6-K 1 a14-8370_16k.htm 6-K

 

 

FORM 6-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Issuer
March 18, 2014

 

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

 

Commission file number:  333-12032

 

Mobile TeleSystems OJSC

(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)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F   x   Form 40-F   o

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes   o   No   x

 

 

 



 

GRAPHIC

 

Press release

 

Mobile TeleSystems Announces Financial Results for the Fourth Quarter and Full Year Ended December 31, 2013

 

March 18, 2014

 

Moscow, Russian Federation — Mobile TeleSystems OJSC (“MTS” - NYSE: MBT), the leading telecommunications provider in Russia and the CIS, today announces its unaudited US GAAP financial results for the three months and full year ended December 31, 2013.

 

Key Financial Highlights of Q4 2013 and FY 2013

 

·                  Consolidated Group revenues increased 5% y-o-y to RUB 398 billion

 

·                  Mobile service revenue in Russia rose 7% y-o-y to RUB 273 billion

 

·                  Data traffic revenue in Russia grew 43% y-o-y to RUB 47 billion

 

·                  Consolidated OIBDA1 of RUB 45 billion increased 8% y-o-y to RUB 175 billion with 43.9% OIBDA margin

 

·                  Consolidated net income2 of RUB 20 billion in Q4 2013 and a net income of RUB 80 billion in FY 2013

 

·                  Free cash-flow from continuing operations3 grew 52% to RUB 69 billion for FY 2013

 

Key Corporate and Industry Highlights

 

·                  Launched LTE networks in Pskov Region, Kirov Region, North Ossetia-Alania, Khabarovsk Krai, Udmurtia, Zabaikalsky Krai, Amur Krai, Rostov region, Kaluga region, Novosibirsk region, Tatarstan and St. Petersburg

 

·                  Launched sales of iPhone 5s/5c in the MTS retail network

 

·                  Through its MGTS subsidiary, MTS divests non-core real estate assets through sale of 51% stake in Business  Nedvizhimost CJSC for RUB 3.2 billion

 

·                  Changed the terms of credit agreements with Sberbank for two non-revolving lines of credit in the amount of RUB 80 billion

 

·                  Redeemed remaining amount of Series 01 ruble-denominated bond

 

·                  Repurchased Series 03 ruble-denominated bonds in the amount of approximately RUB 3.9 billion

 

·                  Paid out semi-annual dividends of RUB 5.22 per ordinary MTS share (RUB 10.44 per ADR) amounting to the total of RUB 10.8 billion on the basis of the Company’s H1 2013 financial and operating results

 

·                  Announced new 3D Strategy: Data, Differentiation, Dividends

 


1  See Attachment A for definitions and reconciliation of OIBDA and OIBDA margin to their most directly comparable US GAAP financial measures.

2  Attributable to the Group.

3  See Attachment B for reconciliation of free cash-flow to net cash provided by operating activity. Free Cash Flow from continuing operations excluding one-offs from settlement of proceedings over Bitel LLC in the amount of RUB 4.1 billion

 

2



 

·                  Concluded a credit facility with Citibank Europe PLC and Swedish Export Credit Corporation for up to $300 million4 supported by Sweden’s Exportkreditnamnden (EKN)

 

Outlook for FY2014

 

MTS expects revenue growth for the Group of 3-5% for 2014; key factors may include:

 

·                  Growth in data revenues through higher penetration of smartphones and data-enabled devices

 

·                  Development of retail product platform and sales of tablets and handsets

 

·                  Growth in broadband/pay TV markets in Russia

 

MTS sees above 2% OIBDA growth for 2014; key factors expected to influence MTS’s OIBDA dynamics:

 

·                  Revenue growth in core markets

·                  Adoption rate of data plans for smartphones and tablets

·                  Sales trends of handsets and accessories

·                  Competitive factors

·                  Increasing share of inflation-based expenses

 

CAPEX spending for 2014 is expected to be 21% of revenue. The investments include network enhancement and key projects:

 

·                  On-going roll out of LTE networks throughout Russia

·                  Enhancements to 3G networks

·                  Continued deployment of GPON in Moscow and Moscow region

·                 Network improvements and equipment swaps  in Ukraine

·                  Maintenance CAPEX in Armenia

·                  Build out of 3G networks in Turkmenistan

 

MTS sees significant macroeconomic uncertainty and volatility across its markets of operation, which may cause MTS to revisit its market guidance and, in turn, impact its financial and operating results

 

Commentary

 

Mr. Andrei Dubovskov, President and CEO of MTS, commented, “Overall in 2013, revenue for the Group grew by 5% to over 398 billion rubles. In all of our markets we see rising usage of voice and strong data adoption in virtually all customer segments. In Russia, we continue to realize benefits through data adoption from our focus in retail on sales of low-cost devices as we lead the market in data penetration through smartphones. Both internal data and independent sources confirm MTS’s leadership in network speed, customer service, brand and other important factors that create our leading customer experience. Unfortunately, we also see macroeconomic factors that have hurt our ability to grow; in particular in Ukraine, macroeconomic uncertainty combined with the absence of 3G likely means that this market may lag the Group’s pace of growth. In spite of these developments, we feel confident in our ability to further grow in our core markets, execute our strategy of differentiation and continue to generate value for our shareholders.”

 


4  RUB 10.9 billion at the date of conclusion

 

3



 

Mr. Vasyl Latsanych, MTS Vice President for Marketing, said, “In Q4 2013, in our Russian business, we grew 7% year-over-year.  Driving this growth was our mobile business, which grew over 8% year-over-year which, we believe  may be the fastest organic rate of growth in the market based on the publicly available data. One of the key drivers of growth was greater adoption of data plans as smartphone penetration among our active subscribers reached 34%, and our data attach rate increased to over 42%. In Q4 2013, this contributed to an increase in data traffic of 49% year-over-year. Revenue was also aided by a strong holiday performance in our retail chain, where sales improved by 9% quarter-on-quarter.  We also registered high-value subscriber additions for the period.  Our sales of SIM-cards continue to be both consistent and sustainable; churn fell slightly to 9.0% for the quarter, a 200 bps reduction from 2012, and MOU increased to 345 minutes. For the year, churn fell to 36.3%, which is a level we haven’t seen since 2009 and a marked improvement versus our competitors. Our fixed business recorded 5% growth year-on-year and 9% quarter-on-quarter aided by contributions from MGTS.

 

Mr. Alexey Kornya, MTS Vice President and Chief Financial Officer, said, “For the year OIBDA grew 8% to 175 billion rubles, which translated to a rate of growth roughly 300 bps faster than topline growth. Overall we showed over 100 bps in improvement in our OIBDA margin through a mix of high-margin revenue growth and sustained improvement in our cost efficiencies.  In Q4, OIBDA grew 11% year-over-year to 45 billion rubles for an OIBDA margin of nearly 43.0% or our highest Q4 margin in recent memory. Reflecting these trends, for the year OIBDA of MTS Russia increased 7% to 157.7 billion rubles.”

 

Additional Information

 

The Company has received a voluntary request for documents and information regarding MTS’s business in Uzbekistan from the United States Securities and Exchange Commission (SEC) regarding investigations into the activities of unaffiliated parties.

 

This press release provides a summary of some o-f the key financial and operating indicators for the period ended December 31, 2013. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

 

4



 

Financial Summary

 

RUB mln

 

Q4’13

 

Q4’12

 

y-o-y

 

Q3’13

 

q-o-q

 

2013

 

2012

 

y-o-y

 

Revenues

 

104,750.6

 

98,414.3

 

6.4

%

103,387.8

 

1.3

%

398,442.8

 

378,240.1

 

5.3

%

OIBDA

 

44,988.4

 

40,456.0

 

11.2

%

46,289.8

 

-2.8

%

175,010.5

 

161,703.2

 

8.2

%

- margin

 

42.9

%

41.1

%

+1.8

pp

44.8

%

-1.9

pp

43.9

%

42.8

%

+1.1

pp

Net operating income

 

27,219.4

 

23,412.6

 

16.3

%

27,394.7

 

-0.6

%

101,758.0

 

93,793.3

 

8.5

%

- margin

 

26.0

%

23.8

%

+2.2

pp

26.5

%

-0.5

pp

25.5

%

24.8

%

+0.7

pp

Net income from continuing operations

 

19,750.1

 

15,450.2

 

27.8

%

18,079.9

 

9.2

%

76,105.5

 

62,488.1

 

21.8

%

- margin

 

18.9

%

15.7

%

+3.2

pp

17.5

%

+1.4

pp

19.1

%

16.5

%

+2.6

pp

Net income attributable to the group

 

19,750.1

 

16,997.1

 

16.2

%

18,079.9

 

9.2

%

79,838.6

 

29,641.7

 

169.3

%

- margin

 

18.9

%

17.3

%

+1.6

pp

17.5

%

+1.4

pp

20.0

%

7.8

%

+12.2

pp

 

Russia Highlights

 

RUB mln

 

Q4’13

 

Q4’12

 

y-o-y

 

Q3’13

 

q-o-q

 

2013

 

2012

 

y-o-y

 

Revenues5

 

94,154.4

 

88,186.6

 

6.8

%

91,532.6

 

2.9

%

354,894.3

 

337,948.7

 

5.0

%

- mobile

 

71,555.7

 

66,102.7

 

8.2

%

70,844.2

 

1.0

%

272,502.2

 

254,887.5

 

6.9

%

- fixed

 

16,725.3

 

15,925.6

 

5.0

%

15,384.4

 

8.7

%

63,300.6

 

61,778.8

 

2.5

%

-sales of handsets & accessories

 

7,759.9

 

8,114.8

 

-4.4

%

7,093.9

 

9.4

%

26,317.0

 

28,677.1

 

-8.2

%

OIBDA

 

41,107.3

 

37,075.9

 

10.9

%

41,522.5

 

-1.0

%

157,698.7

 

148,008.0

 

6.5

%

- margin

 

43.7

%

42.0

%

+1.7

pp

45.4

%

-1.7

pp

44.4

%

43.8

%

+0.6

pp

Net income

 

17,117.0

 

14,710.7

 

16.4

%

15,630.1

 

9.5

%

64,115.3

 

60,796.3

 

5.5

%

- margin

 

18.2

%

16.7

%

+1.5

pp

17.1

%

+1.1

pp

18.1

%

18.0

%

+0.1

pp

 

 

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

ARPU (RUB)

 

306.1

 

292.1

 

305.8

 

318.7

 

314.8

 

297.1

 

307.9

 

MOU (min)

 

323

 

310

 

332

 

337

 

345

 

304

 

327

 

Churn rate (%)

 

11.0

%

9.5

%

9.4

%

9.1

%

9.0

%

42.4

%

36.3

%

 

Ukraine Highlights

 

UAH million

 

Q4’13

 

Q4’12

 

y-o-y

 

Q3’13

 

q-o-q

 

2013

 

2012

 

y-o-y

 

Revenues

 

2,440.6

 

2,396.9

 

1.8

%

2,633.5

 

-7.3

%

9,965.2

 

9,676.8

 

3.0

%

OIBDA

 

1,275.8

 

1,200.3

 

6.3

%

1,355.4

 

-5.9

%

5,176.0

 

4,919.1

 

5.2

%

- margin

 

52.3

%

50.1

%

+2.2

pp

51.5

%

+0.8

pp

51.9

%

50.8

%

+1.1

pp

Net income

 

635.9

 

496.4

 

28.1

%

683.9

 

-7.0

%

2,464.3

 

1,983.3

 

24.3

%

- margin

 

26.1

%

20.7

%

+5.4

pp

26.0

%

+0.1

pp

24.7

%

20.5

%

+4.2

pp

 


5 Revenue, net of intercompany between mobile and fixed.

 

5



 

 

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

ARPU (UAH)

 

38.17

 

37.40

 

38.32

 

38.92

 

35.08

 

39.19

 

37.51

 

MOU (min)

 

602

 

600

 

580

 

561

 

557

 

597

 

577

 

Churn rate (%)

 

5.8

%

6.7

%

6.0

%

6.6

%

6.8

%

30.5

%

26.1

%

SAC (UAH)

 

60.4

 

51.9

 

56.2

 

57.1

 

53.3

 

60.5

 

54.8

 

- dealer commission

 

35.8

 

30.6

 

30.2

 

36.7

 

29.7

 

34.7

 

32.1

 

- adv&mktg

 

14.3

 

12.3

 

16.8

 

12.6

 

14.8

 

15.1

 

14.1

 

- handset subsidy

 

2.7

 

1.6

 

1.2

 

0.6

 

0.9

 

2.6

 

1.1

 

- SIM card & voucher

 

7.6

 

7.3

 

8.0

 

7.1

 

7.8

 

8.0

 

7.6

 

 

Armenia Highlights

 

AMD million

 

Q4’13

 

Q4’12

 

y-o-y

 

Q3’13

 

q-o-q

 

2013

 

2012

 

y-o-y

 

Revenues

 

19,777.5

 

20,053.1

 

-1.4

%

22,521.8

 

-12.2

%

79,925.7

 

77,586.2

 

3.0

%

OIBDA

 

5,297.5

 

10,702.5

 

-50.5

%

12,248.4

 

-56.7

%

36,861.7

 

44,446.0

 

-17.1

%

- margin

 

26.8

%

53.4

%

-26.6

pp

54.4

%

-27.6

pp

46.1

%

57.3

%

-11.2

pp

Net income/(loss)

 

(1,442.1

)

2,329.7

 

n/a

 

4,296.7

 

n/a

 

8,400.3

 

8,944.5

 

-6.1

%

- margin

 

n/a

 

11.6

%

n/a

 

19.1

%

n/a

 

10.5

%

11.5

%

-1.0

pp

 

 

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

ARPU (AMD)

 

2,761.8

 

2,433.6

 

2,750.2

 

3 108.2

 

2,690.6

 

2,656.4

 

2,736.5

 

MOU (min)

 

347

 

330

 

365

 

389

 

398

 

328

 

365

 

Churn rate (%)

 

6.7

%

8.2

%

8.6

%

8.0

%

6.5

%

34.7

%

30.7

%

SAC (AMD)

 

6,332.7

 

6,506.2

 

6,287.4

 

6,077.1

 

6,800.7

 

5,909.9

 

6,415.7

 

 

Turkmenistan Highlights

 

TMT mln

 

Q4’13

 

Q4’12

 

y-o-y

 

Q3’13

 

q-o-q

 

2013

 

Revenues

 

71.8

 

27.0

 

165.8

%

70.2

 

2.2

%

252.9

 

OIBDA

 

43.5

 

8.5

 

411.3

%

26.9

 

61.6

%

104.2

 

- margin

 

60.6

%

31.5

%

+29.1

pp

38.3

%

+22.3

pp

41.2

%

Net income/(loss)

 

39.2

 

8.5

 

360.7

%

24.0

 

63.2

%

89.5

 

- margin

 

54.6

%

31.6

%

+23.0

pp

34.1

%

+20.5

pp

35.4

%

 

 

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2013

 

ARPU (TMT)

 

7.9

 

9.7

 

11.1

 

12.0

 

11.9

 

11.4

 

MOU (min)

 

302

 

473

 

527

 

541

 

531

 

564

 

Churn rate (%)

 

n/a

 

n/a

 

17

%

6.7

%

11.1

%

35.5

%

SAC (TMT)

 

6.2

 

9.5

 

13.6

 

18.1

 

22.1

 

14.9

 

 

6



 

CAPEX Highlights

 

RUB mln

 

FY 2010

 

FY 2011

 

FY 2012

 

FY 2013

 

Russia

 

69,277.8

 

66,868.7

 

82,896.2

 

70,909.9

 

- as % of rev

 

24.2

%

21.4

%

24.5

%

20.0

%

Ukraine

 

4,694.0

 

4,486.9

 

4,124.6

 

8,840.2

 

- as % of rev

 

14.5

%

13.4

%

10.9

%

22.2

%

Armenia

 

913.0

 

1,343.7

 

751.0

 

1,092.6

 

- as % of rev

 

14.5

%

22.8

%

12.5

%

17.5

%

Turkmenistan

 

1,353.6

 

n/a

 

11.2

 

732.1

 

- as % of rev

 

21.5

%

n/a

 

3.4

%

25.8

%

Group

 

76,238.4

 

72,798.3

 

87,783.1

 

81,574.8

 

- as % of rev

 

23.1

%

20.9

%

23.2

%

20.5

%

 

* * *

 

For further information, please contact in Moscow:

 

Joshua B. Tulgan

Director, Corporate Finance & Investor Relations

Mobile TeleSystems OJSC

Tel: +7 495 223 2025

E-mail: ir@mts.ru

 

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

 

* * *

 

Mobile TeleSystems OJSC (“MTS”) is the leading telecommunications group in Russia and the CIS, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services in one of the world’s fastest growing regions. Including its subsidiaries, the Group services over 100 million mobile subscribers. The Group has been awarded GSM licenses in Russia, Ukraine, Turkmenistan, Armenia and Belarus, a region that boasts a total population of more than 200 million. Since June 2000, MTS’ Level 3 ADRs have been listed on the New York Stock Exchange (ticker symbol MBT). Additional information about the MTS Group can be found at www.mtsgsm.com.

 

* * *

 

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might,” and the negative of such terms or other similar expressions.  We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Company’s most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks.

 

* * *

 

7



 

Attachments to the Fourth Quarter and Full Year 2013

Earnings Press Release

 

Attachment A

 

Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP. Due to the rounding and translation practices, Russian ruble and functional currency margins, as well as other non-GAAP financial measures, may differ.

 

Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA margin. OIBDA represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of our net revenues. OIBDA may not be similar to OIBDA measures of other companies, is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations and comprehensive income. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of mobile operators and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA can be reconciled to our consolidated statements of operations as follows:

 

Group (RUB mln)

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating income

 

23,412.6

 

21,577.8

 

25,566.1

 

27,394.7

 

27,219.4

 

93,793.3

 

101,758.0

 

Add: D&A

 

17,043.4

 

17,769.6

 

18,818.9

 

18,895.0

 

17,769.0

 

67,910.0

 

73,252.5

 

OIBDA

 

40,456.0

 

39,347.4

 

44,384.9

 

46,289.8

 

44,988.4

 

161,703.2

 

175,010.5

 

 

Russia (RUB mln)

 

Q4’12

 

Q3’12

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating income

 

22,824.8

 

20,865.0

 

22,977.1

 

25,166.6

 

25,864.7

 

91,773.2

 

94,873.4

 

Add: D&A

 

14,251.0

 

14,981.5

 

16,245.3

 

16,355.9

 

15,242.6

 

56,234.8

 

62,825.3

 

OIBDA

 

37,075.9

 

35,846.5

 

39,222.4

 

41,522.5

 

41,107.3

 

148,008.0

 

157,698.7

 

 

Ukraine (RUB mln)

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating income

 

2,387.3

 

2,261.2

 

2,978.3

 

3,396.6

 

3,109.0

 

9,647.1

 

11,745.0

 

Add: D&A

 

2,282.1

 

2,410.5

 

2,235.5

 

2,165.2

 

2,084.7

 

9,571.0

 

8,895.9

 

OIBDA

 

4,669.4

 

4,671.7

 

5,213.8

 

5,561.8

 

5,193.7

 

19,218.1

 

20,641.0

 

 

Armenia (RUB mln)

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating income/loss

 

310.9

 

279.6

 

446.7

 

600.5

 

(27.3

)

1,344.8

 

1,299.4

 

Add: D&A

 

507.7

 

385.4

 

344.6

 

382.4

 

447.5

 

2,094.8

 

1,559.9

 

OIBDA

 

818.6

 

665.0

 

791.3

 

982.8

 

420.2

 

3,439.7

 

2,859.3

 

 

8



 

Turkmenistan (RUB mln)

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating income

 

92.0

 

137.5

 

228.7

 

305.1

 

487.6

 

n/a

 

1,158.9

 

Add: D&A

 

0.2

 

2.2

 

1.1

 

4.3

 

10.5

 

n/a

 

18.1

 

OIBDA

 

92.2

 

139.7

 

229.8

 

309.4

 

498.1

 

n/a

 

1,177.1

 

 

OIBDA margin can be reconciled to our operating margin as follows:

 

Group

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating margin

 

23.8

%

23.2

%

26.2

%

26.5

%

26.0

%

24.8

%

25.5

%

Add: D&A

 

17.3

%

19.1

%

19.3

%

18.3

%

17.0

%

18.0

%

18.4

%

OIBDA margin

 

41.1

%

42.4

%

45.5

%

44.8

%

42.9

%

42.8

%

43.9

%

 

Russia

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating margin

 

25.9

%

25.2

%

26.6

%

27.5

%

27.5

%

27.2

%

26.7

%

Add: D&A

 

16.1

%

18.1

%

18.8

%

17.9

%

16.2

%

16.6

%

17.7

%

OIBDA margin

 

42.0

%

43.3

%

45.4

%

45.4

%

43.7

%

43.8

%

44.4

%

 

Ukraine

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating margin

 

25.6

%

24.9

%

30.0

%

31.4

%

31.3

%

25.6

%

29.6

%

Add: D&A

 

24.5

%

26.6

%

22.5

%

20.0

%

21.0

%

25.4

%

22.4

%

OIBDA margin

 

50.1

%

51.5

%

52.6

%

51.5

%

52.3

%

50.9

%

52.0

%

 

Armenia

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating margin

 

20.3

%

21.1

%

29.5

%

33.2

%

-1.7

%

22.4

%

20.9

%

Add: D&A

 

33.1

%

29.1

%

22.8

%

21.2

%

28.2

%

34.9

%

25.0

%

OIBDA margin

 

53.4

%

50.3

%

52.3

%

54.4

%

26.5

%

57.3

%

45.9

%

 

Turkmenistan

 

Q4’12

 

Q1’13

 

Q2’13

 

Q3’13

 

Q4’13

 

2012

 

2013

 

Operating margin

 

31.3

%

26.7

%

32.9

%

37.8

%

59.5

%

n/a

 

40.8

%

Add: D&A

 

0.1

%

0.4

%

0.2

%

0.5

%

1.3

%

n/a

 

0.6

%

OIBDA margin

 

31.4

%

27.1

%

33.1

%

38.3

%

60.8

%

n/a

 

41.5

%

 

***

 

9



 

Attachment B

 

Net debt represents total debt less cash and cash equivalents and short-term investments. Our net debt calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare our periodic and future liquidity within the wireless telecommunications industry. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

 

Net debt can be reconciled to our consolidated statements of financial position as follows:

 

RUB mln

 

As of Dec 31, 2012

 

As of Dec 31, 2013

 

Current portion of debt and of capital lease obligations

 

27,624.3

 

25,063.7

 

Long-term debt

 

204,432.3

 

194,073.2

 

Capital lease obligations

 

48.5

 

10.0

 

Total debt

 

232,105.1

 

219,146.9

 

Less:

 

 

 

 

 

Cash and cash equivalents

 

22,014.2

 

30,611.7

 

Short-term investments

 

4,034.4

 

14,632.6

 

Net debt

 

206,056.5

 

173,902.6

 

 

Free cash-flow can be reconciled to our consolidated statements of cash flow as follows:

 

RUB mln

 

For the year ended
Dec 31, 2012

 

For the year ended
Dec 31, 2013

 

Net cash provided by operating activities

 

134,855.8

 

159,924.4

 

Less:

 

 

 

 

 

Purchases of property, plant and equipment

 

(79,835.9

)

(67,146.2

)

Purchases of intangible assets

 

(7,947.1

)

(14,428.7

)

Proceeds from sale of property, plant and equipment

 

394.8

 

418.0

 

Proceeds from sale of other investments

 

2,028.9

 

 

Purchases of other investments

 

(2,100.0

)

(702.9

)

Investments in and advances to associates

 

 

(5,088.9

)

Acquisition of subsidiaries, net of cash acquired

 

(1,936.8

)

 

Free cash flow

 

45,459.7

 

72,975.8

 

 

***

 

10



 

Attachment C

 

Definitions

 

Subscriber. We define a “subscriber” as an individual or organization whose account shows chargeable activity within sixty one days in the case of post-paid tariffs, or one hundred and eighty three days in the case of our pre-paid tariffs, or whose account does not have a negative balance for more than this period.

 

Average monthly service revenue per subscriber (ARPU). We calculate our ARPU by dividing our service revenues for a given period, including interconnect, guest roaming fees and connection fees, by the average number of our subscribers during that period and dividing by the number of months in that period.

 

Average monthly minutes of usage per subscriber (MOU). MOU is calculated by dividing the total number of minutes of usage during a given period by the average number of our subscribers during the period and dividing by the number of months in that period.

 

Churn. We define our “churn” as the total number of subscribers who cease to be a subscriber as defined above during the period (whether involuntarily due to non-payment or voluntarily, at such subscriber’s request), expressed as a percentage of the average number of our subscribers during that period.

 

Subscriber acquisition cost (SAC). We define SAC as total sales and marketing expenses and handset subsidies for a given period. Sales and marketing expenses include advertising expenses and commissions to dealers. SAC per gross additional subscriber is calculated by dividing SAC during a given period by the total number of gross subscribers added by us during the period.

 

***

 

11



 

MOBILE TELESYSTEMS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS (UNAUDITED) AND TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

 

(Amounts in millions of RUB except per share amount)

 

 

 

Three months ended

 

Three months ended

 

Twelve months ended

 

Twelve months ended

 

 

 

December 31, 2013

 

December 31, 2012

 

December 31, 2013

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Net operating revenue

 

 

 

 

 

 

 

 

 

Service revenue and connection fees

 

96 947

 

90 247

 

371 950

 

349 338

 

Sales of handsets and accessories

 

7 804

 

8 167

 

26 493

 

28 902

 

 

 

104 751

 

98 414

 

398 443

 

378 240

 

Operating expenses

 

 

 

 

 

 

 

 

 

Cost of services

 

(21 837

)

(21 496

)

(83 777

)

(83 051

)

Cost of handsets and accessories

 

(7 190

)

(6 914

)

(22 636

)

(25 042

)

Sales and marketing expenses

 

(6 093

)

(6 416

)

(22 861

)

(21 667

)

General and administrative expenses

 

(21 333

)

(20 503

)

(85 458

)

(77 977

)

Depreciation and amortization expense

 

(17 769

)

(17 043

)

(73 253

)

(67 910

)

Provision for doubtful accounts

 

(1 506

)

(537

)

(3 106

)

(2 606

)

Impairment of long-lived assets

 

 

(126

)

 

(522

)

Other operating expenses

 

(1 803

)

(1 966

)

(5 594

)

(5 671

)

 

 

 

 

 

 

 

 

 

 

Net operating income

 

27 220

 

23 413

 

101 758

 

93 794

 

 

 

 

 

 

 

 

 

 

 

Currency exchange and transaction (loss)/gain

 

(840

)

951

 

(5 473

)

3 952

 

 

 

 

 

 

 

 

 

 

 

Other (expenses)/income:

 

 

 

 

 

 

 

 

 

Interest income

 

675

 

402

 

2 793

 

2 588

 

Interest expense, net of capitalized interest

 

(2 983

)

(4 449

)

(15 498

)

(17 673

)

Other income/(loss)

 

1 516

 

220

 

13 108

 

181

 

Total other income/ (expenses), net

 

(792

)

(3 827

)

403

 

(14 904

)

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before provision for income taxes

 

25 588

 

20 537

 

96 688

 

82 842

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(5 669

)

(4 858

)

(19 633

)

(19 384

)

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

19 919

 

15 680

 

77 055

 

63 458

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss) from discontinued operations

 

 

1 547

 

3 733

 

(32 846

)

 

 

 

 

 

 

 

 

 

 

Net income

 

19 919

 

17 226

 

80 788

 

30 612

 

 

 

 

 

 

 

 

 

 

 

Less net income attributable to the noncontrolling interests

 

(167

)

(229

)

(949

)

(970

)

 

 

 

 

 

 

 

 

 

 

Net income attributable to the Group

 

19 752

 

16 997

 

79 839

 

29 642

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/(loss), net of taxes

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

435

 

1 796

 

(2 877

)

(2 211

)

Unrealized gains (losses) on derivatives

 

75

 

(209

)

1 445

 

255

 

Unrecognized actuarial gains

 

157

 

(170

)

185

 

(152

)

Total other comprehensive loss, net of taxes

 

667

 

1 417

 

(1 247

)

(2 108

)

Total comprehensive income

 

20 586

 

18 643

 

79 541

 

28 504

 

Less comprehensive income attributable to the noncontrolling interests

 

(183

)

(306

)

(1 056

)

(772

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to the Group

 

20 403

 

18 337

 

78 485

 

27 732

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, in millions - basic and diluted

 

1 989

 

1 989

 

1 989

 

1 989

 

Earnings per share attributable to the Group - basic and diluted:

 

 

 

 

 

 

 

 

 

EPS from continuing operations

 

9.93

 

7.77

 

38.27

 

31.42

 

EPS from discontinued operations

 

0.00

 

0.78

 

1.88

 

16.51

 

Total EPS

 

9.93

 

8.55

 

40.14

 

14.90

 

 

12



 

MOBILE TELESYSTEMS

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2013 AND DECEMBER 31, 2012

 

(Amounts in millions of RUB)

 

 

 

As of December 31,

 

As of December 31,

 

 

 

2013

 

2012

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

30 612

 

22 014

 

Short-term investments

 

14 633

 

4 034

 

Trade receivables, net

 

34 554

 

33 372

 

Accounts receivable, related parties

 

965

 

336

 

Inventory and spare parts

 

8 498

 

8 586

 

VAT receivable

 

6 651

 

5 415

 

Prepaid expenses and other current assets

 

20 763

 

18 605

 

Total current assets

 

116 676

 

92 362

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

270 660

 

271 781

 

 

 

 

 

 

 

INTANGIBLE ASSETS

 

74 329

 

73 448

 

 

 

 

 

 

 

INVESTMENTS IN AND ADVANCES TO ASSOCIATES

 

13 393

 

5 532

 

 

 

 

 

 

 

OTHER INVESTMENTS

 

4 392

 

5 814

 

 

 

 

 

 

 

OTHER NON CURRENT ASSETS

 

6 074

 

6 041

 

 

 

 

 

 

 

Total assets

 

485 524

 

454 978

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Trade accounts payable

 

23 864

 

22 588

 

Accrued expenses and other current liabilities

 

49 619

 

60 855

 

Accounts payable, related parties

 

3 315

 

2 338

 

Current portion of long-term debt, capital lease obligations

 

25 064

 

27 624

 

Total current liabilities

 

101 862

 

113 405

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Long-term debt

 

194 074

 

204 432

 

Capital lease obligations

 

10

 

49

 

Deferred income taxes

 

21 202

 

10 670

 

Deferred revenue and other long-term liabilities

 

9 391

 

10 133

 

Total long-term liabilities

 

224 677

 

225 284

 

 

 

 

 

 

 

Total liabilities

 

326 539

 

338 689

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

2 932

 

2 298

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity attributable to the MTS Group

 

151 931

 

110 723

 

Non-redeemable Noncontrolling interest

 

4 122

 

3 268

 

TOTAL SHAREHOLDERS EQUITY

 

156 053

 

113 991

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

485 524

 

454 978

 

 

13



 

MOBILE TELESYSTEMS

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

 

(Amounts in millions of RUB)

 

 

 

Twelve months ended

 

Twelve months ended

 

 

 

December 31, 2013

 

December 31, 2012

 

Net income

 

80 788

 

30 612

 

Net (income) loss from discontinued operations

 

(3 733

)

32 846

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

73 253

 

6 7 910

 

Currency exchange and translation loss / (gain)

 

5 473

 

(3 952

)

Impairment of goodwill and long-lived assets

 

 

522

 

Debt issuance cost amortization

 

784

 

952

 

Amortization of deferred connection fees

 

(1 921

)

(2 287

)

Equity in net income of associates

 

(2 472

)

(869

)

Inventory obsolescence expense

 

660

 

759

 

Provision for doubtful accounts

 

3 106

 

2 606

 

Deferred tax loss

 

9 671

 

3 290

 

Other non-cash items

 

(192

)

(61

)

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Increase in trade receivables

 

(3 474

)

(8 489

)

Increase in inventory

 

(592

)

(61

)

Increase in prepaid expenses and other current assets

 

(2 966

)

(727

)

(Increase)/decrease) in VAT receivable

 

(1 190

)

673

 

Increase in trade accounts payable, accrued liabilities and other current liabilities

 

898

 

9 606

 

Dividends received

 

1 831

 

1 526

 

Net cash provided by operating activities - continuing operations

 

159 924

 

134 856

 

Net cash used in operating activities - discontinued operations

 

(547

)

(2 733

)

Net cash provided by operating activities

 

159 377

 

132 123

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Acquisition of subsidiaries, net of cash acquired

 

 

(1 937

)

Purchases of property, plant and equipment

 

(67 146

)

(79 836

)

Purchases of intangible assets

 

(14 429

)

(7 947

)

Proceeds from sale of property, plant and equipment

 

418

 

395

 

Purchases of short-term investments

 

(37 623

)

(33 474

)

Proceeds from sale of short-term investments

 

27 785

 

31 548

 

Purchase of other investments

 

(703

)

(2 100

)

Proceeds from sale of other investments

 

 

2 029

 

Investments in and advances to associates, net

 

(5 088

)

 

Net cash used in investing activities - continuing operations

 

(96 786

)

(91 322

)

Net cash provided by/used in investing activities - discontinued operations

 

115

 

(2 045

)

Net cash used in investing activities

 

(96 671

)

(93 367

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Cash payments for the acquisitions of subsidiaries from entities under common control and non-controlling interests

 

 

(261

)

Contingent consideration paid on acquisition of subsidiaries

 

 

(20

)

Proceeds from issuance of notes

 

25 651

 

 

Repayment of notes

 

(6 195

)

(25 561

)

Notes and debt issuance cost paid

 

(193

)

 

Reimbursement of debt issuance cost

 

959

 

 

Capital lease obligation principal paid

 

(202

)

(213

)

Dividends paid

 

(39 706

)

(29 626

)

Cash on sale of MGTS Business Estate (net of cash disposed) to AFK

 

3 068

 

 

Cash deconsolidated on loss of control over Stream

 

 

(227

)

Proceeds from loans

 

353

 

17 955

 

Loan principal paid

 

(38 996

)

(37 394

)

Other financial activities

 

116

 

1

 

Net cash used in financing activities - continuing operations

 

(55 145

)

(75 346

)

Net cash provided by/(used in) financing activities - discontinued operations

 

 

 

Net cash used in financing activities

 

(55 145

)

(75 346

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

1 037

 

(985

)

 

 

 

 

 

 

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS:

 

8 598

 

(37 575

)

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at beginning of the period

 

22 014

 

59 589

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at end of the period

 

30 612

 

22 014

 

Less cash and cash equivalents from discontinued operations, at end of period

 

 

(411

)

CASH AND CASH EQUIVALENTS from continuing operations, at end of period

 

30 612

 

21 603

 

 

14



 

Investor conference call – March 18, 2014 Andrei Dubovskov President, Chief Executive Officer Alexey Kornya Vice President, Chief Financial Officer Vasyl Latsanych Vice President, Chief Marketing Officer GROUP FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2013

 


SAFE HARBOR Some of the information in this presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of MTS, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might,” and the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not undertake or intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. We refer you to the documents MTS files from time to time with the U.S. Securities and Exchange Commission, specifically the Company’s most recent Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of Russian, U.S. and other foreign government programs to restore liquidity and stimulate national and global economies, our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so, strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses, potential fluctuations in quarterly results, our competitive environment, dependence on new service development and tariff structures, rapid technological and market change, acquisition strategy, risks associated with telecommunications infrastructure, governmental regulation of the telecommunications industries and other risks associated with operating in Russia and the CIS, volatility of stock price, financial risk management and future growth subject to risks.

 


TABLE OF CONTENTS FINANCIAL & CORPORATE HIGHLIGHTS Group news summary for Q4 2013 & key highlights Group financial highlights: revenue & OIBDA Group financial highlights: net income Group balance sheet, operating and free cash flow Group capital expenditures Group debt at the end of Q4 2013 Group mobile subscriber dynamics Outlook Dividend outlook 3D strategy KEY FINANCIAL & OPERATING RESULTS Russian financial highlights Russian revenue breakdown Russian mobile operating indicators Russia fixed operating indicators LTE roll-out roadmap MTS retail network development Ukraine, Armenia and Turkmenistan financial highlights & operating indicators APPENDIX

 


4 FINANCIAL & CORPORATE HIGHLIGHTS

 


+6% +11% +1.8pp Launched LTE networks in Pskov Region, Kirov Region, North Ossetia-Alania, Khabarovsk Krai, Udmurtia, Zabaikalsky Krai, Amur Krai, Rostov region, Kaluga region, Novosibirsk region, Krasnoyarsky Krai Launched sales of iPhone 5s/5c in the MTS retail network MGTS, through its wholly owned subsidiary MGTS-Real Estate CJSC, sold a 51% stake in Business-Nedvizhimost CJSC to Sistema JSFC for RUB 3.2 billion Changed the terms of credit agreements with Sberbank for two non-revolving lines of credit in the amount of RUB 80 billion Redeemed remaining amount of Series 01 ruble-denominated bond Repurchased Series 03 ruble-denominated bonds in the amount of approximately RUB 3.9 billion Paid out semi-annual dividends of RUB 5.22 per ordinary MTS share (RUB 10.44 per ADR) amounting to the total of RUB 10.8 billion on the basis of the Company’s H1 2013 financial and operating results Appointed Mr. Andrei Smelkov as Vice President for Foreign Subsidiaries, Member of the Executive Board Q4 2013 HIGHLIGHTS THEREAFTER Announced new 3D Strategy: Data, Differentiation, Dividends Launched LTE network in Tatarstan and St. Petersburg Concluded a credit facility with Citibank Europe PLC and Swedish Export Credit Corporation for up to $300 million (RUB 10.9 billion at the date of conclusion) supported by Sweden’s Exportkreditnamnden (EKN) Appointed Mr. Valery Shorzhin as Vice President for Procurement and Administration, Member of the Executive Board GROUP NEWS SUMMARY FOR Q4 2013 & KEY HIGHLIGHTS *Free Cash Flow from continuing operations excluding one-offs from settlement of proceedings over Bitel LLC in the amount of RUB 4.1 billion

 


TOTAL GROUP REVENUE (RUB bln) TOTAL GROUP OIBDA (RUB bln) GROUP FINANCIAL HIGHLIGHTS: REVENUE & OIBDA -1% +6% +1% +5% -9% +11% -3% +8% 42.8% 43.9% 2012 2013 OIBDA MARGIN 44.5% 41.1% 42.4% 45.5% 44.8% 42.9% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year-over-Year revenue growth driven by a sustained increase in data revenues in Russia and subscriber growth in key markets Q-on-Q revenue growth bucks seasonal trends due to higher-value subscriber additions, increased data adoption and expansion of fixed-line business in Russia Year-on-Year OIBDA improvement reflects expansion of higher-margin data revenues, sustained improvements in the Company’s operating efficiency, and decline as a percentage of sales of high-cost handsets in the revenue mix Seasonal q-o-q OIBDA decline mitigated by stronger top-line performance

 


GROUP FINANCIAL HIGHLIGHTS: NET INCOME Strong q-on-q and y-o-y bottom line performance enhanced by stable D&A, improved contribution from minority share businesses in Belarus, lower interest expenses and sustained growth in OIBDA Net income in Q4 2013 impacted by non-cash FOREX loss in the amount of RUB 840 mln Net income dynamics in 2013 reflect one-off gains realized in connection with settlement of litigation over Bitel LLC and discontinuation of operations in Uzbekistan *Represents ongoing MTS operations exclusive of operations in Uzbekistan **Includes a non-cash impairment for goodwill and long-lived assets of RUB 979 mln and a gain from the reversal of provision for claims in Uzbekistan of RUB 2 510 mln resulting from the suspension of operations in July 2012 ***Includes a non-cash gain on deconsolidation of Uzbekistan of RUB 3 682 mln ****Includes a non-cash impairment for goodwill and long-lived assets of RUB 20 037 mln and provision for claims in Uzbekistan of RUB 13 948 mln resulting from the suspension of operations in July 2012 GROUP NET INCOME FROM CONTINUING OPERATIONS* (RUB bln) TOTAL GROUP NET INCOME (RUB bln) -26% +28% +9% +22% -16% +16% +9% +169% NET INCOME MARGIN 21.1% 15.7% 13.9% 26.0% 17.5% 18.9% 16.5% 19.1% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012 2013 NET INCOME MARGIN 20.3% 17.3% 14.0% 29.8% 17.5% 18.9% 7.8% 20.0% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012 2013

 


GROUP BALANCE SHEET, OPERATING AND FREE CASH FLOW OPERATING AND FREE CASH FLOW FROM CONTINUING OPERATIONS* (RUB mln) *Free Cash Flow from continuing operations excluding one-offs from settlement of proceedings over Bitel LLC in the amount of RUB 4.1 billion BALANCE SHEET (RUB mln UNLESS NOTED) As of Dec 31, 2012 As of Dec 31, 2013 CASH AND CASH EQUIVALENTS 22 014.2 30 611.7 SHORT-TERM INVESTMENTS 4 034.4 14 632.6 TOTAL DEBT 232 105.1 219 146.9 LONG-TERM DEBT 204 480.8 194 083.2 SHORT-TERM DEBT 27 624.3 25 063.7 NET DEBT 206 056.5 173 902.6 LTM OIBDA 161 703.2 175 010.5 NET DEBT/LTM OIBDA 1.3x 1.0x Sustained increase in cash flows due to OIBDA growth, improvements in working capital and stable CAPEX spending Free cash flow from continuing operations reached RUB 68.9 bln in 2013 excluding one-offs from settlement of proceedings over Bitel LLC Reduction in Net debt/LTM OIBDA ratio to 1.0x due to improvement in operating performance and our success in managing debt portfolio +26% +19% +67% +52%

 


GROUP CAPITAL EXPENDITURES Capital expenditures amounted to RUB 81.6 bln Key projects include the enhancement of 3G networks in Russia, roll-out of LTE/4G networks throughout Russia, the ongoing deployment of GPON in Moscow as well as network modernization in other markets of operations Overall CAPEX spending for FY2013 came in line the guidance of roughly 20% of sales RUSSIA 69 278 66 869 82 896 70 910 UKRAINE 4 694 4 487 4 125 8 840 ARMENIA 913 1 344 751 1 093 TURKMENISTAN 1 354 n/a 11 732 GROUP 76 238 72 798 87 783 81 575 - AS % OF REVENUE 23.1% 20.9% 23.2% 20.5% (IN RUB MLN) 2010 2011 2012 2013 81 575

 


GROUP DEBT AT THE END OF Q4 2013 *Debt composition by currency includes FOREX hedging in the amount of $795.0 mln as of Q4 2013 DEBT COMPOSITION BY CURRENCY Q4 2013* 2% 79% 19% 43% 57% MTS Series 03, 08 and BO-01 ruble bonds contain put options that can be exercised in December 2014, in November 2015 and in March 2018 respectively. MTS expects the options to be exercised. DEBT REPAYMENT SCHEDULE (RUB bln) Total Group Debt = RUB 219.1 bln Net debt/LTM OIBDA* = 1.0x DEBT COMPOSITION BY TYPE Q4 2013* Redeemed remaining amount of Series 01 ruble-denominated bond Changed coupon rate on Series 03 from 7.00% to 7.50% and repurchased outstanding bonds in the amount of RUB 3.9 billion Changed the terms of credit agreements with Sberbank for two non-revolving lines of credit in the amount of RUB 80 billion, tenor of the credit agreements increased from December 2017 until March 2020, and lowered the annual interest rate on both lines from 8.50% to 8.45% Debt composition within the Company’s internal target of maintaining about 70% of its portfolio in ruble-denominated instruments 2.4

 


*Including CDMA subscribers **MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated GROUP MOBILE SUBSCRIBER BASE DYNAMICS In Russia, MTS continues to attract and retain high-quality subscribers by promoting innovative tariff plans and driving sales through its proprietary retail network MTS SUBSCRIBERS (MLN UNLESS NOTED) Q3 2013 Q4 2013 % Change TOTAL MOBILE 105.27 107.83 +2.4% RUSSIA 73.14 75.32 +3.0% UKRAINE* 22.41 22.66 +1.1% TURKMENISTAN 2.01 2.02 +0.3% ARMENIA 2.38 2.44 +2.2% BELARUS** 5.33 5.39 +1.3%

 


OUTLOOK MTS expects revenue growth for the Group of 3-5% for 2014E Key factors which may influence topline revenue growth for the group include: Growth in data revenues through higher penetration of smartphones and data-enabled devices Development of retail product platform and sales of tablets and handsets Growth in broadband/pay TV markets in Russia MTS sees significant macroeconomic uncertainty and volatility across its markets of operation, which may cause MTS to revisit its revenue and OIBDA guidance and, in turn, impact its financial and operating results TOTAL GROUP REVENUE (RUB bln) GROUP CAPEX (RUB bln) GROUP OIBDA (RUB bln) > 2% CAGR 2%

 


DIVIDEND OUTLOOK DIVIDEND POLICY In April 2013, MTS Board approved a new dividend policy, which stipulates that for the calendar years 2013-2015, MTS aims to payout a minimum dividend distribution of an amount equal to at least 75% of Free Cash Flow for the relevant financial period or, if greater, RUB 40.0 billion per year In 2013, MTS also started paying out dividends on a semi-annual basis using interim H1 and full-year financial result MTS paid out in total RUB 41.0 bln in 2013 OUTLOOK FOR 2014+ Given MTS strong performance in 2013 and higher-than-anticipated free cash flow, MTS raises its dividend guidance for 2014 – 2015 to at least RUB 90 bln for the period Decisions on dividends to be paid in 2014 will first be reviewed by Board of Directors in April 2014 MTS will aim to maintain these levels in anticipation of: Rational markets of operation Stable macroeconomic environment Anticipated CAPEX spending of RUB 90.0 bln in 2014 and RUB 85.0 bln in 2015 41.0 DIVIDEND HISTORY AND OUTLOOK (RUB bln) 30.4 30.7 30.0 > 90.0

 


DATA DIFFERENTIATION 3D STRATEGY: LEVERAGING STRENGTHS & OPPORTUNITIES KEY MTS GROWTH OPPORTUNITIES GROWTH IN MOBILE BROADBAND GROWTH IN FIXED BROADBAND/PAY TV GROWTH IN CONVERGENT CORPORATE SERVICES Sustained efficiency and cash flow generation MTS 3D STRATEGY DIVIDENDS Provide customers with fastest, most reliable data networks Increase data penetration in our subscriber base Ensure customers have the best connectivity experience in their homes, workplace and places in between Offer customers unique products and services to enhance their digital lives Establish Moscow as world-class in terms of connectivity and network access Ensure a best-in-class customer experience to improve loyalty throughout our markets of operation Improve continuously the operational efficiency of MTS Enhance shareholder returns KEY MTS STRENGTHS Largest subscriber base Strongest presence in high-value & corporate segment Fastest mobile network speeds Most advanced retail platform in market Leadership in mobile banking space Clear dividend policy PAYMENT OPTIONS AND MOBILE BANKING TRADITIONAL TELECOMMUNICATIONS BUSINESS NEW BUSINESSES Track record of success FTTB/FTTH services in 180 major Russian cities Digital Moscow Highest customer loyalty ratings Strong position in Ukraine/CIS markets Top brand

 


15 KEY FINANCIAL & OPERATING RESULTS

 


RUSSIAN FINANCIAL HIGHLIGHTS Year-over-Year revenue improvement driven by growth in data usage and the Company’s focus on attracting and retaining higher-quality subscribers Q-on-Q revenue growth counters seasonal trends due to higher-value subscriber additions, increased data adoption, growth in retail and expansion of fixed-line business in Russia Seasonal OIBDA decline q-on-q mitigated by increased data revenues, higher profitability in retail and stable competitive environments TOTAL RUSSIA REVENUE (RUB bln) TOTAL RUSSIA OIBDA (RUB bln) STABLE +7% +3% +5% +7% -8% +11% -1% OIBDA MARGIN 45.4% 42.0% 43.3% 45.4% 45.4% 43.7% 43.8% 44.4% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012 2013

 


RUSSIAN REVENUE BREAKDOWN MOBILE REVENUE (RUB bln) FIXED LINE REVENUE (RUB bln) SALES OF HANDSETS & ACCESSORIES (RUB bln) -1% +8% +1% +7% +3% +5% +9% +2% STABLE -4% +9% -8% Strong year-over-year growth in mobile service revenue driven by high data adoption rates Year-over-Year fixed-line revenue growth enhanced by network modernization, the migration of Pay-TV customers to digital platform and growth in B2G services Quarterly increase in fixed-line revenue attributable to the recognition of the revenue from B2G projects in Moscow in Q4 2013 Increase in quarterly sales of handsets due to seasonal factors and record high demand for smartphone and tablets sales prior to the New Year holidays Year-over-Year decline in sales of handset reflective of the Company’s focus on promoting sales of more affordable smartphones as well as the decreased number of MTS retail stores as MTS continues to improve efficiency of its retail operations

 


RUSSIAN MOBILE OPERATING INDICATORS ARPU (RUB) MOU (MIN) Year-on-Year ARPU growth driven by policies aimed at increasing voice and data consumption, including the promotion of tariffs stimulating on-net calling and tariffs to boost data usage on smartphones and tablets MOU growth reflective of success of the tariffs to stimulate voice usage and enhance customer loyalty Sustained churn improvement reflects introduction of innovative tariff plans, changes in the structure of dealer commissions, and on-going focus on attraction and retention of higher-value customers -2% +3% -1% +4% +7% +2% SUBS, MLN 70.7 71.2 71.3 71.7 73.1 75.3 CHURN RATE, % 10.3% 11.0% 9.5% 9.4% 9.1% 9.0% VAS ARPU 80.0 90.2 91.8 90.1 93.5 102.9 - AS % OF ARPU 25.5% 29.5% 31.4% 29.5% 29.3% 32.7% APPM 1.01 0.95 0.94 0.92 0.95 0.91 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 +4% +8% 71.2 75.3 42.4% 36.3% 80.9 93.5 27.2% 30.4% 0.98 0.94 2012 2013

 


RUSSIA MOBILE OPERATING INDICATORS DATA TRAFFIC REVENUE (RUB mln) +7% +49% +10% +43% TOTAL VAS REVENUE (RUB mln) +7% +21% +9% +19% Growth in total VAS revenue attributable to the Company’s success in creating the fastest data networks in Russia, providing best customer service and promoting its value proposition in the marketplace Strong improvement in data traffic driven by growing smartphone and tablet penetration and increased adoption of data products Key initiatives included: Launch of LTE networks in 8 Russia’s regions Promotion of tariff plan Super Bit with fixed price on Internet in all of the Russia’s regions Enhancement of Ultra tariff plan Promotional campaign “Internet for 2 rubles per day” Promo tariff plans for tablets Enablement of LTE networks for iPads Slight year-over-year decline in other VAS revenues reflective of decreased revenues from content as the Company introduced policies to eliminate unsolicited SMS-based services 75 008 89 232 STABLE +7% -3% +7% OTHER VAS REVENUE* (RUB mln) * Including messaging and content revenue

 


RUSSIA FIXED OPERATING INDICATORS Year-on-Year residential ARPU growth attributable to migration of pay-TV subscribers to digital TV platform and upselling of broadband subscribers through modernization of fixed-line networks in the regions ARPU growth in Moscow due to migration of ADSL customers to GPON and expansion of the subscriber base Year-over-Year corporate ARPU growth driven by stronger sales of VAS and contribution from B2G projects in Moscow, including video surveillance Decline in pay TV subscriber base reflects the migration of subscribers from analog TV to digital platform, which results in defection of some of the “social package” subscribers ARPU RESIDENTIAL (RUB) ARPU CORPORATE (RUB) +3% +9% +4% +4% +22% +17% TOTAL HOUSEHOLDS PASSED, 000S 11 761 11 723 11 930 12 070 12 134 12 269 TOTAL BB SUBS, 000S 2 219 2 313 2 314 2 317 2 385 2 421 TOTAL PAY-TV SUBS, 000S 2 952 2 938 2 885 2 806 2 678 2 613 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 +7% +13% 11 723 12 269 2 313 2 421 2 938 2 613 2012 2013

 


In 2013, MTS commercially launched LTE-FDD networks in Moscow and the Moscow region and in 15 other regions across Russia MTS operates a LTE-TDD network in Moscow By the end of 2014, MTS will operate LTE networks in 600 cities and 74 regions throughout Russia By year end 2014, MTS will boast over 15,000 LTE base stations MTS is rolling out LTE networks in the 2600 MHz range in urban areas to ensure maximum capacity and highest data transfer speeds Upon spectrum clearance, MTS will use 800 MHz range in urban areas to provide better indoor coverage and overall better network quality MTS has 10-25 MHz spectrum in the 1800 MHz range in 76 regions which can be refarmed for LTE 1800 MHz upon migrating voice traffic to GSM900/UMTS2100 Upon introduction of LTE Advanced MTS will be able to combine spectrum in different bandwidth to further enhance capacity and increase speeds to over 300 Mb/s To be covered in 2014 To be covered in 2015 LTE 2600 MHz 10 MHz 75 Mb/s LTE 800 MHz 5 MHz 37 Mb/s LTE 1800MHz 10-25 MHz 75 Mb/s 300+ Mb/s LTE ROLL-OUT ROADMAP Covered in 2013

 


MTS RETAIL NETWORK DEVELOPMENT *MTS defines a smartphone as a handset with one of the following operating systems: iOS, Android, Windows, Blackberry OS, Symbian, Linux, Bada or Asha 3 523 4 146 4 462 4 034 At the end of Q4 2013, MTS retail network comprised 4 034 stores, including 1 197 franchised outlets During 2013, MTS focuses on improving point-of-sale efficiency and optimization of franchise network In Q4 2013, smartphones accounted for 64.0% of phones sold in MTS stores

 


UKRAINE FINANCIAL HIGHLIGHTS Year-over-Year growth in revenue attributable to expansion of subscriber base despite unfavorable macroeconomic factors Quarterly decline in revenue reflects seasonal factors in usage Year-on-Year OIBDA growth enhanced by sustained churn improvement, reduction in subscriber acquisition costs and overall cost efficiencies MTS Ukraine continues to demonstrate strong profitability despite weakening macroeconomic trends TOTAL UKRAINE REVENUE (UAH mln) TOTAL UKRAINE OIBDA (UAH mln) -10% +2% -7% -15% +6% -6% +3% +5% OIBDA MARGIN 53.1% 50.1% 51.5% 52.5% 51.5% 52.3% 50.8% 51.9% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012 2013

 


UKRAINE OPERATING INDICATORS Year-over-year ARPU decline attributable to dilution of the subscriber base due to lower-value subscribers Quarterly decline in ARPU tied to seasonal factors and influx of lower-value subscribers Year-on-year reduction in MOU attributable to dilution of customer base with lower-value subscribers ARPU (UAH) MOU (MIN) -13% -8% -10% -1% -8% -1% SUBS, MLN 20.1 20.7 21.0 21.6 22.4 22.7 CHURN RATE, % 9.0% 5.8% 6.7% 6.0% 6.6% 6.8% VAS ARPU 11.8 16.3 12.7 12.1 12.2 12.1 - AS % OF ARPU 26.9% 42.7% 34.1% 31.5% 31.3% 34.5% SAC 56.7 60.4 51.9 56.2 57.1 53.3 APPM 0.072 0.063 0.062 0.066 0.069 0.063 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 -4% -3% 20.7 22.7 30.5% 26.1% 12.6 12.3 32.1% 32.9% 60.5 54.8 0.066 0.065 2012 2013

 


UKRAINE OPERATING INDICATORS Increase in total VAS revenue due to Company’s efforts to monetize its EDGE and CDMA networks Year-on-Year decline in data traffic revenue attributable to reclassification of revenue from bundles in Q4 2012 Key initiatives included: One month of Internet from MTS on purchasing a number of smartphones in MTS retail stores 6 months of Internet for free on purchasing the Samsung Galaxy tablet MTS branded lotteries Launch of subscriptions on MTS’s multimedia content portal Launch of “Turbo button” on CDMA tariff plan TOTAL VAS REVENUE (UAH mln) DATA TRAFFIC REVENUE (UAH mln) +3% +5% +42% -18% +2% x2 -35% +4% +16% -6% +1% +6% OTHER VAS REVENUE* (UAH mln) * Including messaging and content revenue

 


ARMENIA FINANCIAL HIGHLIGHTS TOTAL ARMENIA REVENUE (AMD bln) TOTAL ARMENIA OIBDA (AMD bln) -8% -1% -12% -14% -51% -57% +3% -17% OIBDA MARGIN 57.2% 53.4% 50.3% 52.3% 54.4% 26.8% 57.3% 46.1% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012 2013 Year-over-year revenue growth attributable to the Company’s focus on promotion of bundled voice and data tariff plans and increasing market share Quarterly decline in revenues due to seasonal factors, including lower roaming revenues and international calling Decline in OIBDA due to one-time adjustments in costs related to international long-distance calling and termination rates with MTS Russia

 


ARMENIA OPERATING INDICATORS ARPU (AMD) MOU (MIN) -10% -3% -13% STABLE +15% +2% SUBS, 000S 2 353.9 2 405.0 2 379.2 2 356.4 2 382.2 2 435.1 CHURN RATE, % 7.2% 6.7% 8.2% 8.6% 8.0% 6.5% SAC 6 294.7 6 332.7 6 506.2 6 287.4 6 077.1 6 800.7 APPM 8.8 8.0 7.4 7.5 8.0 6.8 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2 405.0 2 435.1 34.7% 30.7% 5 909.9 6 415.7 8.1 7.5 2012 2013 +3% +11% 2 656 2 737 Quarterly decline in ARPU in line with traditional seasonal trends die to lower own and guest subscriber roaming revenues Year-over-Year rise in MOU as a result of the Company’s efforts to drive voice usage Continued improvement in churn dynamics reflects the sustained focus on promoting customer loyalty

 


TURKMENISTAN FINANCIAL HIGHLIGHTS TOTAL TURKMENISTAN REVENUE (TMT mln) TOTAL TURKMENISTAN OIBDA (TMT mln) x4 +62% OIBDA MARGIN n/a 31.5% 27.2% 33.1% 38.3% 60.6% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 +166 +2% 41.2% 2013 On August 30, 2012, MTS re-launched its network in Turkmenistan and allowed existing subscribers to re-activate SIM cards On October 1, 2012, MTS began sales of new SIM cards Q-on-Q revenue increase of 2% driven by an increase in MTS’s subscriber base and growing consumption of voice, data and content services Rise in OIBDA of 62% q-o-q due to cancellation of reserves for salaries and stock options, reserves for frequency payments, line rentals and reserves for network equipment dismantling due to imminent liquidation of BCTI, MTS’s wholly-owned subsidiary in Turkmenistan

 


TURKMENISTAN OPERATING INDICATORS ARPU (TMT) MOU (MIN) +51% -1% +76% -2% SUBS, 000S 1 440.0 1 888.2 1 882.6 2 009.6 2 016.3 CHURN RATE, % n/a n/a 17% 6.7% 11.1% SAC 6.2 9.5 13.6 18.1 22.1 APPM 0.03 0.02 0.02 0.02 0.02 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2 016.3 35.5% 14.9 0.02 2013 564 Strong year-on-year growth in ARPU reflective of Company’s success in monetization of its subscriber base Substantial year-on-year MOU growth due to Company's efforts to promote tariff plans with free on-net calling

 


30 APPENDIX

 


Non-GAAP financial measures. This presentation includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP. Due to the rounding and translation practices, Russian ruble and functional currency margins, as well as other non-GAAP financial measures, may differ. Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA margin. OIBDA represents operating income before depreciation and amortization. OIBDA margin is defined as OIBDA as a percentage of our net revenues. OIBDA may not be similar to OIBDA measures of other companies, is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of mobile operators and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA can be reconciled to our consolidated statements of operations as follows: DEFINITIONS & RECONCILIATIONS Q4 2012 Q3 2013 Q4 2013 RUB mln Group RUS UKR ARM TUK Group RUS UKR ARM TUK Group RUS UKR ARM TUK OPERATING INCOME/LOSS 23 412.6 22 824.8 2 387.3 310.9 92.0 27 394.7 25 166.6 3 396.6 600.5 305.1 27 219.4 25 864.7 3 109.0 (27.3) 487.6 ADD: D&A 17 043.4 14 251.0 2 282.1 507.7 0.2 18 895.0 16 355.9 2 165.2 382.4 4.3 17 769.0 15 242.6 2 084.7 447.5 10.5 OIBDA 40 456.0 37 075.9 4 669.4 818.6 92.2 46 289.8 41 522.5 5 561.8 982.8 309.4 44 988.4 41 107.3 5 193.7 420.2 498.1 Q4 2012 Q3 2013 Q4 2013 Group RUS UKR ARM TUK Group RUS UKR ARM TUK Group RUS UKR ARM TUK OPERATING MARGIN 23.8% 25.9% 25.6% 20.3% 31.3% 26.5% 27.5% 31.4% 33.2% 37.8% 26.0% 27.5% 31.3% (1.7%) 59.5% ADD: D&A 17.3% 16.2% 24.5% 33.1% 0.1% 18.3% 17.9% 20.0% 21.2% 0.5% 17.0% 16.2% 21.0% 28.2% 1.3% OIBDA MARGIN 41.1% 42.0% 50.1% 53.4% 31.4% 44.8% 45.4% 51.5% 54.4% 38.3% 42.9% 43.7% 52.3% 26.5% 60.8%

 


DEFINITIONS & RECONCILIATIONS Annual adjusted OIBDA can be reconciled to our consolidated statements of operations as follows: 2012 2013 RUB mln Group RUS UKR ARM TUK Group RUS UKR ARM TUK OPERATING INCOME 93 793.3 91 773.2 9 647.1 1 344.8 (116.1) 101 758.0 94 873.4 11 745.0 1 299.4 1 158.9 ADD: D&A 67 910.0 56 234.6 9 571.0 2 094.8 0.7 73 252.5 62 825.3 8 895.9 1 559.9 18.1 OIBDA 161 703.2 148 008.0 19 218.1 3 439.7 (115.4) 175 010.5 157 698.7 20 641.0 2 859.3 1 177.1 2012 2013 Group RUS UKR ARM TUK Group RUS UKR ARM TUK OPERATING MARGIN 24.8% 27.2% 25.6% 22.4% n/a 25.5% 26.7% 29.6% 20.9% 40.8% ADD: D&A 18.0% 16.6% 25.4% 34.9% n/a 18.4% 17.7% 22.4% 25.0% 0.6% OIBDA MARGIN 42.8% 43.8 50.9% 57.3% n/a 43.9% 44.4% 52.0% 45.9% 41.5%

 


DEFINITIONS & RECONCILIATIONS RUB mln As of Dec 31, 2012 As of Dec 31, 2013 Current portion of LT debt and of capital lease obligations 27 624.3 25 063.7 LT debt 204 432.3 194 073.2 Capital lease obligations 48.5 10.0 Total debt 232 105.1 219 146.9 Less: Cash and cash equivalents 22 014.2 30 611.7 ST investments 4 034.4 14 632.6 Net debt 206 056.5 173 902.6 Free cash flow is represented by net cash from operating activities less cash used for certain investing activities. Free cash flow is commonly used by investors, analysts and credit rating agencies to assess and evaluate our performance over time and within the wireless telecommunications industry. Because free cash flow is not based in US GAAP and excludes certain sources and uses of cash, the calculation should not be looked upon as an alternative to our Consolidated statement of cash flows or other information prepared in accordance with US GAAP. RUB mln For the year ended Dec 31, 2012 For the year ended Dec 31, 2013 Net cash provided by operating activities from continuing operations 134 855.8 159 924.4 Less: Purchases of property, plant and equipment (79 835.9) (67 146.2) Purchases of intangible assets (7 947.1) (14 428.7) Proceeds from sale of property, plant and equipment 394.8 418 Proceeds from sale of other investments 2 028.9 - Purchases of other investments (2 100.0) (702.9) Investments in and advances to associates - (5 088.9) Acquisition of subsidiaries, net of cash acquired (1 936.8) - Free cash flow from continuing operations 45 459.7 72 975.8 Net debt represents total debt less cash and cash equivalents and short-term investments. Our net debt calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare our periodic and future liquidity within the wireless telecommunications industry. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

 


DEFINITIONS & RECONCILIATIONS Average monthly service revenue per subscriber (ARPU). We calculate our ARPU by dividing our service revenues for a given period, including interconnect, guest roaming fees and connection fees, by the average number of our subscribers during that period and dividing by the number of months in that period. Average monthly minutes of usage per subscriber (MOU). MOU is calculated by dividing the total number of minutes of usage during a given period by the average number of our subscribers during the period and dividing by the number of months in that period. Subscriber. We define a “subscriber” as an individual or organization whose account shows chargeable activity within sixty one days in the case of post-paid tariffs, or one hundred and eighty three days in the case of our pre-paid tariffs, or whose account does not have a negative balance for more than this period. Churn. We define our “churn” as the total number of subscribers who cease to be a subscriber as defined above during the period (whether involuntarily due to non-payment or voluntarily, at such subscriber’s request), expressed as a percentage of the average number of our subscribers during that period. Subscriber acquisition cost (SAC). We define SAC as total sales and marketing expenses and handset subsidies for a given period. Sales and marketing expenses include advertising expenses and commissions to dealers. SAC per gross additional subscriber is calculated by dividing SAC during a given period by the total number of gross subscribers added by us during the period.

 


CONTACT INFORMATION MTS Investor Relations +7 495 223 20 25 ir@mts.ru www.mtsgsm.com Latest Financial Information www.mtsgsm.com/resources/reports/ Official MTS Blog www.mtsgsm.com/blog/ Follow Us twitter.com/JoshatMTS

 

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

MOBILE TELESYSTEMS OJSC

 

 

 

 

 

 

 

By:

/s/ Andrei Dubovskov

 

 

Name:

Andrei Dubovskov

 

 

Title:

CEO

 

 

 

 

Date:   March 18, 2014

 

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