2017 MTS Group Sustainable Development Report Member of the Social Charter of Russian Business
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years of sustainabe growth 2017 MTS Group Sustainable Development Report Member of the Social Charter of Russian Business Full trade name of the Company in Russian: Публичное акционерное общество «Мобильные ТелеСистемы» Short trade name of the Company in Russian: ПАО «МТС» Full trade name of the Company in English: Mobile TeleSystems Public Joint Stock Company Short trade name of the Company in English: MTS PJSC In this report, the terms “MTS”, “the Company”, and the “MTS Group” shall refer to the group of companies consisting of MTS PJSC and its subsidiaries; MTS PJSC and “the Company” shall mean Mobile TeleSystems Public Joint Stock Company. The indicators contained in this Annual Report are as of December 31, 2017, unless other periods or dates are expressly indicated. The Annual Report of MTS PJSC for 2017 is at report2017.mts.ru. The interactive version of Sustainable Development Report of MTS Group for 2017 is available at our2017.mts.ru. Contents Message from the President 2 People Key figures 2017 4 HR Policy 94 Personnel Structure 96 MTS Group Staff Recruitment and Adaptation 99 About the Group 8 Personnel Development and Training 102 Our Markets 12 Motivation and Social Guarantees 108 Development Strategy 14 Occupational Health & Safety 111 Corporate Culture 22 Society Business Charity 116 Key Services 28 Volunteering 122 Availability of Services 34 Social projects 130 Service Quality 38 Personal Data Protection 40 Environment Management of Environmental Activities 140 Responsibility Environmental Impact 142 Corporate Governance 44 Environmental Initiatives 146 Compliance and Culture of Good Faith Behavior 50 Additional information Responsible supply chain 61 2017 Achievement Calendar 154 About the report 156 Innovations Glossary 168 Innovative Approach 68 Contacts 173 Digital Innovations 71 Innovative Network Development 82 Innovation Promotion 86 Message from the President Dear friends! This is the 10th Sustainable Development Report prepared by MTS Group. In this document, we tradition- ally evaluate and present our progress in being more transparent and more responsible business as well as our contribution to society and the environment. The world is changing rapidly. Today, we live in a new digital reality. The fast spread of the Internet and the associated technologies open up new horizons for humanity, affecting our habits and behavior patterns, our preferences and aspirations. Along with the digital transformation of an individual, the transformation of business that serves or is operated by that "new" person is also gathering pace. Accordingly, a business must respond to the specifics of "new" consumption. Many lasting paradigms have completely changed in recent years. A whole bank now fits into a smartphone; as do online trade and shops, transportation services, geolocation, cinema, training courses, public services, etc. Established industries such as agriculture and medicine are going digital. 2 Message from the President New technologies and their use in everyday life MTS adheres to socially oriented priorities. We share contribute to a particularly innovative way of thinking, the UN’s Sustainable Development Goals, aimed at which in turn stimulates the development of society as transforming the world. We integrate the principles a whole, promoting economic growth, and is the key to of sustainable development into our business perfor- a sustainable future. mance, corporate culture and decision-making system. That is why MTS is implementing a comprehensive For us, as a company, that provides necessary infra- corporate social responsibility strategy focused on structure for these new and exciting technologies, achieving these goals. active creation and development of our own digital solutions is a natural progression. We strive to use all We build our relationships with clients, partners, sup- our potential to make life of each subscriber ever more pliers, shareholders and employees on the principles comfortable and the business of our corporate clients of integrity and transparency. Our stakeholders trust us ever more effective. and share our socially responsible approach to doing business. MTS not only reacts to changes in the world around us. We also set trends of our own, pushing the boundaries We will continue to work actively going forward to im- with new businesses emerging from this digital reality. prove the quality of life of people and to drive positive By exploring areas such as telemedicine, FinTech, cloud changes in the development of our society and country. services, Internet of Things, and Big data, we contrib- ute to the rapid migration of society to the digital Yours faithfully, world and to the emergence of smart and safe cities Alexey Kornya and communities. President of MTS PJSC 3 Key figures 2017 MTS for business 106.5 mln subscribers in host countries 34.7 mln visitors of the online store MTS for employees 5.7 retail stores employees 213,000 km of fiber-optic lines > 65,000 is total HR costs 74.6 bln RUB of capital costs on 62 bln RUB infrastructure 71,000 is the average salary > 25 own mobile applications 16.5 is the average number of training hours per employee 5.6 bln RUB of income from system integration > 700 unique training topics of the Corporate University 42% of the IoT SIM cards in Russia of vacancies closed by 22.4 bln RUB of turnover of MTS Money 66% internal candidates service 1.6 bln RUB is the cumulative effect of the Big Data products 4 Key figures 2017 MTS for society MTS for shareholders 612.7 mln RUB is total costs on charity and social projects 442.9 bln RUB of consolidated revenue 15 mln people of Generation M Internet audience 56 bln RUB of net profit 6,500 volunteers 52 bln RUB of paid dividends > 800 participants of the donor movement > 300 monthly users of MTS/Media Educational Resource 5 MTS Group About the Group 8 Our Markets 12 Development Strategy 14 Corporate Culture 22 About the Group MTS is a leading company in Russia and CIS countries by mobile and fixed-line communication services, Internet access, cable and satellite TV broadcasting, digital services and mobile applications, financial and e-commerce services, as well as convergent IT solutions in system integration, Internet of Things, monitoring, data processing and cloud computing. Providing innovative services and solutions, MTS makes a significant contribution to the development of regions of operation and improvement of the quality of life of dozens of millions of people. Key results In 2017, income of MTS Group amounted to 442.9 sumption of mobile Internet services, as well as sales billion rubles (+1.7% against 2016), while the income in of high-end smartphones of the high price category, Russia grew even faster, by 2.9% to 412.3 billion rubles. which provide access to modern digital services. The income growth in 2017 was influenced by the OIBDA in 2017 increased at the expense of higher market recovery in terms of pricing and increased con- income in Russia on the background of reduced level of Income structure of MTS Group in Russia in 20171, bln RUB. Sales of products System integration Mobile services Fixed services 5.6 52.5 60.8 304.0 1 Intercompany operations in 2017 amounted to 10.6 million rubles. 8 About the Group SIM-cards sales, increased profitability in Ukraine and Adjusted OIBDA of the Group (bln RUB) relative macroeconomic stability. Key role was played and OIBDA margin of the Group by increased consumption of high margin Internet services. 41.5% 40.6% In 2017, MTS Group’s net income grew by 15.6% to 38.8% 56 billion rubles compared to the previous year. The growth was mainly caused by high performance and higher profitability. 179.8 MTS remains a major source of replenishment of 175.5 federal and regional budgets. In 2015, MTS Group paid around 22.4 billion rubles of income tax, up 91.9% 169.3 against 2016. The significant increase in income tax payments was caused by growth in revenue from consumption of data transmission services, uneven 2015 2016 2017 recognition of internal group costs among the MTS subsidiaries (income for 2015, expenses for 2016), and reduced depreciation expenses, as well as reversal of one-time recognition of costs on LTE and GSM licenses Net income of the Group (bln RUB) in 2017. and Net profit margin of the Group More details about MTS Group, its position in the industry, as well as the projected development of 11.6% 12.7% markets in 2018 and in the mid-term outlook are 11.1% given in the 2017 Annual Report of MTS PJSC, the Future Outlook section. 56.0 49.5 48.5 2015 2016 2017 Paid income tax by MTS Group, thou RUB 2015 2016 2017 Russia 7,146,921 10,603,890 21,264,671 Ukraine 1,449,819 37,219 594,645 Armenia 381,788 379,234 123,171 Belarus 14,422 1,958 13,416 Foreign SPV 472,755 351,386 431,348 Total 9,643,2651 11,687,3572 22,427,252 1 Including paid income tax in Turkmenistan in the amount of 177,561 rubles. 2 Including paid income tax in Turkmenistan, the Czech Republic and Uzbekistan in amounts of 228,680 rubles, 77,956 rubles and 7,033 rubles, respectively. 9 MTS Business Model: Dividends Tax payments to MTS shareholders MTS income Financial E-commerce services People on the internet Mass mobile segment Cloud Future services products Companies on the internet Households B2B segment Mobile and fixed-line communication Smartphones Pay TV Customers Services and products Even though current income is gener- MTS continues to develop ated mainly by classic subscribers, MTS its main service – com- munications, but shifts 10 believes that the