2019 MTS SUSTAINABLE DEVELOPMENT REPORT
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MTS SUSTAINABLE DEVELOPMENT REPORT 2019
CONTENTS
About the Report 1
Our Priorities 4
The Report Concept 2 Message from Alexey Kornya 4 ABOUT
Topic Materiality Assessment 3 Message from Regina von Flemming 6 THE REPORT
COVID-19 8
The 2019 MTS Sustainable
Development Report
(the “Report”) has been
prepared by MTS PJSC
and provides consolidated data
on the activities of MTS Group
(“MTS Group”, the “Group”),
including its parent company
OUR ACHIEVEMENTS 10 HOW WE MANAGE VALUES WE CREATE 54 Mobile TeleSystems Public
SUSTAINABLE MTS for shareholders 56 Joint Stock Company
DEVELOPMENT ASPECTS 38 (“MTS PJSC”, the “Company”)
Business Model 12 MTS for customers 60 and its subsidiaries.
MTS for partners 72 The indicators in this Report
Our Markets 14
are as of December 31, 2019,
Sustainable Development MTS for Government 80
Network Infrastructure Expansion 20 unless other periods or dates
Integrated Management System 40 MTS for employees 84 are expressly indicated.
The Board of Directors MTS for local communities 104 The 2019 Report has been
Our Strategy 22 and the Management Board 42 prepared in accordance
MTS for environment 124
Business Development Strategy 22 The Corporate Social Responsibility (CSR) with the Global Reporting
Committee 42 Initiative (GRI) Standards (Core
Innovative Growth Areas 24 option) recommendations
Partnership Projects 26
Supervisory Board For Charity 43 APPENDICES 134 and reference performance
Procurement Management 44 Membership of Associations, National indicators developed
Compliance Committee 44 and International Organizations 134 by the Russian Union
Strategic Sustainable GRI Content Index 135
of Industrialists
Development Priorities 28 and Entrepreneurs (RSPP).
ESG Metrics 138 Financial figures are based
Current Corporate Social Responsibility MTS’s Corporate
Reference Performance Indicators by RSPP 139 on the audited financial
Strategy for 2017–2020 30 Responsibility Principles 45 statements prepared
Additional Materials 140 under International Financial
UN Sustainable Development Code of Business Conduct and Ethics 45
Goals Navigator 32 Reporting Standards (IFRS).
Anti-Corruption 46
Material topics disclosed
Participation in Non-Governmental MTS Awards in 2019 141
Antitrust Compliance 46 in this Report were selected
Organizations 34
by conducting regular
Control over the Use of Insider Information 47 Contacts 144 surveys of key stakeholder
Personal Data Processing Operations 47 groups. The Report compares
Anti-Money Laundering 48 the Group’s current social
and environmental initiatives
Health and Safety Management System 48 with the UN Sustainable
Human Rights at the Workplace 48 Development Goals (SDGs).
Environment 49 The data disclosed in the 2019
Report have been verified
Intellectual property management system 50 by the internal control &
Risk management system and sustainable audit function and approved
development risk map 50 by the functional units
at a Corporate Social
Risk factors by CSR priority area 51
Responsibility Committee (CSR
Committee) meeting.
MTS PJSC sustainable
development reports
traditionally pass
a public assurance procedure
at a meeting of the RSPP Board
on Non-Financial Reporting.
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HOW WE MANAGE SUSTAINABLE
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TOPIC MATERIALITY ASSESSMENT
When preparing a sustainable development report, In addition, MTS has traditionally pinpointed
MTS runs regular surveys of key stakeholder the preferences of the two critical stakeholder
groups to identify the most relevant topics to be groups – customers and employees – with its core
addressed in greater detail. In finally defining material business processes built around them. From January
topics for the report, MTS takes into account to February 2020, we conducted an online
a comprehensive analysis of the Company’s survey of our mobile subscribers (customers)
THE REPORT CONCEPT representatives service on public and state and MTS employees. The survey covered 36 topics
committees, management decisions, strategic across three core dimensions – economic,
priorities approved by the Board of Directors, environmental and social. The most relevant aspects
Dear readers! and the issues raised during regular IR events. Thus, for respondents in both groups are presented
when drafting a sustainable development report in the materiality matrix.
I am pleased to present this 2019 MTS Group concept, the working group has the fullest possible
Sustainable Development Report aligned with the GRI information on the preferences of all key stakeholder As a digital company, MTS has no significant
framework and describing our activities through groups. environmental footprint. At the same time, given
the lens of the UN SDGs. the relevance of global climate change for MTS and
the expert community, we included environmental
We strongly believe that stakeholder confidence safety aspects within the boundary of the Report.
is an important element of sustainable growth.
Therefore, MTS is committed to having an ongoing
open and honest dialogue with partners, customers,
shareholders and employees on economic, social Based on the data obtained, the following topics were included in the 2019 MTS Group Sustainable
and environmental topics. The Report traditionally Development Report in order of their priority for respondents:
discloses our performance separately for each
stakeholder group.
1 3 5 7
A large part of the Report is devoted to our sustainable Protecting customer Protecting customer Ensuring quality Monitoring waste
development and CSR management system health & safety privacy customer service generation
and its integration with the business. Additionally,
the Report provides a wide coverage of MTS’s
corporate compliance efforts. The materials
on the CSR Committee, which has expanded its
2 4 6 8
activities by establishing a carbon management
working group, are a notable addition to the Report. Developing innovative Creating jobs Observing human Monitoring resource
services in regions of operation rights consumption
We always pay particular attention to questions raised (including energy)
by our customers. The 2019 Report is the first to feature Relevance
answers to requests submitted at the Investor Day for customers
9
and Supplier Day. Please email us at csr@mts.ru
Tatyana Chernysheva, and we will be happy to answer any further questions 8 5 5
Member of the Management Board, you may have regarding this Report. 1
1 3
Vice President for Human Resources, 7 9
3 6
Chairwoman of the CSR Committee, MTS PJSC Monitoring GHG
6 6
emissions
2
5
4 2
4
7
4
9
8 2019
3
2018
2
1 Relevance
for employees
0
1 2 3 4 5 6 7 8 9
2 3
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PRIORITIES
fire departments and local police stations
Every one of us needs to kindle the desire in nine regions of Russia were able to maximize MTS’s social programs are aimed at bridging
to develop and move forward, as it makes their performance by being connected the digital divide, improving financial literacy,
us happier. This very principle – taking at least one to MTS’s internet networks. The deployment driving the education and creative development
step every day to change our lives for the better: of our 4G network was completed across all of children, addressing key environmental
learning new things, showing more kindness, tunnels and stations of the Moscow Metro in 2019, challenges and preserving historical and cultural
developing physically and emotionally – underlies and special NB-IoT networks were launched heritage.
the MTS brand concept that we refreshed in 2019. in almost all regions of the country to support IoT-
Today, we spend a significant part of our lives enabled solutions, with several projects piloted Delivering successful progress on all these
online, as digitalization is rapidly transforming on our 5G trial networks. fronts would not have been possible without
the economy’s traditional services – healthcare, the wholehearted engagement and commitment
education and upbringing, the provision of public of our people.
services, as well as everyday household tasks. A special role in developing the environment
Information technology is becoming embedded in which we live is played by our digital
into our lives, and it is essential for us to make and cloud service vertical, which combines
sure our services, technologies and philanthropic not only cloud services but also the Internet
programs work as a single tool to enable self- of Things (IoT), industrial automation
development. Every day, MTS improves with you and system integration solutions.
and for you! By becoming
For example, 2019 saw a number of Russian regions
Our key highlight of 2019 was launch projects to digitize municipal waste removal, better every day,
the adoption of our new business strategy –
Customer Lifetime Value 2.0, aimed at building
in order to provide a more comfortable urban
environment and improve environmental safety.
we do not just
a digital ecosystem based on our extensive
expertise in telecommunications and driven
The Company’s plans include launches of digital
monitoring systems for housing and utilities,
transform ourselves
by investment in high-potential areas. as I believe this area offers great potential but also change
for our own social and environmental initiatives.
the world around
The MTS ecosystem is built around
the individual, and our main objective is to meet
MTS Group’s portfolio of assets includes MTS Bank,
which is a strong fit for our strategy of transforming
us, encouraging others
most of their social needs within the scope MTS from a telecoms operator into a universal
player with a wide range of digital products
to bring out the best
of our product range.
and services. We are continuing to develop in themselves too.
To address this ambitious task, MTS continues our WASD.TV e-sports streaming platform,
to actively develop its mobile and fixed networks. the SmartMed telemedicine service and a whole It is very important
The advanced technological capabilities we have
developed and the vast geographic coverage
range of our new media and entertainment services.
for us to keep up
Alexey Kornya,
President & CEO,
of our network infrastructure have allowed
the Company to take part in the national project
I would like to particularly emphasize
the importance of our corporate volunteer
this momentum
Chairman of the Management Board,
MTS PJSC
to bring broadband connectivity to social movement, Just Give Good!, which enjoys as we build on and go
infrastructure facilities across various regions long-standing success across MTS’s regions
of Russia. Around 5,000 social infrastructure of operation, growing to a total of 7,500 employee beyond what we have
facilities, including healthcare and educational
institutions, government and local authorities,
volunteers in 2019.
achieved.
> 7,500
volunteers in Just Give Good!,
MTS’s corporate volunteer movement
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The COVID-19-induced global crisis has clearly for the public. According to an employee survey run We take particular pride in our employee volunteer
demonstrated the vulnerability of businesses by MTS, in addition to health and quality education, movement, with MTS’s offline social projects alone
to the negative impacts of a pandemic on people’s economic matters such as economic growth, reaching 10 million Russian citizens in 2019. Our
social lives and, consequently, the global economy. as well as responsible consumption and production employee volunteers participate in environmental,
In these difficult times, ESG performance are also given precedence. educational and donor programs, as well as social
is becoming even more important for companies, events held by the Company for veterans, children
as it provides a lens through which to assess In promoting responsible business conduct, in social institutions and people with disabilities.
the relevance of the current developments for future MTS pays particular attention to engaging This allows them to feel that they a part of a wider
development. and educating its partners on sustainable team, a powerful social movement capable
development and CSR, organizing practical public of addressing the issues that are important
The challenges faced by businesses today are so conferences and offering a free educational to society.
numerous and profound that corporations need program on Sustainable Business Development.
to do more than they ever have before. MTS is
well-positioned to do this, and I am in no doubt
that we have a lot to offer to society. For example, Our Inclusivity project holds a special place
when lockdown orders took effect, we immediately on the Company’s CSR agenda. In addition
reviewed our pricing policy to protect vulnerable to providing employment opportunities
customer groups, by making sure that to people with disabilities, MTS offers services The technologies
our subscribers can stay connected regardless
of their actual financial situation.
that improve the quality of life of this target
audience.
we now use
These projects include a Russian sign language
are bridging
Our corporate social responsibility is also video guide to the Victory Museum on Moscow’s
Poklonnaya Hill and a series of shows performed
the divides between
reflected in our strategy’s focus on maintaining
the highest standards of personal data in sign language by the MTS puppet theater countries
and shown on the Visiting a Fairytale TV channel
security and confidentiality, providing
an enhanced employee benefits package, with support from MTS Info, reaching over 6,000 and generations.
delivering on our commitments to manage
our environmental footprint and save energy,
hearing-impaired children across Russia.
We are integrated into
as well as developing programs to support The “MTS – A Company for Everyone” project was
run in 67 regions of Russia to hire older candidates
a global mechanism
inclusivity. We are actively integrating
this approach and new mindset into who would facilitate engagement with our older that shapes our future,
customers.
our corporate culture.
and it is more
As a telecommunications and IT business,
MTS continues to use all available engagement Working with local communities is another
important than ever
formats to communicate our corporate social
responsibility (CSR) principles to all stakeholders.
top priority for us. Within the Cultural Code for us to act together.
project, MTS employee volunteers engage
The technologies we now use are bridging in the restoration and preservation of cultural
the divides between countries and generations. We sites and support craft workshops, exhibitions
are integrated into a global mechanism that shapes and art installations. The project has already
our future, and it is more important than ever covered over 40 participating regions, creating
for us to act together. a real social impact.
In summer 2019, MTS employees participated
in a global survey to measure engagement
with the UN Sustainable Development Goals, which
was conducted by Yale University in 174 countries
Regina von Flemming, of the world. The survey findings suggest that
Member of the Board of Directors, the issues surrounding climate change, quality
Independent Director, MTS PJSC education and health are currently top priorities
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COVID-19 to current accounts of legal entities or individual
entrepreneurs under all cash management programs,
SUPPORT FOR COVID-19
RESPONSE
as well as for transfers to accounts of retail payroll
Today, with physical/social distancing in society customers. MTS has also launched Mneblizko,
dramatically increased, providing tens of millions an interactive map showing operating small MTS has already allocated almost RUB 1 billion
of our customers with reliable connectivity businesses. The project allows entrepreneurs to detail to fight COVID-19 – providing not only free access
and communications services has become our special the services they currently offer and helps consumers to its solutions, medical and educational services
mission. We have invested significant effort to find out which cafes and stores continue to operate for the public, but also assistance to doctors
in adapting our services to customer needs, including in their local vicinity and learn the details of using and healthcare institutions, regional communities
by helping people to maintain their social connections their services. The map was designed to support and volunteers helping elderly people. Together
as much as possible. entrepreneurs who are now required to work in a new with Sistema Charitable Foundation, we provided free
way, e.g. shift to home delivery of food and ready COVID-19 tests to regional hospitals. We have also
meals or offer exercise or learning classes online. provided doctors on the frontline of the coronavirus
pandemic with free connection for three months
FREE PRODUCTS and a reduced tariff beyond this period. MTS is also
involved in the Folding@home global project focused
AND SERVICES RELEVANT SOCIAL on searching for a COVID-19 medicine, providing
cloud resources to model the novel virus mechanism.
MTS has launched a number of special offers INITIATIVES
and free services to help people better organize Our employee volunteers have joined the We
their life and leisure in self-isolation. In particular, In addition, we have launched multiple social Are Together project, manning its hotline and advising
users of home internet and cable or satellite TV initiatives to support people in Russia through callers on purchases and deliveries of medicines
were able to continue consuming all these services the lockdown. We have opened a free hotline and essential goods. MTS is supporting volunteers
even when they run out of credit, and also benefited to offer psychological help to Muscovites, available from other organizations by providing necessary
from free access to dozens of TV channels. In addition, to everyone who needs professional advice equipment to volunteer centers. Training courses
we have zero rated outgoing and incoming calls from volunteer psychologists. To help graduating high for older generations have also been launched to help
to relevant helplines and hotlines set up for the public, school seniors (grade 11) prepare for the Unified State elderly people to learn to get online medical advice,
as well as to airline office numbers from anywhere Exam during the distance learning period, MTS has order home delivery of products and request public
in the world. For customers staying abroad, we have developed free online crash courses. In addition, services without leaving home.
also zero rated text messaging to Russian numbers students in grades 5 to 11 were able to practice
to help them stay connected to their families speaking English for free in conversation clubs
and friends. accessible via our SmartUniversity app.
For a token amount of just one ruble, MTS has MTS teamed up with the Russian Schoolchildren’s
offered customers of any operator access to a new Movement to launch the nationwide #VSkazkuIzDoma
bundle of digital services, including digital television children’s project with support from Russia’s Ministry
(TV) and sports, reading and music applications – of Culture. A free audio fairytale hotline and a major
MTS Fitness, MTS Library and MTS Music – as well reader contest were launched under the guidance
as our SmartMed telemedicine app providing an easy of Russian celebrities for children under 14. Over one
way for anyone to get an urgent consultation online month since launch, the project volunteers received
with a GP on duty or a specialist doctor from a MEDSI 50,000 calls from across Russia, with children MTS continues
clinic. MTS has also zero rated traffic to popular and their parents spending a total of 3,870 hours
educational platforms, as well as resources relating (or about five months) listening to fairytales. As part to do everything
to culture or arts. of other social projects (primarily the Generation
M project), MTS has organized a number of online it can to support
activities to help children focus more on creative
development during this period. We are supporting
people during these
SUPPORT online master classes hosted by the State Tretyakov challenging times.
Gallery, virtual tours of the gallery rooms, online
FOR ENTREPRENEURS auditions and interviews of applicants to the Russian
Institute of Theatre Arts (GITIS), etc.
All businesses that did not previously use #CloudMTS,
our cloud remote corporate data storage and sharing
service, have been offered two months free
access. MTS Bank has cancelled fees for existing
and new customers who are small businesses
or individual entrepreneurs for interbank transfers
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Brand Finance consultancy
Brand Finance Telecoms 300 2019 – The overall
the world’s 300 most valuable telecoms national rating
operator brands
69th place 10th place
by brand strength
The World Branding Forum global Forbes
non-profit organization
international Russia’s top 200 largest private
World companies
Branding Top 20
Awards
MTS won the Brand of the Year award
in the Telecommunications – Mobile
category (National), becoming
Russia’s top telecoms brand
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BUSINESS MODEL FINANCIAL HIGHLIGHTS1
REVENUE BREAKDOWN, RUB BILLION
PARTNERS’ Cooperation drives business efficiency as it accelerates time to market for new,
HIGH-POTENTIAL unique technology solutions and builds trust with retail and corporate customers OIBDA
SOLUTIONS
MTS Telecom
69.3 406.8
210.3
MTS Media MTS Entertainment Communications services
RUB billion
Sales of goods +2.8%
MTS Finance
476.1
+5.5% Revenue growth is driven by steady growth Net profit
MTS Retail
in the core telecoms market and betting
on adjacencies – financial services, system 54.2
integration solutions, software sales, etc. RUB billion
Strong performance gains were partially
MTS IT
offset by a slight decrease in revenue
+692.1%
from sales of handsets and accessories
MTS ECOSYSTEM
MTS IS TRANSFORMING STAKEHOLDER VALUE CREATION2
INTO A MULTI-SERVICE
DIGITAL COMPANY CUSTOMERS LOCAL PEOPLE
Mobile penetration rate COMMUNITIES Average salary per
Our expansion beyond in Russia Total expenditures for charitable employee
the telecoms business into new
markets, driven by our strong 170% and social projects
603.66
focus on partnership projects
and functional support in digital
0.86 thousand per year
RUB billion Average number
areas such as Big Data and AI,
allows us to build a large-scale of training hours
provided to employees
ecosystem of new digital products.
during the year
PARTNERS
Total procurement spend
GOVERNMENT
Tax payments
15.34
in Russia (income tax) man-hours
107.97 15.75
RUB billion RUB billion
ENVIRONMENT
Reduction in ferrous
and base metal waste
Headcount at end-2019 generation
SHAREHOLDERS
3,438
+5.57%
17,693
+12.58% 79.78%
Dividend per share Reduction in paper
28.66 RUB 64,223
people
consumption
19.52%
Total dividends paid
EFFECTIVE
CUSTOMER SERVICE 57.32 Moscow
43,092
+66.76%
POPULAR is delivered through our extensive retail RUB billion Russian regions (including the
Moscow Region)
PRODUCT LINE store network, MTS Retail, mobile apps Outside Russia
of interrelated products drives and specialized online resources, all
a seamless customer experience contributing to trust-based relations
and a powerful social impact with private and corporate customers 1
2019 IFRS consolidated financial statements. Financial
2
Metrics selected based on stakeholder
12 13
performance is fully detailed in the annual report. surveys.
SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
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OUR MARKETS
Mobile TeleSystems Public Joint Stock Company integration, the Internet of Things, remote
(MTS PJSC)1 is Russia and CIS’ leading provider monitoring, data processing and cloud computing.
of mobile and fixed-line services, internet access,
cable and satellite TV services, digital services
By providing innovative services and solutions,
MTS makes a significant contribution to economic
MTS Telecom
and mobile applications, financial and e-commerce growth and improved quality of life for tens
services, as well as converged IT solutions for system of millions of people in its regions of operation. MOBILE BUSINESS IN RUSSIA
Despite a significant increase in mobile data usage The total number of subscribers in Russia reached
both per subscriber and overall, MTS customers
have maintained the same level of voice usage, 79.1 million
MTS GROUP’S KEY MARKETS allowing us to stabilize our ARPU. The proportion (86.9 million for the Group)
of subscribers on bundled tariffs exceeded at the end of 2019, an increase of 1.4% from 2018
63% of the subscriber base. The total number
of subscribers in Russia reached 79.1 million
Operating segment Major operators within MTS Group Target market
at the end of 2019 (86.9 million for the Group),
an increase of 1.4% from 2018.
› Mobile services
MTS Telecom MTS, MGTS, Stream
› Fixed-line services
› Broadband services
› TV
\\Mobile data penetration (proportion of monthly active users), %
Retail sales of digital services and equipment
MTS Retail MTS retail chain (RTC JSC)
(including the online store) 62.9%
58.8%
53.2%
49.0%
MTS Finance MTS Bank
› Banking and financial services 47.2%
42.4% 43.5%
› Financial services and applications 39.0%
35.4%
29.7%
› Big Data
› Artificial intelligence solutions
MTS IT MTS IT, ServiceHub › OTT applications
› Fintech services for banking process
automation
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
› Cloud services
› Internet of Things MTS leverages global experience of developing digital The introduction of tailored tariff plans
› Industrial automation services to tailor offerings that are relevant to various (both personalized and geared to specific
MTS B2B Cloud & MTS, NVision Group, IT-GRAD 1 Cloud, › Smart City customer segments. In December 2019, MTS for target groups) drives both customer loyalty
Digital NIS › System integration
› Data centers the first time provided its customers with the option and emotional involvement with the brand,
› Telemedicine of making up their own tariff plan based on artificial as well as improves customer experience, which
› Online education intelligence (AI) algorithms. An AI engine analyzes is in line with the Company’s strategic priorities
a month’s worth of data on a customer’s service for 2020–2022.
usage pattern and tailors a plan that takes into
MTS Media MTS Media, satellite TV (STV)
› Gaming account the customer’s specific needs and optimizes
› Online TV their mobile and data spend.
› Ticket aggregator (Ticketland
and Ponominalu ticket services)
MTS Entertainment
› MTS Afisha
› MTS Live Arena
1
For more information about the history of MTS Group see our corporate website at
https://moskva.mts.ru/about/informaciya-o-mts/mts-v-rossii-i-v-mire/o-kompanii/informaciya-o-mts.
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MOBILE BUSINESS OUTSIDE RUSSIA
MTS Retail
Armenia
MTS Armenia CJSC is an MTS subsidiary. In a saturated fixed broadband market, the main MTS retail chain1 remains our key channel to attract MTS remains the largest non-food retail chain
The company offers GSM, UMTS and LTE strategy is to attract and retain customers through customers, with MTS stores accounting for over 40% in Russia, with MTS’s retail network comprising 5,679
communications services under the trade mark focusing on bundled offers, higher access speeds, of total SIM card sales. The owned retail store stores at end-2019. MTS offices offer customers a full
Viva-MTS and accounts for 58% of the market. and rollout of converged services. MTS continues network delivers superior performance by both range of services provided by the operator, including
to consistently pursue its strategy of improving the number and quality of new SIM card subscribers. fixed broadband and TV services. As touch points
The main priority of MTS in the Armenian market the quality of its fixed-line products by upgrading for the Company’s ecosystem, MTS retail stores drive
in 2019 was to further expand its line of V&D networks, launching digital and interactive TV increased cross sales
tariffs tailored to the needs of younger customers services and expanding the throughput capacity
in addition to the existing plans. Demand for tariff of backbone infrastructure to deliver a faster
plans increased due to LTE network expansion experience for its customers. Launches of converged
(now covering up to 78% of the total Armenian services, which combine fixed and mobile
population). The subscriber base increased by 3.7% connectivity, are part of the MTS ecosystem
to 2.2 million users as at the end of 2019. development program. As part of its new strategy,
Belarus
MTS intends to significantly increase the number
of its converged customers. The All MTS tariff plan
MTS Finance
Our operator Mobile TeleSystems JLLC (an was developed to drive this strategy by offering
MTS subsidiary) provides mobile (GSM) a bundle of services across three telecoms segments: MTS Bank serves over 5 million users of financial market. Further consolidation will facilitate the shared
coverage to 98% of the Belarusian population. services. The close integration of our financial ecosystem expansion by several times, including
Its communications services are available business with MTS’s Big Data capabilities a single financial marketplace for banking and non-
at all stations of the Minsk subway and along is the Company’s key advantage in the Russian banking products and services.
the main highways of Belarus. To increase wireless
broadband speeds and expand the coverage
of mobile cellular communications services within
the Republic of Belarus, 135 new base stations were
Residential TV Mobile \\Growth by consumer segment, %
installed in December 2019, and 222 base stations
broadband
of the unified LTE network were commissioned.
Segment Share
The subscriber base increased by to 5.6 million
at end-2019, including 3.7 million data users. Retail loan portfolio +67
In Belarus, MTS continues to demonstrate Special consumer loans (POS lending) +46
impressive double-digit growth in financial metrics, B2G General-purpose consumer loans +145
with revenue for the full year 2019 increasing Bank cards (credit cards, including MTS Cashback) +96
by 17.7%. Within the Digital Economy of the Russian Mortgage lending +25
Federation national project, MTS is implementing Retail deposits +44
projects to bring broadband connectivity Fee products and insurance products +42
FIXED-LINE SERVICES to about 5,000 social infrastructure facilities in nine NFC services for contactless payments (Apple Pay, Google Pay, Samsung Pay and MirPay) +120
regions of Russia. These facilities include primary Private Banking (premium service), deposit portfolio +20
MGTS (part of MTS Group) is Moscow’s largest fixed- care centers and rural health posts, schools, Securities portfolio margin +32
line operator. MGTS increased its share of the mass vocational educational institutions, government Growth in the average daily transaction volume +51
broadband market in Moscow to 42% at end-2019, and local authorities, fire departments, local police
with the share of paid TV market expanded to 45.5%. stations and National Guard units in the Amur,
Top 50 39th
The number of GPON users has also continued Kaliningrad, Kemerovo, Leningrad, Tambov,
to grow, with the total subscriber base across Tver and Yaroslavl Regions, as well as Moscow
the mass and business markets expanding to 2.1 and Saint Petersburg. Fixed broadband connection
in terms of repo transactions MTS Bank’s ranking by corporate
million. Growth in fixed-line services is mainly driven provides social infrastructure facilities with access
(by transaction volumes on the Moscow deposits (among Russian banks)
by higher numbers of private users (including due to the ecosystem of digital services MTS offers to its
to new-build connections); however, with a 60% customers to match their needs and objectives. Exchange)
penetration rate at end-2019, the market is saturated
not only in large cities but also in most medium-
sized cities. This is largely due to the gradual
exhaustion of opportunities for growth through old-
build connections.
1
Through its subsidiary Russian Telephone Company JSC (RTC JSC),
MTS is developing a network of owned monobrand stores in Russia.
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HOW WE MANAGE SUSTAINABLE
DEVELOPMENT ASPECTS
VALUES
WE CREATE
PRODUCTS FOR SMALL BUSINESSES
In 2019, MTS Bank significantly expanded its entitled to a subsidy from the federal budget
MTS B2B Cloud & Digital
product line for small businesses, individual to get its lost income reimbursed for loans
entrepreneurs and self-employed, attracting extended in 2019–2024 to small and medium-sized The segment’s key growth drivers are cloud networks in partnership with Ericsson, a global
over 21 thousand new customers during the year, enterprises (SMEs) at the rate of the preferential solutions, Big Data, smart communications network leader in information and communications
a 67% increase. lending program for SMEs run by RSMB Corporation services, and machine-to-machine-based Internet technology. Private LTE networks serve as a digital
and the Ministry of Economic Development of Things (M2M/IoT) solutions. Cloud services infrastructure supporting the adoption of a wide
Compared to 2018, its performing asset portfolio of the Russian Federation. are the fastest-growing product line, delivering range of IoT, Industrial IoT, and other Industry 4.0
increased by 52%, with net fee and commission an almost fourfold increase in revenue facilitated innovative services in energy, chemical and other
income up by 34%, and operating income by 20%. In the reporting period, the Bank’s guarantee by the development of #CloudMTS provider based key industries where increased safety and reliability
The number of foreign currency accounts opened portfolio amounted to RUB 7.4 billion, a more than on own data centers and driven by M&A, including standards are critical.
with the bank in 2019 tripled while merchant 16-fold growth driven among others by the issuance the acquisition of cloud service provider IT-GRAD 1
acquiring turnover grew 3.8 times and sales of cash of express guarantees and the promotion Cloud LLC. The Company participates in the implementation
register equipment 2.5 times. of electronic letters of credit. In 2019, MTS Bank of the Autonomous Non-Profit Organization
continued its active B2B integration with MTS, MTS Group has commenced the construction (ANO) Digital Economy project aimed at building
The small business lending portfolio increased with customers now able to open a current bank of Russia’s first corporate wireless broadband LTE a resilient federal network for the Internet of Things,
by 48% year-on-year to RUB 1.84 billion. To bolster account at an MTS store without visiting a branch. networks (Private LTE), which will soon become developing Smart Cities, modernizing production
lending, MTS Bank qualified as a lending institution the technological base for the digitalization of large facilities, bridging the digital divide and establishing
businesses. NVision Group JSC was the system a regulatory framework to promote and implement
integrator for the construction of Private LTE end-to-end technologies.
MTS IT
The segment is focused on developing digital ServiceHub team, a part of MTS Group, successfully
solutions and designing networks requested
by corporate customers. As part of the business
implements IT projects in education, public sector,
manufacturing and telecommunications. Currently,
MTS Media
line, MTS develops proprietary innovative products the software company develops and implements
for building automation, information security fintech solutions for banks and other financial To achieve its strategic goal of building of MTS TV proprietary multimedia platform, filling
and finance management. institutions. In 2019, ServiceHub launched Goodfin, a digital ecosystem, MTS Group is developing it with unique content and products, promoting
a new financial services platform. The platform an entertainment and media product line. MTS Media it to gain leadership in the media market,
In 2019, MTS continued the development of its SME generates a stable flow of customer orders manages MTS Group’s businesses in all television and designing the best user experience are a priority
offering. Specifically, in early 2019, the Company for financial institutions and serves as a powerful broadcasting environments. The development for MTS Media.
launched an online cash register rental service customer communication engine. According
targeting entrepreneurs who had to switch to online to ServiceHub, Goodfin audience now includes
cash registers by July 1, 2019, when the new 56 thousand legal entities. Goodfin is expected
regulations came into force. Renting a cash register to capture 60% to 75% of customer demand
allows business people to minimize the respective for guarantee and loan products in public
one-off costs and get access to a stock accounting
system and 24/7 technical support.
procurement alone. Negotiations are also in progress
to connect insurance and microfinance companies
MTS Entertainment
to the platform, with plans to offer a wide range
of financial and related products, including The MTS ecosystem building strategy requires
from private investors, going forward. the development of MTS Group entertainment
business. MTS Entertainment drives strategic
business growth in the segment, coordinates asset
interactions, and enables synergies and ecosystem
effects. Current projects include Ticketland
and Ponominalu ticket services, MTS Afisha portal
and app, MTS Live Arena, and others.
18 19SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
01\ OUR
ACHIEVEMENTS
HOW WE MANAGE SUSTAINABLE
DEVELOPMENT ASPECTS
VALUES
WE CREATE
NETWORK INFRASTRUCTURE EXPANSION
LTE
MTS continues the development of core In 2019, we launched
telecommunications services – voice and mobile
data amidst global digitalization. Building a quality over 19
thousand
network and increasing LTE coverage remain key new base stations,
focus areas of our business. 67% of which use LTE frequency bands
We have conducted a massive NB-IoT1 rollout
with over 30 thousand base stations now 5G
supporting all the functionalities required FIBER-OPTIC COMMUNICATION
to enable the development of the Internet 5G pilot zones were set up in three Russian regions, LINES (FOCL)
of Things product line. including for the following events:
› Demonstrating smart city solutions, such Our metro- and local-area FOCL grew by more than
as Safe Overtaking, Smart Intersection 6,100 km in 2019 to almost 250,000 km, with another
and Safe Pedestrian for the Moscow Department 6,000 km of new lines planned for 2020.
of Information Technology at VDNH (Smart City
pavilion)
› Opening MTS 5G lab (MTS StartUp Hub)
for the development of innovative 5G-enabled
products at VDNH (Technograd pavilion)
› Launching 4.9 GHz blanket 5G coverage
in Kronstadt
› Deploying Russia’s first industrial 5G network
at a KamAZ plant
IT SECURITY
MTS PJSC’s information security management
system is certified to ISO/IEC 27001:2013
international standard
In 2019, capabilities were expanded, and separate
service lines focusing on critical IT infrastructure
protection were established in accordance
with Federal Law No. 187-FZ On Security of Critical
Information Infrastructure in the Russian Federation,
as well as a service line around applied solutions
Moscow Metro Antarctica in security and monitoring systems. During the year,
2G/3G/4G coverage has been extended to all On December 19, 2019, a GSM-900 base station the Company signed a number of partnership
operating Moscow Metro stations and tunnels. was successfully launched at the Russian agreements with IT security vendors such as Varonis,
The construction is carried out based on a network Antarctic Expedition station Progress. Similar Fortinet, Wallarm and others.
sharing agreement with MegaFon, with each operator service will be further launched at Bellingshausen,
covering 108 stations. Novolazarevskaya, Mirny and Vostok stations.
1
For more information on the technology see our corporate website at https://moskva.mts.ru/personal/tehnologii.
20 21SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
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ACHIEVEMENTS
HOW WE MANAGE SUSTAINABLE
DEVELOPMENT ASPECTS
VALUES
WE CREATE
OUR STRATEGY CUSTOMER LIFETIME VALUE
\\ In October 2019, MTS PJSC’s Board of Directors confirmed the current Company listing
structure and approved the updated Company development strategy for 2020–2022,
CLV 2.0 (Customer Lifetime Value 2.0), which envisages the creation of a large-scale
BUSINESS DEVELOPMENT STRATEGY ecosystem of new digital products based on accumulated expertise and leadership
achievements in the telecommunications business.
Over the past few years, MTS’s business was driven According to the annual brand valuation
by its 3D (Data. Digital. Dividends) strategy aimed of the world’s largest companies by Brand Finance1, The strategy title is interpreted as follows. Our value We are confident that with functional support
at consistently shifting the emphasis of our business a leading consultancy in the area, MTS became proposition is built around the Customer, to whom in digital service lines such as Big Data and AI,
model from voice to data and subsequently the leader among Russian telecom and IT companies we offer a wide range of digital services. We strive our expansion beyond the telecommunications
to digital services while continuously increasing with 69th place globally by brand value in 2019 (56th to maximize the customer’s Lifetime (the period business into new markets, for example,
operational efficiency. We focused on building place in 2020). MTS was also a leader by brand during which they use our services) by evoking financial services and entertainment, will allow
within the Company a landscape that would strength with tenth place in 2019 and second and gradually strengthening an emotional us to transform into a multi-service digital company.
serve as a foundation for digital services place in 2020. Brand strength is determined using connection with the brand, including by operating We will build our digital product portfolio both based
as well as a tool for business process optimization. a balanced scorecard of metrics (Brand Strength our business in an environmentally and socially on our own development projects and by involving
As a result, we maintained a confident lead Index (BSI)) evaluating marketing investment, responsible way, and by driving customer independent developers and service providers
in our core telecommunications market while offering stakeholder equity and business performance. satisfaction and loyalty. We focus on offering greater as partners. These mutually beneficial partnerships
a consistently high level of dividend payments. Value to the customer while maximizing the value will allow us to bring more value to the lives
we get from them in the longer term. The “2.0” of our customers, offering them more innovative,
We also built important capabilities in core digital symbolizes our transition from the philosophy diverse and convenient services. In the near future,
areas such as Big Data and AI, and entered a number of operating in just one market, telecommunications we plan to increase the number of partnerships,
of related business areas, such as (indicated as “1.0”) to the philosophy of a digital significantly expand the opportunities offered
service provider operating in diverse markets by our partnership programs and become a partner
and offering a variety of products to meet the needs of choice for market players, enabling value
of customers in various areas of their lives in order maximization for all participants of the process.
BANKING to maximize the overall value (both for customers
and for the Company) generated by our entire
service portfolio.
MEDIA
10th place
by brand strength in 2019
ENTERTAINMENT
2nd place in 2020
e of digital s
ang erv
er i ce
CLOUD SERVICES id
W
69th place
s
by brand value globally
ETC. in 2019
CUSTOMER LIFETIME VALUE
56th place in 2020
1
Brand Finance’s brand value ratings have been certified by the Marketing Accountability Standards Board (MASB)
through the Marketing Metrics Audit Protocol (MMAP), a formal process to verify the relationship between marketing
measurement and financial performance: https://brandirectory.com/rankings
22 23SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
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ACHIEVEMENTS
HOW WE MANAGE SUSTAINABLE
DEVELOPMENT ASPECTS
VALUES
WE CREATE
INNOVATIVE GROWTH AREAS MTS STARTUP HUB
MTS StartUp Hub, our innovation launchpad,
\\ In 2019, the Company merged three digital areas – cloud services, IoT and corporate includes a corporate accelerator, a 5G incubator,
system integration – into a single business vertical, Cloud and Digital Solutions. Cloud MTS’s venture capital fund and international offices.
services are the foundation for both driving innovation within the Company and enabling Accelerated development of startup teams is carried
the digital transformation of the national economy. out through mentorship, training and expert support
to prepare products for piloting within the Company.
The accelerator conducted four startup intake
CLOUD SOLUTIONS campaigns, with over 3,000 teams applying
and 58 teams completing the accelerator program.
\\The MTS’s cloud ecosystem A total of 46 pilots were launched, with 19 of those
progressing to the scale-up stage.
1Cloud
In 2019, the accelerator held two startup intake
campaigns. Following the spring startup intake
campaign, ten pilots were launched in HR, e-sports
and fintech. The autumn startup intake campaign
#CloudMTS IT-GRAD brought in 450 applications, a record-high number,
Providers
with 19 startups selected as accelerator participants.
Over the year, MTS StartUp Hub turned
from a corporate accelerator to a genuine open
innovation springboard. A 5G Center was launched
at VDNKh in 2019 within MTS StartUp Hub to test
startup products in next-generation networks. Nine
startups became the Center’s tenants, selected out
of some 100 candidates, including two international
ones. The tenants receive expert and technical
support from MTS, with the teams coming up
with the best solutions awarded a development grant
of up to RUB 500 thousand.
MTS’s RUB 1 bn corporate venture capital fund MTS StartUp Hub also launched a number
was also established in 2019, investing upwards of international offices, with our tech scouts now
Own data centers of USD 500 thousand in seed1 and Series A operating in Germany, Israel and Southeast Asia. MTS
including Avantage, one of the country’s largest rounds. The fund is focused on promising startups also signed partnership agreements with Enterprise
with strategic value for MTS in areas such as AI, ML Singapore and Invest India government innovation
and Big Data, IoT, fintech, cloud technology and SaaS, support agencies for assistance in innovation
edutech, e-sports and media. sourcing in international markets. Our partnership
MTS’s cloud portfolio includes infrastructure New digital service lines at MTS are developed with Enterprise Singapore also provides MTS’s
3,000
solutions based on private, public and hybrid mainly based on our own cloud. The SmartMed accelerator program participants with access
clouds, a range of advisory and professional telemedicine service uses a certified MTS’s cloud > to the Southeast Asia market.
services, as well as data center and telecom segment to store electronic patient records. Our own
teams submitted applications
services. Our extensive portfolio of B2B and B2G cloud resources also power the Smart University, MTS plans to have two startup intake campaigns
services and solutions, broad geographical footprint an e-learning platform, making it possible to adapt for its corporate accelerator in 2020 and launch
stretching from Kaliningrad to Vladivostok, the service to the increasingly heavy content over 15 pilots during the year. MTS’s venture
and our focus on innovative service development
helped MTS quickly ramp up its presence in Russia’s
of training materials and video lessons. The media
platform for gamers, WASD.TV, also uses #CloudМТS RUB 1 bn
MTS’s venture capital fund,
capital fund plans at least two startup deals
for 2020, subject to the 5G Center conducting
cloud market. During the year, we launched resources, which ensures high availability, several successful technology solution demos
a number of cloud services, for example performance and scalability of the service. These set up in 2019 in a 5G network
an antivirus for the public cloud, a completely new benefits of cloud technology are important for any
service for the Russian market developed jointly business driven by digital models.
with Kaspersky Lab, as well as container computing
and DevOps services.
1
A seed round is (minimum) targeted support provided to developers to convert an idea into a product or service. The outcome of the investment
is an established team with a clear business plan.
24 25SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
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HOW WE MANAGE SUSTAINABLE
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WE CREATE
PARTNERSHIP PROJECTS
January 2019 September 2019 November 2019
At the Eastern Economic Forum:
MTS MTS
Sberbank, Gazprom Neft, Yandex,
Samara State
Medical University MTS Mail.ru Group and the Russian Direct
Enterprise Singapore, the Skolkovo Investment Fund
MTS and Samara State Medical University June 2019 Foundation and Sistema Asia
signed an agreement on cooperation At the St. Petersburg International Economic Forum MTS, Sberbank, Gazprom Neft, Yandex, Mail.
in digital health, with plans to open (SPIEF 2019) MTS, Singapore Enterprise (a statutory board ru Group and the Russian Direct Investment
an AI laboratory at the university’s Institute under Singapore’s Ministry of Trade and Industry), Fund (RDIF, Russia’s sovereign investment
for Innovative Development. the Skolkovo Foundation and Sistema Asia fund) announced the signing of a cooperation
signed a cooperation agreement. The partnership agreement envisaging the forging of an artificial
is aimed at implementing Singapore’s technology intelligence alliance, AI-Russia Alliance,
MTS startup solutions in products for the Russian at Artificial Intelligence Journey (AIJ), Eastern
Regional administrations of Moscow, market and supporting Russian startups’ access Europe’s largest AI forum.
Tatarstan, and the Kaluga, Ryazan to Singapore’s market.
and Samara Regions
MTS signed cooperation agreements on digital
project development with regional administrations
of Moscow, Tatarstan, and the Kaluga, Ryazan MTS
2019 2020
and Samara Regions. The Ministry of Digital Development,
Communications and Mass Media
of the Russian Federation, the Ministry
for the Development of the Russian Far
East and Arctic, and the Far Eastern
MTS Federal University (FEFU)
Invest India
MTS signed a memorandum of cooperation MTS, the Ministry of Digital Development, March 2020
with Invest India, the country’s national investment Communications and Mass Media of the Russian
agency. The agreement involves the search Federation, the Ministry for the Development
for technology projects in India that could be of the Russian Far East and Arctic, and the Far Eastern
implemented in the MTS business. The main areas Federal University (FEFU) signed an agreement MTS
for selection will be e-commerce, telemedicine, on the development of the Far Eastern IT cluster Skoltech
fintech and IoT solutions. on Russky Island. The first project will be building
elements of a digital twin of the city of Vladivostok MTS and the Skolkovo Institute of Science
based on MTS’s Big Data and IoT technologies. and Technology (Skoltech) opened an AI
laboratory for research in the field of natural
language processing.
MTS MTS
Ericsson Authorities of the Lipetsk Region, Buryatia,
MTS and Ericsson announced joint development Yakutia, Kamchatka, the Sakhalin and Amur
and production of 5G-enabled solutions Regions and the Khabarovsk Territory
for Russia’s smart cities as part of the Housing
and Urban Environment national project. MTS entered into a number of cooperation agreements
The innovative products will be tested based with the authorities of the Lipetsk Region, Buryatia,
on the joint MTS–Ericsson R&D Center Yakutia, Kamchatka, the Sakhalin and Amur Regions
at Innopolis, a technology park in Tatarstan. and the Khabarovsk Territory aimed at digitizing
the economy, urban environment and social sphere
of the regions.
26 27SUSTAINABLE DEVELOPMENT REPORT \ 2019 \MTS.RU
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HOW WE MANAGE SUSTAINABLE
DEVELOPMENT ASPECTS
VALUES
WE CREATE
STRATEGIC MTS’s sustainability and CSR efforts in 2019 were guided
by the approved CSR strategy, business strategy and HR strategy,
PRIORITIES UN SDGs (the 2030 Agenda), recommendations of the ISO 26000:2010
international standard, the Ten Principles of the UN Global Compact,
and international and Russian best practices in CSR.
BUSINESS STRATEGY CSR STRATEGY
Customer Lifetime Value
2020
› Seamless experience based › Focus on building long-term › Effective partner engagement Customer
on interconnected digital relationships with customers and superior customer › Ensuring equal access
marketplaces › Focus on maintaining experience to the Company’s services,
2022
› Customer centricity loyalty and emotional › Creation of new value beyond increasing loyalty
› Personalized approach connection, including telecoms › Security and responsibility
by operating our business for the services provided
in an environmentally and socially › Creating an innovative
responsible way environment to find business
CUSTOMER solutions addressing social
issues
LIFETIME › Environmental responsibility
MTS’s existing CSR strategy of MTS’s business
was approved in 2017 and builds
on the Company’s business strategy.
VALUE
Each CSR area in the social, economic Lifetime
and environmental spheres › Focus on maintaining
is aligned with the strategic loyalty and emotional
goals and key components connection, including
of the business strategy. by operating our business
With the update
to the business development
ER in an environmentally
and socially responsible way
M
PLIERS
LI
SUP EM
› Development of services
TO
FE
strategy in 2019, PL
O
the CSR strategy was RS enhancing environmental
YE
TIM
E
CUS
M
ES
also refreshed sustainability
TO
DI
CUS
› Development of projects aimed
TA
to maintain a clear link
GIT
DA
E
with the Company’s at environmental protection
AL
LOCAL C
development priorities. BUSINESS MTS and sustainable use of natural
ENT
STRATEGY ECOSYSTEM resources
RNM
OMMU
VE
GO
NI
Value
TI
ES
DIVID E N D S › Reinforcing the image
RS
SHAREHOLDE of a socially responsible
company (the Sustainable
Development Report, ESG, JAC
SOCIAL AREA and CDP)
VA LU E › Creating transparency
ENVIRONMENTAL AREA for shareholders, investors,
suppliers and partners
› Strengthening MTS’s corporate
ECONOMIC AREA
spirit and reputation
CSR
STRA
TEGY
2017
2020
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