Mobile TeleSystems Announces Financial Results for the Third Quarter Ended September 30, 2013

MOSCOW, November 19, 2013 /PRNewswire/ --

Mobile TeleSystems OJSC ("MTS" -NYSE: MBT), the leading telecommunications provider in Russia and the CIS, today announces its unaudited US GAAP financial results for the three months ended September 30, 2013.

Key Financial Highlights of Q3 2013

• Consolidated revenues up 4% y-o-y to RUB 103 billion
• Increase in mobile service revenue in Russia of 6% y-o-y to RUB 70 billion
• Data revenue growth of 45% y-o-y to RUB 13 billion
• Consolidated OIBDA^[1] up 5% y-o-y to RUB 46 billion
• Group OIBDA margin improved 0.3 pp y-o-y to 44.8%
• Consolidated net income^[2] of RUB 18 billion
• Free cash-flow^[3] reached RUB 72 billion for the nine months ended September 30, 2013
  
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  1.  See Attachment A for definitions and reconciliation of OIBDA and OIBDA margin to their most directly comparable US GAAP financial measures.
  2.  Attributable to the Group.
  3.  See Attachment B for reconciliation of free cash-flow to net cash provided by operating activity.

Key Corporate and Industry Highlights

• Completed payment of the dividend for the fiscal year 2012, which amounted to total of RUB 30.2 billion or RUB 14.6 per ordinary MTS share (approximately RUB 29.2 per ADR).
• Announced partnership with Nokia Siemens Networks to jointly develop telecommunications infrastructure and build LTE networks in the Moscow region and Russia's Central Federal District
• EGM approved payout of semi-annual dividends of RUB 5.22 per ordinary MTS share (RUB 10.44 per ADR) amounting to the total of RUB 10.8 billion on the basis of the Company's H1 2013 financial and operating results
• Redeemed remaining portion of the RUB 10 billion series 01 bond
• Launched LTE networks in the Pskov Region, Tambov Region, Kirov Region, North Ossetia-Alania, Khabarovsk Krai, Amur Krai, Zabaikalsky Krai and Udmurtia
• Launched sales of iPhone 5s/5c in the MTS retail network
• Appointed Mr. Andrei Smelkov as Vice President for Foreign Subsidiaries, Member of the Executive Board

Revised Outlook for FY2013

Management reiterates Group revenue growth guidance of at least 5%; key factors may include:

• Growth in data revenues through rising penetration of smartphones and modems
• Lower sales of handsets due to reduced sales of high-value devices
• Absence of any 3G licenses in Ukraine
• Macroeconomic developments in core markets

Guidance for OIBDA margin reiterated at >43%, which reflects both expected growth in service revenues as well as anticipated cost pressures:

• Improvements in churn and increased customer loyalty
• Higher labor costs due to expansion of retail and fixed-line networks
• Inflationary pressure in operational expenses

CAPEX guidance for FY2013 remains as percent of revenue of ≈20% driven by:

• Launch of roll-out of LTE networks in regions throughout Russia
• Continued build-out of our GPON network in Moscow
• Sustained improvements in our 3G networks, including the expansion of IP-connected base stations and enablement of HSPA+ connectivity

Commentary

Andrei Dubovskov, President and CEO of MTS, commented, "In the third quarter 2013, we witnessed a continuation of the positive operating trends we have seen over the last quarters. Group revenue for the period reached RUB 103.4 billion, which puts us on pace to reach our guidance of a minimum 5% revenue growth for the year. In Russia revenue grew 4% year-on-year to RUB 91.5 billion. Revenue was boosted by the continued strong performance of our mobile and fixed operations. Mobile service revenues increased by 6% year-on-year to RUB 70.3 billion. Key growth factors include increased data adoption and further monetization of data traffic and messaging revenues."

Alexey Kornya, MTS Vice President and Chief Financial Officer, said, "During the quarter, Group OIBDA increased by 5% year-on-year up to RUB 46.3 billion for an OIBDA margin of 44.8%. Unlike the second quarter, when one-offs increased our margin by 1.9 percentage points, our OIBDA margin was largely unaffected by any significant one-time gains or losses. Adjusted for this fact, our margin in the third quarter 2013 was a little over 1.1 percentage points higher than in the second quarter, which is a common seasonal difference from Q2 to Q3. Group's performance during the quarter sets us on track to realize our OIBDA guidance for the year of at least 43%. In Russia, OIBDA grew in line with revenue 4% year-over-year to RUB 41.5 billion. For the quarter, we delivered stable OIBDA margin of 45.4%. Increasing data revenue combined with stable sequential sales of handsets and accessories continue to offset inflationary pressures, such as rising personnel costs, higher rent and network maintenance costs."

Mr. Kornya added, "Group net income from continuing operations registered at RUB 18.1 billion for margin of 17.5%. Unlike the second quarter, we saw no significant one-off effects from non-operating activities. Overall, year-on-year net income was stable as we realized a USD 100 million non-cash FOREX gain for the period in 2012. Adjusted for this effect, our net profit is stable year-over-year and should be seen as very strong for the period. Free cash flow for the first nine months was RUB 72.2 billion, or an over 51% increase year-over-year. While we expect significant CAPEX spending in the fourth quarter to mitigate these improvements, operating cash flow from continuing operations for the first nine months is also up 17%. This reflects the continuing improvements in cash flow generation we see at MTS."

This press release provides a summary of some of the key financial and operating indicators for the period ended September 30, 2013. For full disclosure materials, please visit http://www.mtsgsm.com/resources/reports/.

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

For further information, please contact in Moscow:

Joshua B. Tulgan
Director, Corporate Finance & Investor Relations
Mobile TeleSystems OJSC
Tel: +7-495-223-2025
E-mail: [email protected]

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

SOURCE Mobile TeleSystems (MTS)