Markets and Areas of Presence

Digital Focus

MTS Digital Ecosystem

MTS Ecosystem Verticals and Position in the Russian Market

Key markets by verticals

Telecom

MTS is the largest mobile operator in Russia and a dynamically developing ecosystem.

• 80%+ of the population of the Russian Federation are in the LTE coverage area.
• Over 98% of the populated territory of Russia is covered by all networks.
• Coverage in 83 Russian regions supports NB-IoT.
• Growth in the IoT connections amount exceeded 21%.
• Share of mobile Internet users in the base is more than 68%.
• No. 2 on the fixed-line service market.
• Convergent base growth amounted to more than 17%.

FinTech

The MTS Fintech vertical includes banking, mobile commerce, investments, factoring and a credit broker.

Bank is focusing on retail lending and day-to-day banking with a customer base of 3.5 million people. The growth of the retail loan portfolio of the Bank in 2022 amounted to more than 24%. The share of sales of core products (consumer loans and credit cards) through digital channels exceeded 80% in the reporting period.

Media

Leading video streaming service KION and entertainment content provider

MTS Media produces and distributes original and licensed VOD and TV content via cable/IPTV, satellite TV and OTT platform.

Priority areas for MTS Media development:

• developing the KION streaming platform — deep integration into the MTS ecosystem and strengthening the offer through high-quality own content and exclusive partner content;
• customer base growth in the OTT and IPTV segments at a faster pace than the market;
• maintaining market share in stable historical segments of cable and satellite TV;
• using Big Data toolkit to improve the customized interface convenience and the quality of TV content recommendations and, as a result, to improve the long-term relationship with the customer.

Retail

All-Russian consumer electronics retail chain (B&M + e-commerce) with a long-term strategy for sustainable rate of return. The largest telecom retailer in the Russian Federation (in sales of mobile phones). A strong brand built on trust and goodwill.

• 60 mln+ transactions per year
• 200 million+ people — annual store traffic

Vectors of the MTS retail chain strategic development:

• MTS ecosystem entry point;
• expansion of financial services (+online);
• 100% omnichannel approach;
• implementation of the best industry practices;
• expansion of the product range, complementary to the MTS ecosystem.

MTS Web Services (MWS)

The strategic focus of MWS is to become the leading private provider of digital infrastructure and cloud solutions in Russia.

• +30% increase in the product portfolio
• +15% major customers

Strategic MWS targets:

• using a unique combination of telecom network across the country with data center infrastructure to provide best-in-class innovative cloud and network B2B services;
• performance improvement and cost optimization in high-tech and IT infrastructure;
• gaining a leading position in the Cloud and Edge Cloud.

Entertainment

MTS Entertainment (MTS Live brand) is a unit within the MTS Group and a part of MTS ecosystem created to develop projects in the field of entertainment and manage Company’s assets in this segment.

Areas of Activity

• holding your own offline and online events;
• control of ticket operators and a network of own concert venues;
• partnership with theatres;
• investments in own performances and musicals;
• in 2022, the total number of tickets sold amounted to 6.4 million.

MTS Live customers get access to all the MTS ecosystem benefits: from convenient authorization using MTS Login or easy MTS Pay payment in the mobile app to special MTS Premium subscription offers and the ability to accumulate or write off MTS Cashback program points for purchases in the MTS online store, communication services, KION, MTS Music, MTS Bank, etc.

MTS Marketer

MTS Marketer is a service for independent targeted messaging and Internet advertising launch. The service is based on MTS Big Data: depersonalized data about the operator’s subscribers, which allow displaying advertising only to the audience that may be interested in it.

• +22% — revenue growth in Q4 2022 to Q4 2021.
• +73% — growth in the number of registered customers.
• +62% — growth in the volume of implemented advertising campaigns.
• +115% — increase in the number of launched advertising campaigns in Digital.

MTS Tourism

A new business line has appeared in the MTS ecosystem — MTS Travel company, which creates and develops services for travelers across Russia and the world: services for booking hotels, accommodation and tickets, tourist and sightseeing services, rental and leasing of transport, organization of sports leisure.

In 2022, MTS Travel booking service was launched with the following features:

• a choice of 14,000 hotels in Russia;
• booking hotels in Turkey;
• booking payment with a Russian bank card of any payment system;
• cashback up to 5% of the booking price.

In March 2023, the first version of the MTS Travel mobile application was launched.

MTS Travel’s strategy for 2023 is centered around the development of a hotel booking showcase for independent travelers.

• Integration with MTS ecosystem products (members of MTS Cashback program can spend cashback for booking on gadgets, communications and other discounts in MTS services and with partners).
• Development of an own travel media (entry points to the hotel booking service and assistance to customers in choosing and organizing a trip). As part of travel media, online travel guides for several regions of Russia have already been launched, which MTS subscribers receive in a welcome SMS upon arrival in the region.

MTS Smart Home

Combining MTS Big Data technologies, experience in implementing projects in the field of video analytics systems and security solutions of “Smart Home” from Gulfstream opens up new opportunities in the development of a smart and comfortable home for MTS customers.

• +70% growth in the total number of new Gulfstream customers in 2022 compared to 2021
• +9% growth of active users of Gulfstream services in 2022 compared to 2021

Development areas:

• security (protection against intrusion and accidents, smart insurance, climate control, housing and communal services payment);
• video analytics;
• geolocation and assistance services (medical assistance, SOS button, geo-tracking of children and relatives);
• home services (interaction with management companies, delivery, household services, etc.).

MTS Belarus

In Belarus, the 2022 revenue volume reached BYN 1449.4 million (an increase of 6.8% by 2021) mainly due to the growth of income from communication services and income from the sale of phones and accessories. OIBDA grew by 9.2%, reaching BYN 757.6 million in 2022. The main growth driver of the indicator is income from communication services. The subscriber base remained largely unchanged at the level of 5.7 million users at year-end 2022.

The principal development vectors are as follows:

• maintaining positive growth rates of mobile business;
• preserving the subscriber base;
• building up leadership positions in retail;
• uninterrupted provision of high-quality communication services;
• development of the Cloud area.

MTS Armenia

In Armenia, 2022 revenue reached AMD 51.0 billion (an increase of 4.1% compared to 2021), which is mainly due to revenue growth from providing communication services. The OIBDA indicator for 2022 reached AMD 27.5 billion (an increase of 6.4% compared to 2021). The volume of the subscriber base at the end of 2022 increased slightly +1.6% and amounted to 2.3 million users.

MTS Armenia is undergoing a digital transformation from a telecommunications operator to a company offering comprehensive digital services, which corresponds to global trends in the development of the industry, as well as the growing needs and expectations of customers. The company offers a number of gaming, entertainment, educational applications, e-wallet, mobile TV, cloud services and solutions for effective business and financial management, etc.

Key Quantitative Indicators by MTS Business Segment

Ecosystem

• Ecosystem revenue amounted to more than RUB 117 billion.
• Ecosystem customers reached 13.5 million at the end of the year, which is 53% more than in 2021.
• Number of 1M active users of the My MTS app reached 26.4 million users at year-end.
• Growth of users with an MTS Premium subscription was +71%.
• Increase in readiness to recommend the MTS Cashback program in Q4 2022 to Q4 2021 by 2.7 times.
• Average number of ecosystem products per customer increased from 1.43 in the Q4 2021 to 1.6 in Q4 2022.

Telecom

• Revenue from providing communication services in Russia grew by 4.6% reaching RUB 435.6 billion.
• The customer base of mobile business in Russia remained at the level of 80.0 million users as of year-end.
• Sales of phones and accessories decreased by 37% reaching RUB 43.6 billion at year-end.

FinTech

• OIBDA amounted to RUB 5 billion
• Number of MTS Bank customers amounted to 3.5 million at year-end.
• Number of 3M active MTS Bank mobile app users amounted to 2 million at year-end.

Media

• Revenue of MTS Media amounted to RUB 15.9 billion, an increase of 15.6% as compared to 2021.
• The number of KION users reached 6.6 million as of year-end, the growth dynamics reached +63% as compared to 2021.
• The cumulative number of Pay TV subscribers reached 11.1 million at year-end.

2022 Highlights

Corporate News

In March, MTS announced the establishment of the ESG Center, which is responsible for the formation and effective implementation of the ESG strategy, coordinates the implementation of key ESG areas, facilitates the implementation of ESG aspects in the Company’s business processes and promotes the sustainable development agenda in the MTS Group

In May, the Government Commission for the Control of Foreign Investments in the Russian Federation (the “Commission”) upheld the MTS’ request to maintain the American Depositary Receipts Program (“ADR”). The Commission allowed MTS to continue applying for the company’s ADRs outside Russia until July 12, 2022 inclusive.

In June, MTS sent an application to JPMorgan Chase Bank, N.A., a depository bank under the current ADR program, to terminate the depository agreement from July 13, 2022.

In August, MTS received a notification from the New York Stock Exchange (“NYSE”) that NYSE employees had begun the procedure of delisting the ADRs of MTS PJSC. In August, MTS received a notification from the New York Stock Exchange that the ADRs of MTS PJSC had been delisted on August 8, 2022. Under the terms of the Depository Agreement, the guaranteed period for converting MTS PJSC’s ADRs into MTS PJSC ordinary shares ended on January 12, 2023 (inclusive).

In August, MTS filed a notification to CB J.P. Morgan Bank International (LLC) about the start of automatic conversion of ADRs into ordinary shares of MTS PJSC in accordance with the requirements of Russian law. CB “J.P. Morgan Bank International” (LLC) is a Russian depository wherewith a deposit account of the MTS depository program is opened. In the process of automatic conversion, the Russian depositories that accounted for the ADRs debited the accounts of the ADR holders and credited the ordinary shares of MTS PJSC to the accounts of the holders.

In June, the annual general meeting of shareholders (AGMS) was held in the form of absentee voting. Shareholders at the AGMS approved annual dividends based on the Company’s financial results for 2021. Dividends amounted to 33.85 rubles per ordinary share, or a total of RUB 66.3 billion (66,334,910,976.95 rubles), including payments on quasi-treasury shares of MTS. Dividend payments for 2021 in the amount of RUB 48.2 billion ended on August 16, 2022. ADR holders will be entitled to receive dividends after the conversion of depositary receipts into ordinary shares of MTS PJSC in accordance with applicable Russian law, taking into account legal and regulatory restrictions that exist and/or may appear in the future.

Mergers and Acquisitions

In April, the MTS corporate venture fund invested in the online food and beverage ordering service Bartello. The volume of investments amounted to RUB 72 million. Bartello allows ordering and paying for food and drinks online without calling a waiter. The companies plan to provide the opportunity to place online orders in the MTS Live application at concert venues, as well as at music festivals and open-air.

In April, MTS announced a deal to acquire Gulfstream Security Systems JSC (the Gulfstream brand), one of the leaders of the Russian security market, for the comprehensive development of the new MTS Smart Home business vertical. MTS acquired 58.38% of the shares, the transaction amount was RUB 2 billion. Gulfstream provides comprehensive solutions for protection against penetration, fire, water leakage, as well as elements of a Smart Home, being the developer of its own IT platform. Gulfstream solutions can be installed in apartments, private homes, shops and offices.

In July, MTS announced the acquisition of 100% of the Bronevik Group (Bronevik Online LLC and Kompaniya Bronevik LLC) for the development of a new business line of MTS Travel (MTS Travel LLC) in the field of travel and tourism. The Bronevik Group was founded in 2008 and is one of the market leaders in online hotel booking, transfer and related services; it develops private and business tourism, providing hotel and accommodation booking services in Russia and abroad.

In July, MTS announced the closing of a deal to acquire a controlling stake in the Webinar Group (Webinar Meetings, Webinar.ru , We.Study, and COMDI brands), the largest Russian developer of solutions for video meetings, webinars and online events. Founded in 2008, the Webinar Group is a leader among Russian solutions in the video conferencing (VC) and corporate video services market. Webinar services are registered in the registry of domestic software and have their own server infrastructure in Russia.

In August, the MTS corporate venture fund invested in the Belarusian startup LogicLike, an online educational platform for the development of logic and thinking in children. Interactive courses and LogicLike games for the comprehensive development of the child’s intelligence have become available to new and current subscribers of the MTS NETARIF Junior subscription.

In October, MTS and MTS Auto LLC, a 100% subsidiary of MTS, announced investments in the Navitel Group, a Russian provider of navigation and mapping solutions. As a result of the transaction, MTS will be able to form its own geoplatform for the development of ecosystem services and transport solutions. Founded in 2006, the Navitel Group is a developer and distributor of navigation software, an independent provider of geoservices and monitoring services in Russia. The Navitel team is also developing navigation devices and video recorders.

Bonds and Loans

In April, MTS issued two series of exchange-traded bonds on the Moscow Exchange (MOEX) totaling RUB 20 billion: bonds of 001P-20 series for the amount of RUB 10 billion with a maturity of four years and a coupon rate of 11.75%; bonds of the 001P-19 series for the amount of RUB 10 billion with a maturity of three years and a coupon rate of 11.69%. MTS will use these funds for general corporate purposes and optimization of the debt portfolio.

In June, MTS issued exchange-traded bonds of the 001P-21 series with a nominal volume of RUB 10 billion with a circulation period of four years and a coupon rate of 9.65%. The funds raised will be used for general corporate purposes and debt refinancing.

In June, MTS issued exchange-traded bonds of the 001Р-22 series with a nominal volume of RUB 20 billion with a circulation period of four years and a coupon rate of 8.30%.

In November, MTS announced a request for consent regarding Eurobonds maturing in 2023 for consideration and approval of changes in the payment procedure, which will give the right to make direct payments in rubles, and other proposed amendments to the Trust Management Agreement and the terms and conditions of the bonds.

The meeting in the format of a videoconference was held on December 13, 2022. In accordance with the terms of the extraordinary decision, the coupon payment on the bonds dated November 30, 2022 was paid by the Company until January 30, 2023.

In December, MTS issued exchange-traded bonds of the 001Р-23 series with a nominal volume of RUB 15 billion with a circulation period of four years and a coupon rate of 8.40%.

Leadership in Telecommunications

In January, MTS announced the worldʼs first uplink aggregation tests in a 5G pilot network built on the basis of virtualizing network functions on a vRAN radio access network. vRAN solutions will be widely used in 5G networks and in the open radio access architecture Open RAN).

In May, MTS completed work on aggregation on the commercial infrastructure of the Moscow region of all five involved LTE frequency bands, which will allow subscribers to use mobile Internet at speeds up to 800 Mbit/s, and the Company — to use the frequency resource more efficiently and save up to 20% of costs when expanding the network.

Partnerships

In August, MTS announced the development of a new format of partnerships with regional telecom operators to create and promote joint convergent products. The project will allow MTS to enter the market with interesting package services, where local operators are already present, and together with them offer a more in-demand product with several digital services: fixed broadband, mobile communications, KION online cinema and/or IPTV.

In August, MTS and the BelkaCar car-sharing service announced the launch of a series of free audio guides for motorists on the MTS Music platform. The route of the first audio guide will take you from Moscow to the Yasnaya Polyana Estate Museum in the Tula Region.

In September, MTS Entertainment signed agreements on the transfer of management of the Music Media Dome multimedia space in Moscow and the M-1 Arena Concert and Sports Complex in St. Petersburg. The concert venues will become part of the federal MTS Live network and will be named “MTS Live Hall” in Moscow and “MTS Live Arena” in St. Petersburg. As part of the signed agreements, all operational management of the venues is transferred to MTS Entertainment: organization of concerts and leasing of venues for events and shows, ticket sales, operation of bars and restaurants, sponsorship and advertising integrations.

In November, MTS announced the conclusion of a strategic partnership with Rubbles, a Russian provider of business optimization solutions based on Big Data. The Company will jointly develop products for different industries. Rubbles specializes in optimizing business and technological processes based on big data analysis and artificial intelligence. The Company helps automate demand analysis, pricing, process control, as well as personalize customer communications.

Cloud Solutions and Internet of Things

In March, MTS provided the Novolazarevskaya Antarctic Station with an NB-IoT (Internet of Things) standard network. The technologies will help carry out remote monitoring of the state of sea ice, increase the efficiency of scientific research of the Arctic and Antarctic Research Institute and the safety of the station’s activities.

In April, MTS launched the remote monitoring of equipment, Monitoring Events (MONTE) service. This is the first system on the market for monitoring the status of subscriber devices on the Internet of Things (NB-IoT), which allows monitoring the operability of sensors and meters in hard-to-reach areas and avoids the need for regular visits for face-to-face inspections of equipment.

In June, MTS launched a cloud video surveillance service in the form of a flexible “out-of-the-box” solution that allows business customers to quickly establish round-the-clock video monitoring at any facility with a minimum of equipment and costs.

In June, MTS announced the completion of the deployment of the largest federal network of the NB-IoT standard for the Internet of Things in all regions of its presence. The Company plans to become a key provider of IoT services for energy, industrial, agricultural companies, as well as large federal smart city projects.

In June, MTS announced that the GreenBushDC data center, which is part of the MTS infrastructure network, has been certified by the independent international Uptime Institute for Tier III fault tolerance. This status confirms the highest degree of reliability of the constructed facility for the data and equipment of client companies placed in it.

In August, MTS opened a new Data Processing Center (DPC) in Novosibirsk — the first modular data center of MTS in the eastern part of Russia. MTS corporate clients in Siberia will be able to use new capacities for migration of IT systems to the cloud #CloudMTS, data processing and storage, backup, protection against DDoS attacks and other business tasks.

From August to October, MTS successfully implemented a system of continuous monitoring of the climate regime using its own IoT solution “Celsius” in one medical center and a number of cultural facilities in four regions of Russia. Celsius is a portable sensor that monitors temperature, humidity, pressure and indoor air quality.

In November, MTS announced the development of a Smart Click alarm button using Internet of Things technologies to communicate with emergency services, medical personnel, employees of social and retail facilities. The equipment instantly transmits a signal via the NB-IoT network to any platform, works wirelessly and does not require the involvement of specialists for installation and maintenance.

In December, MTS announced the transition of the MTS IoT Hub Internet of Things platform to its own software, which will completely replace foreign solutions in the development of NB-IoT products. The main task of the MTS IoT HUB platform is to provide MTS internal B2B and B2C products with tools for quickly connecting smart devices, receiving telemetry from them, managing these devices and additional analytics directly based on such data. Due to the complete rejection of offers from foreign vendors and the development of the platform based on its own developments, MTS can guarantee the uninterrupted and high-quality operation of its products with Internet of Things support.

Innovations and Products

In April, MTS announced the results of the selection of projects for the technological incubation program: 14 companies will be able to refine their solutions in the field of AR/VR, unmanned vehicles and machine vision, using 5G networks, edge computing technology with the resource and expert support of MTS.

In June, MTS launched MTS Remote Play, a service for remote use of computing capabilities of computers via wired and mobile networks based on edge computing technologies. As a result, users will be able to remotely launch “heavy” games with a high level of signal delay requirements on any gadgets, work with graphics editing programs, video and other services installed on personal productive PCs.

In September, MTS introduced the digital book service “Lines” with a full catalogue of popular classics, modern literature, exclusive publications and author’s podcasts, as well as its own publishing house. The library’s catalogue will include hundreds of thousands of books, audiobooks and magazines. Under the new brand, “Lines” will produce original content, as well as publish foreign bestsellers on exclusive rights.

In November, MTS announced the transition to the technology platform The Platform, which combines all end-to-end IT solutions of the MTS ecosystem. The Platform’s unified technology platform frees IT specialists from routine tasks: configuring system software and databases, monitoring, deployment, allowing them to focus on solving business problems. As a result, up to 30% of the resources of product teams are released by reducing the non-core load.

In November, MTS announced the launch of a beta version of the AppBazar app store for Android OS, in which Russian and foreign developers can host, promote and monetize their services, and users can download applications and pay for them using Russian bank cards or from a mobile phone account. To monetize programs, developers can use various tools, including service of internal in-app purchases, sale of premium versions, subscriptions, and participation in store advertising campaigns.

In December, MTS announced the launch of the decentralized gaming platform MTS Fog Play. It allows owners of high-performance PCs to earn money by renting out the power of their computers through a cloud service. Users who do not have gaming devices can rent a gaming PC and run “heavy” games on smartphones, tablets, set-top boxes and laptops via the Internet.

Significant Events after the Reporting Date

Innovations and Products

In January 2023, MTS announced the launch of the MTS Exolve cloud platform, which is designed for fast and flexible creation of communication services. The platform allows developing own applications for communicating with customers, provides “seamless” integration into existing IT systems and effective management of omnichannel communications.

Mergers and Acquisitions

In February 2023, MTS announced the closing of the acquisition of 67% in the capital of the Buzzoola Group, one of the leading AdTech companies in Russia and the CIS. The purchase of Buzzoola will allow MTS to accelerate the development of its own AdTech area and increase its share in the advertising market. MTS will also be able to include the advertising exchange (AdEx) and the Buzzoola SSP platform in its AdTech circuit, which will complement the Company’s own DSP and DMP solutions (developed under the MTS Marketer umbrella brand).

In March, MTS announced that its subsidiary MTS AI had acquired 49% in the Russian developer of high-tech solutions in the field of access control and ticket systems “Infomatics”. Integration of Infomatics developments in the field of access control, including, for example, its own line of turnstiles and payment terminals, with face recognition technologies and face payment systems (a subsidiary of MTS AI) will allow implementing complex projects for the transport industry, sports and cultural facilities, educational organizations.

In March, MTS announced a deal to acquire 100% of DY Technologies LLC, which is engaged in the construction of a plant for the industrial production of automotive electronics on the territory of the Technopolis Moscow special economic zone (Alabushevo site), with the aim of comprehensive development of the MTS Auto business vertical. The acquisition of the company will allow MTS Auto to use industry technologies and standards for manufacturers of cars and trucks who need to comply with the 719 resolution on localization of the automotive industry.

Private LTE

In January 2023, MTS deployed Russia ‘s largest dedicated LTE technology network for the largest nickel and palladium producer. The network provides communication and telemetry services to more than 800 people and about 500 units of mining equipment at the same time. The use of LTE mobile communication technology has made it possible to significantly expand radio coverage, improve the quality of voice services, increase data transfer speed, ensure the security of communication channels, as well as organize the exchange of multimedia messages.

In April 2023, MTS announced that it would build a dedicated LTE technology network for the gold mining company, the only producer of ore tin in Russia. The deployment of the Private LTE network will allow automating production processes, implementing telemetry, remote control of equipment, transport and drilling and blasting operations, transmitting video information from stationary and mobile video cameras to the dispatcher console and further upgrading the IT infrastructure – creating systems for collecting, processing, storing and transmitting information, as well as providing secure access to centralized IT resources from mobile devices.

MTS Ratings

Credit Ratings

• In January 2023, the Russian National Rating Agency confirmed the MTS credit rating of AAA.ru with stable outlook. Among the factors that influenced the confirmation of the rating, the agency notes the high stability of the presence markets, geographical diversification in the territory of the Russian Federation, moderate debt burden and significant operating profitability.
• In December 2022, the Expert RA Rating Agency confirmed MTS’ credit rating at the ruAAA level with stable outlook. In its message, the agency emphasizes the high level of strategic planning of the MTS Group, the positive results of building a product ecosystem based on the telecom business, as well as low currency risks due to the formation of most of the revenue in Russia and a small share of foreign currency debt.

Sustainable Development Ratings

• In September 2022, AK&M Rating Agency confirmed MTS’ assessment of ESG reporting at the RESG 1 level, which corresponds to the highest level of information disclosure. The Agency noted the structuring of non-financial reporting, as well as a significant improvement in the quality and expansion of the volume of information provided on ESG initiatives and MTS Group’s contribution to sustainable development.
• In November 2022, MTS confirmed the highest category of the “Leaders of Corporate Charity” rating A+ of the Association of Grant-giving Organizations “Donors Forum”.
• In December, MTS received the platinum status of the rating of the best employers in Russia according to Forbes magazine. The expert jury noted the achievements of MTS Group in the areas of “Employees and Society”, “Environment” and “Corporate Governance”. Forbes experts specifically noted MTS’ long-term experience in implementing social projects.
• In December, RAEX awarded the highest rating to MTS annual and ESG reporting with the highest score of “five stars” awarded the highest rating to MTS annual and ESG reporting with the highest score of
• In December 2022, the AK&M Rating Agency assigned MTS the highest sustainable development rating at the A++ level with stable outlook. The ESG rating on the national scale was assigned to the Company for the first time. The Company’s priorities in the field of sustainable development are based on a responsible attitude to the environment, high social responsibility, as well as an ethical corporate governance model.