Mobile TeleSystems Announces Financial Results for the Second Quarter Ended June 30, 2013

MOSCOW, August 20, 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 June 30, 2013.

Key Financial Highlights of Q2 2013

• Consolidated revenues up 5% y-o-y to RUB 97 billion
• Increase in mobile service revenue in Russia of 6% y-o-y to RUB 66 billion
• Data revenue growth of 40% y-o-y to RUB 11 billion
• Consolidated OIBDA up 10% y-o-y to RUB 44 billion
• Group OIBDA margin improved 1.9 pp y-o-y to 45.5%
• Consolidated net income^[1] of RUB 29 billion
• Free cash-flow reached RUB 45 billion for the six months ended June 30, 2013

Key Corporate and Industry Highlights

• Approved a new dividend policy aimed at a payout of a minimum dividend distribution amount of at least 75% of Free Cash Flow for the relevant financial period or, if greater, RUB 40.0 billion per year
• Approved annual dividends of RUB 14.6 per ordinary MTS share (approximately RUB 29.2 per ADR) for the 2012 fiscal year, amounting to a total of RUB 30.2 billion
• Acquisition of 25.095% stake in MTS Bank through a share issuance for RUB 5.09 bln
• Reached an agreement with Altimo, Nomihold and other associated parties to settle all disputes related to investment in Bitel LLC, a mobile telephony services provider in the Kyrgyz Republic
• Issued USD-denominated Loan Participation Notes in the amount of $500 million with an annual interest rate of 5.00% and maturity in June 2023
• Placed exchange-traded ruble bond of RUB 10.0 billion with a maturity of 10years and a five-year put option
• Appointed Mr. Mikhail Arkhipov to the position of Vice President, Human Resources
• MTS's brand was ranked in the BRANDZ™ Top 100 Most Powerful Brands, a ranking published by the Financial Times and Millward Brown Optimor,  with a brand value of $10.63 billion
• Signed an agreement with Ericsson to jointly develop telecommunications infrastructure for an LTE network rollout in Russia's Volga, Siberian, Ural and Southern Federal Districts
• Semi-annual dividend recommendation by the MTS Board of Directors of RUB 5.22 per ordinary MTS share (RUB 10.44 per ADR) on the basis of H1 2013 financial and operating results for a total payout of RUB 10.8 billion
• Partnership with Nokia Siemens Networks to jointly develop telecommunications infrastructure and build 4G networks in the Moscow region and Russia's Central Federal District

^[1] Attributable to the Group.

Commentary

Andrei Dubovskov, President and CEO of MTS, commented, "During the quarter group revenue increased 5% year-over-year. In Russia, revenues grew 4% year-on-year to 86.5 billion rubles. Mobile service revenues increased by 6% year-on-year to 66.2 billion rubles driven by data adoption and further monetization of data traffic. and messaging revenues. We continue to see market-leading growth in data traffic revenue, which grew 40% year-on-year. Our fixed-line operations showed strong performance in spite of sustained competitive pressures, having increased by 4% year-over-year to 14.4 billion rubles."

Alexey Kornya, MTS Vice President and Chief Financial Officer, said, "In Q2 2013, Group OIBDA increased by 10% year-on-year up to 44.4 billion rubles with a margin of 45.5%. Strong OIBDA growth rate is attributable to both organic and inorganic factors. In Russia, OIBDA rose by 6% ear-over-year to 39.2 billion rubles. For the quarter we delivered strong OIBDA margin of 45.4% compared to 44.6% margin in Q2 2012. Margin improvement was driven by one-off factors as well as the rising share of data traffic revenues in total revenues and reduced handset sales. Our topline performance, rising data consumption and continuous cost control initiatives continue to offset inflationary pressures, such as rising personnel costs, higher rent and network maintenance costs. Net income rose to 29.0 bln rubles. We realized a positive gain due to our settlement over Bitel through a reversal of the provision for the acquisition of the 49.0% stake in Tarino Limited, in 2005 the owner of Bitel LLC, and accrued interest in the amount of 223 million US dollars, as well the 125 million US dollars in compensation paid in cash. At the same time, we witnessed a non-cash FOREX loss in the amount of 3.1 bln rubles due to the weakening of the ruble versus the US dollar and Euro and its impact on our debt valuation."

Mr. Kornya continued, "Free cash flow for the first half of the year came improved to 45.2 billion rubles, a 34% increase over the first half 2012.  Our net debt/ LTM adjusted OIBDA ratio came fell to 1.0x due to improvement in operating performance and our success in managing debt portfolio through the early redemption of loans, repurchase of ruble-denominated bonds and the timely and advantageous placement of debt securities.  During the quarter we confirmed our commitment to increasing shareholders return. In early August MTS Board of Directors set the date for the Company's extraordinary general meeting of shareholders for September 30, 2013. The Board also recommended that the EGM approve semi-annual dividends of RUB 5.22 per ordinary MTS share (10.44 rubles per ADR) amounting to the total of RUB 10.8 billion on the basis of the Company's H1 2013 financial and operating results. If the recommendation is approved at the EGM, MTS will pay out around 41.0 billion rubles in 2013 calendar year. This is in line with our new dividend policy that calls for distribution in the form of dividends of an amount equal to at least 75% of Free Cash Flow for the relevant financial period or, if greater, 40.0 billion per year."

Mr. Dubovskov concluded, "We reiterate our revenue guidance of 5-7%.for 2013 -2015. Growth continues to be driven by the increased adoption of data services, as well as sustained sales of smartphone and stable subscriber dynamics. For OIBDA, we are pleased to raise our OIBDA margin guidance to over 43% for the year considering our strong organic performance in the first-half of the year, various one-off factors and continuation of the current stable competitive environments in our markets of operation. For the period 2013-2015 we see our OIBDA margin at about 42%."

This press release provides a summary of some of the key financial and operating indicators for the period ended June 30, 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 nearly 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: ir@mts.ru

SOURCE Mobile TeleSystems OJSC