide the operations of means for attacks search on the communication network with the transfer of management to the authorized body; and
•: organize transfer of information about computer incidents on the CII to the authorized body.

The by-laws envisage measures aimed at CII objects protection, which are difficult to implement, especially as regards the implementation of information protection measures that are not provided by such communication standards as 3GPP, ETSI, etc., which may lead to incompliance with the regulatory requirements. The implementation of these requirements will require additional costs to be incurred. Requirements of Federal Service for Technology and Export Control of the Russian Federation and the Ministry of Communications (orders No. 239 and No. 582) restrict remote access to CII objects, which may affect possibility to provide warranty and technical support of communication infrastructure by foreign vendor agents.

Compliance with the requirements of the laws and regulations or introduction of similar regulations may require additional costs to be incurred by us or otherwise negatively affect us and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Relating to the Shares and ADSs and the Trading Market

Government regulations may limit the ability of investors to deposit shares into our ADS facility.

The ability of investors to deposit shares into our ADS facility may be affected by current or future governmental regulations. For example, under Russian securities regulations, no more than 25% of a Russian company's shares may be circulated abroad through sponsored depositary receipt programs. Prior to December 31, 2005, and at the time of our initial public offering, this threshold was 40%. Although we believe that the new lower threshold does not apply to our ADSs, in the future, we may be required to reduce the size of our ADS program or amend the depositary agreement for the ADSs.

Because our ADS program is regularly at or near capacity, purchasers of our shares may not be able to deposit these shares into our ADS facility, and ADS holders who withdraw the underlying shares from the facility may not be able to re-deposit their shares in the future. As a result, effective arbitrage between our ADSs and our shares may not always be possible. Our shares are listed and traded on the Moscow Exchange. Due to the limited public free float of our common stock, the public market for our shares is significantly less active and liquid than for our ADSs. The cumulative effect of these factors is that our shares may from time to time, and for extended periods of time, trade at a significant discount to our ADSs.

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Failure to comply with requirements on the disclosure of certain information on ADSs and ADS holders may restrict your ability to vote.

Pursuant to the Russian securities laws, depositaries, and as a result, ADS holders are not able to vote in connection with the shares underlying ADSs on behalf of the ADS holders unless they provide certain information to the issuer. At a minimum, this information includes the identity of the holder of the ADSs, registration details including a state registration number (for legal entities), and the number of shares attributable to each ADS holder.

Nevertheless, the legislation stipulates that the issuer, CBR, Russian courts and pretrial investigation agencies may request such lists of depositary receipt holders from the holder of depositary program depo account. The holder of depositary program depo account shall take all reasonable measures in order to provide such information. In case of non-compliance with the above requirements, the CBR may suspend, or impose limitations on, transactions with securities held in the relevant accounts of Russian custodians for a period of up to six months. As a result, the shares underlying the ADSs may be blocked and it may be impossible to deposit or withdraw the shares into or from the depositary program. In addition, uncertainties with respect to exercise of certain rights attaching to shares underlying ADS holders could complicate the exercise of right to, and the ability to derive benefits from, the shares represented by ADSs.

The market price of our ADSs has been and may continue to be volatile.

The market price of our ADSs experienced, and may continue to experience, significant volatility.

For information on the closing price of our ADSs on the New York Stock Exchange, see "Item 9—Offer and Listing Details—A.4. Market Price Information."

Numerous factors, including many over which we have no control, may have a significant impact on the market price of our ADSs, including, among other things:

•: periods of regional or global macroeconomic instability;
•: announcements of technological or competitive developments;
•: regulatory developments in our target markets affecting us, our customers or our competitors;
•: actual or anticipated fluctuations in our quarterly operating results;
•: changes in financial estimates or other material comments by securities analysts relating to us, our competitors or our industry in general;
•: the value of local currencies in the markets where we operate compared to the US dollar;
•: announcements by other companies in our industry relating to their operations, strategic initiatives, financial condition or financial performance or to our industry in general;
•: announcements of acquisitions or consolidations involving industry competitors or industry suppliers;
•: sales or perceived sales of additional ordinary shares or ADSs by us or our significant shareholders; and
•: impact and development of any investigation or lawsuit, currently pending or threatened, or that may be instituted in the future.

For example, market price of our ADSs experienced volatility in 2017 due to legal proceedings relating to Sistema, initiated by Rosneft, Bashneft and the Ministry of Land and Property Relations of Republic of Bashkortostan, and arrest of 31.76% of shares in our authorized capital held by Sistema, which was lifted as a result of execution of the settlement agreement.

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In addition, the stock market in recent years has experienced extreme price and trading volume fluctuations that often have been unrelated or disproportionate to the operating performance of individual companies. These broad market fluctuations may adversely affect the price of our ADSs, regardless of our operating performance.

Voting rights with respect to the shares represented by our ADSs are limited by the terms of the deposit agreement for our ADSs and relevant requirements of Russian law.

ADS holders will have no direct voting rights with respect to the shares represented by the ADSs.

They are able to exercise voting rights with respect to the shares represented by ADSs only in accordance with the provisions of the deposit agreement relating to the ADSs and relevant requirements of Russian law. Therefore, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with them. For example, the Joint Stock Companies Law and our charter require us to notify shareholders no less than 30 days prior to the date of any meeting and at least 50 days prior to the date of an extraordinary meeting to elect our Board of Directors. Our ordinary shareholders will receive notice directly from us and will be able to exercise their voting rights by either attending the meeting in person or voting by power of attorney.

ADS holders by comparison, will not receive notice directly from us. Rather, in accordance with the deposit agreement, we will provide the notice to the depositary. The depositary has undertaken, in turn, as soon as practicable thereafter, to mail to ADS holders the notice of such meeting, voting instruction forms and a statement as to the manner in which instructions may be given by ADS holders.

To exercise their voting rights, ADS holders must then instruct the depositary how to vote the shares represented by the ADSs they hold. Because of this additional procedural step involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of the shares and we cannot assure ADS holders that they will receive voting materials in time to enable them to return voting instructions to the depositary in a timely manner. ADSs for which the depositary does not receive timely voting instructions will not be voted.

Given the above, we cannot provide any assurance that holders and beneficial owners of ADSs will (i) receive notice of shareholder meetings to enable the timely return of voting instructions to the depositary, (ii) receive notice to enable the timely cancellation of ADSs in respect of shareholder actions or (iii) be given the benefit of dissenting or minority shareholders' rights in respect of an event or action in which the holder or beneficial owner has voted against, abstained from voting or not given voting instructions.

See also "—Failure to comply with requirements on the disclosure of certain information on ADSs and ADS holders may restrict your ability to vote."

ADS holders may be unable to repatriate distributions made on the shares and ADSs.

We anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of ADSs, net of the depositary's fees and expenses. The ability to convert rubles into U.S. dollars is subject to the availability of U.S. dollars in Russia's currency markets.

Although there is an existing, albeit limited by size, market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the further development of this market is uncertain. At present, there is a limited market for the conversion of rubles into foreign currencies outside of Russia and limited market in which to hedge ruble and ruble-denominated investments.

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ADS holders may be subject to Russian regulatory restrictions.

Prior to the amendments to the Russian securities laws introduced in 2011, a depositary bank could be considered the owner of the shares underlying the ADS, and as such could be subject to the mandatory public tender offer rules, anti-monopoly clearance rules, governmental consents or reporting requirements in respect of acquisition of shares and other limitations contemplated by Russian law. The amendments to the Russian securities laws introduced in 2011 provide that a depositary bank is not an owner of underlying shares, and as such, these requirements should apply to ADS holders.

ADS holders may be unable to benefit from the United States—Russia income tax treaty.

Under Russian law, dividends paid to a non-resident holder of the shares generally will be subject to Russian withholding tax at a rate of 15%. The tax burden may be reduced to 5% or 10% under the United States—Russia income tax treaty for eligible U.S. holders; a 5% rate may potentially apply for U.S. holders who are legal entities owning 10% or more of the company's voting shares, and a 10% rate applies to dividends paid to eligible U.S. holders in other cases, including dividend payments to individuals and legal entities owning less than 10% of the company's voting shares. However, according to the recent amendments to the Russian Tax Code, U.S. holders will only be able to utilize the 5% reduced rate through tax reimbursement procedures, as the tax agent is required to use the baseline tax rate established by the code or the applicable tax treaty, whichever is appropriate. See also "Item 10—Additional Information—E. Taxation—Certain Russian Tax Consequences—United States—Russia Income Tax Treaty Procedures."

The Russian tax rules in relation to ADS holders (that would affect U.S. holders) are characterized by significant uncertainties and limited interpretive guidance. Recent amendments to the tax rules have clarified the status of the ADS holders as beneficial owners of the income from the underlying shares by establishing that the custodian holding the depo account with the shares underlying the ADSs acting as the tax agent and determines amounts of the withholding tax based on the information about the ADS holders and their tax residency status as provided by the program depositary. However, the application of the baseline tax rate for ADS holders and any double tax treaty relief is available only if the tax treaty residence of the holder is provided to the custodian along with the other information prescribed by the Tax Code. In relation to ADS holders such information is to be provided by the ADS holders to the depositary, who relays it to the custodian, who acts as the tax agent and withholds the taxes when making transferring the dividends to the depositary. It is currently unclear how the depositary will collect the necessary information from ADS holders. Thus, while a U.S. holder may technically be entitled to benefit from the provisions of the United States—Russia income tax treaty, in practice such relief may be difficult or impossible to obtain. See also "Item 10—Additional Information—E. Taxation" for additional information.

Capital gain from the sale of shares and ADSs may be subject to Russian income tax.

Income received by a foreign company from the sale, exchange or other disposal (assuming that such income is not related to a permanent establishment of a foreign company in Russia) of shares (participation interest) in an organization in which over 50% of the assets consist of immovable property located in Russia, as well as financial instruments derived from such shares, is treated as income derived from a source in the Russian Federation and is subject to withholding tax at a rate of 20%. However, gains arising from the disposition of the securities, which are traded on an organized stock exchange, are not treated as Russian-source income, and should not be subject to taxation in Russia.

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the acquisition cost (including other related costs) if documentary evidence of such costs is submitted to the tax agent. The Russian Tax Code also establishes special rules for calculating the tax base for the purposes of transactions with securities. However, an exemption applies if immovable property located in Russia constitutes more than 50% of a company's assets and the securities are traded on a foreign stock exchange. The determination of whether more than 50% of our assets consist of immovable property located in Russia is inherently factual and is made on an on-going basis and the relevant Russian legislation and regulations in this respect are not entirely clear. Hence, there can be no assurance that immovable property owned by us and located in Russia does not currently and will not constitute more than 50% of our assets as at the date of the sale of ADSs by non-residents.

Where the ADSs are sold by legal entities or organizations to persons other than a Russian company or a foreign company or an organization with a registered permanent establishment in Russia, even if the resulting capital gain is considered taxable in Russia, there is currently no mechanism under which the purchaser will be able to withhold the tax and remit it to the Russian budget.

Under the United States / Russia income tax treaty, capital gains from the sale of shares and/or ADSs by eligible U.S. holders should be relieved from taxation in Russia, unless 50% or more of our assets (the term "fixed assets" is used in the Russian version of the treaty) were to consist of immovable property located in Russia.

The taxation of income of non-resident individuals depends on whether this income is received from Russian or non-Russian sources. Russian tax law does not give a definition of how the "source of income" should be determined with respect to the sale of securities, other than that income from the sale of securities, which takes place "in Russia" should be considered as Russian source income. As there is no further definition of what should be considered to be a sale "in Russia," the Russian tax authorities have a certain amount of freedom to conclude what transactions take place in or outside Russia, including looking at the place of the transaction, the place of the issuer of the shares, the location of the registrar recording the transfer of legal title to the relevant securities or other similar criteria.

Non-residents who are individuals are taxable on Russian-source income. Provided that gains arising from the disposition of the foregoing types of securities and derivatives outside of Russia by U.S. holders who are individuals not resident in Russia for tax purposes will not be considered Russian source income, then such income should not be taxable in Russia. However, gains arising from the disposition of the same securities and derivatives "in Russia" by U.S. holders who are individuals not resident in Russia for tax purposes may be subject to tax either at the source in Russia or based on an annual tax return, which they may be required to submit with the Russian tax authorities. See also "Item 10—Additional Information—E. Taxation."

The lack of a central and rigorously regulated share registration system in Russia may result in improper record ownership of our shares and ADSs.

Ownership of Russian joint-stock company shares (or, if the shares are held through a nominee or custodian, then the holding of such nominee or custodian) is determined by entries in a share register and is evidenced by extracts from that register. Currently, there is no single central registration system in Russia. Share registers can be maintained only by licensed registrars located throughout Russia. Regulations have been adopted regarding the licensing conditions for such registrars, as well as the procedures to be followed by licensed registrars when performing the functions of registrar. In practice, however, these regulations have not been strictly enforced, and registrars generally have relatively low levels of capitalization and inadequate insurance coverage. Moreover, registrars are not necessarily subject to effective governmental supervision. Due to the lack of a central and rigorously regulated share registration system in Russia, transactions in respect of a company's shares could be improperly or inaccurately recorded, and share registration could be lost through fraud, negligence or oversight by

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registrars incapable of compensating shareholders for their misconduct. This creates risks of loss not normally associated with investments in other securities markets. Furthermore, the depositary, under the terms of the deposit agreements governing record keeping and custody of our ADSs, is not liable for the unavailability of shares or for the failure to make any distribution of cash or property with respect thereto due to the unavailability of the shares. See "Item 10. Additional Information—Charter and Certain Requirements of Russian Legislation—Registration and Transfer of Shares."

Foreign judgments may not be enforceable against us.

Our presence outside the United States may limit your legal recourse against us. We are incorporated under the laws of the Russian Federation. Substantially all of our directors and executive officers named in this document reside outside the United States. All or a substantial portion of our assets and the assets of our officers and directors are located outside the United States. As a result, you may not be able to effect service of process within the United States on us or on our officers and directors. Similarly, you may not be able to obtain or enforce U.S. court judgments against us, our officers and directors, including actions based on the civil liability provisions of the U.S. securities laws.

In addition, it may be difficult for you to enforce, in original actions brought in courts in jurisdictions outside the United States, liabilities predicated upon U.S. securities laws.

There is no treaty between the United States and the Russian Federation providing for reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters. These limitations may deprive you of effective legal recourse for claims related to your investment in our shares and ADSs. The deposit agreement provides for actions brought by any party thereto against us to be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, provided that any action under the U.S. federal securities laws or the rules or regulations promulgated thereunder may, but need not, be submitted to arbitration. The Russian Federation is a party to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, but it may be difficult to enforce arbitral awards in the Russian Federation due to a number of factors, including the inexperience of Russian courts in international commercial transactions, official and unofficial political resistance to enforcement of awards against Russian companies in favor of foreign investors and Russian courts' inability to enforce such orders and corruption.

Other Risks

We have not independently verified information we have sourced from third parties.

We have sourced certain information contained in this document from third parties, including private companies and Russian government agencies, and we have relied on the accuracy of this information without independent verification. The official data published by Russian federal, regional and local governments may be substantially less complete or researched than those of more developed countries. Official statistics may also be produced on different bases than those used in Western countries. Any discussion of matters relating to Russia in this document must, therefore, be subject to uncertainty due to concerns about the completeness or reliability of available official and public information. In addition, the veracity of some official data released by the Russian government may be questionable.

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Because no standard definition of an average monthly service revenue per user ("ARPU"), average monthly usage per user ("MOU") or churn exists in the telecommunications industry, comparisons between certain operating data of different companies may be difficult to draw.

The methodology for calculating subscriber numbers, ARPU, MOU and churn varies substantially in the telecommunications industry, resulting in variances in reported numbers from that which would result from the use of a uniform methodology. Therefore, comparisons of certain operating data between different telecommunications companies may be difficult to draw.

Factors over which we have little or no control may affect our revenues.

Our business activities depend on a number of factors which are outside of our control, including natural disasters, imposition of a state of emergency in the countries of our operations, strikes and global and regional economic conditions. Any of these factors could result in deterioration of our revenues, which could have a material adverse effect on our results of operations, financial condition, prospects and the price of our ADSs.

Item 4. Information on Our Company

A. History and Development

Mobile TeleSystems CJSC ("MTS CJSC"), our predecessor, was formed in 1993. The founding shareholders included MGTS and three other Russian telecommunications companies, which collectively held 53% of our original share capital, and two German companies, Siemens AG and T-Mobile Deutschland GmbH, an affiliate of Deutsche Telekom AG, which collectively held the remaining 47%. Sistema currently owns 43.23% of our share capital (50.02% excluding treasury shares). See "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders."

Our legal name is Mobile TeleSystems Public Joint Stock Company (MTS) and we are incorporated under the laws of the Russian Federation. Our head office is located at 5 Vorontsovskaya Street, Bldg. 2, Moscow 109147, Russian Federation, and the telephone number of our investor relations department is +7 495 223-2025. The address of our incorporation is 4 Marksistskaya Street, Moscow 109147, Russian Federation. We maintain a website at www.ir.mts.ru. The information on our website is not a part of this report. We have appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711 as our authorized agent for service of process for any suit or proceeding arising out of or relating to our shares, ADSs or the deposit agreement.

Mobile TeleSystems Public Joint Stock Company (MTS PJSC) is the new legal name of Mobile TeleSystems Open Joint Stock Company (MTS OJSC) registered on July 1, 2015 in order to comply with the regulations of Chapter 4 of the Civil Code of Russian Federation (as amended). MTS OJSC was created on March 1, 2000, through the merger of MTS CJSC and RTC CJSC, a wholly owned subsidiary. Our charter was registered with the State Registration Chamber on March 1, 2000, which is our date of incorporation, and with the Moscow Registration Chamber on March 22, 2000. Our initial share issuance was registered by the Russian Federal Commission on the Securities Market on April 28, 2000.

We completed our initial public offering on July 6, 2000, and listed our shares of common stock, represented by ADSs on the New York Stock Exchange (the "NYSE") under the symbol "MBT." Each ADS represents two underlying shares of our common stock. Prior to May 3, 2010, each ADS represented five shares of our common stock.

In September 2001, we won a tender held by the Telecommunications Ministry of the Belarus Republic to form a joint venture with a GSM 900/1800 license to operate in Belarus. On June 26, 2002, MTS Belarus received all of the governmental approvals and licenses required to commence operations in Belarus and it began operations on June 27, 2002.

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In 2003 through a number of purchases we acquired a 100% stake in MTS Ukraine (now VF Ukraine) for RUB 11,872 million. Starting from 2007 until 2015, we operated under the MTS brand in Ukraine. In 2015, as part of our strategic partnership with Vodafone, we introduced Vodafone brand in Ukraine. In December 2019, our wholly owned subsidiary Allegretto Holding S.a.r.L (Lux) sold its 100% stake in its Dutch subsidiary Preludium B.V., the sole shareholder of VF Ukraine, for total consideration of USD 689 million (RUB 44,386 million) (including fair value of earn-out of USD 44 million). See Note 12 to the consolidated financial statements. This deal is in line with our revamped strategy focused on Russia and aimed to build innovative digital services on top of a strong telecoms foundation.

We started operations in Uzbekistan, following the two step acquisition of 100% ownership interest in Uzdunrobita in 2004 and 2007. In July 2012, we suspended providing services in Uzbekistan per the order from the State Agency for Communications and Information ("SACI") of Uzbekistan on the temporary suspension of the operating license of Uzdunrobita for a period of 10 business days which was subsequently extended to three months. On April 22, 2013, the Tashkent Economic Court declared Uzdunrobita bankrupt and initiated liquidation procedures. As a result, we lost control over the subsidiary and deconsolidated Uzdunrobita. In July 2014 the disputes between us and Republic of Uzbekistan were resolved. The parties signed the Settlement Agreement and according to its terms all mutual claims were eliminated. Furthermore, a new mobile operator, UMS, was established by governmental authorities of Republic of Uzbekistan. On September 24, 2014, an ownership interest of 50.01% in UMS was transferred to us as an incentive for reentrance into the country by the State Unitary Enterprise "Center of Radio Communications, Radio Broadcasting and Television," the second shareholder of an operator, on behalf of the Republic of Uzbekistan. We started operations in Uzbekistan in December 2014. On August 5, 2016, we sold our 50.01% stake in UMS to the State Unitary Enterprise "Center of Radio Communications, Radio Broadcasting and Television."

Please see "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and results of operations" regarding recent suspension of our services in Uzbekistan and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Uzbekistan."

In two separate purchases in June and November 2005, we acquired 100% of BCTI, the leading wireless operator in Turkmenistan, for $46.7 million (RUB 1,343 million) in cash. Since October 2006, we have operated under the MTS brand in Turkmenistan. On December 21, 2010, the Ministry of Communication of Turkmenistan suspended our primary operating license and we ceased providing mobile telecommunications services in Turkmenistan. In August 2012, we restarted our mobile communication operations in Turkmenistan via MTS-Turkmenistan and resumed providing services for subscribers who did not cancel their contracts. Since October 1, 2012, we resumed our operations in Turkmenistan entirely and started entering into contracts with new subscribers. On September 29, 2017, we stopped providing communication services in Turkmenistan due to the actions of the state-owned telecommunication company Turkmentelekom, which resulted in the disconnection of international and long-distance zonal communication services and internet access. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—An outcome of the proceedings relating to sustaining operations of our subsidiary in Turkmenistan is unpredictable."

In September 2007, we acquired an 80% stake in International Cell Holding Ltd., a 100% indirect owner of K-Telecom (now MTS-Armenia), the leading wireless operator in Armenia, for €260.0 million (RUB 9,142 million), and entered into a call and put option agreement initially valid until 2012 (and later extended until 2018) for the remaining 20%. Subsequently International Cell Holding Ltd. was substituted by Aramayo Investments Limited and further liquidated due to corporate restructuring. In August 2019 Allegretto Holdings S.a.r.L (Lux), our 100% subsidiary, that held 80% shares of Aramayo Investments Limited entered into a full and final settlement agreement, under which the value of 20%

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shares in MTS-Armenia was offset against the amount of loan issued to the minority shareholders and accrued interest ($99.1 million or RUB 6,618 million). Thus, as a result of the transaction, Allegretto accumulated 100% of indirect ownership over the asset. MTS-Armenia operates in the GSM-900/1800 standard, covering the entire territory of Armenia. It historically operated under the VivaCell brand, and was re-branded as VivaCell-MTS in September 2008.

In October 2009, we acquired a 50.91% stake in Comstar, a leading fixed line operator in Russia, from Sistema, and subsequently increased our ownership interest to 61.97% (or 64.03% excluding treasury shares) in December 2009 and to 70.97% (or 73.33% excluding treasury shares) in September 2010 through a voluntary tender offer. On December 23, 2010, the extraordinary general meetings of shareholders of Comstar and MTS approved a merger, which was completed on April 1, 2011. As a result, Comstar ceased to exist as a separate legal entity and MTS became the legal successor of Comstar in respect of all its rights and obligations.

Prior to April 1, 2011, Comstar operated in both the Moscow and other fixed line communications markets, offering voice telephony, broadband Internet and pay-TV, operator interconnect and other services to its subscribers. As of now we still continue to provide these services. One of Comstar subsidiaries was MGTS, Moscow's incumbent fixed line operator with "last mile" access (the final phase of delivering connectivity from a communications provider to a customer) to approximately 96% of the households in Moscow. In 2011, we completed the re-branding of Comstar with our main MTS brand. MGTS continues to provide services under its own brand.

In 2009, we started to develop our sales and distribution network both organically and through the acquisition of several national and regional retail chains. We organized our retail operations under a wholly owned subsidiary, Russian Telephone Company ("RTC"). RTC handles all functions relating to our retail operations, including the management of points-of-sale, the purchase and sale of handsets and accessories and subscriber enrollment at our retail outlets.

Between 2009 until now we acquired controlling stakes in various regional fixed line operators as we are determined to develop broadband Internet through regional expansion.

In April 2013, we acquired a 25.095% stake in MTS Bank for 5.09 billion rubles through an additional share issuance by the bank. In July 2018, we acquired additional stake in MTS Bank for RUB 8.27 billion from Sistema and our ownership share increased to 55.4%, providing control over the bank. The acquisition allowed us to consolidate MTS business in the Russian FinTech market, simplify corporate and operational management, and accelerate the launch of new products. In February 2019 we acquired a 39.48% stake for RUB 11.4 billion and later in December 2019 we acquired an additional 4.46% stake for RUB 1.4 billion. As a result of these transactions, MTS' effective share in MTS Bank increased to 99.9% (including a 0.2% share in the bank held by our subsidiary MGTS and MTS Bank's ownership of its own treasury shares).

In December 2014, we acquired controlling stakes in Penza-GSM, SMARTS-Ivanovo and SMARTS-Ufa, operating in Penza, Ivanovo and the Bashkortostan Republic, respectively. The acquired companies hold rights to use 900 and 1800 MHz radio frequencies within the regions mentioned. The acquisition enhanced our spectrum resources in the above mentioned regions. The purchase price comprised of cash consideration and a deferred payment, payable in 18 months after the acquisition date. These companies were subsequently merged with MTS.

In April 2014, we acquired a 10.82% stake in OZON, a leading Russian e-commerce company, through the purchase of OZON Holdings Limited's additional share issuance for RUB 2,702 million. Cooperation with OZON created new distribution channels available to us through its extensive online retail platforms. As of December 31, 2017 our interest comprised 11.19% and was further increased to 18.69% as of December 31, 2018. In March 2019, we sold our stake in OZON to Sistema for RUB 7.9 billion. Following this date, we had no interest in OZON.

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In December 2015, we have completed the acquisition of NVision Group ("NVision") and its subsidiaries for RUB 11.2 billion. Through this transaction, we have obtained proprietary rights over our billing systems which will allow us to reduce the time-to-market for new products and better manage billing and IT-related expenses. NVision is a system integrator and complex IT solutions provider in Russia. In November 2020 we sold our 100% stake in NVision Group JSC to Sistema PJSFC for RUB 369 million (including adjustment based on NVision's financial results as of the date of deal closure). Under the terms of the deal, we agreed to sell NVision's systems integration assets, excluding those utilized in the development of our product portfolio. We will also retain the FORIS BSS/OSS billing system that had earlier been part of NVision.

In September 2016, we acquired controlling stake in Smarts-Yoshkar-Ola, a company, operating in the Republic of Mari El and holding rights to use 1800 MHz radio frequencies. The acquisition enhanced our spectrum resources in the Republic of Mari El.

In July 2017, we acquired a 100% ownership interest in Bashkortostan Cellular Communication OJSC, a company which operates in the Republic of Bashkortostan and holds rights to use 450 MHz and 2,100 MHz radio frequencies. The acquisition enhanced our spectrum resources in the Republic of Bashkortostan.

In October 2017, we acquired 50.82% of ownership interest in the Russian retail software developer Oblachny Retail LLC, operating under trademark LiteBox, with a call and put option arrangement existing over another 49.18% of shares. The deal allowed us to enter the cloud-based cash register market as a fully licensed fiscal data operator ("FDO") and a provider of integrated digital cash management solutions for B2B clients.

In December 2017, we purchased a 100% stake in Praliss Enterprises, thus acquiring one of the world's leading eSport clubs—Gambit Esports. The acquisition was a part of our 3D strategy.

In January 2018, we acquired a 78.2% stake of Cubichall Holdings Ltd (the owner of Kulturnaya Sluzhba LLC), operating under the trademark Ponominalu.ru, for RUB 321 million with a call and put option arrangement existing over another 21.8% of shares. Following exercise of options in May 2019 and July 2020 we increased our stake to 100%. In February 2018, we acquired a 100% ownership interest in Moskovskaia Direktciia Teatralno-Kontcertnyh i Sportivno-Zrelishchnyh Kass LLC, operating under the trademark Ticketland.ru, for RUB 3.19 billion. These acquisitions allowed us to enter the event ticket market, while broadening our suite of digital services, and integrate a key new product into existing loyalty program and mobile applications ecosystem.

In August 2018, we purchased a 99% stake in Progressivniye Technologii CJSC, provider of fixed-line services in the cities of Zhukovskiy and Anapa, which allowed us to strengthen our position in the local markets and benefit from the expected synergies from the acquisition.

In October 2018, we acquired Dekart property complex in full from Sistema. The property complex comprises office facilities, parking premises and engineering networks and is partly occupied by us and partly used as investment property.

In December 2018, we acquired a 100% interest in IT-Grad 1 Cloud LLC, one of the largest cloud providers on the Russian IaaS (Infrastructure as a Service) market. This acquisition allowed the Group to strengthen its presence in the Russian cloud services market.

In December 2018, we acquired Serebryaniy Bor property complex in full from Sistema. The property complex comprises administrative facilities, land and engineering networks and is partly occupied by us and partly designated as investment property. In December 2018, we also acquired Serebryaniy Bor administrative property complex from Sistema.

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In April 2019, we acquired from Sistema a 100% interest in Joint Stock Company "United Russian Studios," a management company of a "Kinopolis" movie studio with its own movies production complex. The acquisition was a part of our 3D strategy.

In June 2019, we acquired a 97.42% stake in JSC "RIKT," a regional provider of telecommunications services in Mezhdurechensk and Kemerovo Oblast. The acquisition was commenced through the voluntary tender offer procedure under Russian law. Later, in October 2019 we acquired the remaining 2.58% stake in JSC "RIKT" through obligatory squeeze-out procedure set out in Russian law. As a result of both procedures, MTS' share in JSC "RIKT" increased to 100%. This acquisition allowed the Group to strengthen its presence in the Russian broadband Internet regional market.

In August 2019, we acquired Narodnoje property complex in full from Sistema. The property complex comprises office facilities and hostel premises, and is partly occupied by us and partly used as investment property.

In November 2019, we acquired a 7.5% stake in JUST AI Limited, IT-company specialized in artificial intelligence technologies, machine learning and natural language processing. The acquisition was a part of our CLV 2.0 strategy (as described below).

In December 2019, we acquired a 15.01% stake in SWIPGLOBAL Ltd, IT-company specialized in face recognition payments without using a smartphone or QR code. The acquisition was a part of our CLV 2.0 strategy.

In February 2020, we acquired a 51% stake in Zelenaya Tochka Group, a provider of broadband and digital TV services in a number of Russian regions, and accounted for investment in joint venture, based on the provisions of the shareholders' agreement. The Zelenaya Tochka group of companies comprises 13 connectivity operators operating under multiple brands across 12 Russian cities: Stavropol, Mikhaylovsk, Nevinnomyssk, Elista, Tambov, Belgorod, Lipetsk, Ufa, Neftekamsk, Beloretsk, Tomsk, and Vladivostok. Under the terms of the agreement, we retain three-year call and put options to purchase the remaining 49% of Zelenaya Tochka's share capital.

In June 2020, we acquired a 100% interest in Stopol Group, producer and supplier of car multifunctional multimedia devices / on-board computers. The acquisition is a part of our digital ecosystem strategy. The purchase price constituted a cash payment of RUB 312 million paid in July 2020 and a contingent consideration with the fair value of RUB 9 million at acquisition date.

In September 2020 we announced an agreement to invest RUB 125 million in the developer of CoinKeeper, Russia's most popular personal finance app. The investment—which marks the first outlay by the MTS Venture Fund—is to be structured in multiple tranches, with the fund receiving a minority stake in the startup. As a first tranche we`ve invested RUB 85 m and have got 22.08% stake in Disrapp LLC. In January 2021, MTS announced a RUB 60 million investment by the MTS Venture Fund for an approximately 10% stake in the Russian startup Airo, a platform aggregator for on-demand household and dry cleaning services in Moscow and St. Petersburg with over 50,000 users.

Capital Expenditures

We spent in total RUB 97,838 million in 2020 for network development in Russia and the other countries where we operate, which included RUB 66,685 million in cash expenditures on property, plant and equipment (including 429 million for acquisition of Avantage data center), and RUB 31,153 million for the purchase of intangible assets. We plan to spend up to RUB 100-110 billion (excluding potential capital expenditures for acquisition of frequency bands licenses) in 2021 for further network expansion, connection of socially significant objects to the network, special projects relating to the development of big data, b2b digital, media, artificial intelligence and ecosystem products, fixed network modernization, further construction of radio subsystem and additional storage, processing and

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indexing centers to comply with requirements of "Yarovaya-Ozerov bundle of laws," maintenance capital expenditures, construction of new sites and purchase of software for network managing in Armenia and other initiatives. Increase of expected capital expenditures in 2021 (expected amount of capital expenditures in 2020 was RUB 90 billion) is mainly driven by higher currency exchange rate, competitive environment and development of ecosystem and new business lines. We plan to finance our capital expenditures primarily through operating cash flows, and to the extent necessary, through additional external financing. The actual amount of our capital expenditures for 2021 may vary depending on subscriber growth, demand and network development, as well as currency volatility, vendor terms and the availability of external financing. The capital expenditure estimate for 2021 excludes expenditures that may be made in connection with acquisitions. A breakdown of our capital expenditures in 2020 by country is set forth below.

We spent RUB 262 million, 2,052 million and 3,444 million in 2020, 2019 and 2018, respectively, for acquisitions of subsidiaries, net of cash acquired from third parties.

Russia

We spent RUB 95,972 million in 2020 for network development in Russia, including RUB 65,491 million in cash expenditures on property, plant and equipment (including RUB 429 million for acquisition of Avantage data center), and RUB 30,481 million for the purchase of intangible assets.

Armenia

We spent RUB 1,866 million in 2020 for network development in Armenia, including RUB 1,194 million in cash expenditures on property, plant and equipment, and RUB 672 million for the purchase of intangible assets.

Belarus

MTS Belarus spent RUB 2,388 million in 2020 for network development, including RUB 1,424 million in cash expenditures on property, plant and equipment, and RUB 964 million for the purchase of intangible assets. We do not include the capital expenditures of MTS Belarus in our capital expenditures described above as its results are not consolidated in our financial statements.

B. Business Overview

We are a leading telecommunications provider in Russia and the CIS, providing a wide range of mobile and fixed line voice and data telecommunications services, including data transfer, broadband, pay-TV and various value-added services, including Big Data, IoT, cloud services, banking services, e-commerce, as well as selling equipment, accessories and software. According to AC&M Consulting, we are the largest provider of mobile cellular communications services in Russia. According to our own estimates, we are also the largest provider of mobile cellular communication services in Armenia in terms of mobile subscribers.

As of December 31, 2020, we had a mobile subscriber base of approximately 80.6 million (78.5 million in Russia and 2.1 million in Armenia) which is a decrease of 0.8% compared to December 31, 2019. As of December 31, 2019, we had a mobile subscriber base of approximately 81.3 million (79.1 million in Russia and 2.2 million in Armenia) which is an increase of 1.4% compared to December 31, 2018. As of December 31, 2018, we had a mobile subscriber base of approximately 80.1 million (approximately 78.0 million in Russia and 2.1 million in Armenia) which is a decrease of 0.3% compared to December 31, 2017.

We are also the largest operator in the Moscow residential broadband market in terms of subscribers, with a 38% market share as of December 31, 2020, based on TMT Consulting data. Our

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revenues for the year ended December 31, 2020, were RUB 494,926 million, representing 5.2% increase from the year ended December 31, 2019. Our revenues for the year ended December 31, 2019, were RUB 470,605 million, which is an increase of 5.5% from RUB 446,238 million for the year ended December 31, 2018. Our profit for the year ended December 31, 2020, was RUB 62,073 million, which is an increase of 12.7% from the year ended December 31, 2019. Our profit for the year ended December 31, 2019, was RUB 55,099 million, which is an increase of 603.5% from RUB 7,832 million for the year ended December 31, 2018.

Russia is our principal market, both in terms of subscribers and revenues. For the year ended December 31, 2020 approximately 98.5% of our revenues came from operations in Russia and approximately 1.5% of our revenues came from operations in other countries, respectively.

In July 2018 we acquired control over MTS Bank and started rendering banking services. MTS Bank is one of the 50 largest banks in the Russian Federation. MTS Bank was established in the Russian Federation as an open joint stock company in 1993. MTS Bank's primary business consists of commercial activities, trading with securities, foreign currencies and derivative instruments, originating loans and guarantees. MTS Bank is regulated by the CBR and conducts its business under general license number 2268 issued on December 17, 2014. In 2018, RAEX (Expert RA rating agency) assigned MTS Bank a credit rating of ruBBB+, and Fitch Ratings upgraded the bank's rating to BB–. In 2019, rating agencies affirmed the credit ratings of the financial institution. As of December 31, 2020, among Russian banks, MTS Bank ranked 29th in terms of the amount of household deposits and capital and 37th in terms of total assets, according to Banki.ru.

Our strategy of MTS Bank development is building of a digital bank in cooperation with telecommunication business, resulting in positive synergies and fulfilling financial services area to create a single ecosystem of digital services for customers.

Banking services revenue in 2020 was RUB 35,043 million, representing 7.1% of our total revenues for the year ended December 31, 2020. MTS Bank's net operating profit was positive and amounted to RUB 1,167 million. MTS Bank activities (financial assets and liabilities, management of liquidity risks connected with the activities) are described in Note 31 to the consolidated financial statements. Outstanding deposits and loans to customers as at December 31, 2020 came to RUB 116,668 million. Loans to legal entities made up 21.1% of that total, 76.4% were loans to individuals.

Detailed segment information for MTS Bank is presented in Note 6 to the consolidated financial statements.

As of December 31, 2020, approximately 97.4% of our mobile subscriber base was in Russia and approximately 2.6% was in other countries. According to AC&M-Consulting, as of December 31, 2020, we had a 31% market share of total mobile subscribers in Russia.

The table below sets forth our total mobile subscribers as of the end of the last five years:

Period	Subscribers⁽¹⁾

	(in million)
2016		83.7	⁽²⁾
2017		80.4	⁽³⁾
2018		80.1	⁽³⁾
2019		81.3	⁽³⁾
2020		80.6	⁽³⁾

(1): Excludes MTS Belarus subscribers as its results of operations are not consolidated in our financial statements. We define a subscriber as an organization or individual, whose SIM-card shows traffic-generating activity or accrues a balance for services rendered or is replenished of topped off over the course of any three- month period, inclusive within the reporting period, and was not blocked at the end of the period.

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(2): Excludes Uzbekistan and Ukraine subscribers.
(3): Excludes Turkmenistan and Ukraine subscribers.

In August 2016, we ceased our operations in Uzbekistan. In September 2017, we suspended the provision of telecommunication services to our subscribers in Turkmenistan, due to the termination by Turkmen state-owned companies and state authorities of line rental, frequency allocation, interconnect, and other agreements necessary to servicing MTS clients. For more information, see "Item 3. Key Information—D. Risk Factors—An outcome of the proceedings relating to sustaining operations of our subsidiary in Turkmenistan is unpredictable."

In November, 2019, the Group entered into a sale agreement to dispose of VF Ukraine. The disposal was effected in order to concentrate on development of the Group's core Russian market. The disposal was completed in December, 2019, and is reported in the current period and retrospectively restated in prior periods as a discontinued operation.

In October, 2020, the Group entered into a sale agreement to dispose of JSC "Nvision Group", which provided integration services, as well as the sales of software, and constituted "System Integrator" operating segment. The disposal was completed in October 2020, and is reported in the current period and retrospectively restated in prior periods as a discontinued operation.

For details on the sales, please see "Item 4—Information on our Company—A. History and Development" and Note 12 to the consolidated financial statements.

According to AC&M Consulting, overall mobile cellular penetration in Russia was approximately 172% as at December 31, 2020, 178% as at December 31, 2019 and 174% as of December 31, 2018. According to our estimates, mobile cellular penetration in Armenia was approximately 123% as at December 31, 2020 and 127.6% as of December 31, 2019, as compared to approximately 125.5% as of December 31, 2018.

Our consolidated mobile subscriber base changed insignificantly in the first three months of 2021. Specifically, according to our estimates as of March 29, 2021, we had approximately 80.5 million subscribers, including approximately 78.5 million in Russia and 2.1 million in Armenia.

As of December 31, 2020, according to our estimates, MTS Belarus had approximately 5.7 million subscribers and a leading market share of 48.7%. As of December 31, 2019, according to our estimates, MTS Belarus had approximately 5.6 million subscribers and a leading market share of 46.9%. As of December 31, 2018, according to our estimates, MTS Belarus had approximately 5.5 million subscribers and a leading market share of 45.9%. Belarus, a country with a population of approximately 9.5 million, had a mobile cellular penetration rate of approximately 123.2% as of December 31, 2019, according to our estimates.

As of December 31, 2020, we had mobile licenses to operate and commercial mobile operations throughout the entire territory of Russia with a population of approximately 146.2 million people and throughout the entire territory of Armenia with a population of approximately 3.0 million people. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Failure to renew our licenses, or receive renewed or new licenses with similar terms to our existing licenses, could have a material adverse effect on our business and results of operations," and "—Failure to fulfill the terms of our licenses could result in their suspension or termination, which could have a material adverse effect on our business and results of operations."

In 2020, we offer fixed line communications services in 56 regions across Russia, covering a population of about 25 million households.

Our Moscow fixed line operations contemplate communications services provided through incumbent operator MGTS. Our Moscow fixed line operations included 2.5 million unique residential subscribers as of December 31, 2020. We are the largest operator in the Moscow residential broadband

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market, with a 38% market share. MGTS holds licenses and regulatory approvals to provide local telephony, DLD/ILD voice telephony, interconnect to other operators, Internet and data transmission and other services.

Our fixed line operations in other cities include the following communications services: voice, data and Internet and pay-TV services for corporate and residential subscribers, as well as the provision of interconnect services to other communications operators and numbering capacity to their subscribers. As of December 31, 2020, we had 3.0 million unique residential subscribers according to our estimates. Fixed line services are also provided in Armenia with digital telephony communications services, data transmission, Internet access and the renting of channels.

We have also continued to develop our proprietary sales and distribution network organically.

To maintain and increase our market share and brand awareness, we use a combination of print media, radio, television, direct mail and outdoor advertising, focusing on brand and image advertising, as well as promotion of particular tariff plans.

Business Strategy

In 2019, we have developed and adopted the new strategy called "Customer Lifetime Value 2.0" ("CLV 2.0") which is aimed to build substantial digital business on the top of our telecommunication business. The name of the strategy reiterate that we put Customers at the center of our value proposition. We plan to supply our customers with a wide range of digital services. Our strategy is focused on prolonging customers' Lifetime with our services by increasing emotional attachment to the brand together with level of satisfaction and loyalty. We focus on providing more Value for our clients and maximize their value to us in the long run. Reference to "2.0" stresses that we are shifting from single business line telecom centric ideology (which could be considered "1.0") to a multi-product digital services provider approach and which should enable us to maximize value across the whole product portfolio.

We believe that shift from telecommunication into adjacent markets such as financial services and entertainment supported by digital capabilities like Big Data and AI will be a first step to our future convergence into multi service digital company. We intend not to rely on development of our own products portfolio solely, but rather build partnerships with independent services providers. Collaboration with such projects should enable us to offer more innovative, various and convenient services to our clients and bring more value to their life. In the nearest future we plan to increase the number of partnerships and boost our partnership capabilities and value proposition them in order to become ultimate preferred choice for our potential partners.

Russian market of digital services is quite unique due to the fact that in most of the segments local projects retain leadership positions and compete successfully against the global players. This situation is due to multiple fundamental reasons ranging from customer's behavior and language specifics to regulatory requirements and structure of capital market. This allows major Russian business groups from banking, retail, high tech, and telecom sectors to aggressively develop multiple lines in digital businesses and adopt ecosystem approach in their business strategies. At the moment a number of big local companies from TMT, fintech and digital industries are moving this direction, expanding their businesses outside of their core sectors and entering the market with ecosystem propositions. In this respect we believe we are entering a period of new competition for customer spend and attention in Russia.

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We believe that we are well positioned for this type of competition. Our strong brand and deep knowledge of our clients supported by powerful analytical capabilities (Big Data and AI based) will allow us to provide our clients with seamless, deeply customized and personalized digital experience for wide portfolio of different services. We have already experienced substantial synergies between telecommunication, banking and media services which allow us effectively utilize our online and offline marketing capabilities and deep customer knowledge. We clearly see that customers with a few different services from us bring higher value and have high level of brand loyalty and services satisfaction. We intend to increase the penetration of customers utilizing few different services provided by us in our customer base.

We believe that developments in areas other than telecommunication will add significant grow in the business over time and make user more loyal to the company in all services. We see our telecom business not only as the main source of revenue and profits, but also as the platform for our digital expansion. We aim to keep this part of our business in a robust shape both in terms of quality of services and economical effectiveness. To achieve that we will keep spending at significant capital expenditure level to keep with expectation of our customer base and stay at par with competition on the Russian market.

We understand that in order to provide customers with seamless and lifestyle-oriented ecosystem experience we need to develop specific tools, such as unified ID, common payment system and others, which will be unified across all our products and mobile apps. In 2020 we were focused on building these robust tools and have made significant progress. We intend to use different ways to involve clients into ecosystem:

•: Flexible subscription with a defined budget in which clients can adjust amounts of consumption for each MTS product that they use.
•: Premium subscription with a wide variety of products and services with significant discount for the whole package.
•: Unified cashback system where points gained for consumption of products (including broad range of partners) can be spent within the MTS ecosystem.

In 2021 we aim at significant growth of our ecosystem client base.

Transition to the full scale operational model within CLV 2.0 concept will take some time. In 2020, we brought the overall business configuration in line with our updated strategic model. In the following years it should allow us to radically expand our digital services portfolio and substantially grow number of multi product clients. This should allow us to grow customer base and increase customer spending while driving up brand emotional attachment and loyalty.

Implementation of the strategy is subject to a number of risks. See "Item 3. Key Information—D. Risk Factors" for a description of these and other risks we face.

Current Operations

We are a provider of a wide range of mobile and fixed line voice and data telecommunications services, including data transfer, broadband, pay-TV and various value-added services, including Big Data, IoT, cloud services, banking services, e-commerce, as well as selling equipment, accessories and software.

Subsidiaries

For a list of our major subsidiaries and our ownership percentages in these subsidiaries, see "Item 4. Information on our Company—C. Organizational Structure."

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Mobile Operations

Network Infrastructure—Mobile Core

As of December 31, 2020 MTS Mobile core network in Russia includes the following nodes:

•: Mobile switching centre-server (MSC-S): 129 nodes, servicing 62.4 million subscribers;
•: Media gateway (MGW): 113 nodes, maximum capacity 3.3 million Erl.;
•: Subscriber Data Management (SDM) includes 23 nodes (Home Location Register (HLR) / Home Subscriber Server (HSS));
•: 106 Serving GPRS Support Node/Mobility Management Entity (SGSN/MME) and Serving/Packet Data Network—Gateway (S/P-GW) nodes are used to handle packet data services;
•: 16 Signalling Relay Function (SRF) nodes deployed on network for handling Mobile Number Portability (MNP) services.

The following network expansion and modernization projects were executed during the course of 2020:

•: MSC-S/MGW and S/P-GW nodes were expanded as a result of voice and data traffic growth;
•: Network upgrade completed legacy MS DX200 and MGW IPA2800 Nokia nodes were replaced by new MSS ATCA and MGW ATCA Nokia;
•: SWAP PS Core Far-East macro-region: SGSN/MME Huawei nodes were replaced by new SGSN/MME ULTRA-M Cisco;
•: Upgrade IMS Core Nokia launched VoLTE in 75 regions.

Services Offered

Network Access

We primarily offer mobile cellular voice and data communication services to our subscribers on the basis of various tariff plans designed for different market segments. In general, most of our tariff plans combine voice and data usage for a fixed monthly charge. See "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Tariffs."

Automatic Roaming

Roaming allows our customers, both subscribers and guest roamers, to receive and make international, local and long-distance calls while traveling outside of their home network. Roaming is provided through the agreements between us and other operators.

As of December 31, 2020, we had bilateral roaming contracts with 862 wireless operators/networks in 232 countries, including 14 regional operators/networks in Russia. We continually seek to expand our roaming capability and are currently in negotiations with additional operators.

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Value-Added Services

We offer various value-added services to our customers. These services may be included in the tariff plan selected by the subscriber or subscribers may pay additional monthly charges and, in some cases, usage charges for them. Some basic value-added services that we offer include:


Basic telephony	Customer care	Other services
• Call Divert/Forwarding	• Itemization of Monthly Bills	• Ring Back Tone
• Caller ID Display and anti-Caller ID Display	• Information and Directory Service	• Second Memory (Cloud storage)
• Conference Calling	• Automatic Customer Care System and Customer Care System via the Internet	• Parental control for internet, calls, sms
	• My MTS service app
• Voicemail		• GEO services
• Call Barring		• Connected Car (IoT B2C)
• Call Waiting		• MTS Music
		• MTS Fitness
		• MTS Live
• Missed Call Alert		• MTS TV
• Intelligent call assistant		• MTS Library
		• VoD (Video on Demand)
• Collect call		• Location Based Service ("LBS")
• Black List		• Mobile banking
• VoLTE/Wi-Fi Calling		• Security and Privacy services for B2C
		• Branded App for calls and messaging
Messaging	Mobile internet
• SMS P2P, A2P	• 3G, 4G (LTE), 5G test zone
• MMS	• Data share plan
• Application MTS Connect	• Real IP
	• E shop
	• APN remote access point
	• Fixed Mobile Convergence
	• MTS Modem
	• MTS Tablet
	• Mobile Office
	• Wi-Fi

We also provide many voice and SMS-based value-added services in cooperation with various content providers.

GPRS, EDGE services

We launched our commercial 2G network in 1994 based on GSM-900 technology. From 1999, we significantly improved our 2G network capacity based on GSM-1800 technology. From 2001, we implemented wireless data communication services based on GPRS technology with download data rate of up to 85.6 Kbit/s. In 2005, we modernized our GSM network to support EDGE technology and tripled data services rates. Today we continue supporting and modernizing our 2G network and we put the prime focus at the development of our 3G and LTE networks in order to provide our subscribers

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with high-speed broadband wireless services. As of December 31, 2020, we provided GSM, GPRS and EDGE services with 59,861 2G BTS over the geographic area with more than 95% of population of Russia.

3G Technology

In April 2007, we obtained a nationwide 3G/UMTS (Universal Mobile Telecommunications System) license in Russia. The license was valid till May 21, 2017 and covers the entire territory of Russia with frequencies 1950-1965 MHz and 2140-2155 MHz. In 2017 we prolonged the 3G/UMTS license till 2022. Currently we have commercial 3G networks launched in all regions of Russia. In addition, we use UMTS900 in Moscow region and Habarovskiy kray where we have 2100 MHz restrictions. As of December 31, 2020, we installed 51,022 3G base stations.

In 2010, we started implementation of a high-speed technology known as HSPA+ on our 3G network. This supports up to 21 Mbit/s data transmission speed. In addition, we launched second and third 3G carriers to improve capacity and activated Dual Carrier technology, which supports up to 42 Mbit/s data transmission speed. We have already implemented Dual Carrier on more than 99% sites all over the Russia.

Since 2011, we use 3G femtocell network. Femtocells are small low-power wireless base stations in the licensed 2100 MHz spectrum. They connect to a mobile operator's network using residential DSL or cable broadband connections and can support 3G/HSPA+ mobile devices. We use femtocells to deliver a 3G/HSPA+ services inside building for business clients. In 2016, we launched offer of femtocells for consumers at B2C market segment. In 2020, after 2 years of operation, femtocells in the Moscow metro were decommissioned due to the launch of a macro network at all sections of the Moscow metro. The total number of femtocells installed in Russia decreased to 7,824 by the end of 2020 as compared to 11,049 femtocells as of the end of 2019 due to the decommissioning of femtocells in the metro.

MTS Armenia, our subsidiary in Armenia, have operated commercial 3G network since 2009. In 2011, MTS Armenia started to provide telecommunications services based on HSPA+ technology in Yerevan, six northern regions and in some southern regions of the country. At present HSPA+ technology with QAM64 and Dual Carrier features is available to almost 99% of the Armenian population. Also 2-pairs of RNCs in pool were put in operation in 2019 for increasing UMTS network capacity and reliability.

In 2018, we launched a major network upgrade project in Armenia, which is expected to result in significant increase of 3G and 4G services coverage as well as of network capacity. It includes a re-farming of 900 MHz frequency band to UMTS and 1800 MHz band to LTE with implementation of Carrier Aggregation technology. New Core network nodes were put in operation in 2018, marking the end of a bigger CS and PS Core modernization project.

At the end of 2020, MTS Armenia network has a total of 1,715 2G BTS, 2,517 3G base stations, and 1,805 4G sites.

LTE Technology

In July 2012, we won Russian Ministry of Communications and Mass Media tender for nationwide LTE-FDD license: 720-727.5 / 761-768.5 MHz, 798.5-806 / 839.5-847 MHz and 2540-2550 / 2660-2670 MHz. In December 2011 we got LTE TDD license in 2595-2620 MHz for Moscow only. Since September 2012, we offer LTE-based commercial service in Moscow region, where we initially deployed more than 800 LTE TDD base stations. As of December 2020, we had 9,640 LTE TDD and 75,958 LTE FDD base stations in Moscow.

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In December 2013, Russian regulator allowed re-farming existing 900 and 1800 MHz spectrum to UMTS-900 and LTE-1800. In 2014, we started DCS 1800 spectrum re-farming to LTE and rolled out LTE-1800 network, while expanding LTE 800/2600 coverage. In February 2016, MTS won Russian Ministry of Communications and Mass Media tender for nationwide LTE-TDD license and obtained LTE-TDD frequencies in following bands: 2595-2620 MHz for the whole territory of Russia, except Moscow region (obtained earlier). We are using LTE-TDD as a capacity layer to cope with increasing network utilization due to growing data traffic. In 2018, we started re-farming of existing 900 and 2100 MHz spectrum to LTE-900 and LTE-2100. As of December 2020, we had 85,134 LTE base stations in 83 regions of Russia.

Our LTE network meets requirements of 3GPP Release 14 in line with available LTE customer equipment. We provide data services with download data rate up to 700 Mbit/s, and up to 75 Mbit/s in uplink direction with our LTE network.

As of December 2020, we implemented Carrier Aggregation functionality at 45% of our LTE sites.

We continue working on re-farming the 2100 MHz band in Saint Petersburg and Moscow, where test clusters have been already launched, and plan to roll out LTE-2100 to the rest of the network, Moscow and Central regions. Test clusters are planned to launch by the end of 2021.

In 2018, we launched IoT services based on NB-IoT technology (Narrow Band IoT) in 20 largest Russian cities, including Moscow, Saint Petersburg, Novosibirsk, Kazan, Nizhny Novgorod, Vladivostok and others. MTS is IoT leader in Russian market, with large-scale narrow-band coverage provided by 36,905 base stations as at the end of 2020. We will continue NB-IoT rollout in the smaller regions of Russia in 2021.

In May 2018, we launched a commercial broadband Gigabit Class LTE network with LAA technology. The network showed downlink user throughput of up to 979 Mbps thanks to the aggregation of licensed LTE spectrum in the 1800 MHz (4x4 MIMO, 256-QAM) and three 20 MHz carriers (2x2 MIMO, 256-QAM) in the 5 GHz unlicensed spectrum.

In June 2018, at the FIFA 2018 World Cup MTS performed world's first commercial launch of massive MIMO technology at mass event of such scale and complexity. The technology was introduced in the LTE-TDD 2600 MHz band (B38) at more than 40 sites in seven out of the 11 tournament cities, including Moscow, Saint Petersburg, Kazan, Rostov-on-Don, Nizhny Novgorod, Ekaterinburg and Samara. The new technology allowed us to increase efficiently network capacity around the stadiums, at railway stations, at airports, in fan zones, and recreation areas. In 2019 we continued massive MIMO technology rollout in 23 cities.

In 2019, we started to modernize our network to support LTE-Evolution technology and 5G-ready in 7 North-West regions. In 2020, the modernization of the network in Moscow and the Central Regions began, the estimated project implementation period is 3 years. We plan to start modernization of the network in the regions of the Far East in 2021.

In September 2019, we launched two 5G pilot zones in Moscow and Saint Petersburg in 27GHz and 4.9GHz frequency bands. The pilot zone in Moscow is located at the VDNKh Exhibition Centre with tests to include Smart City applications for security, urban services management and transport systems. The pilot zone in Saint Petersburg is located in Kronshtadt. In October 2019, MTS StartUp Hub has unveiled the 5G Lab - an open incubation platform where startups and other companies can develop new 5G use cases using expertise, grants and other support from MTS. In 2020 5G test zones have been launched in the cities of Kazan, Ufa, Tomsk and Vladivostok. The number of 5G test zones in Moscow has also been expanded by 5.

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Research work has begun with OpenRAN (LTE and 5G). At the end of 2020, we launched at VDNKh the OpenRAN laboratory for testing OpenRAN equipment and software, and collaborating with software developers and hardware vendors.

We launched our first LTE base stations in MTS Armenia network in 2011 in 2600 MHz band and expanded the number of sites and coverage with new base stations installation every year. In 2018, after refarming in 1800 MHz band, LTE sites were activated in 1800 band with Carrier Aggregation technology. In 2019 MTS Armenia obtained the license to operate LTE network in 800 MHz band, as well as licenses for 1800 MHz band additional spectrum to increase L1800 network capacity. More than 230 new LTE base stations were launched in 2020. By the end of 2020 the number of L800/L1800/L2600 base stations in operation is more than 1800, providing LTE services all over Armenia. WiFi Calling and VoLTE services are also launched after Core network major modernization.

The new project for LTE network expansion in all Armenia regions is planned for 2021. It reflects the need to increase network capacity due to the constant growth of packet traffic.

5G Technology

Over the past few years, we launched agreements with leading global vendors to lay the foundation for cooperation on fifth-generation equipment and solutions.

In August 2019, we together with Huawei launched Russia's first large-scale urban 5G coverage on Saint Petersburg's island of Kronshtadt, and made a 5G cell in Moscow near the Smart City pavilion in one of the city's most historic parks, VDNKh. In the early stages, the networks will be used for testing and to connect certain public facilities to the Internet, with plans for broader rollout to subscribers in the future. Coverage includes both 4.9GHz mid-band and 28GHz millimeter-wave frequencies.

In addition, we tested a preproduction Samsung 5G smartphone. Tests were carried out in Moscow at the Nokia laboratory within the pilot MTS millimeter-wave network based on Nokia commercial equipment, using MTS SIM cards and the Samsung S10 5G pre-commercial smartphone based on the Snapdragon 855 platform with Snapdragon X50 modem.

In October 2019, we opened a 5G Lab at the Moscow pilot zone that will provide a platform for startups to develop new products and solutions based on fifth-generation connectivity. Potential 5G applications include smart city solutions in transportation, as well as new use cases in IoT, cloud computing, telemedicine, autonomous vehicles, and virtual and augmented reality (VR/AR).

In January 2020, we demoed private 5G network at the country's largest heavy truck manufacturing facility, the KAMAZ plant in Naberezhnye Chelny.

In July 2020, MTS together with Motorola and Qualcomm Technologies, Inc. have successfully completed testing of the flagship motorola edge+ smartphone, which supports the specific mmWave frequencies that have been allocated for 5G in Russia.

In November 2020, we announced the agreement with Polymetal International plc providing for Russia's first commercial 5G-ready private network—based on Ericsson's Dedicated Networks solution—to be deployed at the Nezhdaninskoye gold deposit in the Republic of Sakha (Yakutia).

Currently, the MTS 5G Center has a strong lineup of startup residents as well as corporate partners, counting among its members Nokia, Sony, Samsung, Qualcomm, and Telit. We are looking forward to welcoming the next dozen residents as we move forward on charting the course for 5G in Russia.

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Artificial Intelligence

In 2017, we created an artificial intelligence center, the main focus of which is the creation of innovative products and the addition of existing services to the company with new functions based on technologies for processing natural language, computer vision and speech recognition.

The key focus of the center is the development of virtual assistants, as well as the development of products in the areas of customer service, medicine, law and other areas.

In June 2019, we started selling customer service robots—automated dialogue systems that allow you to interact with a client without involving people. The solution, based on artificial intelligence technologies, processes any typical requests, for example, talks about products and services, answers popular questions, connects and disconnects services.

In November 2019, we, together with Sberbank, Yandex, Mail.ru Group, Gazprom Neft and the Russian Direct Investment Fund (RDIF), established an artificial intelligence alliance that will develop AI technologies in Russia. To develop solutions based on speech technologies, we also opened a research center in Skolkovo. Center experts intend to create the largest voice database in Russian, collecting and marking more than 15,000 hours of Russian speech.

In December 2019, we started selling a virtual lawyer-the automatic document management and life cycle management system Norma. The solution is based on artificial intelligence technologies such as natural language processing and computer vision.

In September 2020, we launched SaaS version of Norma for small and medium businesses and individuals who want to draft a customize legal document for personal needs. We suppose that legal services could be affordable, user-friendly and quick.

We have prepared a new strategy for 2021 focused on consolidation of AI properties such as competences, products and RnD. We are going to organize the board of directors and advisory board. Moreover, we will develop computer vision, natural language recognition and voice generation technologies in close collaboration with science community.

Banking Services

In July 2018, we started rendering banking services made possible by the acquisition of control over MTS Bank. MTS Bank has accelerated the sale of its retail product with the help of MTS' Big Data capabilities and MTS' digital sales channels. The bank's financial products are complementary to our core business and fully integrating the services under the Group umbrella allows us to offer our customers new integrated services, unlocking new revenue streams and consolidating our brand in the wider consumer space.

MTS Bank carries out its activities in the following areas:

•: Retail business

Serving individuals, including maintaining current accounts, receiving deposits, providing saving and investment products, custody services, servicing credit and debit cards, consumer and mortgage lending.

Serving small and medium-sized businesses, including maintaining current accounts, accepting deposits, providing overdrafts and lending services.

•: Corporate business

Serving corporate clients, including cash settlement, maintaining current accounts, accepting deposits, lending, including overdrafts, providing documentary products, including guarantees, letters of credit.

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•: Investment business

Providing investment banking services, including trading in shares and bonds, precious metals and derivative financial instruments, placement of fixed income securities, issuing debt securities and attracting subordinated loans, operations with foreign currency.

Other Services

In addition to cellular communication services, we offer corporate clients a number of telecommunications services such as design, construction and installation of local voice and data networks capable of interconnecting with fixed line operators, installation and maintenance of cellular payphones, lease of digital communication channels, access to open computer databases and data networks, including the Internet, and provision of fixed, local and long- distance telecommunications services, as well as video conferencing.

We also developed our ecosystem to offer our customers quality services in related sectors such as Telecom, Media, Fintech.

Strategic Partnership with Vodafone

In October 2008, we announced a strategic agreement with Vodafone aimed at drawing on Vodafone's expertise in building and developing 3G networks and mobile broadband products, working with leading global equipment providers and deploying innovative client relationship management ("CRM") practices to enhance quality and further improve the efficiency of our operations. In addition, the agreement allows us exclusive access to a range of products, services and devices from Vodafone for our markets of operation in Russia and Armenia.

In 2020, the agreement with Vodafone was prolonged until December 31, 2023.

Sales and Marketing

Target Customers

Our service model is based on the provision of services to customers to meet the needs of distinctive customer segments. We are not just a mobile operator. Our strategy is to build an umbrella brand which provides digital services and innovative products. We continued to work with youth audience keeping our focus on digital channels, such as social media, banners, pre-rolls and branded content.

In 2020, we focused our efforts on the following:

•: Increasing people's awareness about MTS as an ecosystem;
•: Launching products outside the telecom scope, convergent and comprehensive services;
•: Continuing to build knowledge about MTS as an innovative and technological company with state-of-the-art solutions, including in the main business—telecom;
•: Promoting innovative V&D (voice & data) billing plans;
•: Promoting devices with special operator offers;
•: Promoting our services aimed at the youth audience; and
•: Promoting the MTS CASHBACK virtual card from MTS Bank.

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Advertising and Marketing

Our advertising and public relations initiatives include:

•: Brand and image advertising and public relations to position us as a digital ecosystem encompassing different services and solutions;
•: Category and loyalty campaigns to inform our current and potential customers of the advantages of the high quality and diversity of our services, and the extensive coverage we offer; and
•: Product and billing plan-related advertising and promotions, pricing discounts for various target audiences to demonstrate value for money and cover specific needs.

The key subjects for our advertising campaigns in 2020 included promotion of the MTS Premium innovative service, special offers on devices in our retail stores and new features of the My MTS application. In addition, in 2020, MTS switched from billing plan offers to subscriptions for communication and services included in the ecosystem.

In order to build brand awareness and stimulate demand, we used a combination of various advertising formats, including television, outdoor, retail and radio. We also stepped up online advertising in desktop and mobile. In 2020, quarantine and lockdowns prevented us from hosting offline events, but we managed to host a number of large online concerts and festivals. We also coordinate the advertising policies of our dealers and partners, such as MTS Bank, to capitalize on the increased volume of joint advertising and preserve the integrity and high-quality image of the MTS brand.

In line with our strategy to find new ways to communicate effectively, especially in the digital channel, we launched special activations with partner websites and several collaborations with popular Russian bloggers, trending Internet shows and other formats of online advertising (branded content, collaborations with bloggers; social media integrations, etc.) in 2020.

Promoting the innovative "Non-billing plan" ("Netarif") subscription

In late 2020, we launched a new campaign with the message that MTS is shifting from the billing plan concept to a new approach which is called "Non-billing plan" ("Netarif") subscription. It gives subscribers the opportunity to pick only necessary services from the ecosystem created by MTS and its partners. These services include video and music streaming, unlimited access to social networks and the option to choose suitable gigabytes and minutes package.

The MTS Premium loyalty program

The MTS Premium program covered all clients using our ecosystem. Participants have access to bonuses and discounts on MTS services, lower loan rates at the MTS Bank, discounts on devices at MTS stores, free access to a package of TV channels, movies and series on MTS TV and in other apps.

Image and quality

In 2020, we launched 2 large-scale federal campaigns to promote technologies and unique settings available in our updated network. Both campaigns were brought together under the SMART NETWORK umbrella concept created to support our brand's innovative and high-tech image. The campaigns improved the perception of MTS communication services in terms of their quality—they emphasized the high-speed Internet connection available to mobile and home subscribers and high network performance which remained sustainable despite an increased load caused by mass transition to home offices during the pandemic.

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Ecosystem

In 2020, we launched a federal advertising campaign to promote MTS ecosystem products as allowing people to live a fulfilled life even during the lockdown period.

As part of the campaign, MTS adapted its products to new conditions and offered various benefits to its clients including increased cashback for those clients, who made purchases via the MTS Cashback app; an opportunity to obtain a virtual credit card from MTS Bank remotely, as well as access to free online concerts and useful services such as MTS Fitness, MTS Music, MTS Library and the MTS TV online cinema.

MTS TV

In 2020, we also launched a federal advertising campaign to promote the Super subscription for 99 rubles in the MTS TV online cinema.

This subscription includes 1,000 popular movies and series as well as 100 TV channels in high definition.

Brand

In 2020, we started a comprehensive transition aimed at structuring the ecosystem's architecture, and later had the updated architecture approved. We also started developing a visual style for our ecosystem with different visual features for each category and product and building a common digital platform for the brand book and visual styles. In addition, we updated the creative framework to promote MTS as an innovative and high-tech umbrella brand.

Financial services

In 2020, we launched an impressive advertising campaign promoting the MTS CASHBACK virtual card—an innovative product created by MTS Bank. Its main feature is a completely remote issuing process: a user can get the card in a few clicks using the MTS Bank app without visiting MTS Bank offices. The card allows the user to get an increased cashback at 5% on certain popular categories (such as clothes and food delivery), withdraw cash from ATMs with no commission and make free money transfers across Russia. The campaign pioneered our new creative framework and approach. The creative idea was to split into channels: TV, indoor, OLV, social networks, special projects, incl. integration into the "Musicality" online show.

GPON and Satellite TV

To support our satellite TV, we launched two federal campaigns:

•: a spring campaign that announced our special offer—the option to join satellite TV and unlimited mobile Internet for RUB 590 per month. The campaign was aimed at increasing the number of satellite TV and home Internet users. The creative idea included featuring the MTS company's main celebrity—Dmitry Nagiev—to improve both the product perception and the brand's image indicators. We used various distribution channels including TV, indoor, OLV and social networks; and
•: a Christmas campaign for promotion of another special offer—satellite TV and unlimited mobile Internet access for RUB 490 per month. The campaign was also aimed at increasing the number of satellite TV and home Internet users. It was launched as part of the tactical objective for supporting the product in high season—winter holidays. The distribution channels included TV, indoor, OLV and social networks.

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Promoting convergent offers

We launched WE MTS+, a new convergent billing plan for families, which includes home Internet, IP television, mobile TV and mobile communication in one billing plan for the whole family.

To convey its features more efficiently, we produced two commercials about families consisting of Russia's best-known celebrities. The monitoring results showed that the commercials were successful in terms of their attractiveness and the motivating effect.

Devices

In 2020, the majority of devices-related communication campaigns were targeted at supporting smartphone sales (of various price categories) in MTS retail, as well as supporting launches of global products (Apple).

The main mechanics used in promotion (and communication) were: cashback, price offers, loans, as well as trading-in and package offers (device and phone accessory or billing plan).

Promoting our services specifically for teenage audience

In 2020, we continued to promote our services for teenage audience. We participated in Spotify's launch in Russia and made a collaborative campaign with the offer "6 months of Spotify Premium for free for MTS users".

In addition, we hosted 12 free online concerts (including 3 festivals) with relevant rap and rock artists. We launched MTS LIVE XR—the first interactive music festival in augmented reality.

For the gaming audience, we promoted our WASD streaming service with 2 "League of streamers" campaigns.

Furthermore, we continued supporting modern art and teamed up with the Multimedia Art Museum in Moscow.

B2B offers

We continued developing services and products for entrepreneurs that help solve business issues and streamline processes.

During the lockdown period, we launched a project aimed at supporting small-scale enterprises. We made an interactive map where any representative of small business could offer their goods or services with delivery with no commission.

We continued supporting the SME segment with the "MTS Marketolog" platform, which helps companies to launch advertising campaigns without agencies. The product was mainly promoted in digital.

IoT

In 2020, we continued promoting the following IoT products: Smart watches for kids, Smart watches for seniors, GPS trackers, Smart collars for pets. Over the year, we launched two campaigns to promote smart watches for kids with the special Go-Smart billing plan: "Back to School" campaign (TV) in August and "New Year" campaign (Non-TV) in December. To promote the campaigns, we used a wide range of channels: TV, digital, radio, MTS retail stores.

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Sales and Distribution

We have historically enrolled the vast majority of our subscribers through a network of independent dealers that operate numerous points-of-sale in places with high consumer activity, such as supermarkets, shopping centers, transportation hubs and markets. In 2009, in response to changes in the independent retail market, we began to develop our own proprietary retail network to more effectively control sales of SIM-cards and provide a platform to sell handsets and accessories. We organized our retail operations under a wholly owned subsidiary, RTC. RTC handles all functions relating to our retail operations, including the management of points-of-sale, the purchase and sale of handsets and accessories and subscriber enrollment at our retail outlets. It also requires us to secure optimal locations for our points-of-sale and monitors the effectiveness of their operations.

In 2017, sales in the Russian market reduced for the first time and continued reducing at a higher rate in 2018. Moreover, the churn rate also reduced, which confirmed the improvement of the mobile retail market.

In 2018, our competitors VEON Ltd. and MegaFon agreed on the termination of their joint ownership of Euroset outlets. MegaFon purchased the brand and the business with VEON Ltd. purchasing 50% of points-of-sale.

In 2018, VEON Ltd. rebranded points-of-sale and they began to work under the "Beeline" brand. MegaFon and SLV Group (Svyaznoy owner) have signed an agreement on merging Euroset and Svyaznoy into one retail network, which currently operates under Svyaznoy brand. These transactions marked the beginning of the transformation from the multibrand retail network to the monobrand retail network.

In 2019, we signed a partnership agreement with Svyaznoy. Now Svyaznoy retail network consumers across the country can sign contracts and get information about our tariffs and services. Moreover, in 2019 we and M.Video-Eldorado group, which is the largest household appliance and electronics retail network in Russia, also signed a partnership agreement. We placed stands in large M.Video stores. In addition, joint retail electronic stores, where consumers can arrange our services, have been opened. Furthermore, in 2019, we launched a pilot project to sell smart watches in the largest children goods retailer Detsky Mir. Special zones with wearable devices were installed in several dozen stores, where customers can get acquainted with the watches models and get advice from our specialists.

Such partnerships with market leaders allow us to optimize retail costs and reduce the planned number of own retail points-of-sale.

In 2020, the outbreak of COVID-19 accelerated the trend of retail chain reduction, which concerned all telecommunication market players. Our proprietary distribution network, which consists of MTS branded franchise points of sale (third party dealers operating under the MTS brand) and MTS branded points of sale owned by us, has decreased by 435 points of sale year to year. As a result, as of December 31, 2020, MTS operated 5,240 points-of-sale, including 1,734 franchise points-of-sale and 3,506 points-of-sale owned by us, as compared to 5,674 points-of-sale, including 1,762 franchise points-of-sale and 3,912 points-of-sale owned by us in 2019.

The decline in offline sales pushed the transition to online channels. In April 2020, MTS launched the mobile application for a SIM-card self-registration by a subscriber. This technology allowed launching distribution in new sales channels, for example, online stores, online platforms and aggregators, supermarkets, delivery services.

In the future, we plan to increase the online sales share through the development of the mobile application and the number of services which are available for activation with help of the App.

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We follow the digital solutions market leadership strategy. Development of own digital ecosystem is the base of digital leadership strategy. Connected sales are one of the points of our own ecosystem.

In 2020, we focused on convergent offers of mobile connection, mobile Internet and satellite television. In the future, we plan to increase the share of convergent sales by launching new convergent products.

For newly acquired mobile subscribers in Russia, we link commissions payable to a dealer on a monthly basis to the amount of revenues we receive during six- to 12-month period from the date a subscriber is activated by a dealer. In addition, we have established caps, or a maximum commission amount payable to our dealers. The dealer commissions in Russia currently range between RUB 80 and RUB 2,800 per subscription.

Competition

The Russian wireless telecommunications market

Until 1998, mobile communications developed slowly, penetration was less than 0.5%. Further, as a result of explosive demand in 2006, the number of subscribers registered in networks exceeded the country's population. Three market leading operators, MTS, Beeline and Megafon, served 85% of the subscriber base. Over the past decade, the Russian market has stabilized; further growth is associated with the development of the IoT services market and M2M devices. As of December 31, 2020, overall wireless penetration in Russia was approximately 172%, or approximately 252 million subscribers.

The following table sets forth key data on Russia's wireless telecommunications market as of the dates indicated:

	As of December 31,

	2020		2019		2018
Subscribers⁽¹⁾		252.2		260.7		255.7
Subscriber penetration (%)		172		178		174

According to AC&M-Consulting.

(1): Based on registered subscribers (SIM cards only) including MVNO networks. There is no uniform definition of active subscribers in the Russian wireless market.

The primary mobile providers in Russia include us, MegaFon and VEON (VimpelCom), each of which has effective national coverage in Russia. Competition is based on network coverage and quality, the level of customer service provided, roaming and international tariffs, local tariff prices and the range of services offered. For a description of the risks we face from increasing competition, see "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—We face increasing competition in the markets where we operate, which may result in reduced operating margins and loss of market share, as well as different pricing, service or marketing policies."

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The following table illustrates the number of wireless subscribers for each network operator in Russia as of December 31, 2020, 2019 and 2018:

	As of December 31,

Operator	2020		2019		2018
	(amounts in millions)
MTS		78.5		79.1		78.0
MegaFon		70.4		75.2		75.2
VEON Ltd. (VimpelCom)		49.9		54.6		55.3
T2 RTK Holding (Tele2+Rostelecom)		46.6		46.0		43.5
Others & MVNO		6.8		5.8		3.7

According to AC&M-Consulting and operators' press releases.

MegaFon. MegaFon, which operates GSM 900/1800, UMTS (3G) and LTE (4G) networks, is one of our primary competitors in Russia, and it is the second largest GSM wireless operator in Russia in terms of subscribers. The operator changed the method of calculating the subscriber base in the fourth quarter of 2020 and applied more stricter requirements for monitoring customer activity. MegaFon had a subscriber base of approximately 70.4 million subscribers in Russia, which represented a 28% market share as of December 31, 2020.

VEON. In addition to MegaFon, we also compete with VEON, which is the third largest GSM 900/1800/UMTS (3G)/LTE (4G) wireless operator in Russia in terms of subscribers.

According to our estimates, VEON had a subscriber base of approximately 49.9 million in Russia at December 31, 2020. At December 31, 2020, VEON had a 20% market share of total wireless subscribers in Russia.

T2 RTK Holding. In February 2014, Tele2 and Rostelecom announced a merger which created a new federal wireless provider. The license portfolio of the new company covers all Russia which effectively permits the roll out of federal-scale networks. The most important event for operator was the launch of 3G/4G network in Moscow region in October 2015. The operator's services are now available on the territory where 97% of Moscow Region residents live. In 2018 - 2019, Tele2 have actively rolled out 3G and 4G networks, launched new tariffs, options and services which enabled to provide customers with services similar to those of the market leaders. In 2019, the operator launched a network in the Ivanovo and Yaroslavl regions in the 2G / 3G / 4G standard. By the end of 2020, Tele2 LTE networks were launched in all 68 regions.

Tele2 had a subscriber base of approximately 46.6 million in Russia and 19% market share as at December 31, 2020.

Other Operators. The number of subscribers of other operators, including MVNO operators, which were not indicated above is about 6.8 million customers as of December 31, 2020. The number of MVNO subscribers on the Tele2 network amounted to 2.8 million according to the operator's publication.

The Armenian wireless telecommunications market

As of December 31, 2020, overall wireless penetration in Armenia was around 122.85%—about 3.65 million active subscribers, according to the published figures of the operators and Socio-Demographic Data report published by Statistical Committee of RA (about 2.97 million population).

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The following table illustrates number of active subscriber bases and the coverage area of MTS Armenia and competitors—Beeline (VEON Armenia) and Ucom, as of indicated dates.

	As of December 31,

Operator	2020		2019		Coverage Area
	(amounts in thousands)
MTS Armenia		2,146.89		2,207.37	Nationwide
Beeline		904.68		947.79	Nationwide
Ucom		594.60		621.05	Nationwide

Sources: https://beeline.am; https://www.ucom.am; http://mts.am.

As of December 31, 2020, MTS Armenia reported total 2.15 million 3-month active subscribers, reflecting decrease of 2.74%, y-o-y. Market share from 3-month active subscriber base was around 59% as of end of the reporting year.

Tariffs

We customize our marketing efforts and pricing policies in each region of Russia and our other countries of operation by considering such factors as average income levels, the competitive environment and subscriber needs, all of which vary from region to region. Consistent with our marketing strategy, we have developed tariff plans to appeal to a broader market. The following table shows the mix between Prepaid and other subscribers, such as contract and corporate customers, for Russia for the periods indicated:

	As of December 31,

	2020			2019			2018
Russia
Prepaid		28	%		31	%		36	%
Contract and corporate		72	%		69	%		64	%

We currently have a unified system of tariff plans offered to subscribers throughout Russia. The unified system is aimed at achieving such benefits as clarity, simplicity and transparency for prospective subscribers by offering the same set of tariff categories throughout Russia. Under each tariff category, we offer different tariff plans with different connection fees, per minute call charges and a wide range of value-added services.

By advertising on a national rather than regional or local level, we have been able to streamline and reduce our advertising and marketing expenses through unified advertising campaigns throughout Russia. Furthermore, we are able to convey to consumers a more uniform perception of our brand and services.

Tariff Plans in Russia

Currently, each of our tariff plans in Russia combines per minute usage charges, value-added services in packages and different monthly network access fees (with the exception of the prepaid tariff plans) designed for different market segments. Our tariff plans are currently divided into several categories - "Prepaid," "Smart," "Premium," "Data," IoT, "Corporate" and "Convergent" - with each category designed to target specific segments as follows:

•: Prepaid: Prepaid tariff plans are geared towards consumers who use their mobile phones for personal communication. These plans do not have monthly subscription fees and the per-minute fee charges depend largely on the tariff plan chosen. We offer tariff plan "Super MTS" which varies depending on the region of the customer. Subscribers to our prepaid plans can reduce the

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price of their calls by using tariff options which have a subscription fee. After our customers subscribe to a particular prepaid plan, they have the option of switching to a different prepaid plan by using the mobile app "My MTS" or sending an SMS message (USSD request) to a designated number.

•: Smart: "Smart" is the family of integrated voice and data tariff plans for customers with active mobile data usage, which we believe will remain the main offer for a long period of time. "Smart" has a monthly fee for a bundle of all-net minutes and Internet. For the most of tariff plans the on-net calls above the bundle are free. Versions of "Smart" ("Smart" "My Smart," "X" for Youth segment, "Tarifische" with large Internet bundle and "Our Smart") differ by amount of minutes and megabytes included in the bundle and the corresponding monthly fee. "My Smart" is a personal tariff plan, where each user can adjust the tariff for their needs and select the required package of minutes and Internet. It was replaced by new "NE Tariff "in December 2020. "NE Tariff" has the same logic as "My Smart" with some new possibilities to include VAS services into the monthly fee. "Tarifische" is the tariff with large Internet bundle and option to adjust the tariff for personal needs and select the required package of minutes and unlimited Internet as an opt-in service. We also have tariff plan "Our Smart" for family segment with opportunity to share bundle of all-net minutes and Internet with 5 devices.
•: Premium: "Premium" tariff plans are designed for heavy users who call primarily within their domestic region. Subscribers of unlimited tariff plans are provided an unlimited number of local minutes and access to personal customer care service. In the Moscow region, for those subscribers issued a local number, monthly fees start from RUB 2,833.6 and those using a federal number pay from 2,416.6 per month. The "Ultra" tariff plan includes unlimited calls to MTS numbers as long as the recipient and the caller are in the same region (defined as "home region"), free domestic calls from the MTS network to any number regardless of carrier up to a certain limit of minutes, no roaming charges within Russia, unlimited mobile Internet and 5000 SMS messages within the network.
•: Data: For active users of mobile Internet devices (e.g., 4G capable USB-modems and routers) we offer an unlimited tariff plan with limited speed 4Mbit/second after certain threshold.
•: IoT: For smart devices with special consumption needs we developed unique tariff plan "Smart device" with annual subscription fee. In addition, we provide special tariff free of charge. This free of charge tariff may apply forever if our customer buys certain models of smart watches for kids in MTS retail stores and online.
•: Convergent: "All MTS" and "MY (We) MTS" are the family of integrated mobile and fixed line services with digital or satellite television. The purpose of "All MTS" is to strengthen the user base and reduce customer churn. "All MTS" has a monthly fee for a bundle (mobile, fix Internet and TV). The price for this tariff varies by region and depends on the competitive situation in the market.
•: Corporate: We offer different tariff plans in each region targeted to meet the demands of our corporate clients, each plan allowing them to optimize their communication expenses in accordance with their individual consumption patterns. These plans feature specialized customer care, payment through our credit system and volume and tenure discounts. In addition, we provide customized pricing offers and technical solutions to our biggest clients.

Our tariffs vary from plan to plan. The description of tariffs and charges are, in each case, exclusive of VAT. As of December 31, 2020, the per-minute tariff for local calls within the MTS network varied from zero per minute to RUB 2.08 per minute. Different rates apply to local calls to other networks and vary from RUB 0.78 per minute to RUB 3.5 per minute. Higher rates apply to domestic long distance calls and rates for international calls vary from RUB 1.25 per minute for calls to

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the China and South Korea to RUB 62.5 per minute for calls to other parts of the world. Periodically, we run various promotional campaigns, either on the federal or regional level, in which we provide temporary discounts to our regular prices.

Customer Payments and Billing

We enroll new prepaid subscribers in an advance payment program. As of December 31, 2020, 73% of our consolidated subscriber base was enrolled in the advance payment program and 27% used a credit based system.

Our advance payment system monitors each subscriber account and sends an advance warning on the subscriber's mobile telephone when the balance on the subscriber's account decreases below a certain threshold.

Under the credit payment system, customers are billed monthly in arrears for their network access and usage. We limit the amount of credit extended to customers based on the customer's payment history, type of account and past usage. As of December 31, 2020, subscribers using the credit system of payment had credit limits of up to RUB 2.87 million for key corporate customers in Russia. When a credit limit is reached, we block the telephone number until the balance is settled. There are no credit limits established for certain exceptional, high loyalty customers.

We provide "in full confidence" service, which allows our Prepaid customers who subscribe to this service to continue using services when the balance on the subscriber's account becomes negative. As of December 31, 2020, subscribers using the "in full confidence" service had a maximum credit limit of RUB 345.3 thousands. Customer service representatives can set individual credit limits for subscribers based on their payments and charge history (i.e., average balance usage) during the prior three months. When the credit limit is reached, our billing system blocks the phone number until the balance is settled. Similar to the credit payment system, the subscribers are billed monthly in arrears for usage. The invoice, which can be delivered to the customer by e-mail, fax, regular post and Internet, should be settled within 24 days. If the invoice is not paid five to seven days prior to the due date, the system sends an additional reminder. The telephone number is blocked on the 25th day if the invoice is not settled.

In Russia, we offer our subscribers various ways to pay for our services, including cash or credit card, wire transfer, prepaid cards and express payment cards.

We implemented Foris billing system in Russia in 2008. The Foris billing system allows us to offer all of our subscribers a uniform and consistently high level of service. It also supports the monitoring of account usage in real time. In addition, the system provides us with the ability to offer flexible tariff plans with various usage discounts and subscriber loyalty bonuses. Furthermore, we are able to provide our corporate subscribers with more sophisticated customized billing solutions. For example, our corporate subscribers who use multiple phone numbers in different regions of Russia now receive a single invoice, whereas our previous billing system could not support such a service.

In Armenia, we use the "Eskadenia" billing system.

Customer Service

Russia

In order to attract and retain customers, we must ensure a high level of service at all points of customer assistance, care and billing. In each region where we operate, we have contact centers that provide customer service 24 hours a day, seven days a week. Contact centers provide different services to our clients through various channels (telephone, email, chat). Customer service representatives respond to various issues such as phone lock due to lack of payment, handset operation, roaming

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capabilities, service coverage and billing. A particular group of customer service representatives handles customer complaints and helps those who want to change their service terms. We use automatic systems and independent analysis for monitoring availability and customer satisfaction level of service in our contact centers regularly. We conduct outbound campaigns with the assistance of our employees in the outbound contact center and the laboratory of the customer relationship management inasmuch as we need to improve customer loyalty and promote our services.

In 2020, we changed our approach to new employees training. In particular, we focused on a digital training and application of acquired skills in practice. It allowed us to increase satisfaction of employees with trainings by 20%, as well as to enhance the Net Promote Score of the Call Center by 10%.

Starting from April 2020, we launched a remote work regime for Call Center employees to keep a high performance of operators during the pandemic. By the end of 2020, 50% of the call center employees worked remotely keeping a high quality of service. The Net Promote Score of employees working remotely amounted to 58%.

In 2020, we also launched customer service in WhatsApp and Apple business Chat in certain regions of Russia. In 2021, we are going to scale up the service for the whole Russia and connect additional messengers. It enables customers to communicate with MTS using a convenient platform.

A mechanism of choosing an operator and call routing was developed on the basis of the previously received feedback from customers. It helped to increase the Net Promote Score for such customers by 8%.

We also launched service for MTS ecosystem customers which allowed them to use mobile products and satellite TV with a single call. In 2021, the project will be scaled up for customers using fixed products (TV and home Internet).

In addition, we launched a new Knowledge Management System which will enable us to significantly extend integration opportunities and unite the needs of certain units in one interface, as well as to enhance the service quality of MTS ecosystem products. We have plans for 2021 to launch the internal product completely, create a mobile version and integrate with other customer services systems.

We also developed an intelligent Chat Bot that resolves certain issues and serves customers without a referral to the Call Center Chat. We implemented and extended mobile customer service scenarios, added a service of calls related to the fixed business, implemented handling of online communication quality complaints. In 2021, it is planned to continue developing the chat bot functionality, improve the training and analytics platform and integrate the service in relevant products of the company.

In 2020, the first stage of a single ecosystem card implementation for MTS customers using telecom services and digital products was completed.

We also managed to optimize our costs by 8% of the total number of mobile contact centers by robotization and automation of certain processes.

Network Infrastructure—Technology Strategy

Our technology strategy is formed in accordance with overall company's business strategy and intended to support the existing business operations, as well as to introduce new technologies allowing to launch new services in the future. Our technology strategy considers world technology trends in telecommunications.

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The main focus of the technology strategy is consequent development of the network meeting future technology requirements: higher throughputs, lower latencies and flexible network core as enabler of the new services.

LTE has the main priority while deploying Radio Access Network (81% of the RAN deployment was LTE in 2020) and 2G/3G investments decrease gradually in accordance with changes in network UE penetration structure and traffic migration.

According to Technology Strategy in 2020 we continued frequencies re-farming in 1800 MHz , 2100 MHz and 900 MHz bands from 2G/3G to most efficient technology—LTE. Besides, we use Carrier Aggregation, 256 QAM, high order MIMO and other cutting edge technologies to provide better user experience for our customers. In 2020 MTS became the first company in Russia which obtained a license for the 5G spectrum resource in 24 GHz band.

We chose NB-IoT as a target technology for LPWA IoT segment in 2018, and as of December 31, 2020 we provided NB-IoT coverage in 71 regions of Russia mostly in 1800 MHz band.

We continue using modular architecture for Data Centers construction and, in 2020, we launched a new data center in Leningrad region. In addition, we chose OpenStack solution supplier for alternative infrastructure ecosystems development.

We consider network reliability as one of our strategic priorities, and in 2020 we successfully stress-tested it: despite traffic growth due to the COVID-19 restrictions our main Network Quality Indicators remained at the target level.

Network Infrastructure—Site Construction and Sharing

In October 2014, MTS and VEON Ltd. (VimpelCom) has signed a contract about shared LTE networks deployment and operation. According to this contract one shared LTE network should be deployed for servicing subscribers of both companies in several regions of Russia.

During 2015, 2016 and 2017 scope of the projects has expanded: shared networks are deployed in 42 of 85 regions of Russia.

By the end of 2020 we had 8,076 LTE base stations shared with VEON Ltd. (VimpelCom) in 22 regions and VEON Ltd. (VimpelCom) had 6,831 LTE base stations shared with MTS in other 20 regions of Russia. Total amount of shared infrastructure nodes is 14,907 base stations servicing in 800 MHz, 1800 MHz and 2600 MHz bands FDD&TDD networks.

In addition to network deployment investments and operational costs savings target architecture of the site sharing project includes frequency resources shared usage: by the end of 2019 networks in 32 regions of Russia run in shared 2600 band spectrum usage mode (MOCN concept). The project is being completed in 7 regions.

Network Infrastructure and Frequency Allocation

We use switching and other network equipment supplied by Nokia Solutions and Networks, Ericsson, Huawei, Alcatel-Lucent, Samsung and other major network equipment manufacturers.

In Moscow and Moscow region license area, we have been allocated frequencies spanning 2 × 12 MHz of spectrum in the 900 frequency band and 2 × 24.8 MHz of spectrum in the 1800 frequency band for operation of a dual GSM 900/1800 network and UMTS900 network, LTE900 and LTE1800 networks. In St. Petersburg and the Leningrad region, we have been allocated frequencies spanning 2 × 9.8 MHz of spectrum in the 900 frequency band (including 2 × 1.6 MHz in the E-GSM band) and 2 × 18.6 MHz of spectrum in the 1800 frequency band for operation of a dual GSM 900/1800 network, UMTS900 network, LTE900 and LTE1800 networks.

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We have different amounts of spectrum in the 900 MHz band for GSM 900 and UMTS and LTE networks and in the 1800 MHz band for GSM and LTE networks in almost every region of the Russian Federation.

We have been allocated frequencies 1950-1965 MHz, 2010-2015 MHz and 2140-2155 MHz for UMTS and LTE network deployment for the entire territory of the Russian Federation.

In addition, we have been allocated frequencies 453-457,4 MHz/463-467,4 MHz for IMT-MC and LTE networks and 1920 - 1935 MHz/2110 - 2125 MHz for UMTS and LTE networks in Khanty-Mansi Autonomous Okrug and Republic of Bashkortostan.

We have been allocated frequency bands 2540-2550 MHz and 2660-2670 MHz spanning 2 × 10 MHz and frequency bands 798. 5-806 MHz and 839.5-847 MHz spanning 2 × 7.5 MHz for LTE FDD network deployment for the entire territory of the Russian Federation. In addition, we have been allocated frequency band 2595-2620 MHz spanning 25 MHz for LTE TDD network deployment for the entire territory of the Russian Federation.

We believe that we have been allocated adequate spectrum in each of our license areas.

Network Infrastructure—Virtual Infrastructure

The following projects have been launched in 2020:

•: EPC—prepared to initialization;
•: UDR—prepared to initialization;
•: SBC 2^nd stage—prepared to initialization;
•: TCP Optimization—prepared to initialization.

The following projects were finished in 2020:

•: UDC Novosibirsk;
•: SBC 1 st stage;
•: IMS (IP Multimedia Subsystem) 4 -d stage;
•: U2020 in MR North West.

Two new multi-purpose modules of data-center started operating in Saint Petersburg for deployment of virtual platforms for telecommunication services and cloud services in 2020. In addition, we started construction of a new data-center in Novosibirsk.

Network Infrastructure—Energy Infrastructure

One of the main goals in Energy Infrastructure is to decrease operational costs for electric energy.

According to legislative acts of Russian Federation electric energy payment categories were introduced in 2012. This payment category can be chosen by a consumer in case of introduction of the electric energy accounting system, which allows to hourly monitor an electric energy usage and to report this information to the power supply companies with an accepted procedure.

Considering these conditions we decided to deploy Electric Energy Accounting Automatic System (EEAAS). According to this trial projects of different EEAAS solutions were executed in different regions of Russia (Moscow, Nizhny Novgorod, Vologda, Saint Petersburg, Novosibirsk, Ekaterinburg and Republic of Karelia) in 2014-2015.

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EEAAS deployment projects were accepted in 2016 based on the analysis of those trials, System implementation started in 2016.

Introduction of the EEAAS allowed to:

•: Reduce the electricity payments and operational costs;
•: Increase the level of precise accounting;
•: Implement an energy usage management and to track energy usage dynamics.

The project implementation leads to reduction of payments for the electric energy. The savings in regions where EEAAS was deployed reached the amount of RUB 353,691 million for the period from 2017 to 2019.

Development and maintenance of the network

The process of obtaining appropriate sites requires that our personnel coordinate, among other things, site-specific requirements for engineering and design, leasing of the required space, obtaining all necessary governmental permits, construction of the facility and equipment installation. In Russia, we use special radio planning tools supplied by TEOCO Corporation and radio propagation models supplied by Siradel SAS to assess new sites so that the network design and site development are coordinated. This software can create digital cellular coverage maps of our licensed areas, taking into account the peculiarities of the urban landscape, including the reflection of radio waves from buildings and other obstacles and supports all necessary technologies, such as 2G, 3G, LTE and NB-IoT. In 2020, we started replacement of this TEOCO radioplanning tool by the new one, provided by Forsk. This new tool will allow us to make calculations of 5G networks and will have better performance. Replacement will be completed in 2021. To use these tools more effectively we purchase high quality 3D digital maps for more precise planning. Now we have new detail maps of 1010 cities in Russia. In addition we have implemented a new customized tool for investment planning to speed up the process of RAN development planning and make it more accurate. Used together, these software tools enable us to plan base station sites without the need for numerous field trips and on-site testing, saving us considerable time and money in our network build-out.

Base station site contracts are essentially cooperation agreements that allow us to use space for our base stations and other network equipment. The terms of these agreements range from one to 49 years, with the term of the majority of these agreements being one to five years. Under these agreements, we have the right to use premises located in attics or on top floors of buildings for base stations and space on roofs for antennas. In areas where a suitable base station site is unavailable, we construct towers to accommodate base station antennas, mainly on leased plots of land. We anticipate that we will be able to continue to use our existing GSM 900 base station sites and to co-locate GSM 1800, UMTS 2100 and UMTS 900 base stations at some of the same sites. In 2018 we started the NB IoT technology During 2018-2020, NB IoT technology was implemented on 36,905 base stations of LTE.

Network Monitoring Equipment

We constantly control and monitor the performance of our network, call completion rate and other major key technical performance indicators. We use monitoring systems to optimize our network and to locate and identify the cause of failures or problems, and also to analyze our network performance and obtain network statistics. We have agreements with different suppliers for technical support services that allow us to obtain their assistance in trouble shooting and correcting problems with our network within the warranty period.

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To provide high quality service to our subscribers in Russia, we have a global network operation center ("GNOC") in Krasnodar and additionally a local operation and maintenance center in Voronezh which takes the form of outsourcing partnership with Nokia Solutions and Networks. The GNOC experts and a staff of the local operation and maintenance center have the technical ability to monitor network problems and unusual situations online in all regional branches of MTS in Russia around the clock. Our maintenance department, staffed 24 hours per day, performs daily network integrity checks and responds to reported problems. Our technicians inspect base stations and carry out preventative maintenance at least once every six months.

The GNOC in Krasnodar allows us to centralize such functions as monitoring and controlling of equipment, network planning and optimization, and also helps to solve incidents related to service interruptions. The GNOC strengthens our network's reliability and safety, as well as creates the necessary conditions to launch and implement new technologies and network standards.

In November 2015, a Global Fixed Network Operation Center ("GFNOC") was launched in Nizhny Novgorod, thus completing the centralization process of the MTS mobile and fixed network management. The GFNOC combined functions of monitoring and controlling the equipment in 54 regions of Russia where we offer broadband Internet access, TV and fixed line telephony services. For the subscribers connected to these services the GFNOC acts as a single entry point for technical support. Under the GFNOC project a centralized unit was also set up which is responsible for the quality of the services provided to corporate customers with bundled packages of mobile and fixed communications. Our subsidiary company MGTS performs these functions in Moscow region of Russia.

With the Global Fixed Network Operation Center deployed, we put together all resources for management of the quality of provided mobile and fixed line voice services, data transmission via mobile and fixed networks, leased dedicated digital circuits and VPN channels and digital TV.

In 2016, we also opened satellite TV operation and maintenance center in Moscow, which is used for monitoring head-end station and satellite TV services.

Our networks in Armenia and Belarus are monitored by our local operation and maintenance centers in each country. In addition to the monitoring of network performance, those centers analyze network quality parameters, provide troubleshooting, regular and extraordinary reporting to the management and our headquarters.

The handling of any significant network problems and outages is monitored and coordinated at our headquarters, where we also manage the cross- functional coordination of our networks in all countries of operation.

Our principal suppliers are Huawei, Iskratel, Oracle - PSTN switching equipment and SBC; Ericsson, Harmonic, SumaVision, Cisco Systems - equipment of Digital TV station; Irdeto, Verimatrix - CAS TV systems; MediaKind, Huawei - Hybrid TV platform; Cisco Systems, Huawei, D-Link, Fibercom, EdgeCore - FTTB core and access; Juniper Networks, Huawei, ECI Telecom, Tellabs and Alcatel Lucent for transport network equipment.

All of our equipment is supplied directly through authorized dealers.

Interconnect Arrangements and Telephone Numbering Capacity

We operate various types of communications networks, including mobile cellular, DLD/ILD and local fixed line and zonal fixed line networks.

Cellular operators must interconnect with fixed zonal, wireless, long distance and international telephone operators to obtain access to their networks and, via these operators, to the networks of other operators around the world. Cellular and fixed line operators must also obtain telephone numbering capacity to allocate to their subscribers. There are two categories of telephone numbers:

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"federal" 11-digit numbers (non-geographical numbering plan for cellular operators) and "local" seven-digit numbers (geographical numbering plan for fixed-line operators which can also be used as additional numbering capacity for mobile operators). In Moscow, both "federal" and "local" numbers have been used in the 11-digit format since the beginning of 2011. We have entered into various agreements for the provision of local telephone numbering capacity with several local telecommunications operators in Moscow and in other regions of Russia. We have also built our own local networks in certain cities within Russia (including Moscow) to provide local telephone numbering capacity to our subscribers. Telephone numbering capacity is allocated by the government and we provide interconnect services to other operators in all regions of Russia. Our fixed line zonal and local networks in Russia are interconnected with other operators. Zonal/local interconnect typically entails payment of a one-time connection fee per point of interconnect ("E1") and a usage charge based on minutes of traffic. Operators with a Substantial Market Power may also charge a guarantee monthly usage fee in case traffic is less than 30 kmin per E1.

The Ministry of Communications and Mass Media has allocated special numbering codes for federal 11-digit telephone numbers on a non-geographical basis to all the cellular operators. We believe that sufficient numbering capacity has been allocated to us for the development of our network. However, a combination of regulatory, technological and financial factors has led to the limited availability of local 7-digit telephone numbering capacity in Moscow and the Moscow region. Moscow's "495" code and the Moscow region's "496" code have already reached numbering capacity limits. As a result, the new "499" code was introduced in order to increase the Moscow numbering capacity, the "498" code was introduced to increase Moscow region numbering capacity and since 2011 "local" numbers have been used in Moscow in 11-digit format.

To meet subscriber's demand and provide for an adequate inventory of numbering capacity, we previously entered into contracts with local fixed line providers for allocation of numbering capacity to us. However, the Ministry of Communications and Mass Media subsequently took the view that numbering capacity assigned to one operator could not be rented to other operators. Accordingly, we have entered into arrangements whereby fixed line operators make their numbers available to our subscribers via agency contracts between the subscribers and us acting on behalf of such fixed line operators. Our right to use numbering capacity ranges for an unlimited period of time. As a result of our merger with Comstar, we have decreased the use of local numbering capacity of other operators. As of December 31, 2020, we had numbering capacity (federal and local) for approximately 34.68* million subscribers in the Moscow license area.

To provide our subscribers in Russia with DLD/ILD services, we have interconnect agreements with national operators Rostelecom, MTT (an affiliate of Sistema until March 18, 2009), VEON Ltd. (VimpelCom) and other national transit operators. We have also built and operate our own DLD/ILD network, which allows us to interconnect directly to foreign operators and thereby decrease our interconnect costs. Most interconnect fees for connecting users of other operators' fixed line and wireless networks to our network are based on a one-time connection fee and usage by minute which varies depending on the destination called.

Russian legislation provides that fixed line operators with a substantial market power cannot refuse to provide interconnect or discriminate against one operator in relation to another, and the interconnect rates of operators with a Substantial Market Power are regulated by the government. See "Item 4. Information on Our Company—B. Business Overview—Regulation of Telecommunications in the Russian Federation—Regulation in the Russian Federation—Competition, Interconnect and Pricing" and "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we cannot interconnect cost-effectively with other telecommunications operators, we may be unable to provide services at competitive prices, which may diminish our market share and result in a loss of revenues and margins."

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Interconnect and traffic transit between the networks of mobile operators in Russia occurs through direct channels connecting the switches of the different mobile operators within the same city; through the network of transit long distance operators, which connect the networks of different mobile operators in different cities or through our own DLD/ILD network. For domestic long distance traffic transit we use our DLD/ILD network and networks of different national operators, including among others: MTT, Rostelecom and VEON Ltd. ("VimpelCom"). For ILD traffic transit we primarily use our DLD/ILD network which is interconnected with 52 international carriers. We also have an interconnect between the DLD/ILD MTS network and the ILD networks of our subsidiary, MTS Armenia, in order to provide transit for international traffic.

Handsets

Nearly all of our handset sales consist of tri-band GSM 900/1800/1900 and dual-band UMTS 900/2100 handsets, except for certain models in the low cost segment. Those handsets, which function in the GSM 900, GSM 1800 and PCS-1900 standards, provide users with greater automatic roaming possibilities in Russia, Europe, the United States and Canada. All LTE handsets support bandwidth LTE-FDD 2100 MHz (band 1), LTE-FDD 1800 MHz (Band 3), 2600 MHz (Band 7), LTE-FDD 900 MHz (band 8), 800 MHz (Band 20) and LTE-TDD 2600 MHz (band 38), also there are smartphones in our sales with LTE Advanced support. In 2020, we continued the process of implementation Voice over LTE and Wi-Fi Calling functions.

From 2009, RTC, our wholly-owned subsidiary, started handling all functions relating to our retail operations, including the purchase and sale of handsets and accessories and subscriber enrollment at our retail outlets. RTC has entered into arrangements with Apple, Samsung, Oppo, Vivo, Realme, Nokia, Alcatel, Xiaomi, Philips, Huawei, Honor, ZTE and others to purchase handsets. In 2020, we continued our cooperation with A-brand smartphone vendors. We also offer an array of mobile telephone accessories. Since 2009 we have been successfully selling MTS branded phones.

Fixed Line Services

We offer fixed-line communications services in 56 regions across Russia, covering about 25 million households.

Our other fixed line operations include the following communications services: voice, data and broadband Internet and pay TV services for corporate and residential subscribers, as well as the provision of interconnect services to other communications operators and numbering capacity to their subscribers. Based on TMT Consulting data, as of December 31, 2020, we were the largest operator in the Moscow residential broadband market in terms of subscribers, with a 38% market share. We also operate in Armenia, where we provide digital telephony communications services, data transmission, Internet access and the renting of channels.

For a list of the telecommunications licenses held by us, see "Item 4. Information on Our Company—B. Business Overview—Licenses."

Customers and Services Offered—Moscow Fixed Line Operations

We provide fixed line communications services through our subsidiary, MGTS, which is the incumbent fixed line PSTN operator in Moscow. MGTS owns Moscow's PSTN infrastructure, including switches, a transmission network, underground ducts, and owns or holds leases to properties housing its offices and equipment.

As of December 31, 2020, MGTS had approximately 3.57 million active lines in service, a cable network of over 45,384 km, a fiber optic network of over 44,777 km and 1 841 payphones. Currently, MGTS has focused its efforts on the deployment of GPON, IP/MPLS technologies and an IMS core.

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The old SDH equipment is being removed which results in the decreased number of E1 streams, a reduction in the copper network and the respective extension of the fiber optic network. MGTS also develops new services for IP TV, and MVNO as the convergent service for mobile and fixed telephony.

The total installed capacity of the telephone network reached 0.595 million numbers on the TDM area (Time Division Multiplexing) and 5.18 million numbers on the IMS area (IP Multimedia Subsystem) as of December 31, 2020.

Moscow fixed line operations customers consist of the following subscribers:

Moscow fixed line operations

Residential subscribers	84	%	84	%	84	%
Corporate subscribers	8	%	8	%	8	%
Public sector subscribers	8	%	8	%	8	%

MGTS holds licenses and regulatory approvals to provide, among others, the following services:

•: local telephony;
•: DLD/ILD voice telephony through licensed DLD/ILD operators, including us;
•: interconnect to other operators;
•: Internet and data transmission, including leased DLD/ILD services;
•: IP TV for B2C and B2B subscribers;
•: MVNO mobile telephony and Internet;
•: inquiry and information, including telephone directories;
•: local telephony with use of payphones;
•: telematic communications services;
•: telecommunications services associated with providing of communication channel;
•: telecommunications services associated with voice data transmission;
•: telecommunications services associated with cablecasting;
•: movable radiotelephony services;
•: measures and (or) services for the protection of State secrets;
•: capital construction projects engineering.

As the only licensed PSTN operator in Moscow, MGTS is considered a natural monopoly under Russian antimonopoly regulations. Consequently, substantial part of services provided by MGTS are subject to governmental regulation. The Federal Antimonopoly Service of the Russian Federation regulates MGTS' tariffs for voice telephony services provided to its PSTN subscribers, including monthly subscription fees, installation fees and local call charges. Revenues from regulated services are accounted for approximately 30% of service operating revenues of our Moscow fixed line operations in 2020, 33% in 2019 and 37% in 2018. The percentage decline is connected with gradual growth of operating revenues from non regulated services as a proportion of the overall operating revenues in 2020, 2019 and 2018. The Federal Antimonopoly Service of the Russian Federation sets the tariffs MGTS can charge taking into account cost of services, network investment and a certain profit margin, and the current tariffs fully compensate MGTS for the cost of services provided to residential and government subscribers. According to Russian legislation, MGTS is allowed to petition the Federal Antimonopoly Service of the Russian Federation for tariff increases upon certain conditions, such as

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inflation or increases in the cost of services. Historically, MGTS has petitioned the relevant Russian government agency for tariff increases once per year. The Federal Antimonopoly Service of the Russian Federation has permitted MGTS to increase its tariffs several times.

MGTS also provides a number of unregulated services. According to Russian legislation, DLD/ILD services provided by licensed non monopoly operators, data transmission services, value added services and a number of other services are not subject to tariff regulation. Among others, MGTS provides the following unregulated services:

•: various value-added services, including call forwarding, call waiting, call holding, caller ID, provision of second direct inward dialing (DID) number;
•: Internet access for residential subscribers and corporates;
•: IP TV for B2C and B2B subscribers;
•: MVNO mobile telephony and Internet;
•: alarm signaling;
•: domestic maintenance services, including electric installation, sanitary engineering, cleaning, computer emergency, and consumer electronics installation;
•: video-surveillance; and
•: rent of space for telecommunications equipment of other operators connected to MGTS' network.

MGTS does not have license to provide DLD/ILD communications services directly to its subscribers but must route such traffic through a licensed DLD/ILD operator. As a result, DLD/ILD traffic originated by MGTS subscribers is carried either by us, with these services included in MGTS' monthly bill, or by other providers of DLD/ILD services, who bill MGTS subscribers directly or pay MGTS an agency fee for processing their bills.

The following table presents certain operating data for our Moscow fixed line operations as of and for the years ended December 31, 2020, 2019 and 2018.

Moscow fixed line operations

Installed telephone lines on TDM (000s)⁽¹⁾	0,595	0,683	1,050
Installed telephone lines on IMS (000s)⁽¹⁾	5,180	5,180	5,180
Residential
Number of subscribers (000s)	2,545	2,684	2,686
CPP traffic (millions of minutes)	214	240	307
Corporate⁽²⁾
Number of active lines (000s)	492	525	561
Number of subscribers (000s)	43	46	49
CPP traffic (millions of minutes)	185	205	248

(1): Telephone lines on TDM and IMS can be installed at one household.
(2): Includes state-owned enterprises and government agencies.

MGTS' subscriber segments and the services provided to each subscriber segment are further described below.

Residential and corporate subscribers

MGTS provides basic regulated voice services to residential and corporate subscribers using its PSTN facilities and copper or optical "last mile" access.

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In addition to basic voice services, MGTS provides its residential and corporate subscribers with digital telecommunications services, Internet, IP TV, MVNO mobile telephony and Internet and VPN deployment services, rental of high-speed communication channels, intelligent voice and various other services.

The following table illustrates MGTS' regulated tariff development:

MGTS Regulated Tariffs

Residential⁽¹⁾
Line rental
RUB per month	214	214	214
Per minute tariff plan—local connection fee
RUB per minute	0.60	0.60	0.60
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month	513	299	294
Combined tariff plan—fee for fixed amount of minutes⁽²⁾
RUB per month	438	224	224
Combined tariff plan—fee for each additional minute
RUB per minute	0.58	0.58	0.58
Combined tariff plan—fee for fixed amounts of minutes⁽³⁾
RUB per month	242	28	—
Combined tariff plan-fee for each additional minute
RUB per minute	0.59	0.59	—
Corporate (non-governmental)⁽¹⁾
Line rental
RUB per month	225	225	225
Per minute tariff plan—local connection fee
RUB per minute	0.60	0.60	0.60
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month	641	416	416
Combined tariff plan—fee for fixed amount of minutes⁽⁴⁾
RUB per month	804	224	224
Combined tariff plan—fee for each additional minute
RUB per minute	0.58	0.58	0.58
Corporate (governmental and state-funded organizations)⁽¹⁾
Line rental
RUB per month	225	215	215
Per minute tariff plan—local connection fee
RUB per minute	0.60	0.60	0.60
Unlimited tariff plan—connection fee (unlimited connection)
RUB per month	641	416	416
Combined tariff plan—fee for fixed amount of minutes⁽⁴⁾
RUB per month	804	224	224
Combined tariff plan—fee for each additional minute
RUB per minute	0.58	0.58	0.58

(1): Tariffs for residential subscribers are shown including VAT; tariffs for non-governmental corporate subscribers and governmental/state-funded organizations are shown excluding VAT.
(2): The plan included 400 minutes per month.
(3): This plan included 50 minutes per month.

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(4): This plan included 300 minutes per month.

Operators

MGTS provides interconnect, traffic transmission and leased line services to other communications operators. Interconnect is carried out on the local and zonal levels in accordance with terms and conditions that are publicly disclosed. MGTS also provides additional services to operators interconnecting to MGTS' network, including access to emergency service, information and customer care numbers.

MGTS has also established an active presence in the data transmission market. Through its PDTN, MGTS can establish VPNs for other operators as well as provide other data network services. Operators can also rent space and utility systems from MGTS to house their network equipment.

MGTS provides services for the design and construction of mobile and fixed-line networks for third-party Telecom operators.

Customers and Services Offered—Other Fixed Line Operations

We provide fixed-line communications services to corporate, operator and residential subscribers in 56 regions throughout Russia. Specifically, we offer local voice, DLD/ILD voice, data and Internet and pay TV services to our subscribers. Some of the interconnect tariffs we charge other telecommunications operators for in Moscow and certain other cities are regulated by the Russian government. We believe our fixed-line subscribers typically evaluate our service and product offerings based on such factors as price, technology, security, reliability and customer service.

The following table presents certain operating data for our other fixed line operations in Russia as of and for the years ended December 31, 2020 and 2019.

Other fixed line operations

Residential
Number of subscribers (000s)⁽¹⁾	6,044	5,940
Corporate⁽²⁾
Number of subscribers (000s)	119	96

(1): Subscribers to broadband Internet, pay-TV, Wi-Max, voice and other services.
(2): Includes state-owned enterprises and government agencies.

Corporate subscribers

We target corporate subscribers covering a range of industries, such as business centers, hotels, financial institutions, professional services firms, consumer goods companies, manufacturers and companies involved in extractive industries, among others. These subscribers vary in size, ranging from large multinational and Russian corporations with thousands of employees to small and medium sized enterprises with up to several hundred employees. As of December 31, 2020, we had approximately 27,000 voice and 92,000 Internet corporate subscribers.

As further described below, we offer voice, data transmission and Internet and various value added services to our corporate subscribers.

Voice Services. We provide a full range of other fixed line voice services to corporates in Moscow, the Moscow region and other selected regions of Russia, which include local, zonal, and DLD/ILD services using our transmission network and leased capacity between major Russian cities. We also

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provide integrated voice and data services, voice over frame relay and certain integrated services digital network ("ISDN") services.

Data Transmission and Internet Services. We offer high quality data transmission services to corporates, which allow for data exchange between their various branches or offices located within Russia and internationally. For data transmission services, our network is capable of transferring data at speeds of up to 10 Gbps and utilizes various technologies, such as 10 GE, GE, ATM, TDM, VPN MPLS/VPLS, GPON, Microwave radio relay ("MRR"), xDSL, LTE and Wi-Fi to provide high quality solutions at a relatively low cost. We endeavor to ensure the reliability of network connections by utilizing a full reservation approach to back up all elements of the network.

In addition, we offer a wide range of Internet services to corporates, including broadband Internet access, VoIP, VPNs and data center services using the following technologies: (1) NGN (up to 10 Gbps), (2) GPON (up to 1 Gbps), (3) xDSL (up to 100 Mbps), (4) radio Ethernet (up to 300 Mbps), (5) MRR (up to 1 Gbps), (6) Wi-Fi (up to 600 Mbps), and (7) LTE (up to 100 Mbps). We also provide continuous flexibility to upgrade their network capacity to handle additional Internet services. For example, we often integrate data transmission and Internet services for our clients as they expand their operations and need to interconnect and exchange data with newly opened offices and/or branches.

SD-WAN from MTS—new generation technology for building wide area networks with intelligently network management capabilities that can support increasingly hybrid network architectures, the growing availability of next-generation fixed and mobile access technologies and different network types combinations such as public Internet and private VPNs. SD-WAN services provide much higher levels of manageability, flexibility and security for the customers networks and make MTS solutions easily scalably and cost effective.

We also provide security services, such as Anti DDoS protection and various AntiVirus solutions.

We offer a broad range of Internet packages that vary in terms of data transfer speeds and pricing, with higher tariffs for faster uploading and downloading capabilities. Corporates with GPON broadband Internet packages generally experience data transfer speeds between 1 Mbps and 1 Gbps. In addition, we offer a premium broadband Internet service over our NGN in which subscribers enjoy data transfer speeds between 1 Mbps and 10 Gbps. The NGN provides subscribers with the benefit of the same uploading and downloading data transfer speeds, whereas Internet subscribers using an xDSL/GPON connection upload at speeds that are much slower than the one at which they can download.

We also utilize MGTS' PDTN to provide high speed reliable Internet services and create VPNs for our corporates.

Leased Channels. We provide corporate clients with the ability to rent high speed data channels. These "leased channels" are dedicated lines of data transmission.

Value Added Services. We provide corporates with several value added services, including Autosekretar and integrated solutions. The Autosekretar service is based on our proprietary IN and is designed to help our corporates manage the reception and servicing of a large volume of incoming calls. The unique multi channel telephone number assigned to customers will not change even if the customer moves to a different location in Moscow, and does not require the customer to install any equipment. In addition, this service allows all incoming calls to be transferred to other fixed or mobile telephone numbers in Russia or in other countries. The IN identifies a subscriber by phone number, phone card or password, which allows our customers to bill their subscribers for services and, if necessary, block access for subscribers who have a negative balance on their account.

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In addition, we serve as general contractor for the provision of a full range of integrated solutions to subscribers wishing to establish a modern integrated communications infrastructure. Each solution is customized for subscriber specific needs. In developing these customized networks, we are able to offer the following range of services: site survey, cost analysis and optimum project planning, assistance with government related documentation, supply of equipment and operational, technical and maintenance support on an ongoing basis. Once the infrastructure is established or renovated, as the case may be, we typically provide digital voice communications, voice intelligent services, high speed Internet services, videoconferencing and other data transmission services. We intend to expand our service offerings to include customer premises management and network centric IT solutions.

Fixed mobile convergence. Based on our fixed and mobile networks, we offer fixed to mobile convergence services to corporate clients providing use of their mobile phone as an extension of their private branch exchange ("PBX"). We also provide access to corporate IP networks from a mobile phone via GPRS/EDGE/3G/4G.

Operators

We operate fixed line local and zonal networks in Moscow and other cities for provision of telephony services to fixed line subscribers and additional local numbers to mobile subscribers. In order to lower the costs of intercity and international traffic transition, we put into operation an intercity international network in December 2008.

We had approximately 211 local fixed nodes in 64 regions of Russia, including Moscow, and 56 zonal fixed networks to provide telephony services to subscribers as of December 31, 2020. Our integrated intercity/international network is interconnected to more than 52 international operators.

In the corporate subscriber segment, we generally compete on the basis of network quality, individual and bundled service offerings, customer service, installation time, geographical presence and pricing.

Residential subscribers

We offer voice, Internet and pay TV services to residential subscribers.

Voice Services. We provide voice services to residential and corporate subscribers. Like corporate subscribers, residential subscribers in each of regions of presence seek a full range of high quality voice services equivalent to those provided in Western Europe. In addition to "basic" voice telephony services, we provide a number of additional services, such as call forwarding, call transferring, call waiting, conference, voicemail and Caller ID, among others.

Internet Services. We offer broadband Internet services to residential subscribers throughout Russia. As of December 31, 2020, we had 11% market share in the Russian Federation

Pay TV. We operate a TV service based on IPTV service over ADSL and GPON technologies in Moscow. In addition, we offer pay TV services based on DVB C (digital television via cable connection), analog cable transmission and MMDS (wireless cable) technologies in most of the regions in which we are present. Since November 2013, we connect our subscribers only to the TV with digital quality and since 2017 we broadcast in 4K ultra HD quality. Special auxiliary equipment (set top box) allows pay TV subscribers to access more than 170 channels of digital quality, including channels of HD quality from a home television and channels of 4K ultra HD quality. International and Russian channels are included as part of the base services package.

Our pricing structure is designed to appeal to large numbers of consumers with various interests and purchasing power, and varies significantly between regions. We charge a subscription fee between RUB 499 RUB 999 per month in Moscow and a subscription fee of between RUB 190 RUB 2000 in

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other regions of Russia, depending on the number of channels included in the package. We also offer bundled Internet, pay TV and Internet, Mobile, pay TV services for RUB 549 RUB 1,114 per month in Moscow and RUB 240 RUB 2,250 in certain other regions of Russia, depending on the speed of the Internet connection, the number of pay TV channels being provided and level of competition in a particular region. In 2020, convergent bundles, that included Internet, TV and mobile services, had been developed rapidly. As a result we have acquired more than 515 thousand unique customers and achieved overall growth of convergent subscriber base up to more than 980 thousand subscribers in 52 regions (excluding Moscow), as of December 31, 2020.

Sales and Marketing

Moscow fixed line operations

In 2020, MGTS continued monetization of its own high tech fiber optic network GPON and developed combining different services in packages, including convergent packages of mobile and fix services and online cinemas subscriptions. Promotional packages were offered to clients and included basic services, online cinemas subscriptions and high-speed Internet access. In order to expand and consolidate its market share, MGTS continued to enter the Moscow Region market through the construction of its own network, as well as through acquisition of local Internet service providers.

By the end of 2020, 2.4 million subscribers were transferred to GPON. In 2021, MGTS plans to develop and implement new services as part of the concept of Smart Home and Smart City, participate in the cloud solutions market more actively, develop partnerships with delivery services and become a partner of iconic city projects.

Other fixed line operations

Our target customers include corporate, operator and residential subscribers.

To promote our product and service offerings, we use various communication channels for advertising and marketing, including direct marketing, printed mass media, television, Internet, radio, directories, outdoor advertising, advertising in the subway, special promotions and cross promotions. Through these various advertising and marketing channels, we intend to further develop our brand recognition. Our marketing strategy is designed to create a unified brand for each of our various product and service offerings with the aim of becoming a single source for all of our subscribers' communications needs.

We also actively promote our services to existing subscribers with special bundled product offerings aimed at servicing their communication requirements and enhancing subscriber loyalty. Our advertising and marketing materials are aimed primarily at the promotion of MTS brand. All fixed line products are offered and marketed under this brand. However, when we enter new markets and acquire companies, we have to use both brands in advertising MTS brand and the acquired brand. This is done to decrease churn as customers tend to express strong loyalty towards local brands. We then gradually decrease presence of the acquired brand and this allows us to make MTS a market leader in a given region in future. Our advertising and marketing efforts are designed to convey a positive image of us to the market as a leading communications operator focused on customer satisfaction.

Competition

We compete with a number of fixed line telecommunications operators servicing Moscow, St. Petersburg and other major Russian cities. Moscow is the largest and most competitive of these markets. Our primary competitors include:

•: Rostelecom, Russia's largest national fixed line telecommunications operator with presence in all Russian regions. We compete with Rostelecom in the corporate, operator and residential fixed

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line telecommunications markets in all regions where we operate in Russia. We also compete with Rostelecom in the mobile telecommunications market.

•: ER-Telecom, voice telephony, broadband and TV operator. We compete with ER-Telecom in the corporate and residential fixed line telecommunications market in St. Petersburg, Novosibirsk, Omsk, N.Novgorod, Ekaterinburg, Kazan, Novosibirsk, Chelyabinsk and other regions.
•: VEON Ltd. (VimpelCom), which is also one of our primary competitors in the Russian mobile communications market, offers voice, data and Internet services to corporates, operators and residential subscribers in major cities throughout Russia, Ukraine, Kazakhstan and Uzbekistan. We compete with VEON Ltd. (VimpelCom) in the corporate, operator and residential fixed line telecommunications markets in Moscow and in certain other regions of Russia where we are present, including, among others, St. Petersburg, Rostov, Nizhny Novgorod, Ekaterinburg and Krasnodar.
•: MegaFon, which acquired operators Synterra and Net by Net, and offers services in the operator, corporate and residential fixed line telecommunications markets in Moscow, St. Petersburg, and other regions.
•: Akado Group, provider of pay TV, broadband Internet and digital telephony in Moscow. We compete with the Akado Group primarily in the residential fixed line telecommunications market of Moscow.

Corporate subscribers

The following table sets forth the corporate subscriber market shares of the primary fixed line operators in Moscow as of December 31, 2020:


MTS	24	%
VEON Ltd. (VimpelCom)	17	%
Akado	6	%
Rostelecom	15	%
Other	38	%

Total	100	%

Source: TMT Consulting.

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Residential subscribers

Voice services

According to TMT Consulting, as of December 31, 2020, fixed-line voice services' penetration was 27% in Russia. The following table sets forth the market shares of the primary fixed line operators for voice services in Russia as of December 31, 2020:

Company

MTS	18	%
Rostelecom	74	%
Other	8	%
Total	100	%

Source: TMT Consulting.

Internet

According to TMT Consulting, as of December 31, 2020, broadband Internet penetration of households was 61% in Russia. The following table sets forth the market shares of the primary operators in the residential broadband Internet market in Russia as of December 31, 2020:

Company

MTS	11	%
VEON Ltd. (VimpelCom)	8	%
ER-Telecom	12	%
Rostelecom	36	%
Other	33	%
Total	100	%

Source: TMT Consulting.

Pay-TV

According to TMT Consulting, as of December 31, 2020, pay TV penetration was 81% in Russia. The following table sets forth the market shares of the primary operators in the TV market in Russia as of December 31, 2020:

Company

MTS	9	%
Rostelecom	23	%
Tricolor TV	27	%
ER-Telecom	8	%
Orion	7	%
Other	26	%
Total	100	%

Source: TMT Consulting.

In the TV market, we generally compete on the basis of pricing, channel selection and content, individual and bundled service offerings, customer service and installation time.

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Tariffs

We establish prices for our unregulated services and different subscriber segments based on certain common considerations, policies and goals. For example, we generally seek to establish competitive prices based on market rates for the services we offer and below market prices when our lower than average costs or economies of scale allow us to do so. We also offer subscribers bundled service packages with several services offered together at a discount to the cost of ordering each individual service separately and to promote additional services to our existing subscribers. In addition, we often offer promotions to our various subscriber segments waiving or discounting installation fees in order to attract new subscribers or promote new services.

With regard to corporates, we generally aim to derive the bulk of our operating revenues from monthly payments. Thus, depending on the scale and type of services ordered, we will often discount or waive installation fees.

For services offered to other communications service providers, we aim to generate most of our operating revenues from monthly payments and by offering an array of value added services.

Network Infrastructure

Network Infrastructure—Transmission Networks

Backbone and Internet Networks

Mobile, fixed and inter-carrier aggregated traffic increased in 2020: downlink (towards users) data throughput reached 7.06 Tbps (4.83 Tbps in 2019), uplink (from users) data throughput reached 2.27 Tbps (1.5 Tbps in 2019).

The size of MTS fiber-optic networks increased by 9,004 km in 2020 and reached 249,712 km in total.

The main factor affecting development of our backbone and internet networks in 2020 was the COVID-19 outbreak. The traffic of the backbone Internet network increased by 25% from 6 March 2020 through 2 April 2021. The backbone network successfully passed stress test.

Development of the backbone network in 2020:

•: we launched the route Vologda-Kotlas (new line);
•: we launched the route Kotlas-Syktyvkar-Ukhta-Pechora-Vorkuta-Labytnangi-Salekhard (IRU).

Convergent network

In accordance with our deployment plans, we completed the following projects in 2020:

•: New MBH nodes were deployed: 1,883 ; replacement of obsoleted MBH equipment is ongoing.
•: Micro wave links were deployed: 4,403.
•: The size of fronthaul fiber-optic has been increases by 5226 km.
•: More than 10 5G test zones were launched in different cities of Russia.
•: We implemented NCE Huawei system and Cisco WAE.

We are negotiating launch of the shared network deployment and links interchange projects with other operators and signed the memorandum of understanding with respect to the potential projects. Memorandum defines a list of directions (parts of fiber-optic communication links) which are mutually interesting for both participants. Summarized length of provided communication links is approximately equal on both sides.

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We successfully completed testing of automated provisioning of new network elements. Request for proposal has been launched. We are planning to implement network automatisation in 2021 year. We have started developing automatic systems for our convergent network and reported first results on Layer123 World Congress.

We plan to continue the rollout of SD-WAN in commercial usage in 2021.

As a part of evolution of IPBB (IP Backbone) network equipment modernization is ongoing. The projects assume replacement of Cisco 7600 nodes for ASR9000 nodes due to an end of a support of 7600 nodes.

Satellite Network

Optimized the existing SCPC backbone and VSAT networks.

Preparation for work on the integration of new perspective satellite communication systems with 5G / LTE / IoT networks.

New BTS has been mounted on the South Pole. There was build new satellite connections for a base stations on a Progress and Novolazarevskaya pole stations.

MTS is part of a team of a new satellite systems.

Public Switching Telephone networks (PSTN)

The network infrastructure we maintain in Moscow is substantially different to the infrastructures we use in the regions. In Moscow, primarily we have organic growth, while our regional development has largely been through the acquisition of companies with different business models and a focus on different services. As a result, the network infrastructures in the regions outside Moscow and the technologies used to support such infrastructures are different from the network infrastructure established in Moscow and which we currently own. Now telephone network in Moscow and Moscow region has a capacity of more than 1,086,455 telephone numbers.

All of our PSTN switching centers (TDM and Soft switch) are connected to a digital transport network, which uses SDH and IP technology. The network ensures connectivity with a digital equipment of PSTNs of other operators.

The SDH network will be operated to support existing clients, but we also provide the moving traffic and clients from SDH/TDM technology to IP.

The management of the transport network and digital PSTN is carried out remotely from network operation centers.

As of December 31, 2020, in Moscow and the Moscow region we had a wireless broadband network including 459 base and subscriber stations in the 5-6 GHz frequency band and also near 154 radio-relay lines in the 70-80 GHz frequency band.

For the provision of Internet access, IP-telephony and other services, we have our own IP network, the core of which is constructed as IP MPLS rings with routers connected to each other by means of 10 GE channels. In addition, separate routers are used for inter-carrier connections and are connected to the core routers by means of 10 GE interfaces.

Russia

As of December 31, 2020 we provided cable Internet access to about 10.6 million households and cable TV access to about 10.3 million households. The access equipment used are Ethernet switches, IP DSLAM and Optical Receivers. We mainly use FTTB technology for Internet (10.2 million households)

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and CATV access, which can provide speeds up to 1 Gb/s per building and up to 300 channels CATV (analog and digital). In 2011, we started to roll-out DVB-C technology for a cable TV service. Currently, we have digital TV service (DVB-C&DVB-S2) in approximately 200 cities and localities with 5,45 million of subscribers. In 2014, we started to roll-out an advanced hybrid TV service (DVBC/DVB-S2/IPTV+IP/VOD, CatchUp). By December 2020, we launched Hybrid TV platform with an IPTV commercial service in Moscow and more than 50 other regions, DVB-C/IP Hybrid commercial service in nearly 100 regional cities and DVB-S2/IP Hybrid commercial service all over Russia including 3 UHD channels using HEVC (H.265) format. Total number of connected hybrid TV users is about 0,52 million. During 2019 and 2020 MTS was executing migration from existing Hybrid TV platform to new unified TV platform.

In September 2019 MTS has launched new unified TV platform and started sales in OTT (mobile) TV segment with TV applications for smartphones, pads, Smart TV, Android-based STBs and PC browsers. Migration process for fixed and segments (Hybrid IPTV, DVB-C, DVB-S) was started in the middle of 2020 with active phase completed in December 2020. During 1^st half of 2021 migration in DVB-S and B2B segments is planned to be completed. Number of subscribers activated in OTT segment as of December 31, 2020 amounted to 4,15 million. In order to deliver video traffic to OTT users MTS launched 5 CDN point of presence (6^th PoP will be launched in early 2021) with total bandwidth up to 170 Gbits/sec.

In Moscow and regions as an Internet traffic supplier, we mainly use our own IP Backbone network.

The acquisition of Comstar provided us with an opportunity to use MTS fiber optic lines for fixed network development. Optical network construction in cities is carried out on the basis of fixed and mobile business needs. When we modernize and construct new networks, we deploy fixed and mobile equipment on the basis of "collocation" method

Principal suppliers

Our principal suppliers are: Huawei, Iskratel, Oracle-PSTN switching equipment and SBC; Ericsson, Harmonic, Summavision, Teleste, Lifestream—equipment of Digital TV station; Irdeto, Verimatrix—CAS TV systems; Huawei—Hybrid TV platform; Cisco Systems, Huawei, Juniper-FTTB core; Cisco Systems, Alcatel, Coreant, Huawei, FiberHome, D-Link-FTTB aggregation-access.

All of our equipment is supplied directly through authorized dealers.

Seasonality

Our results of operations are impacted by certain seasonal trends. Generally, revenue is higher during the second and third quarter due to increase in roaming revenues and guest roaming revenues during these quarters. Quarterly trends can also be influenced by a number of factors, including new marketing campaigns and promotions, and may not be consistent from year to year.

In 2020, the measures for combating COVID-19 which included restrictions on movement had a significant impact on the seasonality of our roaming revenues and resulted in the reduction in international roaming of our subscribers and income from guest subscribers.

The COVID-19 outbreak has had a significant impact on the development of the telecommunications industry and contributes to the development of digital services. We recorded an increase in the consumption of internet traffic in mobile and fixed networks as well as, an increase in the number of users of online services, TV users and others OTT applications.

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Regulation of Telecommunications in the Russian Federation

Regulation in the Russian Federation

In the Russian Federation, the federal government regulates telecommunications services. The principal law regulating telecommunications in the Russian Federation is the Federal Law on Communications, which provides, among other elements, for the following:

•: licensing of telecommunications services;
•: requirements for obtaining a radio frequency allocation;
•: equipment certification;
•: equal rights for individuals and legal entities, including foreign individuals and legal entities, to offer telecommunications services;
•: fair competition;
•: freedom of pricing other than pricing by companies with a substantial position in public telecommunication networks; and
•: liability for violations of Russian legislation on telecommunications.

The Federal Law on Communications came into force on January 1, 2004. The Federal Law on Communications creates a framework in which government authorities may enact specific regulations. Regulations enacted under the legislative framework in place prior to the enactment of the Federal Law on Communications continue to be applied to the extent they do not conflict with the Federal Law on Communications.

The Federal Law on Communications, which confers broad powers to the state to regulate the communications industry, including the allocation of frequencies, the establishment of fees for frequency use and the allocation and revocation of numbering capacity, significantly modifies the system of government regulation of the provision of communications services in Russia. In particular, licenses to provide communications services in territories where frequency and numbering capacity are limited may be issued only on the basis of a tender, whereas according to the Government Decree No. 480 dated May 24, 2014, licenses to provide communication services with frequency spectrum—only on auction basis. In addition, the Federal Law on Communications provides for the establishment of a "universal services reserve fund" which is funded by a levy imposed on all operators of public networks, including us.

Regulatory Authorities

The Russian telecommunications industry is regulated by several governmental agencies. These agencies form a complex, multi-tier system of regulation that resulted, in part, from the implementation of the Federal Law on Communications, as well as from the large-scale restructuring of the Russian government in March 2004 and subsequent restructuring in May 2008. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Countries of Operation—Political and Social Risks—Political and governmental instability in Russia and other countries of our operations could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs."

The Ministry of Digital Development, Communications and Mass Media of the Russian Federation is the federal executive body that develops and supervises the implementation of governmental policy in the area of communications and coordinates and controls the activities of its subordinate agencies. The Ministry has the authority to issue certain regulations implementing the Federal Law on Communications and other federal laws.

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The Federal Service for Supervision of Communications, Information Technology and Mass Media (Roskomnadzor) is a federal executive body that supervises and controls certain areas of communications and information technologies, including:

•: the issuance of licenses and permissions in the area of communications and information technologies;
•: the registration of radio-electronic and high-frequency equipment;
•: the assignment of radio frequencies based on decisions taken by the State Commission For Radio Frequencies and registration of such assignments;
•: the technical supervision of networks and network equipment throughout Russia;
•: the monitoring of compliance by network operators with applicable regulations, terms of their licenses and terms of the use of frequencies allocated and assigned to them;
•: the enforcement of equipment certification requirements;
•: the examination of electromagnetic compatibility of equipment with existing civil radio-electronic equipment;
•: the organization of tenders with respect to licenses in the sphere of communications;
•: the control of activity in processing of personal data; and
•: creation, building and maintenance of a unified automated information system Unified Register of Domain Names, Internet Website Page Locators and Network Addresses which Allow to Identify Internet Websites Containing Information Prohibited for Distribution in the Russian Federation.

The Federal Agency of Communications is a federal executive body that implements governmental policy, manages state property and provides public services in the area of communications, including the allocation of numbering capacity and the certification of equipment for compliance with technical requirements.

The State Commission For Radio Frequencies is an inter-agency coordination body acting under the Ministry of Digital Development, Communications and Mass Media of the Russian Federation which is responsible for the regulation of the radio frequency spectrum, develops long-term policy for frequency allocation in the Russian Federation and decides on the allocation of frequency bands.

The Federal Antimonopoly Service (FAS) is a federal executive body that supervises competition regulations and enforces the Federal Law on Protection of Competition and the Federal Law on Natural Monopolies and the regulations enacted thereunder. The FAS controls certain activity of natural monopolies, including monitoring their execution of certain obligatory contracts, and can issue mandatory orders as provided for in the Federal Law on Natural Monopolies. In addition, the FAS regulates certain tariffs in the sphere of telecommunications, including the tariffs on the local, intra-zone and DLD calls by subscribers of public switched telephone networks and installation and subscription fees.

Other regulatory authorities. The Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor) is responsible for the enforcement of sanitary regulations, including some authority over the location of telecommunications equipment, and supervises the compliance of companies with the regulations relating to the protection of consumer rights. The Federal Service for State Registration, Cadastre and Cartography (Rosreestr) is responsible for registering certain telecommunications infrastructure that is considered real property in accordance with Government Decree No. 68 dated February 11, 2005. The Federal Financial Monitoring Service (Rosfinmonitoring) is a federal executive body responsible for countering money laundering and

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terrorism financing. Mobile operators are to comply with Federal Law No. 115-FZ dated August 7, 2001 "On Combating Money Laundering and Terrorist Financing."

Licensing of Telecommunications Services and Radio Frequency Allocation

Telecommunications licenses are issued based on the Federal Law on Communications and Government Decree No. 480 dated May 24, 2014 on Bidding Process (Auctions, Tenders) for Receipt of Telecommunications License. Under these regulations, licenses may be issued and renewed for periods ranging from three to twenty-five years. Several different licenses to conduct different communication services may be issued to one entity. Provided the licensee has conducted its activities in accordance with the applicable law and terms of the license, renewals may be obtained upon application to the Federal Service for Supervision of Communications, Information Technology and Mass Media. Officials of the Federal Service for Supervision of Communications, Information Technology and Mass Media have broad discretion with respect to both issuance and renewal procedures.

A company must complete a multi-stage process before the commercial launch of its communications network. A company must:

•: receive a license from the Federal Service for Supervision of Communications, Information Technology and Mass Media to provide communications services;
•: obtain approval to use specific frequencies within the specified band from the State Commission For Radio Frequencies if providing wireless telecommunications services; and
•: obtain permission from the Federal Service for Supervision of Communications, Information Technology and Mass Media for network operations. To receive this permission, a wireless telecommunications services provider must develop a frequency assignment and site plan, which is then reviewed and certified by the Federal Service for Supervision of Communications, Information Technology and Mass Media for electromagnetic compatibility of the proposed cellular network with other radio equipment operating in the license area. The Federal Service for Supervision of Communications, Information Technology and Mass Media has discretion to modify this plan, if necessary, to ensure such compatibility. Effective January 1, 2004, licenses may be transferred in case of mergers or other reorganizations of the licensee upon application by a transferee as a new license holder. Additionally, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation has declared that agreements on the provision of telecommunications services must be concluded and performed by the license holder.

If the terms of a license are not fulfilled or the service provider violates applicable legislation, the license may be suspended or terminated. Licenses may be suspended for various reasons, including:

•: detection of violations which may cause damage to rights, interests, life or health of individuals or to interests of government administration including, but not limited to, presidential and government telecommunication networks, defense, security and protection of legal order in the Russian Federation;
•: annulment of a frequency allocation if it results in the inability to render communications services;
•: failure in a timely requirements of the licensing authority, which commits to eliminate detected violations, including provisions that had been granted under reprimand to suspend the license.

In addition, licenses may be terminated for various reasons by a court, including:

•: failure to remedy in a timely manner a violation that led to the suspension of the license;

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•: provision of inaccurate information in documents on the basis of which a license was issued; and
•: failure to fulfill obligations undertaken in the process of a tender or auction.

The license may also be terminated by the Federal Service for Supervision of Communications, Information Technology and Mass Media in a number of cases, including liquidation of a license holder. A suspension or termination of a license may be appealed in court.

Frequencies are allocated for a maximum term of ten years, which may be extended upon the application of a frequency user. Under the Federal Law on Communications, frequency allocations may be changed for purposes of state management, defense, security and protection of legal order in the Russian Federation with the license holder to be compensated for related losses. Further, frequency allocations may be suspended or terminated for a number of reasons, including failure to comply with the conditions on which the frequency was allocated.

The following one-time license fee is payable irrespective of the number of regions covered by the license: RUB 7,500 for services involving, among other things, the use of a frequency spectrum and the lease of communication channels. The license fee for a license received through a tender or auction is determined by the terms of such tender or auction. The official fee of RUB 750 is to be paid for renewing (re-issuing) the license.

Furthermore, the Federal Law on Communications provides for the establishment of a "universal services reserve fund" for the purpose of supporting communications companies operating in less developed regions of Russia through the financing, construction and maintenance of telecommunications networks in low-profit and unprofitable sectors. This reserve fund is aimed at eliminating the practice of cross-subsidies by compensating operators for certain mandatory, loss-making local services in rural and sparsely populated areas. It is funded by a levy imposed on all operators of public networks, including us, in the amount of 1.2% of revenues from telecommunications services less the amount of taxes paid by subscribers. The universal service fund concept has been used in some developed countries and in Eastern Europe.

The Federal Law on Communications empowers the Russian government to determine and annually review the list of licensing requirements applicable to various communication services being licensed. The list of licensing requirements was enacted by Government Decree No. 2385 dated December 30, 2020. Licenses also generally contain a number of other detailed conditions, including a date by which service must begin, technical standards and certain other terms and conditions. We have either commenced service by the applicable deadline or received an extension of the applicable deadline for all of our licenses.

Equipment Certification

Government Decree No. 532 adopted on June 25, 2009, sets forth the types of communications equipment that is subject to mandatory certification. Communications equipment must be certified, or its compliance with the established requirements must be declared and proven in the interconnected communications network of the Russian Federation, which includes all fixed line and wireless networks open to the public. All our networks must be certified. The Federal Agency of Communications issues certificates of compliance with technical requirements to equipment suppliers based on the Agency's internal review. In addition, a Presidential decree requires that licenses and equipment certifications should be obtained from the Federal Security Service to design, produce, sell, use or import encryption devices. Some commonly used digital cellular telephones are designed with encryption capabilities and must be certified by the Federal Security Service.

Further, certain high-frequency equipment, a list of which was approved by Government Decree No. 539 dated October 12, 2004 (as amended), manufactured or used in the Russian Federation, requires special permission from the Federal Service for Supervision of Communications, Information

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Technology and Mass Media. Failure to receive such certification could result in the mandatory cessation of the use of such equipment. In accordance to Government Decree No. 1252 dated November 27, 2014, the equipment can be shared by operators according to their agreement and certificate of the Federal Service for Supervision of Communications, Information Technology and Mass Media. In accordance with the Federal Law No. 204 dated June 23, 2016, the radio frequency spectrum can be shared by operators according to their agreement. In the case of shared-use of the radio frequency spectrum for the provision of telecommunications services each operator should have proper telecommunications services license.

Competition, Interconnect and Pricing

The Federal Law on Communications requires federal regulatory agencies to encourage competition in the provision of communication services and prohibits the abuse of a dominant position to limit competition. The Federal Law on Communications provides that telecommunications tariffs may be regulated in cases provided for by legislation. The Federal Law on Communications and Presidential Decree No. 221, enacted on February 28, 1995, as amended, on Measures for Streamlining State Regulation of Prices (Tariffs) allow for regulation of tariffs and other commercial activities of telecommunications companies that are "natural monopolies." Government Decree No. 637, dated October 24, 2005 (as amended) authorized the FAS to set the following tariffs for the natural monopolies in the communications market, including:

•: provision of access to a local telephone network;
•: permanent use of a subscriber's line; and
•: local, intra-zone and DLD calls.

In addition, the Federal Law on Natural Monopolies No. 147 dated August 17, 1995 establishes the legal basis for federal regulation of natural monopolies, including those in the communications market, and provides for governmental control over tariffs and certain activities of the natural monopolies. The Federal Law on Natural Monopolies outlines the types of transactions for which a regulated entity must obtain prior FAS approval and establishes the general principle that regulated entities may not refuse to provide regulated services to certain types of consumers. Regulated entities are also subject to continuous reporting requirements, including submitting plans for capital investments.

The FAS maintains a Register of Natural Monopolies whose tariffs are controlled and regulated by the state. A telecommunications operator may be included in this register upon a decision by the FAS based on analysis of the operator's activities and the market conditions.

Our subsidiary, MGTS, was added to the Register of Natural Monopolies in 2000 and, therefore, is subject to the requirements of the Federal Law on Natural Monopolies including, inter alia, the following:

•: the FAS regulates and controls tariffs for services provided by MGTS, including installation fees, monthly subscription fees (for subscribers to the unlimited tariff plan) and local call charges (for subscribers who do not use the unlimited tariff plan);
•: MGTS must obtain prior FAS approval for any transaction involving the acquisition, disposal or lease of assets not related to the regulated activity, if the value of such assets exceeds 10% of MGTS' share capital, additional capital, retained profits and reserves;
•: MGTS is required to maintain separate accounting records for each type of activity;
•: MGTS is required to publicly disclose information on tariffs, products, material conditions of contracts with customers, capital expenditure programs and certain other information; and

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•: MGTS is required to comply with Federal law No. 223-FZ dated July 18, 2011 "On Procurement of Goods, Works, Services by Certain Types of Legal Entities" while procurement of goods and services.

It should also be noted that our subsidiary Comstar-Regions was added to the Register of Natural Monopolies in 2009, but on November 24, 2015 it was excluded therefrom and on December 5, 2015, it merged into MTS.

In addition, companies which are found to have dominant position on relevant markets may be subject to certain FAS restrictions in conducting their business, including in relation to pricing, acquisitions, geographical expansion, and associations and agreements with competitors. On January 5, 2016, the new version of the Federal law No. 135-FZ "On Protection of the Competition" came into force and the regulations in relation to the register of companies holding market share excess 35% were repealed. Nowadays, dominant position should be on case-by-case basis. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we are found to have a dominant position in the markets where we operate and are determined to have abused this position, the FAS may be entitled to regulate our subscriber tariffs and impose certain restrictions on our operations."

The Federal Law on Communications also provides for the special regulation of telecommunications operators occupying a "substantial position," i.e., operators which together with their affiliates have, in the Russian Federation generally or in a geographically defined specific numerical zone, 25% or more of installed capacity or capacity to carry out transmission of not less than 25% of traffic. MGTS was added to the register of telecommunications operators occupying a substantial position and, therefore, is subject to the requirements of the Federal Law on Communications relating to operators occupying a substantial position in the public switched telephone networks including, inter alia, the following:

•: MGTS must develop interconnect rules and procedures in accordance with the requirements set forth by the federal government;
•: MGTS must ensure that interconnect agreements with operators who intend to interconnect to our networks are entered on the same terms and conditions as the agreements between MGTS, us and our affiliates; MGTS also cannot refuse to provide interconnect or discriminate against one operator over another;
•: MGTS must comply with the mandatory orders of the Federal Service for Supervision of Communications, Information Technology and Mass Media issued if non-compliance with law was identified as a result of monitoring of MGTS' interconnect terms; and
•: MGTS must comply with the tariffs for interconnect and traffic transit where determined by the Federal Agency of Communications.

The Federal Law on Communications and implementation rules adopted by Government Decrees No. 161 dated March 28, 2005, and No. 627 dated October 19, 2005, also provides for government regulation of interconnect tariffs established by operators occupying a substantial position. In addition, such operators, including MGTS, are required to develop standard interconnect contracts and publish them as a public offer for all operators who intend to use such interconnect services.

Notwithstanding the above, fixed line operators not considered to occupy a substantial position and not included in the Register of Natural Monopolies, as well as mobile operators, are free to set their own tariffs. Also see "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we or any of our mobile network operator subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

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Calling Party Pays

In March 2006, the Federal Law on Communications was amended to incorporate a "calling party pays" scheme effective as of July 1, 2006. Prior to the implementation of the "calling party pays" principle, subscribers of fixed line operators could initiate calls to mobile phone users free of charge. Under the current system, fixed line operators charge their subscribers for such calls and transfer a percentage of the charge to mobile operators terminating such calls. The percentage transferred to mobile operators is regulated by the Federal Service for Supervision of Communications, Information Technology and Mass Media and is known as the settlement rate.

Communications Services rules and Mobile Number Portability

On December 15, 2014, Government Decree No. 1342 concerning fixed and mobile services rules was adopted. This act, inter alia, has changed rules and conditions of MNP process (retaining telephone number after switching from one mobile operator to another) of certain types of legal entities and state customers. The period of switching numbers for mentioned subscribers was decreased and the procedure was simplified.

Introduction of renewed procedure on MNP in respect of particular legal entities and state customers affects the mobile services market in Russia and leads to intensification of competition.

Anti-terror law

The Federal Law No. 374 dated July 6, 2016, amended some legislative acts and established additional measures to counter terrorism and to maintain public safety.

In accordance with the abovementioned amendments to the Federal Law on Communications (came into force in July, 2018) the telecommunications operators have to store and to provide to the authorities upon request the information on the facts of receiving, transmitting, delivering and (or) processing of voice information, text messages, images, sounds, video, or other communications by their subscribers, as well as relevant messages themselves.

The implementation of these amendments has a material effect on telecommunications operators' financials and performance, see also "Item 3. Key Information—D. Risk Factors."

Subscribers identification

The Federal Law No 245 dated July 29, 2017, amended the Federal Law on Communications to prevent the conclusion of the contract on the provision of services of mobile communications without proper identification of the subscriber (user) of communication services.

These amendments (came into force in June, 2018) have material effect on telecommunication operators since they are required to implement measures to organize the interaction with state resources for verification of information on subscribers.

Sovereign Internet

The Federal Law No. 90 dated May 1, 2019, establishes the obligation of telecommunications operators to install equipment to counter threats to the stability, security and integrity of the Internet on the territory of the Russian Federation. Consequently, operators are likely to face additional costs for the maintenance and operation of this equipment. For more information on the law, see "Item 3. Key Information—Legal Risks and Uncertainties—Regulatory changes in Russia as well as regulatory changes at the international level may have a material adverse effect on our financial condition and results of operations."

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Personal data

We are subject to laws and regulations regarding privacy and protection of the user data, including the Federal Law No. 152-FZ "On Personal Data" dated July 27, 2006 (the "Personal Data Law"). The notion of "personal data" under Russian law includes any data which relates (directly or indirectly) to an identified or identifiable individual. There is no closed list of information which denotes personal data and any data (or set of data) which identifies a specific individual is treated as personal data. Typically name and contact details are considered to be personal data. The amendments to the Personal Data Law implemented by the Federal Law No. 519 dated December 30, 2020 (which entered into force on March 1, 2021) set forth new rules on processing of a specific type of personal data, being personal data which are made available to the general public (the "Relevant Data").

Russian law uses the term "data operator" to denote a person who determines the scope and purposes of the processing (this notion is equivalent to the notion of the "data controller" under the European Union General Data Protection Regulation). Russia also has a notion of "person involved into the data processing by the data operator" which is equivalent to the notion of "data processor" under the European Union General Data Protection Regulation.

The Personal Data Law, among other things, requires, subject to a limited number of exceptions, that an individual provide specific, informed and conscious consent to any processing (i.e. any action or combination of actions performed on personal data, including the collection, recording, systematization, accumulation, storage, use, transfer (distributing, providing or authorizing access to), blocking, deleting and destroying) of his/her personal data. In respect of most types of data, the Personal Data Law does not require the consent to be in writing (under the Personal Data Law, "in writing" means hand-written or subject to qualified electronic signature) but requires that the consent be in a form that, from an evidential perspective, sufficiently attests to that the data subject.

The consent must be in writing in certain cases, including: (i) where the processing relates to special categories of personal data (regarding the data subject's race, nationality, political views, religion, philosophical beliefs, health conditions or intimate information); (ii) where the processing of personal data relates to any biometrics; (iii) cross-border transfers to a state that does not provide adequate protection of rights of subjects (e.g. under Russian law, the United States is one of such states); and (iv) the certain types processing of an employee's personal data, etc. The written consent of subjects must meet a number of formal requirements and must be signed by holographic or electronic signature.

Procedure for concluding subscription contracts

The Federal Law No 533-FZ dated December 30, 2020 (will come into force in June 1, 2021), amended the Federal Law on Communications to tighten the procedure for concluding subscription contracts, including:

•: The Federal Law introduces the concept of "IMEI". Subscribers have the right to enter in their profile in the Integrated Identification and Authentication System (IIAS) information about the subscriber number and (or) IMEI used by them. If the subscriber's device is lost, he may report this to the operator through the IIAS. Subject to the confirmation of an IMEI number, telecommunications operators should stop providing telecommunications services for the lost device. The introduction of IMEI control in the presence of subscriber devices with the same IMEI, including bona fide owners (users), will lead to a violation of the rights of such bona fide owners.
•: The possibility of remote conclusion of subscription contracts by means of a Simple Electronic Signature obtained during a personal visit to the office of the telecommunications operator will be excluded.

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•: The conclusion of subscription contracts for devices with eSIM technology on the Internet will be possible only through the Unified Biometric System and the Enhanced Qualified Signature.
•: Provision of telecommunications services to corporate clients will be possible only if information about their users is entered in the IIAS. Telecommunications operators will be required to check the availability of such information in the IIAS from December 1, 2021 and stop providing telecommunications services to users with unreliable personal data.
•: Provision of telecommunications services to corporate clients for M2M devices will be possible only if information about the subscriber number, address of the corporate client or location of the device, and other information is entered in the IIAS which will create additional restrictions for the development of M2M services, including Internet of Things projects.
•: Roskomnadzor will create an information system for monitoring to check the work of telecommunications operators. Telecommunications operators will need to refine their business processes and IT-systems to connect to the information system for monitoring.

Licenses

Mobile Services

The following table shows, as of March 29, 2021, information with respect to the license areas in which we and our subsidiaries and affiliates provide or expect to provide GSM, LTE and UMTS services:

License Region	License	Radio Access Networks Technologies	License number	Expiry date

Moscow License Area
Moscow	MTS PJSC	GSM/UMTS-900, GSM/UMTS/LTE –1800	182375	April 28, 2023
Moscow region	MTS PJSC	GSM/UMTS-900, GSM/UMTS/LTE –1800	182375	April 28, 2023
St. Petersburg License Area
St. Petersburg	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Leningrad region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Russian Regional License Areas
European Russia
Adygeya Republic	MTS PJSC	GSM-900, GSM/LTE-1800	160409	April 28, 2023
Arkhangelsk region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Astrakhan region	MTS PJSC	GSM/LTE-1800	162943	October 18, 2021
Astrakhan region	MTS PJSC	GSM-900	168186	December 11, 2023
Bashkortostan Republic	MTS PJSC	IMT-MC/LTE-450, IMT-MC/UMTS/LTE-2100	170616	November 21, 2021
Bashkortostan Republic	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	172049	August 22, 2022
Belgorod region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Bryansk region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Chechen Republic	MTS PJSC	GSM/LTE-1800	149829	April 28, 2021
Chechen Republic	MTS PJSC	GSM/LTE-1800	186313	April 28, 2026
Chechen Republic	MTS PJSC	GSM-900	173072	June 10, 2024
Chuvashia Republic	MTS PJSC	GSM-900, GSM/LTE-1800	168624	December 30, 2023
Dagestan Republic	MTS PJSC	GSM-900, GSM/LTE-1800	168612	December 30, 2023
Ingushetia Republic	MTS PJSC	GSM-900, GSM/LTE-1800	168623	December 30, 2023
Ivanovo region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Kabardino-Balkar Republic	MTS PJSC	GSM/LTE-1800	168617	December 30, 2023
Kabardino-Balkar Republic	MTS PJSC	GSM-900	173071	June 10, 2024
Kaliningrad region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Kalmykia Republic	MTS PJSC	GSM-900	184789	January 25, 2026
Kalmykia Republic	MTS PJSC	GSM/LTE-1800	168620	December 30, 2023
Kaluga region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	174800	April 28, 2023
Karachaevo-Cherkesia Republic	MTS PJSC	GSM-900, GSM/LTE-1800	168613	December 30, 2023
Karelia Republic	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Kirov region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	171610	April 28, 2023
Komi Republic	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	184256	August 22, 2022

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License Region	License	Radio Access Networks Technologies	License number	Expiry date

Kostroma region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	174800	April 28, 2023
Krasnodar region	MTS PJSC	GSM-900, GSM/LTE-1800	152085	May 30, 2022
Kursk region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Lipetsk region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Mari-El Republic	MTS PJSC	GSM-900, GSM/LTE-1800	148177	January 15, 2022
Mordovia Republic	MTS PJSC	GSM-900, GSM/LTE-1800	168618	December 30, 2023
Murmansk region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Nenetsk Autonomous region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Nizhny Novgorod region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Novgorod region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Orel region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Orenburg region	MTS PJSC	GSM-900, GSM/LTE-1800	171610	April 28, 2023
Orenburg region	MTS PJSC	GSM/LTE-1800	136448	October 21, 2025
Penza region	MTS PJSC	GSM-900	86436	May 6, 2026
Penza region	MTS PJSC	GSM-900, GSM/LTE-1800	162944	September 2, 2022
Perm region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Perm region (Komi-Permyak region)	MTS PJSC	GSM/LTE-1800	136451	October 21, 2025
Perm region (excluding Komi-Permyak region)	MTS PJSC	GSM/LTE-1800	136450	October 21, 2025
Pskov region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Rostov region	MTS PJSC	GSM-900, GSM/LTE-1800	182093	July 1, 2025
Ryazan region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Samara region	MTS PJSC	GSM-900, GSM/LTE-1800	156890	December 30, 2022
Saratov region	MTS PJSC	GSM-900, GSM/LTE-1800	153739	July 11, 2022
Severnaya Osetia-Alania Republic	MTS PJSC	GSM-900, GSM/LTE-1800	144270	September 1, 2021
Severnaya Osetia-Alania Republic	MTS PJSC	GSM/LTE-1800	136449	October 21, 2025
Smolensk region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Stavropol region	MTS PJSC	GSM-900, GSM/LTE-1800	168615	December 30, 2023
Tambov region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Tatarstan Republic	MTS PJSC	GSM-900, GSM/LTE-1800	152516	June 26, 2022
Tula region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Tver region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Udmurt Republic	MTS PJSC	GSM-900, GSM/LTE-1800	171610	April 28, 2023
Ulyanovsk region	MTS PJSC	GSM-900	86435	May 6, 2026
Ulyanovsk region	MTS PJSC	GSM/LTE-1800	168614	December 30, 2023
Vladimir region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Volgograd region	MTS PJSC	GSM/LTE-1800	145059	October 4, 2021
Volgograd region	MTS PJSC	GSM-900	172368	February 26, 2024
Vologda region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161213	April 28, 2023
Voronezh region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	174800	April 28, 2023
Yaroslavl region	MTS PJSC	GSM-900, GSM/LTE-1800	174800	April 28, 2023
Asian Russia
Altai Republic	MTS PJSC	GSM/LTE-900	182985	July 19, 2021
Altai Republic	MTS PJSC	GSM/LTE-1800	168621	December 30, 2023
Altai region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	167990	September 8, 2021
Amur region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Amur region	MTS PJSC	GSM/LTE 1800	136447	October 21, 2025
Buryatiya Republic	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Chelyabinsk region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Chukotsk Autonomous region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Irkutsk region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Jewish Autonomous region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Kamchatka region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Kemerovo region	MTS PJSC	GSM-900, GSM/LTE-1800	168616	December 30, 2023
Khabarovsk region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Khakassiya Republic	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	177989	September 13, 2021
Khanty Mansiysk Autonomous region	MTS PJSC	IMT-MC/LTE-450, IMT-MC/UMTS/LTE-2100	165418	May 23, 2023
Khanty Mansiysk Autonomous region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Krasnoyarsk region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	182986	May 7, 2023

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License Region	License	Radio Access Networks Technologies	License number	Expiry date

Kurgan region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Magadan region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Novosibirsk region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	167216	February 21, 2022
Omsk region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	170007	December 20, 2021
Primorsky region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Sakha Republic (Yakutia)	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Sakhalin region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Sverdlovsk region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Tomsk region	MTS PJSC	GSM/LTE-900, GSM/LTE-1800	167991	June 5, 2023
Tyumen region	MTS PJSC	GSM/UMTS-900, GSM/LTE –1800	171610	April 28, 2023
Tyva Republic	MTS PJSC	GSM/LTE-1800	168622	December 30, 2023
Tyva Republic	MTS PJSC	GSM/UMTS/LTE-900	182984	July 19, 2021
Yamalo-Nenetsk Autonomous region	MTS PJSC	GSM-900, GSM/LTE-1800	171610	April 28, 2023
Zabaykalsky region	MTS PJSC	GSM/UMTS/LTE-900, GSM/LTE –1800	161216	April 28, 2023
Russian Federation
European Russia	MTS PJSC	LTE-800,2600	101247	July 25, 2022
European Russia, except Crimea Republic, Sevastopol	MTS PJSC	UMTS/LTE-2100	167215	May 21, 2022
European Russia, except Moscow, Moscow region, Crimea Republic, Sevastopol	MTS PJSC	LTE-2600	142343	April 15, 2026
Moscow, Moscow region	MTS PJSC	LTE	147353	December 29, 2021
Russian Federation, except Crimea Republic, Sevastopol	MTS PJSC	5G/IMT-2020	183416	July 16, 2025
Armenia
Armenia	MTS Armenia CJSC	LTE-800, GSM/UMTS-900, GSM/LTE-1800, UMTS-2100, LTE-2600		November 4, 2034
Belarus
Belarus	Mobile Telesystems LLC	GSM/UMTS/NB-IoT-900, GSM-1800, UMTS-2100, LTE-1800/2600 (MOCN sharing)⁽¹⁾		April 30, 2022

(1): The LTE radio access network in Belarus is owned by a national company beCloud as a Single Wholesale Network, implemented on-board of existing MNOs infrastructure (MTS, A1, Life), using 1800 and 2600 MHz frequency bands.

Mobile Virtual Network

License Region		Licensee		Expiry date

Moscow, Moscow region		MGTS PJSC		August 2, 2023

Each of our licenses requires service to be started by a specific date. We have met this target or received extensions to these dates in those regional license areas in which we have not commenced operations. Neither the government nor other parties have taken or attempted to take legal actions to suspend, terminate or challenge the legality of any of our licenses (except for Uzbekistan, see Note 35 to our audited consolidated financial statements). We have not received any notice of violation of any of our licenses, and we believe that we are in compliance with all material terms of our licenses.

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Fixed Line Services

The following table shows, as of March 29, 2021, information with respect to our fixed line licenses:

Licensee	License Region(s)	License number	Expiry Date

International, national, intra-zonal and local communications services
MTS PJSC	Russian Federation	178568	February 16, 2027
MTS PJSC	Moscow	185275	February 16, 2026
MTS PJSC	Moscow	150064	March 30, 2022
MTS PJSC	Moscow region	135027	November 21, 2021
MTS PJSC	Moscow region	150058	March 30, 2022
MGTS PJSC	Moscow	166444	December 11, 2023
MGTS PJSC	Moscow	161957	July 10, 2023
MGTS PJSC	Moscow region	169795	April 17, 2024
MGTS PJSC	Moscow, Moscow region	180455	July 28, 2025
Progressivniye Technologii CJSC	Moscow region	169311	July 27, 2023
MTS PJSC	St. Petersburg	169450	January 19, 2024
MTS PJSC	St. Petersburg, Leningrad region, Arkhangelsk region, Karelia Republic, Murmansk region, Novgorod region, Vologda region	150052	April 17, 2022
MTS PJSC	Leningrad region	147354	December 7, 2021
MTS PJSC	Altai Republic	148176	February 17, 2022
MTS PJSC	Altai region	146073	October 24, 2021
MTS PJSC	Altai region	158899	February 27, 2023
MTS PJSC	Amur region	146092	October 24, 2021
MTS PJSC	Arkhangelsk region	169456	January 19, 2024
MTS PJSC	Astrakhan region	146080	October 24, 2021
MTS PJSC	Astrakhan region	169454	January 19, 2024
MTS PJSC	Bashkortostan Republic	135028	November 21, 2021
MTS PJSC	Bashkortostan Republic	149173	March 5, 2022
MTS PJSC	Belgorod region	173482	April 10, 2024
MTS PJSC	Belgorod region, Bryansk region, Kursk region, Lipetsk region	158901	February 7, 2023
MTS PJSC	Buryatiya Republic	159602	April 18, 2023
MTS PJSC	Chelyabinsk region	146074	October 24, 2021
MTS PJSC	Chelyabinsk region	135967	December 15, 2021
MTS PJSC	Chuvashia Republic	159599	April 11, 2023
MTS PJSC	Dagestan Republic	152517	June 5, 2022
MTS PJSC	Irkutsk region (except for the Ust-Ordyn Buryat Autonomous District)	146069	October 24, 2021
MTS PJSC	Ivanovo region	146068	October 24, 2021
MTS PJSC	Kaliningrad region	156888	December 17, 2022
MTS PJSC	Kaliningrad region	169457	January 19, 2024
MTS PJSC	Kaluga region	182094	July 3, 2025
MTS PJSC	Karelia Republic	169448	January 19, 2024
MTS PJSC	Kemerovo region	168619	December 26, 2023
MTS PJSC	Kemerovo region	169451	January 19, 2024
MTS PJSC	Khabarovsk region	149647	March 15, 2022
MTS PJSC	Khabarovsk region	146066	October 24, 2021

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Khakassiya Republic	140458	June 6, 2021
MTS PJSC	Khanty Mansiysk Autonomous region	160629	December 1, 2021
MTS PJSC	Khanty Mansiysk Autonomous region	164187	October 24, 2021
MTS PJSC	Kirov region	149653	March 15, 2022
MTS PJSC	Kirov region	146089	October 24, 2021
MTS PJSC	Komi Republic	146079	October 24, 2021
MTS PJSC	Komi Republic	169449	January 19, 2024
MTS PJSC	Krasnodar region	146067	October 24, 2021
MTS PJSC	Krasnodar region	163840	August 1, 2023
MTS PJSC	Krasnoyarsk region	158902	February 27, 2023
MTS PJSC	Krasnoyarsk region (except for the Evenk Autonomous District)	146087	October 24, 2021
MTS PJSC	Kurgan region	170433	February 17, 2024
MTS PJSC	Kurgan region	146086	October 24, 2021
MTS PJSC	Kursk region	176685	August 28, 2024
MTS PJSC	Mari El Republic	159600	April 11, 2023
MTS PJSC	Murmansk region	169455	January 19, 2024
MTS PJSC	Nizhny Novgorod region	146075	October 24, 2021
MTS PJSC	Nizhny Novgorod region	174356	October 1, 2024
MTS PJSC	Novgorod region	169453	January 19, 2024
MTS PJSC	Novosibirsk region	146071	October 24, 2021
MTS PJSC	Novosibirsk region	158896	February 27, 2023
MTS PJSC	Omsk region	146088	October 4, 2021
MTS PJSC	Omsk region	145060	October 4, 2021
MTS PJSC	Orel region	155416	October 3, 2022
MTS PJSC	Orel region, Voronezh region	155415	October 24, 2022
MTS PJSC	Orenburg region	149644	March 15, 2022
MTS PJSC	Orenburg region	146072	October 24, 2021
MTS PJSC	Penza region	149649	March 15, 2022
MTS PJSC	Penza region	150057	March 14, 2022
MTS PJSC	Perm region	146078	October 24, 2021
MTS PJSC	Perm region	135956	December 15, 2021
MTS PJSC	Primorsky region	149648	March 15, 2022
MTS PJSC	Primorsky region	146070	October 24, 2021
MTS PJSC	Rostov region	146084	October 24, 2021
MTS PJSC	Rostov region	163838	August 1, 2023
MTS PJSC	Ryazan region	138952	December 23, 2021
MTS PJSC	Ryazan region	182084	July 3, 2025
MTS PJSC	Sakha Republic (Yakutia)	146076	October 24, 2021
MTS PJSC	Sakhalin region	146081	October 24, 2021
MTS PJSC	Samara region	146090	October 24, 2021
MTS PJSC	Samara region	176558	December 31, 2024
MTS PJSC	Saratov region	149654	March 15, 2022
MTS PJSC	Saratov region	159597	April 18, 2023
MTS PJSC	Severnaya Osetia-Alania Republic	163839	August 1, 2023
MTS PJSC	Severnaya Osetia-Alania Republic	152518	June 5, 2022
MTS PJSC	Smolensk region	158900	February 27, 2023
MTS PJSC	Sverdlovsk region	185834	March 15, 2026
MTS PJSC	Sverdlovsk region	149645	March 15, 2022

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Tambov region	149180	February 28, 2022
MTS PJSC	Tatarstan Republic	146082	October 24, 2021
MTS PJSC	Tatarstan Republic	161954	May 23, 2023
MTS PJSC	Tomsk region	146094	October 24, 2021
MTS PJSC	Tomsk region	158904	February 27, 2023
MTS PJSC	Tver region	157431	August 4, 2022
MTS PJSC	Tver region	158903	February 27, 2023
MTS PJSC	Tyumen region, YamaloNenetsk Autonomous region	135962	December 1, 2021
MTS PJSC	Tyumen region, YamaloNenetsk Autonomous region	154794	August 31, 2022
MTS PJSC	Udmurt Republic	149650	March 15, 2022
MTS PJSC	Udmurt Republic	146091	October 4, 2021
MTS PJSC	Ufa, Bashkortostan Republic	131715	September 8, 2021
MTS PJSC	Ulyanovsk region	149171	February 28, 2022
MTS PJSC	Ulyanovsk region	135960	December 15, 2021
MTS PJSC	Volgograd region	146085	November 17, 2021
MTS PJSC	Volgograd region	170831	March 4, 20124
MTS PJSC	Vologda region	169452	January 19, 2024
MTS PJSC	Yaroslavl region	146077	October 24, 2021
MTS PJSC	Zabaykalsky region	180446	May 6, 2025
MTS PJSC	Sakha Republic (Yakutia)	184096	August 25, 2025
MTS PJSC	Kemerovo region (Mezhdurechensk)	184255	December 27, 2021
MTS PJSC	Khakassiya Republic	186516	February 19, 2026
Zelenaya Tochka Group	Lipetsk region	180988	February 16, 2025
Zelenaya Tochka Group	Tambov region	135050	November 21, 2021*
Zelenaya Tochka Group	Stavropol region	164791	July 12, 2023
Zelenaya Tochka Group	Lipetsk region	139196	February 16, 2021
Zelenaya Tochka Group	Lipetsk region	133869	October 31, 2021*
Zelenaya Tochka Group	Stavropol region	157699	December 6, 2022
Telematic Services
MTS PJSC	Russian Federation	101246	July 25, 2022
MTS PJSC	Russian Federation except Moscow, Moscow region, Republic of Crimea, Sevastopol	142346	April 15, 2026
Navigation Information Systems CJSC	Russian Federation	161286	December 26, 2022
MKS Balashikha	Moscow region (Balashikha)	149925	June 19, 2021
Progressivniye Technologii CJSC	Moscow, Moscow region	169314	July 28, 2021
MGTS PJSC	Moscow, Moscow region	145447	December 11, 2021

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	St. Petersburg, Leningrad region, Arkhangelsk region, Kaliningrad region, Karelia Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Vologda region	145056	October 4, 2021
MTS PJSC	Komi Republic, Perm region, Orenburg region, Orel region, Nizhny Novgorod region, Lipetsk region, Moscow, Kostroma region, Smolensk region, Kirov region, Kaluga region, Ivanovo region, Bryansk region, Belgorod region, Moscow region, Kursk region, Voronezh region, Tyumen region, Sverdlovsk region, Omsk region, Kurgan region, Khanty Mansiysk Autonomous region, Chelyabinsk region, Pskov region, Yaroslavl region, Ryazan region, Vladimir region, Udmurt Republic, Tver region, Tula region, Tambov region, YamaloNenetsk Autonomous region, Amur region	184788	February 15, 2026
MTS PJSC	Adygeya Republic	182548	July 15, 2025
MTS PJSC	Altai Republic	152081	May 22, 2022
MTS PJSC	Altai region	147352	December 1, 2021
MTS PJSC	Astrakhan region	182549	July 15, 2025
MTS PJSC	Bashkortostan Republic	140459	June 21, 2021
MTS PJSC	Buryatiya Republic, Kamchatka region (excluding the excluding the Koryak Autonomous Area), Magadan region, Sakhalin region	182082	June 17, 2025
MTS PJSC	Chechen Republic	156889	December 6, 2022
MTS PJSC	Chukotsk Autonomous region, Jewish Autonomous region, Irkutsk region, Koryak District of the Kamchatka region	182535	August 13, 2025
MTS PJSC	Chuvashia Republic, Mordovia Republic	131717	September 14, 2021
MTS PJSC	Dagestan Republic, Ingushetia Republic, Kabardino-Balkar Republic, Karachaevo-Cherkesia Republic, Severnaya Osetia-Alania Republic	131721	September 14, 2021
MTS PJSC	Kalmykia Republic	182550	July 28, 2025
MTS PJSC	Khabarovsk region	181220	June 17, 2025
MTS PJSC	Khakassiya Republic	182085	June 17, 2025
MTS PJSC	Krasnodar region	182541	July 15, 2025
MTS PJSC	Krasnoyarsk region	161221	May 7, 2023
MTS PJSC	Mari El Republic	131716	September 14, 2021
MTS PJSC	Novosibirsk region	138258	April 13, 2021
MTS PJSC	Novosibirsk region	186312	April 13, 2026
MTS PJSC	Penza region	179663	April 1, 2025
MTS PJSC	Primorsky region	135961	December 21, 2021
MTS PJSC	Republic of Khakassia	181217	May 31, 2025
MTS PJSC	Rostov region	134507	October 26, 2021
MTS PJSC	Sakha Republic (Yakutia)	182088	July 15, 2025
MTS PJSC	Samara region	181215	May 26, 2025

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Saratov region	181210	May 31, 2025
MTS PJSC	Stavropol region	181221	May 26, 2025
MTS PJSC	Tatarstan Republic	182545	July 15, 2025
MTS PJSC	Tomsk region	182086	June 17, 2025
MTS PJSC	Tyva Republic	182546	July 28, 2025
MTS PJSC	Ulyanovsk region	181208	May 31, 2025
MTS PJSC	Volgograd region	181213	May 30, 2025
MTS PJSC	Zabaykalsky region	172247	June 5, 2024
MTS Media	Russian Federation	182309	April 6, 2025
Zelenaya Tochka Group	Belgorod region	178213	December 11, 2024
Zelenaya Tochka Group	Lipetsk region	179043	December 9, 2024
Zelenaya Tochka Group	Bashkortostan Republic	179060	February 16, 2025
Zelenaya Tochka Group	Tambov region	135052	October 5, 2021*
Zelenaya Tochka Group	Stavropol region	164792	July 12, 2023
Zelenaya Tochka Group	Stavropol region	171466	February 17, 2024
Zelenaya Tochka Group	Primorsky region	181008	March 31, 2025
Zelenaya Tochka Group	Stavropol region	140769	April 28, 2021
Zelenaya Tochka Group	Russian Federation	133870	September 8, 2021*
Zelenaya Tochka Group	Stavropol region: Stavropol	158709	July 28, 2021
Zelenaya Tochka Group	Stavropol region	136783	December 1, 2021*
Zelenaya Tochka Group	Stavropol region	157700	December 6, 2022
Zelenaya Tochka Group	Russian Federation	152526	April 16, 2022
Zelenaya Tochka Group	Stavropol region	169446	November 15, 2023
Leased Communications Circuits
MTS PJSC	Russian Federation, except Crimea Republic, Sevastopol	167992	December 29, 2021
Sputnikovoe TV LLC	Russian Federation	176892	August 2, 2023
MTS PJSC	Moscow, Moscow region, Komi Republic, Kostroma region, Tver region	166958	November 24, 2023
MGTS PJSC	Moscow, Moscow region	166443	December 11, 2023
Progressivniye Technologii CJSC	Moscow, Moscow region	180134	June 30, 2025
MKS Balashikha LLC	Moscow region (Balashikha)	156128	June 22, 2022

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	St. Petersburg, Leningrad region, Arkhangelsk region, Karelia Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Vologda region	149174	March 1, 2022
MTS PJSC	Adygeya Republic, Krasnodar region	182544	July 15, 2025
MTS PJSC	Aginski Buryatski Autonomous District	135959	December 1, 2021
MTS PJSC	Aginski Buryatski Autonomous District of the Penza region	135963	December 1, 2021
MTS PJSC	Astrakhan region, Stavropol region	181206	May 31, 2025
MTS PJSC	Bashkortostan Republic	161223	May 7, 2023
MTS PJSC	Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region	173073	July 2, 2024
MTS PJSC	Buryatiya Republic	130983	August 25, 2021
MTS PJSC	Chukotsk Autonomous region	174038	August 6, 2024
MTS PJSC	Chuvashia Republic	182552	July 28, 2025
MTS PJSC	Dagestan Republic	152083	May 21, 2022
MTS PJSC	Ingushetia Republic, Kabardino-Balkar Republic, Karachaevo-Cherkesia Republic, Volgograd region	159601	April 18, 2023
MTS PJSC	Irkutsk region	152082	May 21, 2022
MTS PJSC	Ivanovo region, Kirov region, Nizhny Novgorod region, Yaroslavl region	134509	October 13, 2021
MTS PJSC	Jewish Autonomous region	175252	November 14, 2024
MTS PJSC	Kaliningrad region	149147	March 1, 2022
MTS PJSC	Kalmykia Republic, Severnaya Osetia-Alania Republic	161219	May 7, 2023
MTS PJSC	Kaluga region, Pskov region, Ryazan region, Smolensk region, Tula region, Vladimir region	134506	October 7, 2021
MTS PJSC	Kamchatka region, Koryakski Autonomous region	152084	May 21, 2022
MTS PJSC	Kemerovo region, Tomsk region	161214	May 7, 2023
MTS PJSC	Khabarovsk region, Sakha Republic (Yakutia), Zabaykalsky region (excluding the Aginski Buryatski Autonomous District)	135026	November 21, 2021
MTS PJSC	Khakassiya Republic	182091	June 17, 2025
MTS PJSC	Krasnoyarsk region	161220	May 7, 2023
MTS PJSC	Magadan region	152080	May 21, 2022
MTS PJSC	Mari El Republic	134511	October 5, 2021
MTS PJSC	Mordovia Republic	135965	December 23, 2021
MTS PJSC	Omsk region	147357	December 27, 2021
MTS PJSC	Primorsky region	180447	May 10, 2025
MTS PJSC	Rostov region, Rostov region	166424	October 2, 2023
MTS PJSC	Sakhalin region	130986	August 25, 2021
MTS PJSC	Samara region, Saratov region, Ulyanovsk region	181219	May 31, 2025
MTS PJSC	Tatarstan Republic	161218	May 7, 2023
MTS PJSC	Tyva Republic	182542	July 28, 2025

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Yamalo-Nenetsk Autonomous region, Tyumen region, Sverdlovsk region, Kurgan region, Khanty Mansiysk Autonomous region, Chelyabinsk region, Amur region, Udmurt Republic, Tambov region, Perm region, Orenburg region	138262	April 13, 2021
MTS PJSC	Yamalo-Nenetsk Autonomous region, Tyumen region, Sverdlovsk region, Kurgan region, Khanty Mansiysk Autonomous region, Chelyabinsk region, Amur region, Udmurt Republic, Tambov region, Perm region, Orenburg region	186314	April 13, 2026
MTS PJSC	Altai Republic, Altai region, Novosibirsk region	182555	July 28, 2025
Zelenaya Tochka Group	Belgorod region	178211	February 16, 2025
Zelenaya Tochka Group	Lipetsk region	180191	February 16, 2025
Zelenaya Tochka Group	Bashkortostan Republic	179061	February 16, 2025
Zelenaya Tochka Group	Tambov region	135053	November 21, 2021*
Zelenaya Tochka Group	Stavropol region	164794	July 12, 2023
Zelenaya Tochka Group	Primorsky region	181009	March 31, 2025
Zelenaya Tochka Group	Lipetsk region	159633	December 6, 2022
Zelenaya Tochka Group	Stavropol region	157701	December 6, 2022
Zelenaya Tochka Group	Kalmykia Republic	149193	December 29, 2021
Data Transmission Services
MTS PJSC	Russian Federation	101248	July 25, 2022
Navigation Information Systems CJSC	Russian Federation	161285	December 26, 2022
MTS PJSC	Russian Federation except Moscow, Moscow region, Republic of Crimea, Sevastopol	142344	April 15, 2026
MGTS PJSC	Moscow	166445	December 11, 2023
MGTS PJSC	Moscow region	169794	April 17, 2024
MKS Balashikha LLC	Moscow region (Balashikha)	149923	June 19, 2021
Progressivniye Technologii CJSC	Moscow, Moscow region	169315	July 30, 2021
MTS PJSC	Moscow, Moscow region	150056	April 17, 2022

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	St. Petersburg, Leningrad region, Arkhangelsk region, Kaliningrad region, Karelia Republic, Komi Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Pskov region, Vologda region	150054	April 17, 2022
MTS PJSC	Adygeya Republic	182554	July 15, 2025
MTS PJSC	Altai Republic	182547	July 15, 2025
MTS PJSC	Altai region	166425	October 31, 2023
MTS PJSC	Amur region	150053	April 17, 2022
MTS PJSC	Astrakhan region	182536	July 15, 2025
MTS PJSC	Bashkortostan Republic	182087	June 30, 2025
MTS PJSC	Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region	150062	April 17, 2022
MTS PJSC	Buryatiya Republic, Kamchatka region (excluding the Koryak Autonomous Area), Magadan region, Sakhalin region	182081	June 17, 2025
MTS PJSC	Chechen Republic	156887	December 6, 2022
MTS PJSC	Chukotsk Autonomous region, Jewish Autonomous region, Irkutsk region, Koryak Autonomous Area of the Kamchatka region	182551	August 13, 2025
MTS PJSC	Chuvashia Republic, Mordovia Republic	131718	September 14, 2021
MTS PJSC	Dagestan Republic, Ingushetia Republic, Kabardino-Balkar Republic, Karachaevo-Cherkesia Republic, Severnaya Osetia-Alania Republic	131719	September 14, 2021
MTS PJSC	Ivanovo region, Kaluga region, Kostroma region, Ryazan region, Smolensk region, Tambov region, Tula region, Tver region, Vladimir region, Yaroslavl region	150059	April 17, 2022
MTS PJSC	Kalmykia Republic	182539	July 28, 2025
MTS PJSC	Kemerovo region	181218	May 31, 2025
MTS PJSC	Khabarovsk region	181209	May 31, 2025
MTS PJSC	Khakassiya Republic	182092	June 17, 2025
MTS PJSC	Kirov region, Nizhny Novgorod region, Udmurt Republic	150063	April 17, 2022
MTS PJSC	Krasnodar region	182538	July 15, 2025
MTS PJSC	Krasnoyarsk region	161217	May 7, 2023
MTS PJSC	Mari El Republic	131720	September 14, 2021
MTS PJSC	Novosibirsk region	182543	July 15, 2025
MTS PJSC	Sakha Republic (Yakutia)	182089	June 17, 2025
MTS PJSC	Orenburg region	150055	April 17, 2022
MTS PJSC	Penza region	179661	April 1, 2025
MTS PJSC	Perm region, Chelyabinsk region, Khanty Mansiysk Autonomous region, Kurgan region, Omsk region, Sverdlovsk region, Tyumen region, YamaloNenetsk Autonomous region	150060	April 17, 2022
MTS PJSC	Primorsky region	135957	December 21, 2021
MTS PJSC	Rostov region	138261	April 3, 2021
MTS PJSC	Rostov region	185833	April 3, 2026

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Samara region	181214	May 26, 2025
MTS PJSC	Saratov region	181216	May 31, 2025
MTS PJSC	Stavropol region	181211	May 26, 2025
MTS PJSC	Tatarstan Republic	182537	July 15, 2025
MTS PJSC	Tomsk region	182083	June 17, 2025
MTS PJSC	Tyva Republic	182540	July 28, 2025
MTS PJSC	Ulyanovsk region	181207	May 31, 2025
MTS PJSC	Volgograd region	182090	June 30, 2025
MTS PJSC	Zabaykalsky region	172249	June 5, 2024
Zelenaya Tochka Group	Belgorod region	178212	February 16, 2025
Zelenaya Tochka Group	Lipetsk region	180190	February 16, 2025
Zelenaya Tochka Group	Bashkortostan Republic	179062	February 16, 2025
Zelenaya Tochka Group	Tambov region	135051	October 5, 2021*
Zelenaya Tochka Group	Stavropol region	164795	July 12, 2023
Zelenaya Tochka Group	Primorsky region	181007	March 31, 2025
Zelenaya Tochka Group	Russian Federation	133872	September 8, 2021*
Zelenaya Tochka Group	Stavropol region: Stavropol	158711	July 28, 2021
Zelenaya Tochka Group	Kabardino-Balkar Republic, Stavropol region	157698	December 6, 2022
Zelenaya Tochka Group	Kalmykia Republic	149194	December 29, 2021
Data Transmission Services for Voice
MTS PJSC	Russian Federation	101245	July 25, 2022
MTS PJSC	Russian Federation except Moscow, Moscow region, Crimea Republic, Sevastopol	142345	April 15, 2026
MTS PJSC	Moscow	150061	March 30, 2022
MGTS PJSC	Moscow	184084	February 16, 2026
MTS PJSC	Moscow region	134508	October 26, 2021
MGTS PJSC	Moscow region	146656	January 26, 2022
Progressivniye Technologii CJSC	Moscow, Moscow region	173865	October 12, 2023
MTS PJSC	St. Petersburg	177389	January 28, 2025
MTS PJSC	Leningrad region	170435	February 17, 2024
MTS PJSC	Adygeya Republic	149164	March 15, 2022
MTS PJSC	Altai Republic	149176	March 15, 2022
MTS PJSC	Altai region	149161	March 15, 2022
MTS PJSC	Amur region	149178	March 15, 2022
MTS PJSC	Arkhangelsk region	170427	February 17, 2024
MTS PJSC	Astrakhan region	176557	December 18, 2024
MTS PJSC	Bashkortostan Republic	138260	April 11, 2021
MTS PJSC	Bashkortostan Republic	186311	April 11, 2026

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region	182553	July 28, 2025
MTS PJSC	Buryatiya Republic	149156	March 15, 2022
MTS PJSC	Chechen Republic	149157	March 15, 2022
MTS PJSC	Chelyabinsk region	149166	March 15, 2022
MTS PJSC	Chukotsk Autonomous region, Jewish Autonomous region	159596	March 25, 2023
MTS PJSC	Chuvashia Republic	149186	March 15, 2022
MTS PJSC	Dagestan Republic	149179	March 15, 2022
MTS PJSC	Ingushetia Republic	149160	March 15, 2022
MTS PJSC	Irkutsk region, Primorsky region, Sakhalin region	135029	December 12, 2021
MTS PJSC	Ivanovo region	134510	October 31, 2021
MTS PJSC	Kabardino-Balkar Republic	149163	March 15, 2022
MTS PJSC	Kaliningrad region	149146	March 15, 2022
MTS PJSC	Kalmykia Republic	149162	March 15, 2022
MTS PJSC	Kaluga region	134512	October 26, 2021
MTS PJSC	Kamchatka region	149181	March 15, 2022
MTS PJSC	Karachaevo-Cherkesia Republic	149159	March 15, 2022
MTS PJSC	Karelia Republic	149167	March 15, 2022
MTS PJSC	Kemerovo region	170425	February 17, 2024
MTS PJSC	Khabarovsk region	149170	March 15, 2022
MTS PJSC	Khakassiya Republic	149184	March 15, 2022
MTS PJSC	Khanty Mansiysk Autonomous region, Sverdlovsk region	159595	March 25, 2023
MTS PJSC	Kirov region	149152	March 15, 2022
MTS PJSC	Komi Republic	149151	March 15, 2022
MTS PJSC	Kostroma region	149175	March 15, 2022
MTS PJSC	Krasnodar region	153738	August 31, 2022
MTS PJSC	Krasnoyarsk region	170428	February 17, 2024
MTS PJSC	Kurgan region	149169	March 15, 2022
MTS PJSC	Magadan region	149188	March 15, 2022
MTS PJSC	Mari El Republic	149148	March 15, 2022
MTS PJSC	Mordovia Republic	149158	March 15, 2022
MTS PJSC	Murmansk region	149153	March 15, 2022
MTS PJSC	Nenetsk Autonomous region	159593	March 25, 2023
MTS PJSC	Nizhny Novgorod region	170426	February 17, 2024
MTS PJSC	Novgorod region	170429	February 17, 2024
MTS PJSC	Novosibirsk region	170431	February 17, 2024
MTS PJSC	Omsk region	170430	February 17, 2024
MTS PJSC	Orenburg region	149182	March 15, 2022
MTS PJSC	Penza region	149155	March 15, 2022
MTS PJSC	Perm region	158898	February 27, 2023
MTS PJSC	Pskov region	149177	March 15, 2022
MTS PJSC	Rostov region	185276	February 16, 2026
MTS PJSC	Ryazan region, Vladimir region	159594	March 25, 2023
MTS PJSC	Sakha Republic (Yakutia)	149183	March 15, 2022
MTS PJSC	Samara region	176556	December 31, 2024
MTS PJSC	Saratov region	149165	March 15, 2022

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Severnaya Osetia-Alania Republic	149149	March 15, 2022
MTS PJSC	Smolensk region	170434	February 17, 2024
MTS PJSC	Stavropol region	149154	March 15, 2022
MTS PJSC	Tambov region	176559	December 18, 2024
MTS PJSC	Tatarstan Republic	159598	March 25, 2023
MTS PJSC	Tomsk region	149150	March 15, 2022
MTS PJSC	Tula region	170432	February 17, 2024
MTS PJSC	Tver region	176259	November 24, 2024
MTS PJSC	Tyumen region, YamaloNenetsk Autonomous region	135966	December 1, 2021
MTS PJSC	Tyva Republic	149172	March 15, 2022
MTS PJSC	Udmurt Republic	158897	February 27, 2023
MTS PJSC	Ulyanovsk region	149168	March 15, 2022
MTS PJSC	Volgograd region	170436	February 17, 2024
MTS PJSC	Vologda region	149187	March 15, 2022
MTS PJSC	Yaroslavl region	181212	June 4, 2025
MTS PJSC	Zabaykalsky region	149185	March 15, 2022
Zelenaya Tochka Group	Tambov region	144280	July 28, 2021
Zelenaya Tochka Group	Stavropol region	164793	July 12, 2023
Zelenaya Tochka Group	Lipetsk region	133871	September 8, 2021*
Zelenaya Tochka Group	Stavropol region	157702	November 2, 2022
Zelenaya Tochka Group	Kalmykia Republic	155121	May 26, 2022
Mobile Radio Services
MTS PJSC	Irkutsk region	178743	November 18, 2024
MTS PJSC	Kemerovo region	177489	October 2, 2024
MTS PJSC	Khanty Mansiysk Autonomous region	138956	December 15, 2021
MTS PJSC	Magadan region	178740	November 18, 2024
MTS PJSC	Tatarstan Republic	178744	November 18, 2024
MTS PJSC	Tyumen region	178741	November 18, 2024
MTS PJSC	YamaloNenetsk Autonomous region	135964	December 15, 2021
MTS PJSC	Zabaykalsky region	178742	November 18, 2024
MTS PJSC	Sakha Republic (Yakutia)	181284	March 2, 2025
MTS PJSC	Khabarovsk Territory	182244	April 6, 2025
MTS PJSC	Krasnoyarsk Territory	182245	April 6, 2025
MTS PJSC	Tyva Republic	182246	April 6, 2025
MTS PJSC	Perm region	182247	April 6, 2025
MTS PJSC	Buryatiya Republic	182248	April 6, 2025
MTS PJSC	Komi Republic	182249	April 6, 2025
MTS PJSC	Omsk region	182251	April 6, 2025
MTS PJSC	Moscow	183415	July 16, 2025
MTS PJSC	St. Petersburg	183417	July 16, 2025
MTS PJSC	Sverdlovsk	183418	July 16, 2025
MTS PJSC	Leningrad region	183419	July 16, 2025
MTS PJSC	Moscow region	183420	July 16, 2025

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Licensee	License Region(s)	License number	Expiry Date

MTS PJSC	Samara region	185031	October 27, 2025
Telecommunications Services for Cablecasting
MTS PJSC	Adygeya Republic (Adygeya), Altai Republic, Bashkortostan Republic, Buryatiya Republic, Dagestan Republic, Ingushetia Republic, Kabardino-Balkar Republic, Kalmykia Republic, Karachaevo-Cherkesia Republic, Karelia Republic, Komi Republic, Mari-El Republic, Mordovia Republic, Sakha Republic, Severnaya Osetia—Alania Republic, Tatarstan Republic (Tatarstan), Tyva Republic, Udmurt Republic, Khakassiya Republic, Chechen Republic, Chuvash Republic—Chuvashia;	176260	November 24, 2024
	Altai region, Zabaikalye region, Kamchatka region, Krasnodar region, Krasnoyarsk region, Perm region, Primorsky region, Stavropol region, Khabarovsk region;
	Amur region, Arkhangelsk region, Astrakhan region, Belgorod region, Bryansk region, Vladimir region, Volgograd region, Vologda region, Voronezh region, Ivanovo region, Irkutsk region, Kaliningrad region, Kaluga region, Kemerovo region—Kuzbass, Kirov region, Kostroma region, Kurgan region, Kursk region, Leningrad region, Lipetsk region, Magadan region, Moscow region, Murmansk region, Nizhny Novgorod region, Novgorod region, Novosibirsk region, Omsk region, Orenburg region, Orel region, Penza region, Pskov region, Rostov region, Ryazan region, Samara region, Saratov region, Sakhalin region, Sverdlovsk region, Smolensk region, Tambov region, Tver region, Tomsk region, Tula region, Tyumen region, Ulyanovsk region, Chelyabinsk region, Yaroslavl region;
	Moscow, Saint Petersburg;
	Jewish Autonomous Region;
	Nenetsk Autonomous region, Khanty Mansiysk Autonomous region—Yugra, Chukotskiy Autonomous region, Yamalo-Nenetsk Autonomous region
MGTS PJSC	Moscow	184083	January 27, 2026
MGTS PJSC	Moscow region	161531	June 18, 2023
MKS Balashikha LLC	Moscow region (Balashikha)	149924	June 19, 2021
Progressivniye Technologii CJSC	Moscow region	173864	January 18, 2023
Zelenaya Tochka Group	Tambov region	139584	February 14, 2021

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Licensee	License Region(s)	License number	Expiry Date

Zelenaya Tochka Group	Tambov region	184573	February 14, 2026
Zelenaya Tochka Group	Stavropol	158710	July 28, 2021
Zelenaya Tochka Group	Russian Federation	165886	September 25, 2023
Zelenaya Tochka Group	Stavropol region: Nevinnomyssk	176466	November 1, 2023
Telecommunications Services for Broadcasting
Sputnikovoe TV	Moscow, Moscow region, St. Petersburg, Leningrad region, Adygeya Republic, Arkhangelsk region, Astrakhansk region, Bashkortostan Republic, Belgorod region, Bryansk region, Chuvashia Republic, Dagestan Republic, Ivanovo region, Ingushetia Republic, Kabardino-Balkar Republic, Kaliningrad region, Kalmykia Republic, Kaluga region, Karachaevo-Cherkesia Republic, Karelia Republic, Kirov region, Komi Republic , Kostroma region, Krasnodar region, Kursk region, Lipetsk region, Mari El Republic, Mordovia Republic, Murmansk region, Nizhny Novgorod region, Novgorod region, Orel region, Orenburg region, Perm region, Rostov region, Pskov region, Ryazan region, Samara region, Saratov region, Severnaya Osetia-Alania Republic, Smolensk region, Stavropol region, Tambov region, Tatarstan Republic, Tula region, Tver region, Udmurt Republic, Ulyanovsk region, Vladimir region, Volgograd region, Vologda region, Voronezh region, Yaroslavl region, Altaisk region, Altai Republic, Amur region, Buryatiya Republic, Chelyabinsk region, Jewish Autonomous region, Irkutsk region, Kemerov region, Khabarovsk region, Khakassiya Republic, Khanty Mansiysk Autonomous region, Krasnoyarsk region, Kurgan region, Novosibirsk region, Omsk region, Primorsky region, Sakha Republic (Yakutia), Sakhalin region, Sverdlovsk region, Tomsk region, Tyumen region, Tyva Republic, YamaloNenetsk Autonomous region, Chechen Republic, Zabaykalsky region, Penza region, Krym Republic, Sevastopol, Nenetsk Autonomous region, Magadan region	176894	October 1, 2024

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Licensee	License Region(s)	License number	Expiry Date

Cable Radio (communication services for the purpose of wire broadcasting)
MGTS PJSC	Moscow region, Moscow	154857	May 16, 2022
Progressivniye Technologii CJSC	Moscow region	173867	January 18, 2023
MTS PJSC	St. Petersburg, Leningrad region	176686	August 28, 2024
MTS PJSC	Chelyabinsk region	137711	November 20, 2021
MTS PJSC	Irkutsk region	174442	May 23, 2024
MTS PJSC	Ivanovo region	173166	March 28, 2024
MTS PJSC	Kirov region	149715	November 16, 2021
MTS PJSC	Krasnodar region	169190	October 4, 2023
MTS PJSC	Nizhny Novgorod region	175253	October 1, 2024
MTS PJSC	Novosibirsk region	171678	January 29, 2024
MTS PJSC	Penza region	159702	October 31, 2022
MTS PJSC	Perm region	179662	April 22, 2025
MTS PJSC	Rostov region	152165	February 8, 2022
MTS PJSC	Ryazan region	162597	February 19, 2023
MTS PJSC	Saratov region	168309	September 3, 2023
MTS PJSC	Smolensk region	179430	December 11, 2024
MTS PJSC	Sverdlovsk region	172248	May 23, 2024
MTS PJSC	Volgograd region	156543	July 5, 2022
MTS PJSC	Vologda region	172369	February 26, 2024
MTS PJSC	Yaroslavl region	173165	March 28, 2024
MTS PJSC	Udmurt Republic	182250	April 6, 2025

*: These licenses were extended for 12 months in accordance with the Decree of the Government of the Russian Federation No. 440 dated April 3, 2020 "On Extension of Permits and Other Features in Relation to Licensing Activities in 2020 and 2021".

Banking Services

The following table shows information with respect to the license areas in which MTS Bank provides financial services:

License	License number	Banking services	Issue date

MTS Bank	2268	General license	December 17, 2014
MTS Bank	2268	Attraction of deposits and placement of precious metals	December 17, 2014
MTS Bank	17283	Development, production, distribution of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities, for works and services in the field of data encryption, technical support services of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities (except where technical support services of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities, are performed for the own needs of the legal entity or individual entrepreneur)	June 06, 2019
MTS Bank	177-04635-010000	Dealer activity	January 24, 2001
MTS Bank	177-04613-100000	Broker activity	January 24, 2001
MTS Bank	177-04660-000100	Depository activity	January 24, 2001

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All licenses with expiry date before the date of this Annual Report on Form 20-F for the year ended December 31, 2020 were renewed.

C. Organizational Structure

The table below presents our significant subsidiaries and investees, the places of incorporation and our effective ownership interests therein as of December 31, 2020.

Subsidiary	Accounting Method			Place of Incorporation/ Organization

RTC	Consolidated	100.0	%	Russia
MTS Turkmenistan	Consolidated	100.0	%	Turkmenistan
MTS IT	Consolidated	100.0	%	Russia
NVision Czech Republic	Consolidated	100.0	%	Czech Republic
Sputnikovoe TV	Consolidated	100.0	%	Russia
Stream	Consolidated	100.0	%	Russia
Dega	Consolidated	100.0	%	British Virgin Islands
Stream Digital⁽¹⁾	Consolidated	100.0	%	Russia
MTS Energo	Consolidated	100.0	%	Russia
MTDZK LLC (Ticketland)	Consolidated	100.0	%	Russia
IT Grad	Consolidated	100.0	%	Russia
Kinopolis	Consolidated	100.0	%	Russia
MTS Media	Consolidated	100.0	%	Russia
MTS Artificial Intelligence	Consolidated	100.0	%	Russia
MTS Armenia	Consolidated	100.0	%	Armenia
Stopol Group	Consolidated	100.0	%	Russia
Kulturnaya Sluzhba (Ponominalu)	Consolidated	100.0	%	Russia
MTS Bank	Consolidated	99.9	%	Russia
MGTS Group	Consolidated	94.7	%	Russia
Navigation Information Systems Group	Consolidated	94.7	%	Russia
Oblachny Retail LLC	Consolidated	50.8	%	Russia
MTS International Funding Limited⁽²⁾ ("MTS International")	Consolidated	SE		Ireland
Zelenaya Tochka Group	Equity	51.0	%	Russia
MTS Belarus	Equity	49.0	%	Belarus
Sistema Capital	Equity	30.0	%	Russia
Zifrovoe TV	Equity	20.0	%	Russia
YOUDO Web Technologies	Equity	15.5	%	Cyprus
SWIPGLOBAL	Equity	15.0	%	Cyprus

(1): A wholly-owned subsidiary, through which the Group currently repurchases its own shares.
(2): A company organized and existing as a private limited company under the laws of Ireland. The Group does not have any equity in MTS International. It was established for the purpose of raising capital through the issuance of debt securities on the Irish Stock Exchange followed by transferring the proceeds through a loan facility to the Group. In 2010 and 2013, MTS International issued $750 million 8.625% notes due in 2020 and $500 million 5.0% notes due in 2023, respectively. The notes are guaranteed by MTS in the event of default. MTS International does not perform any other activities except those required for notes servicing. The Group bears all costs incurred by MTS International in connection with the notes' maintenance activities. Accordingly, the Group concluded that it exercises control over the entity.

See also Note 2 to our audited consolidated financial statements.

D. Property, Plant and Equipment

Property, Plant and Equipment

We own and occupy premises in Moscow at 4 Marksistskaya Street Bldgs. 1-4, 34 Marksistskaya Street Bldg. 10, 1/3 Vorontsovskaya Street Bldgs. 2 and 2a, 5 Vorontsovskaya Street Bldgs. 1 and 2,

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13/14 Vorontsovskaya Street Bldg. 4, 8 Vorontsovskaya Street Bldg. 4À, 12/12 Pankratievsky Pereulok, 2/10 Perviy Golutvinskiy Pereulok Bldg. 1 and 2, 4 Perviy Golutvinskiy Pereulok Bldg. 1, 9 Magnitogorskaya Street, 6 Vtoroy Vyazovskiy Proezd Building 1-3, 2A Konstantina Simonova Street, 19 Dmitrovskoye shosse Bldg. 2, 103 Prospect Mira, 42 Profsoyuznaya Street Bldg. 1, Panfilovskiy prospect Zelenograd Bldg 1101À, 24/2 Malaya Dmitrovka Street, 5/9 Malaya Dmitrovka Street, 58/1 Ryazanskiy prospect, 60 Varshavskoe shosse, 27 Smolenskaya-Sennaya square Bldg 2, 27 Smolenskaya-Sennaya square Bldg 3, 6 Ostrovitjanova Street, 2 Mozhayskoe shosse, 51 Second Line of Khoroshevsky Serebryany Bor Bldg.1-3, 24 Central prospect of Khoroshevsky Serebryany Bor, 24 Central prospect, 18 Andropov prospect Bldg. 8-9, 18 Andropov prospect Bldg.1, 18 Andropov prospect Bldg.4 premises in Moscow region in village Valishevo, 5 Bldg 2, in Podolsk, 1 Komsomolskaya street, in Pushkino, 22 Gorky street, Pushkin district, village Pushkino, 7A, Yaroslavl shosse, Mytishchi district, Pirogovo village, 8, Timiryazev street, Lytkarino, Children's town "ZIL", bldg. 60, which we use for administration, sales and other service centers as well as the operations of mobile switching centers.

We also lease buildings in Moscow for similar purposes, including marketing and sales and other service centers. In addition, through our subsidiary MGTS, we own 112 properties and rent buildings and premises at approximately 124 addresses located throughout Moscow, which serve as sales and customer service offices, house MGTS' telecommunication equipment. We also own office buildings in some of our regional license areas, and we lease office space on an as- needed basis. We believe that our properties are adequate for our current needs and additional space is available to us if and when it is needed.

The primary elements of our network are base stations, base station controllers, transcoders and mobile switching centers. Base stations occupy sites leased at selected locations in all the areas in which we provide network coverage. GSM, 3G and 4G technologies are based on an "open architecture," which means that equipment of radio access network from one supplier can be combined with core network equipment of another supplier to expand the network. Thus, there are no technical limitations to using equipment from different suppliers.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is intended to help the reader understand us, our operations and our present business environment and should be read in conjunction with our consolidated financial statements, related notes and other information included elsewhere in this document. In particular, we refer you to the risks discussed in "Item 3. Key Information—D. Risk Factors" for information regarding governmental, economic, fiscal, monetary or political policies or factors that could materially adversely affect our operations or your investment in our shares and ADSs. In addition, this section contains forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements as a result of various factors, including those described under "Item 3. Key Information—D. Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements." Our reporting currency is the Russian ruble and our consolidated financial statements have been prepared in accordance with IFRS.

A. Operating Results

Overview

We are a leading telecommunications group in Russia, providing a wide range of mobile and fixed line voice, data telecommunications and digital services, including transmission, broadband, pay-TV, various value-added services as well as financial and integration services and selling equipment and

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accessories. According to AC&M-Consulting, we are the largest mobile operator in Russia in terms of mobile subscribers. We are also the largest operator in Armenia, according to our estimates. As of December 31, 2020, we had a mobile subscriber base of approximately 80.6 million.

Our revenues for the year ended December 31, 2020 totaled to RUB 494,926 million, an increase of 5.2% year-over-year. The Group's performance was largely driven by both core telecom services as well as new segments beyond connectivity, with Fintech, Media, and B2B Digital & Cloud services. Our operating income for the year ended December 31, 2020 decreased by 2.3% to RUB 112,893 million. Our operating income was negatively impacted by COVID-19 outbreak, including loan impairment provisions at MTS bank, impairment of our e-ticketing business as well as a steep decline in international roaming. Our profit for the year ended December 31, 2020 increased by 12.7% to RUB 62,073 million mainly due to lower finance costs as well compensating effect of our operations with derivatives.

Our revenues for the year ended December 31, 2019 grew by 5.5% to RUB 470,605 million compared to 2018. The growth was largely driven by rising mobile services revenue as well as MTS Bank revenue consolidated starting from July 5, 2018. Our operating income for the year ended December 31, 2019 increased by 4.8% to RUB 115,577 million compared to 2018, the increase was mainly attributable to rising gross margin of our mobile and fixed line services, gain from sale and leaseback of MGTS' building as well as MTS Bank consolidation. Our profit for the year ended December 31, 2019 grew by RUB 47,267 million compared to the previous year and totaled to RUB 55,099 million. Profit in 2018 was negatively impacted by the recognition of the provision for fines and penalties relating to the investigation of the Group's former subsidiary in Uzbekistan which was expensed in 2018; as such, profit in 2019 was comparatively higher by RUB 62,493 million inclusive of foreign exchange impacts. This effect was partially offset by negative results of our hedge and forward contracts, loss on sale of our Ukraine operations and increase of our finance costs.

Our revenues for the year ended December 31, 2018 grew by 4.6% compared to 2017 and totaled to RUB 446,238 million. In 2018 we increased our ownership share in MTS Bank to 55.4% and obtained control over the entity. The effect of MTS Bank consolidation on the Group revenue for the financial year 2018 amounted to RUB 9,336 million. In addition, the increase was driven by strong performance in core Russian market as well as continued positive trends in data consumption and digital service adoption across all the regions of operations. Our operating income for the year ended December 31, 2018 totaled to RUB 110,244 million, an increase of 20.4% in comparison with prior year was mainly due to effects from implementation of IFRS 15 and IFRS 16 as well as MTS Bank consolidation. Main positive effects relate to strong service revenue in Russia, higher income from sale of our fixed assets as well as lower impairment of our non-current assets. Our profit for the year ended December 31, 2018 declined to RUB 7,832 million mainly due to provision for fines and penalties relating to previously disclosed investigation of the Group's former subsidiary in Uzbekistan.

Our cash outlays for capital expenditures for the years ended December 31, 2020, 2019 and 2018 were RUB 97,838 million, RUB 91,736 million and RUB 99,568 million, respectively.

We have financed our cash requirements through our operating cash flows and borrowings. Net cash provided by operating activities for the years ended December 31, 2020, 2019, 2018 and was RUB 155,507 million, RUB 106,652 million and RUB 154,390 million, respectively.

Our borrowings consist of notes and bank loans. Our notes comprise of U.S. dollar and ruble denominated notes. As of December 31, 2020 and December 31, 2019 U.S. dollar denominated notes totaled to RUB 33.1 billion and RUB 46.3 billion, and ruble denominated notes amounted to RUB 175.1 billion and RUB 137.6 billion, respectively. Our bank loans consist of ruble-denominated borrowings totaling approximately RUB 221.1 billion as of December 31, 2020 and RUB 159.4 billion as of December 31, 2019.

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We repaid approximately RUB 162.7 billion and RUB 156.7 billion of indebtedness in 2020 and 2019, respectively. As of December 31, 2020, the total amount available to us under our credit facilities amounted to RUB 229.9 billion. We had total indebtedness of 429.3 billion as of December 31, 2020, excluding lease obligations, compared to RUB 343.3 billion as of December 31, 2019. See Note 25 to our audited consolidated financial statements for a description of our indebtedness.

Our total finance costs for the years ended December 31, 2020, 2019 and 2018 were RUB 42,084 million, RUB 47,366 million and RUB 36,985 million, net of amounts of interest capitalized, respectively. See Note 9 to our audited consolidated financial statements for a description of our finance costs.

Our reporting currency is Russian rubles. Our and our subsidiaries' functional currencies are the ruble in Russia, the hryvnia in Ukraine (before it was disposed of on December 3, 2019), the manat in Turkmenistan, the dram in Armenia and the som in Uzbekistan (before UMS (as defined below) was deconsolidated). See "—Certain Factors Affecting our Financial Position and Results of Operations—Currency fluctuations" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk."

Segments

Management (chief operating decision maker) analyzes and reviews results of the Company's operating segments separately based on the nature of products and services, regulatory environments and geographic areas. The Group's management evaluates the segments' performance based on revenue and operating profit, excluding depreciation and amortization. Management does not analyze assets or liabilities by reportable segments.

The Group identified the following reportable segments:

Russia convergent: represents the results of mobile and fixed line operations, which encompasses services rendered to customers across regions of Russia, including voice and data services, transmission, broadband, pay-TV and various value-added services and retail operations.

Moscow fixed line: represents the results of fixed line operations carried out in Moscow by the Group's subsidiary MGTS. MGTS is the only licensed public switched telephone network ("PSTN") operator in Moscow and is considered a natural monopoly under Russian antimonopoly regulations. Consequently, substantial part of services provided by MGTS are subject to governmental regulation.

MTS Bank: represents the results of banking services rendered to customers across multiple regions of Russia.

Ukraine: Ukraine was excluded from operational segments presentation as a result of its disposal in December 2019. This exclusion was retrospectively presented in 2018.

At the end of 2020, our management changed the approach for reviewing of the Group's operational results which led to the separation of two new segments—Cloud and WASD. Cloud represents operational results of the Group's business focused on cloud services. WASD is the MTS streaming platform. Cloud and WASD were moved from "Russia Convergent" operating segment to the "Other" category.

Management changed the assessment of expenses allocated to HQ in relation with sale of MTS Ukraine in 2019.

On October 30, 2020, the Group entered into a sale agreement with Sistema to dispose of 100% share in JSC "Nvision Group", which provided integration services, as well as the sales of software, and constituted "System Integrator" operating segment included in "Other" reportable segment.

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All figures in the tables below for 2019 and 2018 have been retrospectively restated to reflect the above changes.

The "Other" category does not constitute a reportable segment. It includes the results of a number of other operating segments that do not meet the quantitative thresholds for separate reporting, such as Turkmenistan, Armenia, Cloud, Kinopolis and others. Total revenues of our segments for the years ended December 31, 2020, 2019, 2018 were as follows:

	Year Ended December 31,

	2020			2019			2018
	(in millions of Russian rubles)
Total revenues
Russia convergent		419,151			399,361			392,076
Moscow fixed line		40,430			38,851			38,846
MTS Bank		36,101			31,185			12,072
HQ and other		25,013			24,282			20,947
Eliminations⁽¹⁾		(25,769	)		(23,074	)		(17,703	)

Total revenues as reported		494,926			470,605			446,238

(1): Represents the elimination of inter-company transaction results, primarily interconnect, roaming, rent of channels and telecommunications infrastructure.

Certain Operating Data

Below we provide certain operating data not included in our financial statements that we believe is useful for evaluating our business and results. The data focuses primarily on our mobile operations, particularly in Russia, which comprise the most significant share of our revenue in the periods presented, and is among the information routinely reviewed by our management as part of their regular evaluation of our performance.

Mobile Subscriber Data

The following table shows our mobile subscribers by country as of the dates indicated:

	At December 31,

	2020		2019		2018
	(in millions)
Subscribers⁽¹⁾
Russia		78.5		79.1		78.0
Armenia		2.1		2.2		2.1
Total consolidated		80.6		81.3		80.1



MTS Belarus (unconsolidated)		5.7		5.6		5.5

(1): We define a subscriber as an organization or individual, whose SIM-card shows traffic-generating activity or accrues a balance for services rendered or is replenished of topped off over the course of any three-month period, inclusive within the reporting period, and was not blocked at the end of the period.

We had approximately 78.5 million subscribers in Russia as of December 31, 2020, and a leading 31% market share of total mobile cellular subscribers in Russia, according to AC&M-Consulting. Overall penetration in Russia was at approximately 172%. In addition, as of December 31, 2020, we had approximately 2.1 million subscribers in Armenia, representing 59% market share, according to our estimates.

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For a description of our fixed line subscriber base, see "Item 4. Information on Our Company—B. Business Overview—Fixed Line Services."

Revenues

During the last few years our company evolved from a leading provider of telecommunication services into an eco-system of digital, media, financial and telecommunication services.

Our principal sources of revenue are:

•: revenue from telecommunication services, which include mobile and fixed service revenue;
•: revenues from sales of handsets, accessories and other goods;
•: financial services.

Our mobile tariffs in Russia are not regulated by any organization or governmental authority. The interconnect fees we charge to other operators for terminating calls interconnecting to our mobile network are not regulated in Russia. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we are found to have a dominant position in the markets where we operate and are determined to have abused this position, the FAS may be entitled to regulate our subscriber tariffs and impose certain restrictions on our operations" and "—If we or any of our mobile network operator subsidiaries operating in Russia are identified as an operator occupying a "substantial position," the regulator may reduce our interconnect tariffs which, in turn, may have a material adverse effect on our financial condition and results of operations."

Certain of our fixed service tariffs are regulated, including tariffs charged by Moscow incumbent operator MGTS for installation fees, monthly subscription fees and local call charges, as well as interconnect and traffic transit tariffs. The interconnect tariffs charged by us are also regulated by the Federal Agency on Communications.

Service revenues

Revenue from telecommunication services primarily include monthly fees paid by our users of tariff plans which contain fixed volume of services such as minutes of usage, sms, mobile internet traffic, pay-TV and broadband internet in case of convergent tariff plans. Telecommunication services also include interconnect fees, roaming fees and other services. Telecommunication services as a percentage of revenues gradually declined and were 79.2% in 2020, 80.5% in 2019 and 83.1% in 2018. We expect revenue from telecommunication services to drop slightly as a percentage of total revenue in 2021.

Revenue from financial services which consist primarily of lending services, business funding options, deposit products, cash settlement services, trade finance, foreign currency control, bank cards, payroll projects, merchant acquiring and investment services provided by MTS Bank, comprised 6.8%, 6.2% and 2.6% of our total revenues in 2020, 2019 and 2018, respectively. We expect banking service revenues to increase as a percentage of our total operating revenue due to strengthening of MTS Bank's position in the retail segment, as a result of designing of and offering suitable and attractive financial services to our customers.

Sales of Goods

Sales of goods primary consist of the sale of handsets and accessories and sales of software products and as a percentage of total revenue comprised 14.0% in 2020, 13.3% in 2019, 14.3% in 2018. The decrease in both absolute terms and as a percentage of revenue in 2019 as compared to 2018 is attributable to a decrease in our share of handsets retail market. We expect that sales of goods will remain stable as a percentage of total revenue, as smartphones and devices sales support the usage of our voice and data tariff plans. We do not subsidize handset sales in Russia.

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Cost of Services

Cost of telecommunication services mainly consist of interconnect and line rental charges payable to other operators for access to, and use of their networks, which are necessary in the course of providing service to our subscribers. Roaming expense which consist of amounts charged by other cellular operators under agreements for roaming services provided to our subscribers while outside our service area, is also a significant part of our cost of telecommunication services.

Cost of telecommunication services as a percentage of our total revenues represented 22.3% in 2020, 22.0% in 2019 and 22.1% in 2018.

Cost of financial services. Cost of financial services consists primarily of interests on loans received from banks and other financial institutions and commission fees. Cost of financial services as a percentage of our total revenues represented 2.3% in 2020 and 2019, and 1.0% in 2018.

Cost of goods

This type of expense includes primarily the cost of handsets and accessories sold to subscribers, the cost of SIM cards provided to our customers, the cost of software products sold and inventory obsolescence provision. Cost of handsets, accessories and software sold and SIM cards provided to customers as a percentage of our total revenues represented 12.8% in 2020, 12.5% in 2019, 13.1% in 2018.

Selling, general and administrative expenses

Our selling expenses comprise of all costs relating to the activities that do not directly increase the value of our products and services, but serve to secure sales. These costs consist primarily of:

•: expenses for advertising and promotion;
•: dealer commissions for the acquisition of new subscribers and cash collection; and
•: personnel, utilities and maintenance costs incurred in the area of sales.

In 2020, 2019 and 2018, selling expenses comprised 9.0%, 9.8% and 9.5% of our total revenue, respectively. The decrease of 0.8% of selling expenses in 2020 in comparison with 2019 related to cost optimization due to COVID-19 outbreak. The slight increase of selling expenses in 2019 compared to 2018 was mainly attributable to increase of advertising and marketing costs and personnel costs as a result of acquiring new companies and expansion of the Group.

We retain some degree of flexibility to increase or decrease these expenses in any given period based on our requirements, strategy and the general economic environment.

For the structure of our dealer commissions please see "Item 4. Information on Our Company—B. Business Overview—Mobile Operations—Sales and Marketing—Sales and Distribution."

Our general and administrative expenses comprise of expenses attributable to the core administrative functions that cannot be allocated directly to the production or selling process. These consist primarily of:

•: personnel costs;
•: office maintenance expenses and rental of administrative premises;
•: consulting expenses;
•: taxes other than income taxes, e.g. property taxes;
•: billing and data processing expenses; and

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•: other expenses of administrative nature.

General and administrative expenses as a percentage of our total revenues represented 8.8%, 9.3% and 9.0% in 2020, 2019 and 2018, respectively. The decrease of 0.5% in the financial year 2020 compared to 2019, as well as the decrease of selling expenses, was mainly attributable to cost optimization due to the global pandemic situation. The slight increase of 0.3% in general and administrative expenses in 2019 compared to 2018 related to raise in personnel costs related to acquisition of new companies and a number of employees growth. We expect that general and administrative expenses as a percentage of our revenue will slightly increase in 2021.

Sundry Operating Income/Expenses

Our sundry operating income/expenses include:

•: operating share of associates' profit;
•: impairment of financial assets;
•: impairment for goodwill and long-lived assets; and
•: other operating expenses such as gain/losses on disposal of property, plant and equipment and intangible assets as well as any gain/losses resulting from stock-taking.

Sundry operating income/expenses as a percentage of our total revenues represented 1.3%, (0.9)% and (1.0)% as of December 31, 2020, 2019 and 2018, respectively. The increase of sundry operating expenses in 2020 compared to 2019 was mainly attributable to increase the allowance of expected credit losses (ECL) for bank deposits and loans to customers because of a higher expected credit risk due to COVID-19 outbreak. The slight decrease of sundry operating income in the financial year 2019 compared to 2018 was mainly attributable to increase of bank provisions as a result of portfolio growth.

Depreciation of Property, Network Equipment and Amortization of Intangible Assets

Our expense for depreciation of property, network equipment and amortization of intangible assets as a percentage of our total revenues was equal to 20.3% for the year ended December 31, 2020 as compared to 20.2% of our total revenues for the year ended December 31, 2019. Our expense for depreciation of property, network equipment and amortization of intangible assets comprised 21.1% of our total revenues for the year ended December 31, 2018.

We expect our expense for depreciation of property, network equipment and amortization of intangible assets to remain relatively stable in 2021.

Finance costs

Our finance costs for 2020 decreased by RUB 5,282 million, or 11.2%, to RUB 42,084 million from RUB 47,366 million for the year ended December 31, 2019. The decrease was primarily attributable to effect arisen on the derecognition of debt agreements (RUB 2,220 million), improved loan terms and decreased Central Bank of Russia key rate (RUB 1,930 million). Our finance costs for 2019 increased by RUB 10,381 million, or 28.1%, to RUB 47,366 million from RUB 36,985 million for the year ended December 31, 2018. The increase was primarily attributable to effect arisen on the modification of debt agreements driven by improved loan terms (RUB 5,601 million) and increased indebtedness (RUB 4,779 million).

We expect our finance costs to slightly increase as a percentage of our revenue in 2021.

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Provision for Income Taxes

Taxation on income of Russian companies is regulated by a number of laws, government decrees and implementation instructions.

The income tax base for Russian companies is defined as income received from sales of goods and services reduced by the amount of expenses incurred in such operations with certain exceptions.

The statutory income tax rate in Russia is 20%. The effective tax rate applicable to our consolidated group in the year ended December 31, 2020, 2019 and 2018 was 20.8%, 23.0% and 19.7%, respectively. The effective tax rate differs from the statutory rate mainly as a result of prior period tax effects, change in tax rates, decrease items not liable for tax purposes, decrease in withholding tax on distributed profits from subsidiaries.

Certain Factors Affecting our Financial Position and Results of Operations

COVID-19 impact

The COVID-19 outbreak has limited impact on our results of operations. Our operating income was negatively impacted by COVID-19 outbreak, mainly due to the loan impairment provisions at MTS bank and impairment of our e-ticketing business. In addition, our revenue growth was partly offset by decrease in revenue from roaming services due to a steep decline in international roaming.

For more information, see "Item 3. Key Information—Risk Factors—The outbreak of COVID-19 may have a material adverse effect on our business, financial condition, results of operations and prospects."

Currency fluctuations

A majority of our capital expenditure and a part of our liabilities and borrowings are either denominated in or tightly linked to the U.S. dollar or euro. A significant part of our financial liabilities, denominated in U.S. dollars, excluding trade accounts payables, is hedged through financial instruments with various banks. We conduct operations within the Russian Federation and Armenia, and we are therefore subject to currency fluctuations. The local currencies of these countries fluctuate significantly against the U.S. dollar and euro. As a result of the fluctuations we may incur significant currency exchange gains/losses which may adversely affect our profit for the year.

Inflation

Our financial position and results of operations as reflected in our audited consolidated financial statements included elsewhere in this document have been influenced by inflation.

The Russian economy has been characterized by the following rates of inflation:

Year

2013	6.5	%
2014	11.4	%
2015	12.9	%
2016	5.4	%
2017	2.5	%
2018	4.3	%
2019	3	%
2020	4.9	%

Source: Federal State Statistics Service.

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Inflation rate in Armenia in 2020 was estimated at 3.7%.

We expect inflation-driven increases in costs to put pressure on our margins. While we could seek to raise our tariffs to compensate for such increase in costs, competitive pressures may not permit increases that are sufficient to preserve operating margins. See "Item 3. Key Information—D. Risk Factors—Risks Relating to our Financial Condition—Inflation could increase our costs and adversely affect our results of operations."

Acquisitions

Our results of operations for the periods presented are significantly affected by acquisitions. Results of operations of acquired businesses are included in our audited consolidated financial statements for the periods after their respective dates of acquisition. See "Item 3. Key Information—A. Selected Financial Data."

Below is a list of our major acquisitions during 2020-2018.

Company	Type	Date of acquisition

2020
Stopol Auto	Auto parts and multimedia devices	June 2020	100	%	321
					321



2019
MTS Bank	Banking services	February 2019	39.48	%	11,409
Objedinennye Russkie Kinostudii (Kinopolis)	Movie complex	April 2019	100	%	2,042
RIKT	Regional fixed-line operator	June 2019	97.4	%	360
Narodnoje property complex	Administrative properties	August 2019	100	%	329
MTS Bank	Banking services	December 2019	4.46	%	1,446

					15,586



2018
Kulturnaya Sluzhba ("Ponominalu.ru")	Ticket distribution	January 2018	78.2	%	321
Moskovskaia Direktciia Teatralno-Kontcertnyh i Sportivno-Zrelishchnyh Kass ("Ticketland.ru")	Ticket distribution	February 2018	100	%	3,190
MTS Bank	Banking services	July 2018	28.6	%*	8,273
Progressivniye Technologii	Fixed-line services	August 2018	100	%	395
Dekart	Administrative properties	October 2018	100	%	5,242	**
Serebryaniy Bor	Administrative properties	December 2018	100	%	1,711
IT-Grad	Cloud services	December 2018	100	%	2,422

					21,554

*: Acquisition of 28.6% in MTS Bank in addition to the previously held stake of 26.6% allowed us to obtain control over the entity.
**: This amount includes VAT at tax rate of 18%.

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Results of Operations

Our management identified the following reportable segments: Russia convergent, Moscow fixed line and MTS Bank. See "—Segments."

Intercompany eliminations presented below consist primarily of sales transactions between segments conducted in the normal course of operations.

Financial information by reportable segments is presented below:

	Year Ended December 31,

	2020			2019			2018
Total revenues
Russia convergent		419,151			399,361			392,076
Moscow fixed line		40,430			38,851			38,846
MTS Bank		36,101			31,185			12,072
HQ and other		25,013			24,282			20,947
Eliminations⁽¹⁾		(25,769	)		(23,074	)		(17,703	)

Total revenues as reported		494,926			470,605			446,238



Costs of services, excluding depreciation and amortization shown separately below, and cost of goods
Russia convergent		158,470			148,378			144,329
Moscow fixed line		13,219			11,632			11,754
MTS Bank		13,878			13,765			5,973
HQ and other		16,523			15,723			13,610
Eliminations⁽¹⁾		(16,665	)		(16,569	)		(12,854	)

Cost of services and cost of goods as reported		185,425			172,929			162,812



Sundry operating expenses/(income)⁽²⁾
Russia convergent		2,912			2,861			1,418
Moscow fixed line		(2,505	)		(6,109	)		(2,961	)
MTS Bank		10,020			4,001			397
HQ and other		(2,311	)		(4,850	)		(3,559	)
Eliminations⁽¹⁾		275			0,068			89

Sundry operating expenses/ (income) as reported		8,391			(4,029	)		(4,616	)



Selling, general and administrative expenses
Russia convergent		68,182			68,852			65,441
Moscow fixed line		6,345			6,578			6,491
MTS Bank		8,731			8,864			3,643
HQ and other		10,777			10,135			9,677
Eliminations⁽¹⁾		(6,052	)		(4,496	)		(2,770	)

Selling, general and administrative expenses as reported		87,983			89,933			82,482



Depreciation and amortization expenses
Russia convergent		88,072			83,980			82,456
Moscow fixed line		9,315			9,506			10,867
MTS Bank		1,248			1,082			547
HQ and other		3,976			3,801			3,516
Eliminations⁽¹⁾		(2,377	)		(2,174	)		(2,070	)

Depreciation and amortization expenses as reported		100,234			96,195			95,316



Operating profit
Russia convergent		101,515			95,290			98.432
Moscow fixed line		14,056			17,244			12,695
MTS Bank		2,224			3,473			1,512
HQ and other		(3,952	)		(527	)		(2,297	)
Eliminations⁽¹⁾		(950	)		97			(98	)

Operating profit as reported		112,893			115,577			110,244

(1): Represents the elimination of inter-company transaction results, primarily interconnect, roaming, rent of channels and telecommunications infrastructure.

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(2): For the purposes of this analysis "Sundry operating expenses/(income)" consist of allowance for doubtful accounts, impairment of non-current assets and goodwill, other operating expenses/(income), operating share of profit of associates and provision for investments in distressed banks.

Year Ended December 31, 2020 compared to Year Ended December 31, 2019

Revenues and cost of services and cost of goods

Consolidated revenues for the year ended December 31, 2020, increased by RUB 24,321 million, or 5.2%, to RUB 494,926 million from RUB 470,605 million for the year ended December 31, 2019. The principal reason for the growth was the large increase in revenue from telecommunication services (by RUB 14,985 million) attributable to the usage of voice and data tariffs by our subscribers. This was mainly attributable to the increase in mobile internet penetration, an increase in usage of smartphones by our subscribers, active 3G and LTE network expansion and the consequent improvement of the quality and uptake of value-added services. The growth was also attributable to an increase in in the volume of interconnect traffic consumed by the operators and growth in sales of handsets, accessories and software products by RUB 5,351 million, or 8,3%. Revenue from financial services added to the overall increase of consolidated revenue as it grew by RUB 3,985 million to RUB 33,297 million in 2020 from 29,312 in 2019. The increase of our consolidated revenues for the year ended December 31, 2020 was partly offset by decrease in revenue from roaming services by RUB 7,418 million which is attributable to the COVID-19 pandemic.

Consolidated cost of services and cost of goods for the year ended December 31, 2020 increased by RUB 12,496 million and amounted to RUB 185,425 million as compared to RUB 172,929 million for the year ended December 31, 2020 and comprised 37.5% and 36.7% as a percentage of consolidated revenues for the year ended December 31, 2020 and 2019, respectively. The increase in the consolidated cost of services and cost of goods for the year ended December 31, 2020 was supported by the growth in interconnect and line rental expenses by RUB 6,184 million due to an increase in the volume of traffic. Tremendous increase in device market led to the growth of handsets sales and the consequent increase in cost of handsets, accessories and software products by RUB 4,610 million.

Russia convergent revenues for the year ended December 31, 2020, increased by 5.0% to RUB 419,151 million from RUB 399,361 million for the year ended December 31, 2019. The increase in Russia convergent revenues in the year ended December 31, 2020, was primarily due to the growth in revenue from telecommunication services (RUB 16,039 million) which increased due to active promotion of mobile only and convergent tariff plans, significant volume of Internet traffic included and the constant quality improvement of services provided. Interconnect revenue increased by RUB 5,272 million due to the growth in volume of incoming traffic.

The decrease of our revenues from roaming fees of own subscribers by RUB 7,462 million in the year, ended December 31, 2020 was due to the COVID-19 pandemic.

The increase in device market led to the growth of handsets, accessories and software sales of Russia convergent by RUB 3,752 million. Russia convergent cost of services and cost of goods for the year ended December 31, 2020, increased by 6.8% to RUB 158,470 million from RUB 148,378 million for the year ended December 31, 2019. The increase in Russia convergent cost of services and cost of goods is attributable to the growth in interconnect and line rental expenses by RUB 5,214 million due to an increase in the volume of traffic and an increase in network maintenance expenses by RUB 2,709 million.

The overall increase in Russia convergent cost of services and cost of goods was partly offset by a decrease in roaming expenses by RUB 1,979 million which was caused by COVID-19 pandemic.

The increase in device market led to the growth of handsets, accessories and software sales of Russia convergent and consequent increase of cost of sales by RUB 3,755 million.

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Moscow fixed line revenues for the year ended December 31, 2020 increased slightly and amounted to RUB 40,430 million as compared to RUB 38,851 million for the year ended December 31, 2019.

Moscow fixed line cost of services and cost of goods for the year ended December 31, 2020 increased slightly and amounted to RUB 13,218 million from RUB 11,632 million for the year ended December 31, 2019.

MTS Bank revenues increased by RUB 4,916 million and amounted to RUB 36,101 million for the year ended December 31, 2020 and RUB 31,185 million for the year ended December 31, 2019. Financial service revenues as a percentage of our total revenues represented 6.8% in 2020 and 6.2% in 2019. The growth of revenue from financial services is attributable to the increase in the amount of users and expansion of MTS Bank clients portfolio.

MTS Bank cost of services increased by RUB 113 million and amounted to RUB 13,878 million for the year ended December 31, 2020 and RUB 13,765 million for the year ended December 31, 2019. Cost of banking services as a percentage of our total revenues represented 2.8% in 2020 and 2.9% in 2019.

Other countries and business activities revenues for the year ended December 31, 2020 as compared to the year ended December 31, 2019 remained relatively stable and amounted to RUB 25,013 million and RUB 24,282 million, respectively.

Other countries and business activities cost of goods for the year ended December 31, 2020 as compared to the year ended December 31, 2019 remained relatively stable and amounted to RUB 16,524 million and RUB 15,724 million, respectively.

Sundry operating expenses/(income)

Consolidated sundry operating expenses for the year ended December 31, 2020, increased by RUB 10,395 million in comparison with the previous year. We generated RUB 6,368 million expenses and RUB 4,027 million income for the year ended December 31, 2020 and 2019, respectively. These amounts comprised (1.3)% and 0.9% as a percentage of consolidated revenue for the year ended December 31, 2020 and 2019, respectively. The increase of consolidated sundry operating expenses in 2020 compared to 2019 was attribute to a number of reasons presented below, the main of which was the increase MTS Bank allowance of expected credit losses (ECL) due to the COVID-19 outbreak.

Russia convergent sundry operating expenses for the year ended December 31, 2020, increased slightly by 1.8% or RUB 51 million. We generated RUB 2,912 million and RUB 2,862 million expenses for the year ended December 31, 2020 and 2019, respectively. These expenses comprised 0.7% of Russia convergent revenues for the year ended December 31, 2020 and 2019.

Moscow fixed line sundry operating income for the year ended December 31, 2020, decreased by RUB 3,602 million to RUB 2,506 million from RUB 6,108 million for the year ended December 31, 2019. Moscow fixed line sundry operating income as a percentage of Moscow fixed line revenues decreased to 6.2% for the year ended December 31, 2020, from 15.7% for the year ended December 31, 2019. The main reason for the decrease year-over-year was gain recognized as a result of transaction with the sale of fixed assets and leaseback in 2019. See Note 32 to our audited consolidated financial statements for details.

MTS Bank sundry operating expenses for the year ended December 31, 2020, increased by RUB 6,018 million to RUB 10,020 million from RUB 4,002 million for the year ended December 31, 2019. Sundry operating expenses as a percentage of banking service revenues increased to 27.8% for the year ended December 31, 2020, from 12.8% for the year ended December 31, 2019. Such a significant increase in MTS Bank sundry operating expenses was caused by the increase in impairment loss of financial assets (bank deposits and loans to customers) related to COVID-19 outbreak.

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Other countries and business activities sundry operating income for the year ended December 31, 2020, decreased by RUB 516 million. We recognized income of RUB 4,334 million for the year ended December 31, 2020 and RUB 4,850 million for the year ended December 31, 2019. The decrease is mainly due to growth of expenses due to the expansion of our business.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses for the year ended December 31, 2020, decreased by RUB 1,950 million and amounted to RUB 87,893 million as compared to RUB 89,933 million for the year ended December 31, 2019 and comprised 17.8% and 19.1% as a percentage of consolidated revenues for the year ended December 31, 2020 and 2019, respectively.

Russia convergent selling, general and administrative expenses for the year ended December 31, 2020 decreased by RUB 670 million to RUB 68,182 million, or 16.3% of Russia convergent revenue, from RUB 68,852 million, or 17.2% of Russia convergent revenue, for the year ended December 31, 2019 mainly due to savings related to retail operations during COVID-19 pandemics.

Moscow fixed line selling, general and administrative expenses for the year ended December 31, 2020, decreased slightly by RUB 233 million, to RUB 6,345 million, or 15.7% of Moscow fixed line revenue, from RUB 6,578 million, or 16.9% of Moscow fixed line revenue, for the year ended December 31, 2019. The decrease is mainly attributable to the decrease in advertisement and marketing expenses for RUB 43 million and decrease in dealers commission for 72 million.

MTS Bank selling, general and administrative expenses for the year ended December 31, 2020, decreased slightly by RUB 133 million, to RUB 8,731 million, or 24.2% of MTS Bank revenue, from RUB 8,864 million, or 28.4% of MTS Bank revenue for the year ended December 31, 2019.

Other countries and business activities selling, general and administrative expenses for the year ended December 31, 2020, increased by RUB 641 million or 6.3% to RUB 10,775 million from RUB 10,135 million for the year ended December 31, 2019. Other countries and business activities selling, general and administrative expenses mainly increased due to effect of increase in payroll of sales and marketing personnel.

Depreciation and amortization expenses

Consolidated depreciation and amortization of property, network equipment, customer base, license costs, right-of-use assets, and other intangible assets for the year ended December 31, 2020, increased by 4.2% to RUB 100,234 million from RUB 96,195 million for the year ended December 31, 2019.

Russia convergent depreciation and amortization for the year ended December 31, 2020, increased by 4.9% to RUB 88,072 million from RUB 83,980 million for the year ended December 31, 2019 mainly due to additions of new assets.

Moscow fixed line depreciation and amortization for the year ended December 31, 2020 decreased by 2% and amounted to RUB 9,315 million as compared to RUB 9,506 million for the year ended December 31, 2019 due to disposal of property and equipment during 2020.

MTS Bank depreciation and amortization for the year ended December 31, 2020, amounted to RUB 1,248 million showing an increase of 15.4% as compared to RUB 1,082 for the year ended December 31, 2019.

Other countries and business activities depreciation and amortization for the year ended December 31, 2020, increased by 4.6% to RUB 3,975 million from RUB 3,801 million for the year ended December 31, 2019.

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Operating profit

Consolidated operating profit decreased by RUB 2,684 million, or 2.3%, to RUB 112,893 million in the year ended December 31, 2020 from RUB 115,577 million in the year ended December 31, 2019. The decrease was mainly attributable to lower income from Russia convergent, Moscow fixed line and MTS Bank as well as decrease of other countries and business activities operating loss.

Russia convergent operating profit for the year ended December 31, 2020 increased by RUB 6,225 million, or 6.5%, and totaled to RUB 101,515 million against RUB 95,290 million for the year ended 2019. Russia convergent operating profit grew as a percentage of Russia convergent revenues to 24.2% for the year ended December 31, 2020, from 23.9% for the year ended December 31, 2019. The increase was mainly attributable to the growth in revenue from telecommunication services which increased due to active promotion of mobile only and convergent tariff plans, significant volume of Internet traffic included and the constant quality improvement of services provided.

Moscow fixed line operating profit for the year ended December 31, 2020 decreased by RUB 3,188 million, or 18.5%, and totaled to RUB 14,056 million against RUB 17,244 million for the year ended December 31, 2019. Moscow fixed line operating profit decreased as a percentage of Moscow fixed line revenue to 34.8% for the year ended December 31, 2020 from 44.4% for the year ended December 31, 2019. The decrease related to the gain recognized in the previous year ended December 31, 2019 as a result of transaction with the sale of fixed assets and leaseback and several cost optimization initiatives.

MTS Bank operating profit for the year ended December 31, 2020 decreased by RUB 1,249 million, or 36.0%, and totaled to RUB 2,224 million against RUB 3,473 million for the year ended 2019. MTS Bank operating profit decreased as a percentage of MTS Bank revenue to 6.2% for the year ended December 31, 2020 from 11.1% for the year ended December 31, 2019. The decrease was caused by the increase in impairment loss of financial assets (bank deposits and loans to customers) related to COVID-19 outbreak.

Other countries and business activities operating loss for the year ended December 31, 2020, increased by RUB 4,472 million, or 1040.0%, and totaled to RUB 4,902 million from RUB 430 million for the year ended December 31, 2019 as a result of growth of expenses due to the expansion of our business.

Finance costs

Consolidated finance costs for the year ended December 31, 2020, decreased by RUB 5,282 million, or 11.2%, to RUB 42,084 million from RUB 47,366 million for the year ended December 31, 2019. The decrease was primarily attributable to effect arisen on the derecognition of debt agreements (RUB 2,220 million), improved loan terms and decreased Central Bank of Russia key rate (RUB 1,930 million).

Non-operating share of the profit of associates and joint ventures

Non-operating share of the profit or loss of associates and joint ventures for the year ended December 31, 2020 decreased by RUB 3,223 million to an income of RUB 273 million compared to an income of RUB 3,496 million for the year ended December 31, 2019. The decrease is primarily attributable to the gain on sale of equity investment in OZON of RUB 3,837 million recognized in 2019 and increase in profit of other individually insignificant associates in the year ended December 31, 2020.

Other non-operating expenses/(income), net

Consolidated other non-operating income for the year ended December 31, 2020, was RUB 3,064 million, compared to the expenses of 7,821 million for the year ended December 31, 2019. The loss of

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RUB 15,646 million was mainly attributable to the weakening of the Russian ruble against U.S. dollar and euro during the year ended December 31, 2020. The gain of RUB 26,029 million was mainly attributable to the effect of our operations with derivatives.

Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2020 increased by 2.9% to RUB 16,126 million from RUB 15,667 million for the year ended December 31, 2019 mainly due to increase in income before provision for income taxes, partly offset by decrease in the effective tax rate. The effective tax rate decreased to 20.8% in the year ended December 31, 2020, from 23.0% in the year ended December 31, 2019 mainly as a result of change in income tax rates of subsidiaries (decrease of income tax rate to 18% from 20% in Armenia), prior period tax effects, decrease in withholding tax on distributed profits from subsidiaries (decrease of tax rate on dividends to 0% in Armenia) and decrease in expenses not deductible for tax purposes.

Profit attributable to the non-controlling interest

Profit attributable to the non controlling interest for the year ended December 31, 2020 decreased by RUB 197 million, or 23.0%, and amounted to RUB 661 million compared to profit attributable to the non-controlling interest of RUB 858 million for the year ended December 31, 2019. The decrease was caused by overall decrease in MGTS profit for the year.

Profit attributable to the Group

Profit attributable to the Group for the year ended December 31, 2020, increased by RUB 7,171 million, or 13.2%, to RUB 61,412 million, compared to RUB 54,241 million for the year ended December 31, 2019. Profit as a percentage of revenues was 12.4% in the year ended December 31, 2020, and 11.5% in the year ended December 31, 2019. The increase was mainly caused by the other non-operating income arising on derivatives in the amount of RUB 21,740 million, partly offset by the foreign exchange loss in the amount of RUB 15,646 million.

Year Ended December 31, 2019 compared to Year Ended December 31, 2018

Revenues and cost of services and cost of goods

Consolidated revenues for the year ended December 31, 2019, increased by RUB 24,367 million, or 5.5%, to RUB 470,605 million from RUB 446,238 million for the year ended December 31, 2018. The principal reason for the growth was the acquisition of MTS Bank in the second half of 2018 which added revenue in the amount of RUB 17,778 million to our consolidated revenues, the large increase in the usage of voice and data tariffs by our subscribers (by RUB 8,403 million), which was mainly attributable to the increase in mobile internet penetration, an increase in usage of smartphones by our subscribers, active 3G and LTE network expansion and the consequent improvement of the quality and uptake of value added services. The growth was also attributable to an increase in interconnect revenue by RUB 2,513 million due to an increase in the volume of traffic. The increase of our consolidated revenues for the year ended December 31, 2019 was partly offset by decrease in revenue from roaming services by RUB 4,673 million.

The decrease in our revenues from roaming fees of own subscribers by RUB 4,373 million in the year ended December 31, 2019 due to the cancellation of the fees for incoming calls within the MTS network.

Consolidated cost of services and cost of goods for the year ended December 31, 2019 increased by RUB 10,117 million and amounted to RUB 172,929 million as compared to RUB 162,812 million for the year ended December 31, 2018 and comprised 36.7% and 36.5% as a percentage of consolidated

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revenues for the year ended December 31, 2019 and 2018, respectively. The acquisition of MTS Bank in the second half of 2018 added RUB 6,100 million to the growth of our consolidated cost of services and cost of goods for the year ended December 31, 2019. The increase in the consolidated cost of services and cost of goods for the year ended December 31, 2019 was also supported by the growth in interconnect and line rental expenses by RUB 3,992 million due to an increase in the volume of traffic.

Russia convergent revenues for the year ended December 31, 2019, increased by 1.9% to RUB 399,361 million from RUB 392,076 million for the year ended December 31, 2018. The increase in Russia convergent revenues in the year ended December 31, 2019, was primarily due to the growth in revenue from voice and data tariffs (RUB 8,295 million) which increased due to active promotion of such tariffs, significant volume of Internet traffic included and the constant quality improvement of services provided. Increase in interconnect revenues by RUB 2,694 million was driven by the growth in volume of incoming traffic.

The decrease of our revenues from roaming fees of own subscribers by RUB 4,359 million in the year ended December 31, 2019 was due to the cancellation of the fees for incoming calls within the MTS network.

Russia convergent cost of services and cost of goods for the year ended December 31, 2019, increased by 2.8% to RUB 148,378 million from RUB 144,329 million for the year ended December 31, 2018. The increase in Russia convergent cost of services and cost of goods is attributable to the growth in interconnect and line rental expenses by RUB 4,237 million due to an increase in the volume of traffic and an increase in salaries and social contribution expenses by RUB 1,509 million.

The overall increase in Russia convergent cost of services and cost of goods was partly offset by a decrease in roaming expenses by RUB 1,353 million which was caused by cost optimization initiatives.

Moscow fixed line revenues for the year ended December 31, 2019 remained stable and amounted to RUB 38,851 million as compared to RUB 38,846 million for the year ended December 31, 2018.

Moscow fixed line cost of services and cost of goods for the year ended December 31, 2019 remained stable and amounted to RUB 11,632 million from RUB 11,754 million for the year ended December 31, 2018.

MTS Bank revenues increased by RUB 19,113 million and amounted to RUB 31,185 million for the year ended December 31, 2019 and RUB 12,072 million for the period from the date of MTS Bank consolidation to December 31, 2018. Banking service revenues as a percentage of our total revenues represented 6.6% in 2019 and 2.7% in 2018.

MTS Bank cost of services increased by RUB 7,792 million and amounted to RUB 13,765 million for the year ended December 31, 2019 and RUB 5,973 million for the period from the date of MTS Bank consolidation to December 31, 2018. Cost of banking services as a percentage of our total revenues represented 2.9% in 2019 and 1.3% in 2018.

Other countries and business activities revenues for the year ended December 31, 2019 increased by RUB 3,333 million to RUB 24,282 million from RUB 20,949 million for the year ended December 31, 2018 due to acquisition of new companies, newly acquired contracts.

Other countries and business activities cost of goods for the year ended December 31, 2019 increased to RUB 15,724 million from RUB 13,611 million for the year ended December 31, 2018 due to acquisition of new companies, newly acquired contracts.

Sundry operating expenses/(income)

Consolidated sundry operating income for the year ended December 31, 2019, decreased by RUB 588 million in comparison with the previous year. We generated income of RUB 4,027 million

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and RUB 4,615 million for the year ended December 31, 2019 and 2018, respectively. These amounts comprised 0.9% and 1.0% as a percentage of consolidated revenue for the year ended December 31, 2019 and 2018, respectively. The primary reasons for the changes year-over-year are described below.

Russia convergent sundry operating expenses for the year ended December 31, 2019, increased by 104% or RUB 1,443 million to RUB 2,862 million from RUB 1,418 million for the year ended December 31, 2018 and comprised 0.7% and 0.4% of Russia convergent revenues for the year ended December 31, 2019 and 2018, respectively. The increase is mainly attributable to the growth of accruals of the allowance for doubtful debts related to other receivables.

Moscow fixed line sundry operating income for the year ended December 31, 2019, increased by RUB 3,147 million to RUB 6,108 million from RUB 2,961 million for the year ended December 31, 2018. Moscow fixed line sundry operating income as a percentage of Moscow fixed line revenues increased to 15.7% for the year ended December 31, 2019, from 7.6% for the year ended December 31, 2018. The principal reason for the increase was gain recognized as a result of transaction with the sale of fixed assets and leaseback. See Note 32 to our audited consolidated financial statements for details.

MTS Bank sundry operating expenses for the year ended December 31, 2019, increased by RUB 3,605 million to RUB 4,002 million from RUB 397 million for the year ended December 31, 2018. Sundry operating expenses as a percentage of banking service revenues increased to 12.8% for the year ended December 31, 2019, from 3.3% for the period from the consolidation date (July 5, 2018) to December 31, 2018.

Other countries and business activities sundry operating income for the year ended December 31, 2019, increased by RUB 1,292 million. We recognized income of RUB 4,850 million for the year ended December 31, 2019 and RUB 3,558 million for the year ended December 31, 2018. The increase in sundry operating income in other countries and business activities is mainly due to the recognition of the Group's share of the profit of the associate MTS Belarus, which increased compared to 2018.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses for the year ended December 31, 2019, increased by RUB 7,450 million and amounted to RUB 89,933 million as compared to RUB 82,482 million for the year ended December 31, 2018 and comprised 19.1% and 18.5% as a percentage of consolidated revenues for the year ended December 31, 2019 and 2018, respectively.

Russia convergent selling, general and administrative expenses for the year ended December 31, 2019 increased by RUB 3,412 million to RUB 68,852 million, or 17.2% of Russia convergent revenue, from RUB 65,441 million, or 16.7% of Russia convergent revenue, for the year ended December 31, 2018. Sales and marketing expenses increased by RUB 2,724 million mainly due to increase in advertisement and marketing expenses for RUB 1,521 million and increase in sales and marketing payroll for RUB 770 million. Utilities and maintenance expenses remained stable, while general and administrative expenses slightly increased by RUB 688 million.

Moscow fixed line selling, general and administrative expenses for the year ended December 31, 2019, increased slightly by RUB 87 million, to RUB 6,578 million, or 16.9% of Moscow fixed line revenue, from RUB 6,491 million, or 16.7% of Moscow fixed line revenue, for the year ended December 31, 2018. The increase is mainly attributable to the taxes other than income tax increase due to the low base effect of property tax in 2018.

MTS Bank selling, general and administrative expenses for the year ended December 31, 2019, increased by RUB 5,221 million, to RUB 8,864 million, or 29.7% of MTS Bank revenue, from RUB 3,643 million, or 30.7% of MTS Bank revenue, for the period from the date of MTS Bank's consolidation to December 31, 2018.

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Other countries and business activities selling, general and administrative expenses for the year ended December 31, 2019, increased by 4.7% to RUB 10,135 million from RUB 9,678 million for the year ended December 31, 2018. Other countries and business activities selling, general and administrative expenses mainly increased due to expenses of newly acquired companies and expenses related to the expansion of activities of e-ticket business.

Depreciation and amortization expenses

Consolidated depreciation and amortization of property, network equipment, customer base, license costs, right-of-use assets, and other intangible assets for the year ended December 31, 2019, increased only by 0.9% to RUB 96,195 million from RUB 95,316 million for the year ended December 31, 2018.

Russia convergent depreciation and amortization for the year ended December 31, 2019, increased by 1.8% to RUB 83,980 million from RUB 82,456 million for the year ended December 31, 2018 mainly due to additions of new assets.

Moscow fixed line depreciation and amortization for the year ended December 31, 2019 decreased by 13% and amounted to RUB 9,506 million as compared to RUB 10,867 million for the year ended December 31, 2018 due to disposal of property and equipment during 2019.

MTS Bank depreciation and amortization for the year ended December 31, 2019, amounted to RUB 1,082 million. For the period from the date of MTS Bank's consolidation to December 31, 2018 depreciation and amortization amounted to RUB 547 million.

Other countries and business activities depreciation and amortization for the year ended December 31, 2019, increased by 8% to RUB 3,801 million from RUB 3,515 million for the year ended December 31, 2018.

Operating profit

Consolidated operating profit grew by RUB 5,333 million to RUB 115,577 million in the year December 31, 2019 from RUB 110,244 million in the year ended December 31, 2018. The increase was mainly attributable to higher income from sale of our fixed assets as well as decrease of other countries and business activities operating loss.

Russia convergent operating profit for the year ended December 31, 2019 decreased by 3,142 and totaled to RUB 95,290 million against RUB 98,432 million for the year ended 2018. Russia convergent operating profit fell as a percentage of Russia convergent revenues to 23.9% for the year ended December 31, 2019, from 25.1% for the year ended December 31, 2018. The decrease was mainly attributable to the growth of expenses for RUB 903 million in connection with provision for doubtful debt, and increase in advertisement and marketing expenses for RUB 1,660 million.

Moscow fixed line operating profit for the year ended December 31, 2019, increased by 35.8% to RUB 17,244 million from RUB 12,695 million for the year ended December 31, 2018. Moscow fixed line operating profit increased as a percentage of Moscow fixed line revenue to 44.4% for the year ended December 31, 2019 from 32.7% for the year ended December 31, 2018. The strong increase related to the gain recognized as a result of transaction with the sale of fixed assets and leaseback and several cost optimization initiatives.

MTS Bank operating profit for the year ended December 31, 2019, increased by 129.7% to RUB 3,473 million from RUB 1,512 million for the period from consolidation date July 5, 2018 to December 31, 2018. MTS Bank operating profit decreased as a percentage of MTS Bank revenue to 11.1% for the year ended December 31, 2019 from 12.5% for the period from the consolidation date (July 5, 2018) to December 31, 2018.

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Other countries and business activities operating loss for the year ended December 31, 2019, decreased by 82.0% to RUB 430 million from RUB 2,395 million for the year ended December 31, 2018 due to the acquisition of new companies and newly acquired contracts.

Finance costs

Consolidated finance costs for the year ended December 31, 2019, increased by RUB 10,381 million, or 28.1%, to RUB 47,366 million from RUB 36,985 million for the year ended December 31, 2018. The increase was primarily attributable to effect arisen on the modification of debt agreements driven by improved loan terms (RUB 5,601 million) and increased indebtedness (RUB 4,779 million).

Non-operating share of the profit of associates and joint ventures

Non-operating share of the profit or loss of associates and joint ventures for the year ended December 31, 2019 increased by RUB 4,405 million to an income of RUB 3,496 million compared to a loss of RUB 909 million for the year ended December 31, 2018. The increase is primarily attributable to the gain on sale of equity investment in OZON of RUB 3,837 million and increase in profit of other individually insignificant associates in the year ended December 31, 2019.

Other non-operating expenses/(income), net

Consolidated other non-operating expenses for the year ended December 31, 2019, were RUB 7,821 million, compared to the income of 425 million for the year ended December 31, 2018. The gain of RUB 10,705 million was mainly attributable to the strengthening of the Russian ruble against U.S. dollar and euro during the year ended December 31, 2019. The loss of RUB 17,435 million was mainly attributable to the effect of our operations with derivatives.

Provision for income taxes

Consolidated provision for income taxes for the year ended December 31, 2019 increased by 2.1% to RUB 15,667 million from RUB 15,345 million for the year ended December 31, 2018 mainly due to increase in the effective tax rate. The effective tax rate increased to 23.0% in the year ended December 31, 2019, from 19.7% in the year ended December 31, 2018 mainly as a result of increase in earnings distributions from subsidiaries, and as a result of increase in expenses not deductible for tax purposes.

Profit attributable to the non-controlling interest

Profit attributable to the non-controlling interest for the year ended December 31, 2018 increased by 79.6% and amounted to RUB 984 million compared to profit attributable to the non-controlling interest of RUB 548 million for the year ended December 31, 2017 as a result of an increase in ownership share in our associate MTS Bank from 26.6% to 55.4% and obtaining control over the entity.

Profit attributable to the Group

Profit attributable to the Group for the year ended December 31, 2018, dropped by RUB 49,194 million, or 87.8%, to RUB 6,848 million, compared to RUB 56,042 million for the year ended December 31, 2017. Profit as a percentage of revenues was 1.4% in the year ended December 31, 2018, and 12.7% in the year ended December 31, 2017. The decrease in the amount of RUB 59,050 relates to provision for fines and penalties with respect to the previously disclosed investigation into our former operations in Uzbekistan, see also "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and

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results of operations" regarding recent suspension of our services in Uzbekistan and "Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—7. Litigation—Uzbekistan." Net of the provision effect profit attributable to the Group increased by RUB 9,856 million or 17.6% and totaled to RUB 65,898 million. The positive effect of new IFRS standards implementation amounted to RUB 2,334 million.

B. Liquidity and Capital Resources

Our borrowings consist of notes and bank loans. Our bank loans consist of ruble- denominated borrowings totaling approximately RUB 221.1 billion as of December 31, 2020. We repaid approximately RUB 162.7 billion of indebtedness in 2020. As of December 31, 2020, the total amount available to us under our credit facilities amounted to RUB 229.9 billion. We had total indebtedness of approximately RUB 580.1 billion as of December 31, 2020, including lease obligations, compared to approximately RUB 498.6 billion as of December 31, 2019. Our total finance costs for the years ended December 31, 2020, 2019 and 2018, were RUB 42,084 million, RUB 47,366 million and RUB 36,985 million, net of amounts of interest capitalized, respectively. See Note 9 to our audited consolidated financial statements for a description of our finance costs.

Capital Requirements

We need capital to finance the following:

•: capital expenditures, consisting of purchases of property, plant and equipment and intangible assets;
•: acquisitions;
•: repayment of debt and related interest payments;
•: changes in working capital; and
•: general corporate activities, including dividends.

We anticipate that capital expenditures, acquisitions, repayment of long-term debt and dividends will represent the most significant uses of funds for several years to come.

Our cash outlays for capital expenditures in 2020, 2019 and 2018 were RUB 97,838 million, RUB 91,736 million and RUB 99,568 million respectively. We expect to continue to finance most of our capital expenditure needs through our operating cash flows, and to the extent required, to incur additional indebtedness through borrowings or additional capital raising activities. Historically, a significant portion of our capital expenditures have been related to the installation and build-out of our network and expansion into new license areas. We expect that capital expenditures will remain a large portion of our cash outflows in connection with the continued installation and build-out of our network. In 2021 we expect capital expenditures to total to approximately RUB 100-110 bn including the effect from realized contracts with derivative instruments, as well as required investments under the Yarovaya Law. We plan to finance our capital expenditures primarily through operating cash flows, and to the extent necessary, through additional external financing. The actual amount of our capital expenditures for 2021 may vary depending on subscriber growth, demand and network development, as well as currency volatility, vendor terms and the availability of external financing. The capital expenditure estimate for 2021 excludes expenditures that may be made in connection with acquisitions.

In January 2018, the Group acquired a 78.2% ownership interest in Kulturnaya Sluzhba LLC ("KS"), operating under the trademark Ponominalu.ru. The purchase price comprised a cash payment, deferred payment due within 12 months from the acquisition date, and a contingent consideration to be paid to the sellers if agreed upon financial targets are met by KS. In May 2019 we exercised the option agreement and purchased 667 shares (10.9% stake) of Cubichall Holdings Ltd that allowed us to

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become the owner of 89.1% stake. In February 2018, the Group acquired a 100% ownership interest in Moskovskaia Direktciia Teatralno-Kontcertnyh i Sportivno-Zrelishchnyh Kass LLC ("MDTZK"), operating under the trademark Ticketland.ru. The purchase price comprised of both cash payment and deferred payment payable within 12 months from the acquisition date. These acquisitions allow the Group to enter the event ticketing market, whilst also broadening the Group's suite of digital services. In August 2018, the Group acquired a 99% ownership interest in science and production association Progressivniye Technologii CJSC, a provider of fixed-line services in the cities of Zhukovskiy and Anapa. The acquisition of Progressivniye Technologii allows the Group to strengthen its position in these local markets and benefit from the expected synergies. The purchase price comprised of cash payment and deferred payment. In December 2018, the Group acquired a 100% ownership interest in IT-Grad 1 Cloud LLC (IT-Grad), one of the largest cloud services providers on the Russian IaaS market. The acquisition allows the Group to strengthen its presence in the Russian cloud services market. The purchase price comprised of cash payment of RUB 1,515 million and a contingent consideration. The Group is bound to pay the contingent consideration of RUB 691 million in 8 months after the acquisition date and of RUB 249 million in 18 months after the acquisition date following certain conditions, including the transfer of rights on tangible and intangible assets. In October 2018, the Group acquired Dekart property complex from Sistema for a total consideration of RUB 5,242 million. The property complex comprises office facilities leased by the Group, subsidiaries of Sistema and other counterparties, parking premises and engineering networks and operates under management agreement with Business-Nedvizhimost, a subsidiary of Sistema. The acquisition enables the Group to optimize its rental expenses and enhance its investment property portfolio.

In July 2018, the Group increased ownership share in the Group associate MTS Bank from 26.6% to 55.4% and obtained control over the entity. Consideration paid to Sistema for additional share in MTS Bank amounted to RUB 8,273 million. In February 2019, we have increased our ownership in MTS Bank to 94.97% and later in December 2019 we acquired additional 4.46% stake for RUB 1.4 billion. As a result of these transactions, MTS' effective share in MTS Bank increased to 99.9% (including a 0.2% share in the bank held by our subsidiary PJSC MGTS and Bank's ownership of its own treasury shares).

In June 2019, the Group acquired a 97.4% ownership interest in JSC RIKT ("RIKT"), a fixed-line operator in the Kemerovo region, for cash consideration of RUB 360 million. This acquisition allows the Group to increase its market share in Kemerovo region. In October 2019, the Group finalized the mandatory share repurchase from minority shareholders of RIKT and increased its share in RIKT to 100%. In April 2019, the Group acquired JSC Objedinennye Russkie Kinostudii ("Kinopolis") from Business-Nedvizhimost, a subsidiary of Sistema, for total consideration of RUB 2,042 million. Kinopolis owns fully equipped movie complex in Saint Petersburg. In August 2019, the Group acquired Narodnoje property complex from Sistema for total consideration of RUB 329 million. The property complex comprises office facilities leased by the Group and hostel premises leased by a third party and operates under management agreement with Business-Nedvizhimost, a subsidiary of Sistema. The acquisition enables the Group to optimize its rental expenses and enhance its investment property portfolio. In November 2019, we acquired a 7.5% stake in JUST AI Limited, IT-company specialized in artificial intelligence technologies, machine learning and natural language processing. In December 2019, we acquired a 15.01% stake in SWIPGLOBAL Ltd, IT-company specialized in face recognition payment without using a smartphone or QR code. Both acquisitions are part of our CLV 2.0 strategy.

In February 2020, we purchased 51% stake in each of Achemar Holdings Limited and Clarkia Holdings Limited, owners of the operational companies of "Zelenaya Tochka" Group, fixed-line operator in multiple regions of Russia for RUB 1,370 million. The purchase of 51% stake was accounted as investment in joint venture, with a call and put option arrangement existing over another 49% of shares. In June 2020, the Group acquired a 100% ownership interest in LLC «Stopol Auto» and LLC «Koagent Rus» (jointly referred as «Stopol»), wholesalers of auto parts and multimedia

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devices. The purchase price constituted a cash payment of RUB 312 million paid in July 2020 and contingent consideration. This acquisition allows the Group to enter into the market of the smart multimedia systems for cars.

We also used cash provided by operating activities as well as external credit facilities to finance our capital expenditures. We plan to finance future acquisitions through operating cash flows and additional borrowings. We may continue to expand our business through acquisitions. Our cash requirements relating to potential acquisitions can vary significantly based on market opportunities.

We expect to refinance our existing debt when it becomes due. For scheduled maturities of debt principal outstanding as of December 31, 2020 see Note 25 of our audited consolidated financial statements. We generally use the proceeds from our financing activities for our corporate purposes and refinancing existing indebtedness.

Sistema, which currently controls 43.23% of our total charter capital (effective ownership of 50.02%) and consolidates our results in its financial statements, has a significant amount of outstanding debt and requires funds for debt service. These funds may come, in part, from dividends paid by its subsidiaries, including us.

On March 21, 2019, our Board of Directors approved new dividend policy which sets a minimum payout of RUB 28.0 per ordinary MTS share (RUB 56.0 per ADS) per calendar year. In determining actual dividends payout, we will consider a number of factors, including cash flow from operations, capital expenditures and debt position. The policy will cover 2019 - 2021. Payments will continue to be made on a semi-annual basis. The Group may take decisions on the dividend payout based not only on annual results but also on interim results for three, six or nine months of the fiscal year. Annual and interim dividend payments, if any, must be recommended by the Board of Directors and approved by the shareholders.

We anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in rubles and will be converted into U.S. dollars by the depositary and distributed to holders of ADSs, net of the depositary's fees, expenses, and applicable tax withholding. Accordingly, the value of dividends received by holders of ADSs will be subject to fluctuations in the exchange rate between the ruble and the dollar.

In accordance with Russian laws, earnings available for dividends are limited to profits determined under Russian statutory accounting regulations, denominated in Russian Rubles, after certain deductions.

As of December 31, 2020, 2019 and 2018 dividends payable were RUB 108 million, RUB 23.1 million and RUB 146.2 million, respectively, and included in the trade and other payables within the consolidated statement of financial position.

We generally intend to finance our dividend requirements through operating cash flows, and accordingly, our payment of dividends may make us more reliant on external sources of capital to finance our capital expenditures and acquisitions.

Capital Resources

We plan to finance our capital requirements through a mix of operating cash flows and financing activities, as described above. Our major sources of cash have been cash provided by operations and the proceeds of our U.S. dollar-denominated and ruble-denominated note issuances and loans. We expect that these sources will continue to be our principal sources of cash in the future.

The availability of financing is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, contractual restrictions and market conditions. We cannot assure

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you that we will be able to continue to obtain large amounts of financing in the future through debt or equity offerings, bank financings or otherwise.

As of December 31, 2020, our outstanding indebtedness consisted of the following notes and bank loans:

Notes

As of December 31, 2020, our notes consisted of the following:

	Currency

MTS International Notes due 2023	USD	5.00	%	33,091
MTS PJSC Notes due 2025	RUB	8.00	%	14,987
MTS PJSC Notes due 2022	RUB	7.70	%	14,980
MTS PJSC Notes due 2023	RUB	6.85	%	14,971
MTS PJSC Notes due 2027	RUB	6.60	%	14,971
MTS PJSC Notes due 2021	RUB	8.85	%	9,999
MTS PJSC Notes due 2026	RUB	7.90	%	9,998
MTS PJSC Notes due 2022	RUB	9.00	%	9,998
MTS PJSC Notes due 2021	RUB	7.10	%	9,997
MTS PJSC Notes due 2025	RUB	7.25	%	9,990
MTS PJSC Notes due 2022	RUB	6.45	%	9,988
MTS PJSC Notes due 2024	RUB	8.70	%	9,986
MTS PJSC Notes due 2022	RUB	5.50	%	9,984
MTS PJSC Notes due 2023	RUB	6.50	%	9,860
MTS PJSC Notes due 2024	RUB	8.60	%	7,488
MTS PJSC Notes due 2027	RUB	6.60	%	6,980
MTS PJSC Notes due 2022	RUB	8.40	%	4,994
MTS PJSC Notes due 2026	RUB	6.60	%	4,990
MTS PJSC Notes due 2031	RUB	7.50	%	891
Other				12
Total notes				208,155
Less: current portion				(20,813	)
Total notes, long-term				187,342

We have an unconditional obligation to repurchase certain MTS Notes at par value if claimed by the noteholders subsequent to the announcement of the sequential coupon. The dates of the announcement for each particular note issue are as follows:


MTS PJSC Notes due 2031		March 2021

Notes of the Group are subject to certain covenants limiting the Group's ability to create liens on properties, dispose assets, including cellular licenses in core Russian regions, issue guarantees and grant loans to the third parties, delay payments for the borrowings, merge or consolidate MTS PJSC with a third party or be a subject to unsatisfied judgments (excluding the total penalty under the agreements with the DOJ). If we fail to comply with these and the other covenants contained in the indentures, after certain notice and cure periods, the noteholders can accelerate the debt to be immediately due and payable.

Our ruble-denominated notes contain certain covenants limiting our ability to delist the notes from the quotation lists and delay coupon payments. We may from time to time seek to repurchase or redeem our outstanding notes through cash purchases and/or exchanges for new debt securities in open

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market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on market conditions, our liquidity requirements, contractual restrictions and other factors.

We were in compliance with our covenants as of December 31, 2020.

Bank loans

As of December 31, 2020, our loans from banks and other financial institutions consisted of the following:

	Maturity	Interest rate (actual at December 31, 2020)

*RUB-denominated:*
VTB	2024 - 2026	4.75% - 5.50%	129,091
Sberbank	2021 - 2024	5.99% - 10.00%	85,001
Subsidized loans⁽¹⁾	2021 - 2025	1.75% - 2.85%	1,845
Related party loans	2022 - 2024	4.25% - 8.70%	1,803
Other	2022 - 2025	Various	3,373

Total bank and other loans			221,113
Less: current portion			(13,312	)

Total bank and other loans, long-term			207,801

(1): See Note 3 for further information

See also Note 25 to our audited consolidated financial statements.

Bank loans and notes of the Group are subject to certain covenants limiting the Group's ability to create liens on properties, dispose assets, including cellular licenses in core Russian regions, issue guarantees and grant loans to the third parties, delay payments for the borrowings, merge or consolidate MTS PJSC with a third party or be a subject to unsatisfied judgments (excluding the total penalty under the agreements with the DOJ). We were in compliance with our loan covenants as of December 31, 2020.

The following table presents the aggregate scheduled maturities of debt principal outstanding as of December 31, 2020:



Payments due in the year ending December 31,
2021	35,262		25,244
2022	62,453		52,944
2023	66,263		39,457
2024	22,845		36,005
2025	28,525		91,692
Thereafter	39,845		15,072

Contractual undiscounted cash flows	255,193		260,414
Less: unamortized debt issuance costs	(244	)	—
Less: interest	(46,794	)	(38,374	)
Less: debt modification	—		(909	)
Less: subsidized interest rate effect	—		(18	)
Total debt	208,155		221,113

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In addition, we had lease obligations in the amount of RUB 150,814 million and RUB 155,308 million as of December 31, 2020 and 2019, respectively. The terms of our material lease obligations are described in Note 26 to our audited consolidated financial statements.

In addition, Sistema, which currently controls 43.23% of our total charter capital (effective ownership of 50.02%) and consolidates our results in its financial statements, is subject to various covenants in certain of its credit facilities which impose restrictions on Sistema and its restricted subsidiaries, including us, with respect to, among others, incurrence of indebtedness and liens. See "Item 3. Key Information—D. Risk Factors—Risks Relating to our Financial Condition—Indentures relating to some of our notes contain, and some of our loan agreements and Sistema's loan agreements contain, restrictive covenants, which limit our ability to incur debt and to engage in various activities."

Consolidated Cash Flow Summary

A summary of our cash flows and cash outlays were as follows:

	2020

	(amounts in million RUB)
Cash flows from:
Net cash provided by operating activities		155,507		106,652		154,390
Net cash used in investing activities		(81,133	)	(29,554	)	(78,389	)
Net cash used in financing activities		(27,360	)	(120,448	)	(25,924	)
Effect of exchange rate changes on cash and cash equivalents		385		(2,655	)	3,412

Net increase/(decrease) in cash and cash equivalents		47,399		(46,005	)	53,489



Cash outlays for:
Capital expenditures⁽¹⁾		(97,838	)	(91,736	)	(99,568	)
Acquisition of subsidiaries, net of cash acquired		(262	)	(2,052	)	(3,444	)
Disposal of subsidiaries, net of cash disposed		3,461		37,386		619
Cash payments for the acquisition of subsidiaries under common control and non-controlling interests		—		(15,312	)	(13,242	)
Cash inflow from sale and liquidation of associates		2,450		3,067		—

(1): Includes acquisitions of property, plant and equipment and intangible assets

For the year ended December 31, 2020 net cash provided by operating activities amounted to 155,507 million, a decrease of RUB 6,752 million or 6.3% year-over-year when excluding the one-time payment of RUB 55,607 million made in 2019 under the resolution with the U.S. DOJ and settlement with the SEC. The decrease was mainly driven by disposal of our Ukraine operations, which contributed RUB 17,156 million of operating cash inflow for the year ended December 31, 2019. The negative impact of the disposal was partially offset by relatively lower tax payments and financing costs.

For the year ended December 31, 2020, the cash outflows generated by the Group investing activities increased by RUB 51,579 million or 174.5% and totaled to RUB 81,133 million. The increase was mainly attributable to cash receipts from sale of our Ukraine operations and lower net inflows from investing in deposits, traded debt securities and assets in trust management of Sistema-Capital, which declined by RUB 34,388 million and RUB 18,468 million, respectively. Our capital expenditures in the financial year 2020 increased by RUB 6,102 million due to increased USD/EUR exchange rates, which was partially offset by inflows from our FX related swap contracts.

For the year ended December 31, 2020, the cash outflows generated by the Group financing activities decreased by RUB 93,088 million or 77.3% from RUB 120,448 million to RUB 27,360 million mainly due to increase in borrowed funds. In 2020, net inflows relating to our borrowing activities grew by RUB 100,537 million. Further positive effect resulted from reduction of cash outflows related to

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acquisition of subsidiaries under common control by RUB 15,312 million. The dividends paid increased by RUB 22,418 million due to special dividends distributed on sale of our Ukraine operations.

For the year ended December 31, 2019, net cash provided by operating activities was RUB 106,652 million, a decrease of 30.9% from the year ended December 31, 2018. The decrease in amount of RUB 55,607 million related to payment of fines and penalties under investigation into former operations in Uzbekistan. The remaining increase in amount of RUB 7,869 million or 5.1% was partially driven by MTS Bank activities, which contributed RUB 10,513 million of the increase.

Net cash used in investing activities for the year ended December 31, 2019 totaled to RUB 29,554 million, a decrease of 62.3% in comparison with 2018. Positive effect from proceeds related to sale of our Ukraine operations and share in Ozon in 2019 amounted to RUB 37,386 million and RUB 3,000 million, respectively. In addition, our capital expenditures declined by RUB 7,835 million (last year we invested RUB 7,559 million to acquire data center Avantage). We also spent RUB 5,188 million less on acquisition of subsidiaries and associates in 2019. The negative impact from cash flows related to our swap contracts came to RUB 9,351 million.

Net cash used in financing activities for the year ended December 31, 2019 increased by RUB 94,524 million or 364.6.2%, and totaled to RUB 120,448 million. The increase was mainly driven by cash flows related to our debt. We repaid RUB 108,641 million more of our debt than in 2018. At the same time proceeds from loans and issuance of notes were by RUB 12,365 million higher than in 2018.

Liquidity

As of December 31, 2020, we had total cash and cash equivalents of RUB 85,405 million (RUB 66,933 million in rubles, RUB 10,597 million in U.S. dollars, RUB 6,433 million in euros, RUB 431 million in Turkmenistan manat, RUB 87 million in Ukrainian hryvnias and RUB 924 million in other currencies). In addition, as of December 31, 2020, we had short-term investments of RUB 23,434 million, mostly in form of investments in mutual funds and debt securities as well as deposits. We also had RUB 229,855 million available under existing credit facilities as of December 31, 2020. For a description of our outstanding external financing, see Note 25 to our audited consolidated financial statements.

As of December 31, 2020, we had a working capital deficit of RUB 66,260 million compared to a deficit of RUB 153,869 million as of December 31, 2019. The decrease primarily related to decrease of current portion of our debt by RUB 37,621 million as well as increase of cash and cash equivalents by RUB 47,355 million. We expect to repay all our debts as they become due from our operating cash flows or through re-financings. We believe that our operating cash flows, together with our plans for external financing, will provide us with sufficient funds for our present requirements.

Russian law requires that dividends can only be paid in an amount not exceeding net profits as determined under Russian accounting standards, denominated in rubles, after certain deductions. In addition, dividends may only be paid if the value of the company's net assets is not less than the sum of the company's charter capital, the company's reserve fund and the difference between the liquidation value and the par value of the issued and outstanding preferred stock of the company, if any, as determined under Russian accounting standards. Our profit for the year under Russian accounting standards for the years ended December 31, 2020 and 2019 that was distributable under Russian legislation amounted to RUB 61,622 million and RUB 91,088 million respectively.

Credit Rating Discussion

Our credit ratings impact our ability to obtain short- and long-term financing and the cost of such financing. In determining our credit ratings, the rating agencies consider a number of factors, including

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our operating cash flows, total debt outstanding, commitments, interest requirements, liquidity needs and availability of liquidity. Other factors considered may include our business strategy, the condition of our industry and our position within the industry and the strategy, activity and/or credit rating of Sistema. Although we understand that these and other factors are among those considered by the rating agencies, each agency might calculate and weigh each factor differently. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—The controlling shareholder has a possibility to determine certain decisions of our governing bodies."

Accounting Policies

Please refer to notes in our audited consolidated financial statements included elsewhere in this document.

Recent Accounting Pronouncements

Please refer to note 2 in our audited consolidated financial statements included elsewhere in this document.

C. Research and Development, Patents and Licenses, etc.

Not applicable.

D. Trend Information

Sales

Our mobile subscriber base in Russia and Armenia decreased to 80.6 million subscribers as of December 31, 2020 from 81.3 million subscribers as of December 31, 2019. We expect our consolidated subscriber base to remain stable in 2021 as a result of continued marketing and advertising activity. We expect growth in the long term due to increased use of IoT (M2M) devices. We anticipate our consolidated revenues will remain stable in 2021 mainly based on growth in development of our broadband business and convergent services and growth in sales of handsets and accessories.

Average monthly minutes per subscriber in Russia increased and amounted to 397 minutes in 2020 as compared to 385 minutes in 2019. We expect an increase in megabytes per subscriber due to our efforts aimed at stimulating data usage.

Our subscriber base in Armenia remained stable and amounted to 2.15 million subscribers in 2020. We expect the growth of competition in these markets may, in turn, lead to decreasing tariffs, the addition of lower-value mass market subscribers and macroeconomic trends calling for "save mode."

Russia is the largest market for us, both in terms of subscribers and revenue. In 2020, the underlying developments within this market remained generally positive and included high mobile penetration, strong demand for mobile services and increased consumption of data services, especially remote or online services. We focused our efforts to develop new competencies in the digital economy amid the global epidemic of COVID-19. We expect growth of business activity in Russia to continue throughout 2021.

We expect a challenging operating environment in 2021 due to continued macroeconomic and market volatility in the countries where we operate, increasing competition and significant changes in the mobile retail market in Russia. We also experienced significant exchange rate volatility and depreciation of local currencies in the countries where we operate against the U.S. dollar. The volatility and devaluation of local currencies against the U.S. dollar and/or euro may adversely affect our costs, including our non-cash foreign exchange loss due to the translation of our U.S. dollar- and euro-denominated debt. For further information on these risks, see "—A. Operating Results—Certain

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Factors Affecting our Financial Position and Results of Operations—Currency Fluctuations," and "Item 3. Key Information—D. Risk Factors—Risks Relating to our Financial Condition—Inflation could increase our costs and adversely affect our results of operations."

However, considering current macroeconomic conditions, our management believes that we will experience medium- and long-term growth. Due to the fact that the Russian market is highly penetrated, we believe the next wave of revenue growth for the overall market is likely to come from customers' increasing use of data and convergent services.

Moscow Fixed Line Operations

In 2020 total revenue of MGTS increased by 4.06%. MGTS revenue from broadband Internet services increased by 3.2%. The increase was due to the high quality of services, favorable tariffs and optimization of work, which led to the transition of subscribers from competitors. MGTS revenue from digital television services in 2020 increased by 4.7%. The growth is mainly in the B2C market, where MGTS is the leader in terms of growth rates and the number of TV subscribers. In 2021, we expect further growth in revenue from broadband Internet and digital television services, mainly due to the launch of new products / tariffs, the development of sales channels and an increase in the subscriber base.

In 2020, revenue from MGTS fixed line services decreased by 12.1%. In 2019, the subscriber base of B2C and B2B segments decreased by 5.2% and 7.1%, respectively. We expect a further decrease in MGTS revenue from fixed-line voice services due to a reduction in the subscriber base in 2021.

In 2020, MGTS' revenue from data services in B2G segment decreased by 9.7% due to the termination of some contracts with government customers. In 2021, we do not expect significant reduction of MGTS' revenue from data services in B2G segment.

Churn

We define churn as the total number of subscribers who cease to be a subscriber during the period (whether involuntarily due to non-payment or voluntarily), expressed as a percentage of the average number of our subscribers during that period.

A vast majority of our subscribers are prepaid subscribers with no contractual commitment to us. As a result, these subscribers have unfettered freedom to migrate between operators at their convenience. This freedom, combined with the relative ease with which subscribers can obtain SIM cards, contributes to churn and increasing penetration levels in the markets where we operate.

The churn rate is highly dependent on competition in our license areas and those subscribers who migrate as a result of such competition. Our churn rate in Russia remained relatively stable at around 33% for the year ended December 31, 2020. We continued to offer our popular tariff plans "SMART" (integrated voice and data bundles): "My Smart," "Tarifische" with unlimited Internet and "Our Smart." We expect that the possibility of choosing traffic bundles, connecting of converged services and other our activities will increase customer loyalty and allow us to keep churn rate under control in 2021.

Moscow Fixed Line Operations Churn

Reducing churn and increasing customer loyalty are among the most important areas of MGTS activity. The outflow speed is different for different services. Fixed-line voice services are a fundamental MGTS service. The outflow rate for MGTS fixed line services decreased by 1,3% to 5,8% during the year ended December 31, 2020, compared with 7,1% for the year ended December 31, 2019. MGTS intends to prevent an increase in the outflow rate for fixed line services in 2021 through fixed and mobile offer packages.

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The outflow level of MGTS broadband Internet access services decreased to 14,95% during the year ended December 31, 2020, compared with 15,12% for the year ended December 31, 2019. The outflow rate of MGTS digital television services decreased to 14,4% during the year ended December 31, 2020, compared with 16,8% for the year ended December 31, 2019. MGTS plans to increase customer loyalty in 2021 in order to strengthen its leading position in the market.

E. Off-balance Sheet Arrangements

We believe that our existing off-balance sheet arrangements do not have and are not reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Obligations under derivative contracts

We have entered into several cross currency interest rate swap agreements. These contracts are mainly designated to manage the exposure of changes in currency exchange rate. The contracts assumed periodic exchange of principal and interest payments from RUB denominated amounts to USD denominated amounts at a specified exchange rate. The rate was determined by the market spot rate upon issuance. Cross-currency interest rate swap contracts mature in 2023 - 2024.

F. Tabular Disclosure of Contractual Obligations

We have various contractual obligations and commercial commitments to make future payments, including debt agreements, lease obligations (including interest) and certain committed obligations. The following table summarizes our future obligations under these contracts due by the periods indicated as of December 31, 2020:

	Payments due by period

	Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
	(amounts in millions of RUB)
Contractual Obligations:⁽¹⁾
Long-term principal debt obligations⁽²⁾		34,431		182,031		161,957		52,000		430,419
Interest payments⁽³⁾		26,071		39,077		17,104		2,917		85,169
MTS Bank deposits and liabilities		170,274		2,012		86		—		172,372
Lease obligations		27,094		49,369		49,368		93,520		219,351
Purchase obligations⁽⁴⁾		35,286		19,520		15,302		1,385		71,493
Provision for decommissioning and restoration		182		—		—		4,754		4,936

Retirement and post-retirement obligation		175		18		14		51		258

Payments related to business acquisitions		931		—		—		—		931

Total		294,588		292,027		243,831		154,627		985,073

(1): Debt payments could be accelerated upon violation of covenants in our debt agreements.
(2): Does not include the amount of debt modification.
(3): Interest payments are calculated based on indebtedness as of December 31, 2020, scheduled maturities for the debt and interest rates effective as of December 31, 2020. We calculate interest payments on ruble-denominated notes until the dates of their respective put options, as described in Note 25 to our audited consolidated financial statements. Payments under interest rate swap agreements are excluded from the table as their amount and timing cannot be reasonably estimated.
(4): Includes future payments under purchase agreements to acquire property, plant and equipment, intangible assets, costs related thereto, inventory and services. We plan to finance our capital commitments through operating cash flow and additional borrowings.

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Key Biographies

Our directors and executive officers, their dates of birth and positions as of the date of this document were as follows:

Name	Year of Birth	Position

Felix V. Evtushenkov⁽³⁾	1978	Chairman of the Board of Directors, Non-Executive Director
Artem I. Zassoursky^(3)(4)(5)	1979	Non-Executive Director
Regina von Flemming^{(1)(2)(4)(5)(6)}	1965	Non-Executive Independent Director
Shaygan Kheradpir^(1)(2)(5)	1960	Non Executive Independent Director
Thomas Holtrop^(1)(2)(5)(6)	1954	Non-Executive Independent Director
Nadia Shouraboura⁽²⁾	1970	Non-Executive Independent Director
Konstantin Ernst⁽⁴⁾	1961	Non-Executive Independent Director
Valentin B. Yumashev^(1)(4)(6)	1957	Non-Executive Independent Director
Alexey V. Kornya	1975	Non-Executive Director
Vyacheslav K. Nikolaev	1970	President and Chief Executive Officer ("CEO")
Alexander E. Gorbunov	1967	Vice President, Strategy and Development—Member of the Management Board
Tatyana S. Chernysheva	1977	Vice President, Human Resources—Member of the Management Board
Inessa Galaktionova	1974	First Vice President, Telecommunications—Member of the Management Board
Ilya V. Filatov	1976	Vice President, Financial Services—Member of the Management Board
Dmitry A. Khomchenko	1976	Vice President, Information Technology—Member of the Management Board
Ruslan S. Ibragimov	1963	Vice President, Government Relations and PR—Member of the Management Board
Andrey M. Kamenskiy	1972	Vice President, Finance—Member of the Management Board and Chief Financial Officer ("CFO")
Igor N. Mishin	1962	Vice President, Media—Member of the Management Board
Dmitry A. Khalin	1971	Vice President, Cloud and Digital Solutions—Member of the Management Board
Alexey Barsegian⁽⁴⁾⁽⁵⁾	1973	Vice President, Corporate & Legal Affairs—Member of the Management Board
Sergey Belyakov	1980	Member of the Management Board, CEO of MTS Retail (RTC)
Alexander Khanin⁽³⁾	1987	Vice President, Artificial Intelligence—Member of the Management Board

(1): Member of the Remuneration and Nomination Committee.
(2): Member of the Audit Committee.
(3): Member of the Strategy Committee.
(4): Member of the Corporate Governance, Environmental and Social Responsibility Committee.
(5): Member of the Special Committee on compliance.

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(6): Member of the Special Committee of independent directors for the project of MTS's staff co-location.

Felix V. Evtushenkov was appointed Chairman of our Board of Directors in June 2019. He is the Chairman of our Strategy Committee of the Board of Directors. He is the Member of the Board of Sistema, Member of the Strategy Committee of Sistema, as well as the Chairman of the Board of the Sistema Charity Fund. He is also a Member of the Board of Directors of Redline Capital Partners S.A., BF "Sistema," OJSC "Element," SCP GROUP HOLDINGS SA and Sistema. From 2012 he has served as First Vice President at Sistema. Prior to that from 2011 to 2012, he served as First Vice President, Head of Core Assets. In 2008, he was appointed Vice President, Head of Consumer Assets, at Sistema. From 2000 to 2006 he worked as General Director, CJSC Sistema-Gals, and from 2006 to 2008 as President OJSC Sistema-Gals. Mr. Evtushenkov began his career as an Associate of the President in Sistema-Invest CJSC and Executive Director of the Industry Department at Sistema from 1999 to 2000.

Artem I. Zassoursky serves as one of our Directors since June 2017. He also is a Member of our Corporate Governance, Environmental and Social Responsibility Committee, Strategy Committee and Special Committee on compliance. Mr. Zassoursky is also a Vice President for Strategy and Development and a Member of the Management Board of Sistema. He was a Member of the Board of Directors of Business-Real Estate, Agroholding Steppe, Stream LLC, Sitroniks, Detskiy Mir, Insitel Services Private Limited, and now he is a Member of the Board of Directors of Medsi, Sistema Asia Capital PTE, LTD and Alium. Prior to joining Sistema, he held the position of General Director of Stream LLC, in 2013 he served as a Vice President of SMM OJSC. He held various senior positions at major media companies prior to 2013.

Regina von Flemming serves as one of our Directors since June 2015. She is also the Chairman of our Remuneration and Nomination Committee and Corporate Governance, Environmental and Social Responsibility Committee. She also is a Member of our Audit Committee, Special Committee on compliance and Special Committee of independent directors for the project of MTS's staff co-location of our Board of Directors. Ms. Von Fleming is Member of Board of Directors of PJSC "Sovcombank" serving as the Chairman of the audit committee and a Member of the ESG committee and also serves on the Board of Directors of the Russian Standard Charitable Foundation. She also served as the Chairman of the nominations and remunerations committee and as a Member of the audit committee of PJSC "Chelpipe" and Marketing Director at Weinstube in 2020. Previously, from 2016 to 2018, she was a Member of our Remuneration and Nomination Committee. Ms. von Flemming served as the CEO and Publisher of Axel Springer Russia from 2005 to 2015. Prior to that, she was the founder and owner of Flemming & Partner GmbH Berlin—Moscow, a consultancy providing services in the areas of crisis management, start up, interim management and restructuring, interim CEO in Russia mainly for German and Russian entities. From 2000 to 2003, she worked as Vice President of the "US Russia Investment Fund" at Delta Capital, one of the first private equity funds in Russia. Prior to joining Delta Capital, she held various management roles in German companies.

Shaygan Kheradpir serves as one of our Directors since June 2020. He is also the Member of our Remuneration and Nomination Committee, Audit Committee and Special Committee on compliance of the Board of Directors. He is the Member of the Board of Directors of MTN Group and R9B, Chairman of the Board of Directors Live Earth and President of Shaygan Technology Partners. Previously, from 2015 to 2018 Shaygan has been Chairman and CEO of Coriant. He also served as CEO of Juniper Networks in 2014 and from 2011 to 2014 he served as COO of Barclays Bank. Prior to that, from 2000 to 2010 he served in multiple roles, including as CTO and CIO in Telecom, at Verizon. Shaygan holds bachelor's, master's, and doctoral degrees in electrical engineering from Cornell University.

Thomas Holtrop serves as one of our Directors since February 2013. He is also the Chairman of our Audit Committee, Special Committee on compliance and Special Committee of independent directors for the project of MTS's staff co-location of our Board of Directors. He is also a Member of Remuneration and Nomination Committee. From 2005 to 2011, Mr. Holtrop served as a member of

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the Supervisory Board at Gruner & Jahr (Hamburg). Prior to that, from 2001 to 2004, he served as the President of T-Online International AG. Mr. Holtrop also served as a member of the Board of Directors at Deutsche Telecom AG from 2002 to 2004. Prior to that, he served as Vice President at American Express International Inc. and was a member of the Board of Directors at Bank 24 AG and Deutsche Bank 24 AG.

Nadia Shouraboura serves as one of our Directors since June 2020. She is also the member of our Audit Committee, Strategy Committee of the Board of Directors. Nadia is a Member of the Board of Directors of X5 Retail Group, Ferguson, Blue Yonder and Tosca. She was also a Member of the Board of Directors of Anko Retail from 2018 to 2020. Prior to that from 2012 to 2018 she was founder and CEO of Hointer. From 2004 to 2012 she served as the Vice President for Technology at Amazon and head of systems development at Exelon Power. Previously, from 1994 to 2001 she worked as a Senior Principal Consultant at Diamond Management & Technology. She began her career in 1989 as a robotics engineer at Robcad. Nadia holds a bachelor's degree from Moscow State University, a master's degree from the University of Tel Aviv, and a PhD in Mathematics from Princeton University.

Konstantin Ernst serves as one of our Directors since June 2020. He also is a Member of our Corporate Governance, Environmental and Social Responsibility Committee. Mr. Ernst is CEO of Channel One Russia. Konstantin was appointed Channel One CEO in 1999, having earlier served as Executive Producer from 1995. He holds a graduate degree in biology from St. Petersburg State University.

Valentin B. Yumashev serves as one of our Directors since June 2019. He is also a Member of our Remuneration and Nomination Committee, Corporate Governance, Environmental and Social Responsibility Committee and Special Committee of independent directors for the project of MTS's staff co-location of our Board of Directors. He is a Member of the Board and Advisor of the Boris Yeltsin Presidential Center Fund. He also serves as Advisor to the President of the Russian Federation on a pro bono basis. In 1997-1998, he served as the head of the Russian Presidential Administration. In 1996, he worked as a media relations advisor to the Russian president. From 1987 to 1995 he served in a series of leadership roles at Ogoniok magazine, including as General Director. Mr. Yumashev began his career in 1978 as a journalist at Moskovsky Komsomolets. Mr. Yumashev holds a degree in journalism from Lomonosov Moscow State University.

Alexey V. Kornya serves as one of our Directors since March 2018. He served as our President and CEO from March 2018 to March 2021. He was the Chairman of the Board of Directors of Mobile TeleSystems LLC until 2019 and now he is a Member of the Board of Directors of MTS Bank, MTS Media and Sistema Capital. Mr. Kornya is also a Chairman of the Board of Directors of RTC and a Member of the Board of Directors of Charity Fund Sistema since 2018. He is also serves as a Member of the Advisory Board of Amdocs. Mr. Kornya is a member of the GSMA Association. He also served as our Vice President for Finance, Investments, Mergers and Acquisitions—CFO from 2016. From July 2008, he served as our Acting Vice President for Finance and Investments. From March 2007 to December 2008, Mr. Kornya served as our Chief Financial Controler. He served as our Financial Planing and Analysis Director from November 2004 to March 2007 and as CFO of our Urals Macro-region branch from July 2004 to November 2004. Mr. Kornya joined MTS in July 2004 as MTS Financial Director in the Ural Federal District. Prior to joining MTS, Mr Kornya worked for North West Telecom and PwC Audit.

Vyacheslav K. Nikolaev serves as our President and CEO since March 2021. Prior to that he served as our First Vice President for Customer Experience, Marketing and Ecosystem Development since March 2020, and earlier served as our Vice President for Customer Experience and Marketing since August 2019. Before that he served as our Vice President for Marketing since July 2017. He is a Member of the Board of Directors of MTS Armenia, MTS Bank, MGTS, RTC, KS, MTDZK, Kinopolis and MTS Media. Mr. Nikolaev has been working for MTS since October 2004 and held

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various positions within the Group. Prior to joining MTS, he held various key positions in OOO Renaissance Capital—Financial Consultant and TRUST Investment Bank, OJSC.

Alexander E. Gorbunov serves as our Vice President for Strategy and Development since April 2018. Before that, he was a Member of our Board of Directors, and Deputy Chairman of our Board of Directors. In addition, Mr. Gorbunov serves as a Chairman of Board of Directors of Sistema Smart Technologies and a Member of the Board of Directors of YouDo. From 2011 until 2018 he served as Vice-President managing telecom assets of Sistema. From 2010 until 2011, Mr. Gorbunov served as Executive Vice President for development of telecommunication assets at Core Assets Business Unit of Sistema and from 2011 until 2015—as Executive Vice-President. From 2006 until 2010, he served as Vice President for Strategy and Development at Comstar. Prior to that, from 2005 to 2006, Mr. Gorbunov headed Corporate Development Department at Sistema.

Inesa Galaktionova serves as First Vice President for Telecommunications in August 2019, having earlier joined us in February 2019 as our Vice President for Sales and Customer Service. Ms. Galaktionova brings to our team extensive industry experience, deep domain expertise, and a laser-sharp focus on operational rigor, having held multiple senior executive roles at leading Russian companies, including as Deputy CEO of Russian Post from 2013 to 2019 and Chief Commercial Officer of Tele2 Russia from 2009 to 2013. She began her career at Philips, where she worked from 1996 to 2009, ascending to Chief Marketing Officer of the Russia & Central Asia region. Ms. Galaktionova is a Member of the Board of Directors of MTS Bank, MGTS, RTC, MTS Armenia, Cloud Retail LLC and Cloud Retail plus LLC.

Ruslan S. Ibragimov serves as our Vice President—Government Relations and PR since August 2019. He earlier served as Vice President for Corporate and Legal Affairs from 2008 to 2019 and has been a member of our Management Board since 2007. Mr. Ibragimov is a Member of the Managing Board of Big Data Association, Vice President of the Russian Corporate Counsel Association (RCCA) and Senior Director of the Association of Independent Directors. Mr. Ibragimov also serves as a Member of the Board of Directors of Vysshaya Shkola Publishers OJSC and Prosveshcheniye Publishers. Before that, he was a Chairman of the Management Board of the National Payments Council Association until 2018 and the Member of the Board of Directors of the Doctor Ryadom LLC until 2020. From February 2007 to January 2008, Mr. Ibragimov served as our Director—Chief Legal Counsel. He joined us in June 2006 and initially served as the Director for legal matters, as well as headed our Legal Department. Prior to joining us, Mr. Ibragimov was a member of the law firm Ibragimov, Kagan and Partners from July 2002 to June 2006. From 1996 to 2002, he served as Deputy General Director and Senior Partner at RSM Top-Audit, a tax and legal consulting firm. From 1992 to 1996, Mr. Ibragimov headed legal departments at various commercial banks.

Andrey M. Kamenskiy serves as our Vice President—Chief Financial Officer since April 2018. He is also a Member of the Board of Directors of Mobile TeleSystems LLC, MTS Bank, RTC, Sistema Capital and MTS Media. Prior to that, he served as Executive Vice President, Finance and Economics for Sistema since 2011. From 1997 to 2011, he held senior positions in finance in Trade House Perekrestok, San InBev and ING Bank (Eurasia).

Dmitry A. Khalin serves as our Vice President for Cloud and Digital Solutions since January 2020. He also is a Member of the Board of Directors of IT Grad and Nvision Group. In addition, he serves as an expert consultant on AI matters for the Russian Independent Directors Association. From 2007 through December 2019 he held a series of senior executive roles at Microsoft Russia, most recently from 2013 to 2019 as Chief Technology Officer (CTO) and General Manager of the Microsoft Russia Development Center, as well as leading the company's regional AI strategy. From 2009 to 2013 he headed Microsoft's SME and corporate sales efforts in Russia, and from 2007 to 2009 he served as Strategic Technologies Director. From 2006 to 2007 he worked as Marketing Director at Xerox Russia, having come from Microsoft where he worked as Enterprise Partner Group Manager from 1999 to

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2006. Prior to that he held roles in sales and customer support at DEC and Siemens, after beginning his career in 1994 as a programmer at Russia's Electronic Computing Research Center. In addition, he serves as an expert consultant on AI matters for the Russian Independent Directors Association.

Tatyana S. Chernysheva serves as our Vice President for Human Resources since November 2019. Previously she headed the leadership development practice at the Moscow office of Spencer Stuart International. In 2016-2017, she launched multiple independent projects in HR consulting. In 2016, she worked at LSR Group as Deputy CEO for Human Resources and Organizational Development. From 2004 to 2016, she held a series of HR Director roles at local offices of leading global companies, including Lamoda Group, Alliance Healthcare, Danone Group, and Johnson&Johnson.

Ilya V. Filatov serves as our Vice President for Financial Services since August 2019. He also serves as CEO of MTS Bank. He is also a Member of the Board of Directors of RTC, East-West United Bank S.A. (EWUB), Sistema Capital, Cloud Retail LLC and Cloud Retail Plus LLC. Mr. Filatov joined MTS Bank in 2014 as First Deputy Chairman of the Management Board and was appointed the bank's chief executive in 2015. He earlier held a series of leadership positions at UralSib Bank from 2005 to 2014, including Deputy Chairman of the Management Board.

Dmitry A. Khomchenko serves as our Vice President for Information Technology since August 2019. He also is the Chairman of Board of directors STS JSC and the Chairman of the Supervisory Board of NVision Chech Republic. He has served as our Director of Information Technology since 2014. From 2015 to 2019 he concurrently worked as CEO of Sitronics Telecom Solutions (currently MTS IT), and since 2015 he has also been a member of the supervisory board of Nvision Czech Republic.

Igor N. Mishin serves as our Vice President for Media since September 2019. He serves as CEO and Member of the Board of Directors of MTS Media and Member of the Board of Directors of ?inopolis. He is also a Vice President of the Russian Academy of Television, Member of the European Film Academy, Science & Technology Laureate of the Russian Federation, and Chairman of the Board of Trustees of the Outdoor Film Festival, the world's largest open-sky movie watching event. From 2014 to 2016 he served as General Director of TNT, one of Russia's most-watched TV networks. Prior to that he worked as a President of A-One Concept Media, Inc., General Producer for TV Service CJSC (Muz-TV music channel) and General Director of Amedia.

Alexey Barsegian serves as our Vice President for Corporate & Legal Affairs since September 2019. He is also the member of our Corporate Governance, Environmental and Social Responsibility Committee and Special Committee on compliance. Before that, from 2018 to 2019 he served as Executive Director of Legal Affairs of Sistema and earlier, from 2013 to 2018 as Executive Vice President for Legal Affairs of Sistema. Previously, from 2011 to 2013 he served as Director of Legal Department in Sistema. He began his career as a legal consultant, working at firms including EM & Co. and Padva & Partners. Alexey holds an MBA from the American Institute of Business & Economics as well as a law degree from Moscow State Institute of International Relations (MGIMO).

Sergey Belyakov serves as CEO and Member of the Board of Directors of MTS's retail operations (RTC) since April 2020. From 2016 to 2019 he served as CEO of DIXY Group. Prior to that, from 2014 to 2016 he served as Vice President of Merkuriy Holding Company, and from 2012 to 2014 he served as Director of Investor Relations at EVRAZ. From 2002 to 2012, Sergey held a series of senior roles at Interros Group and in the commercial banking sector. He graduated from Moscow State Institute of International Relations.

Alexander Khanin serves as Vice President for Artificial Intelligence since October 2020. He is also a head of the MTS Artificial Intelligence Center. In addition, he is a co-founder and Chairman of the Board of Directors at VisionLabs. He is also the member of our Strategy Committee of the Board of Directors.

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All members of our Board of Directors were elected at the annual shareholders' meeting on June 24, 2020 and will serve until their terms expire at the next annual shareholders' meeting, which will take place in June 2021. The business address of each of our directors is 4 Marksistkaya Street, Moscow 109147, Russian Federation.

B. Compensation of Directors and Senior Management

We accrued compensation to our Directors and Senior Management during 2020 for services in all capacities provided to us in an aggregate amount of approximately RUB 1,309 million, including social contributions of RUB 214 million. This amount comprised RUB 690 million in base salaries and RUB 619 million in bonuses paid pursuant to a bonus plan and in other monetary compensations for the management and directors. Bonuses are awarded annually based on our financial performance.

Our management and directors are also entitled to cash-settled and equity-settled share-based payments. Related compensation accrued in 2020 amounted to RUB 694 million, including social contributions amounted to RUB 79 million.

Members of the Board of Directors who are independent non-executive directors receive annual base compensation of $300,000 (RUB 21.6 million) or $400,000 (RUB 28.8 million) in the case of an independent non-executive director who serves as Chairman of the Board of Directors.

Independent non-executive directors who also serve on Board committees receive additional compensation as follows. Members of the Strategy Committee, Remuneration and Nomination Committee, Audit Committee and Corporate Governance receive additional annual compensation of $30,000 (RUB 2.2 million), and a director serving as Chairman of the foregoing committees receives additional annual compensation of $50,000 (RUB 3.6 million). Members of special committees of the Board of Directors, which are committees established for undertaking preliminary consideration and making recommendations to the full Board in relation to certain assigned matters, receive additional annual compensation of $30,000 (RUB 2.2 million), and a director serving as Chairman of a special committee receives additional annual compensation of $50,000 (RUB 3.6 million). Members of all other Board committees receive additional annual compensation of $25,000 (RUB 1.8 million) and a director serving as Chairman of any other Board committee receives additional annual compensation of $30,000 (RUB 2.2 million).

Independent non-executive members of the Board of Directors are also eligible for remuneration in the form of shares. The number of shares to be transferred to each non-employee Director based on the results of the corporate year shall be determined as the quotient obtained by:

•: the ruble equivalent of $100,000 (RUB 7.2 million) calculated according to the exchange rate established by the CBR for the date of the annual meeting of shareholders by the end of the corporate year divided by the share price in rubles being the weighted average price of the share for the last 30 calendar days preceding the annual meeting of shareholders, during which the trading was held on the Moscow Exchange.

The aggregate amount of compensation received by an independent non-executive director (including annual base compensation and remuneration for performance of additional duties for serving as a Board committee member should not exceed $400,000 (RUB 28.8 million) and for serving as Chairman of the Board of Directors should not exceed $500,000 (RUB 36.1 million). In the event of early termination of a director, such director receives a pro rata share of the base, committee and bonus compensation based on the amount of time the director served on our Board.

We provide all of our directors with professional liability insurance and reimburse them for all documented expenses incurred in connection with their attendance at Board meetings and other expenses.

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C. Board Practices

Board of Directors

Members of our Board of Directors are elected by a majority vote of shareholders at the annual shareholders' meeting using a cumulative voting system. Directors are typically elected by the annual meeting of shareholders for one year until the next annual meeting of shareholders and may be re-elected an unlimited number of times. The Joint Stock Companies Law requires that companies with more than 10,000 holders of voting shares have a board of directors consisting of not less than nine members. Our Board of Directors currently consists of nine members. The Board of Directors has the authority to make overall management decisions for us, except those matters reserved to the shareholders. Planned meetings of the Board of Directors shall be held periodically when needed, but at least 2 (two) times a quarter. See "—B. Compensation of Directors and Senior Management" for a description of the compensations for the members of our Board of Directors.

Audit Committee

The members of our Audit Committee are appointed by the Board of Directors and all members of the Committee must be the independent directors. The current members are Thomas Holtrop, Regina Dagmar Benedicta von Flemming, Shaygan Kheradpir and Nadia Shouraboura, all of whom are independent members of the Board of Directors. Mr. Thomas Holtrop serves as the Chairman of the Audit Committee. The Audit Committee is primarily responsible for the integrity of our financial statements; overseeing our risk management, internal control system and corporate governance system, including reviewing certain RPT and IPT transactions overseeing our internal control system; overseeing our accounting and financial reporting processes and the internal and external audits of our financial statements; compliance system, compliance with the Code of Business Conduct and Ethics of MTS PJSC; recommending the appointment and compensation of the independent auditors to the Board of Directors; overseeing the performance of the auditors; reviewing issues raised by the auditors, management and/or Board of Directors and, as required, making recommendations to the Board of Directors; resolving matters arising during the course of audits; and since February 25, 2015 exercises functions related to ethics matters.

According to the bylaws, the Audit Committee shall convene with our external auditors at least four times a year, but may convene more frequently if the Audit Committee chooses to do so.

Remuneration and Nomination Committee

Our Remuneration and Nomination Committee consists of four members appointed by the Board of Directors. The current members are, Shaygan Kheradpir, Thomas Holtrop, Valentin Yumashev, and Regina Dagmar Benedicta von Flemming , who serves as the Chairman of the Remuneration and Nomination Committee. The Remuneration and Nomination Committee is primarily responsible for developing a remuneration structure and compensation levels for management executives.

According to the bylaws, the Remuneration and Nomination Committee shall be convened by the Chairman of the Remuneration and Nomination Committee, at his sole discretion, or at the suggestion of any member of this committee, a member of the Board of Directors or our President.

President

Our President is elected by the Board of Directors for a term of three years and can be re-elected for an unlimited number of terms. The rights, obligations and the times and amounts of payment for the President's services are determined by a contract between him and us, as represented by our Chairman or by a person authorized by our Board of Directors. The President is responsible for day to day management of our activities, except for matters reserved to our shareholders or the Board of

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Directors and the Management Board. The President reports to the shareholders' meeting and to the Board of Directors and is responsible for carrying out decisions made by the shareholders and by the Board of Directors and the Management Board.

On March 1, 2018, the Board of Directors has elected Alexey Kornya as our President and CEO for three years effective March 13, 2018. In March 2021, the Board of Directors has elected Vyacheslav Nikolaev, the first vice-president of MTS for customer experience, marketing and ecosystem development, as new President from March 13, 2021.

Management Board

In October 2006, we revised our charter to establish a new governing body called the Management Board. The Management Board is an executive body, which oversees certain aspects of our ongoing activities. The overall number of the Management Board members is approved by the Board of Directors at the proposal of the President with each member being elected by the Board upon nomination by the President. Each Board member is elected for a three-year period and can be reelected an unlimited number of times.

The President is the Chairman of the Management Board. Currently our Management Board consists of 14 members.

Disclosure Committee

In April 2007, we established an advisory body called the Disclosure Committee. The Disclosure Committee supervises our compliance with disclosure standards in connection with all public information regarding us. These disclosure standards are based on principles of timeliness, accuracy and completeness. Members of the Disclosure Committee may be nominated by various divisions of MTS, willing to have representatives in the Disclosure Committee. Members are appointed by the President. Andrey M. Kamensky, our CFO is the Chairman of the Disclosure Committee. Currently, our Disclosure Committee consists of seven members, three of whom are officers of the company.

Auditing Commission

Our Auditing Commission supervises our financial and operational activities. Members of the Auditing Commission are nominated and elected by our shareholders at annual meetings of shareholders. A director may not simultaneously be a member of the Auditing Commission. As of the date of this document, our Auditing Commission has three members:

•: Irina R. Borisenkova, who holds the position of Chief Accountant—Managing Director, Finance and Investment Complex, Sistema;
•: Natalia A. Mikheeva, who holds the position of Director for internal control and audit of MTS; and
•: Andrey Poroh, who holds the position of the Vice president for internal control and audit of Sistema JSFC.

The members of our Auditing Commission serve until their terms expire at the next annual shareholders' meeting, which will take place in June, 2021.

Audit Committee Financial Expert

Our Board of Directors has determined that Thomas Holtrop is an "audit committee financial expert" as defined in Item 16A of Form 20 F. Mr. Holtrop is "independent" as defined in Rule 10A 3 under the Exchange Act and current New York Stock Exchange listing rules applicable to us. For a description of Mr. Holtrop's experience, please see "Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Key Biographies."

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Code of Ethics

The current version of our Code of Ethics was adopted on October 19, 2018. Our Code of Ethics applies to all of our officers, directors and employees. The new Code of Ethics did not substantively alter any of its requirements as compared with the code of ethics that was in effect prior to the approval of the new Code of Ethics.

A copy of our Code of Ethics is available on our website at http://ir.mts.ru/.

Corporate Governance

We are required under the New York Stock Exchange listing rules to disclose any significant differences between the corporate governance practices that we follow under Russian law and applicable listing standards and those followed by U.S. domestic companies under New York Stock Exchange listing standards. This disclosure is posted on our website (http://ir.mts.ru/about-mts/corporate-governance/default.aspx). See also "Item 16G. Corporate Governance."

D. Employees

At December 31, 2020, we had 58,415 employees. Of our 56,590 employees in Russia, we estimate that 675 were executives; 17,867 were technical and maintenance employees; 21,518 were sales, marketing and customer service staff; and 16,530 were administration and finance staff. In addition, of the 56,590 employees in Russia, we estimate that 14,511 were employed in our retail unit.

As of December 31, 2020, 131 of our employees worked in Ukraine (in subsidiaries other than disposed in December 2019). Of these employees, we estimate that 4 were executives; 83 were technical and maintenance employees; 7 were sales, marketing and customer service staff; and 37 were administration and finance staff.

As of December 31, 2020, 23 of our employees worked in Turkmenistan. Of these employees, we estimate that 4 were executives; 2 were technical and maintenance employees; 1 was sales, marketing and customer service staff; and 16 were administration and finance staff.

As of December 31, 2020, 1,169 of our employees worked in Armenia. Of these employees, we estimate that 10 were executives; 131 were technical and maintenance employees; 705 were sales, marketing and customer service staff; and 323 were administration and finance staff.

As of December 31, 2020, 502 of our employees worked in other countries, such as Czech Republic and Belarus. Of these employees, we estimate that 18 were executives; 397 were technical and maintenance employees; 13 were sales, marketing and customer service staff; and 74 were administration and finance staff.

The following chart sets forth the number of our employees at December 31, 2020 and 2019:

	Years ended

	December 31, 2020		December 31, 2019
Russia		56,590		60,972
Ukraine		131		149
Turkmenistan		23		86
Armenia		1,169		1,189
Other		502		489

Total		58,415		62,885

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Our employees are not unionized, except for 1,277 employees of MGTS, who are members of trade unions. We have not experienced any work stoppages and we consider our relations with employees to be strong.

Objectives that we focus on in managing the human capital resources depend on current needs of our ecosystem. We expect to acquire new employees as a consequence of our regular acquisitions in line with the development of new products and services.

E. Share Ownership

As of March 15, 2021, we believe, that our directors, senior management and employees owned less than 1% of our outstanding common stock.

The following table sets forth information with respect to the beneficial ownership of our common stock as of March 15, 2021, by our current directors and executive officers. All shares of common stock have the same voting rights.

	Beneficial ownership as of March 15, 2021

Directors and Executive officers	Number		%⁽¹⁾
Ilya V. Filatov, Vice President, Financial Services—Member of the Management Board		3,051,022		0.17667	%
Alexey V. Kornya, Non Executive Independent Director		823,737		0.04770	%
Ruslan S. Ibragimov, Vice President, Government Relations and PR—Member of the Management Board		380,622		0.02204	%
Dmitry A. Khomchenko, Vice President, Information Technology—Member of the Management Board		173,062		0.01002	%
Vyacheslav K. Nikolaev, Executive Director, President and Chief Executive Officer ("CEO")		102,049		0.00591	%
Alexander E. Gorbunov, Vice President, Strategy and Development—Member of the Management Board		62,725		0.00363	%
Andrey M. Kamenskiy, Vice President, Finance—Member of the Management Board and Chief Financial Officer ("CFO")		60,402		0.00350	%
Regina von Flemming, Non Executive Independent Director		38,669		0.00224	%
Thomas Holtrop, Non Executive Independent Director		31,114		0.00180	%
Valentin B. Yumashev, Non Executive Independent Director		18,364		0.00106	%
Inessa Galaktionova, First Vice President, Telecommunications—Member of the Management Board		15,720		0.00091	%
Total		4,757,486		0.27548	%

(1): Percentage of beneficial ownership of each named director and executive officer is based on 1,726,956,979 ordinary shares outstanding as of March 15, 2021.

Our management is entitled to remuneration in the form of options granted to them for MTS ordinary shares, which will expire in a weighted average term of approximately 3 years. The transfer of such shares is probable and is subject to certain employment conditions. In 2020, options related to compensation accrued in the amount of RUB 694 million.

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The following table sets forth information with respect to our ordinary shares in the form of share options granted to our current directors and executive officers as of March 15, 2021. All shares of common stock have the same voting rights.

	Number of ordinary shares as of March 15, 2021

Directors and Executive officers	Number		%⁽¹⁾
Inessa Galaktionova, First Vice President, Telecommunications—Member of the Management Board		181,707		0.01052	%
Alexey V. Kornya, Non Executive Independent Director		154,597		0.00895	%
Alexander E. Gorbunov, Vice President, Strategy and Development—Member of the Management Board		154,114		0.00892	%
Andrey M. Kamenskiy, Vice President, Finance—Member of the Management Board and Chief Financial Officer ("CFO")		153,473		0.00889	%
Vyacheslav K. Nikolaev, Executive Director, President and Chief Executive Officer ("CEO")		153,289		0.00888	%
Ruslan S. Ibragimov, Vice President, Government Relations and PR—Member of the Management Board		147,272		0.00853	%
Igor N. Mishin, Vice President, Media—Member of the Management Board		110,359		0.00639	%
Dmitry A. Khomchenko, Vice President, Information Technology—Member of the Management Board		103,368		0.00599	%
Alexey Barsegian, Vice President, Corporate & Legal Affairs		83,243		0.00482	%
Tatyana S. Chernysheva, Vice President, Human Resources—Member of the Management Board		56,183		0.00325	%
Dmitry A. Khalin, Vice President, Cloud and Digital Solutions—Member of the Management Board		53,741		0.00311	%
Sergey Belyakov, Member of the Management Board, CEO of MTS Retail (RTC)		46,412		0.00269	%
Alexander Khanin, Vice President, Artificial Intelligence		19,542		0.00113	%
Total		1,417,300		0.08207	%

(1): Percentage of ordinary shares in the form of share options granted to each named director and executive officer is based on 1,726,956,979 ordinary shares outstanding as of March 15, 2021.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth, as of March 15, 2021, certain information regarding the beneficial ownership of our outstanding common stock. All shares of common stock have the same voting rights.

	Beneficial ownership as of March 15, 2021

Name	Number		Percentage
Sistema⁽¹⁾		634,674,257		36.75	%
Sistema Finance S.A.		8,674,112		0.50	%
STA⁽²⁾		220,467,234		12.77	%
ADS holders⁽³⁾		569,675,590		32.99	%
Other Public Float (including our directors and executive officers)⁽⁴⁾		293,465,786		16.99	%

Total⁽⁵⁾		1,726,956,979		100.00	%

(1): Vladimir P. Evtushenkov has a controlling interest in Sistema, and is considered under U.S. securities laws as the beneficial owner of our shares held by Sistema, Sistema Finance SA, and Sistema Telecom Activy ("STA").

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(2): STA is a limited liability company formed under the laws of Russia. Sistema owns 100% of STA, which became a holder of our 12.77% beneficial ownership after VAST LLC and Invest-Svyaz CJSC, the previous beneficial owners of this ownership interest, were merged into STA in 2010 and 2011, respectively.
(3): As of March 15, 2021, the total number of ADSs outstanding was 284,837,795, representing underlying ownership of 569,675,590 shares, or approximately 32.99% of our outstanding common stock. The shares underlying the ADSs are deposited with JPMorgan Chase Bank, formerly known as Morgan Guaranty Trust Company of New York and the local custodian is Sberbank of Russia.
(4): We believe that our directors and executive officers as a group own less than 1% of our shares.
(5): Excludes treasury shares, as described below.

Our subsidiaries, MGTS and Bastion, owned 7,569,230 and 159,284,022 of our ordinary shares, respectively, as of March 15, 2021.

As a result of series of buy-backs since 2016 Stream Digital LLC owned 104,165,997 of our shares as of March 15, 2021.

As of March 15, 2021, we held a total of 271,019,249 shares, 52,060,576 of which were held in the form of ADSs. These shares are excluded from the total number of shares presented in the table above.

Sistema's current effective ownership in us is 50.02%.

B. Related Party Transactions

Transactions with Sistema and its Affiliates

Sistema

In November 2009, the Group accepted a promissory note, issued by Sistema, as repayment of the loan principal and interest accrued to that date under an agreement with Sistema-Hals. The note was interest free and was repaid in fourth quarter of 2018.

In March 2019, the Group disposed of its 18.69% interest in the Group's associate OZON to Sistema for RUB 7,902 million. As of December 31, 2020 the balance of accounts receivable amounted to RUB 2,829 million.

At the end of October 2020, the Group sold 100% of NVision Group to Sistema and since November 2020 it has been a related party for the Group.

Business Nedvizhimost

In February 2015, and further in May 2015, the Group sold its 100% stake in Rent Nedvizhimost to Business Nedvizhimost, a subsidiary of Sistema, for RUB 8,500 million in total. As of December 31, 2019 and 2020 the balance of accounts receivable amounted to RUB 2,916 million and RUB 3,070 million, respectively. The amount as of December 31, 2020 is due before December 31, 2021 and bears interest of CBR Key rate + 1.5% per annum.

In December 2018, the Group sold its 40.26% stake in a mutual investment fund "Sistema-Rentnaya Nedvizhimost" to Business Nedvizhimost for RUB 450 million. At the reporting date the Group accounted for its remaining share in the joint venture in the amount of RUB 636 million.

In March 2019, in order to optimize the processes of real estate management, the Group sold a number of buildings with a carrying value of RUB 1,479 million to Business Nedvizhimost for the consideration of RUB 7,247 million (including VAT). The consideration will be paid by installments for 10 years at 9% per annum with the collateral in the form of disposed buildings granted to the buyer. At the same time, the Group entered into a number of agreements to lease spaces in the buildings sold for the period of up to 15 years.

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As a result of this transaction in 2019, the Group recorded rights of use assets in the amount of RUB 3,123 million, lease obligation in the amount of RUB 5,197 million and recognized gain in the amount of RUB 1,745 million as a part of "Other operating income, net" in consolidated statement of profit or loss in 2019.

Objedinennye Russkie Kinostudii

In April 2019, we acquired a 100% interest in Joint Stock Company Objedinennye Russkie Kinostudii, a management company of "Kinopolis" movie studio with its own movies production complex from Business Nedvizhimost, a subsidiary of Sistema, for RUB 2,042 million.

AB Safety

During the years ended December 31, 2018, 2019 and 2020, we purchased security services from AB Safety, subsidiary of Sistema, for the amount of RUB 324 million, RUB 299 million and RUB 321 million, respectively.

Koncel

During the years ended December 31, 2018, 2019 and 2020, we received expenses (income) from the scrap metal realizations minus the costs of dismantling services with Koncel, subsidiary of Sistema, for the total amount of RUB (1,141) million, RUB (3,328) million and RUB (2,134) million, respectively.

Segezha Group

During the years ended December 31, 2018, 2019 and 2020, we recognized revenue from the providing energy resources by MTS Energy and software supply with Segezha Group, subsidiaries of Sistema, for the amount of RUB 74 million, RUB 1,790 million and RUB 2,060 million, respectively.

Sitronics

During the years ended December 31, 2018, 2019 and 2020, we recognized revenue from internet services and video/images translation services with Sitronics, subsidiary of Sistema, in amount of RUB 1,195, RUB 1,018 million and RUB 1,204 million, respectively.

TelecomCapStroi

In 2018, 2019 and 2020 we entered into series of agreements with TelecomCapStroi, a subsidiary of Sistema and a major constructor of MGTS fixed line network. The costs of facilities constructed during the years ended December 31, 2019 and 2020 were RUB 83 million and RUB 565 million, respectively. As of December 31, 2019 and 2020 the total amount of advances paid to TelecomCapStroi, was RUB 2,319 million and RUB 2,396 million, respectively. The aggregate amount of contracts concluded but not yet executed is RUB 10,754 million including VAT as of December 31, 2021.

Yahont

In October 2019, we entered into agreements with Yahont, subsidiary of Sistema, for the data storage systems and related services supply. The equipment purchased will support further development of our network infrastructure, including implementation of the requirements of anti-terror laws (also known as "Yarovaya-Ozerov bundle of laws"), which became effective in Russia on July 1, 2018. During the years ended December 31, 2019 and 2020 we have purchased equipment for RUB 339 million and 6,266 million, respectively.

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Investments in certain subsidiaries and affiliates of Sistema

As of December 31, 2018, 2019 and 2020, we held investments in the share capital of certain subsidiaries and affiliates of Sistema amounting to RUB 149 million, RUB 149 million and RUB 202 million, respectively. Our main investments are in Sistema Venture Capital (former Sistema Mass Media (SMM)), in which we hold 2.356%, and the value of such investments as of December 31, 2018, 2019 and 2020, amounted to RUB 117 million.

Transactions with equity investees

MTS Bank

On July 5, 2018, we acquired the controlling stake in MTS Bank and thus it ceased to be a related party to the Group since the acquisition date.

We maintain certain bank accounts with MTS Bank, an associate of the Group. The interest accrued on the deposits and cash on current accounts for the period from January 1, 2018 till July 5, 2018, amounted to RUB 448 million and was included as a component of the line item "interest income" in our audited consolidated financial statements in 2018.

During the period from January 1, 2018 till July 5, 2018, we received revenues from mobile and call center services with MTS Bank amounting to RUB 1,271 million. In addition, during in the same period we received revenues from processing documents for bank cards issue and granting of consumer credits amounting to RUB 228 million (agency fees after deduction of cross-fines) and moreover, we incurred commission expenses (bank commission and commission for cash collection from subscribers) amounting to RUB 1,217 million.

East-West United Bank

We maintain certain bank accounts with East-West United Bank, a subsidiary of Sistema. As of December 31, 2018, December 31, 2019, and December 31, 2020 the Group's cash position at East-West United Bank amounted to RUB 938 million, RUB 282 million and RUB 321 million, respectively.

MTS Belarus

During the years ended December 31, 2018, 2019 and 2020, we recognized revenues from roaming agreements with MTS Belarus, our associate company, amounting to RUB 296 million, RUB 296 million and RUB 277 million, respectively. At the same time, during the years ended December 31, 2018, 2019 and 2020 we incurred roaming expenses with MTS Belarus amounting to RUB 104 million, RUB 87 million and RUB 92 million, respectively.

Accounts receivable and accounts payable

We had total accounts receivable of RUB 8,930 million, RUB 16,659 million and RUB 14,189 million, from, and total accounts payable of RUB 1,301 million, RUB 558 million and RUB 3,146 million to, related parties as of December 31, 2018, 2019 and 2020, respectively. We had total Bank deposits and liabilities of RUB 43,686 million, RUB 41,351 million and RUB 52,372 million from related parties as of December 31, 2018, 2019 and 2020. We do not have the intent or ability to offset the outstanding accounts payable and/or accounts receivable with related parties under the term of existing agreements with them. See Note 32 to our audited consolidated financial statements for details of our accounts payable and accounts receivable.

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C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

8.A.1-3. See Item 18.

8.A.4-6. Not applicable.

8.A.7. Litigation

Uzbekistan

In June 2012, the authorities of the Republic of Uzbekistan commenced audits of the financial and operating activities of MTS' wholly-owned subsidiary Uzdunrobita. Further various claims for violation of tax, antimonopoly and industry legislation were made against Uzdunrobita, which resulted in significant amounts of fines and penalties, revocation of all licenses and suspension of services. Fines and penalties amounted to approximately RUB 18,375 million payable in equal installments over eight months.

Considering the adverse impact of such circumstances on the Group's ability to conduct operations in Uzbekistan, the Group tested goodwill and other long-lived assets attributable to Uzbekistan for impairment upon first receiving notification of the investigations. As a result, an impairment loss on the long-lived assets in the amount of RUB 20,037 million was recorded in the consolidated statements of profit or loss for the year ended December 31, 2012. In 2013 these losses were assigned to discontinued operations.

In 2012, the Group filed a claim against the Republic of Uzbekistan in the ICSID, part of the World Bank Group, in Washington, D.C.

On April 22, 2013, the Tashkent Economic Court declared Uzdunrobita bankrupt and initiated a liquidation process. Uzdunrobita was later liquidated. As a result the Group lost control over the subsidiary and deconsolidated Uzdunrobita.

In July 2014, the dispute between MTS and the Republic of Uzbekistan was resolved. The parties signed the Settlement Agreement and according to its terms all mutual claims were eliminated. The Settlement Agreement is governed by English law and provides for resolution of any disputes arising out of the Settlement Agreement in the ICSID. ICSID has discontinued international arbitration proceedings between us and the Republic of Uzbekistan following the submission of a joint application by both parties.

The Republic of Uzbekistan established a legal entity, UMS, with such entity having no legal connection to the previously liquidated entity, Uzdunrobita. UMS was granted 2G, 3G and LTE licenses valid until 2029, and received frequencies, numbering capacity and other permits required for the launch of operations. On September 24, 2014, a 50.01% ownership interest in UMS was transferred to MTS by the State Unitary Enterprise Center of Radio Communications, Radio Broadcasting and

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Television on behalf of the Republic of Uzbekistan. We have also received certain guaranties in relation to the protection of any future investment in the Republic of Uzbekistan.

In March 2014, we received requests for the provision of information from the SEC and the DOJ relating to a currently conducted investigation of the our former subsidiary in Uzbekistan.

In July 2015, activities related to our operations in Uzbekistan have been referenced in a civil forfeiture complaints ("The Complaints"), filed by DOJ in the U.S. District Court, Southern District of New York (Manhattan), directed at certain assets of an unnamed Uzbek government official. The Complaints allege among other things that we and certain other parties made corrupt payments to the unnamed Uzbek official to assist their entering and operating in the Uzbekistan telecommunications market. The Complaints are solely directed towards assets held by the unnamed Uzbek official and none of our assets are affected by the Complaints.

In March 2019, we reached a resolution with the SEC and the DOJ relating with these investigations. We consented to the entry of the Order by the SEC. The United States District Court for the Southern District of New York approved the DPA entered by us and a plea agreement entered into our former subsidiary in Uzbekistan. Under the agreements with the DOJ and SEC, we agreed to pay a total of USD 850 million (RUB 59.1 billion as of December 31, 2018) to the United States, which was comprised of a criminal fine, criminal forfeiture and civil penalty. We provided a provision of USD 850 million (RUB 55.8 billion as of the date of accrual), which was recognized as a part of discontinued operations in our audited consolidated statement of profit or loss for the year ended December 31, 2018. In March 2019, the Group paid the total penalty of USD 850 million (RUB 55.6 billion as of the payment date).

Under the DPA and the Order, we agreed to appoint and in September 2019 appointed an independent compliance monitor. Pursuant to the DPA and the Order, the monitorship will continue for a period of three years starting from the appointment date, and the term of the monitorship may be terminated early or extended depending on certain circumstances, as ultimately determined and approved by the DOJ and SEC.

In March 2019, a proposed class action complaint on behalf of Shayan Salim and all other persons similarly situated has been filed in the United States District Court for the Eastern District of New York against MTS PJSC and certain of its managers. On 1 March 2021, US District Judge of Eastern District Court of New York granted MTS's motion to dismiss with prejudice and dismissed the complaint in full.

In December 2020, we received a request for information from the DOJ concerning certain historical transactions with a supplier of telecommunication and information technology. Currently, we are cooperating to provide information to the DOJ and the SEC responsive to the request.

For additional information please refer to Note 35 to our audited consolidated financial statements, "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The inability of our subsidiaries in the countries in which we are present to maintain control over their operations and assets may adversely affect our business, financial condition and results of operations" regarding recent suspension of our services in Uzbekistan and "—We are subject to anti-corruption laws in the jurisdictions in which we operate, including anti-corruption laws of Russia and the US Foreign Corrupt Practices Act (the "FCPA"), and we may be subject to the UK Bribery Act 2010 (the "UK Bribery Act"). Our failure to comply therewith could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations," "—We have incurred and are continuing to incur costs and related management oversight obligations in connection with our obligations under the DPA and the SEC Order" and "—We could be subject to criminal prosecution or civil sanction if we breach the DPA and the SEC Order, and we may face other

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potentially negative consequences relating to the investigations by, and agreements with, the DOJ and SEC and other authorities, including additional investigations and litigation."

Turkmenistan

In July 2018, we filed a Request for Arbitration against the Sovereign State of Turkmenistan with the ICSID in order to protect our legal rights and investments in Turkmenistan. In April 2019, we filed a Memorial (statement of claim) in the dispute with the Sovereign State of Turkmenistan with the ICSID. As of December 31, 2020 the case is pending. The hearing was scheduled for July 2021 and then, in mid-March 2021, postponed until December 2021 due to ongoing COVID-19 restrictions. See "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—An outcome of the proceedings relating to sustaining operations of our subsidiary in Turkmenistan is unpredictable."

Tax Audits and Claims

In the ordinary course of business, we may be party to various tax proceedings, and subject to tax claims, some of which relate to the developing markets and evolving fiscal and regulatory environments in which we operate. In the opinion of management, our liability, if any, in all pending tax proceedings or tax claims will not have a material effect on our financial condition, results of operations or liquidity. We believe that we have adequately provided for tax liabilities in the accompanying consolidated financial statements; however, the risk remains that relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant. See also Note 35 to our audited consolidated financial statements.

In December 2018, the Russian tax authorities completed a secondary tax audit of MGTS for the year ended December 31, 2014. Based on the results of this audit, the Russian tax authorities argued possibility of utilization by MGTS of tax asset in the amount of RUB 1,065.79 million. In September 2019 we filed an appeal with the Moscow Arbitrate Court. The case is currently pending. Next hearing is scheduled for May 2021.

In December 2019, the Russian tax authorities initiated a tax audit of Stream LLC for the years ended December 31, 2016, 2017 and 2018. In November 2020, the tax audit was completed. Based on the results of this audit, the Russian tax authorities determined that RUB 348,98 million in additional taxes and penalties were payable by us. We are considering whether we intend to appeal this resolution.

In December 2020, the Russian tax authorities initiated a tax audit of MDTZK LLC for the years ended December 31, 2017, 2018 and 2019 which is on-going.

In December 2020, the Russian tax authorities initiated a tax audit of Cultural Service LLC for the years ended December 31, 2017, 2018 and 2019 which is on-going.

Generally, according to Russian tax legislation, tax declarations remain open and subject to inspection for a period of three years following the tax year. As of December 31, 2020, tax declarations of our Russian subsidiaries were open for audit for the preceding three fiscal years. Since 2016, we communicate with tax authorities within Tax Monitoring regime. Under this regime, we disclose information and documents related to calculation of our tax liabilities on-line; the tax year is considered closed for disputes by October of the year following the reporting tax year.

Antimonopoly Proceedings

In July 2017, the FAS issued a warning to MTS, MegaFon, Tele2 and VEON Ltd. (VimpelCom) on termination of actions containing signs of violation of the antimonopoly laws in respect of establishing unreasonable differences in tariffication of communication services for subscribers in home region and outside. Following non-compliance with the warning, the FAS started antimonopoly proceeding against us. The FAS also started antimonopoly proceeding against us for establishing high prices for

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communication services in national roaming. In 2018, we changed the principles and terms of tariffication when travelling about the country. The FAS held us administratively liable and imposed administrative fines in amount of RUB 1 million in respect of each proceeding.

In August 2018, the FAS charged us and other federal operators with violation of antimonopoly laws in respect to establishing distinguished terms and conditions for bulk SMS pricing for the banks with state-owned equity interest as compared to the terms and conditions for the other banks and establishing unreasonably high bulk SMS prices. In May 2019, FAS has ruled on MTS breaching the provisions of antimonopoly laws in respect to establishing discriminatory terms and conditions for bulk SMS pricing and charging unreasonably high bulk SMS prices and has prescribed MTS to cease violations. MTS contested the decision and prescription of FAS in the Moscow Arbitration Court, which upheld the position of FAS in November 2019, following by the Arbitration Court of Appeal in March 2020. MTS filed a cassation appeal to the Arbitration Court of the Moscow District, which also upheld the position of FAS Russia. In December 2020, MTS cassation appeal was rejected by the Judicial Chamber of the Supreme Court. We believe that as of December 31, 2020 we have adequately provided for charges imposed by FAS Russia and other related expenses.

8.A.8. Dividend Distribution Policy

The company's dividend policy for the 2016 - 2018 period was approved by the MTS Board of Director on April 8, 2016 and set a target payout of RUB 25.0 - 26.0 per ordinary MTS share (RUB 50.0 - 52.0 per ADR) per calendar year, with a guaranteed minimum payout of RUB 20.0 per ordinary MTS share (RUB 40.0 per ADR) per calendar year. Payments were made on a semi-annual basis.

Annual and semi-annual dividend payments, if any, must be recommended by the Board of Directors and approved by a General Meeting of Shareholders (GM). We anticipate that any dividends we may pay in the future on the shares represented by the ADSs will be declared and paid to the depositary in Russian rubles and will be converted into U.S. dollars by the depositary and distributed to holders of ADSs, net of the depositary's fees and expenses. Accordingly, the value of dividends received by holders of ADSs will be subject to fluctuations in the exchange rate between the ruble and the dollar.

On March 21, 2019, the MTS Board of Directors approved a new dividend policy covering the period 2019 - 2021 that set a minimum payout of RUB 28.0 per ordinary MTS share (RUB 56.0 per ADR) per calendar year. In determining actual dividend payouts, a number of factors are taken into consideration, including cash flow from operations, capital expenditures, and the company's overall debt position. Payments will continue to be made on a semi-annual basis.

B. Significant Changes

COVID-19—The spread of the coronavirus both in Russia and worldwide may affect our results of operations to the extent that depends on the effectiveness of government mitigating measures, pandemic duration and macroeconomic conditions. As the situation develops rapidly it is currently impossible to assess the impact of the coronavirus spread on our operations. Though it may possibly affect roaming activity of our subscribers, banking and retail services and network equipment supply, see "Item 3. Key Information—D. Risk Factors—Risks Relating to our Financial Condition—Fluctuations in the global economy may materially adversely affect the economies of the countries where we operate and our business in these countries."

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Disposal of STS-Ukraine—In February 2021, we sold 100% stake in LLC "Sitronics Telecom Solutions Ukraine" ("STS-Ukraine") for RUB 52 million. The results of this transaction will be included in our financial statements for the year ended December 31, 2021. We classified the associated assets and liabilities as "held for sale" as of December 31, 2020 and measured at carrying value. Balances were attributable to "Other" category in reportable segments and comprised of:

		RUB mln

Current assents			282
Non-current assets			50

Total assets related to disposal group held for sale			332



Current liabilities			275
Non-current liabilities			16

Total liabilities related to disposal group held for sale			291

Item 9. Offer and Listing Details

(Only Items 9.A.4 and 9.C are applicable.)

A. Market Price Information

Our ADS, each representing two ordinary shares, have been listed on the NYSE since July 6, 2000 under the symbol "MBT." Our ordinary shares have been listed on MICEX (currently Moscow Exchnage) since December 2003. In addition, we issued additional ordinary shares in connection with our merger with Comstar, which have been listed on MICEX (currently Moscow Exchange) since May 2011. The shares of the additional issuance became fully fungible with our previously issued ordinary shares in July 2011. Set forth below, for the periods indicated, are the high and low closing prices per

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ADS as reported by the NYSE and the high and low closing prices per ordinary share as reported by the Moscow Exchange.

	ADS High		ADS Low

Monthly High and Low
March 2021⁽¹⁾	$	8.78	$	8.10	326.00 RUB	313.05 RUB
February 2021	$	9.31	$	8.51	338.10 RUB	311.80 RUB
January 2021	$	9.46	$	8.92	340.10 RUB	325.00 RUB
December 2020	$	9.10	$	8.45	322.05 RUB	316.20 RUB
November 2020	$	8.66	$	7.75	328.30 RUB	308.20 RUB
October 2020	$	8.84	$	7.72	344.95 RUB	308.20 RUB
Quarterly High and Low
First Quarter 2021⁽²⁾	$	9.46	$	8.10	340.10 RUB	311.80 RUB
Fourth Quarter 2020	$	9.10	$	7.72	344.95 RUB	308.20 RUB
Third Quarter 2020	$	9.81	$	8.53	349.70 RUB	312.50 RUB
Second Quarter 2020	$	9.66	$	7.41	339.85 RUB	293.50 RUB
First Quarter 2020	$	11.00	$	6.20	353.05 RUB	250.55 RUB
Fourth Quarter 2019	$	10.24	$	7.88	320.00 RUB	266.55 RUB
Third Quarter 2019	$	9.20	$	7.54	289.70 RUB	252.00 RUB
Second Quarter 2019	$	9.49	$	7.62	288.80 RUB	252.20 RUB
First Quarter 2019	$	8.60	$	7.26	272.10 RUB	237.00 RUB
Annual High and Low⁽³⁾
2020	$	11.00	$	6.20	353.05 RUB	250.55 RUB
2019	$	10.24	$	7.31	323.75 RUB	299.60 RUB
2018	$	12.80	$	6.64	321.00 RUB	222.40 RUB
2017	$	11.58	$	7.77	296.95 RUB	223.05 RUB
2016	$	9.64	$	5.22	268.30 RUB	200.55 RUB

(1): For the period from March 1, 2021 to March 29, 2021.
(2): For the period from January 1, 2021 to March 29, 2021.
(3): Effective May 3, 2010, the ratio of our ADSs changed from 1 ADS per 5 common shares to 1 ADS per 2 common shares. The ADS prices set forth in the table above reflect the new share: ADS ratio for all periods.

Markets

Our common stock has been listed on the Moscow Interbank Currency Exchange (currently Moscow Exchange) since December 2003. ADSs, each representing two shares of our common stock, have been listed on the New York Stock Exchange under the symbol "MBT" since July 6, 2000. Our U.S. dollar-denominated notes due in 2023 are listed on the Irish Stock Exchange. Our ruble-denominated notes are listed on the Moscow Exchange.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Charter and Certain Requirements of Russian Legislation

We describe below material provisions of our charter and certain requirements of Russian legislation. In addition to this description, we urge you to review our charter to learn its complete terms.

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Our Purpose

Article 2.1 of our charter provides that our principal purpose is to obtain profits through the planning, marketing, establishing and operating communications network and facilities, to provide access to Internet and to render communications services on our license territories.

We are registered with the Ministry of Taxes and Duties of the Russian Federation under the state registration number 1027700149124.

General Matters

Pursuant to our charter, we have the right to issue registered common stock, preferred stock and other securities provided for by legal acts of the Russian Federation with respect to securities. Our capital stock currently consists of 1,998,381,575 common shares, each with a par value of 0.10 rubles, all of which are issued and fully paid. Under Russian legislation, charter capital refers to the aggregate par value of the issued and outstanding shares. We are also authorized to issue an additional 100,000,000 common shares with a par value of 0.10 rubles each. We have issued only common stock. No preferred shares are authorized or outstanding. Preferred stock may only be issued if corresponding amendments have been made to our charter pursuant to a resolution of the general meeting of shareholders.

The Joint Stock Companies Law requires us to dispose of any of our shares that we acquire within one year of their acquisition or, failing that, reduce our charter capital. We refer to such shares as treasury shares for the purposes hereof. Russian legislation does not allow for the voting of such treasury shares. Any of our shares that are owned by our subsidiaries are not considered treasury shares under Russian law (i.e., they are considered outstanding shares), and our subsidiaries holding such shares are able to vote and dispose of such shares without any further corporate actions by our shareholders or Board of Directors.

In March 2016, in the course of liquidation of our wholly owned subsidiary, MTS Bermuda, we obtained 67,995,335 shares. As of June 1, 2016, we had 36,652 treasury shares repurchased pursuant to our shareholders' right to demand buy-out following the merger of our subsidiaries into MTS during 2015 and 2016 in accordance with applicable laws. In June 2016, our shareholders decided to decrease our charter capital by cancellation of all outstanding 68,031,987 treasury shares (approximately 3.29% of our share capital at that time). In August 2016, we cancelled these shares, and as such our capital stock decreased from 2,066,413,562 to 1,998,381,575 shares. As of April 1, 2017, we did not have any treasury shares.

In August, 2017, we repurchased 497 treasury shares pursuant to our shareholders' right to demand buy-out following the merger of our subsidiaries into MTS in accordance with applicable laws. As of December 31, 2017, we had 497 treasury shares.

In September 2018, we repurchased 17,167 treasury shares in the course of buy-back procedure under article 75 of the Federal law "On Joint-Stock Companies." As of December 31, 2018, MTS held 17,664 treasury shares. As of December 31, 2019 the number of treasury shares in MTS possession remains the same.

As of April 1, 2016, our subsidiaries held 9,496,163 of our shares. In April 2016, our wholly owned subsidiary Bastion LLC sold 954,386 shares to our management pursuant to our management long-term motivation program. In December 2016, our wholly owned subsidiary Stream Digital LLC purchased 3,060,409 shares (including shares represented by ADSs) as a result of a tender offer announced in October 2016.

A second tender offer was announced in January 2017, as a result of which Stream Digital LLC purchased additional 32,061,256 shares. Thus, as of April 1, 2017, our subsidiaries held a total of 43,543,303 of our shares.

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To increase the shareholder return, we continued repurchase of the shares in the open market in 2017, 2018, 2019 and 2020. Thus, as of December 31, 2017, our subsidiaries held a total of 86,339,156 of our shares. As of December 31, 2018 our subsidiaries held a total of 167,621,235 of MTS shares. As of December 31, 2019, our subsidiaries held a total of 225,529,758 of MTS shares. As of December 31, 2020, our subsidiaries held a total of 271,074,059 of MTS shares.

See "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders." In our consolidated financial statements prepared in accordance with IFRS, these shares are considered treasury shares (i.e., they are considered not outstanding).

As of the date of this document, we had more than ten thousand shareholders for purposes of the Joint Stock Companies Law.

Rights Attaching to Shares

Holders of our common stock have the right to vote at all shareholders' meetings. As required by the Joint Stock Companies Law and our charter, all shares of our common stock have the same par value and grant identical rights to their holders. Each fully paid share of common stock, except for treasury shares, gives its holder the right to:

•: freely transfer the shares without our consent and the consent of other shareholders;
•: receive dividends;
•: participate in shareholders' meetings and vote on all matters within shareholders' competence;
•: transfer voting rights to a representative on the basis of a power of attorney;
•: participate in the election and dismissal of members of the Board of Directors and Auditing Commission;
•: exercise its pre-emptive right in certain circumstances, as determined by the Joint Stock Companies Law;
•: if holding, alone or with other holders, 1% or more of the outstanding common shares, file a lawsuit against a member of the Board of Directors or member of any executive body of the company (including the company's CEO and/or the company's managing organization) to reimburse damages suffered by the company as the result of their fault;
•: if holding, alone or with other holders, more than 1% of the voting shares, demand from the holder of register of shareholders to provide information on shareholders of the company and shares held by such shareholders;
•: if holding, alone or with other holders, 2% or more of the voting stock, within 100 days after the end of our fiscal year, make proposals for the agenda of the annual shareholders' meeting and nominate candidates to the Board of Directors, the Counting Commission and the Auditing Commission;
•: if holding, alone or with other holders, 10% or more of the voting stock, demand from the Board of Directors the calling of an extraordinary shareholders' meeting or an unscheduled audit by the Auditing Commission or an independent auditor, and file a lawsuit against the company to convene an extraordinary shareholders' meeting if the Board of Directors fails to take a decision to convene an extraordinary shareholders' meeting or decides against convening such meeting;

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•

demand, under the following circumstances, the repurchase by us of all or some of the shares owned by it, as long as such holder voted against or did not participate in the voting on the decision approving the following:

•: any reorganization;
•: the conclusion of a major transaction, the value of which exceeds 50% of the balance sheet value of the assets calculated under Russian Accounting Standards ("RAS");
•: any amendment of our charter or approval of a restated version of our charter in a manner that restricts the holder's rights;
•: delisting of our shares from a stock exchange; and
•: the amendment of the public company's charter which eliminates indication that the company is public, simultaneously with the decision on applying to the CBR on release from obligation to disclose information under the laws of the Russian Federation on securities and the decision on applying for delisting of shares and equity securities convertible into shares (i.e., transformation to a non-public company);

•

upon liquidation, receive a proportionate amount of our property after our obligations are fulfilled;

•

have free access to certain company documents, receive copies for a reasonable fee and, if holding alone or with other holders, 25% or more of the voting stock, have access to accounting documents and minutes of the management board meetings;

•

if holding, alone or with other shareholders at least 1% of the voting shares, demand consent for an interested party transaction; and

•

exercise other rights of a shareholder provided by our charter, Russian legislation and decisions of shareholders' meeting approved in accordance with its competence.

Pre-emptive Rights

The Joint Stock Companies Law and our charter provide existing shareholders with a pre-emptive right to purchase shares or securities convertible into shares during an open subscription in the amount proportionate to their existing shareholdings. In addition, the Joint Stock Companies Law provides shareholders with a pre-emptive right to purchase shares or securities convertible into shares, in an amount proportionate to their existing shareholdings, during a private subscription if the shareholders voted against or did not participate in the voting on the decision approving such subscription. The pre-emptive right does not apply to a private subscription to the existing shareholders provided that such shareholders may each acquire a whole number of shares or securities convertible into shares being placed in an amount proportionate to their existing shareholdings. We must provide shareholders with written notice of their pre-emptive right to purchase shares and the period during which shareholders can exercise their pre-emptive rights may not be less than 45 or, under certain circumstances, 20 or even eight business days. We cannot sell the shares or securities convertible into shares which are subject to the pre-emptive rights during this period.

Dividends

The Joint Stock Companies Law and our charter set forth the procedure for determining the quarterly and annual dividends that we may distribute to our shareholders. We may declare dividends based on our first quarter, six month, nine month or annual results. Dividends are recommended to a shareholders' meeting by a majority vote of the Board of Directors and approved by the shareholders by a majority vote. A decision on quarterly, six month and nine month dividends must be taken within

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three months of the end of the respective quarter at the extraordinary shareholders' meeting; and a decision on annual dividends must be taken at the annual general shareholders' meeting. The dividend approved at the shareholders' meeting may not be more than the amount recommended by the Board of Directors.

The Joint Stock Companies Law allows dividends to be declared only out of net profits calculated under RAS as long as the following conditions have been met:

•: the charter capital of the company has been paid in full;
•: the value of the company's net assets on the date of the adoption of the decision to pay dividends is not less (and would not become less as a result of the proposed dividend payment) than the sum of the company's charter capital, the company's reserve fund and the difference between the liquidation value and the par value of the issued and outstanding preferred stock of the company;
•: the company has repurchased all shares from shareholders having the right to demand repurchase; and
•: the company is not, and would not become, insolvent as the result of the proposed dividend payment.

The Joint Stock Companies Law and the Securities Market Law have been amended on December 29, 2012 to adopt new dividend payment rules that came into force January 1, 2014. These amendments include new rules on determining the shareholders entitled to dividend distribution whereby the list of such shareholders is fixed at date determined in the decision of the General shareholders' meeting on the distribution of dividends. The date shall be not earlier than 10 days and not later than 20 days following the date of such decision. The dividends are to be paid to private shareholders registered in the share register of the company within 25 business days and to nominal holders and professional managers within 10 business days from the date on which persons entitled to receive dividends are determined. If shares are held on a depo account with a depository, dividends will be transferred to such shareholders by such depositary within seven business days of receipt of funds by the depositary.

Distributions to Shareholders on Liquidation

Under Russian legislation, liquidation of a company results in its termination without the transfer of rights and obligations to other persons as legal successors. The Joint Stock Companies Law and our charter allow us to be liquidated:

•: by a three-quarters majority vote of a shareholders' meeting; or
•: by a court order.

Following a decision to liquidate us, the right to manage our affairs would pass to a liquidation commission appointed by a shareholders' meeting. In the event of an involuntary liquidation, the court may assign the duty to liquidate the company to its shareholders. Creditors may file claims within a period to be determined by the liquidation commission, but such period must not be less than two months from the date of publication of notice of liquidation by the liquidation commission.

The Civil Code of the Russian Federation gives creditors the following order of priority during liquidation:

•: individuals owed compensation for injuries or deaths;
•: employees and authors of intellectual property;

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•: federal and local governmental entities claiming taxes and similar payments to the federal and local budgets and to non-budgetary funds; and
•: other creditors in accordance with Russian legislation.

Claims of creditors in obligations secured by a pledge of the company's property ("secured claims") are satisfied out of the proceeds of sale of the pledged property prior to claims of any other creditors except for the creditors of the first and second priorities described above, provided that claims of such creditors arose before the pledge agreements in respect of the company's property were made. To the extent that the proceeds of sale of the pledged property are not sufficient to satisfy secured claims, the latter are satisfied simultaneously with claims of the fourth priority creditors as described above.

The Federal Law on Insolvency (Bankruptcy), however, provides for a different order of priority for creditors' claims in the event of bankruptcy.

The remaining assets of a company are distributed among shareholders in the following order of priority:

•: payments to repurchase shares from shareholders having the right to demand repurchase;
•: payments of declared but unpaid dividends on preferred shares and the liquidation value of the preferred shares determined by the company's charter, if any; and
•: payments to holders of common and preferred shares.

Liability of Shareholders

The Civil Code of the Russian Federation and the Joint Stock Companies Law generally provide that shareholders in a Russian joint stock company are not liable for the obligations of a joint stock company and bear only the risk of loss of their investments. This may not be the case, however, when one company is capable of determining decisions made by another company. The company capable of determining such decisions is called an "effective parent." The company whose decisions are capable of being so determined is called an "effective subsidiary." The effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions if:

•: this decision-making capability is provided for in the charter of the effective subsidiary or in a contract between such persons; and
•: the effective parent gives binding instructions or consent for a transaction to the effective subsidiary (except for voting of the effective parent in a shareholders' meeting of its effective subsidiary and approval by the effective parent's governing body of a transaction if such approval is required under the charter of the effective parent or the effective subsidiary).

In addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the act or omission of an effective parent only when the effective parent has used the right to give binding instructions, knowing that the consequence of carrying out this act or omission would be insolvency of this effective subsidiary. This is the case no matter how the effective parent's capability to determine decisions of the effective subsidiary arises, such as through ownership of voting securities or by contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the effective parent that caused the effective subsidiary to take any action or fail to take any action knowing that such action or failure to take action would result in losses.

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Alteration of Capital

Charter Capital Increase

We may increase our charter capital by:

•: issuing new shares; or
•: increasing the par value of previously issued shares.

A decision on any issuance of shares or securities convertible into shares by private subscription, or an issuance by open subscription of common shares or securities convertible into common shares constituting 25% or more of the number of issued common shares, requires a three-quarters majority vote of a shareholders' meeting. Otherwise, a decision to increase the charter capital by increasing the par value of issued shares requires a majority vote of a shareholders' meeting. In certain circumstances provided in our charter, a decision to increase the charter capital may be taken by our Board of Directors. In addition, the issuance of shares above the number provided in our charter necessitates a charter amendment, which requires a three-quarters affirmative vote of a shareholders' meeting.

The Joint Stock Companies Law requires that the value of newly issued shares be determined by the board of directors based on their market value but not less than their par value. The price of newly issued shares for existing shareholders exercising their pre-emptive right to purchase shares could be less than the price paid by third parties, but not less than 90% of the price paid by third parties. Fees paid to intermediaries may not exceed 10% of the shares placement price. The board of directors shall value any in-kind contributions for new shares, based on the appraisal report of an appraiser.

Russian securities regulations set out detailed procedures for the issuance and registration of shares of a joint stock company. These procedures require:

•: taking a decision on a share placement;
•: approval of a resolution on a share issuance;
•: prior registration of the share issuance with the CBR;
•: placement of shares;
•: filing with the CBR and registration of a report or a notice (as applicable) on results of the share issuance; and
•: public disclosure of information relating to the issuance of shares.

Charter Capital Decrease; Share Buy-Backs

The Joint Stock Companies Law does not allow a company to reduce its charter capital below the minimum charter capital required by law, which is 100,000 rubles for a public joint stock company. The Joint Stock Companies Law and our charter require that any decision to reduce our charter capital through the repurchase and cancellation of shares, be made by a majority vote of a shareholders' meeting and through reduction of the par value of shares, by a three-quarter majority vote of a shareholders' meeting. Additionally, within three business days of a decision to reduce our charter capital, we must notify the federal executive body in charge of the state registration of legal entities on the decision taken and publish within the same three-day period a notice regarding the charter capital reduction, as well as a second notice one month after the first notice is published. Our creditors, whose claims arose before the decision on the charter capital decrease was taken, would then have the right to demand, not later than 30 days of the second publication of the notice, early termination or settlement of relevant obligations by us, as well as compensation for damages.

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The Joint Stock Companies Law and our charter allow our shareholders or the Board of Directors to authorize the repurchase of up to 10% of our shares in exchange for cash. The repurchased shares pursuant to a board decision must be resold at the market price within one year of their repurchase or, failing that, the shareholders must decide to cancel such shares and decrease the charter capital. Repurchased shares do not bear voting rights.

Shares repurchased pursuant to a decision of our shareholders' meeting to decrease the overall number of shares are cancelled at their redemption.

The Joint Stock Companies Law allows us to repurchase our shares only if, at the time of repurchase:

•: our charter capital is paid in full;
•: we are not and would not become, as a result of the repurchase, insolvent;
•: the value of our net assets at the time of repurchase of our shares is not less (and would not become less, as a result of the proposed repurchase) than the sum of our charter capital, the reserve fund and the difference between the liquidation value and par value of our issued and outstanding preferred shares; and
•: we have repurchased all shares from shareholders having the right to demand repurchase of their shares in accordance with Russian law, as described immediately below.

Our subsidiaries are not restricted from purchasing our shares, and our subsidiaries can vote these shares.

The Joint Stock Companies Law and our charter provide that our shareholders may demand repurchase of all or some of their shares as long as the shareholder demanding repurchase voted against or did not participate in the voting on the decision approving any of the following actions:

•: any reorganization;
•: the conclusion of a major transaction, which involves assets having value of more than 50% of the balance sheet value of the assets calculated under RAS (including those which are simultaneously interested party transactions); or
•: any amendment of our charter or approval of a restated version of our charter in a manner which restricts shareholders' rights; and
•: the amendment of the public company's charter which eliminates indication that the company is public, simultaneously with the decision on applying to the CBR on release from obligation to disclose information under the laws of the Russian Federation on securities and the decision on applying for delisting of shares and equity securities convertible into shares.

We may spend up to 10% of our net assets calculated under RAS on the date of the adoption of the decision which gives rise to a share redemption demanded by the shareholders. If the value of shares in respect of which shareholders have exercised their right to demand repurchase exceeds 10% of our net assets, we will repurchase shares from each such shareholder on a pro-rata basis. Repurchase of the shares is made at a price agreed on by the board of directors, but it should not be less than the market price.

Registration and Transfer of Shares

Russian legislation requires that a joint stock company ensures maintenance of a register of its shareholders, which for a public joint stock company, shall be maintained by a registrar. Registrar NIKoil OJSC had maintained our register of shareholders since May 10, 2000. In July 2014, it has been merged into Independent Registration Company JSC (known as Computershare Registrar JSC prior to

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October 6, 2015) and on February 4, 2019, Independent Registration Company JSC has been merged into JSC IRC—R.O.S.T. which now maintains our register of shareholders by way of universal succession.

On December 19, 2019, our Board of Directors adopted a decision to terminate the existing agreement with JSC IRC—R.O.S.T. and enter into relevant agreement with JSC REESTR and starting from April 10, 2020 our register is maintained by REESTR.

The Federal Law No. 414-FZ "On the Central Depositary" dated December 7, 2011 (the "Central Depositary Law"), which came into force on January 1, 2012, set out a legal framework for establishment and operation of the central depositary. On November 6, 2012, the Russian Federal Financial Markets Service granted the JSC National Settlement Depositary the status of central depositary which opened its nominee holder accounts in, among others, all securities registers of the issuers which are obliged to disclose information in accordance with Russian securities law. As we are required to make public disclosures, the above requirement is applicable to us, which means that the central depositary became the only person having a nominee holder account in our share register. Also, the Central Depositary Law prohibits persons maintaining securities registers from opening and depositing securities (save for limited exceptions) to other nominee holder accounts from the date of the opening of a nominee holder account with the central depositary.

Ownership of our registered shares is evidenced by entries made in the register of shareholders, on the books of the central depositary or a Russian licensed depositary. Any of our shareholders may obtain an extract from the register of our shareholders maintained by the registrar or from their respective depositary, as the case may be, certifying the number of shares that such shareholder holds. We are also entitled to obtain an extract from our shareholders' register which sets out all of our shareholders registered directly therein. In addition, we are entitled to obtain a list of nominal holders that opened depo accounts with the central depository, as well as a list of entities that have accounts opened with the nominal holders, given that such list is provided by the relevant nominal holder. However, we are unable to monitor transfers of our shares that are held on the books of depositaries registered with the central depository because underlying shareholders have no obligation to reveal and such depositaries have no obligation to notify us about such transfers. As a result, we can currently only identify our actual shareholders in a limited number of cases provided for by Russian law, including when requesting our registrar and the central depository to compile a list of shareholders of record for the General Shareholders' Meeting and when shareholders and ADS holders provide voting instructions together with disclosure of information, including ownership information, in accordance with Russian securities regulations.

The purchase, sale or other transfer of shares is accomplished through the registration of the transfer in the shareholder register, or the registration of the transfer with a depositary if shares are held by a depositary. The registrar or depositary may not require any documents in addition to those required by Russian legislation in order to transfer shares in the register. Refusal to register the shares in the name of the transferee or, upon request of the beneficial holder, in the name of a nominee holder, is not allowed, except in certain instances provided for by Russian legislation, and may be challenged in court.

Reserve Fund

Russian legislation requires that each joint stock company establish a reserve fund to be used only to cover the company's losses, redeem the company's bonds and repurchase the company's shares in cases when other funds are not available. Our charter provides for a reserve fund of 15% of our charter capital, funded through mandatory annual transfers of at least 5% of our net profits until the reserve fund has reached the 15% requirement.

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Disclosure of Information

Russian securities regulations require us to make the following periodic public disclosures and filings:

•: posting on our website quarterly reports, containing information about us, our shareholders and depositary, the structure of our management bodies, the members of the Board of Directors, our branches and representative offices, our shares, bank accounts and auditors, important developments during the reporting quarter, and other information about our financial and business activity;
•: publishing any information (including inside information) concerning material facts and changes in our financial and business activity, including our reorganization, certain changes in the amount of our assets, decisions on share issuances, certain corporate events, such as mandatory or voluntary tender offers, record dates, certain changes in ownership and shareholding, filing of any material claim against us, obtainment or revocation of material licenses, entry into certain transactions, as well as shareholders' and certain board of directors' resolutions and certain information regarding our material subsidiaries;
•: disclosing information on various stages of share placement, issuance and registration through publication of certain data as required by the securities regulations;
•: disclosing our charter and internal corporate governance documents on our website;
•: disclosing our annual report and annual financial statements prepared in accordance with RAS, as well as annual and interim financial statements prepared in accordance with IFRS;
•: posting on our website a list of our affiliated companies and individuals on a quarterly basis;
•: posting on our website a list of inside information; and
•: other information as required by applicable Russian securities legislation.

Bank of Russia developed and adopted regulations "On the disclosure of information by issuers of securities" No. 714-P dated March 27, 2020 that arrange substantial changes to the system of disclosure of information. These regulations will come into force on October 1, 2021.

General Shareholders' Meetings

Procedure

The powers of a shareholders' meeting are set forth in the Joint Stock Companies Law and in our charter. In a public joint stock company a shareholders' meeting may not decide on issues that are not included in the list of its competence by the Joint Stock Companies Law. Among the issues which our shareholders have the power to decide are:

•: charter amendments;
•: reorganization or liquidation;
•: election and removal of members of the board of directors;
•: determination of the amount of compensation for members of the board of directors;
•: determination of the number, par value, class/type of authorized shares and the rights granted by such shares;
•: changes in our charter capital in certain instances;
•: appointment and removal of our independent auditor and of the members of our Auditing Commission and Counting Commission if it is obligatory for the company to have the Auditing Commission;

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•: consent or subsequent approval of certain interested party transactions and major transactions;
•: participation in trade or industrial groups, or other associations of commercial entities;
•: approval of certain internal documents and corporate records;
•: distribution of profits and losses, including approval of dividends;
•: redemption by the company of issued shares in cases provided by the Joint Stock Companies Law; and
•: other matters, as provided for by the Joint Stock Companies Law and our charter.

Voting at a shareholders' meeting is generally based on the principle of one vote per share of common stock, with the exception of the election of the board of directors, which is done through cumulative voting. Decisions are generally passed by a majority vote of the voting shares present at a shareholders' meeting. However, for public joint stock companies Russian law requires a three-quarters majority vote of the voting shares present at a shareholders' meeting to approve the following:

•: charter amendments;
•: reorganization or liquidation;
•: consent or subsequent approval of major transactions involving assets in excess of 50% of the balance sheet value of the company's assets calculated under RAS;
•: the number, par value, and category (type) of authorized shares and the rights granted by such shares;
•: repurchase by the company of its issued shares;
•: any issuance of shares or securities convertible into shares of common stock by private subscription;
•: issuance by open subscription of shares of common stock or securities convertible into common stock, in each case, constituting 25% or more of the number of issued and outstanding shares of common stock;
•: decrease of the charter capital through reduction of the par value of shares; or
•: filing of an application for delisting of our shares or securities convertible into shares.

Moreover, a ninety-five majority vote of the voting shares present at a shareholders' meeting is required to approve the amendment of the public company's charter which eliminates indication that the company is public, simultaneously with the decision on applying to the CBR on release from obligation to disclose information under the laws of the Russian Federation on securities and the decision on applying for delisting of shares and equity securities convertible into shares (i.e., transformation to a non-public company).

The quorum requirement for our shareholders' meetings is met if holders of shares (or their representatives) accounting for more than 50% of the issued voting shares are present. If the 50% quorum requirement is not met, another shareholders' meeting with the same agenda may (and, in case of an annual shareholders' meeting must) be scheduled and the quorum requirement is satisfied if holders of shares (or their representatives) accounting for at least 30% of the issued voting shares are present at that meeting.

The annual shareholders' meeting must be convened by the board of directors between March 1 and June 30 of each year, and the agenda must include the following items:

•: election of the members of the board of directors;

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•: approval of the annual report and the annual financial statements, including the balance sheet and profit and loss statement;
•: approval of distribution of profits, including approval of dividends, and losses, if any;
•: appointment of an independent auditor; and
•: appointment of the members of the auditing commission.

A shareholder or group of shareholders owning in the aggregate at least 2% of the issued voting shares may introduce proposals for the agenda of the annual shareholders' meeting and may nominate candidates for the board of directors, counting commission and auditing commission. Any agenda proposals or nominations must be provided to the company no later than 100 calendar days after the preceding financial year end.

Extraordinary shareholders' meetings may be called by the board of directors on its own initiative, or at the request of the auditing commission, the independent auditor or a shareholder or group of shareholders owning in the aggregate at least 10% of the issued voting shares as of the date of the request. The decision to call or reject the call for an extraordinary shareholders' meeting shall be made by the board of directors within five days from the receipt date of the request and sent to the party that requested the meeting within three days after such a decision was made.

A general meeting of shareholders may be held in a form of a meeting or by absentee ballot. The form of a meeting contemplates the adoption of resolutions by the general meeting of shareholders through the attendance of the shareholders or their authorized representatives for the purpose of discussing and voting on issues of the agenda, provided that if a ballot is mailed to shareholders for participation at a meeting convened in such form, the shareholders may complete and mail the ballot back to the company without personally attending the meeting. A general meeting of the shareholders by absentee ballot contemplates the determination of collecting shareholders' opinions on issues of the agenda by means of a written poll.

The following issues cannot be decided by a shareholders' meeting by absentee ballot:

•: election of the members of the board of directors;
•: election of the auditing commission;
•: approval of a company's independent auditor; and
•: approval of the annual report, the annual financial statements.

At the same time, the provision establishing these restrictions on holding a general meeting of shareholders in absentia was suspended until the end of 2020 due to the COVID-19 pandemic (Article 11 of Federal Law No. 115-FZ dated April 7, 2020, Article 3 of Federal Law No. 17-FZ dated February 24, 2021). Thus, in 2020, general meetings of shareholders, the agenda of which contained the above issues, could also be held in absentia.

Notice and Participation

Pursuant to the Joint Stock Companies Law, persons registered in the register of shareholders and entitled to participate in a general shareholders' meeting must be notified of the meeting, whether the meeting is to be held in the form of a meeting or by absentee ballot, no less than 21 days (or 30 days if the agenda includes an item on reorganization) prior to the date of the meeting, and such notification shall specify the agenda for the meeting. However, if it is an extraordinary shareholders' meeting to elect the board of directors, persons registered in the register of shareholders and entitled to participate in the general shareholder's meeting must be notified at least 50 days prior to the date of

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the meeting. Only those items that were set out in the agenda to shareholders may be voted upon at a general shareholders' meeting.

If a nominal holder of the shares registers in the register of shareholders, then a notification of the shareholders' meeting shall be sent to the nominal holder. The nominal holder must notify its clients in accordance with Russian legislation or an agreement with the client. The list of persons entitled to participate in a general shareholders' meeting is to be compiled on the basis of data in our shareholders register on the date established by the board of directors, which date may neither be earlier than the 10 days after the date of adoption of the board resolution to hold a general shareholders' meeting nor more than 25 days before the date of the meeting (or, in the case of an extraordinary shareholders' meeting to elect the board of directors, not later than 55 days before the date of the meeting).

The right to participate in a general meeting of shareholders may be exercised by a shareholder as follows:

•: by personally participating in the discussion of agenda items and voting thereon;
•: by sending an authorized representative to participate in the discussion of agenda items and to vote thereon;
•: by submitting a written ballot reflecting the shareholders' voting on the agenda items;
•: by delegating the right to submit such written ballot to an authorized representative; or
•: by sending information on their willingness to the nominee holder for further transfer to the registrar in accordance with the requirements of the Russian securities law.

The decision of the Board of Directors to convene the General meeting of shareholders may provide for the possibility to fill the electronic voting ballots online at website on the Internet.

Board of Directors

Our Board of Directors is elected through cumulative voting. Under cumulative voting, each shareholder may cast an aggregate number of votes equal to the number of shares held by such shareholder multiplied by the number of persons to be elected to our Board of Directors, and the shareholder may give all such votes to one candidate or spread them between two or more candidates. Before the expiration of their term, the directors may be removed as a group at any time without cause by a majority vote of a shareholders' meeting.

The Joint Stock Companies Law requires at least a five-member board of directors for all joint stock companies, at least a seven-member board of directors for a joint stock company with more than 1,000 holders of voting shares, and at least a nine-member board of directors for a joint stock company with more than 10,000 holders of voting shares. Only natural persons (as opposed to legal entities) are entitled to sit on the board. Members of the board of directors are not required to be shareholders of the company. The actual number of directors is determined by the company's charter or a decision of the shareholders' meeting. Our charter provides that our Board of Directors consists of at least seven members, which number may be increased pursuant to a decision of the general meeting of shareholders. Currently, our Board of Directors consists of nine members.

The Joint Stock Companies Law prohibits a board of directors from acting on issues that fall within the competence of the general shareholders' meeting. Our Board of Directors has the power to perform the general management of the company, and to decide, among others, the following issues:

•: determination of our business priorities;
•: approval of our annual plans, including financial plans;

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•: convening annual and extraordinary shareholders' meetings, except in certain circumstances specified in the Joint Stock Companies Law;
•: approval of the agenda for the shareholders' meeting and determination of the record date for shareholders entitled to participate in a shareholders' meeting;
•: placement of our bonds and other securities in cases specified in the Joint Stock Companies Law;
•: determination of the price of our property and of our securities to be placed or repurchased, as provided for by the Joint Stock Companies Law;
•: repurchase of our shares, bonds and other securities in certain cases provided for by the Joint Stock Companies Law;
•: appointment and removal of our President and determination of the number of the members of our Management Board and their election;
•: formation of the Board of Directors committees;
•: determination of principles and approaches to risk management, internal control and audit within the company;
•: transfer of powers of the company's CEO to a managing organization of an individual manager;
•: recommendations on the amount of the dividend and the payment procedure thereof;
•: recommendations on the amount of remuneration and compensation to be paid to the members of our Auditing Commission and on the fees payable for the services of an independent auditor;
•: use of our reserve fund and other funds;
•: approval of our internal documents, except for those documents whose approval falls within the competence of our shareholders or the president;
•: consent or subsequent approval of major and interested party transactions in certain cases provided for by the Joint Stock Companies Law;
•: increasing our charter capital by issuing additional shares within the limits of the authorized charter capital, except in certain circumstances specified in our charter;
•: approval of our share registrar and the terms of the agreement with it; and
•: other issues, as provided for by the Joint Stock Companies Law and our charter.

Our charter generally requires a majority vote of the directors present for an action to pass, with the exception of actions for which Russian legislation requires a unanimous vote or a majority vote of the disinterested and independent directors, as described therein. A board meeting is considered duly assembled and legally competent to act when a majority of elected directors is present.

Our internal regulation "On the Board of Directors of Mobile TeleSystems Public Joint Stock Company" (the "Regulation") was approved by the annual shareholders' meeting on June 28, 2018. In accordance with clause 2.2.2 of the Regulation, the members of the Board of Directors have the right to:

•: receive information regarding our operations;
•: propose issues to be discussed by the Board of Directors;
•: review the minutes of the Board of Directors meetings;

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•: request to include in the minutes of the meetings their personal opinion concerning issues on the agenda and decisions made with respect thereto;
•: receive a remuneration and/or compensation of expenses related to the execution of their duties as members of the Board of Directors in accordance with decisions of the general shareholders' meeting; and
•: be present at the general shareholders' meeting and answer questions regarding our operations.

In accordance with clause 2.3.2 of the Regulation, the members of the Board of Directors must:

•: be loyal to the Company;
•: execute their duties in a confident and scrupulous manner;
•: act within their rights and duties in accordance with the goals and objectives of the Board of Directors;
•: not distribute confidential information concerning us and protect such information from unlawful and improper use and publishing, and not use such confidential information in their own or third parties' commercial purposes;
•: participate in the work of the Board of Directors;
•: participate in the voting process during the Board of Directors meetings;
•: complete the tasks assigned by the Board of Directors;
•: evaluate the risks and consequences of the decisions made;
•: inform us on a timely basis about their participation in the management of other companies and changes in such participation;
•: restrain from voting on issues of personal interest;
•: inform the Board of Directors about future deals in which they may have a personal interest;
•: disclose information about the holding, disposal or acquisition of our shares and other securities;
•: restrain from actions, which could lead to a conflict between their personal and our interests; and
•: perform other responsibilities as provided by our charter and the Regulation.

Interested Party Transactions

Under the Joint Stock Companies Law, certain transactions are defined as "interested party transactions." Such transactions include transactions involving a member of the board of directors, the company's CEO, a member of the company's management board), any person controlling the company, or any person who is able to give binding instructions to the company, if that person and/or that person's spouse, parents, children, adoptive parents or children, full and half brothers or sisters and/or their controlled entities, is/are:

•: a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary;
•: controlling persons of a legal entity that is a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary; or

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•: a member of any governing body of a company that is a party to, or beneficiary of, a transaction with the company, whether directly or as a representative or intermediary, or a member of any governing body of a management organization of such a company.

Pursuant to the Joint Stock Companies Law a "controlling person" is deemed to be a person (i) directly or indirectly controlling over 50% of the voting shares in another legal entity (on the basis of an instruction, a shareholders' agreement or other agreements); or (ii) having the right to appoint the sole executive body or more than half of the governing body of a controlled entity. A controlled entity is understood to be a legal entity directly or indirectly controlled by the controlling entity.

Pursuant to the changes to the Joint Stock Companies Law, which entered into force on January 1, 2017, transactions defined as "interested party transactions" do not require a mandatory prior approval by disinterested directors or shareholders of the company. However, a company shall notify members of a board of directors, management board or shareholders (if all members of the board of directors are deemed interested or a board of directors is not formed in a company) of a contemplated interested party transaction not later than 15 days prior to execution of such transaction, and the company's sole executive body, members of its board of directors and management board or a shareholder owning at least 1% of the company's voting shares may request consent for such interested party transaction.

In public joint stock companies consent or subsequent approval of the transaction shall be granted (if requested by the sole director, a member of the management board, a member of the board of directors or a shareholder owning at least 1% of the company's voting shares) by a majority of disinterested directors of the company which within one year prior to the decision:

(1): did not act as persons performing functions of the sole executive body, including its executive manager, members of the company's management board or members of the management bodies of the company's managing organization;
(2): did not have spouses, parents, children, adoptive parents and adopted children, full and half brothers and sisters acting as members of the company's management bodies, members of the management bodies of the company's managing organization or of its executive manager; and
(3): did not control the company or the company's managing organization (including its executive manager) or were not entitled to issue instructions binding on the company (collectively, "independent directors").

Consent or subsequent approval by a majority of shareholders who are not interested in the transaction shall be granted if:

•: the value of such transaction or a number of interrelated transactions is 10% or more of the balance sheet value of the company's assets determined under RAS;
•: the transaction or a number of interrelated transactions involves a sale of common shares, in an amount exceeding 2% of the company's issued common stock, or preference shares, in an amount exceeding 2% of the company's issued stock, unless the charter of a company provides for a lesser amount of shares;
•: the number of directors who are not interested in the transaction is not sufficient to constitute a quorum; or
•: the number of directors who are not interested in the transaction and meet the requirements established by clause 3, Article 83 of the Federal Law "On Joint Stock Companies" becomes less than two, unless the charter of a company provides for a higher quorum for a board of directors meeting on this issue.

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Consent or subsequent approval of interested party transactions is not required nor can be requested in the following instances:

•: the transactions are concluded in the ordinary course of business, provided that the company has concluded similar transactions with disinterested parties on substantially similar terms over a long time;
•: the company has only one shareholder that simultaneously performs the functions of the company's CEO;
•: all shareholders owning voting shares of the company are deemed interested in such transactions and there are no other persons interested in such transactions;
•: the transactions constitute the issuance of shares or securities convertible into shares, including by way of subscription;
•: the transactions constitute the issuance of bonds by public subscription or repurchase of bonds;
•: the transactions arise from the repurchase, whether mandatory or not, by the company of its issued shares;
•: the transactions constitute transfer of assets within the framework of reorganization, in particular under merger and accession agreements; or
•: the transactions are mandatory for the company pursuant to Russian law and must be concluded on the basis of fixed prices and tariffs adopted by a competent state body;
•: the transactions are public agreements which terms are similar to other public agreements executed by the company;
•: the transactions constitute the agreements set out by certain provisions of the Federal Law of the Russian Federation No. 35 "On Electricity Power" dated 26 March 2003;
•: the transactions concluded on the same terms as preliminary contracts previously approved as interested party transactions;
•: the transactions concluded in an open tender, if such tender terms were previously approved by the Board of Directors;
•: the value of the transaction or the subject matter under the transaction does not exceed 0.1% of the company's balance sheet assets calculated according to RAS and it also does not exceed the threshold set out by the CBR for these purposes.

Major Transactions

The Joint Stock Companies Law defines a "major transaction" as a transaction, or a number of interrelated transactions entered into beyond the ordinary course of business connected with the direct or indirect acquisition or disposal, or a possibility of disposal (whether directly or indirectly) of property (including intellectual property) having a value of 25% or more of the balance sheet value of the assets of a company determined under RAS, as well as in other cases provided by the Joint Stock Company Law.

Consent or subsequent approval of major transactions is not required nor can be requested in the following instances:

•: the company has only one shareholder that simultaneously performs the functions of the company's CEO;

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•: the transactions involving the placement of common stock, or securities convertible into common stock or transactions involving services provided in connection with such placements;
•: the transactions constitute transfer of assets within the framework of reorganization, in particular under merger and accession agreements;
•: the transactions to be executed by the company pursuant to the federal laws and/or other regulations of the Russian Federation and priced in accordance with the regulations of the Russian government or other federal bodies authorized by the Russian government;
•: the transactions are public agreements which terms are similar to other public agreements executed by the company;
•: the transactions arising from a mandatory tender offer to purchase company's issued shares or securities convertible to shares;
•: the transactions concluded on the same terms as the preliminary contracts previously approved as major transactions.

Major transactions involving assets having a value ranging from 25% to 50% of the balance sheet value of the assets of a company determined under RAS require unanimous approval by all members of the board of directors or, failing to receive such approval, a simple majority vote of a shareholders' meeting.

Major transactions involving assets having a value in excess of 50% of the balance sheet value of the assets of a company determined under RAS require a three-quarters majority vote of a shareholders' meeting.

Change in Control

Anti-takeover Protection

Russian legislation requires the following:

•: A person intending to acquire more than 30% of a public joint stock company's ordinary shares and voting preferred shares (including, for such purposes, shares already owned by such person and its affiliates), will be entitled to make a public tender offer to other holders of such shares or securities convertible into such shares (the "voluntary offer").
•: A person that has acquired more than 30% of a public joint stock company's ordinary shares and voting preferred shares (including, for such purposes, shares already owned by such person and its affiliates) will, except in certain limited circumstances, be required to make, within 35 days of acquiring such shares, a public tender offer for other shares of the same class (the "mandatory offer") and for securities convertible into such shares, at the price which is not less than the price determined based on a weighted average market price of the shares over the six month period before the filing of the offer with the CBR as described below, if the shares are publicly traded, or on a price supplied by an appraiser if the shares have no or insufficient (less than six months) trading history. The public tender offer price may not be less than the highest price at which the offeror or its affiliated persons purchased or undertook to purchase the relevant securities over the six month period before the offer was sent to the company. From the moment of acquisition of more than 30% of the shares until the date the offer was sent to the company, the person making the offer and its affiliates will be able to register for quorum purposes and vote only 30% of the company's ordinary shares and voting preferred shares (regardless of the size of their actual holdings). These rules also apply to acquisitions resulting in a person or a group of persons owning more than 50% and 75% of a company's issued ordinary shares and voting preferred shares.

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•: A person that as a result of an offer described in either of the preceding paragraphs becomes (individually or with its affiliates) the owner of more than 95% of the company's ordinary shares and voting preferred shares, must buy out the remaining shares of the company as well as other securities convertible into such shares upon request of the holders of such shares or other securities, and may require such holders to sell such shares and other securities, at the price determined in the manner described in the preceding paragraph but not less than (i) the price of the preceding acquisition of the company's relevant securities under an offer described in either of the preceding paragraphs as a result of which the offeror and its affiliates acquired over 95% of the company's ordinary shares and voting preferred shares; or (ii) the highest price at which after the expiration date of an offer described in either of the preceding paragraphs the offeror or its affiliates purchased or undertook to purchase the relevant securities.
•: An offer of the kind described in either of the preceding three paragraphs must be accompanied by a bank guarantee of payment. If the company is publicly traded, prior notice of the offer must be filed with the CBR; otherwise, notice must be filed with the CBR no later than the date of the offer. The CBR may order amendments to the terms of the offer (including price) in order to bring them into compliance with the rules.
•: Once such an offer has been made, competing offers for the same securities can be made by third parties and, in certain circumstances, acceptance of the initial offer may be withdrawn by the security holders who choose to accept such competing offer. From the making of such an offer until 20 days after its expiry (which period may in certain cases exceed 100 days) the company's shareholders' meeting will have the sole power to make decisions on charter capital increase, issuance of securities, approval of interested party and certain major transactions, and on certain other significant matters.

The above rules may be supplemented through CBR rulemaking, which may result in a wider, narrower or more specific interpretation of these rules by the government and judicial authorities, as well as by market participants.

Approval of the FAS

Pursuant to the Federal Law on Competition, until January 5, 2016, the FAS had to approve in advance acquisitions of voting shares in a company involving (1) companies with a combined value of assets or combined annual revenues calculated under RAS exceeding a certain threshold, or (2) companies included in a register of business entities having more than a 35% share of a certain commodity market or otherwise occupying a dominant position on the market, and which would result in acquisition by a person (or a group of affiliates) of more than 25%, 50% or 75% of voting shares of a joint stock company, or a participation interest according 1/3, 50%, ²/3 of voting rights in a limited liability company, or in a transfer between such companies of assets or rights to assets, the value of which exceeds a certain amount.

According to the amendments made by the Federal law No. 275-FZ dated October 5, 2015 starting from January 5, 2016 the regulations in relation to the abovementioned register were repealed and only the combined value of assets or combined annual revenues of the companies involved in the transaction is taken in account. See also "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we are found to have a dominant position in the markets where we operate and are determined to have abused this position, the FAS may be entitled to regulate our subscriber tariffs and impose certain restrictions on our operations."

Strategic Industries Law

Pursuant to the Strategic Foreign Investment Law, investments resulting in a foreign entity or a group of entities receiving control over a company with strategic importance for the national defense

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and security of the Russian Federation (a "strategic company") or acquisition of fixed production assets of a strategic company having value of at least 25% of its assets calculated under RAS require prior approval from the state authorities. The procedure for issuing such consent involves a special governmental commission on control of foreign investments, which was established by the Resolution of the Government of Russia dated July 6, 2008 as the body responsible for granting such consents, and the FAS, which is authorized to process applications for consent from foreign investors. For the purposes of the Strategic Foreign Investment Law "control" means an ability to determine, directly or indirectly, decisions taken by a strategic company, whether through voting at the general shareholders' (participants') meeting of the strategic company, participating in the board of directors or management bodies of the strategic company, or acting as the external management organization of the strategic company, or otherwise. As a result, "control" will generally be deemed to exist if an entity or a group of entities acquires more than 50% of the shares (or participation interest in share capital) of a strategic company, or if through a contract or securities with voting rights it is able to appoint more than 50% of the members of the board of directors or of the management board of a strategic company.

Furthermore, if a foreign entity or group of entities holding securities of a strategic company or other entity that exercises control over this company becomes a direct or indirect holder of voting shares in an amount that is considered to give it direct or indirect control over this company in accordance with the Strategic Foreign Investment Law due to a change in allocation of voting shares pursuant to the procedures provided by Russian law (e.g., as a result of a buy-back of its shares by the relevant company), then such entity or group of entities will have to apply for state approval of its control within three months after it received such control.

Moreover, the Russian prime minister, who acts as President of the Commission, is entitled to impose an obligation of prior approval in regard of any transaction involving a Russian enterprise, regardless of whether such enterprise operates within a "strategic" industry or not. The decision of the Commission President has to be sent to the investor by the FAS within three business days. Upon receipt the investor will need to file the necessary application with the FAS to obtain approval. Failure to comply will result in penalties set out by the legislation.

In addition, foreign investors are required to notify the FAS about any transactions undertaken by them resulting in the acquisition of 5% or more of the charter capital of a strategic company and other transactions or other actions preapproved in accordance with the Strategic Foreign Investment Law.

See also "Item 3. Key Information—D. Risk Factors—Legal Risks and Uncertainties—The Strategic Foreign Investment Law imposes certain restrictions on us and our existing and potential foreign shareholders, which could have a material adverse effect on our business, financial condition, results of operations and prospects."

Disclosure of Ownership

Under Russian law, a person acquiring, directly or indirectly, 5% or more of our voting shares is required to notify us and the CBR of, and we must then publicly disclose, such acquisition, as well as any subsequent acquisitions or disposals resulting in the crossing of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% thresholds of our voting shares by such person.

A holder of more than 5% of our voting shares is required to file with us and the CBR information about its controlling shareholder (if any) or notify us and the CBR about the absence of any such controlling shareholders.

Our subsidiaries are required to notify us and the CBR about the acquisition of our common shares. We are required to publicly disclose the acquisition of our voting shares by our subsidiaries.

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Notification of Foreign Ownership

Legal entities and individual entrepreneurs who acquire shares in Russian joint stock companies are required to notify the Russian tax authorities (in case the share of direct participation exceeds 10%) within one month following such acquisition.

C. Material Contracts

As of December 31, 2020 we are not the party to any contracts considered material to our financial results or operations except for loan agreement with MTS International Funding Limited relating to the issued loan participation notes and ruble bonds issued. For more information, see "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources."

D. Exchange Controls

The Federal Law on Currency Regulation and Currency Control which came into effect on June 18, 2004 sets forth certain restrictions on settlements between residents of Russia with respect to operations involving foreign securities (including ADSs), including requirements for settlement in Russian rubles.

Repatriation of Export Proceeds

Russian companies must repatriate 100% of their receivables from the export of goods and services (with a limited number of exceptions concerning, in particular, certain types of secured financing).

Restrictions on the remittance of dividends, interest or other payments to non-residents

The Federal Law on Foreign Investments in the Russian Federation of July 9, 1999 specifically guarantees foreign investors the right to repatriate their earnings from Russian investments. However, the evolving Russian exchange control regime may materially affect your ability to do so.

Currently, ruble dividends on common shares may be converted into U.S. dollars without restriction. However, the ability to convert rubles into U.S. dollars is also subject to the availability of U.S. dollars in Russia's currency markets. Although there is an existing market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the further development of this market is uncertain.

E. Taxation

Certain Russian Tax Consequences

The following discussion describes the material Russian corporate income tax and personal income tax consequences to you if you are a U.S. holder of ADSs and a resident of the United States for purposes of the United States—Russia income tax treaty and are fully eligible for benefits under the United States—Russia income tax treaty. Subject to certain provisions of the United States—Russia income tax treaty relating to limitations on benefits, a U.S. resident under the treaty is generally defined as a person liable, under the laws of the United States, to U.S. tax (other than taxes with respect to only of income from sources in the United States or capital situated therein) by reason of your domicile, residence, citizenship, place of incorporation, or any other similar criterion (and, for income derived by a partnership, trust or estate, residence is determined in accordance with the residence of the person liable to tax with respect to such income). The treaty provides for a procedure to resolve matters where a resident of the United States qualifies as a Russian tax resident under Russian domestic rules. The treaty also provides for the non-application of treaty benefits to certain types of entities.

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Additionally, the benefits under the United States—Russia income tax treaty discussed in this document generally are not available to U.S. persons who hold ADSs in connection with the conduct of a business in the Russian Federation through a permanent establishment as defined in the United States—Russia income tax treaty. Subject to certain exceptions, a U.S. person's permanent establishment under the United States—Russia income tax treaty is a fixed place of business through which such person carries on business activities in the Russian Federation (generally including, but not limited to, a place of management, a branch, an office and a factory). Under certain circumstances, a U.S. person may be deemed to have a permanent establishment in the Russian Federation as a result of activities carried on in the Russian Federation through agents of the U.S. person. This summary does not address the treatment of holders described in this paragraph.

Treaty benefits may be potentially available to U.S. tax residents that are not subject to limitations on treaty benefits under the treaty, do not operate through a permanent establishment in Russia and are foreign legal entities (i.e., a legal entity or organization in each case not organized under Russian law) or individuals not considered Russian tax residents under Russian law. Under current Russian law, the Russian tax residency for entities is generally determined based on the place of management of this entity; for individuals is generally determined based on the number of days a person spends in Russia in a 12-month rolling period. Law specifies that an individual present in Russia for an aggregate period of 183 days in any consecutive 12-month period will be considered as a tax resident. Since tax year in Russia is a calendar year the final tax residency status of an individual taxpayer shall still be defined for a whole calendar year by counting the days spent in Russia within that relevant calendar year. Accordingly, to be considered a Russian tax resident, the taxpayer should spend at least 183 days in Russia in a calendar year. The following discussion is based on:

•: Russian tax legislation; and
•: the United States—Russia income tax treaty (and judicial and administrative interpretations thereof by the Russian authorities).

All of the foregoing tax consequences are based on information in effect as of the date of this document and are subject to change, possibly on a retroactive basis, after the date of this document. This discussion is also based, in part, on representations of the depositary, and assumes that each obligation in the deposit agreement and any related agreements will be performed in accordance with its terms. The discussion with respect to Russian legislation is based on our understanding of current Russian law and Russian tax rules, which are subject to frequent change and varying interpretations.

The following discussion is not intended as tax advice to any particular investor. It is also not a complete analysis or listing of all potential Russian corporate income and personal income tax consequences to you of ownership of ADSs. We urge you to consult your own tax adviser regarding the specific Russian tax consequences of the ownership and disposition of ADSs under your own particular factual circumstances.

Specific uncertainties associated with the tax treatment of ADS holders

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taxes when making transferring the dividends to the depositary. It is currently unclear how the depositary will collect the necessary information from ADS holders. Thus, while a U.S. holder may technically be entitled to benefit from the provisions of the United States—Russia income tax treaty, in practice such relief may be difficult or impossible to obtain.

Russian tax law and procedures are also not well developed, and local tax inspectors have considerable autonomy and often interpret tax rules without regard to the rule of law. Both the substantive provisions of Russian tax law and the interpretation and application of those provisions by the Russian tax authorities may be subject to more rapid and unpredictable change than in jurisdictions with more developed capital markets.

Taxation of Dividends

Dividends paid to U.S. holders generally will be subject to Russian withholding tax at a 15% rate. The tax burden may be reduced to 5% or 10% under the United States—Russia income tax treaty for eligible U.S. holders; a 5% rate may potentially apply for U.S. holders who are legal entities owning 10% or more of the company's voting shares, and a 10% rate applies to dividends paid to eligible U.S. holders in other cases, including dividend payments to individuals and legal entities owning less than 10% of the company's voting shares. Reduced tax rates may apply in case the information, required by the Russian Tax Code, is presented to the tax agent fully and in time; otherwise, the tax agent is required to use the baseline tax rate established by the code, or tax rate set by the applicable tax treaty, not taking into account the percentage of share in Charter Capital, the amount of investment, or term of ownership, whichever is appropriate. See also "—United States—Russia Income Tax Treaty Procedures."

From a practical perspective, it may have not been possible for the depositary to collect the necessary information from all ADS holders and submit the relevant information to the custodian. Therefore, with respect to legal entities or organizations who are U.S. holders, the custodian may be obligated to withhold income tax at a rate of 15% from dividend payments made to the trustee, unless the information on the ADS holder, the respective amount of ADS held and its tax residency is provided to the depositary and thereafter to the custodian within 7 days of the date on which the shareholders entitled to dividend payout are determined according the relevant decision of the general shareholders meeting. The same amendments have also introduced an expedited refund process whereby the information regarding the ADSs not provided to the custodian can be submitted within 25 days of the date of the payment of the dividends to the depositary in order for the custodian to refund the difference between the increased 15% tax rate used and the tax rate the respective ADS holders are entitled to according to their tax residency, however this process is new and not tested and it is unclear how it will work in practice. Although non-resident holders of ADSs may apply for a refund of a portion of the tax withheld under an applicable tax treaty, the procedure to do so may be time consuming and no assurance can be given that the Russian tax authorities will grant a refund. See "—United States—Russia Income Tax Treaty Procedures."

If the appropriate information is not provided to the depositary for transfer to the custodian in a timely manner, the custodian may have to withhold tax at the 15% rate, and U.S. holders that are legal entities qualifying for a reduced rate under the United States—Russia income tax treaty then may file claims for a refund within three years with the Russian tax authorities.

With respect to individuals who are U.S. holders of ADSs and who are Russian tax non-residents, the custodian may also be obligated to withhold income tax at the rate of 15% from dividend payments made to the depositary. Similarly to the order applicable to legal entities, reduced tax rates may apply in case the information, required by the Russian Tax Code, is presented to the tax agent fully and in time; otherwise, the tax agent is required to use the baseline tax rate established by the code, or tax rate set by the applicable tax treaty, not taking into account the percentage of share in Charter Capital,

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the amount of investment, or term of ownership, whichever is appropriate. Where withholding of personal income tax is not performed, individuals who are U.S. holders of ADSs will then be required to submit an annual personal tax return to the Russian tax authorities and pay Russian income tax at a rate of 15% as under Russian law an individual should report on his or her tax liabilities in case the relevant tax was due but not withheld by a tax agent from the relevant payment. When submitting the tax return, individuals who are U.S. holders may claim an application of the reduced rates of withholding tax established by the relevant treaty, provided that the procedures described in "—United States—Russia Income Tax Treaty Procedures" are complied with. Obtaining the respective approvals from the tax authorities may be time-consuming and burdensome.

For individuals claiming treaty relief, the documents substantiating the right for treaty benefits should be submitted to the Russian tax authorities within one year after the end of the year to which these benefits relate. In practice, where withholding is performed, the tax authorities may refuse to refund or credit the 15% tax withheld from payment of dividends to the depositary and, therefore, it is possible that individuals who are U.S. holders may be subject to up to a 30% effective tax rate (general tax rate for Russian tax non-residents) on their share of dividends.

The amendments to the Russian Tax Code, which came into effect from January 1, 2015, exclude dividends from the scope of payments subject to 30% withholding tax rate.

Taxation of Capital Gains

Legal entities and Organizations

Income received by a foreign company from the sale, exchange or other disposal (assuming that such income is not related to a permanent establishment of a foreign company in Russia) of shares (participation interest) in an organization in which over 50% of the assets consist of immovable property located in Russia, as well as financial instruments derived from such shares, is treated as income derived from a source in the Russian Federation and is subject to withholding tax at a rate of 20%. However, gains arising from the disposition of the securities which are traded on an organized stock exchange are not treated as Russian-source income, and should not be subject to taxation in Russia.

The amount of such income is typically determined as the sales price of shares (participation interest). However, if documentary support for the acquisition cost of the shares (participation interest) is available, the tax may instead be assessed on the basis of the difference between the sales price and the acquisition cost (including other related costs) if documentary evidence of such costs is submitted to the tax agent. The Russian Tax Code also establishes special rules for calculating the tax base for the purposes of transactions with securities. However, an exemption applies if immovable property located in Russia constitutes more than 50% of our assets and the securities are traded on a foreign stock exchange. The determination of whether more than 50% of our assets consist of immovable property located in Russia is inherently factual and is made on an on-going basis and the relevant Russian legislation and regulations in this respect are not entirely clear. Hence, there can be no assurance that immovable property owned by us and located in Russia does not currently and will not constitute more than 50% of our assets as at the date of the sale of ADSs by non-residents.

Under the United States—Russia income tax treaty, capital gains from the sale of shares and/or ADSs by eligible U.S. holders should be relieved from taxation in Russia, unless 50% or more of our

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assets (the term "fixed assets" is used in the Russian version of the treaty) were to consist of immovable property located in Russia.

Individuals

The taxation of the income of tax non-resident individuals depends on whether this income is received from Russian or non-Russian sources. Russian tax law considers the place of sale as an indicator of source. Accordingly, the sale of securities outside of Russia by individuals who are non-resident holders should not be considered Russian source income and, therefore, should not be taxable in Russia. However, Russian tax law gives no clear indication as to how the place of sale of securities should be defined in this respect. Therefore, the Russian tax authorities may have a certain amount of flexibility in concluding whether a transaction is in Russia or out of Russia.

The sale, exchange or other disposal of the shares and ADSs by non-resident individual holders in Russia will be considered Russian source income and will be subject to tax at a rate of 30% on the difference between the sales price and the acquisition costs of such securities, as well as other documented expenses, such as depositary expenses and broker fees, among others, defined by the tax rules.

Under Russian law, the acquisition costs and related expenses can be deducted at the source of payment if the sale was made by a non-resident holder through a licensed Russian broker, trust manager or other person that carries out operations under agency or commission agreements, or other agreements in favor of a taxpayer. Such party (as defined above) should also act as a tax agent and withhold the applicable tax. Such tax agent will be required to report to the Russian tax authorities the amount of income realized by the non-resident individual and tax withheld upon the sale of the securities.

Otherwise, if the sale is made to individuals but not through a tax agent, generally no withholding needs to be made and the non-resident holder will have an obligation to file a tax return, report his income realized and apply for a deduction of acquisition expenses (which includes filing of support documentation). Although Russian tax law imposes tax agent responsibility only on professional trustees, brokers or dealers, in practice, the tax authorities may require Russian legal entities and organizations or foreign companies with any registered presence in Russia that are not professional trustees, dealers or brokers to act as tax agents and withhold the applicable tax when purchasing securities from non-resident individuals.

Under the United States—Russia income tax treaty, capital gains from the sale of the ADSs by eligible U.S. holders should be relieved from taxation in Russia, unless 50% or more of our assets (the term "fixed assets" is used in the Russian version of the United States—Russia Tax Treaty) were to consist of immovable property located in Russia. If this 50% threshold is not met, individuals who are U.S. holders may seek to obtain the benefit of the United States—Russia income tax treaty in relation to capital gains resulting from the sale, exchange or other disposition of the ADSs.

In order to apply the provisions of relevant double tax treaties, the individual holders should receive clearance from the Russian tax authorities as described below. See "—United States—Russia Income Tax Treaty Procedures" below.

United States—Russia Income Tax Treaty Procedures

The Russian Tax Code does not contain a requirement that a non-resident holder that is a legal entity or organization must obtain tax treaty clearance from the Russian tax authorities prior to receiving any income in order to qualify for benefits under an applicable tax treaty. However, a non-resident legal entity or organization seeking to obtain relief from or reduction of Russian withholding tax under a tax treaty must provide to a Russian company or foreign company or

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organization acting through its Russian registered presence, which is a tax agent (i.e., the entity paying income to a non-resident) a confirmation of its tax treaty residence that complies with the applicable requirements and a Russian translation attached to it in advance of receiving the relevant income. The tax residency confirmation needs to be renewed on an annual basis and provided to the payer of income before the first payment of income in each calendar year. Starting from 2017, in order to benefit from the tax treaty the recipient of passive income has to provide a confirmation that it is the beneficial owner of this income.

A U.S. holder may obtain the appropriate certification by mailing completed forms, together with the holder's name, taxpayer identification number, the tax period for which certification is required, and other applicable information, to the United States Internal Revenue Service. The procedures for obtaining certification are described in greater detail in the instructions to Internal Revenue Service Form 8802. As obtaining the required certification from the Internal Revenue Service may take at least six to eight weeks, U.S. holders should apply for such certification as soon as possible.

In accordance with the Russian Tax Code, to rely on tax treaty benefits, a non-resident holder who is an individual must present to the tax authorities an official document confirming his residency in the home country issued by the competent authorities in his/her country of residence and also other supporting documentation including a statement confirming the income received and the tax paid in the home country, also confirmed by the relevant foreign tax authorities, duly translated and apostilled or pass through a consular legalization. Technically, such a requirement means that an individual cannot rely on the tax treaty until he or she pays the tax in the jurisdiction of his or her residence. Therefore, advance relief from or reduction of withholding taxes for individuals will generally be impossible as it is very unlikely that the supporting documentation for the treaty relief can be provided to the tax authorities and approval from the latter obtained before any payments are made to individuals. A non-resident holder which is an individual may apply for treaty-based benefits and claim tax refund within three years following the end of the tax period in which the relevant income was received and the tax was withheld.

If a non-resident holder which is a legal entity or organization does not obtain double tax treaty relief at the time that income or gains are realized and tax is withheld by a Russian tax agent, the non-resident holder may apply for a refund within three years from the end of the tax period (a calendar year) in which the tax was withheld. To process a claim for a refund, the Russian tax authorities require (i) apostilled or legalized confirmation of the tax treaty residence of the non-resident at the time the income was paid, (ii) an application for the refund of the tax withheld in a format provided by the Russian tax authorities and (iii) copies of the relevant contracts under which the foreign entity received income, as well as payment documents confirming the payment of the tax withheld to the Russian budget (Form 1012DT for dividends and interest and Form 1011DT for other income are designed by the Russian tax authorities to combine requirements (i) and (ii) specified above). The Russian tax authorities may require a Russian translation of the above documents if they are prepared in a foreign language. The refund of the tax withheld should be granted within one month of the filing of the above set of documents with the Russian tax authorities. However, procedures for processing such claims have not been clearly established and there is significant uncertainty regarding the availability and timing of such refunds.

Recent amendments to the Russian Tax Code have established additional requirements to the reimbursement procedure referred to above, identifying further documents that need to be provided to the tax authorities. These include: 1) a document confirming the rights of the ADS holder to the ADS as of the date on which the shareholders entitled to the dividend payout are set according to the relevant decision of the General shareholders meeting, 2) a document evidencing the actual amount of income received by the ADS holder, 3) a document with information about the custodian that transferred the dividend amounts to the depositary, and 4) documents confirming the ADS holder's compliance with the requirements of the Tax Code and/or the relevant income tax treaty provisions

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necessary for application of a reduced rate. The above requirements refer not only to ADS, but also to securities in general. In addition to the documents listed above, tax authorities may require more information and documents. Decision on refund is to be taken by the tax authorities within six months. The procedures referred to above are new and no assurance can be given that the custodian will be able to apply the respective double tax treaties when paying dividends to non-resident holders or that ADS holders would be successful in receiving relevant tax refunds.

Neither the depositary nor us has or will have any obligation to assist an ADS holder with the completion and filing of any tax forms.

Certain United States Federal Income Tax Consequences

The following is a general description of certain material United States federal income tax consequences that apply to you if you are, for United States federal income tax purposes, a beneficial owner of ADSs that is an individual who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia, an estate the income of which is subject to U.S. federal income tax regardless of its source, or a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial trust decisions, or if the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person (in each case, a "U.S. Holder"). This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service ("IRS"), all as publicly available and in effect as of the date of this document. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of ADSs, or that any such contrary position would not be sustained by a court. If an entity or arrangement treated as a partnership for United States federal income tax purposes is an owner of ADSs, the United States federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, entities or arrangements treated as partnerships for United States federal income tax purposes that hold ADSs and partners in such partnerships are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them. The following discussion does not deal with the tax consequences to any particular investor or to persons in special tax situations such as:

•: an insurance company;
•: a tax-exempt organization;
•: a financial institution;
•: a person subject to the alternative minimum tax;
•: a person who is a broker-dealer in securities or a trader subject to a mark-to-market election;
•: a S corporation;
•: a partnership, a pass-through entity or arrangement, a person holding ADSs through a partnership or other pass-through entity or arrangement;
•: an expatriate subject to section 877 of the Code;
•: a holder that is not a U.S. Holder;
•: an investor that has a functional currency other than the U.S. dollar;

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•: a person subject to special tax accounting rules as a result of any item of gross income with respect to the shares or ADSs being taken into account in an applicable financial statement;
•: a regulated investment company;
•: a real estate investment trust;
•: an owner of, directly, indirectly or by attribution, 10% or more of the outstanding shares of our stock (by vote or value); or
•: an owner holding ADSs as part of a hedge, straddle, synthetic security or conversion transaction.

In addition, this summary is limited to U.S. Holders holding ADSs as "capital assets" within the meaning of Section 1221 of the Code and whose functional currency is the U.S. dollar. The discussion below does not address the effect of the Medicare tax on "net investment income" or of any United States state or local tax law or foreign tax law. This discussion also does not address any tax consequences relating to the direct ownership of ordinary shares.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. For purposes of applying United States federal income tax law, we believe, and the following discussion assumes, that a holder of an ADS should be treated as the owner of the underlying shares of common stock represented by that ADS, although this matter is not free from doubt.

The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the shares underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying shares. Accordingly, the analysis of the creditability of Russian withholding taxes described below and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders (discussed below) could be affected by actions taken by intermediaries in the chain of ownership between the holder of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of underlying shares and future actions that may be taken by the U.S. Treasury. The remainder of this discussion assumes that a holder of an ADS will be treated as the beneficial owner of the underlying shares of common stock represented by such ADS for United States federal income tax purposes.

Taxation of Distributions on ADSs

Subject to the passive foreign investment company rules described below, for United States federal income tax purposes, the gross amount of a distribution, including any Russian withholding taxes, paid by us with respect to ADSs will be treated as a taxable foreign source dividend on the date of actual or constructive receipt by the depositary to the extent of our current and accumulated earnings and profits, computed in accordance with United States federal income tax principles. If you are a non-corporate U.S. Holder such dividends may be "qualified dividend income" that is taxed at the lower applicable capital gains rate provided that certain conditions are satisfied, including (1) certain holding period requirements are satisfied, (2) either (a) our ADSs continue to be listed on the New York Stock Exchange (are otherwise readily tradable on an established securities market in the United States) or (b) we are eligible for the benefits of the United States—Russia income tax treaty, and (3) we are not, for the taxable year in which the dividend was paid, or in the preceding taxable year, a "passive foreign investment company" (as discussed below). Distributions with respect to ADSs in excess of our current and accumulated earnings and profits will be applied against and will reduce your tax basis in such ADSs and, to the extent in excess of such tax basis, will be treated as gain from a sale or exchange of such ADSs. You should be aware that we do not intend to calculate our earnings and profits for United States federal income tax purposes and, unless we make such calculations, you

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should assume that any distributions with respect to ADSs generally will be treated as a dividend, even if such distributions would otherwise be treated as a return of capital or as capital gain pursuant to the rules described above. If you are a corporation, you will not be allowed a deduction for dividends received in respect of distributions on ADSs, which is generally available for dividends paid by U.S. corporations. U.S. Holders are strongly urged to consult their tax advisors as to the U.S. federal income tax treatment of any distribution received with respect to ADSs.

The amount of any distribution paid in rubles will equal the U.S. dollar value of such rubles, calculated using the exchange rate in effect on the date of actual or constructive receipt by the depositary, regardless of whether the payment is actually converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange rate fluctuations during the period from the date of receipt by the depositary to the date the rubles are converted into U.S. dollars will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes. Additionally, you may be required to recognize foreign currency gain or loss on the receipt of a refund of Russian withholding tax pursuant to the United States—Russia income tax treaty to the extent the United States dollar value of the refund differs from the dollar equivalent of that amount on the date of receipt of the underlying distribution.

Russian withholding tax at the rate applicable to you under the United States—Russia income tax treaty should be treated as a foreign income tax that, subject to generally applicable limitations and conditions, may be eligible for credit against your U.S. federal income tax liability or, at your election, may be deducted in computing taxable income. If Russian tax is withheld at a rate in excess of the rate applicable to you under the United States—Russia income tax treaty, you may not be entitled to U.S. foreign tax credits for the excess amount, even though the procedures for claiming refunds for such Russian taxes and the practical likelihood that refunds will be made available in a timely fashion are uncertain (as described under "Certain Russian Tax Consequences"). If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will generally be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends.

The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For United States foreign tax credit purposes, a dividend distribution with respect to the ADSs will be treated as foreign source "passive category income." The rules relating to the determination of the foreign tax credit, or deduction in lieu of the foreign tax credit, are complex and you should consult your tax advisors with respect to those rules.

Taxation on Sale or Other Taxable Disposition of ADSs

Subject to the passive foreign investment company rules described below, the sale or other taxable disposition of ADSs will generally result in the recognition of gain or loss in an amount equal to the difference between the amount realized on the sale or other taxable disposition and your adjusted basis in such ADSs. That gain or loss will be capital gain or loss and will be long-term capital gain or loss if you have held the ADSs for more than one year. If you are a non-corporate U.S. Holder, such recognized long-term capital gain is generally subject to a reduced rate of United States federal income tax. Limitations may apply to your ability to offset capital losses against ordinary income.

Gain or loss recognized on the sale of ADSs will generally be treated as U.S. source income or loss for foreign tax credit purposes. The use of any foreign tax credits relating to any Russian taxes imposed upon such sale may be limited. You are strongly urged to consult your tax advisors as to the availability of tax credits for any Russian taxes withheld on the sale of ADSs.

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Passive Foreign Investment Company Considerations

A non-U.S. corporation generally will be a passive foreign investment company (a "PFIC"), in any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable "look-through" rules, either (i) at least 75% of its gross income is "passive income" or (ii) at least 50% of the average value of its total assets is attributable to assets which produce passive income or are held for the production of passive income.

We do not believe that we were a PFIC for the year ended December 31, 2020. However, our possible status as a PFIC must be determined annually and requires a factual determination that depends on, among other things, the nature and composition of our income, assets and activities for the entire taxable year. Moreover, the value of our total assets for PFIC purposes is generally determined based on the market price of our ADSs, which is subject to potentially significant fluctuation. Therefore, our possible status as a PFIC may be subject to change. Thus there can be no assurance that we will not be treated as a PFIC in our current taxable year or in the future. If we were to be treated as a PFIC, U.S. Holders generally would be required to pay additional taxes on certain distributions and gains on sales or other dispositions (including pledges) of the ADSs, at tax rates that may be higher than those otherwise applicable. You should consult your tax advisors regarding the application of the PFIC rules to your investment in the ADSs.

Information Reporting and Backup Withholding

Dividend payments with respect to ADSs and proceeds from the sale or exchange of ADSs may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

Additional Reporting Requirements

Certain U.S. Holders who are individuals and certain specified non-individual holders may be required to report information relating to an interest in the ADSs, subject to certain exceptions (including an exception for ADSs held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this requirement on their ownership and disposition of the ADSs.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

The documents that are exhibits to or incorporated by reference in this document can be read at the U.S. Securities and Exchange Commission's Public Reference Room at 100 F Street, NE,

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Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 or, from outside the United States, at 1-202-942-8090. Copies may also be obtained from the SEC website at www.sec.gov. Our electronic filings are available at the SEC website www.sec.gov. Information about MTS is also available on the Internet at www.ir.mts.ru Information included in our website does not form part of this document.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates and foreign currency exchange rates. We are subject to market risk deriving from changes in interest rates, which may affect the cost of our financing. Foreign exchange risks exist to the extent our revenues, costs and debt obligations are denominated in currencies other than the functional currency in the countries of our operations.

Interest Rate Risk

We are exposed to variability in cash flow primarily related to our variable interest rate debt and exposed to fair value risk related to our fixed rate notes. As of December 31, 2020, RUB 130,867 million, or 30.49% of our total indebtedness, excluding lease obligations, was variable interest rate debt, while RUB 298,401 million, or 69.51% of our total indebtedness, excluding lease obligations, was fixed interest rate debt.

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The table below presents principal cash flows and related weighted average interest rates for indebtedness by contractual maturity dates as of December 31, 2020.

Contractual Maturity Date as of December 31, 2020:

Indebtedness	Currency

	(amounts in millions of RUB)
Variable debt
VTB	RUB	216		234		257		24,293		30,000		—		55,000		4.75	%
VTB	RUB	—		—		—		—		15,000		15,000		30,000		4.90	%
VTB	RUB	—		—		—		—		45,000		—		45,000		5.50	%
ZTV	RUB	—		1,776		—		—		—		—		1,776		6.25	%
Total variable debt		216		2,010		257		24,293		90,000		15,000		131,776



Weighted average interest rate		5.06	%	5.06	%	5.05	%	5.05	%	5.11	%	4.90	%	5.04	%
Fixed-rate notes
MTS International Notes due 2023	USD	—		—		33,122		—		—		—		33,122		5.00	%
MTS PJSC Notes due 2022 (V series)	RUB	12		—		—		—		—		—		12		0.25	%
MTS PJSC Notes due 2023	RUB	—		—		9,873		—		—		—		9,873		6.50	%
MTS PJSC Notes due 2031	RUB	891		—		—		—		—		—		891		7.50	%
MTS PJSC Notes due 2022	RUB	—		10,000		—		—		—		—		10,000		9.00	%
MTS PJSC Notes due 2021	RUB	10,000		—		—		—		—		—		10,000		8.85	%
MTS PJSC Notes due 2022	RUB	—		15,000		—		—		—		—		15,000		7.70	%
MTS PJSC Notes due 2021	RUB	10,000		—		—		—		—		—		10,000		7.10	%
MTS PJSC Notes due 2025	RUB	—		—		—		—		10,000		—		10,000		7.25	%
MTS PJSC Notes due 2024	RUB	—		—		—		10,000		—		—		10,000		8.70	%
MTS PJSC Notes due 2022	RUB	—		5,000		—		—		—		—		5,000		8.40	%
MTS PJSC Notes due 2024	RUB	—		—		—		7,500		—		—		7,500		8.60	%
MTS PJSC Notes due 2025	RUB	—		—		—		—		15,000		—		15,000		8.00	%
MTS PJSC Notes due 2026	RUB	—		—		—		—		—		10,000		10,000		7.90	%
MTS PJSC Notes due 2023	RUB	—		—		15,000		—		—		—		15,000		6.85	%
MTS PJSC Notes due 2022	RUB	—		10,000		—		—		—		—		10,000		6.45	%
MTS PJSC Notes due 2027	RUB	—		—		—		—		—		15,000		15,000		6.60	%
MTS PJSC Notes due 2026	RUB	—		—		—		—		—		5,000		5,000		6.60	%
MTS PJSC Notes due 2027	RUB	—		—		—		—		—		7,000		7,000		6.60	%
MTS PJSC Notes due 2022	RUB	—		10,000		—		—		—		—		10,000		5.50	%
Fixed-rate bank loans
Sberbank	RUB	10,000		39,000		31,000		5,000		—		—		85,000		5.99	%
VEB	RUB	4		4		5		61		78		—		152		2.85	%
VTB	RUB	1,711		—		—		—		—		—		1,711		1.75	%
Sberbank	RUB	1		—		—		—		—		—		1		10.00	%
Ekvant	RUB	36		37		36		28		—		—		137		0.00	%
Maind Kraft	RUB	100		59		—		—		—		—		159		5.10	%
NVision Group	RUB	12		6		6		3		—		—		27		8.70	%
Cisco	RUB	351		184		—		—		—		—		535		6.60	%
Cisco	RUB	218		115		—		—		—		—		333		7.15	%
Cisco	RUB	124		132		—		—		—		—		256		7.01	%
Cisco	RUB	341		363		—		—		—		—		704		6.65	%
Cisco	RUB	143		152		81		—		—		—		376		6.38	%
Cisco	RUB	276		291		307		—		—		—		874		5.38	%
Total fixed debt		34,220		90,343		89,430		22,592		25,078		37,000		298,663



Weighted average interest rate		6.70	%	6.66	%	6.62	%	7.46	%	7.25	%	6.95	%	6.94	%

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We would have experienced an additional interest expense of approximately RUB 1,166 million on an annual basis as a result of a hypothetical increase in variable rates by 1% over the current rate as of December 31, 2020. The rates of EUR and USD as of December 31, 2020 were used in calculations.

The fair value of our publicly traded fixed-rate notes as of December 31, 2020, ranged from 100.50% to 109.93% of the notional amount. As of December 31, 2020, the difference between the carrying value and the fair value of other fixed rate debt, including lease obligations, was immaterial. For details of our fixed-rate debt, refer to Note 25 of our audited consolidated financial statements. The fair value of variable rate debt approximates its carrying value.

We use derivative financial instruments to reduce our exposure to adverse fluctuations in interest rates. We primarily focus on reducing risk caused by the fluctuations in interest rates for our variable-rate long-term debt. According to our policy, we have entered into several cross-currency interest rate swap agreements. Most of these contracts assume periodical exchanges of interest payments or both principal and interest payments from ruble-denominated amounts to U.S. dollar-denominated amounts, to be exchanged at specified rates. The rates were determined with reference to the market spot rates upon issuance. These contracts also include an interest rate swap of a variable U.S. dollar-denominated interest rate to a fixed ruble-denominated interest rate. All of our cross-currency interest rate swaps agreements mature in 2023 and 2024.

The table below presents a summary of our cross-currency interest rate swap agreements:

Type of derivative		Notional amount (at inception)

		(amounts in millions of Rubles)
Cross-currency Interest Rate Swap Agreements
Swap agreements with Sberbank to pay a fixed rates of 8.29% to 8.3125% and receive a variable interest rate of 6m LIBOR	June 2024		4,410	445
Swap agreements with Rosbank to pay a fixed rates of 7.924% to 8.2965% and receive a variable interest rate of 6m LIBOR	June 2024		8,499	1,009
Swap agreements with VTB bank to pay a variable Central Bank key rate (not less than 7%) + (–0.02%)–0.575% and receive a fixed interest rate of 5%	May 2023		20,841	3,054

Foreign Currency Risk

The following tables show, for the periods indicated, certain information regarding the exchange rate between the ruble and the U.S. dollar, based on data published by the CBR. These rates may

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differ from the actual rates used in preparation of our financial statements and other financial information provided herein.

	Rubles per U.S. dollar

Years ended December 31,	High		Low		Average⁽¹⁾		Period End
2016		83.59		60.27		66.35		60.66
2017		60.75		55.85		58.10		57.60
2018		69.97		55.67		62.71		69.47
2019		69.47		61.72		64.74		61.91
2020		80.88		60.95		72.15		73.88

(1): The average of the exchange rates on the last business day of each full month during the relevant period.

	Rubles per U.S. dollar

	High		Low
July 2020		73.36		70.44
August 2020		75.54		72.97
September 2020		79.68		73.58
October 2020		79.33		76.44
November 2020		80.57		75.45
December 2020		76.32		72.93
January 2021		76.25		73.36
February 2021		76.25		73.29
March 2021⁽¹⁾		76.17		72.96

Source: CBR.

(1): For the period from March 1, 2021 to March 29, 2021.

The exchange rate between the ruble and the U.S. dollar quoted by the CBR for March 29, 2021 was 75.76 rubles per U.S. dollar.

We have exposure to fluctuations in the value of the U.S. dollar relative to the Russian ruble and Armenian dram which are the functional currencies in our countries of operation. As a result, we may face translation losses, increased debt service payments and increased capital expenditures and operating costs should these currencies depreciate against the U.S. dollar.

A significant part of our capital expenditures, borrowings and certain operating costs (roaming expenses, cost of customer equipment and other costs) are either denominated in U.S. dollars or tightly linked to the U.S. dollar exchange rate, and our U.S. dollar-denominated debt represents our primary future risk of exchange loss in U.S. dollar terms. A decline in the value of the ruble or dram versus the U.S. dollar would result in currency remeasurement losses as the amount of these currencies required to repay U.S. dollar-denominated debt increases. In addition, if any of the ruble or dram declines against the U.S. dollar and tariffs cannot be maintained for competitive or other reasons, our revenues and operating margins could be materially adversely affected and we could have difficulty repaying or refinancing our U.S. dollar-denominated indebtedness and financing our capital expenditures and operating costs.

A portion of our capital expenditures, borrowings and certain operating costs (roaming expenses, costs of customer equipment and other costs) are also denominated in euros. We currently do not hedge against the risk of decline in the ruble or dram against the euro because settlements denominated in euros are not significant.

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We would experience a currency exchange gain of RUB 2,357 million on our U.S. dollar denominated net monetary assets as a result of a hypothetical 30.0% increase in the ruble/manat/dram/sum to U.S. dollar exchange rate at December 31, 2020. We would experience a currency exchange loss of RUB 2,046 million in the fair value of our euro denominated net monetary assets as a result of a hypothetical 30.0% increase in the ruble/manat/dram to euro exchange rate at December 31, 2020. We are unable to estimate future loss of earnings as a result of such changes.

Item 12. Description of Securities Other Than Equity Securities

(Only Items 12.D.3-4 are applicable.)

D. American Depositary Shares

3.: Fees and charges that a holder of American Depositary Receipts may have to pay, either directly or indirectly.

Category	Depositary Actions	Associated Fee

(a) Depositing or substituting the underlying shares	Each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock split declared by the Company, or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the deposited securities	$5.00 for each 100 ADSs (or portion thereof)
(b) Receiving or distributing dividends	Distribution of stock dividends	$5.00 for each 100 ADSs (or portion thereof)
	Distribution of cash	$0.02 or less per ADS (or portion thereof)
(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	$5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing an underlying security	Acceptance of ADRs surrendered for withdrawal of deposited securities or cancellation or reduction of ADSs for any other reason	$5.00 for each 100 ADSs (or portion thereof)
(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	$1.50 per ADS

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Category	Depositary Actions	Associated Fee

(f) General depositary services, particularly those charged on an annual basis	Other services performed by the depositary in administering the ADRs	$0.02 per ADS (or portion thereof) per calendar year which may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADSs as of the record date or record dates set by the depositary during each calendar year and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions
	Custodian and share register related issues, including, without limitation, any inspections of the share register maintained by the Russian share registrar or other confirmation of holdings of deposited securities	$0.01 or less per ADS (or portion thereof) per year which fee shall be assessed against holders of record as of the date set by the depositary not more often than once each calendar year
(g) Expenses of the depositary	Certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges in connection with:	Charges to be assessed against holders as of the record date or dates set by the depositary and payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions
	• compliance with foreign exchange control regulations or any law or regulation relating to foreign investment;
	• depositary or its custodian's compliance with applicable law, rule or regulation;
	• stock transfer or other taxes and other governmental charges;
	• cable, telex, facsimile transmission or delivery charges;

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Category		Depositary Actions		Associated Fee

		• if applicable, transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities (which are payable by persons depositing shares or holders withdrawing deposited securities);
		• expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency);
		• any other charge payable by depositary or its agents including, without limitation, the custodian, or the agents of the depositary's agents in connection with the servicing of the shares or other deposited securities

4. All fees and other direct and indirect payments made by the depositary to the foreign issuer of the deposited securities.

The Depositary has agreed to reimburse to us or pay on our behalf certain reasonable expenses related to our ADS program and incurred by us in connection with the program (such as NYSE listing fees, legal and accounting fees incurred with preparation of Form 20-F and ongoing SEC compliance and listing requirements, investor relations expenses, among others). The amounts the Depositary reimbursed or paid are not perforce related to the fees collected by the depositary from ADS holders.

As part of its service to us, the Depositary has agreed to waive fees for the standard costs associated with the administration of our ADS program, associated operating expenses and investor relations advice estimated to total $0.2 million.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

(a) Disclosure Controls and Procedures.

As of the end of the period covered by this Annual Report on Form 20- F, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective, as of December 31, 2020, to provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions about required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

(b) Management's annual report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and includes those policies and procedures that:

•: Pertain to the maintenance of records that in reasonable details accurately and fairly reflect the transactions and dispositions of our assets;
•: Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that our receipts and expenditures are being made only in accordance with authorizations of our management and members of our board of directors;

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•: Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated Framework (2013).

As a result of management's evaluation of our internal control over financial reporting, management concludes that internal control over financial reporting as of December 31, 2020 was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited and assessed as effective by independent registered public accounting firm Deloitte & Touche CIS, who has also audited and reported on our consolidated financial statements.

There were no changes in our internal control over financial reporting during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

(c) Attestation Report of Independent Registered Public Accounting Firm.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Mobile TeleSystems PJSC

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Mobile TeleSystems PJSC and its subsidiaries (the "Group") as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Group and our report dated March 3, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Group's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based

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on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ AO Deloitte & Touche CIS
Moscow, Russia
March 3, 2021

(d) Changes in internal control over financial reporting.

Management has evaluated, with the participation of our CEO and CFO, whether any changes in our internal control over financial reporting that occurred during the period covered by this annual report have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Thomas Holtrop is an "audit committee financial expert" as defined in Item 16A of Form 20-F. Mr. Holtrop is "independent" as defined in Rule 10A-3 under the Exchange Act and current New York Stock Exchange listing rules applicable to us. For a description of Mr. Holtrop's experience, please see "Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Key Biographies."

Item 16B. Code of Ethics

A copy of our Code of Ethics is available on our website at http://ir.mts.ru/.

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Item 16C. Principal Accountant Fees and Services

AO Deloitte & Touche CIS has served as our Independent Registered Public Accounting Firm for the fiscal years ended December 31, 2020 and 2019 for which audited financial statements appear in this Annual Report on Form 20 F. The following table presents the aggregate fees billed for professional services and other services by AO Deloitte & Touche CIS and its affiliates in 2020 and 2019, respectively.

	Year ended December 31,

	2020		2019
	(in thousands of Russian rubles)
Audit Fees		155,895		160,442
Audit-Related Fees		2,450		1,460
Tax Fees		840		—
All Other Fees		3,490		9,518

Total		162,675		171,420

Audit Fees

The Audit Fees for the years ended December 31, 2020 and 2019 were for the reviews and integrated audits of our consolidated financial statements prepared in accordance with IFRS, reviews and audits of the financial statements of our public subsidiaries prepared in accordance with IFRS, statutory audits.

Audit-Related Fees

The Audit Related Fees for the years ended December 31, 2020 and 2019 primarily relate to agreed-upon procedures engagement.

Tax Fees

The Tax Fees for the years ended December 31, 2020 include the fees principally related to tax compliance services.

All Other Fees

All Other Fees for the year ended December 31, 2020 primarily relate to quality assessment services, due diligence services and agreed-upon procedures engagement on non-financial information; for the year ended December 31, 2019—to quality assessment services and agreed-upon procedures engagement on non-financial information.

Audit Committee Pre-Approval Policies and Procedures

The Sarbanes Oxley Act of 2002 required us to implement a pre approval process for all engagements with our independent public accountants. In compliance with Sarbanes Oxley requirements pertaining to auditor independence, our Audit Committee pre approves the engagement terms and fees of AO Deloitte & Touche CIS and its affiliates for all audit and non audit services, including tax services. Our Audit Committee pre approved the engagement terms and fees of AO Deloitte & Touche CIS and its affiliates for all services performed for the fiscal year ended December 31, 2020. No services of any kind were approved pursuant to a waiver permitted pursuant to 17 CFR 210.2-01(c)(7)(C)(1).

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Item 16D. Exemption from the Listing Standards for Audit Committees

Not Applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any ADSs in the years ended December 31, 2014 and December 31, 2015.

A total of 9,935 MTS ordinary shares representing 0.0005% of our issued share capital were repurchased for RUB 2.1 million in August 2014 pursuant to our shareholders' right to demand buy-out following our decision on merger of our subsidiaries into MTS in accordance with applicable laws. These shares were sold pursuant to the requirements of applicable legislation in August 2015.

A total of 29,666 MTS shares representing 0.001% of our issued share capital were repurchased for RUB 5.9 million in October 2015 pursuant to our shareholders' right to demand buy-out following our decision on merger of our subsidiaries into MTS in accordance with applicable laws. These shares were used for reduction of our issued share capital in August 2016.

A total of 6,986 MTS shares representing 0.0003% of our issued share capital were repurchased for RUB 1.1 million in February 2016 pursuant to our shareholders' right to demand buy-out following our decision on merger of our subsidiaries into MTS in accordance with applicable laws. These shares were used for reduction of our issued share capital in August 2016.

In October 2016, we announced a tender offer (the "First Tender Offer") for repurchase of MTS ordinary shares (including ordinary shares represented by ADSs) for the amount of up to RUB 4,934 million. Also, our subsidiary Stream Digital LLC and Sistema entered into a purchase agreement (the "Sistema Purchase Agreement") pursuant to which Sistema agreed not to tender and sell any shares in the First Tender Offer and instead agreed to sell to us, following completion of the First Tender Offer, a pro rata number of shares of ordinary shares based on the number of shares tendered in the First Tender Offer. As a result of the First Tender Offer in December 2016 our subsidiary, Stream Digital LLC, repurchased 1,509,914 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 0.08% of our issued share capital for RUB 346 million. Simultaneously, Stream Digital LLC repurchased 1,550,495 MTS ordinary shares from Sistema under the Sistema Purchase Agreement representing approximately 0.08% of our issued share capital for RUB 355 million.

In January 2017, we announced another tender offer (the "Second Tender Offer") for repurchase of MTS ordinary shares (including ordinary shares represented by ADSs) for the amount of up to RUB 4,647 million. Also, our subsidiary Stream Digital LLC and Sistema Finance S.A., a subsidiary of Sistema, entered into a purchase agreement (the "Second Sistema Purchase Agreement") pursuant to which Sistema Finance S.A. together with Sistema and Sistema's affiliated entities agreed not to tender and sell any shares in the Second Tender Offer and instead agreed to sell to us, following completion of the Second Tender Offer, a pro rata number of shares of ordinary shares based on the number of shares purchased in the Second Tender Offer.

As a result of the Second Tender Offer in March 2017 Stream Digital LLC, repurchased 16,022,364 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 0.8% of our issued share capital for RUB 4,646 million.

Simultaneously, Stream Digital LLC repurchased 16,038,892 MTS ordinary shares from Sistema Finance S.A. under the Second Sistema Purchase Agreement representing approximately 0.8% of our issued share capital for RUB 4,651 million.

In September 2017, we launched a share repurchase plan for repurchase of MTS ordinary shares (including ordinary shares represented by ADSs) for an amount up to RUB 20 billion under Rule 10b5-1 and Rule 10b-18 of the Exchange Act (the "Repurchase Plan"). Also, we entered into a

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sale and repurchase agreement with Sistema Finance S.A., a subsidiary of Sistema, to acquire any number of shares proportional to any shares acquired from the market under the Repurchase Plan. The Repurchase Plan is carried out by our subsidiary Stream Digital LLC.

As a result of the Repurchase Plan by the end of 2017 Stream Digital LLC repurchased 43,647,128 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 2.2% of our issued share capital for RUB 12,475 million.

During the first quarter of 2018 Stream Digital LLC repurchased 25,397,204 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 1.3% of our issued share capital for RUB 7,354 million.

In March 2018, our wholly owned subsidiary Bastion LLC repurchased 1,400,000 MTS ordinary shares representing approximately 0.07% of our issued share capital in order to accomplish MTS management long-term motivation program.

In July 2018, we launched a share repurchase plan for repurchase of MTS ordinary shares (including ordinary shares represented by ADSs) for an amount up to RUB 30 billion under Rule 10b5 1 and Rule 10b 18 of the Exchange Act (the "Repurchase Plan"). Also, we entered into a sale and repurchase agreement with Sistema Finance S.A., a subsidiary of Sistema, to acquire any number of shares proportional to any shares acquired from the market under the Repurchase Plan. The Repurchase Plan is carried out by our subsidiary Bastion LLC.

As a result of Repurchase Plans by the end of 2018 Stream Digital LLC and Bastion LLC repurchased 81,251,382 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 4.1% of our issued share capital for RUB 22,148 million.

In 2019, Bastion LLC repurchased 57,719,394 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 2.89% of our issued share capital:

Month		Shares repurchased

January			5,827,864
February			15,914,701
March			18,327,119
April			13,420,095
May			4,143,445
August			86,170
Total			57,719,394

At the meeting held on April 6, 2020 the Board of Directors approved the report concerning shares submitted for repurchase in connection with the Extraordinary General Meeting of shareholders (the "EGM") earlier held on February 14, 2020.

Owners of MTS ordinary shares voting at the EGM against issues related to the consolidation of certain subsidiaries or those who abstained from voting were eligible to submit their shares for repurchase at a designated price of RUB 277.07 per ordinary share, based on the weighted average trading price over the six months prior to December 19.

In total, 387,683 ordinary shares were submitted that met the eligibility criteria, equivalent to RUB 107,415,328.81.

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In 2020, Bastion LLC repurchased 45,501,316 MTS ordinary shares (including ordinary shares represented by ADSs) representing approximately 2.28% of our issued share capital:

Month		Shares repurchased

April			777,500
May			778,144
July			2,585,030
August			7,442,481
September			9,444,600
October			10,514,993
November			10,736,018
December			3,222,550
Total			45,501,316

See also "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders."

Item 16F. Change in Registrant's Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

We are a company organized under the laws of the Russian Federation and qualify as a foreign private issuer as such term is defined in Rule 3b-4 of the Exchange Act. In accordance with the NYSE corporate governance rules, listed companies that are foreign private issuers are permitted in some circumstances to follow home country practice in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Listed Company Manual that are applicable to U.S. companies. In addition, foreign private issuers listed on the NYSE must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. companies listed on the NYSE. With regard to our corporate governance practices, these differences can be summarized as follows:

•: For U.S. companies, the NYSE standards require that a majority of directors be independent, as determined by the board. Russian law does not require that a majority of our directors be independent. Of our nine directors, four have been determined by the board to be independent in accordance with the independence standards set forth in SEC Rule 10A-3 and Section 303A.02 of the NYSE Listed Company Manual.
•: For U.S. companies, the NYSE standards require that the audit committee have a minimum of three members. Russian law does not contain such a requirement. Our audit committee comprises of three members.
•: For U.S. companies, the NYSE standards require that non-management directors meet at regularly scheduled executive sessions without management. Russian law does not contain such a requirement. However, our audit committee and remuneration and nomination committee comprises of independent directors, who meet on a regular basis in connection with their work on these committees.
•: For U.S. companies, the NYSE standards require that listed companies have a nominating/corporate governance committee and a compensation committee, each composed entirely of independent directors and having a written charter specifying the committee's purpose and responsibilities, as well as annual performance evaluations of the committee.

We have a corporate governance committee comprising of directors and members of management that is responsible for developing and implementing standards for corporate governance and making

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recommendations to the Board of Directors on developing our strategy in the area of corporate governance.

We have a remuneration and nomination committee comprising of four independent directors. This committee functions pursuant to bylaws approved by the Board of Directors specifying the committee's purpose, duties and responsibilities. The committee is primarily responsible for recommending appointments to key managerial posts, developing a set of requirements and criteria for directors and management executives and developing a remuneration structure and compensation levels for the Board of Directors, the audit committee and management executives (including the CEO). This committee is also responsible for conducting annual performance evaluations of the Board of Directors.

•: For U.S. companies, the NYSE standards require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions. Under Russian law, such approval from shareholders is not required, and our equity compensation plans and material revisions thereto are currently approved by the Board of Directors.
•: For U.S. companies, the NYSE standards require the adoption and disclosure of corporate governance guidelines addressing certain subjects. Our corporate governance guidelines are consistent with what is required under Russian law and are set forth in our Charter, in the bylaw on our Board of Directors and in the bylaws of our various committees.

We may in the future decide to use other foreign private issuer exemptions with respect to some or all of the other New York Stock listing rules. Following our home country governance practices may provide less protection than is accorded to investors under the New York Stock Exchange listing rules applicable to domestic issuers. We are required under the New York Stock Exchange listing rules to disclose any significant differences between the corporate governance practices that we follow under Russian law and applicable listing standards and those followed by U.S. domestic companies under New York Stock Exchange listing standards. This disclosure is posted on our website (http://ir.mts.ru/about-mts/corporate-governance/default.aspx).

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PART III

Item 17. Financial Statements

See instead Item 18.

Item 18. Financial Statements

The following financial statements, together with the report of AO Deloitte & Touche CIS, are filed as part of this annual report on Form 20-F.

		Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-3
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020, 2019 AND FOR THE YEARS ENDED DECEMBER 31, 2020, 2019, AND 2018:
Consolidated statement of financial position as of December 31, 2020 and 2019		F-7 - F-8
Consolidated statement of profit or loss for the years ended December 31, 2020, 2019, and 2018		F-9
Consolidated statements of comprehensive income for the years ended December 31, 2020, 2019, and 2018		F-10
Consolidated statements of changes in shareholders' equity for the years ended December 31, 2020, 2019, and 2018		F-11 - F-12
Consolidated statements of cash flows for the years ended December 31, 2020, 2019, and 2018		F-13 - F-14
Notes to the consolidated financial statements		F-15 - F-117

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Item 19. Exhibits

Exhibits No.			Description

	1.1		Charter of Mobile TeleSystems PJSC, restated version No. 14, as approved by the General Meeting of Shareholders of Mobile TeleSystems PJSC held on June 28, 2018 (English translation) is incorporated herein by reference to Exhibit 1.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20 F.*
	1.2		Amendments and Additions to the Charter of Mobile TeleSystems PJSC (Version No. 14), as approved by Extraordinary Meeting of Shareholders of Mobile TeleSystems PJSC held on February 14, 2020 (English translation) is incorporated herein by reference to Exhibit 1.2 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	1.3		Amendments and Additions to the Charter of Mobile TeleSystems PJSC (Version No. 14), as approved by Extraordinary Meeting of Shareholders of Mobile TeleSystems PJSC held on February 14, 2020 (English translation) is incorporated herein by reference to Exhibit 1.3 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	1.4		Amendments and Additions to the Charter of Mobile TeleSystems PJSC (Version No. 14), as approved by Extraordinary Meeting of Shareholders of Mobile TeleSystems PJSC held on February 14, 2020 (English translation).
	1.5		Code of Corporate Conduct and Business Ethics of Mobile TeleSystems PJSC approved by the Board of Directors of Mobile TeleSystems PJSC on September 21, 2018 (English translation) is incorporated herein by reference to Exhibit 1.4 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20 F.
	2.1		Deposit Agreement, dated as of July 6, 2000, by and among, MTS, Morgan Guaranty Trust Company of New York (as depositary), and holders of ADRs is incorporated herein by reference to Exhibit 2.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000, on Form 20-F.
	2.2		Amendment No. 1 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(2) to Form F-6 (Registration No 333-12008).
	2.3		Amendment No. 2 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(3) to Form F-6 (Registration No 333-121240).
	2.4		Amendment No. 3 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(4) to Form F-6 (333-145190).
	2.5		Amendment No. 4 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(5) to Form F-6 (Registration No. 333-166178).
	2.6		Amendment No. 5 to Deposit Agreement is incorporated herein by reference to Exhibit (a)(6) to Form F-6 (Registration No. 333-166178).

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Exhibits No.			Description

	2.7		Listing Prospectus of Mobile TeleSystems PJSC relating to exchange-traded interest-bearing non-convertible documentary bonds dated March 5, 2013 (English translation) is incorporated herein by reference to Exhibit 2.6 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	2.8		Listing Prospectus of Mobile TeleSystems PJSC relating to exchange-traded interest-bearing non-convertible documentary bonds dated July 27, 2016 (English translation) is incorporated herein by reference to Exhibit 2.8 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	2.9		Modifications to the Listing Prospectus of Mobile TeleSystems PJSC relating to exchange-traded interest-bearing non-convertible documentary bonds dated August 17, 2018 (English translation) is incorporated herein by reference to Exhibit 2.9 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	2.10		Modifications to the Exchange-Traded Bond Program of Mobile TeleSystems PJSC relating to exchange-traded interest-bearing non-convertible documentary bonds dated June 25, 2020 (English translation).
	2.11		Description of the Registrant's Securities registered pursuant to Section of the Securities Exchange Act of 1934, as amended is incorporated herein by reference to Exhibit 2.10 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	4.1		Loan Agreement, dated May 28, 2013 between MTS and MTS International Funding Limited is incorporated herein by reference to Exhibit 4.1 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20 F.
	4.2		MTS License No. 101245 for provision of data communication services for the purposes of voice data communication in the territory of the Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.326 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.3		MTS License No. 101246 for provision of telematic communication services in the territory of the Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.256 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.4		MTS License No. 101247 for provision of mobile radio telephone communication services in the territory of the Asian Russia (English translation) is incorporated herein by reference to Exhibit 4.257 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.5		MTS License No. 101248 for provision of data communication services excluding data communication services for the purposes of voice data communication in the territory of the Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.258 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.6		MTS License No. 130983 for provision of communications services for the provision of communication channels in the territory of the Buryatiya Republic (English translation) is incorporated herein by reference to Exhibit 4.241 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.7		MTS License No. 130986 for provision of communications services for the provision of communication channels in the territory of the Sakhalin region (English translation) is incorporated herein by reference to Exhibit 4.240 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.8		MTS License No. 131715 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of Ufa, the Republic of Bashkortostan (English translation) is incorporated herein by reference to Exhibit 4.230 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.9		MTS License No. 131716 for provision of telematic communication services in the territory of the Republic of Mari El (English translation) is incorporated herein by reference to Exhibit 4.232 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.10		MTS License No. 131717 for provision of telematic communication services in the territory of the Chuvashia Republic, Mordovia Republic (English translation) is incorporated herein by reference to Exhibit 4.264 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.11		MTS License No. 131718 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Mordovia Republic, the Chuvash Republic—Chuvashia (English translation) is incorporated herein by reference to Exhibit 4.231 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.12		MTS License No. 131719 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Republic of Daghestan, the Republic of Ingushetia, the KabardinoBalkar Republic, the KarachayevoCherkesia Republic, the Republic of North Ossetia-Alania (English translation) is incorporated herein by reference to Exhibit 4.237 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.13		MTS License No. 131720 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Mari El Republic (English translation) is incorporated herein by reference to Exhibit 4.233 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.

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Exhibits No.			Description

	4.14		MTS License No. 131721 for provision of telematic communication services in the territory of the Republic of Daghestan, the Republic of Ingushetia, the KabardinoBalkar Republic, the KarachayevoCherkesia Republic, Republic of North Ossetia-Alania (English translation) is incorporated herein by reference to Exhibit 4.234 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.15		MTS License No. 134506 for provision of communications services for the provision of communication channels in the territory of the Vladimir region, the Kaluga region, the Pskov region, the Ryazan region, the Smolensk region, the Tula region (English translation) is incorporated herein by reference to Exhibit 4.224 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.16		MTS License No. 134507 for provision of telematic communication services in the territory of the Rostov region (English translation) is incorporated herein by reference to Exhibit 4.221 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.17		MTS License No. 134508 for provision of data transmission services for the purpose of voice transmission in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.219 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.18		MTS License No. 134509 for provision of communications services for the provision of communication channels in the territory of the Ivanov region, the Kirov region, the Nizhny Novgorod region, the Yaroslavl region (English translation) is incorporated herein by reference to Exhibit 4.228 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.19		MTS License No. 134510 for provision of data transmission services for the purpose of voice transmission in the territory of the Ivanovo region (English translation) is incorporated herein by reference to Exhibit 4.220 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.20		MTS License No. 134511 for provision of communications services for the provision of communication channels in the territory of the Mari El Republic (English translation) is incorporated herein by reference to Exhibit 4.223 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.21		MTS License No. 134512 for provision of data transmission services for the purpose of voice transmission in the territory of the Kaluga Region (English translation) is incorporated herein by reference to Exhibit 4.225 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.

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Exhibits No.			Description

	4.22		MTS License No. 135026 for provision of communications services for the provision of communication channels in the territory of the Sakha Republic (Yakutia), the Khabarovsk Territory, the Zabaikalye Territory (excluding the Aginski Buryatski Autonomous District) (English translation) is incorporated herein by reference to Exhibit 4.218 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.23		MTS License No. 135027 for provision of intrazonal telephone communication services in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.226 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.24		MTS License No. 135028 for provision of intrazonal telephone communication services in the territory of the Republic of Bashkortostan (English translation) is incorporated herein by reference to Exhibit 4.227 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.25		MTS License No. 135029 for provision of data transmission services for the purpose of voice transmission in the territory of the Primorye Territory, the Sakhalin region, Irkutsk region (excluding the Ust-Ordyn Buryat District) (English translation) is incorporated herein by reference to Exhibit 4.222 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.26		MTS License No. 135956 for provision of intrazonal telephone communication services in the territory of the Perm Territory (English translation) is incorporated herein by reference to Exhibit 4.305 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.27		MTS License No. 135957 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Primorsky Territory (English translation) is incorporated herein by reference to Exhibit 4.228 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.28		MTS License No. 135959 for provision of communications services for the provision of communication channels in the territory of Aginski Buryatski Autonomous District of the Zabaikalye Territory (English translation) is incorporated herein by reference to Exhibit 4.216 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.29		MTS License No. 135960 for provision of intrazonal telephone communication services in the territory of the Ulyanovsk region (English translation) is incorporated herein by reference to Exhibit 4.215 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.30		MTS License No. 135961 for provision of telematic communication services in the territory of the Primorsky Territory (English translation) is incorporated herein by reference to Exhibit 4.210 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.

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Exhibits No.			Description

	4.31		MTS License No. 135962 for provision of intrazonal telephone communication services in the territory of the Tyumen region, YamaloNenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.214 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.32		MTS License No. 135963 for provision of communications services for the provision of communication channels in the territory of the Aginski Buryatski Autonomous District of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.213 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.33		MTS License No. 135964 for provision of mobile radio telephone services in fixed communication network in the territory of the Yamalo-Nenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.299 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.34		MTS License No. 135965 for provision of communications services for the provision of communication channels in the territory of the Mordovia Republic (English translation) is incorporated herein by reference to Exhibit 4.212 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.35		MTS License No. 135966 for provision of data transmission services for the purpose of voice transmission in the territory of the Tyumen Region, the Yamalo-Nenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.300 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.36		MTS License No. 135967 for provision of intrazonal telephone communication services in the territory of the Chelyabinsk Region (English translation) is incorporated herein by reference to Exhibit 4.204 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.37		MTS License No. 136447 for provision of mobile radio telephone services in the territory of the Amur region (English translation) is incorporated herein by reference to Exhibit 4.199 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.38		MTS License No. 136448 for provision of mobile radio telephone services in the territory of the Orenburg Region (English translation) is incorporated herein by reference to Exhibit 4.205 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.39		MTS License No. 136449 for provision of mobile radio telephone services in the territory of the Republic of North Ossetia-Alania (English translation) is incorporated herein by reference to Exhibit 4.206 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.

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Exhibits No.			Description

	4.40		MTS License No. 136450 for provision of mobile radio telephone services in the territory of the Perm Territory, excluding the Komi-Permyak area (English translation) is incorporated herein by reference to Exhibit 4.207 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.41		MTS License No. 136451 for provision of mobile radio telephone services in the territory of the Perm Territory—the Komi-Permyak area (English translation) is incorporated herein by reference to Exhibit 4.200 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.42		MTS License No. 137711 for provision of communication services for the purpose of wire broadcasting in the territory of the Chelyabinsk region (English translation) is incorporated herein by reference to Exhibit 4.201 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.43		MTS License No. 138258 for provision of for provision of telematic communication services in the territory of the Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.195 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.44		MTS License No. 138260 for provision of data transmission services for the purpose of voice transmission in the territory of the Republic of Bashkortostan (English translation) is incorporated herein by reference to Exhibit 4.233 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.45		MTS License No. 138261 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Rostov Region (English translation) is incorporated herein by reference to Exhibit 4.234 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.46		MTS License No. 138262 for provision of communications services for the provision of communication channels in the territory of the Udmurt Republic, Perm Territory, Amur region, the Kurgan region, the Orenburg region, the Sverdlovsk region, the Tambov region, the Tumen region, the Chelyabinsk region, the Khanty Mansiysk Autonomous region, the YamaloNenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.197 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015, on Form 20-F.
	4.47		MTS License No. 138952 for provision of intra-area telephone communication services in the territory of the Ryazan Region (English translation) is incorporated herein by reference to Exhibit 4.236 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.48		MTS License No. 138956 for provision of mobile radio communication services in the allocated telecommunications network in the territory of the Khanty-Mansiysk Autonomous District-Yugra (English translation) is incorporated herein by reference to Exhibit 4.238 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.49		MTS License No. 140458 for provision of local telecommunication services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Republic of Khakassia (English translation) is incorporated herein by reference to Exhibit 4.240 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.50		MTS License No. 140459 for provision of telematic communication services in the territory of Bashkortostan (English translation) is incorporated herein by reference to Exhibit 4.241 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.51		MTS License No. 142343 for provision of mobile radio telephone communication services in the territory of the Russian Federation, except for Moscow, the Moscow Region, the Republic of Crimea and Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.245 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.52		MTS License No. 142344 for provision of data communication services, except for data communication services for voice transmissions in the territory of the Russian Federation, except for Moscow, the Moscow Region, the Republic of Crimea and Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.246 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.53		MTS License No. 142345 for provision of data communication services for voice transmissions in the territory of the Russian Federation, except for Moscow, the Moscow Region, the Republic of Crimea and Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.247 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.54		MTS License No. 142346 for provision of telematic communication services in the territory of the Russian Federation, except for Moscow, the Moscow Region, the Republic of Crimea and Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.248 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.55		MTS License No. 144270 for provision of mobile radio telephone communication services in the territory of the Republic of North Ossetia-Alania (English translation) is incorporated herein by reference to Exhibit 4.251 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.56		MTS License No. 145056 for provision of telematic communication services in the territory of the Republic of Karelia, Arkhangelsk Region, Vologda Region, Kaliningrad Region, Leningrad Region, Murmansk Region, Novgorod Region, Saint Perterburg, Nenets Autonomus District (English translation) is incorporated herein by reference to Exhibit 4.252 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.57		MTS License No. 145059 for provision of mobile radio telephone communication services in the territory of the Volgograd Region (English translation) is incorporated herein by reference to Exhibit 4.255 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.58		MTS License No. 145060 for provision of intra-area telephone communication services in the territory of the Omsk Region (English translation) is incorporated herein by reference to Exhibit 4.256 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.59		MGTS License No. 145447 for provision of intra-area telephone communication services in the territory of the Omsk Region (English translation) is incorporated herein by reference to Exhibit 4.257 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.60		MTS License No. 146066 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Khabarovsk Territory (English translation) is incorporated herein by reference to Exhibit 4.259 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.61		MTS License No. 146067 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Krasnodar Territory (English translation) is incorporated herein by reference to Exhibit 4.260 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.62		MTS License No. 146068 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Ivanovo Region (English translation) is incorporated herein by reference to Exhibit 4.261 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.63		MTS License No. 146069 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Irkutsk Region, except for the Ust-Ordyn Buryat Autonomus District (English translation) is incorporated herein by reference to Exhibit 4.262 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.64		MTS License No. 146070 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Primorsky Territory (English translation) is incorporated herein by reference to Exhibit 4.263 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.65		MTS License No. 146071 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Novosibirsk Region (English translation) is incorporated herein by reference to Exhibit 4.264 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.66		MTS License No. 146072 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Orenburg Region (English translation) is incorporated herein by reference to Exhibit 4.265 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.67		MTS License No. 146073 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Altai Territory (English translation) is incorporated herein by reference to Exhibit 4.266 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.68		MTS License No. 146074 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Chelyabinsk Region (English translation) is incorporated herein by reference to Exhibit 4.267 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.69		MTS License No. 146075 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Nizhny Novgorod Region (English translation) is incorporated herein by reference to Exhibit 4.268 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.70		MTS License No. 146076 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Republic of Sakha (Yakutia) (English translation) is incorporated herein by reference to Exhibit 4.269 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.71		MTS License No. 146077 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Yaroslavl Region (English translation) is incorporated herein by reference to Exhibit 4.270 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.72		MTS License No. 146078 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Perm Territory (English translation) is incorporated herein by reference to Exhibit 4.271 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.73		MTS License No. 146079 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Republic of Komi (English translation) is incorporated herein by reference to Exhibit 4.272 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.74		MTS License No. 146080 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Astrakhan Region (English translation) is incorporated herein by reference to Exhibit 4.273 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.75		MTS License No. 146081 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Sakhalin Region (English translation) is incorporated herein by reference to Exhibit 4.274 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.76		MTS License No. 146082 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Republic of Tatarstan (English translation) is incorporated herein by reference to Exhibit 4.275 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.77		MTS License No. 146084 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Rostov Region (English translation) is incorporated herein by reference to Exhibit 4.277 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.78		MTS License No. 146085 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Volgograd Region (English translation) is incorporated herein by reference to Exhibit 4.278 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.79		MTS License No. 146086 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Kurgan Region (English translation) is incorporated herein by reference to Exhibit 4.279 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.80		MTS License No. 146087 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Krasnoyarsk Territory, except for the Evenk Autonomous District (English translation) is incorporated herein by reference to Exhibit 4.280 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.81		MTS License No. 146088 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Omsk Region (English translation) is incorporated herein by reference to Exhibit 4.281 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.82		MTS License No. 146089 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Kirov Region (English translation) is incorporated herein by reference to Exhibit 4.282 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.83		MTS License No. 146090 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Samara Region (English translation) is incorporated herein by reference to Exhibit 4.283 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.84		MTS License No. 146091 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Udmurt Republic (English translation) is incorporated herein by reference to Exhibit 4.284 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.85		MTS License No. 146092 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Amur Region (English translation) is incorporated herein by reference to Exhibit 4.285 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.86		MTS License No. 146094 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Tomsk Region (English translation) is incorporated herein by reference to Exhibit 4.287 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.87		MGTS License No. 146656 for provision of data communication services for voice transmission in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.269 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.88		MTS License No. 147352 for provision of telematic communications services in the territory of the Altai Territory (English translation) is incorporated herein by reference to Exhibit 4.288 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.89		MTS License No. 147353 for provision of mobile radio telephone communications services in the territory of the Moscow Region and Moscow (English translation) is incorporated herein by reference to Exhibit 4.289 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.90		MTS License No. 147354 for provision of intra-area telephone communications services in the territory of the Leningrad Region (English translation) is incorporated herein by reference to Exhibit 4.290 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.91		MTS License No. 147357 for provision of communications channel provision services in the territory of the Omsk Region (English translation) is incorporated herein by reference to Exhibit 4.293 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.92		MTS License No. 148176 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Altai Republic (English translation) is incorporated herein by reference to Exhibit 4.271 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.93		MTS License No. 148177 for provision of mobile radio telephone communication services in the territory of the Mari El Republic (English translation) is incorporated herein by reference to Exhibit 4.275 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.94		MTS License No. 149146 for provision of data communication services for voice transmission in the territory of the Kaliningrad region (English translation) is incorporated herein by reference to Exhibit 4.277 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.95		MTS License No. 149147 for provision of communication channel provision services in the territory of the Kaliningrad region (English translation) is incorporated herein by reference to Exhibit 4.278 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.96		MTS License No. 149148 for provision of data communication services for voice transmission in the territory of the Mari El Republic (English translation) is incorporated herein by reference to Exhibit 4.279 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.97		MTS License No. 149149 for provision of data communication services for voice transmission in the territory of the Severnaya Osetia Alania Republic (English translation) is incorporated herein by reference to Exhibit 4.280 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.98		MTS License No. 149150 for provision of data communication services for voice transmission in the territory of the Tomsk region (English translation) is incorporated herein by reference to Exhibit 4.280 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.99		MTS License No. 149151 for provision of data communication services for voice transmission in the territory of the Komi Republic (English translation) is incorporated herein by reference to Exhibit 4.282 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.100		MTS License No. 149152 for provision of data communication services for voice transmission in the territory of the Kirov region (English translation) is incorporated herein by reference to Exhibit 4.283 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.101		MTS License No. 149153 for provision of data communication services for voice transmission in the territory of the Murmansk region (English translation) is incorporated herein by reference to Exhibit 4.284 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.102		MTS License No. 149154 for provision of data communication services for voice transmission in the territory of the Stavropol territory (English translation) is incorporated herein by reference to Exhibit 4.285 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.103		MTS License No. 149155 for provision of data communication services for voice transmission in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.286 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.104		MTS License No. 149156 for provision of data communication services for voice transmission in the territory of the Buryatiya Republic (English translation) is incorporated herein by reference to Exhibit 4.287 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.105		MTS License No. 149157 for provision of data communication services for voice transmission in the territory of the Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.288 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.106		MTS License No. 149158 for provision of data communication services for voice transmission in the territory of the Mordovia Republic (English translation) is incorporated herein by reference to Exhibit 4.289 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.107		MTS License No. 149159 for provision of data communication services for voice transmission in the territory of the KarachaevoCherkesia Republic (English translation) is incorporated herein by reference to Exhibit 4.290 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.108		MTS License No. 149160 for provision of data communication services for voice transmission in the territory of the Ingushetia Republic (English translation) is incorporated herein by reference to Exhibit 4.291 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.109		MTS License No. 149161 for provision of data communication services for voice transmission in the territory of the Altai territory (English translation) is incorporated herein by reference to Exhibit 4.292 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.110		MTS License No. 149162 for provision of data communication services for voice transmission in the territory of the Kalmykia Republic (English translation) is incorporated herein by reference to Exhibit 4.293 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.111		MTS License No. 149163 for provision of data communication services for voice transmission in the territory of the KabardinoBalkar Republic (English translation) is incorporated herein by reference to Exhibit 4.294 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.112		MTS License No. 149164 for provision of data communication services for voice transmission in the territory of the Adygeya Republic (English translation) is incorporated herein by reference to Exhibit 4.295 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.113		MTS License No. 149165 for provision of data communication services for voice transmission in the territory of the Saratov region (English translation) is incorporated herein by reference to Exhibit 4.296 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.114		MTS License No. 149166 for provision of data communication services for voice transmission in the territory of the Chelyabinsk region (English translation) is incorporated herein by reference to Exhibit 4.297 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.115		MTS License No. 149167 for provision of data communication services for voice transmission in the territory of the Karelia Republic (English translation) is incorporated herein by reference to Exhibit 4.298 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.116		MTS License No. 149168 for provision of data communication services for voice transmission in the territory of the Ulyanovsk region (English translation) is incorporated herein by reference to Exhibit 4.299 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.117		MTS License No. 149169 for provision of data communication services for voice transmission in the territory of the Kurgan region (English translation) is incorporated herein by reference to Exhibit 4.300 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.118		MTS License No. 149170 for provision of data communication services for voice transmission in the territory of the Khabarovsk Territory (English translation) is incorporated herein by reference to Exhibit 4.301 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.119		MTS License No. 149171 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Ulyanovsk region (English translation) is incorporated herein by reference to Exhibit 4.302 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.120		MTS License No. 149172 for provision of data communication services for voice transmission in the territory of the Tyva Republic (English translation) is incorporated herein by reference to Exhibit 4.303 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.121		MTS License No. 149173 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Bashkortostan Republic (English translation) is incorporated herein by reference to Exhibit 4.304 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.122		MTS License No. 149174 for provision of communication channel provision services in the territory of the St. Petersburg, Leningrad region, Arkhangelsk region, Karelia Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Vologda region (English translation) is incorporated herein by reference to Exhibit 4.305 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.123		MTS License No. 149175 for provision of data communication services for voice transmission in the territory of the Kostroma region (English translation) is incorporated herein by reference to Exhibit 4.306 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.124		MTS License No. 149176 for provision of data communication services for voice transmission in the territory of the Altai Republic (English translation) is incorporated herein by reference to Exhibit 4.307 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.125		MTS License No. 149177 for provision of data communication services for voice transmission in the territory of the Pskov region (English translation) is incorporated herein by reference to Exhibit 4.308 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.126		MTS License No. 149178 for provision of data communication services for voice transmission in the territory of the Amur region (English translation) is incorporated herein by reference to Exhibit 4.309 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.127		MTS License No. 149179 for provision of data communication services for voice transmission in the territory of the Dagestan Republic (English translation) is incorporated herein by reference to Exhibit 4.310 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.128		MTS License No. 149180 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Tambov region (English translation) is incorporated herein by reference to Exhibit 4.311 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.129		MTS License No. 149181 for provision of data communication services for voice transmission in the territory of the Kamchatka region (English translation) is incorporated herein by reference to Exhibit 4.312 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.130		MTS License No. 149182 for provision of data communication services for voice transmission in the territory of the Orenburg region (English translation) is incorporated herein by reference to Exhibit 4.313 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.131		MTS License No. 149183 for provision of data communication services for voice transmission in the territory of the Sakha Republic (Yakutia) (English translation) is incorporated herein by reference to Exhibit 4.314 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.132		MTS License No. 149184 for provision of data communication services for voice transmission in the territory of the Khakassiya Republic (English translation) is incorporated herein by reference to Exhibit 4.315 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.133		MTS License No. 149185 for provision of data communication services for voice transmission in the territory of the Zabaykalsky Territory (English translation) is incorporated herein by reference to Exhibit 4.316 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.134		MTS License No. 149186 for provision of data communication services for voice transmission in the territory of the Chuvashia Republic (English translation) is incorporated herein by reference to Exhibit 4.317 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.135		MTS License No. 149187 for provision of data communication services for voice transmission in the territory of the Vologda region (English translation) is incorporated herein by reference to Exhibit 4.318 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.136		MTS License No. 149188 for provision of data communication services for voice transmission in the territory of the Magadan region (English translation) is incorporated herein by reference to Exhibit 4.319 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.137		MTS License No. 149644 for provision of intra-area telephone communications services in the territory of the Orenburg region (English translation) is incorporated herein by reference to Exhibit 4.320 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.138		MTS License No. 149645 for provision of intra-area telephone communications services in the territory of the Sverdlovsk region (English translation) is incorporated herein by reference to Exhibit 4.321to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.139		MTS License No. 149647 for provision of intra-area telephone communications services in the territory of the Khabarovsk Territory (English translation) is incorporated herein by reference to Exhibit 4.322 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.140		MTS License No. 149648 for provision of intra-area telephone communications services in the territory of the Primorsky Territory (English translation) is incorporated herein by reference to Exhibit 4.323to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.141		MTS License No. 149649 for provision of intra-area telephone communications services in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.324 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.142		MTS License No. 149650 for provision of intra-area telephone communications services in the territory of the Udmurt Republic (English translation) is incorporated herein by reference to Exhibit 4.325 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.143		MTS License No. 149653 for provision of intra-area telephone communications services in the territory of the Kirov region (English translation) is incorporated herein by reference to Exhibit 4.327 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.144		MTS License No. 149654 for provision of intra-area telephone communications services in the territory of the Saratov region (English translation) is incorporated herein by reference to Exhibit 4.328 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.145		MTS License No. 149715 for provision of telecommunications services for wired radio broadcasting in the territory of the Kirov Region (English translation) is incorporated herein by reference to Exhibit 4.295 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.146		MTS License No. 149829 for provision of mobile radio telephone communication services in the territory of the Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.297 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.

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Exhibits No.			Description

	4.147		MTS License No. 150052 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the St. Petersburg, Leningrad region, Arkhangelsk region, Karelia Republic, Murmansk region, Novgorod region, Vologda region (English translation) is incorporated herein by reference to Exhibit 4.330 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.148		MTS License No. 150053 for provision of data communication services, except for data communication services for voice transmission in the territory of the Amur region (English translation) is incorporated herein by reference to Exhibit 4.331 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.149		MTS License No. 150054 for provision of data communication services, except for data communication services for voice transmission in the territory of the St. Petersburg, Leningrad region, Arkhangelsk region, Kaliningrad region, Karelia Republic, Komi Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Pskov region, Vologda region (English translation) is incorporated herein by reference to Exhibit 4.332 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.150		MTS License No. 150055 for provision of data communication services, except for data communication services for voice transmission in the territory of the Orenburg region (English translation) is incorporated herein by reference to Exhibit 4.333 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.151		MTS License No. 150056 for provision of data communication services, except for data communication services for voice transmission in the territory of the Moscow, Moscow region (English translation) is incorporated herein by reference to Exhibit 4.334 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.152		MTS License No. 150057 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.335 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.153		MTS License No. 150058 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.336 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.154		MTS License No. 150059 for provision of data communication services, except for data communication services for voice transmission in the territory of the Ivanovo region, Kaluga region, Kostroma region, Ryazan region, Smolensk region, Tambov region, Tula region, Tver region, Vladimir region, Yaroslavl region (English translation) is incorporated herein by reference to Exhibit 4.337 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.155		MTS License No. 150060 for provision of data communication services, except for data communication services for voice transmission in the territory of the Perm region, Chelyabinsk region, Khanty Mansiysk Autonomous region, Kurgan region, Omsk region, Sverdlovsk region, Tyumen region, YamaloNenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.338 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.156		MTS License No. 150061 for provision of data communication services for voice transmission in the territory of the Moscow (English translation) is incorporated herein by reference to Exhibit 4.339 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.157		MTS License No. 150062 for provision of data communication services, except for data communication services for voice transmission in the territory of the Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region (English translation) is incorporated herein by reference to Exhibit 4.340 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.158		MTS License No. 150063 for provision of data communication services, except for data communication services for voice transmission in the territory of the Kirov region, Nizhny Novgorod region, Udmurt Republic (English translation) is incorporated herein by reference to Exhibit 4.341 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.159		MTS License No. 150064 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Moscow (English translation) is incorporated herein by reference to Exhibit 4.342 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.160		MTS License No. 152080 for provision of communication channel provision services in the territory of the Magadan region (English translation) is incorporated herein by reference to Exhibit 4.345 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.161		MTS License No. 152081 for provision of telematic communication services in the territory of the Altai Republic (English translation) is incorporated herein by reference to Exhibit 4.346 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Table of Contents

Exhibits No.			Description

	4.162		MTS License No. 152082 for provision of communication channel provision services in the territory of the Irkutsk region (English translation) is incorporated herein by reference to Exhibit 4.347 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.163		MTS License No. 152083 for provision of communication channel provision services in the territory of the Dagestan Republic (English translation) is incorporated herein by reference to Exhibit 4.348 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.164		MTS License No. 152084 for provision of communication channel provision services in the territory of the Kamchatka region (English translation) is incorporated herein by reference to Exhibit 4.349 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.165		MTS License No. 152085 for provision of mobile radio telephone communication services in the territory of the Krasnodar territory (English translation) is incorporated herein by reference to Exhibit 4.350 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.166		MTS License No. 152165 for provision of telecommunication services for the purpose of wired radio brodcasting services in the territory of the Rostov Region (English translation) is incorporated herein by reference to Exhibit 4.308 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016, on Form 20-F.
	4.167		MTS License No. 152516 for provision of mobile radio telephone communication services in the territory of the Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.351 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.168		MTS License No. 152517 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Dagestan Republic (English translation) is incorporated herein by reference to Exhibit 4.352 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.169		MTS License No. 152518 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Severnaya Osetia Alania Republic (English translation) is incorporated herein by reference to Exhibit 4.353 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.170		MTS License No. 153738 for provision of data communication services for voice transmission in the territory of the Krasnodar territory (English translation) is incorporated herein by reference to Exhibit 4.355 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

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Exhibits No.			Description

	4.171		MTS License No. 153739 for provision of mobile radio telephone communication services in the territory of the Saratov region (English translation) is incorporated herein by reference to Exhibit 4.356 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.172		MTS License No. 154794 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Tyumen region, YamaloNenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.362 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.173		MGTS License No. 154857 for provision of telecommunications services for wired radio broadcasting in the territory of the Moscow region, Moscow (English translation) is incorporated herein by reference to Exhibit 4.26 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.174		MTS License No. 155415 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Orel region, Voronezh region (English translation) is incorporated herein by reference to Exhibit 4.369 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.175		MTS License No. 155416 for provision of intra-area telephone communications services in the territory of the Orel region (English translation) is incorporated herein by reference to Exhibit 4.370 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.176		MTS License No. 156543 for provision of telecommunications services for wired radio broadcasting in the territory of the Volgograd region (English translation) is incorporated herein by reference to Exhibit 4.371 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.177		MTS License No. 156887 for provision of data communication services, except for data communication services for voice transmission in the territory of the Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.372 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.178		MTS License No. 156888 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Kaliningrad region (English translation) is incorporated herein by reference to Exhibit 4.373 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.179		MTS License No. 156889 for provision of telematic communication services in the territory of the Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.374 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

256

Table of Contents

Exhibits No.			Description

	4.180		MTS License No. 156890 for provision of mobile radio telephone communication services in the territory of the Samara region (English translation) is incorporated herein by reference to Exhibit 4.375 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.181		MTS License No. 157431 for provision of intra-area telephone communications services in the territory of the Tver region (English translation) is incorporated herein by reference to Exhibit 4.376 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.182		MTS License No. 158896 for provision of intra-area telephone communications services in the territory of the Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.380 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.183		MTS License No. 158897 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Udmurt Republic (English translation) is incorporated herein by reference to Exhibit 4.381 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.184		MTS License No. 158898 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Perm region (English translation) is incorporated herein by reference to Exhibit 4.382 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.185		MTS License No. 158899 for provision of intra-area telephone communications services in the territory of the Altai territory (English translation) is incorporated herein by reference to Exhibit 4.383 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.186		MTS License No. 158900 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Smolensk region (English translation) is incorporated herein by reference to Exhibit 4.384 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.187		MTS License No. 158901 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Belgorod region, Bryansk region, Kursk region, Lipetsk region (English translation) is incorporated herein by reference to Exhibit 4.385 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.188		MTS License No. 158902 for provision of intra-area telephone communications services in the territory of the Krasnoyarsk Territory (English translation) is incorporated herein by reference to Exhibit 4.386 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

257

Table of Contents

Exhibits No.			Description

	4.189		MTS License No. 158903 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of the Tver region (English translation) is incorporated herein by reference to Exhibit 4.387 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.190		MTS License No. 158904 for provision of intra-area telephone communications services in the territory of the Tomsk region (English translation) is incorporated herein by reference to Exhibit 4.388 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.191		MTS License No. 159593 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Nenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.390 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.192		MTS License No. 159594 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Ryazan region, Vladimir region (English translation) is incorporated herein by reference to Exhibit 4.391 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.193		MTS License No. 159595 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Khanty Mansiysk Autonomous region, Sverdlovsk region (English translation) is incorporated herein by reference to Exhibit 4.392 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.194		MTS License No. 159596 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Chukotsk Autonomous region, Jewish Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.393 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.195		MTS License No. 159597 for provision of local telephone communication services, excluding local telephone communication services using payphones and shared-access facilities in the territory of the Saratov Region (English translation) is incorporated herein by reference to Exhibit 4.403 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.196		MTS License No. 159598 for provision of data transfer communication services for purposes of voice messages transmission in the territory of the Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.394 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.

258

Table of Contents

Exhibits No.			Description

	4.197		MTS License No. 159599 for provision of local telephone communication services, excluding local telephone communication services using payphones and shared-access facilities in the territory of the Chuvashia Republic (English translation) is incorporated herein by reference to Exhibit 4.273 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.198		MTS License No. 159600 for provision of local telephone communication services, excluding local telephone communication services using payphones and shared-access facilities in the territory of the Mari El Republic (English translation) is incorporated herein by reference to Exhibit 4.272 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.199		MTS License No. 159601 for provision of communication channels in the territory of the Republic of Ingushetia, Kabardino-Balkar Republic, KarachaevoCherkesia Republic, Volgograd Region (English translation) is incorporated herein by reference to Exhibit 4.255 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.200		MTS License No. 159602 for provision of local telephone communication services, excluding local telephone communication services using payphones and shared-access facilities in the territory of the the Republic of Buryatia (English translation) is incorporated herein by reference to Exhibit 4.274 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.201		MTS License No. 159702 for provision of telecommunications services for wired radio broadcasting in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.395 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.202		MTS License No. 160409 for provision of mobile radio telephone services in the territory of Adygeya Republic (English translation) is incorporated herein by reference to Exhibit 4.314 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.203		MTS License No. 160629 for provision of intra-area telephone communications services in the territory of the Khanty Mansiysk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.396 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.204		MTS License No. 161213 for provision of mobile radio telephone services in the territory of St. Petersburg, Leningrad region, Arkhangelsk region, Kaliningrad region, Karelia Republic, Murmansk region, Nenetsk Autonomous region, Novgorod region, Pskov region, Vologda region (English translation) is incorporated herein by reference to Exhibit 4.316 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

259

Table of Contents

Exhibits No.			Description

	4.205		MTS License No. 161214 for provision of telecommunication services for provision of communication channels in the territory of Kemerovo region, Tomsk region (English translation) is incorporated herein by reference to Exhibit 4.317 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.206		MTS License No. 161216 for provision of mobile radio telephone services in the territory of Amur region, Buryatiya Republic, Chukotsk Autonomous region, Jewish Autonomous region, Irkutsk region, Kamchatka region, Khabarovsk Territory, Magadan region, Primorsky Territory, Sakha Republic (Yakutia), Sakhalin region, Zabaykalsky Territory (English translation) is incorporated herein by reference to Exhibit 4.319 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.207		MTS License No. 161217 for provision of data communication services excluding data communication services for the purposes of voice data communication in the territory of Krasnoyarsk Territory (English translation) is incorporated herein by reference to Exhibit 4.320 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.208		MTS License No. 161218 for provision of telecommunication services for provision of communication channels in the territory of Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.321 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.209		MTS License No. 161219 for provision of telecommunication services for provision of communication channels in the territory of Kalmykia Republic, Severnaya Osetia Alania Republic (English translation) is incorporated herein by reference to Exhibit 4.322 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.210		MTS License No. 161220 for provision of telecommunication services for provision of communication channels in the territory of Krasnoyarsk Territory (English translation) is incorporated herein by reference to Exhibit 4.323 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.211		MTS License No. 161221 for provision of telematic services in the territory of Krasnoyarsk Territory (English translation) is incorporated herein by reference to Exhibit 4.324 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.212		MTS License No. 161223 for provision of telecommunication services for provision of communication channels in the territory of Bashkortostan Republic (English translation) is incorporated herein by reference to Exhibit 4.326 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.213		MGTS License No. 161531 for provision of cable television in the territory of Moscow region (English translation) is incorporated herein by reference to Exhibit 4.327 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

260

Table of Contents

Exhibits No.			Description

	4.214		MTS License No. 161954 for provision of intra zonal communications services in the territory of Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.328 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.215		MGTS License No. 161957 for provision of local telephone communication services using payphones in the territory of Moscow (English translation) is incorporated herein by reference to Exhibit 4.329 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.216		MTS License No. 162597 for provision of telecommunications services for wired radio broadcasting in the territory of the Ryazan region (English translation) is incorporated herein by reference to Exhibit 4.399 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.217		MTS License No. 162943 for provision of mobile radio telephone communication services in the territory of the Astrakhan region (English translation) is incorporated herein by reference to Exhibit 4.400 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.218		MTS License No. 162944 for provision of mobile radio telephone communication services in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.401 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2017, on Form 20-F.
	4.219		MTS License No. 163838 for provision of intra zonal communications services in the territory of Rostov region (English translation) is incorporated herein by reference to Exhibit 4.331 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.220		MTS License No. 163839 for provision of intra zonal communications services in the territory of Severnaya Osetia Alania Republic (English translation) is incorporated herein by reference to Exhibit 4.332 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.221		MTS License No. 163840 for provision of intra zonal communications services in the territory of Krasnodar territory (English translation) is incorporated herein by reference to Exhibit 4.333 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.222		MTS License No. 164187 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of Khanty Mansiysk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.334 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

261

Table of Contents

Exhibits No.			Description

	4.223		MTS License No. 165418 for provision of radio telephone services in the territory of Khanty Mansiysk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.336 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.224		MTS License No. 166424 for provision of telecommunication services for provision of communication channels in the territory of Rostov region (English translation) is incorporated herein by reference to Exhibit 4.337 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.225		MTS License No. 166425 for provision of data communication services excluding data communication services for the purposes of voice data communication in the territory of Altai territory (English translation) is incorporated herein by reference to Exhibit 4.338 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.226		MGTS License No. 166443 for provision of leased communications circuits in the territory of Moscow, Moscow region (English translation) is incorporated herein by reference to Exhibit 4.339 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.227		MGTS License No. 166444 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of Moscow (English translation) is incorporated herein by reference to Exhibit 4.340 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.228		MGTS License No. 166445 for provision of data transmission services in the territory of Moscow (English translation) is incorporated herein by reference to Exhibit 4.341 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.229		MTS License No. 166958 for provision of telecommunication services for provision of communication channels in the territory of Moscow, Moscow region, Komi Republic, Kostroma region, Tver region (English translation) is incorporated herein by reference to Exhibit 4.343 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.230		MTS License No. 167215 for provision of mobile radio telephone services in the territory of Russian Federation, except the Republic of Crimea, Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.344 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.231		MTS License No. 167216 for provision of mobile radio telephone services in the territory of Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.345 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

262

Table of Contents

Exhibits No.			Description

	4.232		MTS License No. 167990 for provision of mobile radio telephone services in the territory of Altai territory (English translation) is incorporated herein by reference to Exhibit 4.346 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.233		MTS License No. 167991 for provision of mobile radio telephone services in the territory of Tomsk region (English translation) is incorporated herein by reference to Exhibit 4.347 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.234		MTS License No. 167992 for provision of telecommunication services for provision of communication channels in the territory of Russian Federation, except the Republic of Crimea, Sevastopol (English translation) is incorporated herein by reference to Exhibit 4.348 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.235		MTS License No. 168186 for provision of mobile radio telephone services in the territory of Astrakhan region (English translation) is incorporated herein by reference to Exhibit 4.349 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.236		MTS License No. 168309 for provision of cable radio in the territory of Saratov region (English translation) is incorporated herein by reference to Exhibit 4.350 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.237		MTS License No. 168612 for provision of mobile radio telephone services in the territory of Dagestan Republic (English translation) is incorporated herein by reference to Exhibit 4.351 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.238		MTS License No. 168613 for provision of mobile radio telephone services in the territory of Karachaevo-Cherkesia Republic (English translation) is incorporated herein by reference to Exhibit 4.352 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.239		MTS License No. 168614 for provision of mobile radio telephone services in the territory of Ulyanovsk region (English translation) is incorporated herein by reference to Exhibit 4.353 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.240		MTS License No. 168615 for provision of mobile radio telephone services in the territory of Stavropol territory (English translation) is incorporated herein by reference to Exhibit 4.354 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.241		MTS License No. 168616 for provision of mobile radio telephone services in the territory of Kemerovo region (English translation) is incorporated herein by reference to Exhibit 4.355 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

263

Table of Contents

Exhibits No.			Description

	4.242		MTS License No. 168617 for provision of mobile radio telephone services in the territory of Kabardino-Balkar Republic (English translation) is incorporated herein by reference to Exhibit 4.356 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.243		MTS License No. 168618 for provision of mobile radio telephone services in the territory of Mordovia Republic (English translation) is incorporated herein by reference to Exhibit 4.357 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.244		MTS License No. 168619 for provision of local telecommunications services, except for local telecommunications services via coin-box telephones and multiple-access facilities in the territory of Kemerovo region (English translation) is incorporated herein by reference to Exhibit 4.358 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.245		MTS License No. 168620 for provision of mobile radio telephone services in the territory of Kalmykia Republic (English translation) is incorporated herein by reference to Exhibit 4.359 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.246		MTS License No. 168621 for provision of mobile radio telephone services in the territory of Altai Republic (English translation) is incorporated herein by reference to Exhibit 4.360 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.247		MTS License No. 168622 for provision of mobile radio telephone services in the territory of Tyva Republic (English translation) is incorporated herein by reference to Exhibit 4.361 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.248		MTS License No. 168623 for provision of mobile radio telephone services in the territory of Ingushetia Republic (English translation) is incorporated herein by reference to Exhibit 4.362 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.249		MTS License No. 168624 for provision of mobile radio telephone services in the territory of Chuvashia Republic (English translation) is incorporated herein by reference to Exhibit 4.363 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.250		MTS License No. 169190 for provision of cable radio in the territory of Krasnodar territory (English translation) is incorporated herein by reference to Exhibit 4.364 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.251		MTS License No. 169448 for provision of intra zonal communications services in the territory of Karelia Republic (English translation) is incorporated herein by reference to Exhibit 4.365 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

264

Table of Contents

Exhibits No.			Description

	4.252		MTS License No. 169449 for provision of intra zonal communications services in the territory of Komi Republic (English translation) is incorporated herein by reference to Exhibit 4.366 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.253		MTS License No. 169450 for provision of intra zonal communications services in the territory of St. Petersburg (English translation) is incorporated herein by reference to Exhibit 4.367 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.254		MTS License No. 169451 for provision of international, national, intra zonal and local communications services in the territory of Kemerovo region (English translation) is incorporated herein by reference to Exhibit 4.368 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.255		MTS License No. 169452 for provision of intra zonal communications services in the territory of Vologda region (English translation) is incorporated herein by reference to Exhibit 4.369 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.256		MTS License No. 169453 for provision of intra zonal communications services in the territory of Novgorod region (English translation) is incorporated herein by reference to Exhibit 4.370 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.257		MTS License No. 169454 for provision of intra zonal communications services in the territory of Astrakhan region (English translation) is incorporated herein by reference to Exhibit 4.371 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.258		MTS License No. 169455 for provision of intra zonal communications services in the territory of Murmansk region (English translation) is incorporated herein by reference to Exhibit 4.372 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.259		MTS License No. 169456 for provision of intra zonal communications services in the territory of Arkhangelsk region (English translation) is incorporated herein by reference to Exhibit 4.373 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.260		MTS License No. 169457 for provision of intra zonal communications services in the territory of Kaliningrad region (English translation) is incorporated herein by reference to Exhibit 4.374 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.261		MGTS License No. 169794 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.397 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

265

Table of Contents

Exhibits No.			Description

	4.262		MGTS License No. 169795 for provision of local telephone communication services, excluding local telephone communication services using payphones and shared-access facilities in the territory of the Moscow region (English translation) is incorporated herein by reference to Exhibit 4.398 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.263		MTS License No. 170007 for provision of mobile radio telephone services in the territory of Omsk region (English translation) is incorporated herein by reference to Exhibit 4.375 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.264		MTS License No. 170425 for provision of data transmission services for voice in the territory of Kemerovo region (English translation) is incorporated herein by reference to Exhibit 4.376 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.265		MTS License No. 170426 for provision of data transmission services for voice in the territory of Nizhny Novgorod region (English translation) is incorporated herein by reference to Exhibit 4.377 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.266		MTS License No. 170427 for provision of data transmission services for voice in the territory of Arkhangelsk region (English translation) is incorporated herein by reference to Exhibit 4.378 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.267		MTS License No. 170428 for provision of data transmission services for voice in the territory of Krasnoyarsk Territory (English translation) is incorporated herein by reference to Exhibit 4.379 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.268		MTS License No. 170429 for provision of data transmission services for voice in the territory of Novgorod region (English translation) is incorporated herein by reference to Exhibit 4.380 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.269		MTS License No. 170430 for provision of data transmission services for voice in the territory of Omsk region (English translation) is incorporated herein by reference to Exhibit 4.381 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.270		MTS License No. 170431 for provision of data transmission services for voice in the territory of Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.382 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.271		MTS License No. 170432 for provision of data transmission services for voice in the territory of Tula region (English translation) is incorporated herein by reference to Exhibit 4.383 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

266

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Exhibits No.			Description

	4.272		MTS License No. 170433 for provision of intra zonal communications services in the territory of Kurgan region (English translation) is incorporated herein by reference to Exhibit 4.384 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.273		MTS License No. 170434 for provision of data transmission services for voice in the territory of Smolensk region (English translation) is incorporated herein by reference to Exhibit 4.385 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.274		MTS License No. 170435 for provision of data transmission services for voice in the territory of Leningrad region (English translation) is incorporated herein by reference to Exhibit 4.386 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.275		MTS License No. 170436 for provision of data transmission services for voice in the territory of Volgograd region (English translation) is incorporated herein by reference to Exhibit 4.387 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.276		MTS License No. 170616 for provision of mobile radio telephone services in the territory of Bashkortostan Republic (English translation) is incorporated herein by reference to Exhibit 4.388 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.277		MTS License No. 170831 for provision of intra zonal communications services in the territory of Volgograd region (English translation) is incorporated herein by reference to Exhibit 4.389 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.278		MTS License No. 171610 for provision of mobile radio telephone services in the territory of Kirov region, Orenburg region, Perm region, Udmurt Republic, Chelyabinsk region, Khanty Mansiysk Autonomous region, Kurgan region, Sverdlovsk region, Tyumen region, YamaloNenetsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.390 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.279		MTS License No. 171678 for provision of cable radio in the territory of Novosibirsk region (English translation) is incorporated herein by reference to Exhibit 4.391 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.280		MTS License No. 172049 for provision of mobile radio telephone services in the territory of Bashkortostan Republic (English translation) is incorporated herein by reference to Exhibit 4.393 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.281		MTS License No. 172368 for provision of mobile radio telephone services in the territory of Volgograd region (English translation) is incorporated herein by reference to Exhibit 4.395 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.

267

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Exhibits No.			Description

	4.282		MTS License No. 172369 for provision of cable radio in the territory of Vologda region (English translation) is incorporated herein by reference to Exhibit 4.396 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, on Form 20-F.
	4.283		MKS Balashikha License No. 149923 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of Moscow region (Balashikha) (English translation) is incorporated herein by reference to Exhibit 4.361 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.284		MKS Balashikha License No. 149924 for provision of telecommunication services for Cable Broadcasting in the territory of Moscow region (Balashikha) (English translation) is incorporated herein by reference to Exhibit 4.362 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.285		MKS Balashikha License No. 149925 for provision of telematic services in the territory of Moscow region (Balashikha) (English translation) is incorporated herein by reference to Exhibit 4.363 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.286		MKS Balashikha License No. 156128 for provision of telecommunication services for provision of communication channels in the territory of Moscow region (Balashikha) (English translation) is incorporated herein by reference to Exhibit 4.365 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.287		Navigation Information Systems JSC License No. 161285 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.366 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.288		Navigation Information Systems License No. 161286 for provision of telematic services in the territory of Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.367 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.289		Progressivniye Technologii License No. 169311 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of Moscow region (English translation) is incorporated herein by reference to Exhibit 4.372 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.290		Progressivniye Technologii License No. 169314 for provision of telematic services in the territory of Moscow, Moscow region (English translation) is incorporated herein by reference to Exhibit 4.373 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

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Exhibits No.			Description

	4.291		Progressivniye Technologii License No. 169315 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of Moscow, Moscow region (English translation) is incorporated herein by reference to Exhibit 4.374 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.292		MTS License No. 172247 for provision of telematic services in the territory of Zabaykalsky Territory (English translation) is incorporated herein by reference to Exhibit 4.377 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.293		MTS License No. 172248 for provision of cable radio services in the territory of Sverdlovsk region (English translation) is incorporated herein by reference to Exhibit 4.378 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.294		MTS License No. 172249 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of Zabaykalsky Territory (English translation) is incorporated herein by reference to Exhibit 4.379 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.295		MTS License No. 173071 for provision of mobile radio telephone services in the territory of KabardinoBalkar Republic (English translation) is incorporated herein by reference to Exhibit 4.380 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.296		MTS License No. 173072 for provision of mobile radio telephone services in the territory of Chechen Republic (English translation) is incorporated herein by reference to Exhibit 4.381 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.297		MTS License No. 173073 for provision of telecommunication services for provision of communication channels in the territory of Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region (English translation) is incorporated herein by reference to Exhibit 4.382 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.298		MTS License No. 173165 for provision of cable radio services in the territory of Yaroslavl region (English translation) is incorporated herein by reference to Exhibit 4.383 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.299		MTS License No. 173166 for provision of cable radio services in the territory of Ivanovo region (English translation) is incorporated herein by reference to Exhibit 4.384 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.300		MTS License No. 173482 for provision of Intrazonal communications services in the territory of Belgorod region (English translation) is incorporated herein by reference to Exhibit 4.385 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

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Table of Contents

Exhibits No.			Description

	4.301		Progressivniye Technologii License No. 173864 for provision of telecommunication services for Cable Broadcasting in the territory of Moscow region (English translation) is incorporated herein by reference to Exhibit 4.386 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.302		Progressivniye Technologii License No. 173865 for provision of data transmission services for voice in the territory of Moscow, Moscow region (English translation) is incorporated herein by reference to Exhibit 4.387 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.303		Progressivniye Technologii License No. 173867 for provision of cable radio services in the territory of Moscow region (English translation) is incorporated herein by reference to Exhibit 4.388 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.304		MTS License No. 174038 for provision of telecommunication services for provision of communication channels in the territory of Chukotsk Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.389 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.305		MTS License No. 174356 for provision of Intrazonal communications services in the territory of Nizhny Novgorod region (English translation) is incorporated herein by reference to Exhibit 4.390 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.306		MTS License No. 174442 for provision of cable radio services in the territory of Irkutsk region (English translation) is incorporated herein by reference to Exhibit 4.391 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.307		MTS License No. 174800 for provision of mobile radio telephone services in the territory of Belgorod region (English translation) is incorporated herein by reference to Exhibit 4.392 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.308		MTS License No. 175252 for provision of telecommunication services for provision of communication channels in the territory of Jewish Autonomous region (English translation) is incorporated herein by reference to Exhibit 4.394 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.309		MTS License No. 175253 for provision of cable radio services in the territory of Nizhny Novgorod region (English translation) is incorporated herein by reference to Exhibit 4.395 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.310		MTS License No. 176259 for provision of data transmission services for voice in the territory of Tver region (English translation) is incorporated herein by reference to Exhibit 4.399 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

270

Table of Contents

Exhibits No.			Description

	4.311		MTS License No. 176260 for provision of telecommunication services for Cable Broadcasting in the territory of Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.400 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.312		MTS License No. 176556 for provision of data transmission services for voice in the territory of Samara region (English translation) is incorporated herein by reference to Exhibit 4.401 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.313		MTS License No. 176557 for provision of data transmission services for voice in the territory of Astrakhan region (English translation) is incorporated herein by reference to Exhibit 4.402 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.314		MTS License No. 176558 for provision of Intrazonal communications services in the territory of Samara region (English translation) is incorporated herein by reference to Exhibit 4.403 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.315		MTS License No. 176559 for provision of data transmission services for voice in the territory of Tambov region (English translation) is incorporated herein by reference to Exhibit 4.404 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.316		MTS License No. 176685 for provision of Intrazonal communications services in the territory of Kursk region (English translation) is incorporated herein by reference to Exhibit 4.408 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.317		MTS License No. 176686 for provision of cable radio services in the territory of St. Petersburg, Leningrad region (English translation) is incorporated herein by reference to Exhibit 4.409 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.318		Sputnikovoe TV License No. 176892 for provision of telecommunication services for provision of communication channels in the territory of Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.410 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

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Table of Contents

Exhibits No.			Description

	4.319		Sputnikovoe TV License No. 176894 for provision of communication services for the purpose of broadcasting in the territory of Moscow, Moscow region, St. Petersburg, Leningrad region, Adygeya Republic, Arkhangelsk region, Astrahansk region, Bashkortostan Republic, Belgorod region, Bryansk region, Chuvashia Republic, Dagestan Republic, Ivanovo region, Ingushetia Republic, KabardinoBalkar Republic, Kaliningrad region, Kalmykia Republic, Kaluga region, KarachaevoCherkesia Republic, Karelia Republic, Kirov region, Komi Republic , Kostroma region, Krasnodar territory, Kursk region, Lipetsk region, Mari El Republic, Mordovia Republic, Murmansk region, Nizhny Novgorod region, Novgorod region, Orel region, Orenburg region, Perm region, Rostov region, Pskov region, Ryazan region, Samara region, Saratov region, Severnaya Osetia Alania Republic, Smolensk region, Stavropol territory, Tambov region, Tatarstan Republic, Tula region, Tver region, Udmurt Republic, Ulyanovsk region, Vladimir region, Volgograd region, Vologda region, Voronezh region, Yaroslavl region, Altaisk territory, Altai Republic, Amur region, Buryatiya Republic, Chelyabinsk region, Jewish Autonomous region, Irkutsk region, Kemerov region, Khabarovsk Territory, Khakassiya Republic, Khanty Mansiysk Autonomous region, Krasnoyarsk Territory, Kurgan region, Novosibirsk region, Omsk region, Primorsky Territory, Sakha Republic (Yakutia), Sakhalin region, Sverdlovsk region, Tomsk region, Tyumen region, Tyva Republic, YamaloNenetsk Autonomous region, Chechen Republi?, Zabaykalsky Territory, Penza region, Krym Repablic, Sevastopol, Nenetsk Autonomous region, Magadan region (English translation) is incorporated herein by reference to Exhibit 4.411 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.320		MTS License No. 177389 for provision of data transmission services for the purpose of voice transmission in the territory of St. Petersburg (English translation) is incorporated herein by reference to Exhibit 4.412 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.321		MTS License No. 177489 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of Kemerovo region (English translation) is incorporated herein by reference to Exhibit 4.413 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.322		MTS License No. 177989 for provision of mobile radio telephone services in the territory of Khakassiya Republic (English translation) is incorporated herein by reference to Exhibit 4.414 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.323		MTS License No. 178568 for provision of local, international and intercity phone communication service in the territory of the Russian Federation (English translation) is incorporated herein by reference to Exhibit 4.415 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.324		MTS License No. 178740 for provision of mobile radio telephone services in the territory of Magadan region (English translation) is incorporated herein by reference to Exhibit 4.416 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

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Table of Contents

Exhibits No.			Description

	4.325		MTS License No. 178741 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of Tyumen region (English translation) is incorporated herein by reference to Exhibit 4.417 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.326		MTS License No. 178742 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of Zabaykalsky Territory (English translation) is incorporated herein by reference to Exhibit 4.418 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.327		MTS License No. 178743 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of Irkutsk region (English translation) is incorporated herein by reference to Exhibit 4.419 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.328		MTS License No. 178744 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of Tatarstan Republic (English translation) is incorporated herein by reference to Exhibit 4.420 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.329		MTS License No. 179430 for provision of cable radio services in the territory of Smolensk region (English translation) is incorporated herein by reference to Exhibit 4.421 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.330		MTS License No. 179661 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.426 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.331		MTS License No. 179662 for provision of communication services for the purpose of wire broadcasting in the territory of the Perm Territory (English translation) is incorporated herein by reference to Exhibit 4.427 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.332		MTS License No. 179663 for provision of telematic communication services in the territory of the Penza region (English translation) is incorporated herein by reference to Exhibit 4.428 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.

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Table of Contents

Exhibits No.			Description

	4.333		MTS License No. 181284 for provision of mobile radio telephone services in the territory of Sakha Republic (Yakutia), No. 182244 for provision of mobile radio telephone services in the territory of Khabarovsk Territory, No. 182245 for provision of mobile radio telephone services in the territory of Krasnoyarsk Territory, No. 182246 for provision of mobile radio telephone services in the territory of Tyva Republic, No. 182247 for provision of mobile radio telephone services in the territory of Perm Region, No. 182248 for provision of mobile radio telephone services in the territory of Buryatiya Republic, No. 182249 for provision of mobile radio telephone services in the territory of Komi Republic, No. 182251 for provision of mobile radio telephone services in the territory of Omsk Region, No. 182250 for provision of telecommunications services for broadcasting in the territory of Udmurt Republic (English summary) is incorporated herein by reference to Exhibit 4.429 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.334		MTS Bank License No. 177-046113-100000 for carrying out broker activity (English translation) is incorporated herein by reference to Exhibit 4.430 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.335		MTS Bank General Banking License No. 2268 (English translation) is incorporated herein by reference to Exhibit 4.431 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.336		MTS Bank License No. 177-04660-000100 for carrying out depositary activity (English translation) is incorporated herein by reference to Exhibit 4.432 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.337		MTS Bank License No. 177-04635-010000 for carrying out dealer activity (English translation) is incorporated herein by reference to Exhibit 4.433 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.338		MTS Bank License No. 0016453 for carrying out development, production, distribution of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities, for works and services in the field of data encryption, technical support services of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities (except where technical support services of encryption (cryptographic) facilities, information and telecommunication systems, which are protected with encryption (cryptographic) facilities, are performed for the own needs of the legal entity or individual entrepreneur) (English translation) is incorporated herein by reference to Exhibit 4.434 to the Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019, on Form 20-F.
	4.339		MTS PJSC License No. 86435 for provision of mobile radio telephone services in the territory of the Ulyanovsk region (English translation).
	4.340		MTS PJSC License No. 86436 for provision of mobile radio telephone services in the territory of the Penza region (English translation).

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Exhibits No.			Description

	4.341		Zelenaya Tochka Group License No. 133869 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Lipetsk region (English translation).
	4.342		Zelenaya Tochka Group License No. 133870 for provision of telematic services in the territory of the Russian Federation (English translation).
	4.343		Zelenaya Tochka Group License No. 133871 for provision of data transmission services for voice in the territory of the Lipetsk region (English translation).
	4.344		Zelenaya Tochka Group License No. 133872 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Russian Federation (English translation).
	4.345		Zelenaya Tochka Group License No. 135050 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Tambov region (English translation).
	4.346		Zelenaya Tochka Group License No. 135051 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Tambov region (English translation).
	4.347		Zelenaya Tochka Group License No. 135052 for provision of telematic services in the territory of the Tambov region (English translation).
	4.348		Zelenaya Tochka Group License No. 135053 for provision of telecommunication services for provision of communication channels in the territory of the Tambov region (English translation).
	4.349		Zelenaya Tochka Group License No. 136783 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.350		Zelenaya Tochka Group License No. 139196 for provision of Intrazonal communications services in the territory of the Lipetsk region (English translation).
	4.351		Zelenaya Tochka Group License No. 139584 for provision of telecommunication services for Cable Broadcasting in the territory of the Tambov region (English translation).
	4.352		Zelenaya Tochka Group License No. 140769 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.353		Zelenaya Tochka Group License No. 144280 for provision of data transmission services for voice in the territory of the Tambov region (English translation).
	4.354		Zelenaya Tochka Group License No. 149193 for provision of telecommunication services for provision of communication channels in the territory of the Kalmykia Republic (English translation).
	4.355		Zelenaya Tochka Group License No. 149194 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Kalmykia Republic (English translation).
	4.356		Zelenaya Tochka Group License No. 152526 for provision of telematic services in the territory of the Russian Federation (English translation).

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Exhibits No.			Description

	4.357		Zelenaya Tochka Group License No. 155121 for provision of data transmission services for voice in the territory of the Kalmykia Republic (English translation).
	4.358		Zelenaya Tochka Group License No. 157698 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Kabardino-Balkar Republic, Stavropol region (English translation).
	4.359		Zelenaya Tochka Group License No. 157699 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Stavropol region (English translation).
	4.360		Zelenaya Tochka Group License No. 157700 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.361		Zelenaya Tochka Group License No. 157701 for provision of telecommunication services for provision of communication channels in the territory of the Stavropol region (English translation).
	4.362		Zelenaya Tochka Group License No. 157702 for provision of data transmission services for voice in the territory of the Stavropol region (English translation).
	4.363		Zelenaya Tochka Group License No. 158709 for provision of telematic services in the territory of the Stavropol region: Stavropol (English translation).
	4.364		Zelenaya Tochka Group License No. 158710 for provision of telecommunication services for Cable Broadcasting in the territory of the Stavropol (English translation).
	4.365		Zelenaya Tochka Group License No. 158711 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Stavropol region: Stavropol (English translation).
	4.366		Zelenaya Tochka Group License No. 159633 for provision of telecommunication services for provision of communication channels in the territory of the Lipetsk region (English translation).
	4.367		Zelenaya Tochka Group License No. 164791 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Stavropol region (English translation).
	4.368		Zelenaya Tochka Group License No. 164792 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.369		Zelenaya Tochka Group License No. 164793 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Stavropol region (English translation).
	4.370		Zelenaya Tochka Group License No. 164794 for provision of telecommunication services for provision of communication channels in the territory of the Stavropol region (English translation).
	4.371		Zelenaya Tochka Group License No. 164795 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Stavropol region (English translation).

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Exhibits No.			Description

	4.372		Zelenaya Tochka Group License No. 165886 for provision of telecommunication services for Cable Broadcasting in the territory of the Russian Federation (English translation).
	4.373		Zelenaya Tochka Group License No. 169446 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.374		Zelenaya Tochka Group License No. 171466 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.375		Zelenaya Tochka Group License No. 176466 for provision of telecommunication services for Cable Broadcasting in the territory of the Stavropol region: Nevinnomyssk (English translation).
	4.376		Zelenaya Tochka Group License No. 178211 for provision of telecommunication services for provision of communication channels in the territory of the Belgorod region (English translation).
	4.377		Zelenaya Tochka Group License No. 178212 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Belgorod region (English translation).
	4.378		Zelenaya Tochka Group License No. 178213 for provision of telematic services in the territory of the Belgorod region (English translation).
	4.379		Zelenaya Tochka Group License No. 179043 for provision of telematic services in the territory of the Lipetsk region (English translation).
	4.380		Zelenaya Tochka Group License No. 179060 for provision of telematic services in the territory of the Bashkortostan Republic (English translation).
	4.381		Zelenaya Tochka Group License No. 179061 for provision of telecommunication services for provision of communication channels in the territory of the Bashkortostan Republic (English translation).
	4.382		Zelenaya Tochka Group License No. 179062 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Bashkortostan Republic (English translation).
	4.383		Progressivniye Technologii CJSC License No. 180134 for provision of telecommunication services for provision of communication channels in the territory of the Moscow, Moscow region (English translation).
	4.384		Zelenaya Tochka Group License No. 180190 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Lipetsk region (English translation).
	4.385		Zelenaya Tochka Group License No. 180191 for provision of telecommunication services for provision of communication channels in the territory of the Lipetsk region (English translation).
	4.386		MTS PJSC License No. 180446 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Zabaykalsky region (English translation).
	4.387		MTS PJSC License No. 180447 for provision of telecommunication services for provision of communication channels in the territory of the Primorsky region (English translation).

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Exhibits No.			Description

	4.388		MGTS PJSC License No. 180455 for provision of Intrazonal communications services in the territory of the Moscow, Moscow region (English translation).
	4.389		Zelenaya Tochka Group License No. 180988 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Lipetsk region (English translation).
	4.390		Zelenaya Tochka Group License No. 181007 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Primorsky region (English translation).
	4.391		Zelenaya Tochka Group License No. 181008 for provision of telematic services in the territory of the Primorsky region (English translation).
	4.392		Zelenaya Tochka Group License No. 181009 for provision of telecommunication services for provision of communication channels in the territory of the Primorsky region (English translation).
	4.393		MTS PJSC License No. 181206 for provision of telecommunication services for provision of communication channels in the territory of the Astrakhan region, Stavropol region (English translation).
	4.394		MTS PJSC License No. 181207 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Ulyanovsk region (English translation).
	4.395		MTS PJSC License No. 181208 for provision of telematic services in the territory of the Ulyanovsk region (English translation).
	4.396		MTS PJSC License No. 181209 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Khabarovsk region (English translation).
	4.397		MTS PJSC License No. 181210 for provision of telematic services in the territory of the Saratov region (English translation).
	4.398		MTS PJSC License No. 181211 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Stavropol region (English translation).
	4.399		MTS PJSC License No. 181212 for provision of data transmission services for voice in the territory of the Yaroslavl region (English translation).
	4.400		MTS PJSC License No. 181213 for provision of telematic services in the territory of the Volgograd region (English translation).
	4.401		MTS PJSC License No. 181214 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Samara region (English translation).
	4.402		MTS PJSC License No. 181215 for provision of telematic services in the territory of the Samara region (English translation).
	4.403		MTS PJSC License No. 181216 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Saratov region (English translation).

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Exhibits No.			Description

	4.404		MTS PJSC License No. 181217 for provision of telematic services in the territory of the Republic of Khakassia (English translation).
	4.405		MTS PJSC License No. 181218 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Kemerovo region (English translation).
	4.406		MTS PJSC License No. 181219 for provision of telecommunication services for provision of communication channels in the territory of the Samara region, Saratov region, Ulyanovsk region (English translation).
	4.407		MTS PJSC License No. 181220 for provision of telematic services in the territory of the Khabarovsk region (English translation).
	4.408		MTS PJSC License No. 181221 for provision of telematic services in the territory of the Stavropol region (English translation).
	4.409		MTS PJSC License No. 182081 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Buryatiya Republic, Kamchatka region (excluding the Koryak Autonomous Area), Magadan region, Sakhalin region (English translation).
	4.410		MTS PJSC License No. 182082 for provision of telematic services in the territory of the Buryatiya Republic, Kamchatka region (excluding the excluding the Koryak Autonomous Area), Magadan region, Sakhalin region (English translation).
	4.411		MTS PJSC License No. 182083 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Tomsk region (English translation).
	4.412		MTS PJSC License No. 182084 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Ryazan region (English translation).
	4.413		MTS PJSC License No. 182085 for provision of telematic services in the territory of the Khakassiya Republic (English translation).
	4.414		MTS PJSC License No. 182086 for provision of telematic services in the territory of the Tomsk region (English translation).
	4.415		MTS PJSC License No. 182087 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Bashkortostan Republic (English translation).
	4.416		MTS PJSC License No. 182088 for provision of telematic services in the territory of the Sakha Republic (Yakutia) (English translation).
	4.417		MTS PJSC License No. 182089 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Sakha Republic (Yakutia) (English translation).
	4.418		MTS PJSC License No. 182090 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Volgograd region (English translation).

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Exhibits No.			Description

	4.419		MTS PJSC License No. 182091 for provision of telecommunication services for provision of communication channels in the territory of the Khakassiya Republic (English translation).
	4.420		MTS PJSC License No. 182092 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Khakassiya Republic (English translation).
	4.421		MTS PJSC License No. 182093 for provision of mobile radio telephone services in the territory of the Rostov region (English translation).
	4.422		MTS PJSC License No. 182094 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Kaluga region (English translation).
	4.423		MTS PJSC License No. 182244 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Khabarovsk Territory (English translation).
	4.424		MTS PJSC License No. 182245 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Krasnoyarsk Territory (English translation).
	4.425		MTS PJSC License No. 182246 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Tyva Republic (English translation).
	4.426		MTS PJSC License No. 182247 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Perm region (English translation).
	4.427		MTS PJSC License No. 182248 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Buryatiya Republic (English translation).
	4.428		MTS PJSC License No. 182249 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Komi Republic (English translation).
	4.429		MTS PJSC License No. 182250 for provision of communication services for the purpose of wire broadcasting in the territory of the Udmurt Republic (English translation).
	4.430		MTS PJSC License No. 182251 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Omsk region (English translation).
	4.431		MTS Media License No. 182309 for provision of telematic services in the territory of the Russian Federation (English translation).
	4.432		MTS PJSC License No. 182375 for provision of mobile radio telephone services in the territory of the Moscow, Moscow region (English translation).
	4.433		MTS PJSC License No. 182535 for provision of telematic services in the territory of the Chukotsk Autonomous region, Jewish Autonomous region, Irkutsk region, Koryak District of the Kamchatka region (English translation).

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Exhibits No.			Description

	4.434		MTS PJSC License No. 182536 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Astrakhan region (English translation).
	4.435		MTS PJSC License No. 182537 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Tatarstan Republic (English translation).
	4.436		MTS PJSC License No. 182538 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Krasnodar region (English translation).
	4.437		MTS PJSC License No. 182539 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Kalmykia Republic (English translation).
	4.438		MTS PJSC License No. 182540 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Tyva Republic (English translation).
	4.439		MTS PJSC License No. 182541 for provision of telematic services in the territory of the Krasnodar region (English translation).
	4.440		MTS PJSC License No. 182542 for provision of telecommunication services for provision of communication channels in the territory of the Tyva Republic (English translation).
	4.441		MTS PJSC License No. 182543 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Novosibirsk region (English translation).
	4.442		MTS PJSC License No. 182544 for provision of telecommunication services for provision of communication channels in the territory of the Adygeya Republic, Krasnodar region (English translation).
	4.443		MTS PJSC License No. 182545 for provision of telematic services in the territory of the Tatarstan Republic (English translation).
	4.444		MTS PJSC License No. 182546 for provision of telematic services in the territory of the Tyva Republic (English translation).
	4.445		MTS PJSC License No. 182547 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Altai Republic (English translation).
	4.446		MTS PJSC License No. 182548 for provision of telematic services in the territory of the Adygeya Republic (English translation).
	4.447		MTS PJSC License No. 182549 for provision of telematic services in the territory of the Astrakhan region (English translation).
	4.448		MTS PJSC License No. 182550 for provision of telematic services in the territory of the Kalmykia Republic (English translation).
	4.449		MTS PJSC License No. 182551 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Chukotsk Autonomous region, Jewish Autonomous region, Irkutsk region, Koryak Autonomous Area of the Kamchatka region (English translation).

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Exhibits No.			Description

	4.450		MTS PJSC License No. 182552 for provision of telecommunication services for provision of communication channels in the territory of the Chuvashia Republic (English translation).
	4.451		MTS PJSC License No. 182553 for provision of data transmission services for voice in the territory of the Belgorod region, Bryansk region, Kursk region, Lipetsk region, Orel region, Voronezh region (English translation).
	4.452		MTS PJSC License No. 182554 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Adygeya Republic (English translation).
	4.453		MTS PJSC License No. 182555 for provision of telecommunication services for provision of communication channels in the territory of the Altai Republic, Altai region, Novosibirsk region (English translation).
	4.454		MTS PJSC License No. 182984 for provision of mobile radio telephone services in the territory of the Tyva Republic (English translation).
	4.455		MTS PJSC License No. 182985 for provision of mobile radio telephone services in the territory of the Altai Republic (English translation).
	4.456		MTS PJSC License No. 182986 for provision of mobile radio telephone services in the territory of the Krasnoyarsk region (English translation).
	4.457		MTS PJSC License No. 183415 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Moscow (English translation).
	4.458		MTS PJSC License No. 183416 for provision of mobile radio telephone services in the territory of the Russian Federation, except Crimea Republic, Sevastopol (English translation).
	4.459		MTS PJSC License No. 183417 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the St. Petersburg (English translation).
	4.460		MTS PJSC License No. 183418 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Sverdlovsk (English translation).
	4.461		MTS PJSC License No. 183419 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Leningrad region (English translation).
	4.462		MTS PJSC License No. 183420 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Moscow region (English translation).
	4.463		MGTS PJSC License No. 184083 for provision of telecommunication services for Cable Broadcasting in the territory of the Moscow (English translation).
	4.464		MGTS PJSC License No. 184084 for provision of data transmission services for voice in the territory of the Moscow (English translation).
	4.465		MTS PJSC License No. 184096 for provision of Intrazonal communications services in the territory of the Sakha Republic (Yakutia) (English translation).

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Exhibits No.			Description

	4.466		MTS PJSC License No. 184255 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Kemerovo region (Mezhdurechensk) (English translation).
	4.467		MTS PJSC License No. 184256 for provision of mobile radio telephone services in the territory of the Komi Republic (English translation).
	4.468		Zelenaya Tochka Group License No. 184573 for provision of telecommunication services for Cable Broadcasting in the territory of the Tambov region (English translation).
	4.469		MTS PJSC License No. 184788 for provision of telematic services in the territory of the Komi Republic, Perm region, Orenburg region, Orel region, Nizhny Novgorod region, Lipetsk region, Moscow, Kostroma region, Smolensk region, Kirov region, Kaluga region, Ivanovo region, Bryansk region, Belgorod region, Moscow region, Kursk region, Voronezh region, Tyumen region, Sverdlovsk region, Omsk region, Kurgan region, Khanty Mansiysk Autonomous region, Chelyabinsk region, Pskov region, Yaroslavl region, Ryazan region, Vladimir region, Udmurt Republic, Tver region, Tula region, Tambov region, YamaloNenetsk Autonomous region, Amur region (English translation).
	4.470		MTS PJSC License No. 184789 for provision of mobile radio telephone services in the territory of the Kalmykia Republic (English translation).
	4.471		MTS PJSC License No. 185031 for provision of mobile radio telephone communication services in the allocated telecommunications network in the territory of the Samara region (English translation).
	4.472		MTS PJSC License No. 185275 for provision of Intrazonal communications services in the territory of the Moscow (English translation).
	4.473		MTS PJSC License No. 185276 for provision of data transmission services for voice in the territory of the Rostov region (English translation).
	4.474		MTS PJSC License No. 185833 for provision of data transmission services, except for data transmission services for the purpose of voice transmission in the territory of the Rostov region (English translation).
	4.475		MTS PJSC License No. 185834 for provision of local telephone communication services, excluding local telephone communication services using coin-box telephones and public access services in the territory of the Sverdlovsk region (English translation).
	4.476		MTS PJSC License No. 186311 for provision of data transmission services for voice in the territory of the Bashkortostan Republic (English translation).
	4.477		MTS PJSC License No. 186312 for provision of telematic services in the territory of the Novosibirsk region (English translation).
	4.478		MTS PJSC License No. 186313 for provision of mobile radio telephone services in the territory of the Chechen Republic (English translation).
	4.479		MTS PJSC License No. 186314 for provision of telecommunication services for provision of communication channels in the territory of the Yamalo-Nenetsk Autonomous region, Tyumen region, Sverdlovsk region, Kurgan region, Khanty Mansiysk Autonomous region, Chelyabinsk region, Amur region, Udmurt Republic, Tambov region, Perm region, Orenburg region (English translation).

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Exhibits No.			Description

	4.480		MTS PJSC License No. 186516 for provision of Intrazonal communications services in the territory of the Khakassiya Republic (English translation).
	8.1		List of Subsidiaries of Mobile TeleSystems Public Joint Stock Company.
	12.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	12.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	13.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	13.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101		The following financial information formatted in Extensive Business Reporting Language (XBRL): (i) Consolidated statements of financial position as of December 31, 2020 and 2019, (ii) Consolidated statements of profit or loss for the years ended December 31, 2020, 2019 and 2018, (iii) Consolidated statements of comprehensive income for the years ended December 31, 2020, 2019 and 2018, (iv) Consolidated statements of changes in shareholders' equity for the years ended December 31, 2020, 2019 and 2018, (v) Consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018, and (vi) Notes to the consolidated financial statements.

*: Approved by General Meeting of Shareholders of Mobile TeleSystems Public Joint Stock Company held on June 28, 2018 and became effective upon registration with the Federal Tax Service on July 11, 2018.

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

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PJSC MOBILE
TELESYSTEMS
AND SUBSIDIARIES
Consolidated Financial Statements

As of December 31, 2020, 2019 and for the Years Ended
December 31, 2020, 2019 and 2018.

F-1

Table of Contents

PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

TABLE OF CONTENTS

		Page

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020, 2019 AND FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-3
Consolidated statements of financial position		F-7 - F-8
Consolidated statements of profit or loss		F-9
Consolidated statements of comprehensive income		F-10
Consolidated statements of changes in shareholders' equity		F-11 - F-12
Consolidated statements of cash flows		F-13 - F-14
Notes to the consolidated financial statements:		F-15 - F-117
1.	General information and description of business	F-15
2.	Summary of significant accounting policies and new accounting pronouncements	F-15
3.	Impacts of COVID-19	F-19
4.	Significant accounting judgments, estimates and assumptions	F-20
5.	Business acquisitions	F-23
6.	Segment information	F-30
7.	Revenue from contracts with customers	F-34
8.	Selling, general and administrative expenses	F-39
9.	Finance income and costs	F-40
10.	Other non-operating (income)/expenses	F-40
11.	Operations in Turkmenistan	F-41
12.	Discontinued operations	F-41
13.	Income tax	F-45
14.	Earnings per share	F-48
15.	Cash and cash equivalents	F-48
16.	Short-term investments	F-49
17.	Investments in associates and joint ventures	F-50
18.	Other investments	F-54
19.	Trade and other receivables	F-55
20.	Inventories	F-58
21.	Property, plant and equipment	F-60
22.	Goodwill	F-63
23.	Impairment review	F-63
24.	Other intangible assets	F-67
25.	Borrowings	F-69
26.	Rights-of-use assets and lease obligations	F-73
27.	Reconciliation of liabilities arising from financial activities	F-76
28.	Provisions	F-76
29.	Fair value of financial instruments	F-79
30.	Financial risk management	F-84
31.	Bank financial assets and liabilities	F-89
32.	Related parties	F-105
33.	Shareholders' equity	F-112
34.	Liability under put option agreement	F-115
35.	Commitments and contingencies	F-115
36.	Subsequent events	F-117

F-2

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Mobile TeleSystems PJSC

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Mobile TeleSystems PJSC and subsidiaries (the "Group") as of December 31, 2020 and 2019, the related consolidated statements of profit or loss, comprehensive income, changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2021 expressed an unqualified opinion on the Group's internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-3

Table of Contents

Revenue Recognition—Refer to Note 7 to the consolidated financial statements

Critical Audit Matter Description

The Group's revenue from telecommunication services consists of a significant volume of low-value transactions, sourced from multiple systems, databases, and other tools, including billing systems. The processing and recording of revenue is highly automated and is based on established tariff plans.

We identified the revenue recognition for telecommunications services as a critical audit matter due to the complexity of information systems involved in the revenue recognition process and the risks associated with recognition and measurement of revenue, arising from the diversity and constant evolution of tariff plans, marketing offers and discounts provided to customers. The auditing of revenue required an increased extent of audit effort, including the need for us to involve professionals with expertise in information technology (IT) to identify, test, and evaluate the Group's systems, software applications, and automated controls.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Group's revenue recognition for telecommunication services included the following, among others:

•: We analysed the IT environment that secures proper functioning of billing and other IT systems related to accounting, including control procedures for monitoring changes and segregation of duties, as well as testing of these controls;
•: We tested the design and operating effectiveness of internal controls over revenue recognition, including: recording and registration of phone calls, call duration, provision of data and value added services; authorization of changes in tariff plans and input of this information into the billing systems; and correctness of the application of incentive arrangements and discounts;
•: We performed end-to-end testing of reconciliation of data on the duration and volume of provided telecommunication services from the their initial registration by switching equipment to billing and other IT systems and then to accounting records, including testing of certain manual adjustments recorded when transferring data from billing and other IT systems to the general ledger;
•: We used test calls to test the correctness of the details of connections, their duration and the tariff plans applied;
•: We tested whether incentive arrangements and discounts were correctly accounted for in accordance with the relevant accounting policies of the Group; and
•: We agreed the information on active tariffs entered in the billing systems to the approved tariff orders and published tariff plans.

We evaluated the Group's accounting policy with respect to the recognition of revenue from the provision of services to subscribers to determine if the existing policy continues to be appropriate, and assessed the compliance of the disclosures in the consolidated financial statements with the requirements of IFRS 15, Revenue from Contracts with Customers.

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Assessment and measurement of expected credit losses on loans to customers—Refer to Note 3 and Note 31 to the consolidated financial statements

Critical Audit Matter Description

The Group applies an 'expected loss' model to determine the impairment of loans to customers of MTS Bank. As described in Note 31, Bank financial assets and liabilities, the Group reported an allowance for expected credit losses in respect of loans to customers of RUB 16,446 million at December 31, 2020 (2019: RUB 10,031 million). Due to the underlying assumptions and estimations, in particular in light of negative impact of Covid-19 on the loan portfolios and increased credit defaults, the determination of expected credit losses is one of the most significant management estimates.

Key areas of judgment and estimates related to the auditing of the allowance for expected credit losses on loans to customers included the following:

•: determination of the impairment stage for loans assessed on an individual basis which is based on timely identification and appropriate evaluation of events indicating default or significant increases in credit risk;
•: evaluation of the probability of default of loans assessed on an individual basis at the first and the second stages of impairment as well as loans assessed on a collective basis.

We identified this area as a critical audit matter because models and techniques used in identifying defaults and significant increases in credit risk and for calculating expected credit losses requires the use of data from both external and internal sources, as well as the application of complex and subjective judgments by management. Therefore, a high degree of auditor judgment and an increased extent of effort was required in this area, including the need to involve our actuarial specialists and to perform focused audit procedures to evaluate management judgements made in estimating the allowance for expected credit loses to customers.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assessment and measurement of expected credit losses of loans to customers included the following, among others:

•: We tested the design and the effectiveness of internal controls over classification of the loan portfolio between stages of credit risk and the use of key assumptions in the assessment of probability of default of customers;
•: We evaluated compliance of the methodology, models and techniques, used by the Group management to determine the expected credit losses, with the requirements of IFRS 9, Financial Instruments;
•: We tested the completeness and accuracy of data used in the estimation of expected credit losses, including historical data, using external and internal sources of information;
•: For individually assessed loans, we obtained the Group's schedule of loans classified between stages of credit risk and testing, on a sample basis, the completeness of management's identification of events indicating customer default or significant increase in credit risk, based on information from internal and external sources, as well as evaluation of management assessment of such events, with a particular focus on the treatment of forbearance for customers operating in sectors that are significantly affected by the COVID-19 pandemic;
•: For the evaluation of probability of default of individually assessed loans, with the involvement of our actuarial specialists, we obtained the validation report and tested the outcome of the model against observed losses; and

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•: For collectively assessed loans, with the assistance of actuarial specialists, we performed an analysis of the integrity and logic of the models and assessed the most critical underlying assumptions against historical data and recent trends of default ratios as well as evaluated judgements made by management when assessing the effect of restructuring of customer loans due to economic downturn on expected credit losses.

We also assessed the compliance of the disclosures in the consolidated financial statements with the requirements of IFRS 9, Financial Instruments.

/s/ AO Deloitte & Touche CIS

Moscow, Russia

March 3, 2021

We have served as the Group's auditor since 2002.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2020 AND 2019

(Amounts in millions of Russian Rubles)



ASSETS
NON-CURRENT ASSETS:
Property, plant and equipment	21	284,804	265,479
Investment property		1,889	2,986
Right-of-use assets	26	130,503	138,817
Goodwill	22	38,041	38,675
Other intangible assets	24	90,103	79,729
Investments in associates and joint ventures	17	8,555	6,450
Other investments	18	9,488	11,195
Deferred tax assets	13	8,778	9,975
Accounts receivable, related parties	32	5,209	10,787
Trade accounts receivable	19	2,163	3,556
Bank deposits and loans to customers	31	63,992	53,472
Other financial assets	29	7,575	3,220
Other assets		5,749	4,981

Total non-current assets		656,849	629,322

CURRENT ASSETS:
Inventories	20	15,204	15,515
Trade and other receivables	19	32,868	35,595
Accounts receivable, related parties	32	8,980	5,872
Bank deposits and loans to customers	31	52,676	39,370
Short-term investments	16	23,434	25,618
Advances paid and prepaid expenses		4,288	4,107
VAT receivable		8,877	9,350
Income tax assets		4,660	4,301
Assets held for sale		667	497
Cash and cash equivalents	15	85,405	38,070
Other financial assets	29	23,975	14,558
Other assets		1,320	1,735

Total current assets		262,354	194,588

TOTAL ASSETS		919,203	823,910

The accompanying notes are an integral part of these consolidated financial statements.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)

AS OF DECEMBER 31, 2020 AND 2019

(Amounts in millions of Russian Rubles)



EQUITY AND LIABILITIES
EQUITY:
Common stock	33	200		200
Treasury stock	33	(74,990	)	(59,748	)
Additional paid-in capital		89		—
Retained earnings		94,391		85,249
Accumulated other comprehensive income	33	9,010		7,367

Equity attributable to owners of the Company		28,700		33,068
Non-controlling interests		3,990		3,326

Total equity		32,690		36,394

NON-CURRENT LIABILITIES:
Borrowings	25	395,143		271,573
Lease obligations	26	134,637		140,080
Bank deposits and liabilities	31	1,883		1,805
Deferred tax liabilities	13	19,191		17,866
Provisions	28	5,128		4,761
Contract liabilities	7	717		589
Other financial liabilities	29	14		955
Other liabilities		1,186		1,430

Total non-current liabilities		557,899		439,059

CURRENT LIABILITIES:
Trade and other payables		56,017		71,808
Accounts payable, related parties	32	3,146		558
Contract liabilities	7	21,125		20,718
Borrowings	25	34,125		71,746
Lease obligations	26	16,177		15,228
Bank deposits and liabilities	31	165,794		136,147
Income tax liabilities		753		784
Provisions	28	13,460		11,526
Other financial liabilities	29	1,109		1,424
Other liabilities		16,908		18,518

Total current liabilities		328,614		348,457

TOTAL EQUITY AND LIABILITIES		919,203		823,910

The accompanying notes are an integral part of these consolidated financial statements.


President and CEO		Vice-president, Finance
Alexey V. Kornya		Andrey M. Kamensky
March 3, 2021

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts in millions of Russian Rubles, except per share amounts)



Service revenue		425,448		406,478		382,387
Sales of goods		69,478		64,127		63,851

Revenue	6,7	494,926		470,605		446,238

Cost of services		121,943		114,057		104,143
Cost of goods	20	63,482		58,872		58,669
Selling, general and administrative expenses	8	87,983		89,933		82,482
Depreciation and amortization	6	100,234		96,195		95,316
Operating share of the profit of associates and joint ventures	17	(5,048	)	(4,583	)	(3,799	)
Impairment of non-current assets	23	2,023		(148	)	149
Impairment of financial assets		11,912		7,723		3,671
Other operating income		(496	)	(7,021	)	(4,637	)

Operating profit	6	112,893		115,577		110,244

Finance income	9	(3,437	)	(4,352	)	(5,579	)
Finance costs	9	42,084		47,366		36,985
Non-operating share of the profit of associates and joint ventures	17	(273	)	(3,496	)	909
Other non-operating (income)/expenses	10	(3,064	)	7,821		(425	)

Profit before tax		77,583		68,238		78,354

Income tax expense	13	16,126		15,667		15,345

Profit for the year from continuing operations		61,457		52,571		63,009

(Profit) / loss from discontinued operations	12, 35	(616	)	(2,528	)	55,177

Profit for the year		62,073		55,099		7,832



Profit for the year attributable to:
Owners of the Company		61,412		54,241		6,848
Non-controlling interests		661		858		984
Earnings per share from continuing operations (basic and diluted), Russian Rubles:	14	34.53 and 34.51		29.04 and 28.99		33.11 and 33.07
Earnings per share from discontinued operations (basic and diluted), Russian Rubles:	14	0.35 and 0.35		1.42 and 1.42		(29.45) and (29.42)

The accompanying notes are an integral part of these consolidated financial statements.


President and CEO		Vice-president, Finance
	Alexey V. Kornya		Andrey M. Kamensky

March 3, 2021

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts in millions of Russian Rubles)



Profit for the year	62,073		55,099		7,832



Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Unrecognized actuarial gain	—		—		167
Items that may be reclassified subsequently to profit or loss:
Reclassification to profit and loss due to Disposal of VF Ukraine (Note 12)	—		7,947		—
Exchange differences on translating foreign operations	1,840		1,134		7,416
Net fair value (loss) / gain on financial instruments	—		(237	)	(103	)
Share of other comprehensive (loss) / income of associates
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations in associates	(196	)	(413	)	319

Other comprehensive income for the year, net of income tax	1,644		8,431		7,799

Total comprehensive income for the year	63,717		63,530		15,631



Total comprehensive income for the year attributable to:
Owners of the Company	63,056		62,672		14,647
Non-controlling interests	661		858		984

The accompanying notes are an integral part of these consolidated financial statements.


President and CEO		Vice-president, Finance
	Alexey V. Kornya		Andrey M. Kamensky

March 3, 2021

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts in millions of Russian Rubles, except share amounts)

														Accumulated other comprehensive income / (loss)

	Common stock				Treasury stock									Financial instruments revaluation reserve			Foreign currency translation reserve			Remeasurements of the net defined benefit liability					Equity attributable to equity holders
	Common stock				Treasury stock						Additional paid-in capital											Retained earnings						Non-controlling interests			Total equity
	Shares		Amount		Shares			Amount			Additional paid-in capital											Retained earnings						Non-controlling interests			Total equity
Balances at January 1, 2018		1,998,381,575		200		(86,339,156	)		(22,644	)		381			340			(9,697	)		503		151,043			120,126			4,079			124,205



Adjustment on initial application of IFRS 15 (net of tax)		—		—		—			—			—			—			—			—		2,528			2,528			17			2,545
Adjustment on initial application of IFRS 9 (net of tax)		—		—		—			—			—			—			—			—		1,367			1,367			—			1,367
Adjusted balance at January 1, 2018		—		—		—			—			—			—			—			—		154,938			124,021			4,096			128,117
Profit for the year		—		—		—			—			—			—			—			—		6,848			6,848			984			7,832
Unrecognized actuarial gain		—		—		—			—			—			—			—			167		—			167			—			167
Currency translation adjustment																		7,726								7,726			9			7,735
Net fair value (loss) / gain on financial instruments		—		—		—			—			—			(103	)					—		—			(103	)		—			(103	)
Total comprehensive (loss) / income for the year		—		—		—			—			—			(103	)		7,726			167		6,848			14,638			993			15,631
Issuance of stock options		—		—		—			—			675			—			—			—		—			675			—			675
Exercise of stock options		—		—		1,369,303			403			(403	)		—			—			—		—			—			—			—
Dividends declared by MTS		—		—		—			—			—			—			—			—		(48,921	)		(48,921	)		—			(48,921	)
Dividends to non-controlling interests		—		—		—			—			—			—			—			—		—						(1,165	)		(1,165	)
Purchase of own stock (Note 33)		—		—		(82,669,046	)		(22,567	)		(4	)		—			—			—		—			(22,571	)		—			(22,571	)
Purchase of non-controlling interests		—		—		—			—			(97	)		—			—			—		—			(97	)		47			(50	)
Acquisitions under common control		—		—		—			—			(2,471	)		—			—			—		—			(2,471	)		8,320			5,849
Reclass to retained earnings		—		—		—			—			1,919			—			—			—		(1,919	)		—			—			—

Balances at December 31, 2018		1,998,381,575		200		(167,638,899	)		(44,808	)		—			237			(1,971	)		670		110,946			65,274			12,291			77,565



Profit for the year		—		—		—			—			—			—			—			—		54,241			54,241			858			55,099
Disposal of VF Ukraine (Note 12)		—		—		—			—			—			—			7,947			—		—			7,947			—			7,947
Currency translation adjustment																		721			—					721			—			721
Net fair value (loss) / gain on financial instruments		—		—		—			—			—			(237	)		—			—		—			(237	)		—			(237	)
Total comprehensive (loss) / income for the year		—		—		—			—			—			(237	)		8,668			—		54,241			62,672			858			63,530
Issuance of stock options		—		—		—			—			872			—			—			—		—			872			—			872
Exercise of stock options		—		—		3,610,561			982			(1,060	)		—			—			—		—			(78	)		—			(78	)
Dividends declared by MTS		—		—		—			—			—			—			—			—		(74,302	)		(74,302	)		—			(74,302	)
Dividends to non-controlling interests		—		—		—			—			—			—			—			—		—			—			(1,123	)		(1,123	)
Purchase of own stock (Note 33)		—		—		(61,519,084	)		(15,922	)		—			—			—			—		—			(15,922	)		—			(15,922	)
Purchase of non-controlling interests		—		—		—			—			(4,162	)		—			—			—		—			(4,162	)		(8,700	)		(12,862	)
Acquisitions under common control (Note 5)		—		—		—			—			(1,286	)		—			—			—		—			(1,286	)		—			(1,286	)
Reclass to retained earnings		—		—		—			—			5,636			—			—			—		(5,636	)		—			—			—

Balances at December 31, 2019		1,998,381,575		200		(225,547,422	)		(59,748	)		—			—			6,697			670		85,249			33,068			3,326			36,394

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 (CONTINUED)

(Amounts in millions of Russian Rubles, except share amounts)

														Accumulated other comprehensive income / (loss)

	Common stock				Treasury stock									Financial instruments revaluation reserve		Foreign currency translation reserve		Remeasurements of the net defined benefit liability					Equity attributable to equity holders
	Common stock				Treasury stock						Additional paid-in capital									Retained earnings						Non-controlling interests			Total equity
	Shares		Amount		Shares			Amount			Additional paid-in capital									Retained earnings						Non-controlling interests			Total equity
Balances at December 31, 2019		1,998,381,575		200		(225,547,422	)		(59,748	)		—			—		6,697		670		85,249			33,068			3,326			36,394

Profit for the year		—		—		—			—			—			—		—		—		61,412			61,412			661			62,073
Disposal of VF Ukraine (Note 12)		—		—		—			—			—			—		—		—		—			—			—
Currency translation adjustment		—		—		—			—			—			—		1,644		—		—			1,644			—			1,644
Net fair value (loss) / gain on financial instruments		—		—		—			—			—			—		—		—		—			—			—			—
Total comprehensive income for the year		—		—		—			—			—			—		1,644		—		61,413			63,056			661			63,717
Issuance of stock options		—		—		—			—			560			—		—		—		—			560			—			560
Exercise of stock options		—		—		2,865,735			768			(767	)		—		—		—		—			—			—
Dividends declared by MTS		—		—		—			—			—			—		—		—		(52,012	)		(52,012	)		—			(52,012	)
Dividends to non-controlling interests		—		—		—			—			—			—		—		—		—			—			52			52
Purchase of own stock (Note 33)		—		—		(48,797,719	)		(16,010	)		—			—		—		—		—			(16,010	)		—			(16,010	)
Reclass to retained earnings and other		—		—		—			—			296			—		—		—		(258	)		38			(49	)		(11	)

Balances at December 31, 2020		1,998,381,575		200		(271,479,406	)		(74,990	)		89			—		8,341		670		94,391			28,700			3,990			32,690

The accompanying notes are an integral part of these consolidated financial statements.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts in millions of Russian Rubles)



CASH FLOWS FROM OPERATING ACTIVITIES:
Profit for the year	62,073		55,099		7,832
Adjustments for:
Depreciation and amortization	100,205		106,948		104,588
Impairment of non-current assets	2,023		(148	)	149
Impairment of financial assets	11,936		7,761		3,694
(Gain)/Loss from sale of Ukraine operations (Note 12)	(2,101	)	5,499		—
Provision related to SEC investigation (Note 35)	—		—		55,752
Finance income	(3,439	)	(4,805	)	(5,981	)
Finance costs	42,085		48,711		38,165
Income tax expense	17,191		17,671		16,969
Share of profit of associates and joint ventures	(5,321	)	(8,079	)	(2,890	)
Net foreign exchange (gain) / loss and change in fair value of financial instruments	(4,330	)	1,784		1,508
Inventory obsolescence expense	891		2,207		3,326
Change in provisions	1,492		305		(1,474	)
Other non-cash items	(4,393	)	(6,882	)	(3,479	)
Movements in operating assets and liabilities:
(Increase)/Decrease in trade and other receivables and contract assets	1,904		(3,808	)	438
Increase in bank deposits and loans to customers	(33,570	)	(34,452	)	(15,367	)
(Increase) / decrease in inventory	(630	)	3		(11,292	)
(Increase) / decrease in advances paid and prepaid expenses	(6,507	)	3,478		1,429
Decrease / (Increase) in VAT receivable	482		(2,522	)	72
(Decrease)/Increase in trade and other payables, contract liabilities and other current liabilities	(1,104	)	6,825		(58	)
Increase in bank deposits and liabilities	27,172		27,823		4,100
Fines and penalties related to investigation into former operations in Uzbekistan (Note 35)	—		(55,607	)	—
Dividends received	3,676		3,707		3,726
Income tax paid	(15,193	)	(23,943	)	(19,777	)
Interest received	2,727		5,263		10,016
Interest paid, net of interest capitalized	(41,762	)	(46,186	)	(37,056	)

NET CASH PROVIDED BY OPERATING ACTIVITIES	155,507		106,652		154,390

The accompanying notes are an integral part of these consolidated financial statements.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

(Amounts in millions of Russian Rubles)



CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired (Note 5)	(262	)	(2,052	)	(3,444	)
Purchases of property, plant and equipment (including capitalized interest in the amount of RUB 426 million, RUB 550 million and RUB 460 million, respectively)	(66,256	)	(68,465	)	(64,731	)
Purchases of other intangible assets	(31,153	)	(23,016	)	(21,751	)
Purchase of Avantage	(429	)	—		(7,559	)
Purchase of 3G and 4G licenses in Armenia and Ukraine	—		(255	)	(5,527	)
Cost to obtain and fulfill contracts, paid	(5,442	)	(4,651	)	(4,764	)
Proceeds from sale of property, plant and equipment and assets held for sale	6,678		6,536		5,905
Purchases of short-term and other investments	(10,054	)	(22,714	)	(18,754	)
Proceeds from sale of short-term and other investments	16,012		47,139		38,596
Investments in associates and joint ventures (Note 17)	(1,460	)	(75	)	(3,871	)
Cash (payments) and proceeds related to swap contracts	5,322		(2,459	)	6,892
Proceeds from sale of subsidiaries, net of cash disposed (Note 12)	3,461		37,386		619
Proceeds from sale/liquidation of associates (Note 17)	2,450		3,067		—
Other investing activities	—		5		—

NET CASH USED IN INVESTING ACTIVITIES	(81,133	)	(29,554	)	(78,389	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes	(28,167	)	(189	)	(27,983	)
Proceeds from issuance of notes	46,757		72,500		27,550
Notes and debt issuance cost paid	(107	)	(111	)	(39	)
Lease obligation principal paid	(15,054	)	(15,154	)	(13,577	)
Dividends paid	(74,923	)	(52,505	)	(50,054	)
Acquisition of entities under common control, net of cash acquired	—		(15,312	)	(13,242	)
Proceeds from loans	194,645		62,415		95,000
Repayment of loans	(134,483	)	(156,511	)	(20,076	)
Payments under credit guarantee agreement related to foreign-currency hedge (Note 30)	—		—		(981	)
Repurchase of common stock	(16,028	)	(15,922	)	(22,655	)
Other financing activities	—		341		133

NET CASH USED IN FINANCING ACTIVITIES	(27,360	)	(120,448	)	(25,924	)

Effect of exchange rate changes on cash and cash equivalents	385		(2,655	)	3,412

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	47,399		(46,005	)	53,489



CASH AND CASH EQUIVALENTS, beginning of the year	38,070		84,075		30,586

CASH AND CASH EQUIVALENTS, end of the year	85,469		38,070		84,075



Less cash and cash equivalents within held for sale	(64	)	—		—
CASH AND CASH EQUIVALENTS, end of the year	85,405		38,070		84,075

The accompanying notes are an integral part of these consolidated financial statements.

F-14

Table of Contents

PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in millions of Russian Rubles unless otherwise stated)

1. GENERAL INFORMATION AND DESCRIPTION OF BUSINESS

Mobile TeleSystems Public Joint-Stock Company ("MTS PJSC", or "the Company") is a company incorporated under the laws of the Russian Federation and having its registered address at 4, Marksistskaya Street, 109147, Moscow, Russian Federation.

The consolidated financial statements of the Company and its subsidiaries ("the Group" or "MTS") as of December 31, 2020 and 2019, and for the years ended 31 December 2020, 2019 and 2018 were authorized for issue by the President of the Company on March 3, 2021.

Business of the Group—MTS PJSC was incorporated on March 1, 2000, through the merger of MTS CJSC and Rosico TC CJSC, its wholly-owned subsidiary. MTS CJSC started its operations in the Moscow licence area in 1994, before expanding through Russia and the CIS. MTS PJSC's majority shareholder is Sistema Public Joint-Stock Financial Corporation or Sistema, whose controlling shareholder is Vladimir P. Yevtushenkov.

MTS completed its initial public offering in 2000 and listed its shares of common stock, represented by American Depositary Shares, or ADSs, on the New York Stock Exchange under the symbol "MBT". Since 2003 common shares of MTS PJSC have been traded on the Public Joint-Stock Company "Moscow Exchange MICEX-RTS" (the "Moscow Exchange").

The Group provides a wide range of telecommunications and digital services including voice and data transmission, internet access, pay TV, various value added services ("VAS") through wireless and fixed lines, financial services, integration services as well as the sale of equipment, accessories and software. In June 2018 the Group entered the market of banking services through acquisition of controlling stake in PJSC MTS Bank. Upon disposal of its operations in Ukraine in December 2019 (Note 12), the Group primarily operates in Russia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

Basis of preparation—The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The consolidated financial statements have been prepared on a historical cost basis, unless disclosed otherwise. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Amounts in the consolidated financial statements are stated in millions of Russian Rubles ("RUB million"), unless indicated otherwise.

The consolidated financial statements have been prepared on the assumption that the Group is a going concern and will continue in operation for the foreseeable future.

Basis of consolidation—The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved only where the Company has power over the entity, is exposed and has rights to variable returns, and is able to use the power to affect its amount of variable returns. The results of the controlled entities acquired or disposed of during the reporting period are included in the consolidated financial statements from the date the Group achieves control over the entity, or until the date on which the Company ceases to control the entity. If necessary, the accounting policies of controlled entities are aligned with the accounting policy applied by the Group. All intra-group balances, income, expenses and cash flows are eliminated on consolidation.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

Effective ownership interests in the Group's significant subsidiaries were the following:

	Accounting method

RTC	Consolidated	100.0	%	100.0	%
MTS Turkmenistan (Note 11)	Consolidated	100.0	%	100.0	%
MTS Armenia	Consolidated	100.0	%	100.0	%
MTS IT	Consolidated	100.0	%	100.0	%
Nvision Czech Republic	Consolidated	100.0	%	100.0	%
Sputnikovoe TV	Consolidated	100.0	%	100.0	%
Stream	Consolidated	100.0	%	100.0	%
Dega	Consolidated	100.0	%	100.0	%
Stream Digital	Consolidated	100.0	%	100.0	%
MTS Energo	Consolidated	100.0	%	100.0	%
MDTZK LLC (Ticketland) (Note 5)	Consolidated	100.0	%	100.0	%
IT Grad (Note 5)	Consolidated	100.0	%	100.0	%
Kinopolis (Note 5)	Consolidated	100.0	%	100.0	%
MTS Media	Consolidated	100.0	%	100.0	%
MTS Artificial Intelligence	Consolidated	100.0	%	100.0	%
Stopol (Note 5)	Consolidated	100.0	%	—
Sibintertelecom⁽¹⁾	Consolidated	—		100.0	%
RIKT⁽¹⁾	Consolidated	—		100.0	%
Nvision Group⁽²⁾ (Note 12)	Consolidated	—		100.0	%
Kulturnaya Sluzhba (Ponominalu) (Note 5)	Consolidated	100.0	%	89.1	%
MTS Bank (Note 5)	Consolidated	99.9	%	99.9	%
MGTS Group	Consolidated	94.7	%	94.7	%
Navigation Information Systems Group	Consolidated	94.7	%	94.7	%
Oblachny Retail LLC	Consolidated	50.8	%	50.8	%
MTS International Funding Limited⁽³⁾ ("MTS International")	Consolidated	SE		SE
"Zelenaya Tochka" Group (Note 5)	Equity	51.0	%	—
MTS Belarus (Note 17)	Equity	49.0	%	49.0	%
Sistema Capital	Equity	30.0	%	30.0	%
Zifrovoe TV	Equity	20.0	%	20.0	%
YouDo Web Technologies (Note 17)	Equity	15.5	%	15.5	%
SWIPGLOBAL	Equity	15.0	%	15.0	%

(1): Merged with PJSC MTS in 2020.
(2): Disposed on October 30, 2020.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

(3): A company organized and existing as a private limited company under the laws of Ireland. The Group does not have any equity in MTS International. It was established for the purpose of raising capital through the issuance of debt securities on the Irish Stock Exchange followed by transferring the proceeds through a loan facility to the Group. In 2010 and 2013, MTS International issued USD 750 million 8.625% notes due in 2020 (fully repaid in June 2020) and USD 500 million 5.0% notes due in 2023, respectively (Note 25). The notes are guaranteed by MTS PJSC in the event of default. MTS International does not perform any other activities except those required for notes servicing. The Group bears all costs incurred by MTS International in connection with the notes' maintenance activities. Accordingly, the Group concluded that it exercises control over the entity.

Acquisitions from entities under common control—Business combinations arising from transfers of interests in entities that are under common control with the Group are consolidated prospectively starting from the date that the control over those entities is passed to the Group. The assets and liabilities acquired are recognized at the carrying values recorded previously in the counterparty's financial statements, with the resulting gain or loss recognized directly in equity.

Joint operations—The Group has joint operations with Megafon and Vimpelcom, relating to the construction of LTE base stations. Joint operations are characterized by the fact that the operators that have joint control over the arrangement each have both a right to the assets, and obligations for the liabilities, according to the arrangement. Respectively, each operator accounts for its share of the joint assets and its agreed share of any liabilities, and recognizes its share of the output, revenues and expenses incurred under the arrangement. The result of joint operations does not influence the financial statements significantly.

Non-current assets held for sale and discontinued operations—The Group classifies assets and disposal groups as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is met only when the assets (or disposal group) are available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and their sale is highly probable to occur within a year. Held for sale assets and disposal groups are measured at the lower of carrying amount or fair value less cost to sell. Assets and liabilities classifies as held for sale are presented separately as current items in the statement of financial position.

A disposal group qualifies as discontinued operation if it is a component of the entity that either has been disposed of or is classified as held for sale, and:

•: Represents a separate major line of business or geographical area of operations;
•: Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations;
•: Or is a subsidiary acquired exclusively with a view to resale.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss.

Group's statement of cash flows include both cash flows from continuing and discontinued operations, amounts related to discontinued operations by operating, investing and financing activities are presented in Note 12.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

Functional currency translation methodology—As of December 31, 2020, the functional currencies of Group entities were as follows:

•: For entities incorporated in the Russian Federation, Dega and MTS International—the Russian Ruble ("RUB");
•: For MTS Armenia—the Armenian Dram;
•: For MTS Turkmenistan—the Turkmenian Manat;
•: For MTS Belarus—the Belarusian Ruble;
•: For Nvision Czech Republic—the Czech Crown.

Foreign-currency transactions are translated into the functional currency at the exchange rates at the dates of the transactions. At the reporting date, monetary items denominated in foreign currencies are translated at the closing rate, whereas non-monetary items are stated at the exchange rate at the date of their recognition. Exchange rate differences are recognized in profit or loss.

For entities whose records are maintained in their functional currency, which is other than the reporting currency, all year-end assets and liabilities have been translated into U.S. Dollars ("USD") at the period-end exchange rate set by local central banks. Subsequently, U.S. Dollars balances have been translated into Russian Rubles at the period-end exchange rate set by the Central Bank of Russia. Revenues and expenses have been translated at the average exchange rate for the period using the cross-currency exchange rate via the U.S. Dollar as described above. Translation differences resulting from the use of these rates are reported as a component of other comprehensive income.

Standards, interpretations and amendments adopted in the financial year 2020


Amendments to Conceptual Framework		Conceptual Framework in IFRS standards
Amendments to IFRS 3		Definition of a Business
Amendments to IAS 1 and IAS 8		Definition of Material
Amendments to IFRS 9, IAS 39 and IFRS 7		Interest Rate Benchmark Reform and its Effects on Financial Reporting
Amendment to IFRS 16		COVID-19 Related Rent Concessions

None of these interpretations and amendments had material effect on the Group's consolidated financial statements.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS (Continued)

Standards, interpretations and amendments in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:


Amendments to IFRS9, IAS39, IFRS7,IFRS 4 and IFRS16		Interest Rate Benchmark Reform (Phase 2)⁽¹⁾
Amendments to IAS 37		Onerous contracts—Cost of fulfilling a contract⁽²⁾
Amendments to IAS 16		Property, Plant and Equipment: Proceeds before Intended Use⁽²⁾
Amendments to IFRS 3		Reference to Conceptual Framework⁽²⁾
Amendments to IFRS		Annual Improvements to IFRSs (2018-2020 Cycle)⁽²⁾
Amendments to IAS 1		Classification of Liabilities as Current or Non-Current⁽³⁾
IFRS 17 and amendments to IFRS17		Insurance Contracts⁽³⁾
Amendments to IFRS 10 and IAS 28		Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

(1): Effective for annual periods beginning on or after January 1, 2021, with earlier application permitted.
(2): Effective for annual periods beginning on or after January 1, 2022, with earlier application permitted.
(3): Effective for annual periods beginning on or after January 1, 2023, with earlier application permitted.
(4): The effective date for these amendments was deferred indefinitely. Early adoption continues to be permitted.

These IFRS pronouncements are not expected to have a material impact on the Group's consolidated financial statements.

3. IMPACTS OF COVID-19

The coronavirus pandemic has led to a global economic crisis. Due to higher demand for certain telecommunications services the impact of the crisis felt less severely by the telecommunication industry and the Group than by other industries. The main effects on business activities and financial performance of the Group were as follows:

•: A drop in international roaming revenue;
•: A drop in revenue from event-ticketing;
•: An increase in impairment loss of financial assets (bank deposits and loans to customers);
•: Impairment of goodwill related to event-ticketing companies;
•: Gain realized on termination of lease contracts as well as rent holidays in relation of the Group retail outlets;
•: Increased costs for putting in place additional sanitation measures in offices and stores;
•: A reduction of sales and marketing expenses (mainly payroll of retail employees), travelling, trainings as well as administrative office maintenance costs.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

3. IMPACTS OF COVID-19 (Continued)

On June 30, 2020 the Group concluded a subsidized credit facility with VTB. The facility is a revolving credit line, which allows the Group to borrow up to RUB 1,702 million. The principal and interest accumulated under this credit facility could be partially or fully forgiven if the Group fulfills certain conditions (primarily to maintain fixed employment rate in retail business) as part of government support related to COVID-19.

For the year ended December 31, 2020 the Group recognized gain related to termination of lease agreements and rent holidays for retail outlets in the amount of RUB 464 and RUB 286 million, respectively.

The main effects of COVID-19 in respect of estimates required to prepare these consolidated financial statements concerned:

Impairment of financial assets:

As a result of a higher expected credit risk due to COVID-19, the Group increased the allowance for expected credit losses (ECL) for bank deposits and loans to customers. Please refer to Note 31 for more details on the relating estimates and assumptions.

In respect of trade and other receivables, the Group experienced very minor payment defaults as a consequence of COVID-19 in the financial year 2020. However, there is still great uncertainty surrounding the economic environment, so the Group will continue to monitor the risk of non-recovery of trade and other receivables on an ongoing basis.

Impairment review:

For the financial year ended December 31, 2020, the Group recognized impairment of goodwill related to event ticketing companies in the total amount of RUB 1,281 million. Key assumptions for impairment review are detailed in Note 23.

As of December 31, 2020 the main specific excess costs related to COVID-19 were as follows:

•: Costs for putting in place sanitation measures in offices and stores (RUB 520 million)

Generally, the global COVID-19 situation remains fluid and could further affect the economies and financial markets of many regions, including the countries in which the Group operates, which in turn could impact consumer and business spending patterns and Group's operating results.

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

A critical accounting estimate is an estimate that is both important to the presentation of the Group's financial position and requires management's most difficult, subjective or complex judgments, often as a result of the need to determine estimates and develop assumptions about the outcome of matters that are inherently uncertain.

Management evaluates such estimates on an on-going basis, based upon historical results, historical experience, trends, consultations with experts, forecasts of the future, and other methods which management considers reasonable under the circumstances. Management considers the accounting estimates discussed below to be its critical accounting estimates, and, accordingly, provides an explanation of each.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

1. Depreciation and amortization of non-current assets

Depreciation and amortization expenses are based on management estimates of useful life, residual value and amortization method of property and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the amortization or depreciation charges. Technological developments are difficult to predict and management views on the trends and pace of development may change over time. Some of the assets and technologies, in which the Group invested several years ago, are still in use and provide the basis for new technologies. Critical estimates in the evaluations of useful lives for intangible assets include, but are not limited to, the estimated average customer relationship based on churn, the remaining licence period and the expected developments in technology and markets.

The useful lives of property and equipment and intangible assets are reviewed at least annually, taking into consideration the factors mentioned above and all other important relevant factors. The actual economic lives of intangible assets may be different from useful lives estimated by management, thereby resulting in a different carrying value of intangible assets with finite lives.

The Group continues to evaluate the amortization period for intangible assets with finite lives to determine whether events or circumstances warrant revised amortization periods. A change in estimated useful lives is a change in accounting estimate, and depreciation and amortization charges are adjusted prospectively. See Notes 21 and 24 for further information.

2. Impairment of non-current assets

The Group has made significant investments including in property, plant and equipment, intangible assets, goodwill, right-of-use assets, acquiring and fulfilling of contracts.

Pursuant to IAS 36, goodwill and other intangible assets with indefinite useful lives and intangible assets not yet brought into use must be tested for impairment annually or more often if indicators of impairment exist. Other assets are tested for impairment when circumstances indicate that there may be a potential impairment.

Recoverable amounts of assets and cash generating units ("CGUs") are based on evaluations, including the determination of the appropriate CGUs, the discount rate, estimates of future performance, the revenue generating capacity of the assets, timing and amount of future purchases of property and equipment, assumptions of the future market conditions and the long-term growth rate into perpetuity (terminal value). A change of assumptions, particularly in relation to the discount rate and growth rate used to estimate the recoverable amounts of assets, could significantly impact results of the Group's impairment evaluation.

See Note 23 for further information.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

3. Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques, including discounted cash flow models. The inputs to these models are taken from observable markets where possible, but when this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 29 for further information.

4. Provisions and contingencies

The Group is subject to various legal proceedings, disputes and claims, including regulatory discussions related to the Group's business, licences, tax positions and investments, where the outcomes are subject to significant uncertainty. In addition, significant uncertainty exists in relation to employee bonuses and other rewards, which depend on their individual performance and Group's results. The management evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss or related expense. Unanticipated events or changes in these factors may require the Group to increase or decrease the amount recorded or to be recorded for a matter that has not been previously recorded because it was not considered probable. See Notes 28 and Note 35 for further information.

5. Right-of-use assets and lease liabilities

The value of right-of-use assets and lease liabilities is based on management estimates of lease terms as well as an incremental borrowing rate used to discount lease payments. The lease term corresponds to the non-cancellable period of each contract except in cases where the Group is reasonably certain of exercising renewal options. When assessing the lease term the management considers all facts and circumstances that create the economic incentive for the Group to exercise the option to extend the lease, such as the useful life of the asset located on the leased site, statistics on sites replacement, sequence of technology change, profitability of the Group's retail stores as well as costs to terminate or enter into lease contracts. The incremental borrowing rate of the Group is determined based on the credit spreads of the Group's debt instruments in relation to zero-coupon yield curve for government securities.

Changes in these factors could affect the estimated lease term and the reported value of right-of-use assets and lease liabilities.

See Note 26 for further information.

6. Impairment of financial assets

The Group uses management's judgement to estimate allowance for expected credit losses (ECL) for financial assets at amortized costs. ECL are measured in a way that reflects the unbiased and probability-weighted amount, the time-value of money and reasonable and supportable information at the reporting date pertaining to past events, current conditions and forecasts of future economic conditions.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

ECL are measured as probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated using a statistical model based on three major risk parameters: probability of default, loss given default and exposure at default.

The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (unemployment rate, inflation rate) and forecasts of future economic conditions.

Significant changes in risk parameters could affect the estimated amount of ECL.

See Notes 19 and 31 for further information.

5. BUSINESS ACQUISITIONS

Unless stated otherwise, all business combinations disclosed were accounted for by applying the acquisition method. Goodwill recognized as a result of the acquisitions is not expected to be deductible for income tax purposes.

Acquisitions in 2020

Acquisition of Stopol—In June 2020, the Group acquired a 100% ownership interest in LLC «Stopol Auto» and LLC «Koagent Rus» (jointly referred as «Stopol»), wholesalers of auto parts and multimedia devices. The purchase price constituted a cash payment of RUB 312 million paid in July 2020 and a contingent consideration. This acquisition allows the Group to enter into the market of the smart multimedia systems for cars.

The purchase price allocation for Stopol as at the date of acquisition was presented as follows:



Goodwill⁽¹⁾	282
Other non-current assets	2
Current assets	230
Cash and cash equivalents	69
Current liabilities	(262	)

Total consideration	321



*Including:*
Fair value of contingent consideration	9
Cash paid	312

(1): The goodwill is attributable to the expected synergies resulted from the acquisition and allocated to the "Stopol" operating segment within «Other» category in reportable segments.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

Acquisitions in 2019

Acquisition of JSC RIKT—In June 2019, the Group acquired a 97.4% ownership interest in JSC RIKT ("RIKT"), a fixed-line operator in the Kemerovo region, for cash consideration of RUB 360 million. This acquisition allows the Group to increase its market share in the region. In September 2019, the Group finalized the mandatory share repurchase from minority shareholders of RIKT and increased its share to 100%.

The fair values of the identifiable assets and liabilities of RIKT as at the date of acquisition were as follows:


Goodwill⁽¹⁾	105
Other intangible assets⁽²⁾	172
Property, plant and equipment	118
Trade and other receivables	12
Cash and cash equivalents	6
Other current assets	9
Other non-current assets	14
Current liabilities	(37	)
Non-current liabilities	(39	)

Consideration transferred (in cash)	360

(1): The goodwill is attributable to the expected synergies resulted from the acquisition and allocated to the "Russia Convergent" operating segment.
(2): Amortized over the average term of 12 years.

Acquisitions under common control, accounted for directly in equity

Acquisition of JSC Objedinennye Russkie Kinostudii («Kinopolis») —In April 2019, the Group acquired Kinopolis from Business-Nedvizhimost, a subsidiary of Sistema, for total consideration of RUB 2,042 million. Kinopolis owns fully equipped movie complex in Saint-Petersburg. Acquisition of Kinopolis enables the Group to develop its own entertainment content.

Acquisition of property complex at Narodnogo opolcheniya street («Narodnoje»)—In August 2019, the Group acquired Narodnoje property complex from Sistema for total consideration of RUB 329 million. The property complex comprises office facilities leased by the Group and hostel premises leased by a third party and operates under management agreement with Business-Nedvizhimost, a subsidiary of Sistema. The acquisition enables the Group to optimize its rental expenses and enhance its investment property portfolio.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

The following table summarizes the details of acquisitions of subsidiaries under common control finalized in 2019:

Acquired company

Kinopolis	2,030	12	1,017	58
Narodnoje	329	—	102	—

Total effect of acquisitions under common control	2,359	12	1,119	58

*: Included in consolidated statement of cash flows within cash flows from financing activities as transactions with entities under common control

Acquisitions in 2018

Acquisition of Kulturnaya Sluzhba—In January 2018, the Group acquired a 78.2% ownership interest in Kulturnaya Sluzhba LLC ("KS"), operating under the trademark Ponominalu.ru. The purchase price comprised a cash payment, a deferred payment, and a contingent consideration to be paid to the sellers if agreed upon financial targets are met by KS. The Group also entered into an option agreement with the non-controlling shareholders of the KS. Pursuant to the agreement, the Group has the right and obligation in the form of a call and put option, with the put option exercisable at the request of non-controlling shareholders, to acquire their shares at a price calculated based on the operating and financial results of KS. The option was excercised in 2020 for RUB 20 million.

Acquisition of MDTZK—In February 2018, the Group acquired a 100% ownership interest in Moskovskaia Direktciia Teatralno-Kontcertnyh i Sportivno-Zrelishchnyh Kass LLC ("MDTZK"), operating under the trademark Ticketland.ru. The purchase price comprised of both cash payment and deferred payment.

These acquisitions allow the Group to enter the event ticketing market, whilst also broadening the Group's suite of digital services.

Acquisition of ProgTech—In August 2018, the Group acquired a 99% ownership interest in science and production association Progressivniye Technologii CJSC ("ProgTech"), a provider of fixed-line services in the cities of Zhukovskiy and Anapa. The acquisition of ProgTech allows the Group to strengthen its position in these local markets and benefit from the expected synergies. The purchase price comprised of cash payment and deferred payment.

Acquisition of IT-Grad—In December 2018, the Group acquired a 100% ownership interest in IT-Grad 1 Cloud LLC ("IT-Grad"), one of the largest cloud services providers on the Russian IaaS market. The acquisition allows the Group to strengthen its presence in the Russian cloud services market. The purchase price comprised of cash payment of RUB 1,515 million and a contingent consideration based on fulfillment of certain conditions, including the transfer of rights on tangible and intangible assets.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

The fair values of the identifiable assets and liabilities of acquired companies as at the dates of acquisitions were the following:



Goodwill	479	⁽¹⁾	2,033	⁽²⁾	213	⁽³⁾
Customer base	37	⁽⁴⁾	727	⁽⁴⁾	123	⁽⁵⁾
Trademark	129	⁽⁴⁾	779	⁽⁴⁾	—
Other non-current assets	43		145		172
Current assets	117		202		15
Cash and cash equivalents	39		542		28
Current liabilities	(383	)	(868	)	(80	)
Liability under put option agreement over non-controlling interests	(106	)	—		—
Non-current liabilities	(34	)	(370	)	(76	)

Total consideration	321		3,190		395



*Including:*
Fair value of contingent consideration	54		—		3
Cash paid	267		3,190		392

(1): The goodwill is attributable to the market significance of the acquiree in the Russian event ticketing industry and expected synergies resulted from the acquisition and allocated to the "Ponominalu" operating segment.
(2): The goodwill is attributable to the market significance of the acquiree in the Russian event ticketing industry and expected synergies resulted from the acquisition and allocated to the "Ticketland" operating segment.
(3): The goodwill is attributable to the expected synergies resulted from the acquisition and allocated to the "Moscow fixed line" operating segment.
(4): Amortized over the term of 10 years.
(5): Amortized over the term of 15 years.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

The purchase price allocation of IT-Grad was not finalized as of the date the 2018 financial statements were authorised for issue as the Group had not completed the valuation of the individual assets of the company acquired. The Group's consolidated financial statements as of December 31, 2018 reflected the allocation of the purchase price based on a preliminary fair value assessment of the assets acquired and liabilities assumed. In 2019 the Group finalized the valuation of assets of IT-Grad and the acquisition date fair value of the assets changed since the preliminary calculations. The following table summarizes the purchase price allocation for IT-Grad as of December 31, 2019:



Goodwill	1,877	⁽¹⁾	—		1,877	⁽¹⁾
Customer base	643		(192	)	451	⁽²⁾
Trademark	—		41		41
Other non-current assets	32		128		160
Current assets	44		—		44
Cash and cash equivalents	13		—		13
Current liabilities	(59	)	(47	)	(106	)
Non-current liabilities	(128	)	4		(124	)

Total consideration	2,422		(66	)	2,356

*Including:*
Fair value of contingent consideration	907		(66	)	841
Cash paid	1,515		—		1,515

(1): The goodwill is attributable to the market position obtained and expected synergies resulted from the acquisition and allocated to the "Russia Convergent" operating segment and reallocated to «Cloud» operating segment in 2020.
(2): Amortized over the term of 7 years.

Acquisitions under common control, accounted for directly in equity

Acquisition of Dekart—In October 2018, the Group acquired Dekart property complex from Sistema for a total consideration of RUB 5,242 million. The property complex comprises office facilities leased by the Group, subsidiaries of Sistema and other counterparties, parking premises and engineering networks and operates under management agreement with Business-Nedvizhimost, a subsidiary of Sistema. The acquisition enables the Group to optimize its rental expenses and enhance its investment property portfolio.

Acquisition of MTS Bank—In July 2018, the Group increased ownership share in the Group associate MTS Bank from 26.6% to 55.4% and obtained control over the entity. Consideration paid to Sistema for additional share in MTS Bank amounted to RUB 8,273 million.

In 2019 the Group increased its share in MTS Bank to 99.9% as of December 31, 2019 through participation in additional share issuance and purchase from Sistema. Consideration paid to Sistema for additional share in MTS Bank amounted to RUB 12,855 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

Acquisition of Serebryaniy Bor—In December 2018, the Group acquired Serebryaniy Bor property complex from Sistema for a total consideration of RUB 1,711 million. The property complex comprises land, nonresidential buildings leased by the Group and other counterparties, and engineering networks.

The details of acquisitions of subsidiaries under common control in 2018 are as follows:

Acquired company

Dekart	4,658	—		3,406	125
Serebryaniy Bor	1,711	—		383	—
MTS Bank	6,873	1,401	*	126,180	128,165

Total effect of acquisitions under common control	13,242	1,401		129,969	128,290

*: Included in consolidated statement of cash flows within cash flows from financing activities as transactions with entities under common control

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

According to the terms of the purchase agreements, deferred payments and contingent consideration payable by the Group could be reduced by the amount of any losses incurred by the Group in respect of any tax or other claims relating to the pre-acquisition period. In case the amount of the losses incurred exceeds the amount of deferred payment, the seller has indemnified the Group for the amounts in excess. The following table summarizes the movement in deferred payment and contingent consideration liabilities and related indemnification assets for the years ended December 31, 2020, 2019 and 2018:

Indemnification asset/ (Liability on deferred payment/ contingent consideration)

January 1, 2018	—		—		—		—		—		—

Initial recognition of deferred payment/contingent consideration	(78	)	(54	)	(60	)	(32	)	(907	)	—
Less: Provision for tax liabilities related to pre-acquisition period	134		—		125		29		—		—
Revaluation	—		—		—		—		—		—
Payment	—		54		—		—		—		—

December 31, 2018	56		—		65		(3	)	(907	)	—

Measurement period adjustment	—		—		—		—		66		—
Reversal of indemnity	(134	)	—		(125	)	—		—		—
Revaluation	(13	)	—		(9	)	—		(66	)	—
Payment	91		—		69		3		—		—

December 31, 2019	—		—		—		—		(907	)	—

Initial recognition of deferred payment/contingent consideration	—		—		—		—		—		(40	)
Less: Provision for tax liabilities related to pre-acquisition period	—		—		—		—		—		26
Reversal of tax provision	—		—		—		—		—		(10	)

December 31, 2020	—		—		—		—		(907	)	(24	)

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

5. BUSINESS ACQUISITIONS (Continued)

Pro forma results of operations—The following pro forma financial data for the years ended December 31, 2020, 2019 and 2018 give effect to the business combinations as they had been completed at the beginning of the year.

Pro forma:

Net revenues	495,273	476,257	463,110
Net income	62,079	55,101	8,194

The pro forma information is based on various assumptions and estimates. The pro forma information is neither necessarily indicative of the operating results that would have occurred if the Group acquisitions had been consummated as of January 1, 2018, 2019, or 2020, nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any potential revenue enhancements or cost synergies or other operating efficiencies that could result from the acquisitions. The actual results of operations of these companies are included into the consolidated financial statements of the Group only from the respective dates of acquisition and are presented as follows:



Net revenues	355	238		13,261
Net income/(loss)	25	(15	)	615

6. SEGMENT INFORMATION

Management (chief operating decision maker) analyzes and reviews results of the Group's operating segments separately based on the nature of products and services, regulatory environments and geographic areas. Management of the Group evaluates the segments' performance of each segment based on revenue and operating profit, excluding depreciation and amortization measured on the basis consistent with IFRS consolidated financial statements. Management does not analyze assets or liabilities by reportable segments.

The Group identified the following reportable segments:

Russia Convergent: represents the results of mobile and fixed line operations, which encompasses services rendered to customers across the regions of Russia, including voice and data services, transmission, broadband, pay-TV and various value-added services and retail operations.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

6. SEGMENT INFORMATION (Continued)

Moscow Fixed Line: represents the results of fixed line operations carried out in Moscow by the Group's subsidiary MGTS. MGTS is the only licensed public switched telephone network ("PSTN") operator in Moscow and is considered a natural monopoly under Russian antimonopoly regulations. Consequently, a substantial part of the services provided by MGTS are subject to governmental regulation.

Ukraine: was ceased to be presented as a separate operating segment due to its disposal in December 2019 (Note 12). Presentation of segments' operating results was retrospectively corrected for the year ended December 31, 2018.

MTS Bank: represents the results of banking services rendered to customers across regions of Russia.

At the end of 2020 management change approach of reviewing of Group operational results led to separation of two new segments—Cloud and WASD. Cloud represents operational results of Group MTS business aimed at cloud services. WASD is the MTS streaming platform. Cloud and WASD were moved from "Russia Convergent" operating segment to the "Other" category.

Management change assessment of expenses amount allocated to HQ in relation with sale of MTS Ukraine in 2019.

All figures in the tables below for 2019 and 2018 have been retrospectively restated to reflect all of three facts above.

The intercompany eliminations presented below primarily consist of sales transactions between segments conducted under the normal course of operations.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

6. SEGMENT INFORMATION (Continued)

Financial information by reportable segments is presented below:

Year ended December 31, 2020:



Revenue
External customers	409,078		34,437		33,652		477,167		17,667		92		494,926
Intersegment	10,073		5,993		2,449		18,515		7,254		(25,769	)	—

Total revenue	419,151		40,430		36,101		495,682		24,921		(25,677	)	494,926

Operating profit/(loss)	101,515		14,056		2,224		117,795		270		(5,172	)	112,893
Depreciation and amortization	(88,072	)	(9,315	)	(1 248	)	(98,635	)	(3,957	)	2,358		(100,234	)
Other disclosure:
Capital expenditures	99,428		8,350		2,407		110,185		3,795		—		113,980

Year ended December 31, 2019:



Revenue
External customers	390,066		34,598		29,304		453,968		16,543		94		470,605
Intersegment	9,295		4,253		1,881		15,429		7,645		(23,074	)	—

Total revenue	399,361		38,851		31,185		469,397		24,188		(22,980	)	470,605

Operating profit/(loss)	95,290		17,244		3,473		116,007		11,064		(11,494	)	115,577
Depreciation and amortization	(83,980	)	(9,506	)	(1,082	)	(94,568	)	(3,855	)	2,228		(96,195	)
Other disclosure:													—
Capital expenditures	75,569		9,100		2,414		87,083		3,928		—		91,011

Year ended December 31, 2018:



Revenue
External customers	385,818		34,348		11,534		431,700		14,416		122		446,238
Intersegment	6,258		4,498		538		11,294		6,409		(17,703	)	—

Total revenue	392,076		38,846		12,072		442,994		20,825		(17,581	)	446,238

Operating profit/(loss)	98,432		12,695		1,512		112,639		8,206		(10,601	)	110,244
Depreciation and amortization	(82,456	)	(10,867	)	(547	)	(93,870	)	(3,551	)	2,105		(95,316	)
Other disclosure:													—
Capital expenditures	67,523		6,306		683		74,512		13,936		—		88,448

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

6. SEGMENT INFORMATION (Continued)

The consolidated operating profit is reconciled to the consolidated profit before tax on the face of the consolidated statement of profit or loss.

Financial information by geographic area is presented below:

Revenue

Russia	481,536	459,415	435,671
Other	13,390	11,190	10,567

Total revenue	494,926	470,605	446,238

	December 31,

Non-current assets⁽¹⁾	2020		2019
Russia		401,743		373,803
Other		11,205		10,080

Total non-current assets:		412,948		383,883

(1): Comprises property, plant and equipment, goodwill and other intangible assets.

Revenues from external customers and non-current assets are allocated to individual countries based on location of operations. No single customer represents 10% or more of the consolidated revenue.

Disaggregation of revenue:

Year ended December 31, 2020:

Revenue
Mobile services	322,762	2,184	—	324,946	6,235	92		331,273
Fixed line services	24,477	32,141	—	56,618	332	—		56,950
Finance services	—	16	33,652	33,668	—	—		33,668
Integration services	409	—	—	409	2,513	—		2,922
Sales of goods	61,430	96	—	61,526	7,952	—		69,478
Other services	—	—	—	—	635	—		635
External Customers	409,078	34,437	33,652	477,167	17,667	92		494,926
Intersegment	10,073	5,993	2,449	18,515	7,254	(25,769	)	—

Total revenue	419,151	40,430	36,101	495,682	24,921	(25,677	)	494,926

Thereof:
Recognised over time	347,648	34,341	24,246	415,641	9,715	92		425,448
Recognised at point of time	61,430	96	9,406	61,526	7,952	—		69,478

	409,078	34,437	33,652	477,167	17,667	92		494,926

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

6. SEGMENT INFORMATION (Continued)

Year ended December 31, 2019:

Revenue
Mobile services	308,847	1,938	—	310,785	6,667	94		317,546
Fixed line services	23,085	32,543	—	55,628	376	—		56,004
Finance services	—	—	29,304	29,304	—	—		29,304
Integration services	457	—	—	457	3,166	—		3,623
Sales of goods	57,677	117	—	57,794	4,859	—		62,653
Other services	—	—	—	—	1,475	—		1,475
External Customers	390,066	34,598	29,304	453,968	16,543	94		470,605
Intersegment	9,295	4,253	1,881	15,429	7,645	(23,074	)	—

Total revenue	399,361	38,851	31,185	469,397	24,188	(22,980	)	470,605

Thereof:
Recognised over time	332,389	34,481	21,996	388,866	11,684	94		400,644
Recognised at point of time	57,677	117	7,308	65,102	4,859	—		69,961

	390,066	34,598	29,304	453,968	16,543	94		470,605

Year ended December 31, 2018:

Revenue
Mobile services	304,049	1,487	—	305,536	6,663	122		312,321
Fixed line services	22,939	32,739	—	55,678	377	—		56,055
Finance services	—	—	11,534	11,534	—	—		11,534
Integration services	350	5	—	355	872	—		1,227
Sales of goods	58,480	117	—	58,597	5,255	—		63,852
Other services	—	—	—	—	1,249	—		1,249
External Customers	385,818	34,348	11,534	431,700	14,416	122		446,238
Intersegment	6,258	4,498	538	11,294	6,409	(17,703	)	—

Total revenue	392,076	38,846	12,072	442,994	20,825	(17,581	)	446,238

Thereof:
Recognised over time	327,338	34,231	8,264	369,833	9,161	122		379,116
Recognised at point of time	58,480	117	3,270	61,867	5,255	—		67,122

	385,818	34,348	11,534	431,700	14,416	122		446,238

7. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue is recognized to the extent that the Group has delivered goods or rendered services under an agreement, the amount of revenue can be reliably measured and it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue is measured at the fair value of the consideration receivable, exclusive of value added taxes and discounts.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

The Group obtains revenue from providing mobile and fixed telecommunication services (access charges, voice and video calls, messaging, interconnect fees, fixed and mobile broadband, tv and musical content and connection fees), financial services, integration services, cloud services, tickets distribution, as well as selling equipment, accessories and software. Products and services may be sold separately or in bundle packages. The most significant part of revenue relates to prepaid contracts.

Revenue for access charges, voice and video calls, rendering of cloud services, messaging, interconnect fees and fixed and mobile broadband is recognized as services are rendered. This is based upon either usage (minutes of traffic processed, volume of data transmitted) or passage of time (monthly subscription fees). Revenue from the sale of prepaid credit is deferred until such time as the customer consumes the services or the credit expires.

Revenue from the provision of TV and music content is recognized as the Group renders the service and is recorded either at the gross amount billed to the customers or in the amount of commission fee receivable by the Group.

Revenue from commission services for tickets distribution is recognized as services are rendered.

Revenue from sales of goods (mainly mobile handsets, other mobile devices, software licences) is recognized when the significant risks and rewards of ownership have been transferred to the customer.

For bundled packages, the Group accounts for individual products and services separately if they are distinct, which means that a product or service, as well as the customer benefit, is separately identifiable from other items in the bundled package and a customer can benefit from it. The arrangement consideration is allocated to each separate product and service, based on its relative fair value. The determined fair value of individual elements is generally based on prices at which the deliverable is regularly sold on a stand-alone basis after considering any appropriate volume discounts.

The Group provides retrospective volume discounts under roaming agreements with international and local mobile operators. To estimate the variable consideration in relation to these discounts, the Group uses original data traffic adjusted on a monthly basis to reflect newly-available information. The resulting liability for the expected future discounts is recognized as a reduction of revenue within trade and other payables in the accompanying consolidated statement of financial position.

For contracts that permit customers to return acquired mobile devices, the amount of recognized revenue is adjusted for expected product return or refunds, which are estimated based on the basis of historical data. The respective refund liability is recorded as provision in the accompanying consolidated statement of financial position.

Revenue from the provision of financial services mainly relates to interest bearing assets of MTS Bank. Such revenue is recognized on an accrual basis using the effective interest method. Loan origination fees are deferred together with the related direct costs and are recognised as an adjustment to the effective interest rate of the loan. Comission revenue which is also a significant part of MTS Bank revenue is either recognized at the moment the related operation occurs, or during the period of customer contract duration.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

Revenue from integration services mainly relates to project type contracts and is determined by reference to the stage of completion of each respective projects. The stage of completion is calculated using the input method—based on the proportion of costs incurred for work performed to date to the estimated total contract costs. Revenue is recognized cumulatively as total revenue under the project multiplied by percentage of completion as at reporting date. When it is probable that total contract costs will exceed the total contract revenue, the expected loss is recognized as an expense immediately.

Contract balances

Contract balances include trade receivables related to the recognized revenue, contract assets and contract liabilities.

Trade receivables represent an unconditional right to receive consideration (primarily in cash).

Contract assets represent accrued revenues that have not yet been billed to customers due to certain contractual terms other than the passage of time. This is the case in a bundled offering which combines the sale of a mobile device and the provision of mobile services for a fixed-period, where the mobile device is invoiced at a reduced price leading to the reallocation of a portion of amounts invoiced for mobile communication services to the supply of the mobile phone. The excess of the amount allocated to the mobile phone over the price invoiced is recognized as a contract asset and is thus transferred to trade receivables as the service is invoiced. The other part of contract assets relates to the Group's rights to consideration for work completed but not yet billed for integration services projects.

Contract liabilities represent amounts paid by customers to the Group before receiving the goods and/or services promised in the contract. This is the case for advances received from customers or amounts invoiced or amounts invoiced and paid for goods or services that are yet to be transferred.

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:

	December 31,

	2020			2019
Receivables		31,452			35,019
Contract assets		53			149

Total assets		31,505			35,168

Less current portion		(29,342	)		(31,612	)

Total non-current assets		2,163			3,556

Contract liabilities:
Mobile and fixed telecommunication services		(20,714	)		(18,849	)
Other services		(694	)		(2,115	)
Loyalty programme		(434	)		(343	)

Total liabilities		(21,842	)		(21,307	)
Less current portion		21,125			20,718

Total non-current liabilities		(717	)		(589	)

Changes in the contract liabilities balances during the period are as follows:



Balance as of January 1	(21,307	)	(22,155	)
Revenue recognised that was included in the contract liability balance at the beginning of the period	17,531		19,951
Increase due to cash received, excluding amount recognised as revenue during the period	(18,438	)	(22,659	)
Disposal of VF Ukraine	—		3,556
Disposal of Nvision Group	372		—
Business combinations	—		—

Balance as of December 31	(21,842	)	(21,307	)

The Group expects to recognize revenue related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2020 as follows:



Mobile telecommunication services	19,997	709	8	—	20,714
Other services	694	—	—	—	694
Loyalty programme	434	—	—	—	434

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PJSC MOBILE TELESYSTEMS AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

7. REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

The total transaction price assigned to unsutisfied performance obligations is presented below:



Telecommunication services	2,394	751	406	305	3,856
Integration services	41	67	11	—	119

Cost to obtain and fulfill a contract

The Group capitalizes certain incremental costs incurred in acquiring or fullfilling a contract with a customer if the management expects these costs to be recoverable.

The Group uses a practical expedient from IFRS 15 which allows to expense contract costs as incurred when the expected contract duration is one year or less.

Costs of acquiring a contract include commissions paid to a third-party distrubutors as well as the associated remuneration of the Group's commercial employees for obtaining a contract with a customer with the expected duration of more than twelve months. These costs are amortized on a straight-line basis over the average life of a long-lived subscriber.

Costs to fulfill a contract mainly relate to costs of equipment transferred to the subscribers required for the provision of services. These costs are amortized on a straight-line basis generally for the period of average subscriber life.

As of December 31, 2020 and 2019 the balances of cost to obtain and fulfill contracts capitalized by the Group amounted to:

	December 31,

	2020			2019
Cost to obtain contracts
Gross book value		14,268			13,635
Accumulated amortization		(6,600	)		(6,394	)
Cost to fulfill contracts
Gross book value		4,081			2,918
Accumulated amortization		(1,628	)		(1,221	)

Amortization expense related to cost to obtain and fulfill contracts recognized for the years ended December 31, 2020 and 2019 amounted to RUB 3,819 million and RUB 3,940 million, respectivly. There was no impairment loss relating to the costs capitalized.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

8. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the years ended December 31, 2020, 2019 and 2018 comprised the following:



Salaries and social contributions	48,865	50,451	44,312
Advertising and marketing expenses	10,652	10,930	9,286
General and administrative expenses	7,526	7,653	7,670
Universal service fund	3,670	3,587	3,535
Cash collection commission	3,645	3,504	3,660
Consulting expenses	3,418	2,626	1,961
Dealers commission	3,385	3,081	2,760
Utilities and maintenance	2,255	2,809	2,821
Taxes other than income tax	1,845	2,486	3,606
Other personnel expenses	1,546	1,664	1,613
Other	1,176	1,142	1,258

Total	87,983	89,933	82,482

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

9. FINANCE INCOME AND COSTS

Finance income and costs for the years ended December 31, 2020, 2019 and 2018 comprised the following:



Interest expense:
—Loans and notes	28,174		30,105		25,589
—Amortization of debt issuance costs	97		489		415
—Lease obligations⁽¹⁾	12,277		13,416		12,852
—Provisions: unwinding of discount	138		113		151

Total interest expense	40,686		44,123		39,007

Loss on financial instruments	373		780		1,008
Other finance costs	85		151		44

Total finance costs	41,144		45,054		40,059

Less: amounts capitalized on qualifying assets⁽²⁾	(426	)	(550	)	(460	)
Debt modification/derecognition and other loss/(gain)	1,366		2,862		(2,614	)
Finance costs	42,084		47,366		36,985

Finance income on loans and receivables:
—Interest income on bank deposits	2,282		3,318		4,780
—Interest income on loans issued	17		91		357
—Other finance income	1,138		943		442

Finance income	3,437		4,352		5,579

Net finance costs	38,647		43,014		31,406

(1): Starting from January 1, 2018 the Group has applied IFRS 16, "Leases".
(2): The annual weighted average capitalization rates of 6.9%, 8.1% and 8.2% were used to determine the amount of capitalized interest for the years ended December 31, 2020, 2019 and 2018, respectively.

10. OTHER NON-OPERATING (INCOME)/EXPENSES

Other non-operating (income)/expenses for the years ended December 31, 2020, 2019 and 2018 comprised the following:



Net forex exchange (gain) / loss	10,380		(5,266	)	5,438
Loss/(gain) arising on derivatives	(13,443	)	8,297		(7,229	)
Net gain/(loss) arising on financial assets measured at FVTPL	(1,893	)	528		(285	)
Net gain/(loss) arising on financial liabilities measured at FVTPL	(53	)	1,197		241
Impairment of investments and loans given	1,392		616		478
Other	553		2,449		932

Total	(3,064	)	7,821		(425	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

11. OPERATIONS IN TURKMENISTAN

In September 2017, the Group's subsidiary in Turkmenistan MTS Turkmenistan or MTS-TM, suspended the provision of telecommunication services to its subscribers, due to the termination by Turkmen state-owned companies and state authorities of line rental, frequency allocation, interconnect, and other agreements necessary to provide telecommunication services. The license for the provision of telecommunication services on the territory of Turkmenistan was valid until July 2018.

The Group considered these facts as impairment indicators and consequently determined that all long-lived assets attributable to the Turkmenistan subsidiary were impaired. The Group also assessed the recoverability of the current assets and recorded a provision for those that were considered to be impaired. No indicators of impairment were identified in respect of cash and cash equivalents attributable to MTS-TM. Total impairment charges recognized in the Group's consolidated statement of profit or loss for the year ended December 31, 2017 were as follows:



Impairment of long-lived assets	3,204
Current provision for income tax	100
Provision for doubtful accounts	74
Other operating expenses	37
Taxes other than income tax	20
Deferred income tax	(69	)

	3,366

In July 2018, the Group filed a Request for Arbitration against the Sovereign State of Turkmenistan with the World Bank's International Center for Settlement of Investments Disputes ("ICSID") in order to protect its legal rights and investments in Turkmenistan. As of December 31, 2020 the case is pending. The hearing is currently scheduled for July 2021.

In December 2018 the Group started dismantling its network equipment in Turkmenistan and accrued a dismaltlment provision of RUB 228 million. In 2019 the dismantling of terminal network equipment was finalized.

12. DISCONTINUED OPERATIONS

UKRAINE

On November 22, 2019, the Group entered into a sale agreement to dispose of Preludium B.V., 100% owner of PJSC "Vodafone Ukraine", "PTT Telecom Kyiv", LLC "VF Retail" and LLC "IT SmartFlex", which carried out the Group's operations in Ukraine and constituted 'Ukraine' reporting segment. The disposal was effected in order to concentrate on development of the Group's core Russian market. The disposal was completed on December 3, 2019, and the results of operations in Ukraine were reported as discontinued operations in the accompanying consolidated statements of profit or loss for 2019 and prior periods.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

12. DISCONTINUED OPERATIONS (Continued)

As of December 3, 2019, the carrying amounts of assets and liabilities pertaining to the discontinued operation and reconciliation of the loss on disposal were as follows:



Property, plant and equipment	26,037
Right-of-use assets	8,175
Intangible assets	18,124
Goodwill	114
Other non-current assets	1,534
Other current assets	10,760
Cash and cash equivalents	4,181
Non-current liabilities	(9,009	)
Current liabilities	(17,979	)
Accumulated other comprehensive loss	7,948

Total consideration	(44,386	)



In the form of:
Cash and cash equivalents (USD 645 million)	(41,567	)
Deferred consideration (USD 12 million)	(774	)
Fair value of contingent consideration (variable earn-out) as of December 3, 2019 (USD 32 million)	(2,045	)
Loss on disposal	5,499
Net cash inflow arising on disposal:	37,386
Cash consideration received	41,567
Less: cash and cash equivalents disposed of	(4,181	)

Total consideration comprised of cash payment, deferred consideration and contingent consideration.

Cash payment of USD 645 million (RUB 41,567 million as of December 3, 2019) was received in December 2019. In June, 2020, the Group and the purchaser agreed on the amount of adjustment to the cash payment based on finalized financial statements results as of disposal date and the Group recognized additional income in amount of USD 28 million (RUB 2,101 million as of payment date in September, 2020) in discontinued operations in the consolidated statement of profit or loss.

The deferred consideration was settled in cash by the purchaser in September, 2020 in RUB amount of RUB 897 million, representing equivalent of USD 12 million as of the date of payment.

In the event the operations of discontinued operation achieve certain performance criteria for the periods starting 2019 and ending 2022 as specified in an 'earn out' clause of the sale agreement, additional contingent consideration will be receivable. As of December 3, 2019 the Group recognized contingent consideration receivable as a financial asset at fair value through profit or loss in the amount of RUB 2,045 million. The fair value of the financial asset amounted to RUB 2,013 million as of December 31, 2019 and RUB 2,631 million as of December 31, 2020.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

12. DISCONTINUED OPERATIONS (Continued)

The results of operations in Ukraine were reported as discontinued operations in the accompanying consolidated statements of profit or loss. The consolidated statements of financial position and consolidated statements of cash flows for all periods presented were not retrospectively restated on discontinued operations.

The results of the discontinued operation in Ukraine, which have been included in the profit for the year, were as follows:

	For the year ended December 31,

	2020			2019			2018
Revenue		—			36,675			28,826
Expenses		—			(28,564	)		(22,094	)

Profit before tax		—			8,111			6,732

Attributable tax expense		—			(2,018	)		(1,575	)

Profit for the period		—			6,093			5,157

Profit/(loss) on disposal		2,101			(5,499	)		—
Currency revaluation gain/(loss) on deferred consideration		154			(30	)		—
Earn-out revaluation—fair value measurement		645			48			—
Earn-out revaluation—Currency revaluation gain/(loss)		(27	)		(80	)		—

Net income attributable to discontinued operations		2,873			532			5,157

Cash flows from (used in) discontinued operation are presented as follows:

	For the year ended December 31,

	2020		2019			2018
Net cash provided by operating activities		—		17,343			16,773
Net cash provided by/(used in) investing activities		2,998		(13,046	)		(15,724	)
Net cash used in financing activities		—		(1,114	)		(1,057	)

NVISION GROUP

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

12. DISCONTINUED OPERATIONS (Continued)

As of October 30, 2020, the carrying amounts of discontinued operation net assets and reconciliation of the loss on disposal were as follows:



Property, plant and equipment	95
Intangible assets	245
Other non-current assets	220
Other current assets	2,912
Cash and cash equivalents	285
Non-current liabilities	(98	)
Current liabilities	(3,281	)
Accumulated other comprehensive loss	3
Total consideration	(369	)
Satisfied by:
Cash and cash equivalents	(369	)
Loss on disposal*	11
Net cash inflow arising on disposal:	84
Cash consideration received	369
Less: cash and cash equivalents disposed of	(285	)

*: Included in additional paid-in capital in consolidated statement of changes in shareholders' equity, analogically to the purchase of JSC "Nvision Group" from Sistema in 2015.

Cash consideration in amount of RUB 369 million was settled in October and December 2020.

The results of the discontinued operation of JSC "Nvision Group", which have been included in the profit for the year, were as follows:

	Year ended December 31,

	2020			2019			2018
Revenue		10,051			12,898			10,792
Expenses		(11,305	)		(14,263	)		(12,026	)
Loss before tax		(1,254	)		(1,365	)		(1,234	)
Attributable tax expense		(1,003	)		(83	)		(50	)
Loss for the period		(2,257	)		(1,448	)		(1,284	)
Net loss attributable to discontinued operations		(2,257	)		(1,448	)		(1,284	)

Cash flows from (used in) discontinued operation are presented as follows:

	For the year ended December 31,

	2020			2019			2018
Net cash (used in)/provided by operating activities		(1,466	)		(55	)		(645	)
Net cash provided by/(used in) investing activities		664			347			(551	)
Net cash provided by/(used in) financing activities		748			(372	)		1,220

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

13. INCOME TAX

Income taxes of the Group's Russia-incorporated entities have been calculated in accordance with Russian legislation and are based on the taxable profit for the period. The corporate income tax rate in Russia is 20%. The withholding tax rate on dividends paid within Russia is 13%. The foreign subsidiaries of the Group pay withholding taxes in their respective jurisdictions. Deferred tax assets and liabilities are recognized for temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases of assets and liabilities that will result in future taxable or deductible amounts. The deferred tax assets and liabilities are measured using the enacted or substantially enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Significant components of income tax expense were as follows;



Current income tax charge	15,170		20,757		19,175
Prior period tax adjustments	(509	)	(90	)	(133	)

Total current income tax	14,661		20,667		19,042

Deferred tax	1,465		(5,000	)	(3,697	)

Income tax expense on continuing operations	16,126		15,667		15,345

Income tax expense on continuing operations excludes the amounts from the discontinued operations of RUB (1,003) million, RUB 1,935 million and RUB 1,525 million for the years ended December 31, 2020, 2019 and 2018, respectively, which have been included in profit / (loss) from discontinued operations in the accompanying consolidated statements of profit or loss (Note 12).

The statutory income tax rates in jurisdictions in which the Group operates for 2020 were as follows: Russia—20%, Armenia—18%, Turkmenistan—8%, Czech Republic—19%, for 2019 and 2018 were as follows: Russia and Armenia—20%, Turkmenistan—8%, Czech Republic—19%.The Russian statutory income tax rate of 20% reconciled to the Group's effective income tax rate for the years ended December 31, 2020, 2019 and 2018 as follows:



Statutory income tax rate for the year	20.0	%	20.0	%	20.0	%
Adjustments:
Expenses not deductible for tax purposes	1.3		2.1		0.7
Prior periods tax effects	(0.7	)	(0.1	)	(0.2	)
Different tax rate of subsidiaries	(0.8	)	(0.4	)	(0.2	)
Withholding tax on distributed and undistributed profits	1.5		1.9		(0.5	)
Change in fair value of derivative financial instruments	—		0.2		(0.1	)
Derecognition of deferred tax assets	(0.1	)	(0.5	)	0.1
Other	(0.4	)	(0.2	)	(0.1	)

Effective income tax rate	20.8	%	23.0	%	19.7	%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

13. INCOME TAX (Continued)

The Group reported the following deferred income tax assets and liabilities in the consolidated statement of financial position:



Deferred tax assets	8,778		9,975
Deferred tax liabilities	(19,191	)	(17,866	)

Net deferred tax liabilities	(10,413	)	(7,891	)

Movements in the deferred tax assets and liabilities for the year ended December 31, 2020 were as follows:



Assets / (liabilities) arising from tax effect of:
Property, plant and equipment	(17,954	)	(318	)	19		—	3		(18,250	)
Other intangible assets	(6,564	)	314		—		—	(64	)	(6,314	)
Potential distributions from/ to Group's subsidiaries/ associates and joint ventures	(2,430	)	(42	)	(34	)	—	—		(2,506	)
Licenses	(1,739	)	47		(7	)	—	—		(1,699	)
Customer base	(576	)	106		—		—	—		(470	)
Capitalization of cost to obtain and fulfill contracts	(1,448	)	(220	)	—		—	—		(1,668	)
Accrued expenses for services	7,929		(710	)	5		—	(66	)	7,158
Write-down of inventories	681		(211	)	10		—	(67	)	413
Allowance for ECL	2,947		(112	)	3		—	(125	)	2,713
Right-of-use assets and lease obligations	3,520		709		(2	)	—	(3	)	4,224
Loss carryforward	4,634		56		—		—	(729	)	3,961
Contract liabilities	1,230		203		—		—	(3	)	1,430
Debt modification	(433	)	310		—		—	—		(123	)
Hedge and other	2,312		(1,594	)	—		—	—		718

Net deferred tax liability	(7,891	)	(1,462	)	(6	)	—	(1,054	)	(10,413	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

13. INCOME TAX (Continued)

Movements in the deferred tax assets and liabilities for the year ended December 31, 2019 were as follows:



Assets / (liabilities) arising from tax effect of:
Property, plant and equipment	(16,238	)	(1,168	)	42		57		(647	)	(17,954	)
Other intangible assets	(6,080	)	(448	)	2		(5	)	(33	)	(6,564	)
Potential distributions from/ to Group's subsidiaries/ associates and joint ventures	(4,019	)	(462	)	135		—		1,916		(2,430	)
Licenses	(1,917	)	154		24		—		—		(1,739	)
Customer base	(706	)	159		—		(29	)	—		(576	)
Capitalization of cost to obtain and fulfill contracts	(1,321	)	(148	)	(1	)	—		22		(1,448	)
Accrued expenses for services	7,005		1,193		14		—		(283	)	7,929
Write-down of inventories	1,448		(761	)	(6	)	—		—		681
Allowance for ECL	1,438		1,722		10		—		(223	)	2,947
Right-of-use assets and lease obligations	2,564		1,024		6		—		(74	)	3,520
Loss carryforward	4,256		275		—		103		—		4,634
Provision for investment in Delta Bank in Ukraine	367		—		26		—		(393	)	—
Contract liabilities	954		192		(6	)	—		90		1,230
Debt modification	(1,075	)	642		—		—		—		(433	)
Hedge and other	75		2,172		58		—		7		2,312

Net deferred tax liability	(13,249	)	4,546		304		126		382		(7,891	)

The Group recognizes deferred income tax on future dividend distributions from subsidiaries/ associates and joint ventures which are based on the cumulative undistributed earnings of those subsidiaries in accordance with local statutory accounting regulations.

The Group recognizes deferred tax assets in respect of tax losses carried forward to the extent that realization of tax losses against future taxable profit is probable. Deferred tax assets related to tax losses of the Group's subsidiaries are recognized according to the fact that certain tax planning opportunities are available to these subsidiaries that will create taxable profit in the period in which the unused tax losses can be utilized. The amount of the deferred tax asset considered realizable, however, could be remeasured if estimates of future taxable income are changed.

Federal law 401-FZ dated November 30, 2016 cancelled the time limit of prior periods' tax losses carryforward, which had been previously restricted to 10 years. Furthermore, the law specified that for the years 2017-2020 prior periods' tax losses carried forward should not exceed 50% of the tax base.

Unused tax losses, for which deferred tax assets were not recognized in the consolidated statements of financial position as of December 31, 2020 and 2019 amounted to RUB 43,393 million and RUB 41,816 million, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

13. INCOME TAX (Continued)

The Group accrued RUB 595 million and RUB 825 million as of December 31, 2020 and 2019, respectively, as a component of income tax payable in relation to uncertain income tax positions.

A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.

14. EARNINGS PER SHARE

The following table sets forth the computation of earnings per share for the years ended December 31:



Numerator:
Profit for the year from continuing operations attributable to the owners of the company	60,796	51,713	62,025
Profit / (loss) for the year from discontinued operations attributable to the owners of the company	616	2,528	(55,177	)
Denominator, in thousands:
Weighted-average ordinary shares outstanding	1,760,468	1,780,935	1,873,563
Employee stock options	1,310	2,682	2,158

Weighted-average diluted shares outstanding	1,761,778	1,783,617	1,875,721



Earnings per share—basic, Russian Rubles	34.88	30.46	3.66
Basic EPS from continuing operations	34.53	29.04	33.11
Basic EPS from discontinued operations	0.35	1.42	(29.45	)
Earnings per share—diluted, Russian Rubles	34.86	30.41	3.65
Diluted EPS from continuing operations	34.51	28.99	33.07
Diluted EPS from discontinued operations	0.35	1.42	(29.42	)

15. CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent cash on hand and in bank accounts, as well as short-term bank deposits, which have original maturities of less than three months. Other short-term highly liquid investments are treated as cash equivalents only if they are held for the purpose of meeting short-term cash commitments, are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

15. CASH AND CASH EQUIVALENTS (Continued)

Cash and cash equivalents comprised the following:

	December 31,

	2020		2019
Cash and cash equivalents at banks and on hand in:
Russian Rubles		39,076		27,749
US Dollars		10,597		1,014
Euro		6,433		2,751
Turkmenian Manat		431		419
Ukraine Hryvna		43		224
Other		916		844
Short-term deposits with an original maturity of less than 92 days:
Russian Rubles		27,857		4,859
Ukraine Hryvna		44		206
Euro		—		—
Other		8		4

Total cash and cash equivalents		85,405		38,070

16. SHORT-TERM INVESTMENTS

Short-term investments represent investments in loans and time deposits, which have original maturities of longer than three months and are repayable in less than twelve months, as well as investment in debt and equity securities. Deposits, loans and debt securities are carried at amortized cost as they are held to collect contractual cash flows in the form of payments of principal and interest. Assets in Sistema Capital trust management as well as mutual funds are carried at fair value through profit and loss ("FVTPL"), as this portfolio of assets is neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

Short-term investments are presented net of allowance for expected credit losses ("ECL").

Loans to customers issued by MTS Bank are presented separately within Bank deposits and loans in the accompanying consolidated statements of financial position.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

16. SHORT-TERM INVESTMENTS (Continued)

The Group's short-term investments comprised the following:

		December 31,

	Category	2020		2019
Mutual funds (Notes 29)	At FVTPL		10,699		9,349
Assets in Sistema-Capital trust management (Notes 29)	At FVTPL		10,313		8,195
Notes / loans	At amortized cost		1,007		6,376
Deposits	At amortized cost		1,415		1,699

Short-term investments, gross			23,434		25,619

Allowance for ECL			—		(1	)

Total short-term investments			23,434		25,618

17. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Associates are those entities where the Group exercises significant influence, and they are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not equate to control or joint control over those policies. These entities are recognized at cost at the time of acquisition and adjusted thereafter to recognize the Group's share of the profit or loss and other comprehensive income. The carrying amount of the investment in such entities may include goodwill as the positive difference between the cost of the investment and Group's proportionate share in the fair-values of the entity's identifiable assets and liabilities.

Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement and have rights to the net assets of the arrangement. The Group recognizes its interest in a joint venture where it has joint control of the investment and accounts for that investment using the equity method.

The Group presents its share in profits or losses in associates and joint ventures within operating profit if those interests are viewed as part of Group's core operations. As of December 31, 2020, MTS Belarus, Zelenaya Tochka and Fancy Show were considered as part of the Group's core operating activity. Shares in profits and losses of other Group's associates and joint ventures were presented as non-operating items.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

17. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (Continued)

The Group's investments in associates and joint ventures comprised the following:

	Country of operations	Operating activity

MTS Belarus	Belarus	telecommunications	5,124	4,502
Zelenaya Tochka	Russia	telecommunications	1,260	—
YouDo	Russia	classifieds property investments mutual fund	724	724
Sistema-Rentnaya Nedvizhimost	Russia		636	658
Other unquoted companies	Russia		811	566

Total investments in associates			8,555	6,450

The reconciliation of summarized financial information of MTS Belarus to the carrying amount of the Group's interest in associate is presented as follows:



Assets
Non-current assets	20,008		19,496
Current assets	12,705		11,536

Liabilities
Non-current liabilities	(11,257	)	(9,849	)
Current liabilities	(10,999	)	(11,995	)

Total identifiable net assets	10,457		9,188



The Group's share in associate	49	%	49	%
The Group's share of identifiable net assets	5,124		4,502
Carrying amount of the Group's interest	5,124		4,502

The composition of the Group's share of income of MTS Belarus is as follows:

	Year ended December 31,

	2020			2019			2018
Revenue		36,121			32,593			27,695
Net profit for the year		10,267			9,354			7,752

The Group's share of the profit of the associate for the year		5,031			4,583			3,799

Other comprehensive income/(loss) for the year (currency translation adjustment)		(397	)		(842	)		648
Total comprehensive income for the year		9,870			8,512			8,400
The Group's share of total comprehensive income of the associate for the year		4,836			4,171			4,116

Dividends received		(4,212	)		(3,821	)		(3,691	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

17. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (Continued)

Joint ventures presented within operating profit

Zelenaya Tochka

In February 2020, the Group purchased 51% stakes in Achemar Holdings Limited and Clarkia Holdings Limited, owners of the operational companies of "Zelenaya Tochka" Group, fixed-line operator in multiple regions of Russia. Purchase price comprised of cash payment in total amount of RUB 1,370 million. Purchase conditions included call and put options for the remaining stakes in Achemar Holdings Limited and Clarkia Holdings Limited, and share of purchase price in amount of RUB 166 million related to the fair value of call and put options acquired. The purchase of 51% stake was accounted as investment in joint venture based on the terms of the shareholders' agreement.

Fancy Show

In 2020 the Group formed a partnership with "LLC Fancy Show", for the purposes of production, release and promotion of "Chess" musical in Russia. The Group received the right to 36% net profit of the partnership and accounted for investment as investment in joint venture.

The following table is the aggregate financial information of investments in individually insignificant joint ventures, held by the Group and presented within operating profit:

	Year ended December 31,

	2020		2019		2018
Net income for the year		3		—		—
The Group's share of the income of the joint venture for the year		17		—		—
Other comprehensive income for the year		—		—		—
Total comprehensive income for the year		3		—		—
The Group's share of total comprehensive income of the joint venture for the year		17		—		—

Associates and joint ventures presented within non-operating items

YouDo

In September 2018, the Group acquired a 13.68% ownership interest in Youdo Web Technologies Limited (YouDo), a Russian online service provider matching freelance labor supply to demand for everyday and business tasks, for a cash contribution of RUB 824 million. Though the Group holds less than 20% of the equity interests in YouDo, nevertheless it has significant influence over the investee based on its ownership of equity shares, representation on the investee's Board of Directors and certain additional rights related to the decision-making process on key issues.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

17. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (Continued)

Sistema-Rentnaya Nedvizhimost

In December 2018, MTS Bank sold 40.26% share in a property investments mutual fund "Sistema-Rentnaya Nedvizhimost" to Business Nedvizhimost, subsidiary of Sistema, for cash consideration of RUB 450 million. The Group classified the remaining investment in the mutual fund as investment in joint venture, based on the existence of a joint decision-making process and the rights to net assets of the mutual fund. The Group applied the equity method of accounting to its remaining share in the mutual fund.

SWIPGLOBAL

In December 2019, the Group acquired a 15.01% ownership interest in SWIPGLOBAL Limited (SWIPGLOBAL), a parent company of LLC "Smart wallet", Russian provider of authorization and payment solutions, for a cash contribution of RUB 75 million. Though the Group holds less than 20% of the equity interests in SWIPGLOBAL, nevertheless it has significant influence over the investee based on its ownership of equity shares, representation on the investee's Board of Directors and certain additional rights related to the decision-making process on key issues.

OZON

In 2014, the Group acquired a 10.82% stake in OZON Holdings Limited (OZON), a leading Russian e-commerce company. The Group accounted for its investment under the equity method, as the Group's representation on the investee's board of directors and a number of veto rights provided it with a significant influence over the investee.

In 2018, the Group acquired additional equity interests in OZON through several transactions, which resulted in increase of the Group's share in OZON from 11.19% as of December 31, 2017 to 18.69% as of December 31, 2018. In March 2019, the Group disposed its 18.69% interest in OZON to Sistema for RUB 7,902 million (of which RUB 3,000 million was paid by Sistema in March 2019, RUB 2,450 million is due in July 2020 and RUB 2,452 million is due in July 2021). As of December 31, 2019 and 2020 the Group has retained no interest in OZON.

As a result of the transaction the Group recognized a gain on disposal which was included in the non-operating share of the income of the associates and joint ventures in the accompanying consolidated statement of profit or loss:



Proceeds from disposal	7,902
Less: carrying amount of investment on the date of disposal	(4,065	)

Gain recognized*	3,837

*: A current tax expense of RUB 420 million is attributable to the aforementioned gain.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

17. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (Continued)

MTS Bank

In July 2018, the Group increased its ownership share in its associate MTS Bank from 26.6% to 55.4% and obtained control over the entity. The Group discontinued the use of the equity method for accounting of investment in MTS Bank and accounted for the acquisition as a transaction under common control directly in equity (Note 5).

The Group's share in the net losses of MTS Bank prior to discontinuing use of the equity method was included in the non-operating share of the loss of the associates in the accompanying consolidated statement of profit or loss for the year ended December 31, 2018 and is presented as follows:



Total interest income	(9,289	)
Total interest expense	3,799
Net loss for the period	609

The Group's share of the loss of the associate for the period	162

Other comprehensive loss for the period	614
Total comprehensive loss for the period	1,223

The Group's share of the total comprehensive loss for the period	326

The following table is the aggregate financial information of investments in individually insignificant associates and joint ventures, held by the Group and presented within non-operating items:

	Year ended December 31,

	2020			2019		2018
Net (income)/loss for the year		(1,048	)		2,448		4,600
The Group's share of the (income)/loss of the associate for the year		(273	)		341		747
Other comprehensive income for the year		—			—		—
Total comprehensive (income)/loss for the year		(1,048	)		2,448		4,600
The Group's share of total comprehensive (income)/loss of the associate for the year		(273	)		341		747

18. OTHER INVESTMENTS

Other investments consist primarily of long-term deposits, which are repayable in more than a year, loans, debt securities and equity holdings in private companies. Deposits, loans and notes are carried at amortized cost as they are held to collect contractual cash flows in the form of payments of principal and interest.

Loans to customers issued by MTS Bank are presented separately within Bank deposits and loans.

Investments in shares of the companies over which the Group does not have control or an ability to exercise significant influence are accounted for at amortized cost.

Other investments are presented net of allowance for expected credit losses (ECL).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

18. OTHER INVESTMENTS (Continued)

Other investments of the Group comprised the following:

		December 31,

	Category	2020			2019
Debt securities	At amortized cost		8,764			9,381
Deposits	At amortized cost		—			124
Loans and unquoted notes	At amortized cost		328			36
Other	At amortized cost		400			1,656

Other investments (Gross)			9,492			11,197

Allowance for ECL			(4	)		(2	)

Total other investments			9,488			11,195

19. TRADE AND OTHER RECEIVABLES

Trade and other receivables are carried at transaction price. The carrying value of all trade receivables is reduced by appropriate allowances for ECL.

For trade receivables the Group applies a simplified approach and calculates ECL based on lifetime expected credit losses. For receivables from subscribers and dealers and partially for other trade receivables the allowance for ECL is computed using the provision matrix. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome and all reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, receivables from subscribers are written-off if past due for more than 180 days. Receivables other than from subscribers are written-off upon the expiration of the limitation period or before based on results of internal investigations.

MTS Group accounts for Receivables from handset sales financing as a part of current trade and other receivables and non-current other non-financial assets. These receivables are measured based on fair value basis using effective rate approach. Receivables from handset sales financing are written-off if past due for more than 720 days.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

19. TRADE AND OTHER RECEIVABLES (Continued)

Trade and other receivables current and non-current comprised the following:

	December 31,

	2020			2019
Receivables from handset sales financing		15,785			16,845
Subscribers		12,704			10,980
Other trade receivables		4,954			4,427
Interconnect		1,794			1,624
Integration services		1,512			2,407
Roaming		1,072			1,912
Bonuses from suppliers		342			724
Dealers		158			268
Receivables from the sharing agreement		73			802
Receivables from sale of VF Ukraine		—			743
Other receivables		1,260			2,622
Allowance for ECL		(4,623	)		(4,203	)

Trade and other receivables, total		35,031			39,151

Less non-current portion		(2,163	)		(3,556	)

Trade and other receivables, current		32,868			35,595

The analysis of the age of trade and other accounts receivables and the respective allowance for ECL as of December 31, 2020:

Receivables from subscribers and dealers and other trade receivables assessed for impairement based on provision matrix						Credit-impaired

Current	3	%	2,087	(62	)	No
1 - 30 days past due	5	%	9,029	(478	)	No
31 - 60 days past due	41	%	466	(190	)	No
60 - 90 days past due	59	%	384	(225	)	No
More than 90 days past due	81	%	896	(727	)	Yes

Total	13	%	12,862	(1,682	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

19. TRADE AND OTHER RECEIVABLES (Continued)

Receivables other than from subscribers and dealers and handset sales financing assessed for impairement based on individual basis						Credit-impaired

Current	3	%	7,966	(227	)	No
1 - 30 days past due	1	%	825	(11	)	No
31 - 60 days past due	2	%	459	(11	)	No
60 - 90 days past due	10	%	227	(23	)	No
More than 90 days past due	69	%	1,530	(1,069	)	Yes

Total	12	%	11,007	(1,341	)

Receivables from handset sales financing						Credit-impaired

Current	2	%	13,943	(245	)	No
1 - 30 days past due	15	%	331	(50	)	No
31 - 60 days past due	53	%	102	(54	)	No
60 - 90 days past due	65	%	65	(43	)	No
More than 90 days past due	90	%	1,344	(1,208	)	Yes

Total	10	%	15,785	(1,600	)

The analysis of the age of trade and other accounts receivables and the respective allowance for ECL as of December 31, 2019:

Receivables from subscribers and dealers and other trade receivables assessed for impairment based on provision matrix						Credit-impaired

Current	—		21	—		No
1 - 30 days past due	4	%	9,844	(395	)	No
31 - 60 days past due	16	%	522	(86	)	No
60 - 90 days past due	38	%	202	(77	)	No
More than 90 days past due	64	%	659	(421	)	Yes

Total	9	%	11,248	(979	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

19. TRADE AND OTHER RECEIVABLES (Continued)

Receivables other than from subscribers and dealers and handset sales financing assessed for impairment based on individual basis						Credit-impaired

Current	1	%	8,743	(77	)	No
1 - 30 days past due	1	%	2,020	(22	)	No
31 - 60 days past due	2	%	878	(14	)	No
60 - 90 days past due	58	%	1,581	(916	)	No
More than 90 days past due	37	%	2,039	(746	)	Yes

Total	12	%	15,261	(1,775	)

Receivables from handset sales financing						Credit-impaired

Current	2	%	15,085	(261	)	No
1 - 30 days past due	15	%	396	(60	)	No
31 - 60 days past due	47	%	125	(59	)	No
60 - 90 days past due	61	%	99	(60	)	No
More than 90 days past due	88	%	1,140	(1,009	)	Yes

Total	9	%	16,845	(1,449	)

The following table summarizes changes in the allowance for expected credit losses for the year ended December 31, 2020, 2019 and 2018:



Balance, beginning of the year calculated under IAS 39	—		—		(2,344	)

Additional allowance required under IFRS 9	—		—		(233	)

Balance, beginning of the year, calculated under IFRS 9	(4,203	)	(4,318	)	(2,577	)



Allowance for ECL	(3,382	)	(4,290	)	(3,210	)
Accounts receivable written off	2,719		4,276		2,948
Disposal/(Acquisition) of subsidiaries	243		129		(1,479	)

Balance, end of the year	(4,623	)	(4,203	)	(4,318	)

20. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventory cost is determined using the weighted average cost method. Handsets and accessories held for sale are expensed when sold. The Group regularly assesses its inventories for obsolete and slow-moving stock.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

20. INVENTORIES (Continued)

Inventory and spare parts comprised the following:

	December 31,

	2020		2019
Handsets and accessories		12,827		12,412
Spare parts for telecommunication equipment		110		984
Advertising and other materials		964		912
SIM cards and prepaid phone cards		726		700
TV equipment for resale		425		494
Software and equipment for installation and resale		152		13

Total inventories		15,204		15,515

Other materials mainly consist of automobile and IT components, stationery, fuel and auxiliary materials.

Spare parts for telecommunication equipment included in the inventory are expected to be utilized within twelve months of the year end.

Expenses for writing inventory down to net realisable value were included in cost of goods in the consolidated statement of profit or loss.

For the years ended December 31, 2020, 2019 and 2018, cost of goods comprised the following expenses:



Amount of inventories recognized as an expense	62,587		56,761		55,278
Inventory obsolescence provision	1,465		2,564		3,803
Reversal of obsolescence provision	(570	)	(453	)	(412	)

Total cost of goods	63,482		58,872		58,669

The reversal of the inventory obsolescence provision relates to handsets and accessories sold over the course of the Group's promotion campaigns. Inventories were sold with a positive margin.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

21. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, including improvements, are stated at cost. Property, plant and equipment with a useful life of more than one year is capitalized at historical cost and depreciated on a straight-line basis over its expected useful life, as follows:



Network and base station equipment:
Network infrastructure		3 - 44 years
Other		3 - 20 years
Land and buildings:
Buildings		7 - 150 years
Leasehold improvements		the term of the lease
Office equipment, vehicles and other:
Office equipment		2 - 7 years
Vehicles		2 - 10 years
Other		2 - 25 years

The estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal of an item of property, plant and equipment is determined as the difference between any sale proceeds and the carrying amount of the asset and is recognised in the consolidated statement of profit or loss.

Construction in progress and equipment held for installation is not depreciated until the constructed or installed asset is ready for its intended use. Maintenance and repair costs are expensed as incurred, while upgrades and improvements are capitalized.

Borrowing costs—Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset during the construction phase that necessarily takes a substantial period of time are capitalized as part of property, plant and equipment until the asset is substantially ready for its intended use. The Group considers a construction period of more than six months to be substantial.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

21. PROPERTY, PLANT AND EQUIPMENT (Continued)

Balances of cost, accumulated depreciation, net book value as of December 31, 2020 and 2019 and movements of property, plant and equipment for the year ended December 31, 2020, 2019 and 2018 were as follows:



Cost
January 1, 2018	566,358		25,024		47,830		19,494		658,706

Additions	2,777		4,887		777		63,047		71,488
Transferred into use	48,780		1,807		5,939		(56,526	)	—
Arising on business combinations	123		3,912		1,323		18		5,376
Transfer to assets held for sale	(752	)	(1,656	)	(36	)	—		(2,444	)
Disposal	(25,963	)	(322	)	(2,712	)	26		(28,971	)
Transfer of financial leasing	(10,124	)	—		(110	)	—		(10,234	)
Other	(1,043	)	(536	)	(319	)	—		(1,898	)
Foreign exchange differences	12,977		718		1,595		162		15,452

December 31, 2018	593,133		33,834		54,287		26,221		707,475

Additions	4,162		39		1,117		64,398		69,716
Transferred into use	51,130		1,803		12,919		(65,852	)	—
Arising on business combinations	484		32		177		4		697
Transfer to assets held for sale	(1,573	)	555		—		—		(1,018	)
Disposal	(26,870	)	(428	)	(3,091	)	(186	)	(30,575	)
Disposal of VF Ukraine (Note 12)	(62,196	)	(2,128	)	(6,966	)	(2,060	)	(73,350	)
Other	730		1,042		(1,125	)	80		727
Foreign exchange differences	1,889		(188	)	55		55		1,811

December 31, 2019	560,889		34,561		57,373		22,660		675,483

Additions	(173	)	434		729		74,032		75,022
Transferred into use	53,005		1,317		12,286		(66,608	)	—
Arising on business combinations	578		4		6		—		588
Disposal of NVISION GROUP (Note 12)	—		—		(314	)	(18	)	(332	)
Transfer to assets held for sale	(2,890	)	(475	)	(34	)	(3	)	(3,402	)
Disposal	(38,293	)	(447	)	(4,405	)	(255	)	(43,400	)
Other	(4	)	675		30		35		736
Foreign exchange differences	2,286		495		520		74		3,375

December 31, 2020	575,398		36,564		66,191		29,917		708,070

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

21. PROPERTY, PLANT AND EQUIPMENT (Continued)



Accumulated amortisation and impairment
January 1, 2018	(348,759	)	(9,421	)	(36,699	)	(764	)	(395,643	)

Charge for the year	(50,056	)	(941	)	(4,126	)	—		(55,123	)
Arising on business combinations	(13	)	(368	)	(922	)	—		(1,303	)
Impairment	—		361		151		—		512
Transfer to assets held for sale	223		455		37		—		715
Disposal	25,116		175		2,464		—		27,755
Transfer of financial leasing	2,070		—		41		—		2,111
Other	553		22		309		—		884
Foreign exchange differences	(9,148	)	(500	)	(1,292	)	—		(10,940	)

December 31, 2018	(380,014	)	(10,217	)	(40,037	)	(764	)	(431,032	)

Charge for the year	(47,905	)	(1,148	)	(5,064	)	—		(54,117	)
Arising on business combinations	(290	)	(5	)	(104	)	—		(399	)
Impairment	—		—		—		—		—
Transfer to assets held for sale	762		(76	)	(1	)	—		685
Disposal	26,163		256		2,709		—		29,128
Disposal of VF Ukraine (Note 12)	40,717		1,056		5,540		—		47,313
Other	(962	)	(616	)	628		—		(950	)
Foreign exchange differences	(767	)	174		(39	)	—		(632	)

December 31, 2019	(362,296	)	(10,576	)	(36,368	)	(764	)	(410,004	)

Charge for the year	(43,220	)	(1,153	)	(5,696	)	—		(50,069	)
Disposal of NVISION GROUP (Note 12)	—		—		236		—		236
Transfer to assets held for sale	1,899		146		(7	)	—		2,038
Disposal	33,058		343		4,165		—		37,566
Other	(5	)	(133	)	(34	)	—		(172	)
Foreign exchange differences	(1,968	)	(397	)	(496	)	—		(2,861	)

December 31, 2020	(372,532	)	(11,770	)	(38,200	)	(764	)	(423,266	)

Net book value
December 31, 2019	198,593		23,985		21,005		21,896		265,479



December 31, 2020	202,866		24,794		27,991		29,153		284,804

The amount of the compensation from third parties for items of property, plant and equipment that were accidentally damaged during construction in Moscow for the years ended December 31, 2020, 2019 and 2018 totaled RUB 1,510 million, RUB 2,034 million and RUB 1,304 million, respectively. This was included in the accompanying consolidated statements of profit or loss as component of other operating income.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

22. GOODWILL

Goodwill represents an excess of consideration transferred plus the fair value of any non-controlling interest ("NCI") in the acquiree at the acquisition date over the fair values of the identifiable net assets of the acquired entity. Goodwill is not amortized, but is tested for impairment (Note 23).

The change in the net carrying amount of goodwill for the years ended December 31, 2020 and 2019 by reportable segments was as follows:



Balance at January 1, 2019
Gross amount of goodwill	32,124		1,377		11,112		44,613
Accumulated impairment loss	(1,466	)	—		(4,040	)	(5,506	)

	30,658		1,377		7,072		39,107

Acquisitions (Note 5)	105		—		—		105
Reclassification	41		(41	)	—		—
Disposal of VF Ukraine (Note 12)	—		—		(114	)	(114	)
Currency translation adjustment	—		—		(423	)	(423	)

Balance at December 31, 2019
Gross amount of goodwill	32,270		1,336		10,575		44,181
Accumulated impairment loss	(1,466	)	—		(4,040	)	(5,506	)

	30,804		1,336		6,535		38,675

Acquisitions (Note 5)	—		—		282		282
Reclassification (Note 6)	(1,877	)	—		1,877		—
Impairment (Note 23)	—		—		(1,281	)	(1,281	)
Currency translation adjustment	—		—		365		365

Balance at December 31, 2020
Gross amount of goodwill	30,393		1,336		13,099		44,828
Accumulated impairment loss*	(1,466	)	—		(5,321	)	(6,787	)

	28,927		1,336		7,778		38,041

*: Accumulated impairment loss of Other segments consists of Armenia (RUB 3,516 million), Oblachnyi retail (RUB 524 million) and Ticketland and Ponominalu (RUB 1,281 million).

23. IMPAIRMENT REVIEW

Goodwill—The management of the Group performs impairment tests with respect to goodwill assigned to the cash-generating units at least annually, and also when there are any indications that the carrying amount of the cash generating unit ("CGU") is impaired.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

23. IMPAIRMENT REVIEW (Continued)

Investments in associates and joint ventures—The carrying amount of an investment accounted for under the equity method is tested for impairment provided there are indications of impairment. If the carrying amount of the investment exceeds its recoverable amount, an impairment loss is recognized in the amount of the difference. The recoverable amount is measured at the higher of fair value less costs of disposal and value in use.

Tangible and intangible assets excluding goodwill—At the end of each reporting period, the management of the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets may be impaired. If such an indication exists, the recoverable amount of the assets is estimated in order to determine the amount of impairment loss.

In the process of identifying the impairment indicators management of the Group considers, among other factors, CGU market value and book value and changes in risk premiums in country of operations.

When the carrying amount of the CGU exceeds its recoverable amount, assets allocated to this CGU must be impaired.

For the purpose of the impairment test the recoverable amounts of the CGUs are considered to be equal to their value-in-use. While determining value-in-use, the estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU. The discount rate applied to measure free cash flow is the weighted average cost of capital according to the finance structure established for each CGU.

Estimation of future cash flows requires assumptions to be made in respect to uncertain factors, including management expectations in relation to OIBDA margin, timing and amount of capital expenditures, terminal growth rates and appropriate discount rates to reflect the risks involved. Therefore, OIBDA margin and capital expenditures used for value in use calculation are primarily derived from internal sources, based on past experience and extended to include management expectations. For the purposes of impairment testing OIBDA calculated as operating profit less depreciation and amortization measured on the basis consistent with IFRS consolidated financial statements.

For the purposes of impairment testing as of December 31, 2020 the Group has assessed the effects of COVID-19 pandemic on Group's business and financial situation (as disclosed in Note 3) for impairment indicators. The Group has adjusted estimations of future cash flows to reflect its estimates of impact of the pandemic factors. The impairment charge recognized and discussed below is based on expected cash flows after applying these adjustments.

Oblachniy Retail

During the year ended December 31, 2018 the Group recognized impairment of RUB 677 million in respect of the goodwill and non-current assets of CGU "Oblachniy Retail".

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(Amounts in millions of Russian Rubles unless otherwise stated)

23. IMPAIRMENT REVIEW (Continued)

CGU "Oblachniy Retail" operates as a retail software developer, cash register distributor and provider of integrated digital cash management solutions for business to business ("B2B") clients. The impairment in CGU "Oblachniy Retail" reflects lower operating performance and uncertainty in respect to the ability to meet its operational targets. The recoverable amount of CGU "Oblachny Retail" equaled to RUB 765 million as of December 31, 2018. The amount includes inventory stock measured at net realizable value and related tax balances.

During 2019 and 2020 there were no changes in factors relevant to the impairment review.

Nvision Czech Republic

CGU "Nvision Czech Republic" tailors in-house software solutions, provides support and managed services to telecom operators, delivers electronic and mechanical manufacturing services.

During the year ended December 31, 2017 the Group recognized impairment of RUB 571 million in respect of the non-current assets of CGU "Nvision Czech Republic", whereas during the year ended December 31, 2018, RUB 507 million were reversed as a result of the improvement in its operating performance.

The recoverable amount of CGU "Nvision Czech Republic" was RUB 1,778 million as of December 31, 2018 compared to RUB 954 million as of December 31, 2017.

During 2019 and 2020, there were no changes in factors relevant to the impairment review.

Ticketland and Ponominalu

Due to restrictive measures implemented by government in respect to mass events and gatherings ticket sales dropped significantly in 2020. Group management adjusted its expectations of Ticketland and Ponominalu operating performance to reflect significant reduction of business activities and time needed for recovery. The recoverable amount was in total equal to RUB 2,658 million as of June 30, 2020.

As a result of impairment test the Group recognized impairment of goodwill related to Ticketland and Ponominalu in the aggregate amount of RUB 1,281 million for the year ended December 31, 2020.

Kinopolis

Kinopolis provides services of movie sites rental and movie production. The sites and related infrastructure for rent are presented in the statement of financial position as investment property.

Overall slowdown of movie production and pandemic restrictions lead to decrease in demand for movie site rental. Operating results of Kinopolis dropped below expectations.

As of December 31, 2020 the recoverable amount of Kinopolis's assets was assessed as being lower than its carrying amount, and hence the impairment charge of RUB 807 million was recognized in respect to Kinopolis CGU.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

23. IMPAIRMENT REVIEW (Continued)

MTS Turkmenistan

During the years ended December 31, 2020 and 2019 MTS Turkmenistan sold a number of long-lived assets impaired in prior periods, hence the reversal of the impairment in the amount of gain from disposal of RUB 66 million and RUB 148 million, respectively, was recognized in the accompanying consolidated statements of profit or loss.

Impairment losses and reversal of the impairment charges recognized during the years ended December 31, 2020, 2019 and 2018 are attributable to operating segments, reported as a part of the "Other" category (Note 6).

The total amount of impairment loss and reversal of impairment charges for the year ended December 31, 2020, 2019 and 2018 was allocated to the long-lived assets carrying amounts as follows:

	2020				2019						2018

	Ticketland and Ponominalu		Kinopolis		MTS Turkmenistan			MTS Turkmenistan			Oblachniy Retail		Nvision Czech Republic
Goodwill		1,281		—		—			—			524		—
Property, plant and equipment		—				(66	)		(114	)		13		(505	)
Investment property		—		807		—			—			—		—
Other intangible assets		—		—		—			(34	)		140		(2	)

Total		1,281		807		(66	)		(148	)		677		(507	)

Key assumptions used for value in use calculation:

The table below presents OIBDA margin applied for value in use calculation of related CGUs:

	December 31,

CGU	2020	2019
Russia Convergent	43.2% - 44.3%	42.4% - 43.5%
Armenia	51.8% - 54.0%	46.9% - 50.0%
Moscow Fixed Line	54.0% - 57.2%	52.9% - 56.6%
Nvision Czech Republic	3.5% - 5.2%	3.2% - 3.9%
Ticketland and Ponominalu	8.8% - 32%	15.1% - 38.2%
Cloud	41.3% - 69.0%	n/a
Kinopolis	2.9% - 3.9%	n/a

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

23. IMPAIRMENT REVIEW (Continued)

The table below presents capital expenditure as a percentage of revenue applied for value-in-use calculations of related CGUs:

	December 31,

CGU	2020			2019
Russia Convergent		20.9	%		19.2	%
Armenia		22.2	%		15.6	%
Moscow Fixed Line		12.6	%		19.8	%
Nvision Czech Republic		1.2	%		1.2	%
Ticketland and Ponominalu		0.0	%		nil
Cloud		15.4	%		n/a
Kinopolis		31.2	%		n/a

The terminal growth rate into perpetuity has been determined based on the nominal gross domestic product rates for the country of operation, adjusted for specific characteristic of the CGUs.

The table below presents terminal growth rates applied for value-in-use calculations of related CGUs:

	December 31,

CGU	2020			2019
Russia Convergent		1	%		1	%
Armenia		nil			nil
Moscow fixed line		1	%		1	%
Nvision Czech Republic		2	%		2	%
Ticketland and Ponominalu		1.5	%		3	%
Cloud		1	%		n/a
Kinopolis		1	%		n/a

The table below presents pre-tax rates for the discounting of cash flows in functional currencies of related CGUs:

	December 31,

CGU	2020			2019
Russia Convergent		11.4	%		14.1	%
Armenia		13.3	%		13.5	%
Moscow fixed line		11.0	%		14.1	%
Nvision Czech Republic		6.1	%		6.1	%
Ticketland and Ponominalu		13.6	%		16.7	%
Cloud		13.2	%		n/a
Kinopolis		14.3	%		n/a

24. OTHER INTANGIBLE ASSETS

Other intangible assets primarily consist of billing, telecommunication, accounting and office software as well as numbering capacity, customer base and licenses. These assets are assets with finite useful lives. They are initially recognized at cost and amortized on a straight-line basis over their estimated useful lives.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

24. OTHER INTANGIBLE ASSETS (Continued)

Balances of cost, accumulated amortization, net book value as of December 31, 2020 and 2019 and movements of other intangible assets for the year ended December 31, 2020, 2019 and 2018 were as follows:



*Useful life, years*	*1 to 20*		*1 to 15*		*1 to 25*		*4 to 31*		*2 to 15*		*2 to 5*		*1 to 10*
Cost
January 1, 2018	27,741		7,851		119,976		7,323		2,915		—		2,480		168,286

Additions	7,479		19		20,884		—		10		3,961		401		32,754
Arising on business combinations (Note 5)	—		—		3,021		1,530		1		—		909		5,461
Effect on adoption of IFRS 15	—		—		—		—		—		19,197				19,197
Impairment	—		—		(168	)	—		—		—		(20	)	(188	)
Disposal	(223	)	(1,223	)	(8,215	)	(63	)	(82	)	—		(198	)	(10,004	)
Other	—		1		89		—		—		—		(46	)	44
Foreign exchange differences	4,630		—		2,977		—		24		202		80		7,913

December 31, 2018	39,627		6,648		138,564		8,790		2,868		23,360		3,606		223,463

Additions	1,106		(38	)	27,921		—		(2	)	10,290		366		39,643
Arising on business combinations (Note 5)	—		—		6		(37	)	2		—		61		32
Disposal of VF Ukraine (Note 12)	(19,149	)	—		(15,770	)	—		(136	)	(1,826	)	(692	)	(37,573	)
Impairment	—		(26	)	—		—		—		—		—		(26	)
Disposal	(84	)	(865	)	(11,564	)	(2,823	)	(64	)	(18,281	)	(208	)	(33,889	)
Other	4		(1	)	93		—		—		—		(81	)	15
Foreign exchange differences	201		(29	)	718		—		9		92		44		1,035

December 31, 2019	21,705		5,689		139,968		5,930		2,677		13,635		3,096		192,700

Additions	1,466		(11	)	35,277		—		15		10,390		1,941		49,078
Arising on business combinations (Note 5)	—		—		—		—		—		—		—		—
Disposal of NVISION GROUP (Note 12)	—		—		(311	)	—		—		—		—		(311	)
Reclassification into assets for sale	—		—		(184	)	—		—		—		—		(184	)
Impairment	—		43		(167	)	—		—		—		(2	)	(126	)
Disposal	(108	)	(172	)	(28,035	)	(73	)	(24	)	(9,758	)	(1,033	)	(39,203	)
Other	25		30		(83	)	—		—		—		(1	)	(29	)
Foreign exchange differences	913		—		386		—		—		—		4		1,303

December 31, 2020	24,001		5,579		146,851		5,857		2,668		14,267		4,005		203,228

Accumulated amortisation and impairment
January 1, 2018	(11,481	)	(4,761	)	(63,840	)	(4,641	)	(2,756	)	—		(1,410	)	(88,889	)

Charge for the year	(2,711	)	(796	)	(20,941	)	(680	)	(57	)	(3,876	)	(427	)	(29,488	)
Arising on business combinations (Note 5)	—		—		(1,785	)	—		—		—		—		(1,785	)
Effect on adoption of IFRS 15	—		—		—		—		—		(12,368	)	—		(12,368	)
Effect on assets impairment	—		—		44		—		—		—		6		50
Impairment	—		—		—		—		—		—		—		—
Disposal	193		971		7,994		63		82		—		180		9,483
Other	—		—		(70	)	—		—		—		26		(44	)
Foreign exchange differences	(2,114	)	—		(2,187	)	—		(23	)	(99	)	(37	)	(4,460	)

December 31, 2018	(16,113	)	(4,586	)	(80,785	)	(5,258	)	(2,754	)	(16,343	)	(1,662	)	(127,501	)

Charge for the year	(2,911	)	(372	)	(24,394	)	(603	)	(41	)	(6,887	)	(374	)	(35,582	)
Arising on business combinations (Note 5)	—		—		(2	)	—		—		—		—		(2	)
Disposal of VF Ukraine (Note 12)	5,155		—		12,657		—		129		1,208		301		19,450
Effect on assets impairment	—		—		—		—		—		—		—		—
Disposal	25		831		11,065		2,813		64		18,281		196		33,275
Other	(2	)	—		(22	)	—		—		(2,573	)	17		(2,580	)
Foreign exchange differences	664		29		(615	)	—		(9	)	(80	)	(20	)	(31	)

December 31, 2019	(13,182	)	(4,098	)	(82,096	)	(3,048	)	(2,611	)	(6,394	)	(1,542	)	(112,971	)

Charge for the year	(1,266	)	(367	)	(25,146	)	(431	)	(27	)	(9,964	)	(345	)	(37,546	)
Arising on business combinations (Note 5)	—		—		—		—		—		—		—		—
Disposal of NVISION GROUP (Note 12)	—		—		77		—		—		—		—		77
Reclassification into assets for sale	—		—		5		—		—		—		—		5
Effect on assets impairment	—		—		—		—		—		—		2		2
Disposal	71		160		27,953		72		24		9,758		402		38,440
Other	(10	)	(31	)	76		—		—		—		—		35
Foreign exchange differences	(894	)	—		(275	)	—		—		—		2		(1,167	)

December 31, 2020	(15,281	)	(4,336	)	(79,406	)	(3,407	)	(2,614	)	(6,600	)	(1,481	)	(113,125	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

24. OTHER INTANGIBLE ASSETS (Continued)



Net book value
December 31, 2019	8,523	1,591	57,872	2,882	66	7,241	1,554	79,729

December 31, 2020	8,720	1,243	67,445	2,450	54	7,667	2,524	90,103

The Group was granted with GSM licenses by the Russian Ministry of Information Technologies and Communications to provide telecommunication services. In addition to the licenses received directly from the Russian Ministry of Information Technologies and Communications, the Group acquired access to telecommunication licenses through business combinations. In foreign subsidiaries, the licenses are granted by the local communication authorities.

Operating licenses contain several conditions specified by legislation which generally include the required date of services provision, territorial coverage and expiration date. Management believes that the Group is in compliance with all material terms of its licenses.

The Group's operating licenses do not provide for automatic renewal. All licenses covering the territories of the Russian Federation expired as of December 31, 2019 were renewed. The cost to renew the licenses was not significant. Weighted-average period until the next renewal of licenses in the Russian Federation is two and half years.

The license for the provision of telecommunication services in Armenia is valid until 2034.

Contractual obligations to purchase intangible assets are disclosed in the Note 35.

25. BORROWINGS

Group's borrowings represent interest bearing bank loans and bonds issued in the capital markets. Borrowings are initially recorded at fair value plus transaction costs that are directly attributable to the issue of the financial liability and subsequently measured at amortized cost, using the effective interest rate method.

The Group's borrowings comprise the following:

	December 31,

	2020			2019
Notes		208,155			183,935
Bank and other loans		221,113			159,384

Total borrowings		429,268			343,319

Less: current portion		(34,125	)		(71,746	)
Total borrowings, non-current		395,143			271,573

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

25. BORROWINGS (Continued)

Notes—The Group's notes consisted of the following:

	Currency

MTS International Notes due 2023	USD	5.00	%	33,091		27,712
MTS PJSC Notes due 2025	RUB	8.00	%	14,987		14,984
MTS PJSC Notes due 2022	RUB	7.70	%	14,980		14,969
MTS PJSC Notes due 2023	RUB	6.85	%	14,971		14,961
MTS PJSC Notes due 2027	RUB	6.60	%	14,971		—
MTS PJSC Notes due 2021	RUB	8.85	%	9,999		9,995
MTS PJSC Notes due 2026	RUB	7.90	%	9,998		9,998
MTS PJSC Notes due 2022	RUB	9.00	%	9,998		9,995
MTS PJSC Notes due 2021	RUB	7.10	%	9,997		9,992
MTS PJSC Notes due 2025	RUB	7.25	%	9,990		9,988
MTS PJSC Notes due 2022	RUB	6.45	%	9,988		9,973
MTS PJSC Notes due 2024	RUB	8.70	%	9,986		9,982
MTS PJSC Notes due 2022	RUB	5.50	%	9,984		—
MTS PJSC Notes due 2023	RUB	6.50	%	9,860		9,351
MTS PJSC Notes due 2024	RUB	8.60	%	7,488		7,485
MTS PJSC Notes due 2027	RUB	6.60	%	6,980		—
MTS PJSC Notes due 2022	RUB	8.40	%	4,994		4,991
MTS PJSC Notes due 2026	RUB	6.60	%	4,990		—
MTS PJSC Notes due 2031	RUB	7.50	%	891		891
Other				12		12
MTS International Notes due 2020	USD	8.625	%	—		18,616
MTS PJSC Notes due 2020	RUB	7.90	%	—		40

Total notes				208,155		183,935

Less: current portion				(20,813	)	(27,937	)
Total notes, non-current				187,342		155,998

The Group has an unconditional obligation to repurchase certain MTS PJSC Notes at par value if claimed by the noteholders subsequent to the announcement of the sequential coupon. The dates of the announcement for each particular note issue are as follows:


MTS PJSC Notes due 2031		March 2021

The Group discloses these notes as maturing in 2021 (MTS PJSC Notes due 2031) in the aggregated maturities schedule as the noteholders have the unilateral right to demand repurchase of the notes at par value upon announcement of new coupons.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

25. BORROWINGS (Continued)

Bank and other loans—The Group's loans from banks and financial institutions consisted of the following:

		Interest rate (actual at December 31, 2020)

*RUB-denominated:*
VTB	2024 - 2026	4.75% - 5.50%	129,091		43,893
Sberbank	2021 - 2024	5.99% - 10.00%	85,001		103,832
Subsidized loans¹	2021 - 2025	1.75% - 2.85%	1,845		—
Related party loans	2022 - 2024	4.25% - 8.70%	1,803		688
Other			3,373		10,971

Total bank and other loans			221,113		159,384

Less: current portion			(13,312	)	(43,809	)

Total bank and other loans, non-current			207,801		115,575

(1) See Note 3 for further information

Compliance with covenants—Bank loans and notes of the Group are subject to certain covenants limiting the Group's ability to create liens on properties, dispose assets, including cellular licenses in core Russian regions, issue guarantees and grant loans to the third parties, delay payments for the borrowings, merge or consolidate MTS PJSC with a third party or be a subject to unsatisfied judgments (excluding the total penalty under the agreements with the DOJ). The Group is required to comply with certain financial ratios.

The noteholders of MTS International Notes due 2023 have the right to require the Group to redeem the notes at 101% of their principal amount and related interest, if the Group experiences a change in control.

If the Group fails to meet these covenants, after certain notice and cure periods, the debtholders are entitled to demand accelerated principal repayment.

The Group was in compliance with all existing notes and bank loans covenants as of December 31, 2020.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

25. BORROWINGS (Continued)

Available credit facilities—As of December 31, 2020, the Group's total available unused credit facilities amounted to RUB 229,855 million and related to the following credit lines:

	Currency		Interest rate	Available till

Sberbank	RUB	2025	To be agreed	August 2025	130,000
Sberbank	RUB	2024	To be agreed	May 2024	65,000
Sberbank	RUB	2024	To be agreed	August 2024	20,000
VTB	RUB	2028	To be agreed	August 2028	5,000
Rosselhozbank	RUB/USD/EUR	2021	To be agreed	November 2021	5,000
VEB	RUB	2025	0.1 CBR key rate¹ +2.42%	November 2023	4,348
Cisco	RUB	2023	To be agreed	January 2021	283
ZTV	RUB	2022	CBR key rate1	July 2022	224

Total					229,855

(1) CBR—Central Bank of Russia

In addition, the Group has a credit facility made available by Citibank at an interest rate of MosPrime + 1.50%, with the available amount set up on request and to be repaid within 182 days.

The following table presents the aggregated scheduled maturities of principal and interests on notes and bank loans (gross of debt issuance costs) outstanding for the five years ending December 31, 2025 and thereafter:

	December 31, 2020

	Notes			Bank loans and other debt
Payments due in the year ending December 31,
2021		35,262			25,244
2022		62,453			52,944
2023		66,263			39,457
2024		22,845			36,005
2025		28,525			91,692
Thereafter		39,845			15,072

Contractual undiscounted cash flows		255,193			260,414



Less: unamortized debt issuance costs		(244	)		—
Less: interest		(46,794	)		(38,374	)
Less: debt modification		—			(909	)
Less: subsidized interest rate effect		—			(18	)

Total debt		208,155			221,113

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

26. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS

The Group's lease contracts largely relate to leases of cellular sites (i.e. land, space in cell towers or rooftop surface areas), network infrastructure, and retail stores as well as buildings used for administrative or technical purposes.

The Group recognizes a right-of-use asset and a corresponding lease liability with respect to all lease agreements (including sub-lease and lease of intangible assets), which conveys the right to control the use of identified assets for a period of time in exchange for consideration, except for short-term leases (with a lease term of 12 months or less). For these leases, the Group recognizes the lease payments as operating expenses over the term of the lease. When identifying the lease, the Group uses practical expedient of IFRS 16 permitting the lessee not to separate the non-lease components of the contract and, instead, to account for any lease and associated non-lease components as a single arrangements.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate of the Group. The incremental borrowing rate of the Group is determined based on the credit spreads of the Group debt instruments in relation to the zero-coupon yield curve for government securities. The lease payments include fixed payments, variable payments that depend on index or rate, amounts expected to be paid under residual value guarantee, the exercise price under a purchase option the Group is reasonably certain to exercise as well as early termination fees unless the Group is reasonably certain not to terminate earlier. Variable payments that depend on external factors (such as sale volume of a particular retail store) are expensed as incurred.

Lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. A corresponding adjustment is made to the carrying amount of the right-of-use assets, or is recorded in profit or loss if the carrying amount of right-of-use asset had been reduced to zero.

Right-of-use assets are initially measured at cost, which is the initial amount of lease liability adjusted for any lease payments made at or before the commencement date, plus any direct costs incurred and an estimate of costs to dismantle, remove or restore the underlying asset less any lease incentives received.

Right-of-use assets are subsequently amortized on a straight-line basis over the expected lease term. The lease term corresponds to the non-cancellable period of each contract except in cases where the Group is reasonably certain of exercising renewal or termination options. When assessing the lease term, the Group considers all facts and circumstances that create an economic incentive for the Group to exercise the option to extend the lease, such as useful life of the asset located on the leased site, sites replacement statistics, sequence of technology change, profitability of our retail stores as well as costs to terminate or enter into lease contracts.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

26. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS (Continued)

The table below summarises the estimated terms, over which the right-of-use assets are amortized:


Sites for placement of network equipment and base stations inside the buildings		10 years
Sites for placement of network equipment and base stations on land		20 years
Retail stores		Up to 8 years
Administrative offices, warehouses, parking garages		not less than 3 years
Vehicles		4 - 5 years

The following table presents a summary of net book value of right-of-use assets:

	December 31,

	2020		2019
Sites for placement of network and base station equipment		93,948		93,694
Land and buildings		36,468		45,020
Vehicles and other		87		103

Right-of-use assets, net		130,503		138,817

Depreciation of the right-of-use assets for the years ended December 31, 2020, 2019 and 2018 included in depreciation and amortization expense in the accompanying consolidated statement of profit or loss was as follows, whereas RUB 3, RUB 1,644 and RUB 1,388 million, respectively were recognized as part of loss from discontinued operation in the accompanying consolidated statements of profit or loss:



Sites for network and base station equipment	6,903	6,900	7,784
Land and buildings	11,903	11,968	10,955
Vehicles and other	43	404	135
Exclusive rights for trademarks	—	693	694

Depreciation charge, total	18,849	19,965	19,568

Additions to the assets leased during the years ended December 31, 2020, 2019 and 2018 amounted to RUB 13,102, RUB 20,436 and RUB 22,572 million.

Interest expense accrued on lease obligations for the years ended December 31, 2020, 2019 and 2018 in the amount of RUB 12,277, RUB 13,416 and RUB 12,852 million, respectively, were included in finance costs, whereas RUB 1, RUB 1,246 and RUB 1,066 million, respectively were recognized as part of loss from discontinued operation in the accompanying consolidated statements of profit or loss.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

26. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS (Continued)

For the years ended December 31, 2020, 2019 and 2018, expenses recognized in respect of variable lease payments not included on the measurement of lease liabilities and short-term leases amounted to:



Variable lease payments	9,542	8,522	1,934
Short-term leases	195	203	173

Total	9,737	8,725	2,107

The following table presents future minimum lease payments under lease arrangements together with the present value of the net minimum lease payments as at December 31, 2020 and 2019:

	December 31,

	2020			2019
Minimum lease payments, including:
Current portion (less than 1 year)		27,094			27,650
More than 1 to 5 years		98,737			100,005
Over 5 years		93,520			106,411

Total minimum lease payments		219,351			234,066



Less amount representing interest		(68,537	)		(78,758	)
Present value of net minimum lease payments, including:
Current portion (less than 1 year)		16,177			15,228
More than 1 to 5 years		66,784			63,016
Over 5 years		67,853			77,064

Total present value of net minimum lease payments		150,814			155,308



Less current portion of lease obligations		(16,177	)		(15,228	)

Non-current portion of lease obligations		134,637			140,080

Total cash outflows for leases for the years ended December 31, 2020, 2019 and 2018 totaled to RUB 36,963, RUB 38,545 and RUB 29,368 million, of which RUB 12,173, RUB 14,666 and RUB 13,684 million was included in interest paid.

A minor part of the Group's lease contracts for retail stores include variable payments that depend on sales volume of the respective store.

The Group's lease contracts include typical restrictions and covenants common for local business practice, such as the responsibility of the Group for regular maintenance and repair of the lease assets and their insurance, redesign and conduction of permanent improvements only with the consent of the lessor, and use of the leased asset in accordance with current legislation.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

27. RECONCILIATION OF LIABILITIES ARISING FROM FINANCIAL ACTIVITIES



Notes (Note 25)	183,935	18,590		—		—		7,674		—	—		—	(2,044	)	208,155
Bank and other loans (Note 25)	159,384	60,055		—		26		—		—	—		—	1,648		221,113
Lease obligation (Note 26)	155,308	(15,054	)	(12,173	)	(145	)	1,405		150				21,323		150,814
Payables related to repurchase of common stock (Note 33)	—	(16,028	)	—		—		—		—	—		—	16,028		—
Dividends payable (Note 33)	23,080	(74,923	)	—		—		—		—	—		52,012	(60	)	109
Payables related to transactions under common control	22	—		—		—		—		—	—		—	(22	)	—
Liability under put option agreement	73	—		—		—		—		—	(53	)	—	42		62
Hedge asset (net)	955	—		(449	)	—		(3,582	)	—	—		—	(515	)	(3,591	)

Total liabilities arising from financial activities	522,757	(27,360	)	(12,622	)	(119	)	5,497		150	(53	)	52,012	36,400		576,662

(1): Including accrual of liabilities related to repurchase of common stock, additions under lease agreements, dividends related to non-controlling interest, depreciation of debt issuance cost, modification gain and other changes.



Notes (Note 25)	117,355		72,200		—		—		(5,668	)	—	—	—	48		183,935
Bank and other loans (Note 25)	250,780		(93,640	)	—		18		(1,057	)	—	—	—	3,283		159,384
Lease obligation (Note 26)	160,552		(15,154	)	(14,666	)	(8,895	)	(1,150	)	493	—	—	34,128		155,308
Payables related to repurchase of common stock (Note 33)	—		(15,922	)	—		—		—		—	—	—	15,922		—
Dividends payable (Note 33)	146		(52,505	)	—		—		—		—	—	74,302	1,137		23,080
Payable related to purchase of noncontrolling interests	—		—		—		—		—		—	—	—	—		—
Payables related to transactions under common control	120		(15,312	)	—		—		—		—	—	—	15,214		22
Liability under put option agreement (Note 34)	3,735		—		—		—		—		—	1,805	—	(5,467	)	73
Receivables related to sale of own shares	—
Hedge asset (net)	(2,796	)	(115	)	(726	)	—		3,299		296	—	—	997		955

Total liabilities arising from financial activities	529,892		(120,448	)	(15,392	)	(8,877	)	(4,576	)	789	1,805	74,302	65,262		522,757

(1): Including accrual of liabilities related to repurchase of common stock, additions under lease agreements, dividends related to non-controlling interest, depreciation of debt issuance cost, modification gain, offsetting the liability under put option with the loan issued to the minority shareholders of MTS Armenia and other changes.

28. PROVISIONS

Provisions—Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of past event, and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the managements' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. The main provisions the Group holds are in relation to employees' bonuses and other rewards (including retirement benefits and cash-settled share based payments), decommissioning and restoration obligation, tax provisions as well as legal claims.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

28. PROVISIONS (Continued)

Provision for decommissioning and restoration—The Group calculates a provision for decommissioning and restoration when the Group has a legal or constructive obligation in connection with the retirement of tangible long-lived assets. The Group's obligations relate primarily to the cost of removing its equipment from sites. The Group records the present value of provision for decommissioning and restoration as non-current provisions in the consolidated statement of financial position.

Employee bonuses and share-based settlement programs—For employee bonuses and cash-settled share-based payment transactions, the fair value of the obligation is newly determined at each reporting date and at the settlement date, and the changes in the fair value are recognized in profit or loss, until the liability is settled.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

28. PROVISIONS (Continued)

The following table summarizes the movement in provisions for the years ended December 31, 2020, 2019 and 2018:



January 1, 2018	(310	)	(1,049	)	(10,157	)	—		(645	)	(12,161	)



Arising during the year	(374	)	(1,912	)	(14,259	)	(55,752	)	(941	)	(73,238	)
Utilised	336		18		13,873		—		393		14,620
Discount rate adjustment and imputed interest (change in estimates)	—		(223	)	177		—		—		(46	)
Unused amounts reversed	211		89		1,079		—		872		2,251
Arising due to acquisitions of subsidiaries	(113	)	—		(984	)	—		(1,165	)	(2,262	)
Other	(2	)	(32	)	(107	)	(3,298	)	(27	)	(3,466	)

December 31, 2018	(252	)	(3,109	)	(10,378	)	(59,050	)	(1,513	)	(74,302	)



Current portion	(252	)	—		(10,096	)	(59,050	)	(1,513	)	(70,911	)
Non-current portion	—		(3,109	)	(282	)	—		—		(3,391	)

January 1, 2019	(252	)	(3,109	)	(10,378	)	(59,050	)	(1,513	)	(74,302	)



Arising during the year	(410	)	(2,341	)	(16,896	)	—		(208	)	(19,855	)
Utilised	19		19		16,055		55,607		527		72,227
Discount rate adjustment and imputed interest (change in estimates)	—		42		(12	)	—		—		30
Unused amounts reversed	34		—		523		—		155		712
Arising due to acquisitions of subsidiaries	—		—		(9	)	—		—		(9	)
Disposal of VF Ukraine (Note 12)	50		760		672		—		126		1,608
Other	(4	)	(159	)	2		3,443		20		3,302

December 31, 2019	(563	)	(4,788	)	(10,043	)	—		(893	)	(16,287	)



Current portion	(563	)	(126	)	(9,944	)	—		(893	)	(11,526	)
Non-current portion	—		(4,662	)	(99	)	—		—		(4,761	)
January 1, 2020	(563	)	(4,788	)	(10,043	)	—		(893	)	(16,287	)



Arising during the year	(211	)	(914	)	(14,770	)	—		(3,860	)	(19,755	)
Utilised	29		54		16,489		—		137		16,709
Discount rate adjustment and imputed interest (change in estimates)	1		(138	)	67		—		—		(70	)
Unused amounts reversed	8		513		(125	)	—		114		510
Arising due to acquisitions of subsidiaries	—		—		—		—		—		—
Disposal of Nvision Group (Note 12)	115		—		245		—		9		369
Other	—		—		(62	)	—		(2	)	(64	)

December 31, 2020	(621	)	(5,273	)	(8,199	)	—		(4,495	)	(18,588	)



Current portion	(621	)	(229	)	(8,115	)	—		(4,495	)	(13,460	)
Non-current portion	—		(5,044	)	(84	)	—		—		(5,128	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets include, in particular, cash and cash equivalents, trade and other receivables, bank loans to customers, investments (mainly deposits with original maturity of more than three months, originated loans other than bank loans to customers as well as debt securities) and derivative financial assets. Financial liabilities generally substantiate claims for repayment in cash or another financial asset. In particular, this includes bonds, trade and other payables, bank loans, lease obligations and derivative financial liabilities. Financial instruments are recognized as soon as the Group becomes a party to the contractual provision of the instrument.

Financial assets and financial liabilities are recognized initially at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability, except for a financial asset or liability accounted for at fair value through profit or loss, in which case transaction costs are expensed. Subsequently they are measured either at amortized cost or fair value depending on the classification of those assets and liabilities.

Financial assets can be classified as 1) financial assets at amortized cost; 2) financial assets at fair value through other comprehensive income; 3) financial assets at fair value through profit or loss. If the financial assets are held for collecting contractual cash flows in the form of principal and interest on the specified dates, it is classified as carried at amortized cost. If the financial assets are held not only for collecting contractual cash flows in the form of principal and interest on the specified dates, but also for potential sale, they are classified as measured at fair value through other comprehensive income. All other financial assets are classified as measured at fair value through profit or loss.

Financial liabilities can be classified as measured at fair value or at amortized costs. The Group measures its derivative instruments, contingent consideration recognized in business combination as well as liability under put option agreement at fair value. All other financial liabilities of the Group are measured at amortized cost.

Derivative instruments activities—The Group uses derivative instruments, including interest rate and foreign currency swaps, to manage foreign currency and interest rate risk exposures. The Group measures derivatives at fair value and recognizes them as either other current or other non-current financial assets or liabilities in the consolidated statement of financial position. Cash flows from derivatives are classified according to their nature. The Group reviews related fair value hierarchy classifications on a quarterly basis. The fair value measurement of the Group's derivative instruments is based on the observable yield curves for similar instruments.

Gains and losses from changes in the fair value of derivative instruments are recorded immediately in profit or loss.

Assets and liabilities related to multiple derivative contracts with one counterparty are not offset by the Group.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Liability under put option agreement—To optimize the structure of business acquisitions and to defer payment of the purchase price, the Group enters into put and call option agreements to acquire the remaining non-controlling stakes in newly acquired subsidiaries. Upon initial recognition, the commitment to purchase non-controlling interests is recognized as a financial liability for the present value of the redemption amount, which approximates its fair value. Subsequent changes in the value of the commitment are recognized in profit or loss for the reporting period.

Netting—The Group offsets its financial assets and financial liabilities only if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Fair value of financial instruments—Fair value of financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

•: Level 1—Quoted prices in active markets for identical assets or liabilities;
•: Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities;
•: Level 3—No observable pricing inputs in the market.

Financial assets and financial liabilities are classified in the three-tier hierarchy based on the lowest level of input that is significant to the fair value measurements. The Group's assessment of the significance of a particular input to the fair value measurements requires judgment which may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

1. Financial assets of the Group

	December 31,

	2020			2019
Cash and cash equivalents (Note 15)		85,405			38,070
Trade and other receivables (Note 19)		35,031			39,151
Accounts receivable, related parties (Note 32)		14,189			16,659
Other financial assets:
Financial assets at amortized cost:
Deposits and loans issued		118,594			94,757
Notes		9,583			15,957
Other		2,196			3,520

*Total financial assets at amortized cost*		130,373			114,234

Financial assets at fair value through profit or loss:
Securities held by MTS Bank		21,824			13,273
Mutual funds		10,699			9,349
Assets in Sistema Capital trust management		10,313			8,195
Cross-currency swaps not designated as hedges		4,508			318
Contingent consideration (Note 12)		2,631			2,013
Embedded derivatives in a lease agreement		562			—
Assets under option agreements		228			—
Currency forwards, swaps and options not designated as hedges		2			52

*Total financial assets at fair value through profit or loss*		50,767			33,200

Total other financial assets		181,140			147,434

Total financial assets		315,765			241,314
Less current portion		(227,338	)		(159,084	)

Total financial assets, non-current		88,427			82,230

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

2. Financial liabilities of the Group

	December 31,

	2020			2019
Trade and other payables		56,017			71,808
Accounts payable, related parties (Note 32)		3,146			558
Other financial liabilities:
Financial liabilities at amortized cost:
Bank and other loans (Note 25)		221,113			159,384
Notes (Note 25)		208,155			183,935
Bank deposits and liabilities (Note 31)		167,677			137,952
Lease obligations (Note 26)		150,814			155,308

*Total financial liabilities at amortized cost*		747,759			636,579

Financial liabilities at fair value through profit or loss:
Contingent consideration and other liabilities		1,068			917
Liabilities under option agreements		55			73
Cross-currency swaps not designated as hedges		—			955
Currency forwards and swaps not designated as hedges		—			366
Interest rate swaps not designated as hedges		—			68

*Total financial liabilities at fair value through profit or loss*		1,123			2,379

Total other financial liabilities		748,882			638,958

Total financial liabilities		808,045			711,324
Less current portion		(276,368	)		(296,911	)

Total financial liabilities, non-current		531,677			414,413

The fair value measurement of the Group's derivative instruments and investments in Sistema Capital trust management is based on the observable yield curves for similar instruments and represents the estimated amount the Group would receive or pay to terminate these agreements at the reporting date, taking into account current interest rates, foreign exchange spot and forward rates. The investment in mutual investment funds is measured at fair value of the Group's share in net assets of funds.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The table below presents the fair value of financial instruments carried at fair value within the statement of financial position:

		December 31,

	Level of inputs	December 31,
	Level of inputs	2020			2019
Assets
Securities held by MTS Bank	Level 1		21,824			13,273
Derivative instruments	Level 2		4,510			370
Cross-currency swaps			4,508			318
Currency forwards, swaps and options			2			52
Mutual investment funds, managed by Sistema Capital (Note 16)	Level 2		10,699			9,349
Assets in Sistema Capital trust management (Note 16)	Level 2		10,313			8,195
Embedded derivatives in a lease agreement	Level 2		562			—
Contingent consideration	Level 3		2,631			2,013
Assets under option agreements	Level 3		228			—
Liabilities
Derivative instruments	Level 2		—			(1,389	)
Cross-currency interest rate swaps			—			(955	)
Currency forwards and swaps			—			(366	)
Interest rate swaps			—			(68	)
Contingent consideration	Level 3		(944	)		(907	)
Liabilities under option agreements	Level 3		(55	)		(73	)

Net realized gains and losses of Level 3 assets and liabilities resulting from fair value measurements were included in the consolidated statements of profit or loss in the following amounts:

	For the years ended December 31,

	2020			2019			2018
Net realized gains/(losses) of Level 3 assets		846			2,013			—
Net realized gains/(losses) of Level 3 liabilities		(39	)		(1,813	)		(719	)

		807			200			(719	)

No unrealized gains or losses of Level 3 liabilities resulting from fair value measurements were recognized during the years ended December 31, 2020, 2019 and 2018.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Financial instruments at amortised cost

The carrying value of the Group's financial instruments accounted for at amortized cost approximates their fair value due to their short-term nature and market interest rates, except for borrowings, gross of debt issuance cost, as disclosed in the table below:

		December 31, 2020						December 31, 2019

	Level of inputs	Fair value			Carrying value			Fair value			Carrying value
Notes	Level 1		(200,198	)		(191,142	)		(180,824	)		(174,165	)
Unquoted notes	Level 3		(17,012	)		(17,012	)		(10,012	)		(10,012	)
Bank and other loans (Note 25)	Level 3		(221,113	)		(221,113	)		(159,384	)		(159,384	)

			(438,323	)		(429,267	)		(350,220	)		(343,561	)

The carrying value of the Group's bank and other loans approximates their fair value as of December 31, 2020 and 2019.

While management has used available market information in estimating the fair value of its financial instruments, the market information may not be fully reflective of the value that could be realized in the current circumstances.

There were no transfers between levels of inputs within the hierarchy during the years ended December 31, 2020, 2019 and 2018.

There were no transfers between the accounting categories of financial instruments during the years ended December 31, 2020 and 2018.

During the year ended December 31, 2019 several of the Group's swap agreements in the amount of RUB 678 million were transferred from accounting category "financial assets at fair value through other comprehensive income" to category "financial assets at fair value through profit or loss" as a result of termination of hedging relationships due to the early redemption of hedged loans.

30. FINANCIAL RISK MANAGEMENT

As part of its business the Group is exposed to several types of financial risks: capital risk (mainly by MTS Bank), market risks, credit (or counterparty) risks, and liquidity risks. Risks mitigating activities are mainly performed at the Group headquarters by the corporate finance personnel and are subject to the approval of the Group's supervisory bodies—the Board of Directors and its Budget Committee.

Capital risk

MTS Bank, a subsidiary of the Group, is subject to regulations of the Central Bank of Russia which require that banks comply with minimum capital adequacy ratios calculated on the basis of statutory standalone financial statements as follows:

•: 8.00% for own capital;

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(Amounts in millions of Russian Rubles unless otherwise stated)

30. FINANCIAL RISK MANAGEMENT (Continued)

•: 4.50% for base capital;
•: 6.00% for main capital.

MTS Bank meets the requirements established by the CBR. As of December 31, 2020 and 2019, the capital adequacy ratio of MTS Bank in accordance with CBR requirements were:

•: 12.82% and 13.7% for own capital;
•: 9.95% and 9.89% for base capital;
•: 8.22% and 7.78% for main capital, respectively.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market prices. The Group is primarily exposed to the following types of market risks: interest rate risk and currency exchange rates fluctuations. Financial instruments affected by market risk include loans and borrowings, deposits, accounts payable and accounts receivables denominated in foreign currencies and derivative financial instruments. The sensitivity analyses in the following sections relate to the financial position as of December 31, 2020 and 2019.

Interest rate risks

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Fixed interest rate risk

A part of the Group's notes denominated US Dollars bear fixed interest rates. To eliminate the exposure of changes in the value of debt obligations, the Group enters into fixed-to-variable cross-currency and interest rate swap agreements. In aggregate, the Group entered into fixed-to-variable cross-currency and interest rate swap agreements designated to manage the exposure of changes in value of the debt related to 7.4% and 5.8% of the Group's notes and bank loans with fixed rates outstanding as of December 31, 2020 and 2019.

The notional amounts of interest rate derivative instruments outstanding amounted to RUB 22,163 million and RUB 25,387 million as of December 31, 2020 and 2019, respectively.

Sensitivity analysis

A reasonably possible increase of 100 basis points in short term interest rates would have resulted in RUB 1,166 million, RUB 271 million and RUB 201 million future increases of interest expense for the years ended December 31, 2020, 2019 and 2018, respectively. The same decrease in short term interest rates would have resulted in RUB 1,166 million, RUB 271 million and RUB 201 million future decreases of interest expenses for the years ended December 31, 2020, 2019 and 2018, respectively. There will be no material impact on equity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

30. FINANCIAL RISK MANAGEMENT (Continued)

The interest rate sensitivity analysis was performed based on a constant level of fixed and floating rate debt.

Foreign currency risks

Foreign currency risk is the risk that the fair value of financial instruments will fluctuate because of changes in foreign exchange rates. The Group's exposure to these changes in foreign exchange rates relates primarily to the Group's financing activities. The Group manages its currency risk by operation derivatives and by using money market instruments.

The Group has entered into several cross-currency swap agreements. These contracts are mainly designated to manage the exposure of changes in currency exchange rate. The contracts assumed periodic exchange of principal and interest payments from RUB-denominated amounts to USD-denominated amounts at a specified exchange rate. The exchange rate was determined by the market spot rate upon issuance. Cross-currency interest rate swap contracts mature in 2023-2024.

In aggregate the Group entered into cross-currency interest rate swap agreements designated to manage the exposure of changes in currency exchange rate for 66.7% and 40.0% of its USD-denominated notes and bank loans outstanding as of December 31, 2020 and 2019 respectively.

The notional amounts of currency derivative instruments amounted to RUB 22,163 million and RUB 18,572 million as of December 31, 2020 and 2019 respectively.

The Group has entered into currency forward and swaps agreements to minimize the foreign currency risk. The contracts assumed the purchase or sale of the agreed amount of currency at a specified exchange rate and on a specific date. The rate was determined by the market spot rate upon issuance. As the result of currency forward and swap agreements, unfulfilled as of December 31, 2020, 2019 and 2018, the Group recognized RUB 1,136 million loss, RUB 701 million gain and RUB 1,937 million gain the consolidated statement of profit and loss for the years ended December 31, 2020, 2019 and 2018, respectively.

The notional amounts of currency forward and swap instruments, unfulfilled as of December 31, 2020 and 2019, amounted to RUB 7,911 million and RUB 69,535 million, respectively.

In 2018-2019, several swap agreements were ceased to be hedge instruments due to the earlier redemption of hedged loans from Calyon, ING Bank N.V, Nordea Bank AB, Raiffeisen Zentralbank Osterreich AG, Citibank and subsequently several swap agreements were early terminated. Loans and swaps were due in 2019 - 2024. The amount of RUB 12 million and RUB 505 million, net of tax, was immediately reclassified from accumulated other comprehensive income to profit for the year during the years ended December 31, 2019 and 2018, respectively, and recognized as a part of other non-operating (income)/expenses in consolidated statement of profit or loss.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

30. FINANCIAL RISK MANAGEMENT (Continued)

The following tables demonstrate the sensitivity of profit before tax to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant.



2020	+10	%	786		+10	%	(682	)
	–10	%	(1,291	)	–10	%	682
2019	+5	%	2,516		+1	%	120
	–5	%	(2,516	)	–1	%	(120	)
2018	+1	%	(176	)	+1	%	152
	–1	%	176		–1	%	(152	)

The movement in the pre-tax effect is a result of a change in monetary assets and liabilities denominated in US dollars and Euro, where the functional currency of the entity is a currency other than US dollars and Euro.

There will be no material impact on equity.

The Group's exposure to foreign currency changes for all other currencies is not material.

MTS Bank credit limits committee determines stop-loss limits related to security portfolio and to foreign exchange transactions, as well as limits for net foreign exchange position. The limits for net foreign exchange position conform fully to CBR requirements. Monitoring of adherence to the limits restricting the amount of MTS Bank's market risk is performed day-to-day.

Liquidity risk

Liquidity risk is the risk of a shortage of funds. The Group's policy is to borrow centrally using a mixture of long-term and short-term borrowing facilities. These borrowings, together with cash generated from operations are utilized to meet anticipated funding requirements. The Group assessed the concentration of risk with respect to refinancing its debt and determined it to be of low level.

The Group manages liquidity risk on long-term borrowings by maintaining a varied maturity profile and a required net debt position, therefore minimizing the refinancing risk. Long-term borrowings mature between one and 6 years.

Securities held by MTS Bank which are accounted for at fair value through profit and loss and investments at amortized cost are included in liquidity analysis on the basis of remaining maturity. Most of these securities are included in the CBR Lombard list and if required may be used to obtain Repurchase Agreement (REPO) financing from the CBR. MTS Bank's demand for medium-term liquidity is fully satisfied by the availability of interbank loans and customer deposits (obtaining new and prolongating existing deposits), secured loans and conclusion of REPO agreements. Analysis of the liquidity and interest rate risks of MTS Bank is presented in Note 31.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

30. FINANCIAL RISK MANAGEMENT (Continued)

As at December 31, 2020, the Group's consolidated current liabilities exceeded current assets by RUB 66,315 million. The management believes the Group has sufficient existing and continuing access to liquidity through both operating cash flows and the availability of committed credit facilities of RUB 229,855 million (Note 25).

Credit risk

Credit risk is the risk that the counterparty will not meet its obligations arising from entering into financial instrument, leading to a financial loss.

In accordance with IFRS 9 the Group records an allowance for expected credit losses (ECL) for all financial assets not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due under the contract and all cash flows that the Group expects to receive. The shortfall is discounted at an approximation to the asset's original effective interest rate.

The expected credit-loss approach uses three stages for allocating impairment losses:

Stage 1: expected credit losses within the next twelve months

Stage 1 includes all contracts with no significant increase in credit risk since initial recognition and usually contains new contracts that are fewer than 31 days past due date. The portion of the lifetime expected credit losses resulting from default events possible within the next 12 months is recognized.

Stage 2: expected lifetime credit losses—not credit impaired

If a financial asset has a significant increase in credit risk since initial recognition but is not yet credit impaired, it is moved to stage 2 and measured at lifetime expected credit loss. This is defined as the expected credit loss that results from all possible default events over the expected life of the financial instrument.

In all cases, the Group considers that there has been a significant increase in credit risk when the contractual payment is more than 30 days past due.

Stage 3: expected lifetime credit losses—credit impaired

If a financial asset is defined as credit impaired or in default, it is transferred to stage 3 and measured at lifetime expected credit loss. Objective evidence for a credit-impaired financial asset includes 91 days past due date as well as other information indicating significant financial difficulties of the borrower. The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realizing security (if any is held).

The determination of whether a financial asset has experienced a significant increase in credit risk is based on an assessment of the probability of default, which is made at least quarterly, incorporating external credit rating information as well as internal information on the credit quality of the financial asset. For debt instruments that are not receivables from financial services, a significant increase in credit risk is assessed mainly based on past-due information.

For contract assets, trade and other receivables, a simplified approach is applied whereby ECL are initially measured over the lifetime of the instrument.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

30. FINANCIAL RISK MANAGEMENT (Continued)

The Group considers its exposure to credit risk as of December 31, 2020, and 2019 to be as follows:

	December 31,

	2020		2019
Deposits and loans issued		118,594		94,757
Cash and cash equivalents		85,405		38,070
Trade and other receivables		35,031		39,151
Securities held by MTS Bank		21,824		13,273
Mutual funds		10,699		9,349
Assets in Sistema Capital trust management		10,313		8,195
Notes		9,583		15,957
Derivative financial instruments		5,072		370
Contingent consideration		2,631		2,013
Assets under option agreements		228		—
Other		2,196		3,520

Information on the Group's exposure to credit risk on guarantees issued and commitments on loans of MTS Bank is presented in Note 31.

In accordance with the provisions of the internal Group regulations on allocate of free funds, the aggregate credit risk exposure the Group may have to one counterparty is limited. The Group maintains a mixture of cash and cash equivalents, investments, derivatives and certain other financial instruments within various financial institutions. Those are approved as required by internal procedure related to selection of financial institutions to allocate funds. Credit rating assigned by international rating agencies is a main criteria to consider in the process of financial institutions selection.

MTS Bank performs daily monitoring of future expected cash flows on the operations of both clients and banks, which is a part of the management process of assets and liabilities. The credit risk exposure is monitored on a regular basis to ensure that the credit limits and credit worthiness guidelines established by the MTS Bank's risk management policy are not breached.

Concentrations of credit risk with respect to trade receivables are limited given that the Group's customer base is large and unrelated. Therefore, management believes there is no further credit risk provision required in excess of the normal provision for bad and doubtful receivables.

31. BANK FINANCIAL ASSETS AND LIABILITIES

As of December 31, 2020, COVID-19 constitutes a new factor that the Group has to take into account while assessing and managing credit risk. The updated assumptions used for the assessment of credit risk of different bank customers segments are presented below.

Loans to individuals, small and medium businesses:

•: The Group introduced the concept of a technically overdue bucket that significantly improved differentiation of stage 2 loans by the respective probability of default;

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(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

•: The Group included an additional macroeconomic adjustment in assessment of loss probability by different generations of loans that are less than 12 months of age, thereby improving the related behavioural assessment of each generation;
•: Additionally the Group has recalibrated its macroeconomic model and updated the macroeconomic forecasts based on the most recent information available as of reporting date;
•: Out of schedule stress testing of credit risk has been performed in light of the deterioration of the macroeconomic environment.

Loans to corporate customers:

•

The Group has updated macroeconomic scenarios for PD (Probability of Default) model using the updated macroeconomic forecasts by CBRF (Central Bank of Russian Federation) and Oxford Economics; Out of schedule stress testing of credit risk has been performed in light of macroeconomic environment deterioration;

•

Decrease of risk appetite caused by:

•: Enhancement of authorization procedures for new loans and tranches for existing lines of credit;
•: Review of new loan applications in light of stressful scenario of economic development according to budget and business plan;
•: Tendency to replace revolving and non-revolving lines of credit with products that have more preferable risk profile, like overdrafts and factoring;
•: Launch of enhanced monitoring of existing borrowers.

The weighted average provision rates increased from 7.77% as of December 31, 2019 to 12.46% as of December 31, 2020 for individuals, and decreased from 13.74% to 13.21% for corporate borrowers, taking into account the updated macroeconomic forecasts.

Magnitude of COVID-19 influence on the bank's operations largely depends on time duration of the pandemic and the extent of the virus influence on global and local economy.

Stress-testing

Management considers the sensitivity of the ECL outcome against the economic forecasts as part of the ECL management process by recalculating the ECL under two scenarios described below for corporate borrowers, bonds held to maturity and individuals:

•: Base forecast of CBRF dated July 24, 2020: crude oil price = USD 38 per barrel, GDP = –5.5% (bottom of the range);
•: Negative scenario of CBRF: crude oil price = USD 19 per barrel, GDP = –11.15%.

According to the Group estimations probability of occurrence is 80% for scenario 1 and 20% for scenario 2.

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(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Stress testing results show that capital adequacy ratios are within acceptable range*.

ECL increase for Scenario 1 and 2 is equal to RUB 2.9 and 4.6 billion respectively:

•: Scenario 1: corporate borrowers and bonds held to maturity—RUB 2.5 billion, individuals—RUB 0.4 billion
•: Scenario 2: corporate borrowers and bonds held to maturity—RUB 3.4 billion, individuals—RUB 1.2 billion

As of the date of these financial statements, Management believes that the results of stress-testing performed in 2^nd quarter of 2020 show the conservative approach and an update is not required due to improvements of macroeconomic parameters used in the mentioned stress-testing since 2^nd quarter of 2020 up to date.

Interest rate shock scenario is used for assets and liabilities sensitive to changes in interest rate that is a one-time increase by 400 b.p. for all time ranges. Calculations showed moderate decline of net interest income that may negatively affect bank's equity only in combination with exceptional amount of losses (more than 25% of equity) caused by occurrence of other types of risks.

Stress testing of bank's sensitivity to interest rate risk factors in trading book is carried out for several scenarios among which the key scenario is parallel shift of yield curves by 500 b.p. leading to negative revaluation of bond portfolio that is significantly lower than 5% of bank's own funds.

Stress testing of bank's liquidity position is carried out according to three model scenarios provided for by internal policies: "short-term financial crisis", "long-term systematic crisis" and "reputational crisis of the bank of companies". Stress test model has composite nature and includes reduction of inflows from assets due to realization of credit risk, as well as significant outflows of outside funds (100%, 50% in rare cases, of conditionally stable level for current liabilities). Ultimate goal of the stress testing is assessment of bank's liquidity buffer adequacy including the assessment of the survival period of the bank compared to the minimum limits set by the Risk appetite declaration of PJSC MTS Bank. Results of the stress testing displayed that "survival period" is reached for all three base scenarios.

Considering that in current circumstances, caused by COVID-19, majority of governments globally have chosen ways of monetary and fiscal stimulation, as well as increased cash accessibility, mentioned hypothetical stress test scenarios that take into account sharp increase of interest rate and liquidity deficit on the market, adequately include possible pandemic influence on the Group.

*: According to conservative expert assumption that increase in ECL will lead to comparable increase in allowance booked as a result of Russian accounting standards ("RAS") application, because capital adequacy ratios are based on RAS numbers.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Bank deposits and loans to customers

The table below represents the structure and amounts of current and non-current bank deposits and loans to customers as of December 31, 2020 and 2019.

	December 31,

	2020			2019
Loans to customers		130,164			99,990
Due from banks		2,950			2,883
Allowance for ECL		(16,446	)		(10,031	)

Total bank deposits and loans to customers, net		116,668			92,842

Less: current portion		(52,676	)		(39,370	)

Bank deposits and loans to customers, non-current		63,992			53,472

The structure and amounts of bank loans to customers as of December 31, 2020 and 2019 is presented in the table below:

	December 31,

	2020			2019
Loans to legal entities
Corporate borrowers		26,602			24,192
Medium-sized enterprises and small businesses		1,736			1,959

Total loans to legal entities		28,338			26,151

Loans to individuals
Mortgage loans		14,384			11,164
Consumer loans		65,142			46,484
Credit cards		21,874			15,618
Other		426			573

Total loans to individuals		101,826			73,839

Due from banks
Time deposits with banks		1,770			1,581
Obligatory reserves with the Central Bank of Russia		1,180			1,302

Total due from banks		2,950			2,883

Total bank deposits and loans to customers		133,114			102,873

Less: allowance for expected credit losses		(16,446	)		(10,031	)
Total bank deposits and loans to customers, net		116,668			92,842

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

The table below summarizes carrying value of loans to customers aggregated by types of collateral obtained by the Group:

	December 31,

	2020			2019
Guaranties		17,200			11,448
Pledge of real estate		18,733			14,077
Securities		370			1,017
Pledge of equipment		100			495
Rights of claim, pledge of inventories or own promissory notes and by other collateral		156			44
Unsecured loans		93,605			72,909
Allowance for expected credit losses		(16,436	)		(10,024	)

Total loans to customers, net		113,728			89,966

The balances above do not necessarily reflect the fair value of collateral received.

Movements in the allowance for impairment losses attributable to bank deposits and loans to customers for the year ended December 31, 2020 and 2019 are presented in the table below:



Balance as at January 1, 2020	10,024		7	10,031
Provision charge/release	8,271		3	8,274
Recovery of bad debt written-off	565		—	565
Bad debt written-off	(2,145	)	—	(2,145	)
Sale of loans	(279	)	—	(279	)

Balance as at December 31, 2020	16,436		10	16,446



Balance as at January 1, 2019	7,689		40		7,729
Provision charge/release	3,551		(18	)	3,533
Recovery of bad debt written-off	827		1		828
Bad debt written-off	(2,006	)	(16	)	(2,022	)
Sale of loans	(40	)	—		(40	)
Foreign currency revaluation effect	3		—		3

Balance as at December 31, 2019	10,024		7		10,031

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Movements in provision for expected credit losses on loans to legal entities for the year ended December 31, 2020 and 2019 were as follows:



Balance as at January 1, 2020	681		77		3,199		3,957
— Transfer to stage 1	1		(1	)	—		—
— Transfer to stage 2	(66	)	66		—		—
— Transfer to stage 3	(30	)	(47	)	77		—
New financial assets originated or purchased	418		—		—		418
Change due to change of credit risk	(105	)	46		38		(21	)
Sale of loans	—		—		(279	)	(279	)
Write-offs	—		—		(515	)	(515	)
Recovery of previously written-off assets	—		—		184		184
Foreign exchange difference	—		—		—		—

Balance as at December 31, 2020	899		141		2,704		3,744



Balance as at January 1, 2019	318		486		3,408		4,212
— Transfer to stage 1	19		(18	)	(1	)	—
— Transfer to stage 2	(46	)	47		(1	)	—
— Transfer to stage 3	(55	)	(496	)	551		—
New financial assets originated or purchased	524		2		132		658
Change due to change of credit risk	(42	)	56		(419	)	(405	)
Sale of loans	(40	)	—		—		(40	)
Write-offs	—		—		(863	)	(863	)
Recovery of previously written-off assets	—		—		392		392
Foreign exchange difference	3		—		—		3

Balance as at December 31, 2019	681		77		3,199		3,957

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Movements in provision for expected credit losses attributable to loans to individuals for the year ended December 31, 2020 and 2019 were as follows:



Balance as at January 1, 2020	1,808		923		3,336		6,067
— Transfer to stage 1	1,396		(1,172	)	(224	)	—
— Transfer to stage 2	(415	)	594		(179	)	—
— Transfer to stage 3	(2	)	(3,848	)	3,850		—
New financial assets originated or purchased	1,226		—		—		1,226
Change due to change of credit risk	(914	)	4,949		2,613		6,648
Write-offs	—		—		(1,631	)	(1,631	)
Recovery of previously written-off assets	—		—		382		382

Balance as at December 31, 2020	3,099		1,446		8,147		12,692



Balance as at January 1, 2019	756		318		2,403		3,477
— Transfer to stage 1	599		(465	)	(134	)	—
— Transfer to stage 2	(188	)	236		(48	)	—
— Transfer to stage 3	(2	)	(1,228	)	1,230		—
New financial assets originated or purchased	1,351		—		—		1,351
Change due to change of credit risk	(708	)	2,062		593		1,947
Write-offs	—		—		(1,143	)	(1,143	)
Recovery of previously written-off assets	—		—		435		435

Balance as at December 31, 2019	1,808		923		3,336		6,067

The following valuation categories represent the Group's classification of credit quality of the loans:

•: Low to fair risk—loans of high credit quality and low probability of default, not past due or immaterially overdue;
•: Monitoring—loans with increased probability of default including restructured loans;
•: Impaired—impaired loans including more than 90 days overdue.

The table below summarizes information regarding the quality of loans to individuals:

As of December 31, 2020

Low to fair risk	88,058		—		—		88,058
Monitoring	—		3,816		306		4,122
Impaired	—		—		9,646		9,646
Loss allowance	(3,099	)	(1,446	)	(8,147	)	(12,692	)

Total	84 959		2,370		1 805		89,134

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

As of December 31, 2019

Low to fair risk	66,506		138		—		66,644
Monitoring	—		2,801		49		2,850
Impaired	—		—		4,345		4,345
Loss allowance	(1,808	)	(923	)	(3,336	)	(6,067	)

Total	64,698		2,016		1,058		67,772

The table below summarizes information regarding the quality of loans to legal entities:

As of December 31, 2020

Low to fair risk	12,136		2,947		—		15,083
Monitoring	6,106		3,649		—		9,755
Doubtful	—		—		877		877
Impaired	—		—		2,623		2,623
Loss allowance	(899	)	(141	)	(2,704	)	(3,744	)

Total	17,343		6,455		796		24,594

As of December 31, 2019

Low to fair risk	11,711		1,728		—		13,439
Monitoring	7,396		1,489		—		8,885
Impaired	—		—		3,826		3,826
Loss allowance	(681	)	(77	)	(3,199	)	(3,957	)

Total	18,426		3,140		627		22,193

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Analysis by credit quality of loans to individuals outstanding as of December 31, 2020 is as follows:

As of December 31, 2020

Collectively assessed
Not past due	88,056	(3,101	)	84,955	4	%
Overdue:
up to 30 days	2,370	(507	)	1,863	21	%
31 to 60 days	841	(506	)	335	60	%
61 to 90 days	605	(432	)	173	71	%
91 to 180 days	1,739	(1,373	)	366	79	%
over 180 days	7,523	(6,431	)	1,092	85	%

Total collectively assessed loans	101,134	(12,350	)	88,784	12	%

Individually impaired
Not past due	256	(90	)	166	35	%
Overdue:
up to 30 days	46	(12	)	34	0	%
31 to 60 days	7	—		7	0	%
61 to 90 days	—	—		—	—
91 to 180 days	6	—		6	0	%
over 180 days	377	(240	)	137	64	%
Total individually impaired loans	692	(342	)	350	49	%

Total	101,826	(12,692	)	89,134	12	%

Analysis by credit quality of loans to medium-sized enterprises and small businesses outstanding as of December 31, 2020 is as follows:

As of December 31, 2020

Collectively assessed
Not past due	1,025	(16	)	1,009	2	%
Overdue:
up to 30 days	29	(6	)	23	21	%
31 to 60 days	8	(3	)	5	37	%
61 to 90 days	8	(5	)	3	64	%
91 to 180 days	22	(12	)	10	54	%
over 180 days	644	(407	)	237	63	%

Total collectively assessed loans	1,736	(449	)	1,287	26	%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Analysis by credit quality of loans to individuals outstanding as of December 31, 2019 is as follows:

As of December 31, 2019

Collectively assessed
Not past due	66,506	(1,664	)	64,842	3	%
Overdue:
up to 30 days	1,841	(472	)	1,369	26	%
31 to 60 days	519	(293	)	226	56	%
61 to 90 days	441	(282	)	159	64	%
91 to 180 days	1,110	(816	)	294	74	%
over 180 days	2,615	(2,043	)	572	78	%

Total collectively assessed loans	73,032	(5,570	)	67,462	8	%

Individually impaired
Not past due	495	(380	)	115	77	%
Overdue:
up to 30 days	48	(15	)	33	31	%
31 to 60 days	—	—		—	0	%
61 to 90 days	1	—		1	0	%
91 to 180 days	4	—		4	0	%
over 180 days	259	(102	)	157	39	%
Total individually impaired loans	807	(497	)	310	62	%

Total	73,839	(6,067	)	67,772	8	%

Analysis by credit quality of loans to medium-sized enterprises and small businesses outstanding as of December 31, 2019 is as follows:

As of December 31, 2019

Collectively assessed
Not past due	1,213	(19	)	1,194	2	%
Overdue:
up to 30 days	29	(9	)	20	31	%
31 to 60 days	30	—		30	0	%
61 to 90 days	—	—		—	0	%
91 to 180 days	14	(3	)	11	21	%
over 180 days	672	(399	)	273	59	%

Total collectively assessed loans	1,958	(430	)	1,528	22	%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Bank deposits and liabilities

The table below represents the structure and amounts of current and non-current bank deposits and liabilities as of December 31, 2020 and 2019.

	December 31,

	2020			2019
Customer accounts		139,438			122,809
Due to banks and other financial institutions		24,644			12,305
Debt securities issued		1,840			1,421
Financial liabilities at fair value through profit or loss		2			297
Other financial liabilities		1,753			1,120

Total bank deposits and liabilities		167,677			137,952

Less: current portion		(165,794	)		(136,147	)

Total bank deposits and liabilities, non-current		1,883			1,805

The structure and amounts of customer accounts of December 31, 2020 and 2019 are presented below:

	December 31,

	2020		2019
Legal entities
— Current/settlement accounts		13,163		10,005
— Term deposits		19,466		12,092
Individuals
— Current/settlement accounts		18,219		14,915
— Term deposits		88,590		85,797

Total customer accounts		139,438		122,809

The structure and amounts of due to banks as of December 31, 2020 and 2019 are presented below:

	December 31,

	2020		2019
Loans under repurchase agreements		20,540		11,994
Loans and term deposits from banks and other financial institutions		2,732		50
Correspondent accounts of other banks		1,372		261

Total due to banks		24,644		12,305

Loans under repurchase agreements were secured by the following collateral:

•: Securities measured at fair value through profit/loss with the value of RUB 9,678 million as of December 31, 2020;

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(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

•: Securities measured at amortized cost with the value of RUB 1,557 million and RUB 8,719 million as of December 31, 2020 and 2019 respectively;
•: Federal Loan Bonds (OFZ) received from Deposit Insurance Agency (DIA) as a subordinated securities loan in the amount of RUB 6,374 million and RUB 3,518 million as of December 31, 2020 and 2019 respectively.

In November 2015, MTS Bank received a subordinated debt of RUB 7,246 million in the form of OFZ from the state corporation DIA with the date of maturity January 22, 2025. In accordance with the terms of the contract, MTS Bank should return the securities to the creditor at the end of the contract period. The Group does not recognize the securities and the obligation to return them to the creditor in the consolidated statement of financial position as of December 31, 2020 and 2019. In accordance with the contract, MTS Bank should comply with certain covenants with respect to capital, loan portfolio, employee benefits. If the above conditions are not met, DIA may apply penalties to MTS Bank. The contract also includes certain restrictions on sale or repledge of the securities by MTS Bank.

An analysis of liquidity and interest rate risk inherent to bank assets as of December 31, 2020 and 2019 is presented in the following table. The maturity corresponds to the contractual terms. However, individuals are entitled to terminate their deposit agreement ahead of schedule.

As of December 31, 2020

Financial assets
Financial assets at fair value through profit or loss	21,823	—	—	—	—	1	21,824
Due from banks	16,915	—	—	—	—	—	16,915
Loans to customers*	6,455	15,949	38,916	57,422	8,971	2,150	129,863
Investments in securities	15	166	643	8,760	—	—	9,584

Total interest bearing financial assets	45,208	16,115	39,559	66,182	8,971	2,151	178,186

Cash and cash equivalents	22,274	—	—	—	—	—	22,274
Due from banks	1,180	—	—	—	—	—	1,180
Currency forwards and options not designated as hedges	1	1	—	—	—	—	2
Other financial assets*	962	125	35	—	—	47	1,169

Total non-interest bearing financial assets	24,417	126	35	—	—	47	24,625

Total financial assets	69,625	16,241	39,594	66,182	8,971	2,198	202,811

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)



Financial liabilities
Due to banks and other financial institutions	(22,962	)	—		(127	)	—		—		(23,089	)
Customer accounts*	(21,827	)	(15,109	)	(69,684	)	(1,423	)	—		(108,043	)
Debt securities issued	(1,204	)	—		(341	)	(295	)	—		(1,840	)
Lease obligations*	(11	)	(47	)	(196	)	(332	)	—		(586	)

Total interest bearing financial liabilities	(46,004	)	(15,156	)	(70,348	)	(2,050	)	—		(133,558	)

Currency forwards and options not designated as hedges	(1	)	(1	)	—		—		—		(2	)
Obligation to deliver securities	—		—		—		—		—
Due to banks and other financial institutions	(1,372	)	—		—		—		—		(1,372	)
Customer accounts*	(41,698	)	—		—		—		—		(41,698	)
Other financial liabilities*	(2,231	)	(492	)	(1,472	)	—		—		(4,195	)
Total non-interest bearing financial liabilities	(45,302	)	(493	)	(1,472	)	—		—		(47,267	)

Total financial liabilities	(91,306	)	(15,649	)	(71,820	)	(2,050	)	—		(180,825	)

Liquidity gap	(21,681	)	592		(32,226	)	64,132		8,971

Stable sources of funding	42,378		1,823		30,814		(15,970	)	(59,045	)

Net liquidity gap	20,697		2,415		(1,412	)	48,162		(50,074	)

Cumulative liquidity gap	20,697		23,112		21,700		69,862		19,788



* Including intercompany balances	8,776		(7,808	)	(4,361	)	(1,971	)	—		(5,364	)

As of December 31, 2019

Financial assets
Financial assets at fair value through profit or loss	13,273	—	—	—	—	—	13,273
Due from banks	1,831	—	—	—	—	—	1,831
Loans to customers	4,366	12,334	33,371	49,138	6,187	1,783	107,179
Investments in securities	5	10	6,059	8,937	442	—	15,453

Total interest bearing financial assets	19,475	12,344	39,430	58,075	6,629	1,783	137,736

Cash and cash equivalents	26,244	—	—	—	—	—	26,244
Due from banks	466	128	697	9	—	—	1,300
Currency forwards and options not designated as hedges	—	26	—	—	—	—	26
Other financial assets*	683	57	57	—	—	21	818

Total non-interest bearing financial assets	27,393	211	754	9	—	21	28,388

Total financial assets	46,868	12,555	40,184	58,084	6,629	1,804	166,124

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(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)



Financial liabilities
Due to banks and other financial institutions	(12,044	)	—		—		—		—		(12,044	)
Customer accounts*	(16,094	)	(12,746	)	(69,178	)	(928	)	—		(98,946	)
Debt securities issued	(445	)	(701	)	(70	)	(354	)	—		(1,570	)
Lease obligations*	—		(15	)	(234	)	(377	)	—		(626	)

Total interest bearing financial liabilities	(28,583	)	(13,462	)	(69,482	)	(1,659	)	—		(113,186	)

Currency forwards and options not designated as hedges	—		(25	)	—		—		—		(25	)
Obligation to deliver securities	(272	)	—		—		—		—		(272	)
Due to banks and other financial institutions	(261	)	—		—		—		—		(261	)
Customer accounts*	(30,152	)	—		—		—		—		(30,152	)
Other financial liabilities	(1,987	)	(550	)	(1,534	)	—		—		(4,071	)
Debt securities issued	—		(8	)	(64	)	(323	)	(463	)	(858	)
Total non-interest bearing financial liabilities	(32,672	)	(583	)	(1,598	)	(323	)	(463	)	(35,639	)

Total financial liabilities	(61,255	)	(14,045	)	(71,080	)	(1,982	)	(463	)	(148,825	)

Liquidity gap	(14,387	)	(1,490	)	(30,896	)	56,102		6,166

Stable sources of funding	40,625		641		30,855		(14,270	)	(57,852	)

Net liquidity gap	26,238		(849	)	(41	)	41,832		(51,686	)

Cumulative liquidity gap	26,238		25,389		25,348		67,180		15,494



* Including intercompany balances	6,802		593		(13,532	)	(2,960	)	—		(9,097	)

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(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

Analysis of the liquidity and interest rate risks as of December 31, 2020 and 2019 is presented in the following table. The amounts in the table below represent future aggregate undiscounted cash flows.

As of December 31, 2020

Interest bearing financial liabilities
Due to banks	4.4	%	22,962	—	127	—	—	—	23,089
Customer accounts*	5.9	%	22,046	15,352	71,255	1,458	—	—	110,111
Debt securities issued	4.0	%	1,204	—	348	321		—	1,873
Lease obligations*	6.1	%	10	48	204	377	—	—	639

Total interest bearing financial liabilities			46,222	15,400	71,934	2,156	—	—	135,712

Non-interest bearing financial liabilities
Financial liabilities at fair value through profit or loss			—	—	—	—	—	—	—
Due to banks			1,372	—	—	—	—	—	1,372
Customer accounts*			41,968	—	—	—	—	—	41,968
Other financial liabilities*			2,231	492	1,472	—	—	—	4,195

Total non-interest bearing financial liabilities and commitments			45,571	492	1,472	—	—	—	47,535

Total financial liabilities			91,793	15,892	73,406	2,156	—	—	183,247



* Including intercompany balances			10,770	8	39	58	—	—	10,875

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

As of December 31, 2019

Interest bearing financial liabilities
Due to banks	6.5	%	12,064	—	—	—	—	—	12,064
Customer accounts*	5.9	%	16,337	13,273	71,588	957	—	—	102,155
Debt securities issued	9.5	%	458	707	71	354	—	—	1,590
Lease obligations*	6.8	%	26	40	195	444	—	—	705

Total interest bearing financial liabilities			28,885	14,020	71,854	1,755	—	—	116,514

Non-interest bearing financial liabilities
Financial liabilities at fair value through profit or loss			272	—	—	—	—	—	272
Due to banks			261	—	—	—	—	—	261
Customer accounts*			30,152	—	—	—	—	—	30,152
Other financial liabilities			1,987	550	1,534	—	—	—	4,071
Debt securities issued			—	9	64	323	463	—	859

Total non-interest bearing financial liabilities and commitments			32,672	559	1,598	323	463	—	35,615

Total financial liabilities			61,557	14,579	73,452	2,078	463	—	152,129



* Including intercompany balances			6,936	214	—	—	—	—	7,150

The Group has contingent liabilities (future period obligations) represented by bank guarantees in amount of RUB 9.8 million as at December 31, 2020 (RUB 5 million as at December 31, 2019). The Group is not subject to Credit risk on these obligations.

Information on the maximum amount of credit risk on guarantees issued and commitments on loans is presented below:

As of December 31, 2020

Commitments on loans	21,410		1,729		56		23,195
Guarantees issued	21,426		2,084		247		23,757

Less provision	(340	)	(33	)	(213	)	(586	)

Total commitments on loans and guarantees issued	42,496		3,780		90		46,366

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

31. BANK FINANCIAL ASSETS AND LIABILITIES (Continued)

As of December 31, 2019

Commitments on loans	18,890		4,909		13		23,812
Guarantees issued	18,204		1,398		244		19,846

Less provision	(339	)	(17	)	(47	)	(403	)

Total commitments on loans and guarantees issued	36,755		6,290		210		43,255

32. RELATED PARTIES

Related parties include the controlling shareholder of the Group, entities under common ownership with the Group, affiliated companies, associated and joint ventures.

The aggregated impact of transactions with related parties to the Group's statements of financial position as of December 31, 2020 and 2019 and statements of profit or loss for the years then ended was the following:

	December 31,

	2020		2019
Statements of financial position:
Advances given for property, plant and equipment		1,109		3,866
Right-of-use assets		4,957		4,526
Other investments		529		149
Accounts receivable, non-current		5,209		10,787
Bank loans to customers, non-current		2,856		4,150
Accounts receivable, current		8,980		5,872
Bank loans to customers, current		5,162		1,677
Short-term investments		3		246
Advances paid and prepaid expenses		1,526		—
Cash and cash equivalents		321		282
Loans receivable, non-current		11		—
Lease obligations, non-current		4,878		5,160
Bank deposits and liabilities, non-current		124		153
Dividends payable		3		11,747
Accounts payable, current		3,146		558
Loans receivable, current		1,792		688
Lease obligations, current		738		763
Bank deposits and liabilities, current		52,248		41,198

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(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)

Statements of profit or loss

Revenue	5,832	4,932	4,352
Cost of services	2,842	3,237	1,696
Selling, general and administrative expenses	2,694	3,188	2,948
Other operating income / (expense)	2,147	5,190	878
Other expense	278	—	—
Finance income / (loss)	1,289	1,662	1,398
Interest expenses under lease arrangements	442	447	135

Terms and conditions of transactions with related parties—Outstanding balances as of December 31, 2020 and 2019 were unsecured and settlements are made on a cash basis. There have been no guarantees provided or received for any related party receivables or payables. As of December 31, 2020, the Group had no significant amounts of impairment relating to receivables owed by related parties as well as expenses recognized during the years ended December 31, 2020 and 2019 in respect to bad or doubtful debts from related parties.

The Group has neither the intent nor the ability to offset the outstanding accounts payable and accounts receivable with related parties under the terms of existing agreements.

Balances of related parties' transactions as of December 31, 2020 and 2019 were as follows:

	December 31,

	2020		2019
Advances for property, plant and equipment:
Sistema's subsidiaries		1,096		2,501
Sistema's associates		13		1,365

Total advances for property, plant and equipment, related parties		1,109		3,866



Carrying value of right-of-use assets:
Sistema's subsidiaries		4,845		4,386
Sistema's associates		93		108
The Group's associates		11		26
Other related parties		8		6

Total carrying value of right-of-use assets, related parties		4,957		4,526



Other investments:
Sistema's subsidiaries		253		—
The Group's associates		74		—

Total other investments, related parties		327		—



Other investments in shares:
Sistema's subsidiaries		117		149
The Group's associates		85		—

Total investments in shares, related parties		202		149



Accounts receivable, non-current:

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(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)

	December 31,

	2020		2019
Sistema's subsidiaries		5,209		8,153
Sistema, parent company		—		2,634

Total accounts receivable, non-current, related parties		5,209		10,787



Bank loans to customers, non-current:
Sistema's subsidiaries		1,480		1,277
Sistema's associates		1,376		2,873

Total bank loans to customers, related parties, non-current		2,856		4,150



Accounts receivable, current:
Sistema's subsidiaries		4,571		2,652
Sistema, parent company		2,829		2,634
The Group's associates		1,397		562
Sistema's associates		57		22
Other related parties		126		2

Total accounts receivable from related parties, current		8,980		5,872



Bank loans to customers, current:
Sistema's associates		2,819		105
Sistema, parent company		1,831		1,440
Sistema's subsidiaries		464		81
Key management personnel of the Group and its parent		48		51

Total bank loans to customers, related parties, current		5,162		1,677



Short-term investments:
Sistema's subsidiaries		3		246

Total short-term investments in related parties		3		246



Advances paid and prepaid expenses:
Sistema's subsidiaries		1,518		—
Other related parties		8		—

Total advances paid and prepaid expenses, related parties		1,526		—



Loans receivable, non-current:
Sistema's subsidiaries		11		—

Total loans receivable to related parties, non-current		11		—



Lease obligations, non-current:
Sistema's subsidiaries		4,801		5,069
Sistema's associates		66		81
The Group's associates		4		5
Other related parties		7		5

Total lease obligations, related parties, non-current		4,878		5,160

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)

	December 31,

	2020		2019
Bank deposits and liabilities, non-current:
Key management personnel		124		153

Total bank deposits and liabilities, related parties, non-current		124		153



Dividends payable:
Sistema's subsidiaries		3		3,338
Sistema, parent company		—		8,409

Total dividends payable, related parties		3		11,747



Accounts payable, current:
Sistema's subsidiaries		1,631		290
Sistema's associates		958		154
The Group's associates		553		114
Other related parties		4		—

Total accounts payable to related parties, current		3,146		558



Loans receivable, current:
The Group's associates		1,776		688
Sistema's subsidiaries		16		—

Total loans receivable to related parties, current		1,792		688



Lease obligations, current:
Sistema's subsidiaries		724		743
Sistema's associates		13		17
The Group's associates		1		3

Total lease obligations, related parties, current		738		763



Bank deposits and liabilities, current:
Key management personnel of the Group and its parent		34,708		31,481
Sistema's subsidiaries		10,752		4,030
Sistema, parent company		3,218		242
Sistema's associates		2,689		2,502
The Group's associates		415		2,679
Other related parties		466		264

Total bank deposits and liabilities, related parties, current		52,248		41,198

Operating transactions—During the years ended December 31, 2020, 2019 and 2018 the Group provided the following services to related parties—electricity supply, software supplies, Internet and video/image transmission services, roaming, interconnect and other telecommunication services, banking and call center services.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)

At the same time the Group incurred security expenses, asset management expenses, interest expenses on bank accounts and deposits of the Group's key management personnel, telecommunication expenses, dismantling equipment expenses and income from scrap metal sales, rent, result of sale and leaseback transactions.



Revenues from related parties:
Sistema's subsidiaries	4,371		3,740		2,057
Sistema's associates	615		407		47
The Group's associates	418		550		2,098
Sistema, parent company	143		127		80
Other related parties	285		108		70

Total revenues from related parties	5,832		4,932		4,352



Cost of services:
Key management personnel of the Group and its parent	1,830		1,973		705
Sistema's subsidiaries	599		507		441
Sistema, parent company	141		377		289
Sistema's associates	127		139		32
The Group's associates	126		135		120
Other related parties	19		106		109

Total cost of services incurred on transactions with related parties	2,842		3,237		1,696



Selling, general and administrative expenses:
Key management personnel of the Group and its parent	2,003		2,372		1,370
Sistema's subsidiaries	625		672		316
The Group's associates	30		91		1,218
Sistema's associates	(2	)	25		21
Other related parties	38		28		23

Total selling, general and administrative expenses incurred on transactions with related parties	2,694		3,188		2,948



Other operating income / (expense):
Sistema's subsidiaries	2,160		5,203		865
Sistema's associates	(17	)	(19	)	1
The Group's associates	4		6		7
Sistema, parent company	—		—		5

Total Other operating income / (expense) incurred on transactions with related parties	2,147		5,190		878



Other expense:
The Group's associates	278		—		—

Total other expense from related parties	278		—		—



Finance income / (loss):

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(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)



Sistema's subsidiaries	1,058		821	472
Sistema, parent company	295		367	4
The Group's associates	(64	)	474	922

Total finance income from related parties	1,289		1,662	1,398



Interest expense accrued on those finance lease obligations:
Sistema's subsidiaries	434		438	133
Sistema's associates	7		8	—
The Group's associates	1		1	2

Total Interest expense accrued on those finance lease obligations, related parties	442		447	135

During the years 2020, 2019 and 2018, the Group acquired property, plant and equipment and intangible assets from related party in the amount of:



Purchases of property, plant and equipment, intangible assets and other assets:
Sistema's associates	6,299	410	9
Sistema's subsidiaries	3,324	656	6,610
The Group's associates	127	178	28
Other related parties	112	—	—

Total purchases of property, plant and equipment, intangible assets and other assets, related parties	9,862	1,244	6,647

MTS Bank—On July 5, 2018 the Group acquired the controlling stake in MTS Bank and thus it ceased to be a related party to the Group since the acquisition date.

East-West United Bank—The Group maintains certain bank accounts with East-West United Bank, a subsidiary of Sistema. As of December 31, 2020 and 2019, the Group's cash position at East-West United Bank amounted to RUB 321 million and RUB 282 million, respectively.

Business Nedvizhimost—In 2015, the Group sold its 100% stake in Rent Nedvizhimost to Business Nedvizhimost, subsidiary of Sistema, for RUB 8,500 million in total. As of December 31, 2020 and 2019 the balance of related accounts receivable amounted to RUB 3,070 million and RUB 2,916 million, respectively. The amount as of December 31, 2020 is due before December 31, 2021 and bears an interest of CBR key rate + 1.5% p.a.

In December 2018, the Group sold its 40.26% stake in a mutual investment fund Sistema-Rentnaya Nedvizhimost to Business Nedvizhimost for RUB 450 million. The remaining investment in the joint venture amounted to RUB 636 million as of December 31, 2020 (Note 17).

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(Amounts in millions of Russian Rubles unless otherwise stated)

32. RELATED PARTIES (Continued)

In March 2019, in order to optimize the processes of real estate management, the Group sold a number of buildings with carrying value of RUB 1,479 million to Business Nedvizhimost for the consideration of RUB 7,247 million (including VAT). The consideration is payable by installments for 10 years at 9% per annum with the collateral in the form of disposed buildings granted by the buyer. At the same time, the Group entered into a number of agreements to lease spaces in the buildings sold for the period of up to 15 years (leaseback).

As a result of this transaction, the Group recorded right-of-use assets of RUB 3,123 million, lease obligation of RUB 5,197 million and recognized a gain in the amount of RUB 1,745 million as a part of "Other income" in consolidated statement of profit or loss in 2019.

Sistema—In March 2019, the Group disposed of its 18.69% interest in the Group's associate OZON to Sistema for RUB 7,902 million (Note 17). As of December 31, 2020 and 2019 the balance of accounts receivable amounted to RUB 2,829 million and RUB 5,267 million, respectively.

In October 2020, the Group disposed of 100% in Nvision Group to Sistema and since then it is considered to be a related party instead of subsidiary of the Group (Note 12).

Yahont—In October 2019, the Group entered into agreements with Yahont, an associate of Sistema, for the data storage systems and related services supply. The equipment purchased supports development of the Group network infrastructure, including implementation of the requirements of anti-terror laws (also known as "Yarovaya-Ozerov bundle of laws"), which became effective in Russia on July 1, 2018.

The amounts of equipment purchased during the years ended December 31, 2020 and 2019 were RUB 6,266 million and RUB 340 million, respectively.

Lease payments—During the years ended December 31 2020, 2019 and 2018, the MTS Group made lease payments (capitalized in accordance with IFRS 16) in the amount of RUB 1,530 million, RUB 1,240 million and RUB 499 million, respectively, in favor of the Related Parties.

Remuneration of key management personnel—Key management personnel of the Group are members of the Board of Directors and Management Board. During the years ended December 31 2020, 2019 and 2018 their total remuneration amounted to RUB 1,309 million, RUB 1,574 million and RUB 816 million, respectively, including social contributions of RUB 214 million, RUB 219 million and RUB 75 million, respectively. These amounts comprised of RUB 690 million, RUB 917 million and RUB 504 million in base salaries and 619 RUB million, RUB 657 million and RUB 312 million in bonuses paid pursuant to a bonus plan, respectively (including social contributions).

The management and directors are also entitled to cash-settled and equity-settled share-based payments. Related compensation accrued during the years ended December 31 2020, 2019 and 2018 amounted to RUB 694 million, RUB 798 million and RUB 554 million, respectively, including social contributions amounted to RUB 79 million, RUB 53 million and RUB 72 million, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

33. SHAREHOLDERS' EQUITY

Common stock (ordinary shares)—The Group had 1,998,381,575 authorized and issued ordinary shares with par value 0.1 RUB as of December 31, 2020 and 2019. Preferred shares have not been authorized and issued.

Shares of common stock repurchased by the Group are recorded at cost as treasury stock and reduce the shareholders' equity in the Group's consolidated financial statements. As of December 31, 2020, the total shares in treasury stock comprised 271,479,406 and 1,726,902,169 shares were outstanding. As of December 31, 2019, the total shares in treasury stock comprised 225,547,422 and 1,772,834,153 shares were outstanding.

Information on shares repurchased by the Group is presented as follows:

	December, 31

	2020				2019				2018
	Shares		RUBm		Shares		RUBm		Shares		RUBm
Open market		26,038,847		8,525		32,589,740		8,472		37,399,328		10,332
Sistema Finance		22,758,872		7,485		28,929,344		7,450		45,269,718		12,235

Total		48,797,719		16,010		61,519,084		15,922		82,669,046		22,567

Nature and purpose of reserves

Additional paid in capital is used to recognize equity-settled share-based payment transactions, results of capital transactions under common control; changes in ownership interest in subsidiaries that do not result in gain/loss of control and the excess of cash received over the acquisition cost of treasury shares.

Share-based payment programs—Equity-settled share-based payment transactions are measured at fair value on the grant date. The fair value of the obligation is recognized as personnel costs over the vesting period and offset against capital reserves.

Foreign currency translation reserve is used to record exchange differences arising from the translation of foreign subsidiaries financial statements from their functional to the presentation currency.

Financial instruments revaluation reserve is used to record the accumulated impact of derivatives designated as cash flow hedges and revaluation of investments available for sale.

Remeasurements of the net defined benefit liability is used to recognize actuarial gains and losses related to the pension program set for employees of the Group's subsidiary MGTS.

Non-controlling interests

As of December 31, 2020 and 2019, MGTS and MTS Bank were the only subsidiaries of the Group, which had material non-controlling interests.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

33. SHAREHOLDERS' EQUITY (Continued)

The summarized financial information of MGTS and MTS Bank is presented as follows:

MGTS

Non-controlling interests opening balance	(3,328	)	(3,649	)	(4,180	)

Profit for the year attributable to non-controlling interests	(675	)	(806	)	(619	)
Dividends to non-controlling interests	—		1,123		1,165
Other	(52	)	4		(15	)

Non-controlling interests closing balance	(4,055	)	(3,328	)	(3,649	)

	December 31,

MTS Bank	2020			2019
Non-controlling interests opening balance		(53	)		(8,698	)

Loss/(profit) for the year attributable to non-controlling interests		2			(51	)
Acquisitions under common control		7			—
Acquisition of additional ownership interests under common control		—			8,700
Other		41			(4	)

Non-controlling interests closing balance		(3	)		(53	)

	December 31,

MGTS	2020			2019
Current assets		17,052			16,271
Non-current assets		66,129			52,539
Current liabilities		(18,471	)		(17,224	)
Non-current liabilities		(19,881	)		(19,641	)

	December 31,

MTS Bank	2020			2019
Current assets		126,811			100,230
Non-current assets		59,178			52,668
Current liabilities		(180,509	)		(148,288	)
Non-current liabilities		(2,851	)		(2,303	)

	Year ended December 31,

MGTS	2020			2019			2018
Revenue, gross of intercompany		(41,103	)		(39,479	)		(39,375	)
Profit for the year, gross of intercompany		(11,811	)		(14,148	)		(10,846	)

	Year ended December 31,

MTS Bank	2020			2019			2018
Revenue, gross of intercompany		(35,078	)		(29,869	)		(11,871	)
Profit for the year, gross of intercompany		(1,121	)		(1,318	)		(468	)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

33. SHAREHOLDERS' EQUITY (Continued)

Dividends

As a leading telecommunications group with a home base in developing markets, the primary need of the Group is to maintain sufficient resources and flexibility to meet financial and operational requirements. At the same time, the Group continually seeks ways to create shareholder value through both its commercial and financial strategies, including organic and non-organic development as well as the Group's capital management practices.

The Group continues to include dividend payments as part of its commitment to maximizing shareholder value. Decisions on dividends are proposed by the Board of Directors and voted upon thereafter at a General Meeting of Shareholders. In determining the Company's dividend payout, the Board of Directors considers a variety of factors, including:

•: Macroeconomic factors and levels of competitiveness in core markets,
•: Cash flow from operations,
•: The outlook for earnings growth,
•: Capital expenditure requirements,
•: Potential acquisition opportunities,
•: The state of capital markets and
•: The Group's liquidity position, and overall debt position.

For 2019-2021, MTS management commits to a minimum cumulative payout of RUB 28.0 per share per calendar year through semi-annual payments.

The Group may take decisions on the dividend payout based not only on annual results but also on interim results for three, six or nine months of the fiscal year. Annual and interim dividend payments, if any, must be recommended by the Board of Directors and approved by the shareholders.

The following table summarizes the Group's declared cash dividends for the years ended December 31, 2020, 2019 and 2018:



Dividends declared (including dividends on treasury shares of 6,936, 9,449 and 3,037 respectively)	58,948	83,751	51,958
Dividends, RUB per ADS	59.00	83.82	52.00
Dividends, RUB per share	29.50	41.91	26.00

As of December 31, 2020 and 2019, dividends payable were RUB 108 million and RUB 23,079 million, respectively, and included in the trade and other payables within the consolidated statement of financial position.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

34. LIABILITY UNDER PUT OPTION AGREEMENT

Until August 2019, the Group owned an 80% stake in Aramayo Investments Limited, the 100% indirect owner of MTS Armenia and had a call and put option agreement to acquire the remaining 20% stake. According to the aforementioned option agreement, the price for the remaining 20% stake option was determined by a pre-agreed independent appraiser and the call option could have been exercised by the Group up to December 31, 2018.

In December 2018 the Group served a call notice on the minority shareholders of MTS Armenia to purchase the remaining 20% stake in Aramayo Investments Limited (and indirectly in MTS Armenia). The call option was excercised by offsetting the amount of the liability under put option with the due amount of the loan issued to the minority shareholders of MTS Armenia.

The acquisition of a stake took place in August 2019, bringing the Group's total ownership share to 100%.

The amount of the liability under the option agreement was RUB 3,629 million as of December 31, 2018 (Note 29).

35. COMMITMENTS AND CONTINGENCIES

Capital commitments—As of December 31, 2020, the Group had entered into purchase agreements of approximately RUB 62,616 million to acquire property, plant and equipment, intangible assets and costs related thereto.

Taxation—Management believes that it has adequately provided for tax liabilities in the accompanying condensed consolidated financial statements. However, the risk remains that the relevant tax authorities could take different positions with regard to interpretive issues and the effect could be significant.

The Group estimates the following contingent liabilities in respect of additional tax settlements:

	December 31,

	2020		2019
Contingent liabilities for additional taxes other than income tax		1,043		986
Contingent liabilities for additional income taxes		892		2,173

Licenses—Management believes that as of December 31, 2020 the Group complied with conditions of the licenses used.

Litigation—In the ordinary course of business, the Group is party to various legal, tax and customs proceedings, and subject to claims, some of which relate to developing markets and evolving fiscal and regulatory environments within MTS's markets of operation.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

35. COMMITMENTS AND CONTINGENCIES (Continued)

Antimonopoly proceedings—In August 2018, the Federal Antimonopoly Service of Russia ("FAS Russia") charged MTS and other federal operators with violation of antimonopoly laws in respect to establishing discriminatory terms and conditions for bulk SMS pricing for the banks with state-owned equity interest as compared to the terms and conditions for other banks and later—with establishing unreasonably high bulk SMS prices. In May 2019, FAS Russia considered that MTS had breached the provisions of antimonopoly laws in respect to establishing discriminatory terms and conditions for bulk SMS pricing and charging unreasonably high bulk SMS prices, prescribing MTS to cease its violations. MTS contested the decision and the prescription of FAS Russia in the Moscow Arbitration Court, which upheld the position of FAS Russia in November 2019, following by the Arbitration Court of Appeal in March 2020. MTS filed a cassation appeal to the Arbitration Court of the Moscow District, which also upheld the position of FAS Russia. In December 2020, MTS cassation appeal was rejected by the Judicial Chamber of the Supreme Court. Management of the Group believes that as of December 31, 2020 it has adequately provided for charges imposed by FAS Russia and other related expenses.

Potential adverse effects of economic instability and sanctions in Russia—In 2014 political and economic sanctions targeting certain Russian economic sectors were introduced by the EU, US and other countries. Sanctions were subsequently extended and there is significant uncertainty regarding the extent and timing of further sanctions. Furthermore, the Russian Ruble has significantly depreciated against the U.S. Dollar and Euro and Ruble interest rates have increased significantly after the Central Bank of Russia raised its key rate to 17% in December, 2014. In 2018, due to Russia's ability to remain stable amid severe external shocks, Russia's sovereign credit ratings were increased from "stable" to "positive". The Central Bank of Russia has gradually decreased its key rate to 6.25% as of December 31, 2019 and further to 4.25% as of December 31, 2020.

These factors resulted in a lower cost of capital and a stable rate of inflation. However, in Russia there is an uneven growth dynamics, which could have a negative impact on the Group's business including ability to obtain financing on commercially reasonable terms. The management believes it is acting appropriately to support the sustainability of the Group's business in the current circumstances. The Group has a hedging policy in place, which partly mitigates the variability of cash outflows, denominated in foreign currencies.

In 2020 the government of Russia took actions and issued guidelines to protect public health during COVID-19 pandemic, which have affected Group's business and financial situation (as disclosed in Note 3). It's currently impossible to reliably evaluate further implications of COVID-19 pandemic for the Group's business and financial situation.

Investigations into former operations in Uzbekistan—In March 2019, the Group reached a resolution with the United States Securities and Exchange Commission ("SEC") and the United States Department of Justice ("DOJ") relating to the previously disclosed investigation concerning the Group's former subsidiary in Uzbekistan.

The Group consented to the entry of an administrative cease-and-desist order (the "Order") by the SEC.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in millions of Russian Rubles unless otherwise stated)

35. COMMITMENTS AND CONTINGENCIES (Continued)

The United States District Court for the Southern District of New York approved a deferred prosecution agreement ("DPA") entered by the Group and a plea agreement entered into a subsidiary of the Group in Uzbekistan.

Under the agreements with the DOJ and SEC, the Group agreed to pay a total penalty of USD 850 million (RUB 59.1 billion as of December 31, 2018) to the United States, which was comprised of a criminal fine, criminal forfeiture and civil penalty. The Group provided a provision of USD 850 million (RUB 55.8 billion as of the date of accrual), which was recognized as a part of discontinued operations in the consolidated statements of profit or loss for the year ended December 31, 2018. In March 2019, the Group paid the total penalty of USD 850 million (RUB 55.6 billion as of the payment date).

Under the DPA and the Order, the Group agreed to appoint and in September 2019 appointed an independent compliance monitor. Pursuant to the DPA and the Order, the monitorship will continue for a period of three years starting from the appointment date, and the term of the monitorship may be terminated early or extended depending on certain circumstances, as ultimately determined and approved by the DOJ and SEC.

Class action complaint—In March 2019, a proposed class action complaint on behalf of Shayan Salim and all other persons similarly situated has been filed in the United States District Court for the Eastern District of New York against MTS PJSC and certain of its managers. On 1 March 2021, US District Judge of Eastern District Court of New York granted MTS's motion to dismiss with prejudice and dismissed the complaint in full.

36. SUBSEQUENT EVENTS

Disposal of STS-Ukraine—In February 2021, the Group sold 100% stake in LLC "Sitronics Telecom Solutions Ukraine" ("STS-Ukraine") for RUB 52 million. The results of this transaction will be included in the financial statements of the Group for the year ended December 31, 2021. The Group classified the associated assets and liabilities as "held for sale" as of December 31, 2020 and measured at carrying value. Balances were attributable to "Other" category in reportable segments and comprised of:



Current assents			282
Non-current assets			50

Total assets related to disposal group held for sale			332



Current liabilities			275
Non-current liabilities			16

Total liabilities related to disposal group held for sale			291

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Date: March 29, 2021

MOBILE TELESYSTEMS PUBLIC JOINT STOCK COMPANY

/s/ Vyacheslav K. Nikolaev

Vyacheslav K. Nikolaev

Chief Executive Officer