Dear friends and colleagues,

The past year was not easy, nevertheless, in the face of uncertainty and a volatile external situation, we managed to achieve stable results, proving the correctness of the chosen strategy in business diversification and building an ecosystem of services on a stable telecom base.

MTS Group’s revenue for 2022 increased by 2.6% to 541.7 billion rubles — it did not grow at the usual pace, but we felt much better than most of the market. By the end of 2022, the Group’s adjusted OIBDA amounted to 224.3 billion rubles, net profit — to 32.6 billion rubles. These results were influenced by instability in financial markets; at the same time, the OIBDA level was supported by the growth of telecom, fintech and media assets.

I would like to emphasize once again that a stable telecom business as the core of the ecosystem ensures the stability of the entire Group’s activities, as well as supports the development of other areas. In 2022, revenue from MTS communication services in Russia increased by 4.6% year-on-year to 435.6 billion rubles, which was a good indicator for the market. We continue to be the largest mobile operator in Russia by the number of subscribers, we are the second in the subscriber base of fixed business and consistently strengthen our leadership positions in the converged services market. For example, last year we launched a large-scale partnership with regional fixed-line operators to promote joint convergent products, and the number of mass-market broadband customers increased by 4%.

In 2022, the rapid growth of our ecosystem business continued, which became successful a year earlier thanks to the launch of the KION online cinema. Ecosystem revenue increased by 67%, amounting to more than 100 billion rubles. Media verticals (OTT platform and TV), entertainment (organization of concerts and entertainment) and fintech contributed here. With the acquisition of the Bronevik Group, we have successfully launched a promising MTS Travel direction for organizing travel and booking hotels. We have also relaunched the MTS Strings e-book service, which is of great interest.

Ecosystem construction is the most promising direction. It is the user of ecosystem services with subscriptions who brings the Company almost 10 times more today than a standard user of communication services. At the end of 2022, the number of MTS ecosystem customers increased to 13.5 million, which is 52.7% higher year-on-year, and the average number of ecosystem products per customer increased to 1.6 from 1.43 at the end of 2021. In general, ecosystem clients are beginning to generate almost half of the Company’s B2C revenues, and we expect in 2023 further growth of ecosystem indicators.

Speaking about our fintech business, I would like to assure you that, despite the introduction of restrictive measures by a number of foreign governments, this will not affect the provision of financial services to our clients in any way inside the country. Our fintech vertical demonstrated excellent results last year and continues to launch new digital financial products. At the same time, we are making every effort to mitigate possible negative consequences.

A significant part of our business is solutions and services for business customers in telecom and IT. MTS occupies the largest share in the projects of dedicated technological (Private) LTE in Russia, deploying these networks for enterprises of the mining, energy and metallurgical industries. We continued to develop the area of intelligent communications on the basis of our subsidiary MTT, introducing voice robots into the functionality of virtual PBX. Last year, MTS acquired the Webinar Group, which will allow us to create a single universal communication application for video calls and conferences for B2B. At the beginning of this year, the MTS Exolve cloud platform was launched for the rapid and flexible creation of communication services to ensure their seamless integration into existing IT systems and effective management of omnichannel communications.

The business of our subsidiary infrastructure company and cloud solutions provider, MTS Web Services (MWS), is developing dynamically. In 2022, the MWS product portfolio grew by 30%, and the number of major customers increased by 15%. This company offers customers a wide range of cloud services based on 14 data centers across the country and aims to gain leading positions in Cloud and Edge Cloud technologies.

MTS has long moved away from the model of a classic telecom operator and is consistently transforming into an IT company. Over the past few years, we have been focused on developing and promoting innovative digital projects — in addition to cloud technologies, we are actively developing the areas of the Internet of Things (IoT), Big Data and artificial intelligence.

In 2022, MTS completed the deployment of an energy-efficient NB-IoT mobile network in all regions of its presence, ensuring a 64% increase in revenue from the implementation of intelligent IoT solutions in the electric power industry, housing and utilities, logistics and other areas. We have strengthened the area for the development of smart home systems by purchasing control from Gulfstream, a provider of security systems.

With a world-class Big Data team, the company uses big data analytics not only in the construction of its telecom infrastructure and the organization of business processes, but also in commercial projects. For example, last year MTS launched Russia’s first automated “out-of-the-box” solution for analyzing attendance at cultural events based on geo-analytics.

To accelerate the development of new digital products, at the end of last year we switched to a single technology platform, The Platform, which combined all end-to-end IT solutions of the MTS ecosystem. Thanks to the transition to “this very platform”, the Company plans to speed up the launch of new products to the market four times and reduce business downtime due to technological incidents three times.

Building up our IT and Big Data competencies allows MTS to enter new markets and develop an ecosystem of digital services for B2B. This is what the AdTech area is becoming for us. We have an MTS Marketer platform for organizing advertising for various audience segments. Last year we became an advertising data operator, and this year we acquired control in the Buzzoola group, which will strengthen our position in the online advertising market.

Another area that we continue to actively explore is MTS Auto. This subsidiary company specializes in the development of automotive multimedia devices and telematics systems. Last year, through MTS Auto, we invested in the Navitel Group, a provider of navigation and mapping solutions. This will give us the opportunity to form our own geoplatform, independent of other mapping systems, for the development of services and solutions for vehicles.

And finally, information security. We have long strengthened this circuit within the Company and provide customer protection services on the basis of our own Security Operations Center (SOC). Last year, we established a subsidiary in the field of cybersecurity, Serenity Cyber Security, which develops commercial products and solutions in the field of cybersecurity. This is a very popular area today — our customers should understand that they are under reliable protection and use safe services.

To emphasize the innovative spirit of our company, this year MTS announced a global rebranding. The MTS brand has a new logo that will organically accommodate all the products of the ecosystem.

Also, the MTS Group continues to actively improve the compliance system. These positive changes concern both the improvement and automation of internal processes, which require compliance controls, and the transfer of experience gained in this area to internal and external stakeholders. The shift in the focus of the compliance system towards proactive support of business units is bearing fruit in the development of the internal corporate ethical culture of the company. Demonstrating ethical leadership at all levels allows maintaining a high level of compliance culture, which is confirmed by its annual assessment. Maintaining the level of compliance culture and the leadership role of MTS in supporting the best practices of responsible business allows us to ensure sustainable development and protect the company from emerging risks.

Today, despite the sanctions pressure and uncertainty, we are optimistic about the future. The company, as before, will continue to implement the CLV strategy, focusing on the uninterrupted provision of quality services and the development of the digital ecosystem. In recent years, we have concentrated almost the entire business in Russia, our products and services are in demand by tens of millions of our customers more than ever, the company responds quickly, flexibly and effectively to challenges, strengthening its competitive position. And the most important asset of the company is people. We have formed a strong cohesive team of professionals who contribute to the development of the company, the economy of the country and the whole society with their work.

Yours sincerely,
President of MTS