Mobile TeleSystems Announces Financial Results for the First Quarter Ended March 31, 2016

May 19, 2016, 08:00 ET from Mobile TeleSystems (MTS)

MOSCOW, May 19, 2016 /PRNewswire/ --

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 March 31, 2016. 

 

Key Financial Highlights of Q1 2016 

  • Consolidated group revenue increased 7.9% y-o-y to RUB 108.1 bln
  • Total revenue in Russia rose 6.5% y-o-y to RUB 96.3 bln
  • Mobile service revenue in Russia improved 1% y-o-y to RUB 71.1 bln
  • Sales of goods in Russia increased 71% y-o-y to RUB 10.7 bln
  • Active subscriber base grows 3.8% for the Group to 108.3 mln
  • Group adjusted OIBDA remains stable on y-o-y basis at RUB 41.3 bln
  • OIBDA in Russia improved slightly by 1.1% y-o-y at RUB 38.6 bln
  • MTS reiterates its Group guidance for 2016:
    • Group revenue growth of more than 4%
    • Group adjusted OIBDA growth of -2 to +1%
    • Reduction of Group CAPEX to RUB 85 bln

Key Corporate and Industry Highlights 

  • Entered the tower infrastructure market with the intention to develop a new business direction to managing existing tower infrastructure.
  • The Board of Directors recommended that an annual general meeting of shareholders approve annual dividends of RUB 14.01 per ordinary MTS share (RUB 28.02 per ADR) or a total of RUB 28.0 bln based on the full-year 2015 financial results.
  • The Board of Directors confirmed the Company's new dividend policy, which implies a target payout of RUB 25.0 - 26.0 per ordinary MTS share (RUB 50.0 - 52.0 per ADR) per calendar year. The policy guarantees a minimum payout of RUB 20.0 per ordinary MTS share (or RUB 40.0 per ADR). The new policy will be in effect from 2016 - 2018.
  • The Board of Directors tasked management to propose a share buyback program and allocate up to RUB 30 bln over three years.
  • MTS PJSC took possession of shares representing 3.3% of charter capital with an intention to cancel the shares.

Commentary  

Mr. Andrei Dubovskov, President and CEO, commented, "We are pleased to announce the beginning of another successful year for MTS. Group revenue increased nearly 8% to over RUB 108 bln as we continue to execute on our 3D strategy. We continue to see sustained demand for data throughout our key markets, which continues to drive growth in both Russia and Ukraine. Macroeconomic factors and competitive issues continue to impact our performance in many ways, but in sum, our group revenue performance continues to pace the market."

Mr. Dubovskov continued, "Despite continued macroeconomic volatility and increased competition, Group Adjusted OIBDA was roughly stable year-over-year at RUB 41.3 bln. While we see weakness in a number of our foreign subsidiaries due to macroeconomic issues or strategic developments, year-over-year growth in Russia OIBDA drove the group performance."

Mr. Vasyl Latsanych, Chief Marketing Officer, commented, "For the year, total revenue in Russia increased by 6.5% to RUB 96.3 bln. Our mobile business revenue grew 6.6% as we see a continuation of trends that had previously defined our growth, in particular stronger data usage due to both the growth of customer usage and migration to data plans as smartphone penetration increased to 50.3%. The implementation of our retail strategy in Russia in the face of increased competitor behavior has led to higher handset sales and a 3.7% growth in subscribers as we focus more on sales through our proprietary retail channels."

Mr. Latsanych continued, "In our fixed-line business, revenue increased slightly by 0.3% to RUB 15.4 bln. Growth continues to be driven by our increasing market share in B2C markets, in particular in Moscow where our broadband and pay-tv market shares continue to increase."

"In Ukraine, revenue for the period improved by nearly 5% to UAH 2.8 bln. The obvious driver is data consumption, which is rising as we have rolled out 3G to 19 regional centers in Ukraine. We see strong take-up of traditional voice tariffs now being offered under the Vodafone brand with revised pricing on international calling."

"Among our foreign subsidiaries, we note that revenue in Armenia fell year-over-year by over 16% as macroeconomic factors continue to impact usage of services such as international calling and roaming. In Turkmenistan, revenue also declined roughly 6% due to a slight decline in the active user base and macroeconomic-driven factors. In Uzbekistan, however, we continue to see strong revenue growth as we further develop our business in the market."

Mr. Alexey Kornya, Vice President, Finance and Investments and Chief Financial Officer, further commented, "Group net income for the period increased 33.3% year-over-year to RUB 14.5 bln. In addition to OIBDA trends, primary factors here include a non-cash FOREX gain for the period of RUB 2.3 bln, due to ruble appreciation vis-à-vis our non-ruble denominated debt and the fact that we had reserves related to cash balances held in distressed banks in Ukraine in Q1 2015."

"Free cash flow for the period amounted to RUB 20.5 bln, an increase of 37% year-over-year for the period. CAPEX spending of RUB 18 bln, or 28% lower than Q1 in 2015, was a key factor, as cash flows from operations was relatively stable. As we guided in March, we aim to reduce overall CAPEX spending this year to RUB 85 bln, which will support free cash flow this year."

"In Q1, the Board of Directors confirmed the Company's new dividend policy and recommended dividend payments for 2015 fiscal year. Under the new dividend policy, management sets a target payout of RUB 25.0 - 26.0 per ordinary MTS share (RUB 50.0 - 52.0 per ADR) per calendar year and guarantees a minimum payout of RUB 20.0 per ordinary MTS share (or RUB 40.0 per ADR). As part of the company's long-stated ambition to equalize semi-annual payments, the Board recommended a dividend payment of 14.01 rubles per share (or 28.02 per ADR) based on full-year 2015 financial results. In accordance with the new dividend policy, the Board will review proposals for an interim dividend in Fall 2016, which combined with our upcoming proposed payment would translate to 25 to 26 rubles per share."

"Likewise, the Board has tasked management to consider the advisability of a share repurchase program as an additional way to create further shareholder value. As part of such a program, the Group could allocate up to RUB 30 bln to be spent over the next three years on the repurchase of shares."

"By the end of the period, total debt stood at RUB 317 bln, a significant decrease from Q4 2015, but largely due to ruble appreciation in relation to our non-ruble denominated debt as well as some amortized payments in Q1. Our net debt/LTM Adjusted OIBDA declined slightly to 1.1x, a comfortable level for the Company and very low in relation to our peers. We remind investors that 97% of our non-ruble debt position is currently covered by a combination of hedges, short-term deposits and stable long-term investments, all of which are denominated in US dollar or Euro."

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)

16:00 hrs (London time)

11:00 hrs (US Eastern time)

To take part in the conference call, please dial one of the following telephone numbers and quote the confirmation code, 1448760

From Russia + 7 495 213 0978

From the UK: + 44(0)20 3427 1906

From the US: + 1212 444 0896

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: +1 347 366 9565 PIN 1448760

From the UK: +44(0)20 3427 0598 PIN 1448760

This press release provides a summary of some of the key financial and operating indicators for the period ended December 31, 2015. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

 Financial Summary

   
    RUB mln                 Q1'16   Q1'15   y-o-y   Q4'15     q-o-q
    Revenues               108,090 100,182    7,9% 113,325    -4,6%
    Adjusted OIBDA          41,279  41,309   -0,1%  43,495    -5,1%
    - margin                 38,2%   41,2%  -3,0pp   38,4%   -0,2pp
    Operating profit        21,031  19,163    9,7%  18,876    11,4%
    - margin                 19,5%   19,1%   0,4pp   16,7%    2,8pp
    Net profit              14,507  10,887   33,3%   7,135   103,3%
    - margin                 13,4%   10,9%   2,5pp    6,3%    7,1pp

 

Russia Highlights

   
    RUB mln                 Q1'16   Q1'15   y-o-y   Q4'15     q-o-q
    Revenues[1]             96,302  90,423    6,5% 102,537    -6,1%
    - mobile                71,132  70,521    0,9%  74,928    -5,1%
    - fixed                 15,369  15,319    0,3%  15,513    -0,9%
    - integrated services    2,492     n/a     n/a     876   184,5%
    -sales of goods         10,700   6,258   71,0%  13,840   -22,7%
    OIBDA                   38,583  38,171    1,1%  41,116    -6,2%
    - margin                 40,1%   42,2%  -2,1pp   40,1%    0,0pp
    Net profit              15,000   9,109   64,7%  11,817    26,9%
    - margin                 15,6%   10,1%   5,5pp   11,5%    4,1pp

 

Ukraine Highlights

   
    UAH mln                 Q1'16   Q1'15   y-o-y   Q4'15     q-o-q
    Revenues                 2,761   2,631    4,9%   2,405    14,8%
    Adjusted OIBDA             803   1,238  -35,1%     885    -9,3%
    - margin                 29,1%   47,0% -17,9pp   36,8%   -7,7pp
    Net profit                 275   1,096  -74,9%     412   -33,3%
    - margin                 10,0%   41,6% -31,6pp   17,1%   -7,1pp

 

Armenia Highlights

   
    AMD mln                 Q1'16   Q1'15   y-o-y    Q4'15    q-o-q
    Revenues                14,151  16,921  -16,4%    16,481   -14,1%
    Adjusted OIBDA           5,618   8,147  -31,0%     7,629   -26,4%
    - margin                 39,7%   48,1%  -8,4pp     46,3%   -6,6pp
    Net profit/(loss)          239   2,420  -90,1%  (17,119)      n/a
    - margin                  1,7%   14,3% -12,6pp       n/a      n/a

 

Turkmenistan Highlights

   
    TMT mln                 Q1'16   Q1'15   y-o-y   Q4'15     q-o-q
    Revenues                    67      72   -6,4%      75   -10,3%
    OIBDA                       24      26   -7,7%      28   -16,0%
    - margin                 35,5%   36,0%  -0,5pp   37,9%   -2,4pp
    Net profit                  11      12   -5,8%      15   -25,7%
    - margin                 16,8%   16,7%   0,1pp   20,3%   -3,5pp

 

Uzbekistan Highlights

   
    UZS mln                   Q1'16      Q1'15   y-o-y     Q4'15    q-o-q
    Revenues                  85,241    19,292  341,8%    82,384     3,5%
    OIBDA                      5,731  (38,819)     n/a     2,583   121,9%
    - margin                    6,7%       n/a     n/a      3,1%    3,6pp
    Net loss                (12,507)  (41,853)     n/a  (22,071)      n/a
    - margin                     n/a       n/a     n/a       n/a      n/a

 

Belarus Highlights

   
    BYR bln                  Q1'16   Q1'15   y-o-y   Q4'15    q-o-q
    Revenues                 1,489   1,174   26,8%   1,542    -3,4%
    Adjusted OIBDA             681     640    6,4%     700    -2,8%
    - margin                 45,7%   54,5%  -8,8pp   45,4%    0,3pp
    Net profit                 397     478  -17,0%     513   -22,6%
    - margin                 26,7%   40,7% -14,0pp   33,3%   -6,6pp

 

CAPEX Highlights

   
    RUB mln                                 FY 2015         3M 2016
    Russia[2]                                79,619          16,490
    - as % of rev                             20.4%           17.1%
    Ukraine[3]                               12,427           1,590
    - as % of rev                             44.1%           19.9%
    Armenia                                   1,371              99
    - as % of rev                             15.2%            4.6%
    Turkmenistan                                500              34
    - as % of rev                              9.8%            2.4%
    Uzbekistan                                2,195             157
    - as % of rev                             47.6%            7.1%
    Group                                    96,111          18,371
    - as % of rev                             22.3%           17.1%

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, Central and Eastern Europe. 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, Uzbekistan 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. Attachments to the First 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 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 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 operations as follows:

   
    Group (RUB mln)               Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating profit             19,163  22,501  27,319  18,876   21,031
    Less: Gain from reentrance
    in Uzbekistan                             -       -       -        -
    Add: Provision for cash
    balances deposited in
    distressed Ukrainian banks    1,698       -       -       -        -
    Add: Loss from impairment
    of goodwill in Armenia            -       -       -   3,516        -
    Adjusted operating profit    20,861  22,501  27,319  22,392   21,031
    Add: D&A                     20,448  20,221  20,700  21,103   20,248
    Adjusted OIBDA               41,309  42,722  48,019  43,495   41,279

   
    Russia (RUB mln)         Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating profit        21,091  23,728  27,275  23,481   21,599
    Add: D&A                17,080  17,517  17,252  17,634   16,984
    OIBDA                   38,171  41,245  44,527  41,115   38,583

   
    Ukraine (RUB mln)             Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating profit                693   1,190   1,675   1,158      795
    Add: Provision for cash
    balances deposited in
    distressed Ukrainian banks    1,698       -       -       -        -
    Adjusted operating profit     2,391   1,190   1,675   1,158      795
    Add: D&A                      1,344   1,107   1,358   1,390    1,557
    Adjusted OIBDA                3,735   2,297   3,032   2,548    2,351

   
    Armenia (RUB mln)             Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating profit/ (loss)        436     412     680 (3,122)      120
    Add: Loss from impairment
    of goodwill in Armenia            -       -       -   3,516        -
    Adjusted operating profit       436     412     680     394      120
    Add: D&A                        623     525     626     656      737
    Adjusted OIBDA                1,059     937   1,306   1,050      857

   
    Turkmenistan (RUB mln)    Q1'15   Q2'15   Q3'15   Q4'15     Q1'16
    Operating profit            252     237     326     330       278
    Add: D&A                    205     165     203     209       232
    OIBDA                       458     402     529     538       510

   
    Uzbekistan (RUB mln)   Q1'15    Q2'15   Q3'15   Q4'15     Q1'16
    Operating loss        (2,134) (1,373) (1,404) (1,163)     (607)
    Add: D&A                1,209     917   1,275   1,228       760
    OIBDA                   (925)   (455)   (128)      65       154

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

   
    Group                         Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating margin              19.1%   21.9%   23.7%   16.7%    19.5%
    Add: Provision for cash
    balances deposited in
    distressed Ukrainian banks     1.7%       -       -       -        -
    Add: Loss from impairment
    of goodwill in Armenia            -       -       -    3.1%        -
    Adjusted operating margin     20.8%   21.9%   23.7%   19.8%    19.5%
    Add: D&A                      20.4%   19.7%   18.0%   18.6%    18.7%
    Adjusted OIBDA margin         41.2%   41.6%   41.7%   38.4%    38.2%

   
    Russia                   Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating margin         23.3%   25.2%   26.2%   22.9%    22.4%
    Add: D&A                 18.9%   18.6%   16.6%   17.2%    17.6%
    OIBDA margin             42.2%   43.7%   42.8%   40.1%    40.1%

   

    Ukraine                       Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating margin               8.8%   20.2%   22.5%   16.7%     9.9%
    Add: Provision for cash
    balances deposited in
    distressed Ukrainian banks    21.5%       -       -       -        -
    Adjusted operating margin     30.2%   20.2%   22.5%   16.7%     9.9%
    Add: D&A                      17.0%   18.8%   18.2%   20.0%    19.5%
    Adjusted OIBDA margin         47.3%   38.9%   40.7%   36.7%    29.4%

   
    Armenia                       Q1'15   Q2'15   Q3'15   Q4'15    Q1'16
    Operating margin              19.8%   20.1%   26.9%     n/a     5.6%
    Add: Loss from impairment
    of goodwill in Armenia            -       -       -  155.0%        -
    Adjusted operating margin     19.8%   20.1%   26.9%   17.4%     5.6%
    Add: D&A                      28.3%   25.7%   24.8%   28.9%    34.2%
    Adjusted OIBDA margin         48.1%   45.8%   51.7%   46.3%    39.7%

   
    Turkmenistan            Q1'15   Q2'15   Q3'15   Q4'15     Q1'16
    Operating margin        19.8%   22.0%   24.3%   23.4%     19.4%
    Add: D&A                16.1%   15.4%   15.1%   14.8%     16.2%
    OIBDA margin            36.0%   37.4%   39.4%   38.1%     35.6%

   
    Uzbekistan              Q1'15    Q2'15   Q3'15  Q4'15     Q1'16
    Operating margin            -       -       -     n/a       n/a
    Add: D&A                    -       -       -   61.1%     34.1%
    OIBDA margin                -       -       -     n/a      6.9%

*** 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:

   
                                                     As of Dec 31,     As of Mar 31,
    RUB mln                                                  2015              2016
    Current portion of LT debt and of finance
    lease obligations                                      54,346            46,273
    LT debt                                               282,435           259,968
    Finance lease obligations                              11,231            10,650
    Total debt                                            348,012           316,891
    Less:
    Cash and cash equivalents                              33,464            44,389
    ST investments                                         49,840            30,961
    LT deposits                                            30,677            28,886
    Effects of hedging of non-ruble denominated
    debt                                                   18,174            14,636
    Net debt                                              215,857           198,019

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

   
                                                   For the three      For the three
                                                    months ended       months ended
    RUB mln                                         Mar 31, 2015       Mar 31, 2016
    Net cash provided by operating activities              39,115            39,076
    Less:
    Purchases of property, plant and equipment           (21,886)          (13,656)
    Purchases of intangible assets[4]                     (3,539)           (4,715)
    Proceeds from sale of property, plant and
    equipment                                               1,291             1,153
    Investments in associates                                   -           (1,326)
    Free cash flow                                         14,981            20,532

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

   
                                          Nine months    Three months   Twelve months
                                                ended   ended Mar 31,           ended
    RUB mln                              Dec 31, 2015        2016        Mar 31, 2016
                                                    A               B       C = A + B
    Net operating profit                       68,696          21,031          89,727
    Add: Impairment of goodwill in
    Armenia                                     3,516               -           3,516
    Add: D&A                                   62,024          20,248          82,272
    LTM ADJUSTED OIBDA                        134,236          41,279         175,515

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.

   
    MOBILE TELESYSTEMS
    CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
    AS OF MARCH 31,2016 AND AS OF DECEMBER 31,2015

    (Amounts in millions of RUB)

                                                                     As of March 31,  As of December 31,
                                                                                 2016               2015
    NON-CURRENT ASSETS:
    Property, plant and equipment                                             292 949            302 662
    Investment property                                                           363                364
    Intangible assets                                                         107 925            109 064
    Investments in associates                                                   8 938              9 299
    Deferred tax assets                                                         8 668              9 287
    Other non-financial assets                                                    503                480
    Other investments                                                          32 884             34 667
    Accounts receivable (related parties)                                       3 424              3 335
    Other financial assets                                                     20 228             25 203
    Total non-current assets                                                  475 882            494 361

    CURRENT ASSETS:
    Inventories                                                                12 583             14 510
    Trade and other receivables                                                36 060             34 542
    Accounts receivable (related parties)                                       5 975              6 326
    Short-term investments                                                     30 961             49 840
    VAT receivable                                                              9 792              9 815
    Income tax assets                                                           4 468              5 190
    Assets held for sale                                                          826                549
    Advances paid and prepaid expenses, other
    current assets                                                              4 080              4 781
    Cash and cash equivalents                                                  44 389             33 464
    Total current assets                                                      149 134            159 017

    Total assets                                                              625 016            653 378

    EQUITY:
    Equity attributable to equity holders                                     165 415            160 115
    Non-controlling interests                                                   7 568              8 256
    Total equity                                                              172 983            168 371

    NON-CURRENT LIABILITIES:
    Borrowings                                                                269 256            292 168
    Deferred tax liabilities                                                   28 036             27 346
    Provisions                                                                  2 713              2 565
    Other financial liabilities                                                   654 676
    Other non-financial liabilities                                             4 234              4 342
    Total non-current liabilities                                             304 893            327 097

    CURRENT LIABILITIES:
    Borrowings                                                                 45 663             53 701
    Provisions                                                                 10 373              7 863
    Trade and other payables                                                   56 301             57 756
    Accounts payable (related parties)                                          1 558              1 809
    Income tax liabilities                                                      1 379                831
    Other financial liabilities                                                 8 054              9 778
    Other non-financial liabilities                                            23 812             26 172
    Total current liabilities                                                 147 140            157 910

    Total equity and liabilities                                              625 016            653 378

   
    MOBILE TELESYSTEMS
    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
    FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

    (Amounts in millions of RUB except per share amount)

                                                                         Three months ended   Three months ended
                                                                              March 31, 2016      March 31, 2015

    Service revenue                                                                   97 327              93 810
    Sales of goods                                                                    10 763               6 372
                                                                                     108 090             100 182

    Cost of services                                                                (34 598)            (32 372)
    Cost of goods                                                                    (9 746)             (4 686)
    Selling, general and administrative expenses                                    (23 667)            (22 295)
    Depreciation and amortization expense                                           (20 248)            (20 448)
    Other operating income/expense                                                       499               (516)
    Operating share of the profit of associates                                          701                 996
    Provision for cash balances deposited in distressed
    Ukrainian banks                                                                        -             (1 698)

    Operating profit                                                                  21 031              19 163

    Currency exchange gain or (loss)                                                   2 273             (3 509)

    Other (expenses)/income:
    Finance income                                                                     1 696               2 326
    Finance costs                                                                    (6 734)             (6 048)
    Other expenses                                                                     (686)                 (5)
    Total other expenses, net                                                        (5 724)             (3 727)

    Profit before tax                                                                 17 580              11 927

    Income tax expense                                                               (3 263)             (1 938)

    Profit for the period                                                             14 317               9 989

    Loss for the period attributable to non-controlling
    interests                                                                            190                 898

    Profit for the period attributable to owners of the
    Company                                                                           14 507              10 887

    Other comprehensive income/(loss)
    Items that may be reclassified subsequently to
    profit or loss
    Exchange differences on translating foreign
    operations                                                                       (8 174)             (9 364)
    Net fair value (loss)/gain on financial instruments                              (1 605)             (2 591)
    Other comprehensive (loss)/income                                                (9 779)            (11 955)
    Total comprehensive income/(loss) for the period                                   4 538             (1 966)
    Less comprehensive loss for the period attributable
    to the noncontrolling interests                                                      688                 744

    Comprehensive income/(loss) for the period
    attributable to owners of the Company                                              5 226             (1 222)

    Weighted average number of common shares
    outstanding, in millions - basic                                               1 988 711           1 988 730
    Earnings per share attributable to the Group -
    basic:                                                                              7,29                5,47
    Weighted average number of common shares
    outstanding, in millions - diluted                                             1 990 178           1 989 951
    Earnings per share attributable to the Group -
    diluted:                                                                            7,29                5,47

   
    MOBILE TELESYSTEMS
    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
    FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

    (Amounts in millions of RUB)

                                                                                         Three months ended   Three months ended
                                                                                             March 31, 2016       March 31, 2015

    Profit for the period                                                                             14 317               9 989

    Adjustments for:
    Depreciation and amortization                                                                     20 248              20 448
    Finance income                                                                                   (1 696)             (2 326)
    Finance costs                                                                                      6 734               6 048
    Income tax expense                                                                                 3 263               1 938
    Currency exchange (gain)/loss                                                                    (2 273)               3 509
    Change in fair value of financial instruments                                                      (118)                   -
    Amortization of deferred connection fees                                                           (281)               (287)
    Share of the profit of associates                                                                   (63)               (793)
    Inventory obsolescence expense                                                                       231                  30
    Allowance for doubtful accounts                                                                      398                 711
    Change in provisions                                                                               3 579               2 002
    Other non cash items                                                                               (754)               (180)

    Movements in operating assets and liabilities::
    Increase in trade and other receivables                                                          (5 431)             (2 884)
    Decrease/(increase) in inventory                                                                   1 624               (123)
    Increase in VAT receivable                                                                         (200)               (247)
    Decrease in advances paid and prepaid expenses                                                       535                 986
    Increase in trade and other paybles and other current liabilities                                  3 312               2 540

    Dividends received                                                                                   661                 576
    Income taxes paid                                                                                (1 338)             (1 679)
    Interest received                                                                                  1 324               1 194
    Interest paid (net of interest capitalised)                                                      (4 996)             (2 337)
    Net cash provided by operating activities                                                         39 076              39 115

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property, plant and equipment                                                      (13 656)            (21 886)
    Purchases of intangible assets (net of purchases of 3G licences in Ukraine and
    4G licenses in Russia)                                                                           (4 715)             (3 539)
    Purchases of 4G licenses in Russia/3G licences in Ukraine                                        (2 570)             (7 044)
    Proceeds from sale of property, plant and equipment and assets held for sale                       1 153               1 291
    Purchases of short-term investments                                                                (801)            (21 390)
    Proceeds from sale of short-term investments                                                      16 152               1 353
    Purchase of other investments                                                                       (31)            (39 831)
    Proceeds from sale of other investments                                                                -                  97
    Investments in associates                                                                        (1 326)                   -
    Net cash used in investing activities                                                            (5 794)            (90 949)

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Cash flows under capital transactions with related parties                                             -                 363
    Loan principal paid                                                                             (18 549)             (6 429)
    Proceeds from loans                                                                                  213              43 498
    Repayment of notes                                                                                 (505)                   -
    Notes and debt issuance cost paid                                                                      -             (1 112)
    Finance lease principal paid                                                                       (104)               (143)
    Cash outflow under credit guarantee agreement related to foreign-currency
    hedge                                                                                            (1 034)                   -
    Other financing activities                                                                             2                   -
    Net cash provided by financing activities                                                       (19 977)              36 177

    Effect of exchange rate changes on cash and cash equivalents                                     (2 380)             (2 133)

    NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS:                                           10 925            (17 790)

    CASH AND CASH EQUIVALENTS, at beginning of period                                                 33 464              61 566

    CASH AND CASH EQUIVALENTS, at end of period                                                       44 389              43 776

[1] Revenue, net of intercompany between mobile, fixed and integrated services

[2] 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

[3] Excluding purchase of 3G license in Ukraine in the amount of RUB 7.0 bln in 2015

[4] Excluding purchases of 3G license in Ukraine in the amount of RUB 7.0 bln in Q1 2015 and 4G licenses in Russia in the amount of RUB 2.6 bln in Q1 2016

SOURCE Mobile TeleSystems (MTS)