About the Company

MTS Group Today

213thousand

60%

More than

70 thousand

employees

More than 213 thousand

km of fiber-optic lines

MTS LTE coverage

in Russia — around

60% of the populated

territory 

70thousand

8

9 million

5.6thousand

36% 38%

More than 5.6 thousand

MTS outlets and around

100 offices of MTS Bank

MTS share in the mass market

of broadband access to Internet

and paid TV — 36% and 38%

accordingly

New WEB-platform for MTS

online shop, more than 9 million

on-line orders per year

MTS Group Today

9

Digital business areas

More than 78 million subscribers

Satellite TV MTS

350 thousand users

Penetration

of smart-

phones in MTS

network – 65%

Big Data

1.6 billion RUB total effect

Smart-analytics for business optimization

IoT42% SIM-cards in Russia1

Platform for industrial IoT

FinTech22 billion RUB MTS Money

service turnover

Sistema Capital – retail investments

Apps9.5 million monthly

My MTS users

more than 20 MTS apps

Cloud8 data centers in Russia

Big Data-as-a-Service

1 Source: AC&M

10

Online cash register

LiteBox

Cloud product for retail

Entertainment

25% of theater and concert

tickets market in Russia

Ticketland.ru and Ponominalu.ru

E-Health

Telehealthcare

Joint project with MEDSICloud

8 data centers in Russia

Big Data-as-a-Service

Cybersport

Gambit Esports

Products for gamers

and marketing activities

E-Learning

MTS English &

В2В-training

Entrance into market of corporate

and remote education

Strengthening of leadership through acquisitions, partnerships and development of own innovative products

22 billion RUB – MTS Money service turnover

System integration 5.6 billion RUB

Digital business areas

11

• MTS completed 2017 with strong financial results and has secured a footing in the new markets. 2017 has become the year of transformation for MTS. The Company has been working successfully on digitization strategy implementation and expanded business in the new areas.

• In September, MTS entered the market of investment services, having taken part in the capital of Sistema Capital MC LLC, one of the largest management companies in Russia by volume of collective investments.

• In October, the company acquired 50.82% in the authorized capital of Cloud Retail LLC (LiteBox trademark), the Russian developer of software for retail. The transaction takes MTS to the market of cloud cash registers as a supplier of ready solutions for cash services to business customers.

• In December, MTS entered the market of cybersport based on one of leading cybersport clubs in the world — Gambit Esports. The teams within Gambit Esports have many times been champions of the world and Europe, and also silver and bronze prize winners of the largest international competitions. MTS strategy in the cybersport market will both combine marketing activities and development of products for gamers.

Main Outcomes for 2017

12

Financial Indicators

Consolidated income

442.9 billion RUB

OIBDA

179.8 billion RUB

OIBDA profitability

40.6%

Total net profit

56.0 billion RUB

Net income margin

12.7%

Operational indicators

Smartphone penetration in MTS network has grown up to 65% by the end of 2017 in contrast to 54% in the previous year.

MTS platform was launched for industrial IoT: MTS share in the market of SIM-cards for IoT in Russia amounted to

42%

Сumulative effect from the use of Big data

1.6 billion RUB

Кevenue from system integration

5.6 billion RUB

Dividend payments in 2017 in the amount of 26.0 rubles per share + yield of 10.9 rubles per share as a part of redemption program

Main Outcomes for 2017

13

2017 Highlights

February 13, 2017 MTS launched a new service MTS Money Wallet, which makes it possible to get quick and convenient access per single click to financial services of MTS. MTS Money Wallet combines all payment tools — MTS e-wallet account, subscriber’s personal account, bank cards — in a single place for access to wide spectrum of MTS financial services.

March 2, 2017 MTS was included into TOP-5 of Russia’s Best Employers according to HeadHunter. The company strengthened its positions in the rating, having climbed up one line compared to the previous year and was awarded the fourth place. Besides, MTS has become the leader of the rating among telecoms.

March 30, 2017 MTS enters the market of cloud services for large business in all regions of presence in Russia. The corresponding cloud platform, and also presence of own DPCs in combination with the branched network of trunk and city communication channels will make it possible for MTS to propose comprehensive and fully disaster-proof solutions for cloud calculations and data storage.

Yu.S. Romashkina, Director, Compliance Department, became the winner in the nomination “Best Chief Compliance Officer of the Year in Europe, Middle East and Africa” based on voting results of the expert council of the C5 “Women in compli-ance Awards 2017”. The award ceremony was held in London.

April 7, 2017 The MTS Corporate University was awarded with an international award GlobalCCU Awards Silver in the nomination “Best Innovative Corporate University”. The award ceremony took place in Paris during the GlobalCCU Forum.

April 20, 2017 MTS and Ericsson tested fifth generation mobile communication technologies (5G), during which for the first time in Russia the record speed of data transmission up to 25 Gbit/s was achieved on the moving smartphone prototype. Previously all tests of data transmission in this technology were conducted only between stationary devices.

April 27, 2017 MTS won four nominations of Effie Awards Russia 2017 — one of the most prestig-ious awards in the world in the sphere of marketing and communications.

May 24, 2017 MTS won the international award Global Telecom Business Innovation Award, which identifies most successful telecommunications projects all over the world, in the nomination Innovation Awards 2017 for Virtual PBX service.

June 29, 2017 Vyacheslav Nikolayev was appointed as the Vice President of the MTS Group on marketing. Previously he had been the Director of Mass Market Department in MTS for six years. The candidate was approved by the Board of Directors of MTS PJSC.

July 27, 2017 MTS purchased 100% shares of the regional communications provider Cellular Communication of Bashkortostan OJSC (CCB) for 300 million RUB, including net debt. Purchase of the asset made it possible for MTS to expand its presence in the Republic of Bashkortostan and to obtain an additional frequency resource, includ-ing bandwidths with frequency of 15 MHz in the range of 2100 MHz and 4.4 MHz in the range of 450 MHz.

14

August 11, 2017 The company started to use Vera robot in recruitment, which is a robot-recruiter that operates on the basis of artificial intelligence technology.

September 6, 2017 MTS Board of Directors approved the program of its own common stock and ADA redemption by the plan of shares purchase for the total amount not exceeding 20 billion RUB, which includes funds spent to purchase shares of the company from Sistema Finance, until April 2019.

September 19, 2017 MTS started to provide services for cloud processing of large data arrays on the basis of its own DPCs. Use of Big-Data-as-a-Service (BDaaS) infrastructure makes it possible for MTS customers to quickly, flexibly and efficiently organize processing of big data without development of own computing capabilities.

September 29, 2017 MTS had to suspend communication services provision in Turkmenistan in connection with actions of the state communication system Turkmentelecom for disconnection of services of international and long-distance zonal communication and services of access to Internet.

September 29, 2017 The company entered the market of investment services, having taken part in the capital of Sistema Capital MC LLC, one of the largest management companies in Russia by volume of collective investments.

October 3, 2017 MTS purchased the share in the authorized capital of Cloud Retail LLC (LiteBox trademark), the Russian developer of software for retail. The transaction takes MTS to the market of cloud cash registers as a supplier of ready solutions for cash services to business customers.

October 23, 2017 MTS and Ericsson signed an agreement to upgrade and prepare MTS network for 5G standard and Internet of Things technologies (IoT), under the framework of which in 2017–2020 Ericsson will supply to MTS the state of the art equipment and software for the backbone network and radio access network in some regions of Russia for the total amount exceeding 400 million EUR.

November 2017 In 2017 MTS entered the market of information security with provision of commer-cial services of the Online Information Security Event Monitoring Center.

November 13, 2017 Completion of certification audit of MTS Unified Compliance System compliance with international standards ISO19600:2014 “Compliance Management Systems” and ISO37001:2016 “Anti-Corruption Compliance Management Systems”, following the results of which the company received the compliance certificate in 2018.

December 7, 2017 MTS launched IoT platform for deployment of solutions based on Internet of Things in business of Russia. The platform for industrial Internet of Things makes it possi-ble to manage any facilities, where it is necessary to track parameters of equipment operation.

December 18, 2017 Maria Golyandrina was appointed as the Vice-President, Human Resources, Member of the MTS Group Management Board, who had been the Director of MTS Remunerations, Benefits and HR Administration Department for three years. The candidate was approved by the Board of Directors of MTS PJSC.

2017 Highlights

15

Message of the Board of Directors Chairman

Dear shareholders,

While deliberating on the words I may address you with on the pages of this report, I thought that I would inevitably have to speak about things that had become habitual ,ordinary, and even trite to some extent. At the same time I am pleased with the fact that such com-monness in our case is of purely positive, joyful nature. Another year has elapsed, when I was fortunate enough to hold in the role of the Chairman of MTS Board of Di-rectors. Again, as a year before and for a few preceding years I may share more good news with you. First of all, I am glad to report that our company has achieved target levels of all main operational indicators. Second, let me note that our leadership in the telecommunica-tions market of Russia remains totally unshakeable, and regarding capitalization, our domination is absolute. Third, in 2017 we made dividend payments in the total amount of 52 billion RUB, which complies with our tar-get benchmarks that we also confirm the current year of 2018. Therefore, the results of our business in 2017 may be called predictably good, and I am not even afraid to be overconfident here.

16

Having completed this format part, I would like to say a few words on that result of the previous year that in my strong opinion has the same significance as numerical levels of key business indicators. 2017 has become the first full year, when we implemented our new digital 3D strategy: Data. Digital. Dividends, the central element of which is undoubtedly the Digital concept. It is not a secret for anyone that the sphere of telecommunica-tions does not enthuse greatly the investors, and there are objective reasons for it, which we will not discuss in details now. Besides, it is also well-known that the concept of digitalization has recently become a certain pattern, a spell used everywhere, and probably it is losing its initial strength. I may assure you that all our statements related to going beyond telecommunica-tions business through development of Digital areas and digital transformation of the company, have quite a specific embodiment in the form of new products, services, modified business processes, which you will learn about in sections below.

I would like to note that we follow the principles of openness and transparency and speak about all our actions and achievements on a regular basis during the year within quarterly reports, which we summarize here, in the annual report. I am happy to acknowledge that the investment community sees and supports our efforts, which is reflected in the positive dynamics of the company value.

I would like to end my message with acknowledge-ments for the management of the company, my colleagues in the Board of Directors for work well done and for our dear shareholders, whose continuous support we feel. Now I would like to pass the floor to the management, who will speak in detail on MTS 2017 business results.

Ron Sommer, Chairman of MTS Board of Directors

Message of the Board of Directors Chairman

17