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Pdf Annual Report 2018 Pdf 12.0 MB About this Report Contents Preliminarily approved by the Board of Directors Chairman’s Statement 02 of PJSC MegaFon on 24 May MegaFon 2019. Chief Executive’s Review 05 is a pan-Russian provider of digital This Annual Report presents 1. About MegaFon 10 data from 1 January through Performance Highlights 16 opportunities and a leader in the Russian 31 December 2018. Creating a Digital Future 18 and global telecommunications market This Annual Report has been Assets and Resources 28 prepared in accordance with the Global Reporting Geography 32 Initiative (GRI) Guidelines Key Events 34 for reporting on sustainable development. 2. Strategic Report 38 Market Overview 40 Digital Strategy in Action 54 For more information see Appendix: Material Topics and Materiality Matrix. Business Model 62 In this Report ‘MegaFon’ Operational Results 66 or the ‘Company’ refer to PJSC MegaFon Financial Performance 122 Mission Vision and its controlled entities, PJSC ‘MegaFon’ refers Risk Management 128 to Public Joint-Stock Company Sustainability 138 Providing opportunities Becoming a digital market ‘MegaFon’. leader and first-choice 3. Corporate Governance 168 data provider by building Immaterial discrepancies in totals strong relationships with and subtotals in the charts Corporate Governance Framework 170 and tables of the Annual Report Governing Bodies 174 individuals and businesses are due to rounding. while offering top-of-the- Control over Financial and Business Operations 196 line digital products and External Audit 198 Information Disclosure 199 services Protecting the Confidentiality of Insider Information 199 4. Securities 200 Shareholders’ Equity 202 Presence on Stock Exchanges 204 Dividends 206 Bonds 207 Credit Ratings 209 Investor Relations 210 Information Disclosure 211 5. Financial Statements 212 Read Online Report at: For more information please visit: and Appendix ar2018.megafon.ru corp.megafon.com 2 Statements Chairman’s Statement 3 How was 2018 for the Russian of Big Data and developing our service network Chairman’s telecommunications industry? to meet the needs of each user, thereby making them happier. In 2018, the growth of the Russian telecoms market hit a five-year high. To a large extent, The next priority is ‘Fastest Service Provider’. Statement this is the result of efforts made by leading We are working hard to quickly and efficiently operators to stabilise the market – helping to curb transform internal processes by launching initiatives excessive price competition, abandoning unlimited to accelerate the review process for proposals plans, and placing a much stronger emphasis for technology innovation and switching to what we on developing service quality. However, we did see refer to as ‘agile’ methods of working, among other a return of price competition in late 2018, in certain changes. segments, and new ‘unlimited plans’ re-entering the market. Finally, the third priority is ‘Government and Industry Digitalisation’. We are continuing How would you summarise MegaFon’s to build our in-house competencies and develop 2018 results? innovative products that can be used to digitalise various sectors of the economy. MegaFon delivered a strong set of results in 2018 as the Company’s digital leadership strategy How is MegaFon contributing generated service revenue growth which outstripped to building a digital economy in Russia? market growth overall. What are the key achievements 2018 was a year in this area? Overall, it has been a significant year for MegaFon, of transformation marked by several milestones and achievements. We Our ambition is to become a key partner and achievement established key strategic agreements with leaders for the Government in this area. Currently, in other industries for the development of ambitious MegaFon is contributing towards the preparation for MegaFon. We ended joint projects in digital ecosystems, mobile retail, and running of ANO Digital Economy programmes the year with strong financial e-commerce, and m commerce; we launched new that have been approved by the President of Russia. products for individual consumers and businesses; and operating results, and continued to improve our network quality As noted previously, we are progressing and reliability, while expanding our 4G coverage. the development of Digital Region Management demonstrating that our Furthermore, we began trials of 5G networks and Smart City, new solutions which will manage digital leadership strategy through a series of pilot projects, and strengthened urban infrastructure, security, and transport. our cooperation with the Government in building MegaFon is well-positioned to deliver these adopted in 2017 has placed a digital economy, including the signing of key projects owing to our extensive in-house expertise partnership agreements with Russian regional in expanding communications networks, MegaFon on a positive authorities for the deployment of solutions, such deploying M2M/IoT, and other related capabilities. trajectory, as the Company as Digital Region Management and Smart City. MegaFon is also making a significant contribution to the development and testing of 5G networks moves away from the more What is the latest update on MegaFon’s and their future applications, which are key traditional approach strategy? Were any modifications to building a digital economy. made in 2018? to telecommunications MegaFon’s Board of Directors went MegaFon continues to pursue its ‘2017–2020 through a number of changes in 2018, to pursue new digital Driving the Digital World’ strategy, aimed including its complete renewal opportunities. The Company at transforming the Company from a traditional at the start of the year. What was telecoms operator to a provider of digital the reason? remains committed to its aim opportunities. Our strategic goal is to be a leader in the digital economy by 2020. To achieve this, As a result of Gazprombank’s acquisition of a 19% of positioning itself as a pan- we are offering high-quality products and services stake in MegaFon from Telia Company in late Russian provider of digital to our customers, we are becoming an effective 2017, the Bank was permitted to nominate two partner for the Government, the business representatives for appointment to the Board. opportunities and one community and society as a whole, and we are Additionally, the controlling shareholder wished seek to introduce the latest digital technologies to refresh the Board by appointing several of the industry leaders, into everyday life. USM Group candidates who were very familiar both in Russia and globally. with MegaFon’s business and could build In 2018, we added three new priorities a management team that would effectively execute to our strategy. The first of these priorities our strategy. The Company remains committed is called ‘Happiest Customer’, whereby we intend to its policy of having independent directors to tailor our digital products and services to each on the Board, with Jarkko Armas Veijalainen subscriber’s individual needs through the use and Harri Eerik Koponen taking these positions on the new Board. 4 Statements Chief Executive’s Review 5 At the end of 2018, we invited Anna Serebryanikova, Following the completion of this mandatory MegaFon’s Chief Operating Officer and a Member tender offer in March 2019, MegaFon’s free float Chief Executive’s of the Management Board, to join the Board is around 0.8%. of Directors. Anna has extensive industry experience and expertise which makes her well-placed The buyback opportunity was offered review to contribute to the Company’s development to shareholders at a substantial premium and engagement with the Government in building to the trading prices that prevailed prior a digital economy. to the announcement of the buyback, resulting in a successful buyback and enabling minority Furthermore, Gevork Vermishyan was appointed holders to make profitable exits. as MegaFon CEO in 2018. He previously served as our Executive Director and has worked Despite the fact that we are now effectively with the Company for over 7 years. Gevork brings a private company following our delisting and share a proactive nature and a fresh perspective which, repurchases, we intend to endeavour to comply combined with his contemporary management with best practices in both corporate governance methods and in-depth knowledge of trends and disclosure. in the transformation and digitisation of core business processes in the telecommunications What is to be expected from 2019? industry, will, I am certain, be just right In 2018, we continued for the achievement of our strategic objectives. Despite increased levels of competition, I am hugely positive about the outlook to deliver on our strategy, Why did MegaFon decide to delist for the telecommunications sector and its Driving the Digital World, from the London Stock Exchange? technological development. In 2018, we witnessed Please describe the procedure and give the arrival of the digital future as the world’s first while improving our customer us your opinion on the results? commercial 5G networks were launched in the USA and the Republic of Korea. In 2019, we expect experience. We made progress Following the announcement of MegaFon’s 5G networks to be launched across a further towards achieving our key goal – new strategy, remaining a public company 16 nations1 and expect to see the rapid development is no longer a strategic priority for the Company. of the Internet of Things, video content, AR, VR, to become a digital market Delisting means
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