MegaFon Investor presentation

December 2017 Disclaimer

Certain statements and/or other information included in this document may not be historical facts and may constitute “forward looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 2(1)(e) of the U.S. Securities Exchange Act of 1934, as amended.

The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plans”, “forecast”, “project”, “will”, “may”, “should” and similar expressions may identify forward looking statements but are not the exclusive means of identifying such statements. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues, operations or performance, capital expenditures, financing needs, our plans or intentions relating to the expansion or contraction of our business as well as specific acquisitions and dispositions, our competitive strengths and weaknesses, the risks we face in our business and our response to them, our plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industry and the political, economic, social and legal environment in which we operate, and other information that is not historical information, together with the assumptions underlying these forward looking statements. By their very nature, forward looking statements involve inherent risks, uncertainties and other important factors that could cause our actual results, performance or achievements to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the political, economic, social and legal environment in which we will operate in the future.

We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. We expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect actual results, changes in assumptions or in any other factors affecting such statements. Agenda

1. About MegaFon

2. Strategy update

3. Key Corporate and Financial Highlights for Q3 2017

4. Appendix 1. About MegaFon About MegaFon

MegaFon – a leading Russian company…

Highlights Consolidated 9M 2017 revenue breakdown Strong fundamentals 98.6% of revenues comes from • 2nd largest Russian mobile operator(1), with 75.6m subscribers(2) and historically growing market share

• Unique network position overall on the back of substantial investments 8,76%8.8% Sales of handsets • Unrivalled frequency spectrum and accessories; RUB • Leading and 4G+/LTE-A operator providing access to 4G/LTE network in 83 Russian regions to 237.2 bn 67%(3) of population, and LTE-A network in 30 regions of Russia by the end of Q3 2017 8,28%8.3% 83.0% • Innovative player with a customer-centric approach and a leading position in digital services and Wireline revenues; Wireless revenues; content

• Best position to create digital ecosystem in Russia Compelling historical financial performance (4) • Extensive retail network consisting of c. 7,240 stores, including c. 3,670 owned-and-operated stores and third-party monobrand stores and 3,570 Euroset stores RUB bn 2012 2013 2014 2015 2016 CAGR 9m2017 Total mobile subscribers (m) 4.6% • Managed by a professional team with solid track record 64.6 70.1 72.2 76.8 77.4 77.2 Consolidated revenue 272.3 297.2 314.8 313.4 316.3 3.8% 237.2 • Listed on the London and stock exchanges since 27 Nov 2012 Consolidated (5) Returns OIBDA 117.1 132.6 138.5 132.4 121.1 0.9% 93.0 Margin (%) 43.0% 44.6% 44.0% 42.2% 38.3% 39.2% • Dividend policy implies shareholder remuneration at least 70% of free cash flow to equity Capex (45.2) (47.1) (56.5) (70.2) (65.6) 9.7% 33.9

Source: Company data. As % of revenues 16.6% 15.9% 17.9% 22.4% 20.7% 14.3% Note: (1) – By overall mobile revenue and number of subscribers as of the year end of Q3 2017 in Russia (2) – Total number of subscribers as of the year end of Q3 2017 was 77.2m in Russia, , South Ossetia and Abkhazia OIBDA−Capex 71.9 85.4 82.0 62.2 55.6 -6.2% 59.1 (3) – Russian population as of the latest census in October 2010 (4) – Performance of MegaFon standalone 26.4% 28.7% 26.1% 19.8% 17.6% 25.2% (5) – OIBDA adjusted to exclude a RUB 3.4bn impairment loss relating to the goodwill allocated to the Broadband internet cash generating unit As % of revenues About MegaFon … with 24 years of our success story to become a market leader… ~20X

314.8 316.3 297.2 272.3 242.4

1993 2004 - 2005 2007 - 2008 2011 2013 2015 “NorthWest GSM” founded, Launch of online store 1st operator to launch Acquisition of Net-by- Acquisition of 100% Acquisition of 4 SMARTS launched operations in St. and introduction of network in Russia in St. Net stake in /Scartel companies in the Volga Petersburg EDGE technology Petersburg region MegaLabs launches Number of 4G operations subscribers hits Acquisition of GARS 1 million Purchase of a 49.99% stake in class A office building in Moscow 2003 2006 2009 - 2010 2012 2014 2016 1st operator in Europe to launch 1st operator to cover Acquisition of Synterra Launch of 4G/LTE services in Leading 4G provider in Russia MegaFon to become a leader “MMS” and 1st operator in Russia to all regions in Russia partnership with Yota in digital convergence – BoD Becomes #2 mobile operator in Russia General Communication partner for introduce “Mobile-TV” approves a 63.8% voting in terms of subscribers Acquisition of 50% stake in Euroset Olympics 2014 stake in Mail.Ru Start listing on the LSE and MICEX MegaFon total revenue (RUB bn) About MegaFon … operating in an attractive Russian market despite turbulent macroeconomic environment…

Competitive telecom market dynamics MegaFon track record of gaining market share(4)

• 3 nationwide mobile operators (Subscribers in millions) • Tele2 lags the Big3 operators in the market share, but launched its services in Moscow in late October 2015; actively develops MVNO projects with various 230 237 240 252 256 253 254 256 ∆ Q3 2017/2012 banks, fixed-line operators and others 30.9% 31.0% 30.7% 31.3% 31.2% 30.7% 30.7% • Predominantly prepaid market, limited handset subsidies 29.3% -0.2pp 27.1% • Relatively high OIBDA margin (compared to developed markets) on the back of 28.8% 29.0% 29.7% 29.6% 29.9% 29.8% 29.6% +2.4pp relatively benign competition and regulatory framework 24.3% 23.9% 23.8% 23.7% 22.8% 23.0% -1.3 pp Benign regulatory framework 22.5% 22.9% 17.6% Others 18.1% • Mobile termination rates, rates, and last mile fiber access are not 16.1% 15.9% 16.3% 16.4% 16.6% 16.7% -0.9 pp (1) regulated 2012 2013 2014 2015 2016 1Q 2017 2Q 2017 3Q 2017 • Mobile number portability implemented relatively late in terms of market development(2). • Local loop unbundling is not implemented Total mobile revenues 9m 2016 Total mobile revenues 9m 2017

Russian market fundamentals 29.4% 28.7% Eastern Russia G7(3) Europe 12.6% 13.1% GDP (CAGR 2015-2018E, real change p.a.) 0.6% 2.2% 1.8%

CPI (CAGR 2015-2018E, change p.a.) 6.8% 5.4% 1.8% 33.3% Source: Bloomberg Consensus Forecast summary (April 2015). 24.7% 33.5% Note: 24.8% (1) - Government focus on MTR and potential roaming regulation is increasing (2) - Fully implemented since April 2014 (3) - Includes Canada, Germany, France, Italy, Japan, United Kingdom, United States (4) - FY2016 and 9 m 2017 are based on MegaFon’s estimates, official disclosure of mobile operators and AC&M market estimates Other 7 About MegaFon … possessing a unique spectrum advantage…

MegaFon has noticeable advantage in terms of frequencies… …allowing to get significantly higher data transfer rate in MegaFon’s network

• Both operator and end-user equipment already 700 MHz (LTE) 2x7.5 2x7.5 2x7.5 2x7.5 support 2x20 MHz for LTE, no other operator beside MegaFon can provide such band length 800 MHz (LTE) 2x7.5 2x7.5 2x7.5 2x7.5 • After implementation of technology neutrality MegaFon is the only operator able to utilize 3 times 900 MHz ((2)) 2x4.8-2x15.6(1) 2x2.4-2x13.2(1) 2x0.8- 2x13.6(1) 2x0.6- 2x8.4(1) 2x20 MHz channels (2x20 MHz in 1800 band and 2 times 2x20 in 2,600 band) for LTE 1 800 MHz (2G / LTE) 2x14.6-2x30.6(1) 2x13.6-2x44.4(1) 2x12-2x29.6(1) 2x9.4-2x44.6(1) • None of nation-wide operators except MegaFon can realize significant benefits from utilizing 2x40 MHz 2 100 MHz (3G) 2x15 2x15 2x15 2x15 frequency band in LTE 2,600 following the recently adopted spectrum sharing law (4) 2 400 MHz (LTE) - - - 30 - 70(1) • In other technologies all nation-wide operators are almost equal 2 600 MHz 25 25 - - (LTE - TDD(3))

2 600 MHz (LTE) 2x40 2x10 2x10 2x10

Note: (1) Band size varies depending on Russian region (2) 3G only for Moscow, Moscow region and Komsomolsk-on-Amur Wider band means higher data transfer rate (3) In Moscow only and higher capacity of the network (4) Federal Law dated 23.06.2016 № 204-ФЗ ”О n amendments to articles 2 and 24 of the Federal Law “On Communication”

8 About MegaFon … that will allow to strengthen technological leadership without excessive spending

MegaFon has 4x advantage in 2600 MHz … enabling 5G deployment and 4G development spectrum vs any competitor… at minimum costs

Average telcos spectrum width(1), MHz

10 10 19 15 40 8 1 5G DEPLOYMENT EASE MegaFon +33% 102 MegaFon will be able to enter the new era significantly cheaper than competitors

10 8 19 15 10 15 Comp 1 77 2 EFFICIENCY IN 4G

MegaFon is running 4G network with up to 15% 10 6 16 15 10 6 CAPEX savings Comp 2 63

3 UNIQUE VALUABLE ASSET 5 10 2 18 15 10 Comp 3 There is no free new spectrum in Russia, and its price 60 is 6x higher than European benchmarks

Spectrum below 800 MHz is not fully Potential spectrum for 5G available in Russia deployment Note: (1) Band size varies depending on Russian region (2) 3G only for Moscow, Moscow region and Komsomolsk-on-Amur (3) In Moscow only 450 800 900 1800 2100 FDD 2600 TDD 26002 (4) Federal Law dated 23.06.2016 № 204-ФЗ ”Оn amendments to articles 2 and 24 of the Federal Law “On Communication” 9 About MegaFon …keep building and operating best-in class network infrastructure…

Number of base Fiber optics infrastructure stations(1) Growth • The largest fiber optic network among Russian mobile operators ▲9 % • Supports further roll-out of the Company’s mobile network 143 663 131 252 30 192 ▲ 31% 23 003

42 499 45 717 ▲ 8% 2G BS, units 3G BS, units 65 750 67 754 ▲ 3% 4G BS, units 2015 2016

Growth (2) FOCL ▲ 5%

184 401 192 714 ▲ 6%

65% 64% ▲ 4% 126 030 130 615 Backbone, km Note: Backhaul, km 2015 2016 (1) Verified data for 2015 in accordance with the new methodology to calculate number of logic base stations that function in various frequency spectrum bands Share of BS interconnected via FOCL(2), % (2) FOCL – fiber-optic communication lines 10 About MegaFon … with key competitive advantage in 4G…

Federal regions covered by MegaFon 4G / LTE network 4G/LTE services Federal regions covered by MegaFon 4G+ / LTE-A network • 14.2 million 4G-enabled devices registered Cities where LTE-Advanced available on MegaFon network, up by 49.1% y-o-y • 2-fold increase of 4G traffic usage y-o-y • Share of 4G traffic in total data traffic reached Kaliningrad Saint-Petersburg 53.9%

Yaroslavl Moscow Kostroma Yakutsk Tula Ivanovo 4G/LTE network development Kirov Yuzhno- Ryazan Nizhniy Novgorod Perm Sakhalinsk • Focus on increasing 4G network capacity in Lipetsk Tambov Ekaterinburg existing areas of presence, and on service Ufa Amur region Rostov-on-Don Samara quality improvement Krasnodar Chelyabinsk Krasnoyarsk Khabarovsk Sochi Omsk Novosibirsk • 4G/LTE network is available in 83 Federal Chita regions with enhanced coverage in all of the Vladivostok 15 cities with a population(1) over 1 million people • 4G+/LTE-A network providing speeds of up to 150-450 Mbit/s was launched in 30 regions Availability of MegaFon 4G services • VoLTE launched in Q4 2016 82 83 72 77 • 4G infrastructure included 36,070 base stations 72% 49 59% 65% Number of Russia’s • LTE roaming agreements signed with 164 51% 28 regions where operators in 94 countries 36% MegaFon 4G services 25% are available % of population covered 2012 2013 2014 2015 2016 9m 2017

(1) Russian population as of the latest census in October 2010 11 About MegaFon … and constantly improving the network and connectivity quality…

Network improvements Spectrum initiatives

GNOC measures to improve network quality • MegaFon continued implementing LTE 1.800 as an additional layer to support Post-incident measures – accident damage control, prompt incident further roll-out and improve the coverage of 4G/LTE network. response and mitigation, monitoring and control over fault correction time • MegaFon and Yota combined their 2x20MHz bands in LTE 2,600 spectrum and Preventive measures – prediction of incidents and preventive technical started sharing directly both spectrum and active infrastructure to provide better maintenance services to subscribers in Moscow and Moscow region In 2016, GNOC Performance Management system was adopted to improve registering usage and quality metrics of provided services. It includes Fault • In 2016, MegaFon was the first operator in Russia to launch a fully-fledged Management, Network Resource Inventory and Trouble Ticketing systems VoLTE network. Subscribers now can enjoy high quality voice transmission, rapid call set-up and continuity of internet sessions while calling via LTE • Key Quality Indicator, the integral performance index, was adopted to monitor the network performance and assess the quality of connection based on identified subscribers’ needs obtained through analysis of customer requests to call centers and user satisfaction surveys Connectivity improvements in 2016

• To improve the end-to-end quality metrics of the services MegaFon introduced • MegaFon continued its efforts to reduce cut-off calls at specific locations and certain solutions adding new functionality to its radio access network and eliminate local network overloading and traffic congestion optimised the parameters of backhaul network sections 4G 3G 2G • On the back of RAN QoS system, MegaFon implemented the statistic management of traffic based on resource allocation technology. It allows Call set-up success rate ▲99.49% ▲99.61% ▲99.21% MegaFon to improve distribution of 3G and 4G network resources among subscribers and services depending on the type of product (service). Dynamic Drop call rate ▼ 0.21% ▼ 0.27% ▼ 0.64% management of the traffic is underway.

Note: (1) Global network operational center 12 About MegaFon … to become the leader in perceived quality of data and communication services…

2017 2020

Leadership in number of base stations Leadership in perceived quality of data and communication services

Leadership in FOCL networks length

Leadership in spectrum, including 4x advantage in 2600 МHz

13 About MegaFon … while continuing to improve efficiency through large scale operational transformation projects…

Unified billing Objective: optimization of processes in the company and faster launch of new Creating a single billing platform instead of individual products to market systems of branches and subsidiaries Status: launched pilots in several regions

Objective: cost reduction through centralization and unification of back-office Shared Service Center processes Consolidation of all branches and subsidiaries back offices in Samara Status: Center set up in July 2016 and now provides services for 8 branches of MegaFon and 10 its subsidiaries

First Tower Company Objective: improve efficiency of tower portfolio management and CAPEX efficiency Assets spin-off to create a company with the best tower infrastructure in Russia Status: FTC was officially launched on July 3rd, 2017

Objective: re-engineer the Company’s key business processes on the back of the GAGARIN newest SAP S4/HANA ERP system New ERP system creation Status: system is created and launched in 2 Company’ subsidiaries; implementation of the system to be started in MegaFon’s main operation entity within a few months

P.O.T.O.K. Objective: higher quality of provided services Legal function transformation to increase services quality and create external legal solutions provider Status: launched external legal solutions provider

14 About MegaFon … introducing unrivaled new service offering to meet the interest of digital subscribers in their everyday life

Vklyuchaisya1! New approach to forming service price … leading to a bigger share of higher Tariff family offerings… ARPU subscribers in new gross adds

Connect! Interact Considers behavior of our subscribers Uplift in ARPU without direct based on Big Data analysis of a increase in prices subscriber’s mobile app usage Connect! Premium

Connect! Write Includes most popular services Avoidance of direct comparison in subscription fee with competitors' products Connect! Watch

Connect! Listen

Offers tailor-made options depending Enhancement of emotional on usage profile of each subscriber2 attractiveness of the tariff Connect! Talk

Note: (1) Connect! 15 About MegaFon … increasing footprint in unique digital services and financial products…

MegaFon.TV MegaFon.Card

Unique free Unique single account for mobile TV & VoD OTT service and banking card offering premium content for high LTV clients

3.3 million users 70% of registered users are 1.1 million cards RUB 19.5 bn total Unique loyalty registered1 subscribers using MegaFon issued to MegaFon transaction volume program2 bundled tariffs subscribers for 9m 2017 for card-holders

Note: (1) As of 30 June 2017 (2) For each RUB100 spent on MegaFon.Card a cardholder gets 10 MB gift. Cardholders subscribed for Connect! tariff line get additional 1GB gift for the fist transaction above RUB 100 16 About MegaFon … and shaping a new landscape of the mobile distribution in Russia

MegaFon and VEON decided to end Euroset JV to pursue independent … following completion of the split retail strategies and optimise mobile distribution…

FAS and corporate approvals obtained, completion is subject to other conditions precedent 50% stake in Euroset

MegaFon VEON We consider a number of strategic options with respect to Euroset: § Keeping Euroset as a separate multibrand 100% 100% channel

RUB 1.25 bn § Integration into monobrand stores, incl. 100% stake footprint optimization Euroset NewCo¹ in NewCo § Possible combinations with other market players

~2 K ~ 2 K At closing VEON pays RUB 1.25 bn and acquires rights to 50% of Euroset stores in exchange for stores stores VEON’s equity stake in Euroset

Note: (1) A company with ~2K lease agreements for VEON stores (2) CJSC ”Deloitte & Touche CIS”, an independent appraisal 17 About MegaFon MegaFon employs the best-in-class Corporate Governance practices…

Corporate governance Board of Directors composition(1)

• Existing MegaFon Corporate Governance structure complies with all Nominated by USM requirements of the London Stock Exchange and Moscow Exchange where MegaFon trades Nominated by Telia • In July 2017 the Company amended its Charter to meet the requirements of the Federal Law "On JSC“: the number of members of the Board was increased to 9 people • Current composition of the Board of Directors (1) : Vladimir Streshinsky — 6 Board members represent interests of minority shareholders: Chairman of the Board 3Telia representative and 3 INEDs Robert Wilhelm Per Emil Nilsson Henriette Ohland — 3 representatives of controlling shareholder USM Andersson Wendt • Three Committees of the Board of Directors have been set up for improving corporate governance standards: Independent directors — Audit Committee — Remuneration and Nominations Committee Ardavan Moshiri — Finance and Strategy Committee • Following the listing reform on the Moscow Exchange(2), the Company’s shares were upgraded to the “Highest” quotation list QL I, thus allowing pension funds Jan Rudberg Alexander Galitsky Lord Myners and state corporations to invest in MegaFon’s stock. This upgrade confirms MegaFon compliance with MOEX’s highest corporate standards The majority of the Board represents • In November 2013, MegaFon’s Board of Directors approved the Code of Business Conduct and Ethics further streamlining the corporate governance Nikolay Krylov minority shareholders procedures in the Company

Note: (1) Current Board composition; following Telia’s exit, a new Board will be elected at EGM on 19 January 2018. More information on nominees to the Company’s Board is available at: https://corp.megafon.com/investors/shareholder_meetings/extraordinary_general_shareholde/egm_19012018/egm_notice/ 18 (2) New listing rules came into force in June 2014 About MegaFon …led by a management team with extensive TMT experience

Sergey Soldatenkov, Chief Executive Officer (General Director) Gevork Vermishyan, Executive Director • Chief Executive Officer since 30 June 2016 • Executive Director since November 2017 Executive • Chairman of the Board of Directors of MegaFon from June 2012 to April 2016 • Joined MegaFon in July 2011 as CFO Bodies • Chief Executive Officer of MegaFon from April 2003 to April 2012 • Previously Director of Corporate Finance at AFK Sistema • Extensive experience in the Russian telecom industry • 14 years of finance / 9 years of TMT experience • Before joining MegaFon held senior management positions in Telecominvest, Delta Telecom, North West GSM

Vlad Wolfson, Chief Commercial Officer Anna Serebryanikova, Chief Operating Officer • CCO since October 2016 • COO since October 2016 • Previously Director for Corporate Business since December 2013 • Previously Director of Legal Affairs and Government Relations since October • Joined MegaFon in 2012 2012, General Counsel from 2008 to 2012 and Company’s Corporate Secretary from 2007 • 14 years of TMT experience • Joined MegaFon in 2006 • 14 years of TMT experience

Pavel Korchagin, Chief Technology Officer Dmitry Kononov, Director - Investors Relations and M&A • CTO since July 2017 • Director for Business Development, M&A, IR since Dec 2008 • Previously Head of North-West Branch, Volga Branch and Central • Joined MegaFon in 2000. Served as the Company’s CFO from 2002 to 2004 Branch since 2011 • 23 years of TMT experience • Joined MegaFon in 2003. • 15 years of TMT experience

Natalya Chumachenko, Director - Strategic & Organizational Alexander Sobolev, Director - Strategy Development • Director for Strategy since September 2015 • Joined MegaFon in 2016 as Director for Strategic & Organizational • Previously Head of Strategic Partnerships and Projects Development • Joined MegaFon in 2012 • In 2012-2016 1st Deputy CEO at USM Advisors, a Board member of • 5 years in consulting (Strategy Partners Group and BCG) Metalloinvest • In 1999-2012 worked in various positions at Vimpelcom group 19 About MegaFon

Operating results provided on this page cover only the Russian business Operating and financial results Financial results are presented on a consolidated basis

Total Russia wireless subscribers, m Consolidated Revenue breakdown, RUB bn

69.7 74.8 75.6 75.5 75.6 Growth 62.6 68.1 297.2 314.8 ▲ 0.9% 272.3 23.1 313.4 316.3 29.3 31.0 30.8 31.1 18.1 22.2 23.4 25.7 237.2 21.0 25.2 27.4 17.9 13.3 20.1 19.9 27.0 235.0 18.7 18.5 19.6 20.8

259.0 269.5 270.0 263.6 241.1 197.8 196.8

2012 2013 2014 2015 2016 9M 2016 9M 2017 2012 2013 2014 2015 2016 9M 2016 9M 2017 (1) Data service user base User base not using data service (2) Wireless services Wireline services Equipment & Accessories Russia Data ARPU (ARPDU(3)) and APPMb(4) Consolidated OIBDA and OIBDA margin 0,20 0,20 Lower 0.15 233 230 231 234 138.5 ▼ 8.5% 177 211 132.6 132.4 121.1 0.11 0,15 0,15 117.1 92.1 93.0 43.0% 44.6% 44.0% 0,10 0.06 0,10▲ 42.2% 164 0.04 38.3% 39.2% 39.2% 0.08 0.07 0,05 0,05 0.05 0,00 0,00 2012 2013 2014 2015 2016 9M 2016 9M 2017 2012 2013 2014 2015 2016 9M 2016 9M 2017 Data ARPU, RUB per month APPMb, RUB

Russia DSU(5) and data-enabled device penetration Consolidated CAPEX(6) and CAPEX margin Lower Lower 61.4% ▼ 6.5% ▼ 12.9% 57.2% 90% 70.2 65.6 53% 56% 56.5 38% 47% 45.2 47.1 38.9 33.9 32% 22.4% 20.7% 16.6% 4 286 6 145 40% 16.6% 15.9% 17.9% 14.3% 3 286 4 027 2 614 1 091 1 556 -10% 2012 2013 2014 2015 2016 9M 2016 9M 2017 2012 2013 2014 2015 2016 9M 2016 9M 2017 20 DSU, MB/month Data-enabled device penetration

Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed. (3) — Total data revenues in a given period divided by average number of data service subscribers during such period, (5) — Total number of megabytes transferred during a given period divided by average number of data subscribers during (1 ) —Data Service User is defined as a Subscriber who has used any of our data transfer services within the preceding one divided by number of months in such period such period, divided by number of months in such period month (4) — Starting from 2013, APPMb presented here vary from those reported earlier do to the change in methodology for data (6) — Total CAPEX, including CAPEX on spectrum acquisition via purchase of SMARTS in August 2015. Refers to actual CAPEX (2) — Active subscribers that do not comply with the definition of Data Service User Base service user calculation. APPMb is calculated by taking ARPDU for a given period, and dividing by DSU in that period accrued for the year and may not match cash flow CAPEX 2. Strategy update Strategy update Russian mobile market is the main revenue stream for MegaFon, while other businesses are supporting

Traditional addressable markets, Russia (current trends) Core business:

Projected CAGR, 2015-2020, % Mobile business: main focus due to big market 2020 size and real competitive advantages 8% Market size (diameter) ICT services3 Supporting Supporting businesses: 6% Handsets businesses

TV2 Handsets: support mobile business growth 4% through client development Fixed internet1 Core business 2% Fixed & TV: customer loyalty increase and churn reduction

0% Mobile

Information & Communication Technology (ICT) services: connectivity based integrational -2% services for Government and businesses Fixed telephony Non-attractive businesses -4% 0% 5% 10% 15% 20% 25% 30% 35% Source: MegaFon’s Strategy analysis, TMT consulting (1) Fixed business implies only revenues from internet use and does not include telephony and other services (2) Incudes satellite, cable and IPTV MegaFon market share, 2016, % (3) Includes addressable market for MegaFon without hardware and software 22 Strategy update MegaFon’s aim on mobile market is to avoid constant price reduction and stimulate digital growth

Market recovery Digital growth potential potential

ARPU Data erosion penetration

ARPU erosion due to Growth due to higher price reduction and data penetration and increasing limits increasing DOU MegaFon is the market leader, both 2015 2020 in ARPU recovery MOBILE MARKET MOBILE MARKET at current trends and in digital growth

23 Strategy update New strategy allows MegaFon to return to growth in current market reality

MISSION PROVIDING OPPORTUNITIES

Goal: LTV increase

COMMERCIAL Products Big Data Retail ICT & IoT STRATEGY value creation 360° clients best reach to digital development of without price overview high-value clients at corporate services competition minimum cost value proposition

Digital Best Continuous Efficient ecosystem infrastructure operational management ENABLERS & spectrum efficiency model improvement

24 Strategy update Following new challenges, MegaFon is going to become 1 the leader in digital services

Source: MegaFon’s Strategy analysis 25 Strategy update Life Time Value (LTV) growth of each subscriber becomes 2 the main goal of MegaFon

The present value of the future cash flows attributed to the subscriber during his/her entire relationship with MegaFon

LTV

Brand Loyalty Willingness to pay Operating efficiency Decline in loss of subscribers ARPU maximization Minimal costs

Source: MegaFon’s Strategy analysis

26 Strategy update In the new era MegaFon will primarily focus on digital 2 clients needs

MegaFon will be focused on digital clients growth as well as their LTV increase

Digital client is … … a smartphone user …

… who consistently uses mobile data …

… for apps, messengers, social networks and online games

27 Strategy update MegaFon will offer products that meet customer’s 3 needs and bring extra value to them

BUNDLES OF MINUTES AND GIGABYTES TARIFFS THAT MEET CUSTOMER’S NEEDS MARKET SEGMENTATION

Speak – for those who value voice Gb 300 minutes and 3 Gb calls based on values

Listen – for music fans Gb 500 minutes and 5 Gb

Watch – for those who watch video based on needs Gb 1000 minutes and 10 Gb frequently

… ADDITIONAL DIGITAL SERVICES

based on behavior … MegaFon.TV

MegaFon.Bank

28 Strategy update To serve our clients in the best way MegaFon is developing deep understanding of their needs through Big Data 4 competences

360 degree client overview

Adjusted offerings for new & existing clients

29 Strategy update MegaFon has set strategic priorities for each channel 5 based on deep understanding of our clients

Target audience Strategic function

• Loyal clients development through MONOBRAND Loyal customers & high-value digital clients of MegaFon up- and cross-sells > 2/3 - MegaFon loyal • Traditional to digital clients conversion clients

MULTIBRAND High-value digital clients Digital clients acquisition through better < 1/3 - MegaFon loyal and wider access provided by multibrand clients

High-value digital clients Digital clients development through up- ONLINE of MegaFon and cross-sells, including online channels ~100% - digital clients functionality improvement

30 Strategy update To improve retail efficiency MegaFon will optimize 5 footprint and introduce new models & tools

The current amount of telecom In the new market reality MegaFon will … POS in Russia is excessive as

• POS penetration is one of the highest in the world … optimize retail • Ineffective POS retraction without affecting top-line footprint • 400 POS were already closed in 2017 • There are no new clients left in the market • The most effective channel-product mix formation … introduce Contribution Margin • Dealer commissions payment scheme revision to reflect sales quality

• Rental costs optimization … improve owned • Traffic to and location optimization POS efficiency • Conversion rate improvement

31 Strategy update MegaFon has earned 2-nd place in mobile B2X and will continue growing through ICT projects 6 MegaFon will develop product portfolio in traditional B2X …MegaFon will implement ICT projects and respond to segment Government’s digital agenda

The Government creates new initiatives for driving the economy into digital: “Digital Economy” is aimed National Technology Initiative – program at developing infrastructure to create national ICT champions on new for digital economy promising markets

40 +1 Growth rate Forecasted growth Russia B2G/G mobile market volume, RUB bn 20 rates for telecom sector Russia ICT market volume, RUB bn • In 2016 MegaFon has earned 2-nd place in mobile B2X • Further growth requires development of products quality, but not price competition

Government digital 160 175 agenda

Esimate by The Boston Consulting Group ICT services and infrastructure32 Strategy update MegaFon is already addressing the Government’s 6 digital agenda by participating in key digital projects

Creation Construction of telecom Installations on trucks Monitoring of "smart" of a telecommunication infrastructure in the stadiums within the "Platon" substations for PJSC system for Russian Interior hosting 2018 World Cup project "Rossetti" Ministry 33 Strategy update In collaboration with Mail.Ru Group MegaFon will build the best digital ecosystem for its clients

7 Mail.Ru Group has unique reach to almost … and competences in developing all Russian internet users … and monetizing digital services

Russian internet users reach Selected Mail.Ru Group digital services

Offline mobile app Food delivery app

Online gaming Online classified Ridesharing social Music streaming platform ads network app ~ 95% ~ 5% Mail.Ru Group & Other Russian MegaFon joint reach internet users

Effect filters for Cloud Web browser Online messenger videos 34 Strategy update Beyond collaboration with Mail.Ru Group, MegaFon is

7 best positioned to develop the biggest digital ecosystem in Russia

MegaFon Local players Global players Strategy update In order to support corporate strategy implementation, MegaFon is updating the management model

BUSINESSCENTRALIZATION DIGITALCOMPETENCESSTRENGTHENING REGIONSCLUSTERIZATION

§ Centralized business & processes § Building and enhancing Customer Value § Regions grouping by strategic management in Headquarters to ensure Management competencies proximity instead of geography consistency in strategy implementation

§ Transforming towards truly Data driven § Operational flexibility strengthening § Simplifying organization structure organization and decision making speed increase for more efficiency and less bureaucracy

§ Expanding DevOps & Agile approaches

§ Creating the best digital team in the industry

36 Strategy update New strategy implementation – commercial and operational transformation projects are already producing first effects

1 Commercial transformation

1. “Connect!” line of tariffs improved structure of new additions without any decrease in their number

2. Yota shifted from unlimited Internet to unlimited access to services, while outperforming the budget

3. Distribution strategy is focused on efficient acquisition of high-income customers in all channels and footprint optimization

2 Operational transformation

1. MegaFon will implement new management model till the end of 2017, first steps have been made already 2. Continuous efficiency improvement through large-scale projects in operational transformation

37 Strategy update MegaFon will successfully implement new strategy due to its unique competitive advantages…

Best positioned to build digital Leadership in infrastructure ecosystem The largest network – the basis for leadership Reach to 95% Russian Internet users in perceived quality of services unrepeatable by competitors

Unique multibrand approach Efficient Governance model MegaFon is the only operator with digital Centralized management from Headquarters brands to satisfy needs of all customer and flexible approach within the cluster model segments

Continuous efficiency improvement Best position in distribution Smart OPEX & CAPEX and large scale Unique access to monobrand and multibrand efficiency improving projects

38 3. Financial and Operating results Financial and Operating Results Q3 2017 Telecom segment key financial highlights¹

Revenue Q3 2017 (up ▲ 4.4% y-o-y) 81.1 84.7 (RUB bn) Q3 2016 OIBDA Q3 2017 33.3 (up ▲ 3.3% y-o-y) (RUB bn) Q3 2016 32.3

Q3 2017 (down ▼ 0.4 p.p. y-o-y) OIBDA Margin (%) Q3 2016 39.8 39.4

Net Profit(2) Q3 2017 (up ▲ 28.0% y-o-y) (RUB bn) Q3 2016 6.3 8.1

CAPEX Q3 2017 (up ▲ 7.7% y-o-y) (RUB bn) Q3 2016 11.7 12.6

(3) Free Cash Flow Q3 2017 (up ▲ 0.9% y-o-y) (RUB bn) Q3 2016 10.7 10.8

Note: (1) Key financial highlights of the Telecom segment include the consolidated financial results of the Company’s Telecom segment and exclude financial results of Mail.Ru Group (2) Profit attributable to equity holders of the Company (3) Starting from the first quarter of 2017, pursuant to the adoption of its new dividend policy, the Group switched from reporting free cash flow, the financial measure previously used, to 40 reporting a new financial measure, free cash flow to shareholders Financial and Operating Results Key highlights: earnings trends

Growth Growth ▲ 4.4% ▲ 0.9% Revenue, OIBDA and Net profit 84.7 81.1 81.3 74.5 78.0 235.0 237.2 • In Q3 2017, total revenue increased by 4.4% y-o-y to Revenue RUB 84.7 bn supported by all revenue streams: 1.2% growth in wireless revenue, driven primarily by mobile data revenue growth, 11.5% increase in wireline revenue and 29.8% growth in revenue from sales of equipment Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9М 2016 9М 2017 and accessories Growth Growth • OIBDA increased by 3.3% y-o-y mainly due to growth ▲ 3.3% ▲ 1.0% in topline 33.3 32.3 29.1 30.6 29.0 92.1 93.0 - OIBDA margin decreased by 0.4 p.p. y-o-y to 39.4% (1) 39.8% 39.0% 39.3% 39.4% 39.2% OIBDA 35.7% 39.2% mainly driven by higher sales of equipment and accessories, which traditionally carry lower- margins, and higher provision for employee bonuses Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9М 2016 9М 2017 linked to improved financial results Growth Lower ▲ 28.0% ▼ 22.0% • Net profit increased by 28.0% y-o-y mainly due to an 8.1 increase in OIBDA and a reduction in the Company’s 6.3 share of losses of associates and joint ventures Net profit(2)(3) 5.5 22.4 3.1 3.8 17.5 9.5% 7.8% 3.8% 5.2% 7.1% 9.6% 7.4% % of Revenue Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9М 2016 9М 2017

Note: Due to rounding, manual calculations for financials and KPIs(3) may differ from those displayed (1) OIBDA in Q4 2016 excludes impairment loss relating to the goodwill allocated to the Broadband internet cash generating unit (2) Net profit attributable to equity holders of the Company 41 (3) Profit attributable to equity holders of the Company, excluding non-cash impairment of Euroset joint venture in the amount of RUB 15.9 bn Financial and Operating Results Key revenue components

(RUB bn) Growth ▲ 4.4% Wireless revenue increased in Q3 2017 by 1.2% y-o-y mainly driven by the growth in data consumption and, hence, data 84.7 revenue as well as higher demand for MegaFon’s value-added Equipment and 81.1 81.3 services, which offset the continued stagnation in voice revenue accessories 78.0 8.9 6.8 8.4 74.5 ▲ 29.8% 6.2 Mobile data revenue increased by 7.5% y-o-y and continued to 6.4 5.7 7.1 Wireline 7.0 6.5 ▲ contribute substantially to the total revenue with its share in 6.1 11.5% wireless revenue increasing from 32.0% in Q3 2017 to 34.0% in Q3 2017. The increase was principally due to a successful promotion of our innovative tariff line for digital customers known as “Vklyuchaisya!” (“Connect!”). This tariff line was designed based Other wireless 46.2 45.4 on 360 degree customer overview and deep understanding of a (1) 44,5 41.8 43.4 revenue client’s consumption behavior through Big Data analysis to arrive ▲ 1.2% at an understanding of subscriber needs and, in particular, the areas which were likely to encourage greater data usage for the things they like Wireline revenue increased by 11.5% y-o-y mainly due to one-off Data 23.4 21.7 21.4 20.9 21.9 ▲ 7.5% boost in revenue resulting from additional services provided during the FIFA Confederations Cup. Net of this one-off event, wireline revenue demonstrated organic growth on the back of continued Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 expansion of our service portfolio

Wireless 83.7% 81.0% 84.2% 83.8% 81.1% Sales of equipment and accessories increased by 29.8% y-o-y as a result of the demand for more expensive high-end devices, - Data particularly Samsung and Apple phones 32.0% 32.4% 33.4% 33.6% 34.0% (% of wireless) Wireline 7.8% 8.6% 8.2% 8.3% 8.4% Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed. Equipment and (1) Other wireless revenue includes revenues from VAS services; revenue from local subscribers which 8.4% 10.4% 7.7% 7.9% 10.5% accessories includes monthly fees, airtime revenues, own subscriber roaming and connection fees; wireless interconnection revenues; roaming charges to other wireless operators 42 Financial and Operating Results Drivers of Russia total wireless services revenues: Wireless subscribers Results provided on this page (million) cover only the Russian business 75.5 75.6 75.6 75.8 75.6 Total Russia wireless subscribers including data service users

• Overall subscriber base in Russia increased by 0.1 million 30.8 31.0 31.1 31.0 31.1 ▲ 1.1% y-o-y new subscribers (+0.2% y-o-y) to 75.6 million • As previously announced, we have shifted our focus from gross additions to increasing the life-time value of our subscribers and their contribution to margin ▲ 0.2% y-o-y • Data service user base increased by 1.1% y-o-y to 31.1 million users accounting for 41.2% of the overall subscriber base principally as a result of ongoing promotion of MegaFon 44.5 44.7 44.6 44.5 44.8 data services and products, including those represented in our new “Vklyuchaisya!” (“Connect!”) tariff offering, aimed at better satisfying subscribers’ data service needs

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Data service user base (1) User base not using data service (2)

Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed Share of data users in overall subscriber base, % (1) Data Service User is defined as a Subscriber who has consumed any amount of data traffic within preceding month 40.8% 41.0% 41.2% 40.9% 41.2% (2) Mobile subscribers that do not fall within the definition of Data Service User Base 43 Financial and Operating Results Drivers of Russia total wireless services revenues: DSU and APPMB Results provided on this page cover only the Russian business Growth Growth Data revenue operating statistics ▲ 59.2 % ▲ 52.6% (1) DSU & 6 145 • Strong increase in DSU (59.2+% y-o-y) in Q3 2017 was driven APPMB(2) 6 679 0,2 6 029 by : 5 061 5 727 4 027 4 195 – promotion of our innovative tariff offering “Vkluchaisya!” (Connect!), designed using Big Data to analyze DSU, 0.06 0,1 0.05 consumer behavior across the entire subscriber base to Mb/month 0.04 0.04 0.04 0.06 0.04 arrive at satisfaction of subscriber’s needs and, thus, APPMb, RUB intended to promote more data services and greater 0 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9M 2016 9M 2017 data usage – Continued increase in the number of hi-end data- enabled and data-heavy devices, resulting in Growth Growth penetration of such devices up to 61.4% of all devices RUB per ▲ 6.5 % month ▲ 1.3% utilizing MegaFon network

DATA ARPU 231 228 224 233 246 231 234 – intensive roll-out of the 4G/LTE network (3) (ARPDU ) – continued increase in 4G-enabled devices registered in MegaFon network, reaching 14.2 million

• APPMB decreased by RUB 0.02 to RUB 0.04

• ARPDU increased by 6.9% y-o-y due to acceleration of Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9M 2016 9M 2017 mobile data revenue growth supported mainly by cancelation of unlimited tariffs, introduction of innovative tariff line “Vkluchaisya!” (Connect!) Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed (1) Total number of megabytes transferred during a given period divided by average number of data subscribers during such period, divided by number of months in such period; (2) ARPDU for a given period divided by DSU in such period; (3) Total data revenues in a given period divided by average number of data service subscribers during such period, divided by number of months in such period 44 Financial and Operating Results Key factors influencing OIBDA margin

Key components

OIBDA margin • In Q3 2017, OIBDA increased by 3.3% y-o-y, while OIBDA (%) S&M as % of G&A as % of margin decreased by 0.4 p.p. y-o-y to 39.4% 39.8% Gross profit margin revenue revenue 39.4% ▼ 0.4p.p. • The following factors influenced OIBDA: ▲ 0.2 p.p ▲ 0.1 p.p ▼ 0.7 p.p. - Gross profit increased by 4.6% y-o-y, while gross profit margin grew by only 0.2 p.p. to 69.6% largely due to increased cost of revenue resulting from the higher sales of equipment and accessories, being traditionally a lower- Growth margin segment ▲ 3.3% 3.6 - Sales & marketing expenses increased by 2.0% y-o-y 32.3 33.3 mainly due to higher cash collection commission resulted OIBDA from increased share of bank payments received from (RUB bn) (1.0) (0.1) (1.4) our subscribers - General & administrative expenses grew by 7.4% y-o-y: Gross profit – employee benefits and related social charges increased by 26.1% y-o-y as a result of higher 4.6% provision for employee bonuses related to improved financial performance for 9M 2017 – radio frequency fees increased by 12.9% due to +4.4% +4.2% +2.0% +7.4% acquisition of additional radio-frequency channels in E-GSM frequency band OIBDA Revenue Cost of revenue Sales & General & OIBDA Q3 2016 Marketing Administrative Q3 2017

Note: Due to rounding, manual calculations for financials and KPIs may y-o-y growth y-o-y decrease differ from those displayed.

45 Financial and Operating Results Key highlights: free cash flow and CAPEX

Growth Lower CAPEX, OIBDA-CAPEX, Free Cash Flow ▲ 7.7% ▼12.9% 26.7 38.9 33.9 • In Q3 2017, MegaFon spent RUB 12.6 bn, which is 7.7% higher than in Q3 2016 due to higher investing activities CAPEX(1) 11.7 32.9% 13.1 12.6 8.1 16.5% 14.3% • The major investment projects in 2017 included the further 14.4% 10.9% 16.9% 14.8% roll-out of high-speed mobile data LTE and LTE-Advanced networks coverage across the existing network footprint Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9M 2016 9M 2017 and continued upgrade of 2G and 3G networks. The Growth Growth equipment swap program to be substantially completed ▲ 0.8% ▲ 11.1% by the year-end and is intended, inter alia, to support 59.1 20.9 20.8 53.2 deployment of the next generation network. In our CAPEX 20.6 17.5 28.0% programs we continue focusing on: OIBDA(2) - 25.4% 22.4% 24.5% 2.3 22.6% 24.9% CAPEX 2.9% – investment project prioritization, and – optimization of technical solutions Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9M 2016 9M 2017 • Due to higher OIBDA in Q3 2017 OIBDA-CAPEX increased Growth Growth by 0.8% y-o-y ▲ 0.9% ▲ 5.8% 10.7 10.8 • Free Cash Flow increased by 0.9% y-o-y mainly driven by the growth in operating cash flow in Q3 2017 6.7 7.4 Free Cash Flow 21.0 22.2 4.0 • Free cash flow for 9m 2017 increased by 5.8% y-o-y due 8.9% 9.4% 13.2% 8.3% 5.3% 9.5% 12.8% to growth in operating cash flow by RUB 9.7 bn, or 13.2% % of Revenue y-o-y, partially offset by interest paid, increased by RUB Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 9M 2016 М9 2017 6.0 bn

Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed (1) MegaFon CAPEX refers to actual CAPEX accrued for the year and may not match cash flow CAPEX. (2) OIBDA in Q4 2016 excludes impairment loss relating to the goodwill allocated to the Broadband internet cash generating unit 46 Financial and Operating Results Net debt and liquidity evolution

NET DEBT BUILD-UP, RUB BN AS OF 30 JUN 2017 AS OF 30 SEPT 2017 CHANGE • MegaFon’s leverage remained at a comfortable level after Cash and cash equivalents 19.9 13.7 (6.2) the dividend payment in July-August 2017 Short-term investments 19.3 15.8 (3.5) – Net debt/LTM OIBDA at 1,91x level at the end of Q3 2017

Total debt 265.2 262.6 (2.6) – In July-August MegaFon paid final dividends for FY2016 in the total amount of RUB 20 bn Long-term debt 201.4 199.4 (2.0) Short-term debt 63.8 63.2 (0.6) • Continued focus on FX risk mitigation 73% of cash held in USD to offset the revaluation of FX- Net debt 226.0 233.1 7.1 – denominated liabilities – Remaining cash held in Rubles to take advantage of Net debt and Net debt/LTM OIBDA Liquidity(1) split higher deposit rates by currency RUB bn / (x) • MegaFon is the highest rated telecom company in Russia Growth ▲ 0.35x – On 19 September, Standard & Poor’s upgraded 240,0 1.91x MegaFon’s foreign currency rating to BBB-, one notch 1.91x 1.87x 2,30x 27% above Russia’s sovereign rating 220,0 2,10x 200,0 1.56x 1.63x 1,90x – On 21 September, ACRA (Russian Analytical Credit 1,70x Rating Agency) assigned AA (RU) credit rating to the 180,0 1,50x Company. MegaFon has the highest corporate credit 233.1 160,0 229.4 226.0 1,30x 73 % rating among the companies without government 196.9 140,0 190.2 1,10x support 0,90x 120,0 0,70x73% 100,0 0,50x Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 RUB USD

Net debt Net debt/LTM OIBDA Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed 47 (1) — Liquidity is calculated as the sum of cash and cash equivalents and short-term investments Financial and Operating Results Debt profile

By instrument By currency (1) By maturity In September MegaFon successfully executed landmark bond transactions: % of total 5% 4% • On 28 September, the Company successfully closed the 21% 10% 24% 51% order book for its exchange bonds in the amount of RUB 15 bn at a record low coupon rate – 7.85% per annum for 5Y 2017

- 11% tenor.

Jun • On 29 September, the Company issued the first-ever - % % %

0 61 81 51 Russian commercial paper with blockchain-registered 3 18% 61% ownership with maturity in December 2017 81% 7% 7% • On 20 October, the Company redeemed in full its Series BO- 05 bonds in the aggregate amount of RUB 15 bn

21% 5% 4% MegaFon has: 24% 9% 51% • Diversified portfolio structure with no reliance on any specific means of financing

2017 11% - • No short-term refinancing risk

Sep % - 61 % 82 51 % - 51% of the Company’s debt becomes due in

30 5 years or later 82% - Most of 1Y maturities are attributable to RUB bonds 18% 61% 7% 7%

Bank Loans RUB 1 Year 2 Years Equipment Financing USD Hedged(2) 3 Years 4 Years Bonds USD EUR 5 Years and Longer

Note: Due to rounding, manual calculations for financials and KPIs may differ from those displayed (1) — On nominal basis 48 (2 ) — Including structured and plain vanilla FX hedges Outlook for 2017 Outlook for 2017

Telecom segment

Service revenue OIBDA CAPEX Flat to low single RUB ~118 bn RUB 55-60 bn digit y-o-y growth

49 4. Appendix Appendix New dividend policy

At least 70% of free cash flow to the — Transparency Prudent in the Company’s shareholders and calculation context simplicity of financial in determining management the amount goals — Given that the Company generally of dividend intends that a dividend payment does not increase its level of leverage and aims to have that ratio not exceed 2.0x except in those instances when it is reasonable to borrow for strategically important M&A transactions which will Focusing the Enabling the increase the Company’s shareholder management shareholders on delivering on to benefit from value the new the new strategy goals strategy implementation — Dividend metrics do not account for Mail.Ru results

51 Appendix MegaFon’s headline tariffs (Moscow region) (1/3)

TARIFF NAME PRICE FEATURES BEYOND THE PACKAGE

• 500 minutes to all subs in Russia • SMS to subs in the domestic region – • Free calls to MegaFon subs in Russia 1.5 RUB/unit Connect ! Interact • • SMS to subs in Russia – 3.0 RUB/unit 600 RUB/ month 12 GB on Internet traffic All the fun in social networks • Unlimited access to messengers (WhatsApp, Viber, eMotion, TamTam) and social networks (VK, Odnoklassniki, FB) • 2 free movies, free traffic and channel bundle on MegaFon.TV • 1.200 minutes to all subs in Russia • SMS tSMS to subs in Russia – 3.0 • Free calls to MegaFon subs in Russia RUB/unit • o subs in the domestic region – 1.5 Connect ! Watch • Free traffic on Internet video / Youtube RUB/unit For movie, series and YouTube 950 RUB/ month • 16 GB of Internet traffic lovers • Unlimited access to messengers (WhatsApp, Viber, eMotion, TamTam) and social networks (VK, Odnoklassniki, FB, Instagram) • 4 free movies and 50 channels on MegaFon.TV • 350 minutes to all subs in the domestic region • Outgoing calls to MegaFon subs in • Free calls to MegaFon subs in the domestic region Russia – 3.0 RUB/min

Bundledtariffs Connect ! Write • 400 SMS Use all messenger’s features 400 RUB/ month • Outgoing calls to all subs in Russia – • 2 GB of Internet traffic 12.5 RUB/unit • Unlimited access to messengers (WhatsApp, Viber, eMotion) • SMS to all subs in Russia – 3.0 RUB/unit • Free traffic on MegaFon.TV • 600 minutes to all subs in Russia • SMS to subs in the domestic region – • Free calls to MegaFon subs in Russia 1.5 RUB/unit Connect ! Talk When it’s easier to call than to 500 RUB/ month • 3 GB on Internet traffic • SMS to subs in Russia – 3.0 RUB/unit chat • Unlimited access to messengers (WhatsApp, Viber, eMotion) • Free traffic on MegaFon.TV

52 Appendix MegaFon’s headline tariffs (Moscow region) (2/3)

TARIFF NAME PRICE FEATURES BEYOND THE PACKAGE

• 250 minutes to all subs in the domestic region • Outgoing calls to MegaFon subs in • Free calls to MegaFon subs in the domestic region Russia – 3.0 RUB/min • Outgoing calls to all subs in Russia – Connect ! Listen • 6 GB on Internet traffic 500 RUB/ month 3.0 RUB/unit Music for any taste • Unlimited access to messengers (WhatsApp, Viber, eMotion) and music web-sites (Boom, Yandex.Music, Zvooq, Vkontakte Music) • SMS to subs in the domestic region – 1.5 RUB/unit • Free traffic and channel bundle on MegaFon.TV • SMS to subs in Russia – 3.0 RUB/unit

• 5,000 minutes to all subs in Russia • Free on-net calls • Unlimited SMS to all subs in Russia • Unlimited access to Internet video (YouTube, Rutube, Vimeo) Bundledtariffs Connect ! Premium 3.000 RUB/ • 20 GB of Internet traffic Don’t limit yourself! month • Unlimited access to messengers (WhatsApp, Viber, eMotion, Telegram, Facebook Messenger, TamTam) • Unlimited access to social networks (Vkontakte, Odnoklassniki, Facebook, Instagram) and music web-sites (Boom, Yandex.Music, Zvooq, Vkontakte Music) • 4 free movies and 100+ channels on MegaFon.TV

• All outgoing calls to other regions of • Outgoing calls to MegaFon subs in the domestic region – Russia – 3.0 RUB/min 1.3 RUB/ min (1st minute) and ) RUB/min (from 2nd minute) Switch to zero 0 RUB/ month • 1 Mb of internet traffic 9.9 RUB • Outgoing calls to other subs in the domestic region – • 2.5 RUB/ min Internet XS tariff option available in conjunction

• Outgoing call to all subs in the domestic region – 1.8 RUB/min Everything is simple 0 RUB/ month • Not applicable Other tariffs Other • Outgoing calls to other subs in Russia – 5 RUB/min

53 Appendix MegaFon’s headline tariffs (Moscow region) (3/3)

TARIFF OPTION NAME PRICE FEATURES BEYOND THE PACKAGE

• 3 GB of traffic Internet S 350 RUB/ month • Maximum speed is not limited • 1 free movie and channels on MegaFon TV

• 16 GB of traffic* • Once a plan data allowance is used, the Internet access will automatically be Internet M 590 RUB/ month • Maximum speed is not limited suspended until the next calendar month or until the plan is upgraded with other • 2 free movies and channels on MegaFon TV options • 36 GB of traffic* Internet L 890 RUB/ month • Maximum speed is not limited • 4 free movies and channels on MegaFon TV

• 1.5 GB of traffic Internet Tablet XS 190 RUB/ month • Maximum speed is not limited • Channels on MegaFon TV

• 4 GB of traffic

Internet tariffs options Internet Internet Tablet S 400 RUB/ month • Maximum speed is not limited • 1 free movie and channels on MegaFon TV

• 16 GB of traffic Internet Tablet M 590 RUB/ month • Maximum speed is not limited • 2 free movie and channels on MegaFon TV

• 36 GB of traffic Internet Tablet L 890 RUB/ month • Maximum speed is not limited • 4 free movie and channels on MegaFon TV

(*) 50% of traffic is available from 8.00 am to 00.59 am, the rest 50% of traffic is available from 1.00 am to 7.59 am (**) Amount of traffic available is unlimited from 1.00 am to 7.59 am, 30 GB of traffic is available from 8.00 am to 00.59 am 54 Appendix MegaFon TV is a fully-fledged video and TV OTT solution, aimed at boosting subscribers loyalty and lifetime

Content

• Available to MegaFon subscribers and those of other mobile operators • VOD(1): Large catalogue of movies, TV series and sequels of first-rate Russian and foreign studios • Live TV: 150+ channels, including 1 and 2 multiplex • STS content available before official TV release

Devices supported

• OTT solution for all types of devices: smartphone, tablet, SMART TV, Web, 3.3 million users registered as of the end of 2017 • Available as app for mobile devices and SMART. TV app 70% of registered users are subscribers using MegaFon bundled tariffs

80% of users via portable data-enabled devices Uniqueness

• Unique terms of use for subscribers using “Connect” bundled tariff plans and options 80% of app users rate the service as “good” and “excellent” • VOD and LiveTV tandem solution 4.1 rate out of 5 in Google Play and 4.0 out of 5 in AppStore • Premium HD content: Amedia, Discovery HD, HBO, Disney, Warner, Universal, START, Sport HD, etc. • Individual recommendations based on ratings and 9% share of paid content and OTT market(2) perceptions by subscribers

55 Appendix MegaFon.Card is the new unique financial product representing debit card, fully integrated with user’s mobile account

KEY — Available in all regions of presence of MegaFon DEVELOPMENT — 1.1 mn cards issued to MegaFon subscribers IN 9M 2017 — RUB 19.5 bn total transaction volume in 9m 2017

KEY HIGHLIGHTS OF THE PRODUCT

How to obtain At any MegaFon Retail store/ within 5-10 minutes

MegaFon card is fully integrated Can be topped up using a phone # of cards linked to Up to 10 cards with MegaFon user mobile number and/or via internet or one account account mobile banking, card2card payment, web dashboards Interest on account 8% p.a. provided at least one transaction during a month and balance average account balance > RUB 500

Can be used as an ordinary debit MegaFon-Bank application Set-up charge (one- Free for subs using major bundled tariff plans All included” tariff card for on-line and off-line cash compatible with all OSs to off) plans and non-cash payments facilitate card usage Maintenance fee Free • Certified MasterCard 24/7 card support via a separate For each RUB 100 spent on MegaFon.Card a cardholder gets • 3D-Secure contact center at 5555 short Loyalty program 10 MB gift • Additional security when using number content services Cashback Up to 50% depending on a program with a commercial partner Appendix Main transformation projects — Unified Billing (1/3) KEY PROJECT HIGHLIGHTS

Strategy Key developments MegaFon branch offices Project Partner • Total control over the key parameters of • Launch of B2C and B2B Fix sales MegaFon’s business from the very beginning — covers all of the Company’s B2C sales of the process chain channels — >90% of B2B fixed-line clients have been • Absence of foreign components and built-in migrated to “GreenField Fix” solution FX risks for both CAPEX and OPEX • Shorter time-to-market implementation • Unified technical solution based on open process architecture with capacity to scale up and expand the system going forward • Positive trend on key operational KPIs (uptime and claim rate) Implementation • Introduction of new (1) service level agreement between IT BSS and business and • System simplification permits optimized (2) operating level agreement between utilization of back-office functions, including MegaFon and Peter-Service focusing on IT, accounting, product management and quality and speed of delivery other functions, by up to 30% • Enables MegaFon to further integrate and unify the organizational structure Unified Billing (BSS) replaces separate standalone PROJECT 2015 2016 2017 2018 billing systems Migration used by Launch of Pilot project Sales Rollout MegaFon TIMELINE operational testing Q3 2017 branches and 15.12.2015 subsidiaries

57 Appendix Main transformation projects — Shared Services Center (SSC) (2/3)

KEY PROJECT HIGHLIGHTS

Accounting and Rationale Implementation Development reporting

• Optimization and unification of the business • Opening of a fully-controlled SSC as a • SSC launched on 1 July 2016 processes back-office in Samara Financial control • Currently, 8 of 8 branch offices and 10 and treasury • Implementation of client-oriented culture in • Transfer of all branch offices and subsidiaries are served by SSC SAMARA auxiliary departments and functions subsidiaries to the SSC by year-end of 2017 • Planned number of employees – 900 Procurement • Implementation of lean tools and methods • High-level of centralization supported by people planning for regular self-improvement strict agreement restrictions (covenants) and support under SLAs • Improvement of reporting transparency and operating model of the Company HR • Enhancement of business scalability

B2O operational support PROJECT August, 2015 2016 2017 2018 STAGE 1 STAGE 2 STAGE 3 STAGE 4 Receivables TIMELINE management Economies Creation of SSC Rollout Rendering services evaluation Pilot project to 3rd parties Project structure draft

58 Appendix Main transformation projects — First Tower Company (3/3)

TOWER INFRASTRUCTURE KEY PROJECT - Creation of a player with the best tower portfolio in Russia HIGHLIGHTS - Focus on improvement of operating efficiency – Effective management of tower portfolio and savings from >15K Strategy infrastructure maintenance towers 13% Towers – Better return on CAPEX – Incremental gains from active involvement in fast growing Masts market of tower leasing 27% 47% Concrete posts - Flexibility in future decisions Iron posts – Sale of a share in First Tower Company 13% – Potential establishment of NetCo for end-to-end management of active and passive infrastructure

FTC 2017 2018 2019 DEVELOPMENT STAGE 1 STAGE 2 STAGE 3 Spin-off of tower and Spin-off of tower and Spin-off of tower and SCENARIO related assets to FTC related assets to FTC related assets to FTC (07/2017) (07/2017) (07/2017)

• Tower portfolio categorized and • Planning and construction of tower • Under optimal market conditions, sale of structured infrastructure transferred to FTC a stake in FTC to a strategic buyer / financial investor • Commence involvement in the market of • MegaFon keeps control over FTC to tower leasing synchronize its plans for network design and roll-out • Disposal of unused tower infrastructure via partnerships • Implementation of MegaFon strategy subject to value accretion of FTC 59 Contact Information 41 Oruzheyniy lane, Moscow, 127006, Russia MegaFon Investor Relations Tel.: +7 495 926 20 12 Email: [email protected] Web: corp.megafon.com