Mobile TeleSystems Announces Financial Results for the Fourth Quarter and Full Year Ended December 31, 2013

MOSCOW, March 18, 2014 /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  and  full  year  ended  December  31,  2013.

Key  Financial  Highlights  of  Q4  2013  and  FY  2013

• Consolidated Group revenues increased 5% y-o-y to RUB 398 billion
• Mobile service revenue in Russia rose 7% y-o-y to RUB 273 billion
• Data traffic revenue in Russia grew 43% y-o-y to RUB 47 billion
• Consolidated OIBDA^[1] of RUB 45 billion increased 8% y-o-y to RUB 175 billion with 43.9% OIBDA margin
• Consolidated net income^[2] of RUB 20 billion in Q4 2013 and a net income of RUB 80 billion in FY 2013
• Free cash-flow from continuing operations^[3] grew 52% to RUB 69 billion for FY 2013

Key  Corporate  and  Industry  Highlights

• Launched LTE networks in Pskov Region, Kirov Region, North Ossetia-Alania, Khabarovsk Krai, Udmurtia, Zabaikalsky Krai, Amur Krai, Rostov region, Kaluga region, Novosibirsk region, Tatarstan and St. Petersburg
• Launched sales of iPhone 5s/5c in the MTS retail network
• Through its MGTS subsidiary, MTS divests non-core real estate assets through sale of 51% stake in Business Nedvizhimost CJSC for RUB 3.2 billion
• Changed the terms of credit agreements with Sberbank for two non-revolving lines of credit in the amount of RUB 80 billion
• Redeemed remaining amount of Series 01 ruble-denominated bond
• Repurchased Series 03 ruble-denominated bonds in the amount of approximately RUB 3.9 billion
• Paid out 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
• Announced new 3D Strategy: Data, Differentiation, Dividends
• Concluded a credit facility with Citibank Europe PLC and Swedish Export Credit Corporation for up to $300 million^[4] supported by Sweden's Exportkreditnamnden (EKN)

Outlook  for  FY2014

MTS expects revenue growth for the Group of 3-5% for 2014; key factors may include:

• Growth in data revenues through higher penetration of smartphones and data-enabled devices
• Development of retail product platform and sales of tablets and handsets
• Growth in broadband/pay TV markets in Russia

MTS sees above 2% OIBDA growth for 2014; key factors expected to influence MTS's OIBDA dynamics:

• Revenue growth in core markets
• Adoption rate of data plans for smartphones and tablets
• Sales trends of handsets and accessories
• Competitive factors
• Increasing share of inflation-based expenses

CAPEX spending for 2014 is expected to be 21% of revenue. The investments include network enhancement and key projects:

• On-going roll out of LTE networks throughout Russia
• Enhancements to 3G networks
• Continued deployment of GPON in Moscow and Moscow region
• Network improvements and equipment swaps  in Ukraine
• Maintenance CAPEX in Armenia
• Build out of 3G networks in Turkmenistan

--------------------------------------------------

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. Free Cash Flow from continuing operations excluding one-offs from settlement of proceedings over Bitel LLC in the amount of RUB 4.1 billion

4. RUB 10.9 billion at the date of conclusion

MTS sees significant macroeconomic uncertainty and volatility across its markets of operation, which may cause MTS to revisit its market guidance and, in turn, impact its financial and operating results

Commentary

Mr. Andrei Dubovskov, President and CEO of MTS, commented, "Overall in 2013, revenue for the Group grew by 5% to over 398 billion rubles. In all of our markets we see rising usage of voice and strong data adoption in virtually all customer segments. In Russia, we continue to realize benefits through data adoption from our focus in retail on sales of low-cost devices as we lead the market in data penetration through smartphones. Both internal data and independent sources confirm MTS's leadership in network speed, customer service, brand and other important factors that create our leading customer experience. Unfortunately, we also see macroeconomic factors that have hurt our ability to grow; in particular in Ukraine, macroeconomic uncertainty combined with the absence of 3G likely means that this market may lag the Group's pace of growth. In spite of these developments, we feel confident in our ability to further grow in our core markets, execute our strategy of differentiation and continue to generate value for our shareholders."

Mr. Vasyl Latsanych, MTS Vice President for Marketing, said, "In Q4 2013, in our Russian business, we grew 7% year-over-year. Driving this growth was our mobile business, which grew over 8% year-over-year which, we believe  may be the fastest organic rate of growth in the market based on the publicly available data. One of the key drivers of growth was greater adoption of data plans as smartphone penetration among our active subscribers reached 34%, and our data attach rate increased to over 42%. In Q4 2013, this contributed to an increase in data traffic of 49% year-over-year. Revenue was also aided by a strong holiday performance in our retail chain, where sales improved by 9% quarter-on-quarter. We also registered high-value subscriber additions for the period.  Our sales of SIM-cards continue to be both consistent and sustainable; churn fell slightly to 9.0% for the quarter, a 200 bps reduction from 2012, and MOU increased to 345 minutes. For the year, churn fell to 36.3%, which is a level we haven't seen since 2009 and a marked improvement versus our competitors.Our fixed business recorded 5% growth year-on-year and 9% quarter-on-quarter aided by contributions from MGTS.

Mr. Alexey Kornya, MTS Vice President and Chief Financial Officer, said, "For the year OIBDA grew 8% to 175 billion rubles, which translated to a rate of growth roughly 300 bps faster than topline growth. Overall we showed over 100 bps in improvement in our OIBDA margin through a mix of high-margin revenue growth and sustained improvement in our cost efficiencies.  In Q4, OIBDA grew 11% year-over-year to 45 billion rubles for an OIBDA margin of nearly 43.0% or our highest Q4 margin in recent memory.Reflecting these trends, for the yearOIBDA of MTS Russia increased 7% to 157.7 billion rubles."

Additional  Information

The Company has received a voluntary request for documents and information regarding MTS's business in Uzbekistan from the United States Securities and Exchange Commission (SEC) regarding investigations into the activities of unaffiliated parties.  

This  press  release  provides  a  summary  of  some  of  the  key  financial  and  operating  indicators  for  the  period  ended  December  31,  2013.  For  full  disclosure  materials,  please  visit  http://www.mtsgsm.com/resources/reports/.

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

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.

SOURCE Mobile TeleSystems OJSC

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