FORM 6-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Issuer
November 17, 2016

 

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

 

Commission file number:  333-12032

 

Mobile TeleSystems PJSC

(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

 

 

 



 

 

Press release

 

Mobile TeleSystems Announces Financial Results for the Third Quarter Ended September 30, 2016

 

November 17, 2016

 

Moscow, Russian Federation — Mobile TeleSystems PJSC (“MTS” NYSE: MBT; MOEX: MTSS), the leading telecommunications provider in Russia and the CIS, today announces its unaudited IFRS financial results for the three months ended September 30, 2016.

 

Key Financial Highlights of Q3 2016

 

·                  Consolidated group revenue decreased by 1.3% y-o-y to RUB 112.2 bln

 

·                  Total revenue in Russia decreased by 0.8% y-o-y to RUB 103.1 bln

 

·                  Group adjusted OIBDA down 5.1% y-o-y to RUB 45.7 bln

 

·                  OIBDA in Russia down 3.0% y-o-y to RUB 43.2 bln

 

·                  Group net profit fell 12.8% y-o-y to RUB 12.6 bln

 

·                  Sales of goods in Russia increased by 8.0% y-o-y to RUB 13.6 bln

 

·                  Total subscriber base increased by 2.5% to 108.8 mln

 

·                  MTS’s proprietary retail network in Russia increased to 5,998 stores

 

·                  Revenue in Ukraine increased by 11.2% y-o-y to UAH 2.9 bln

 

·                  Total Group debt fell to RUB 267.9(1) bln as Net Debt/LTM Adjusted OIBDA remained stable at 1.1x

 

Key Corporate and Industry Highlights

 

·                  Paid out in dividends RUB 24.0 bln or RUB 11.99 per ordinary MTS share (RUB 23.98 per ADR) based on H1 2016 results. Together with the earlier payment of RUB 28.0 bln  (RUB 14.01 per ordinary share or 28.02 per ADR) based on FY2015 results, the total dividend paid per share in calendar year 2016 was RUB 26 per ordinary share, which is in line with the new Company’s dividend policy

 

·                  The Board of Directors approved a Tender Offer that was launched on October 31, with the proposed return of a maximum of RUB 4,934,527,300 to the Company’s Holders of Shares of Common Stock and ADS Holders

 

·                  MTS’s majority shareholder, Sistema, has also agreed to sell an amount of shares proportional to its aggregate ownership upon completion of the tender, so that the total return to all shareholders could reach RUB 10 bln

 

·                  Sold 50.01% stake in the telecommunications operator Universal Mobile Systems (UMS) to the State Unitary Enterprise Centre of Radio Communication, Radio Broadcasting and Television of the Ministry of the Development of Information Technologies and Communications of the Republic of Uzbekistan

 

·                  The launch of the mobile app “MTS Money”, which enables customers to upload virtual banking cards, tickets for public transportation in Moscow and discount coupons to their NFC-enabled smartphones

 


(1)  Net of financial leasing and unamortized debt issuance cost adjustment, as of September 30, 2016

 

1



 

·                  The launch of a new payment system, allowing customers to leave their cash and bank cards at home by which MTS subscribers will be able to make payments from their mobile accounts in a variety of stores or cafés

 

·                  The launch of a pilot project to utilize Big Data for the development of MTS monobrand retail chain

 

·                  Acquisition of a regional asset of SMARTS to enhance services in Republic of Mari El through additional spectrum of 14.8 Mhz in the 1,800 Mhz range that will allow to develop LTE networks

 

·                  Launched the Innovation Center, a department that brings a new approach to business development through the launch of new products and services. The Center uses a flexible methodology for service development (the agile-methodology). The establishment of the Innovation Center will enable the timeline for launching new products to be reduced by 3x-4x

 

·                  Successfully placed RUB 10 bln exchange-traded Series 2 bond with a first coupon rate of 9.4%, which was one of the lowest ruble-based coupon rates among corporate borrowers on the local market in recent years

 

·                  Redeemed series 05 ruble-denominated bond, which was issued on July 28, 2009, by repaying the remaining portion of the instrument in the amount of RUB 1.8 bln

 

·                  MTS was the first company in the history of Russian corporate governance to launch an online service for electronic voting for MTS shareholders

 

·                  MTS won the Telecommunications award in the country category at the 2016-2017 World Branding Awards

 

·                  MTS and Samsung Electronics, the world-leading company in consumer electronics and hi-end IT, announced the signing of a memorandum with the intention to co-operate in developing 5G technologies. Under the strategic partnership, companies will work on innovations aimed at implementing LTE-Advanced Pro network, developing the standards and deployment of 5G in Russia regions

 

·                  Partnership agreement with Huawei by which Huawei will supply a broader range of smartphones and other consumer electronics for sale through the MTS retail network

 

·                  The launch of Wi-Fi calling in Russia enabling subscribers to make voice calls wherever there is a Wi-Fi connection (Voice over Wi-Fi)

 

·                  MTS terminated its rating relationship with Moody’s Investors Service Ltd

 

Commentary

 

Andrei Dubovskov, President and CEO of MTS commented, “For the period we saw a slight revenue decline of 1.3% year-over-year to RUB 112.2 bln. Macroeconomic factors and competitive issues continue to impact our performance in many ways, in particular voice and messaging usage in roaming, but in general, our revenue trends have shown relative stability in comparison to our peers throughout our markets of operations.

 

Vasyl Latsanych, Vice President, Strategy and Marketing, highlighted, “Total revenue in Russia did decline slightly by 0.8% to RUB 103.1 bln, as the weaker economy impacts travel and roaming usage. Nevertheless, we saw stronger data usage due to both the growth of customer usage and the migration to data plans as smartphone penetration reached nearly 52%, and a 2.8% growth in subscribers. In our fixed-line business, revenue increased slightly by 0.1% to RUB 15.1 bln. We see continuous growth from our B2C broadband and pay-TV markets, as market shares in Moscow in both home internet and pay-tv improved.

 

“In Ukraine, revenue for the period increased by 11.2% to nearly UAH 2.9 bln. Key drivers include a 2.7% increase in subscribers and data consumption, which is rising as we have rolled out 3G to all major population centers throughout

 

2



 

Ukraine.  Among our foreign subsidiaries, revenue in Armenia and Turkmenistan fell during the period. Both markets remain exposed to macroeconomic trends, which continue to weaken voice and data usage.”

 

Mr. Dubovskov continued, “Adjusted OIBDA declined 5.1% year-over-year to RUB 45.7 bln. We already warned of weaker Adjusted OIBDA performance when we lowered our guidance for the year, and certain factors continued to impact us, including competition, reduced usage of services sensitive to macroeconomic factors and a lower contribution from foreign subsidiaries due to ruble appreciation during the period.”

 

Commented Alexey Kornya, Vice President, Finance, Investments and M&A, “We saw relative strength in our Russian operations as Russia OIBDA declined 3.0% year-over-year. As indicated by our Group adjusted OIBDA performance, Russia showed a relative improvement in OIBDA quarter-on-quarter as well (8.8% vs 8.0% growth) when compared to 2015. Like in previous quarters, roaming usage and its impact on overall revenues, as well as our retail expansion and efforts to manage the increased competition within the marketplace, continued to pressure profitability.

 

Mr. Kornya continued, “In Ukraine, adjusted OIBDA improved year-over-year to nearly UAH 1.1 bln. We continue to see improvement in Ukraine efficiency as we realize the scale benefits of our 3G investments in the market through rising subscriber levels and growing revenues from voice and data products. In our other markets, OIBDA trends in Armenia and Turkmenistan reflect revenue dynamics, as we see customer usage impacted by the weakened economy through a reduction in international dialing and roaming.”

 

“Group net profit for the period decreased slightly year-over-year to RUB 12.6 bln. This included a RUB 2.7 bln loss on the disposal of UMS LLC. Other factors impacting our net profit include OIBDA dynamics, a decrease in non-cash FOREX loss from ruble appreciation  and a stronger ruble in relation to group currencies and key non-ruble expenses.”

 

“Free cash flow to date amounted to RUB 48.9 bln, an increase of 67.2% year-over-year through the first nine months. Lower CAPEX spending of RUB 58 bln year-to-date is a key factor, and we expect more moderate CAPEX spending to continue and be in line with our guidance of RUB 85 bln. By the end of the period, total debt stood at RUB 267.9 bln — net of leases and debt issuance costs — which is trending lower due to our on-going debt repayments as well as financial policies. Our net debt/LTM Adjusted OIBDA remained stable at a manageable 1.1x, a comfortable level for the Company and very low in relation to our peers.”

 

Mr. Dubovskov concluded, “While our quarterly performance was below past performance, we feel strongly that MTS is well-positioned for the future. In our key markets, we’ve seen the effects of macroeconomic weakness, especially in segments like roaming and small business, impact our results disproportionately to our competitors. Despite these challenges, we have been successful in sustaining our market share.

 

“Overall, we saw subscriber growth in our key markets of Russia and Ukraine. We’ve completed our core network build, and we now offer LTE in every region of Russia and 3G services throughout Ukraine. In Moscow, our market share in Internet and pay-tv is increasing. Our expansion into complementary businesses remains promising as we have issued more than 3.2 million of MTS Money cards. Our balance sheet remains the strongest in the business. We’ve sustained current net debt/adjusted OIBDA levels for many quarters and generate sufficient cash flow to make a healthy return to shareholders.”

 

2016 Outlook

 

In accordance with IFRS 5 disclosure requirements, from Q3 2016 the Group shall present financial results in a manner that enables users of the financial statements to evaluate the effects of discontinued operations. Results of discontinued operations shall be excluded from the results of continuing operations and presented separately as a single amount in the statement of comprehensive income.

 

3



 

Group Revenue: For 2016, MTS reiterates its Group revenue outlook at 2-3% growth, after disposal of UMS LLC and expected full deconsolidation of UMS’s financial results in Q3 2016 and other factors:

 

·                  Subscriber growth in Russia;

·                  Rising data usage and sustained data adoption in Russia and Ukraine;

·                  Increased sales of handsets in Russia; and

·                  Rising share in Moscow B2C broadband/Pay-TV markets.

 

Group OIBDA: MTS reiterates its outlook on adjusted Group OIBDA growth rate at -4% due primarily to the sale of UMS LLC as well as other factors:

 

·                  Sustained competitive pressures in the Russian distribution market and the Company’s strategic efforts to sustain market share;

·                  The build-out of 3G in Ukraine and non-market factors impacting our profitability;

·                  Developments in foreign subsidiaries; and

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

 

Group CAPEX: MTS aims to reduce FY2016 CAPEX to RUB 85 bln

 

Additional Information

 

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

 

Conference Call

 

The conference call will start today at:

 

18:00 hrs (Moscow time)

15:00 hrs (London time)

10:00 hrs (US Eastern time)

 

To take part in the conference call, please dial one of the following telephone numbers and quote the confirmation code, 8926555

 

From Russia: + 7 495 213 1767

From the UK: + 44(0)20 3043 2002

From the US: + 1 719 325 2229

 

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

 

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

 

From the US: +1 719 457 0820 PIN 8926555

From the UK: +44(0)20 7660 0134 PIN 8926555

 

This press release provides a summary of some of the key financial and operating indicators for the period ended September 30, 2016. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

 

4



 

Financial Summary

 

RUB mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues

 

112,182

 

113,709

 

-1.3

%

106,055

 

5.8

%

Adjusted OIBDA

 

45,691

 

48,139

 

-5.1

%

40,656

 

12.4

%

- margin

 

40.7

%

42.3

%

-1.6

pp

38.3

%

2.4

pp

Operating profit

 

24,152

 

28,714

 

-15.9

%

20,491

 

17.9

%

- margin

 

21.5

%

25.3

%

-3.8

pp

19.3

%

2.2

pp

Net profit

 

12,551

 

14,393

 

-12.8

%

9,056

 

38.6

%

- margin

 

11.2

%

12.7

%

-1.5

pp

8.5

%

2.7

pp

 

Russia Highlights

 

RUB mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues(2)

 

103,060

 

103,917

 

-0.8

%

97,435

 

5.8

%

- mobile

 

75,885

 

77,967

 

-2.7

%

72,786

 

4.3

%

- fixed

 

15,096

 

15,076

 

0.1

%

15,263

 

-1.1

%

- integrated services

 

1,067

 

240

 

344.6

%

1,258

 

-15.2

%

- sales of goods

 

13,625

 

12,615

 

8.0

%

10,552

 

29.1

%

OIBDA

 

43,193

 

44,527

 

-3.0

%

39,706

 

8.8

%

- margin

 

41.9

%

42.8

%

-0.9

pp

40.8

%

1.1

pp

Net profit

 

14,461

 

13,448

 

7.5

%

10,788

 

34.0

%

- margin

 

14.0

%

12.9

%

1.1

pp

11.1

%

2.9

pp

 

Ukraine Highlights

 

UAH mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues

 

2,860

 

2,572

 

11.2

%

2,745

 

4.2

%

Adjusted OIBDA

 

1,070

 

1,048

 

2.1

%

827

 

29.4

%

- margin

 

37.4

%

40.8

%

-3.4

pp

30.1

%

7.3

pp

Net profit

 

448

 

569

 

-21.3

%

222

 

101.8

%

- margin

 

15.7

%

22.1

%

-6.4

pp

8.1

%

7.6

pp

 

Armenia Highlights

 

AMD mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues

 

15,122

 

19,296

 

-21.6

%

15,040

 

0.5

%

Adjusted OIBDA

 

6,519

 

9,984

 

-34.7

%

5,944

 

9.7

%

- margin

 

43.1

%

51.7

%

-8.6

pp

39.5

%

3.6

pp

Net profit/(loss)

 

3,678

 

4,107

 

-10.4

%

(1,991

)

n/a

 

- margin

 

24.3

%

21.3

%

3.0

pp

n/a

 

n/a

 

 

Turkmenistan Highlights

 

TMT mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues

 

64

 

75

 

-14.5

%

66

 

-3.5

%

OIBDA

 

22

 

29

 

-23.9

%

22

 

0.9

%

- margin

 

35.0

%

39.3

%

-4.3

pp

33.4

%

1.6

pp

Net profit

 

10

 

16

 

-38.5

%

10

 

1.1

%

- margin

 

15.0

%

20.9

%

-5.9

pp

14.4

%

0.6

pp

 


(2) Revenue, net of intercompany between mobile, fixed and integrated services

 

5



 

Belarus Highlights

 

BYN mln

 

Q3’16

 

Q3’15

 

y-o-y

 

Q2’16

 

q-o-q

 

Revenues

 

175

 

144

 

21.6

%

162

 

8.2

%

Adjusted OIBDA

 

80

 

67

 

19.0

%

76

 

5.8

%

- margin

 

45.7

%

46.7

%

-1.0

pp

46.8

%

-1.1

pp

Net profit

 

49

 

47

 

5.2

%

47

 

6.1

%

- margin

 

28.2

%

32.6

%

-4.4

pp

28.8

%

-0.6

pp

 

6



 

CAPEX Highlights

 

RUB mln

 

FY 2015

 

9M 2016

 

Russia(3)

 

79,619

 

52,055

 

- as % of rev

 

20.4

%

17.5

%

Ukraine(4)

 

12,427

 

4,343

 

- as % of rev

 

44.1

%

19.4

%

Armenia

 

1,371

 

418

 

- as % of rev

 

15.2

%

6.7

%

Turkmenistan

 

500

 

117

 

- as % of rev

 

9.8

%

3.0

%

Uzbekistan

 

2,195

 

 

- as % of rev

 

47.6

%

 

Group(5)

 

96,111

 

56,935

 

- as % of rev

 

22.3

%

17.6

%

 

* * *

 

For further information, please contact in Moscow:

 

Joshua B. Tulgan

Director, Corporate Finance & Investor Relations

Mobile TeleSystems PJSC

Tel: +7 495 223 2025

E-mail: ir@mts.ru

 

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

 

* * *

 

Mobile TeleSystems PJSC (“MTS” - NYSE:MBT; MOEX:MTSS) is the leading telecommunications group in Russia and the CIS.  We provide wireless Internet access and fixed voice, broadband and pay-TV to over 100 million customers who value high quality of service at a competitive price. Our wireless and fixed-line networks deliver best-in-class speeds and coverage throughout Russia, Ukraine, Armenia, Turkmenistan and Belarus. To keep pace with evolving customer demand, we continue to grow through innovative products, investments in our market-leading retail platform, mobile payment services, e-commerce and IT solutions. For more information, please visit: www.mtsgsm.com.

 

* * *

 

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

 


(3)  Excluding costs of RUB 3.4 bln related to the acquisition of a 4G license in Russia in 2015 and RUB 2.6 bln in 2016

(4)  Excluding purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015

(5)  Excluding RUB 875 mln spent on CAPEX in Uzbekistan in 2016, which was stated under cash flows from discontinued operations

 

7



 

Attachments to the Third Quarter 2016
Earnings Press Release

 

Attachment A

 

Non-IFRS financial measures. This presentation includes financial information prepared in accordance with International Financial Reporting Standards, or IFRS,  as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Due to the rounding and translation practices, Russian ruble and functional currency margins, as well as other non-IFRS 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 IFRS and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of profit or loss. 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 IFRS, 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. We use a term Adjusted for OIBDA and operating income when there were significant excluded one off effects.  OIBDA can be reconciled to our consolidated statements of profit or loss as follows:

 

Group (RUB mln)

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating profit

 

28,714

 

20,026

 

21,629

 

20,491

 

24,152

 

Add: Loss from impairment of goodwill in Armenia

 

 

3,516

 

 

 

 

Adjusted operating profit

 

28,714

 

23,542

 

21,629

 

20,491

 

24,152

 

Add: D&A

 

19,425

 

19,876

 

19,488

 

20,165

 

21,539

 

Adjusted OIBDA

 

48,139

 

43,418

 

41,117

 

40,656

 

45,691

 

 

Russia (RUB mln)

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating profit

 

27,275

 

23,481

 

21,599

 

21,954

 

24,107

 

Add: D&A

 

17,252

 

17,634

 

16,984

 

17,752

 

19,086

 

OIBDA

 

44,527

 

41,115

 

38,583

 

39,706

 

43,193

 

 

Ukraine (RUB mln)

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating profit

 

1,675

 

1,158

 

795

 

627

 

1,179

 

Add: D&A

 

1,358

 

1,390

 

1,557

 

1,530

 

1,542

 

OIBDA

 

3,032

 

2,548

 

2,351

 

2,157

 

2,722

 

 

Armenia (RUB mln)

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating profit/ (loss)

 

680

 

(3,122

)

120

 

136

 

196

 

Add: Loss from impairment of goodwill in Armenia

 

 

3,516

 

 

 

 

Adjusted operating profit

 

680

 

394

 

120

 

136

 

196

 

Add: D&A

 

626

 

656

 

737

 

681

 

690

 

Adjusted OIBDA

 

1,306

 

1,050

 

857

 

817

 

886

 

 

Turkmenistan (RUB mln)

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating profit

 

326

 

330

 

278

 

209

 

197

 

Add: D&A

 

203

 

209

 

232

 

207

 

215

 

OIBDA

 

529

 

538

 

510

 

416

 

412

 

 

8



 

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

 

Group

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating margin

 

25.3

%

18.0

%

20.4

%

19.3

%

21.5

%

Add: Loss from impairment of goodwill in Armenia

 

 

3.2

%

 

 

 

Adjusted operating margin

 

25.3

%

21.1

%

20.4

%

19.3

%

21.5

%

Add: D&A

 

17.1

%

17.9

%

18.4

%

19.0

%

19.2

%

Adjusted OIBDA margin

 

42.3

%

39.0

%

38.8

%

38.3

%

40.7

%

 

Russia

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating margin

 

26.2

%

22.9

%

22.4

%

22.5

%

23.4

%

Add: D&A

 

16.6

%

17.2

%

17.6

%

18.2

%

18.5

%

OIBDA margin

 

42.8

%

40.1

%

40.1

%

40.8

%

41.9

%

 

Ukraine

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating margin

 

22.5

%

16.7

%

9.9

%

8.8

%

16.2

%

Add: D&A

 

18.2

%

20.0

%

19.5

%

21.4

%

21.2

%

OIBDA margin

 

40.7

%

36.7

%

29.4

%

30.1

%

37.4

%

 

Armenia

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating margin

 

26.9

%

n/a

 

5.6

%

6.6

%

9.5

%

Add: Loss from impairment of goodwill in Armenia

 

 

155.0

%

 

 

 

Adjusted operating margin

 

26.9

%

17.4

%

5.6

%

6.6

%

9.5

%

Add: D&A

 

24.8

%

28.9

%

34.2

%

32.9

%

33.6

%

Adjusted OIBDA margin

 

51.7

%

46.3

%

39.7

%

39.5

%

43.1

%

 

Turkmenistan

 

Q3’15

 

Q4’15

 

Q1’16

 

Q2’16

 

Q3’16

 

Operating margin

 

24.3

%

23.4

%

19.4

%

16.8

%

16.7

%

Add: D&A

 

15.1

%

14.8

%

16.2

%

16.6

%

18.2

%

OIBDA margin

 

39.4

%

38.1

%

35.6

%

33.4

%

35.0

%

 

***

 

9



 

Attachment B

 

Net debt represents total debt less cash and cash equivalents and short-term investments and long-term deposits. 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-IFRS financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS.

 

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

 

RUB mln

 

As of June 30, 2016

 

As of September 30, 2016

 

Current portion of LT debt and of finance lease obligations

 

49,586

 

59,753

 

LT debt

 

225,569

 

208,682

 

Finance lease obligations

 

10,297

 

10,115

 

Total debt

 

285,452

 

278,550

 

Less:

 

 

 

 

 

Cash and cash equivalents

 

24,956

 

36,489

 

ST investments

 

27,978

 

11,689

 

LT deposits

 

30,409

 

30,275

 

Effects of hedging of non-ruble denominated debt

 

12,369

 

11,498

 

Net debt

 

189,740

 

188,599

 

 

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

 

RUB mln

 

For the nine months
ended
September 30, 2015

 

For the nine months
ended
September 30, 2016

 

Net cash provided by operating activities

 

100,011

 

104,900

 

Less:

 

 

 

 

 

Purchases of property, plant and equipment

 

(56,528

)

(36,925

)

Purchases of intangible assets(6)

 

(16,529

)

(20,885

)

Proceeds from sale of property, plant and equipment

 

2,279

 

3,130

 

Investments in associates

 

 

(1,326

)

Acquisition of subsidiaries, net of cash acquired

 

 

(5

)

Free cash flow

 

29,233

 

48,889

 

 


(6)  Excluding costs of RUB 2.6 bln in 2016 and purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015

 

10



 

LTM Adjusted OIBDA can be reconciled to our consolidated statements of operations as follows:

 

RUB mln

 

Q4 2015 ended
Dec 31, 2015

 

Nine months ended
September 30, 2016

 

Twelve months ended
September 30, 2016

 

 

 

A

 

B

 

C = A + B

 

Net operating profit

 

20,026

 

66,272

 

86,298

 

Add: Impairment of goodwill in Armenia

 

3,516

 

 

3,516

 

Add: D&A

 

19,876

 

61,192

 

81,068

 

LTM ADJUSTED OIBDA

 

43,418

 

127,464

 

170,882

 

 

***

 

Attachment C

 

Definitions

 

Subscriber. 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 or 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.

 

***

 

11



 

MOBILE TELESYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

As of September 30,2016 AND As of December 31,2015

 

(Amounts in millions of RUB)

 

 

 

As of September 30,

 

As of December 31,

 

 

 

2016

 

2015

 

NON-CURRENT ASSETS:

 

 

 

 

 

Property, plant and equipment

 

275 670

 

302 662

 

Investment property

 

367

 

364

 

Intangible assets

 

106 728

 

109 064

 

Investments in associates

 

9 064

 

9 299

 

Deferred tax assets

 

6 594

 

9 287

 

Other non-financial assets

 

577

 

480

 

Other investments

 

34 215

 

34 667

 

Accounts receivable (related parties)

 

3 603

 

3 335

 

Other financial assets

 

15 712

 

25 203

 

Total non-current assets

 

452 530

 

494 361

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Inventories

 

13 017

 

14 510

 

Trade and other receivables

 

32 461

 

34 542

 

Accounts receivable (related parties)

 

3 037

 

6 326

 

Short-term investments

 

11 689

 

49 840

 

VAT receivable

 

7 018

 

9 815

 

Income tax assets

 

1 233

 

5 190

 

Assets held for sale

 

632

 

549

 

Advances paid and prepaid expenses, other current assets

 

5 299

 

4 781

 

Cash and cash equivalents

 

36 489

 

33 464

 

Total current assets

 

110 875

 

159 017

 

 

 

 

 

 

 

Total assets

 

563 405

 

653 378

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

Equity attributable to equity holders

 

130 572

 

160 115

 

Non-controlling interests

 

4 569

 

8 256

 

Total equity

 

135 141

 

168 371

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

Borrowings

 

217 700

 

292 168

 

Deferred tax liabilities

 

28 418

 

27 346

 

Provisions

 

2 397

 

2 565

 

Other financial liabilities

 

544

 

676

 

Other non-financial liabilities

 

4 114

 

4 342

 

Total non-current liabilities

 

253 173

 

327 097

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Borrowings

 

59 200

 

53 701

 

Provisions

 

6 189

 

7 863

 

Trade and other payables

 

73 154

 

57 756

 

Accounts payable (related parties)

 

1 454

 

1 809

 

Income tax liabilities

 

2 251

 

831

 

Other financial liabilities

 

6 475

 

9 778

 

Other non-financial liabilities

 

26 368

 

26 172

 

Total current liabilities

 

175 091

 

157 910

 

 

 

 

 

 

 

Total equity and liabilities

 

563 405

 

653 378

 

 

12



 

MOBILE TELESYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED September 30, 2016 AND 2015

 

(Amounts in millions of RUB except per share amount)

 

 

 

Nine months
ended

 

Nine months
ended

 

Three months
ended

 

Three months
ended

 

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

 

Continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

289 437

 

288 584

 

98 728

 

101 015

 

Sales of goods

 

34 665

 

26 735

 

13 454

 

12 694

 

 

 

324 102

 

315 319

 

112 182

 

113 709

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

(98 342

)

(94 175

)

(32 377

)

(32 489

)

Cost of goods

 

(32 210

)

(23 437

)

(12 173

)

(11 716

)

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

(69 102

)

(64 949

)

(22 846

)

(21 107

)

Depreciation and amortization

 

(61 192

)

(57 967

)

(21 539

)

(19 425

)

Other operating income/(expense)

 

759

 

(1 721

)

110

 

(1 141

)

Operating share of the profit of associates

 

2 257

 

2 525

 

795

 

883

 

Provision for cash balances deposited in distressed Ukrainian banks

 

 

(1 698

)

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

66 272

 

73 897

 

24 152

 

28 714

 

 

 

 

 

 

 

 

 

 

 

Currency exchange gains/(losses)

 

3 067

 

(3 146

)

(205

)

(3 306

)

 

 

 

 

 

 

 

 

 

 

Other (expenses)/income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance income

 

4 185

 

6 698

 

1 180

 

1 935

 

Finance costs

 

(21 674

)

(19 258

)

(5 864

)

(6 709

)

Other (expenses)/income

 

(787

)

(1 647

)

500

 

(1 047

)

Total other expenses, net

 

(18 276

)

(14 207

)

(4 184

)

(5 821

)

 

 

 

 

 

 

 

 

 

 

Profit before tax from continuing operations

 

51 063

 

56 544

 

19 763

 

19 587

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(11 110

)

(11 322

)

(4 230

)

(4 279

)

 

 

 

 

 

 

 

 

 

 

Profit for the period from continuing operations

 

39 953

 

45 222

 

15 533

 

15 308

 

 

 

 

 

 

 

 

 

 

 

Discontinued operation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operation, net of tax

 

(4 021

)

(4 591

)

(2 889

)

(1 354

)

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

35 932

 

40 631

 

12 644

 

13 954

 

 

 

 

 

 

 

 

 

 

 

Loss/(income) for the period attributable to non-controlling interests

 

182

 

1 723

 

(93

)

439

 

 

 

 

 

 

 

 

 

 

 

Profit for the period attributable to owners of the Company

 

36 114

 

42 354

 

12 551

 

14 393

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss)/income

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

(13 137

)

(455

)

(3 534

)

11 587

 

Net fair value (loss)/gain on financial instruments

 

(1 529

)

(2 987

)

207

 

415

 

Other comprehensive (loss)/income for the period

 

(14 666

)

(3 442

)

(3 327

)

12 001

 

Total comprehensive income for the period

 

21 266

 

37 189

 

9 316

 

25 955

 

Less comprehensive loss/(income) for the period attributable to the noncontrolling interests

 

783

 

1 249

 

(138

)

(355

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income for the period attributable to owners of the Company

 

22 049

 

38 438

 

9 178

 

25 601

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, in thousands - basic

 

1 989 289

 

1 988 732

 

1 989 728

 

1 988 734

 

Earnings per share attributable to the Group - basic:

 

 

 

 

 

 

 

 

 

EPS from continuing operations

 

19,85

 

22,46

 

7,72

 

7,58

 

EPS from discontinued operation

 

- 1,69

 

- 1,16

 

- 1,41

 

- 0,35

 

Total EPS - basic

 

18,15

 

21,30

 

6,31

 

7,23

 

Weighted average number of common shares outstanding, in thousands - diluted

 

1 990 175

 

1 989 953

 

1 990 171

 

1 989 955

 

Earnings per share attributable to the Group - diluted:

 

 

 

 

 

 

 

 

 

EPS from continuing operations

 

19,84

 

22,45

 

7,72

 

7,58

 

EPS from discontinued operation

 

- 1,69

 

- 1,16

 

- 1,41

 

- 0,35

 

Total EPS - diluted

 

18,15

 

21,28

 

6,31

 

7,23

 

 

13



 

MOBILE TELESYSTEMS

CONSOLIDATED  STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED September 30, 2016 AND 2015

 

(Amounts in millions of RUB)

 

 

 

Nine months ended

 

Nine months ended

 

 

 

September 30, 2016

 

September 30, 2015

 

 

 

 

 

 

 

Profit for the period

 

35 932

 

40 631

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

Depreciation and amortization

 

62 869

 

61 369

 

Finance income

 

(4 186

)

(6 698

)

Finance costs

 

21 965

 

19 380

 

Income tax expense

 

10 926

 

10 789

 

Currency exchange (gain)/loss

 

(3 058

)

3 238

 

Change in fair value of financial instruments

 

(243

)

(91

)

Amortization of deferred connection fees

 

(678

)

(1 044

)

Share of the profit of associates

 

(1 412

)

(912

)

Inventory obsolescence expense

 

877

 

131

 

Allowance for doubtful accounts

 

1 800

 

2 080

 

Change in provisions

 

9 341

 

6 357

 

Non-cash loss on sale of subsidiary in Uzbekistan

 

2 726

 

 

Other non-cash items

 

(2 376

)

(541

)

 

 

 

 

 

 

Movements in operating assets and liabilities:

 

 

 

 

 

Increase in trade and other receivables

 

(4 961

)

(9 150

)

Decrease/(increase) in inventory

 

230

 

(8 076

)

Decrease/(increase) in VAT receivable

 

387

 

(3 326

)

Decrease in advances paid and prepaid expenses

 

643

 

373

 

(Decrease)/Increase in trade and other payables and other current liabilities

 

(5 118

)

4 360

 

 

 

 

 

 

Dividends received

 

1 688

 

2 205

 

Income taxes paid

 

(4 565

)

(8 034

)

Interest received

 

2 420

 

3 667

 

Interest paid (net of interest capitalised)

 

(20 307

)

(16 697

)

Net cash provided by operating activities

 

104 900

 

100 011

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Acquisition of subsidiary, net of cash acquired

 

(5

)

 

Purchases of property, plant and equipment

 

(36 925

)

(56 528

)

Purchases of intangible assets (net of purchases of 3G licences in Ukraine and 4G licenses in Russia)

 

(20 885

)

(16 529

)

Purchases of 4G licenses in Russia/3G licences in Ukraine

 

(2 598

)

(7 044

)

Proceeds from sale of property, plant and equipment and assets held for sale

 

3 130

 

2 279

 

Purchases of short-term investments

 

(6 595

)

(28 871

)

Proceeds from sale of short-term investments

 

40 039

 

17 962

 

Purchase of other investments

 

(2 721

)

(40 439

)

Proceeds from sale of other investments

 

5

 

97

 

Investments in associates

 

(1 326

)

 

Disposal of discontinued operation, net of cash disposed of

 

(378

)

 

Net cash used in investing activities

 

(28 259

)

(129 073

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Cash flows under capital transactions with related parties

 

3 063

 

(3 408

)

Loan principal paid

 

(33 288

)

(10 080

)

Proceeds from loans

 

1 457

 

49 671

 

Repayment of notes

 

(19 702

)

(2 460

)

Proceeds from issuance of notes

 

10 000

 

 

Notes and debt issuance cost paid

 

(1

)

(1 226

)

Finance lease principal paid

 

(251

)

(313

)

Dividends paid

 

(28 945

)

(39 455

)

Cash outflow under credit guarantee agreement related to foreign-currency hedge

 

(2 032

)

 

Other financing activities

 

1

 

(48

)

Net cash used in financing activities

 

(69 698

)

(7 319

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(3 917

)

(36

)

 

 

 

 

 

 

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

 

3 025

 

(36 417

)

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at beginning of the period, including cash and cash equivalents within assets held for sale of 156 as of January 1, 2015

 

33 464

 

61 566

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, at end of the period

 

36 489

 

25 149

 

 

14



 

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 PJSC

 

 

 

 

 

 

 

By:

/s/ Andrei Dubovskov

 

 

Name:

Andrei Dubovskov

 

 

Title:

CEO

 

 

 

 

Date:   November 17, 2016

 

15