Telecom

Mobile Business

Mass Market

In 2021, we actively developed and offered our customers favorable data plans, in which each customer could choose a set of standard telecom services, as well as a wide range of ecosystem digital products, best suitable for them.

The range of ecosystem services and integration with Big Data to deeply understand our customers’ preferences allow us to perform the transition from traditional price competition in telecom products to the creation of offers for consumer segments. This helps increase customer loyalty and emotional attachment to the brand, as well as improve customer experience.

The MTS Premium subscription, which has existed since 2020, sets itself the task of the Company penetration into the daily life of the customer. Within the ecosystem project, in January 2021, a partnership was signed with Yandex.Plus, and in April, the KION online cinema was launched with original series of its own production. For MTS Premium subscribers, priority service is available at the MTS and MTS Bank offices as well.

The launch of convergent services is a part of the MTS ecosystem development program. Convergent products are one of the key tools to retain subscribers and increase their loyalty. Combining the capabilities of fixed-line and mobile communications, the MTS designs and continues to develop convergent services. MTS intends to significantly increase the number of convergent subscribers. All MTS data plan is a bundle of services in three telecommunication areas: home internet + TV + mobile communications. The Company is the only operator in Russia, which, in addition to standard telephony, internet, cable or IPTV, also allows connection to satellite TV services. The development of convergent products is one of the main drivers of fixed-line communication sales growth, which allows MTS to maintain the rates of subscriber base growth for fixed-line communication services outstripping the market.

In 2021, we launched more than 10 different subscriber offers combining a beneficial offer for equipment purchase (phones, watches, laptops) and MTS ecosystem products. MTS opened new formats of retail outlets under the franchise scheme aimed at expanding distribution in small towns. Also, together with the partners (Xiaomi, BQ manufacturers), MTS opened a number of co-branded retail outlets presenting a wide range of equipment and services included in the MTS ecosystem.

Retail Distribution

The MTS retail chain remains the main channel for attracting MTS subscribers. More than 40% of SIM card sales are carried out through MTS retail outlets. MTS own network demonstrates high rates in the number and quality of SIM card connections.

At MTS offices, subscribers receive a full range of services provided by the operator, including services involving broadband access to the internet and television. Being points of contact with the MTS ecosystem, MTS outlets allow increasing cross-sales. Any new service released by the Company automatically becomes available for sale in the retail chain office. Furthermore, we offer the customers an extensive list of financial services, such as: consumer lending, money transfers, credit repayment, life insurance (voluntary medical insurance), product insurance and MTS Money cards.

Our own sales channel enables us to more effectively manage the number and quality of activations, as well as to maintain our level of service.

Mobile Business Network

MTS increased the network development pace to ensure a consistent level of coverage and high quality of mobile Internet, alongside with executing a record-setting volume of construction of new base stations (BS) in 2021.

In 2021, more than 25,000 4G BSs were commissioned (network growth totaled 30%). Construction volumes in 2021 exceeded those of 2020 by almost 30% and the growth of 4G BS in the Moscow Region was 2.7 times ahead of 2020 volumes. In key regions, the LTE network grew by 40%.

In addition to the classical capacity increase methods, the redistribution of the use of the 2G/3G frequency resource to LTE technology (Moscow, St. Petersburg, the coast of the Krasnodar Territory, etc.) is actively applied, which allows for the most efficient use of the current network resources and provides subscribers with high-quality services.

Smart Rollout

The approach to investment planning has changed. When making decisions, the perception of subscribers comes to the foreground in relation to the technical specifications of the network.

Big Data has taught AI to predict the income of planned sites, which allows finding the most efficient locations for investment.

5G

MTS is strengthening its leadership position in terms of new technologies. The company was the first in Russia to launch 5G test zones for mass market subscribers: Moscow (29 sites) and St. Petersburg (23 sites).

Innovative Projects

MTS is also developing advanced digital solutions based on the current LTE network. In 2021, work was carried out on 20 projects (of which 18 are private LTE networks). At the end of the calendar year, certificates of successful technical testing were signed for the SUEK Izykhsky and EVRAZ Sheregeshskaya projects.

Fixed-Line Business

B2C Fixed-Line Business

In 2021, MTS continued to implement a large-scale program for modernization and construction of fixed networks; the project affected more than 47 cities — at year-end 2021, data plans with Internet access speeds of up to 2021 Gbps became available for 61% of MTS network. The development of a new TV platform continued as well, expanding the capabilities of traditional TV with interactive components. Interactive TV products (IP TV and Hybrid TV) were relaunched in all cities of fixed business presence.

As part of the investment program for the development of fixed networks, it is planned to modernize more than 80% of the capacity by 2023. In 2021, MTS also expanded the geography of its fixed business presence both through the construction of its own networks and acquisition of Green Point Group of Companies.

The share of Internet BBA penetration into the telecom market of the Russian Federation in 2021 remained at the level of 61%. The subscriber base grew by only 0.8% (earlier in 2020 — by 2.1%) — the growth rates slowed down against the backdrop of high market saturation. A significant impact on the BBA market growth in 2021 was caused by the spread of convergent products of operators.

Revenue of the Russian telecom market in 2021 grew significantly higher than in 2020 — by 3.0% against 1.1% a year before. One of the positive factors was an increase in sales due to convergent products, as well as targeted revision of commercial conditions in certain BBA market segments.

The growth of the Pay TV market almost stopped: at year-end 2021, the subscriber base increased by only 0.5% (against 1.8% a year before) and reached 46.4 million. The service penetration was recorded at 82%. The churn in the cable TV segment was somewhat slowed down by the COVID-19 pandemic: low mobility of citizens and increased interest in TV (as one of the principal leisure types). In turn, the growth in the number of competing offers from non-operator video services had a negative impact on the pay TV subscriber base dynamics.

At year-end 2021, the increase in the BBA and TV subscriber base at MTS was 10% and 7%, respectively (including the Green Point Group of Companies). MTS retains its market leader position in terms of revenue growth year-on-year: by 13% in the BBA segment and by 10% in the TV segment. In the market saturation conditions, MTS continues to keep its leadership in the telecom market of the Russian Federation due to intensive subscriber attraction and retention, as well as due to extensive (synergy of the effect from taking over the Green Point Group of Companies) factors.

Fixed-Line Network

The pace of developing fixed-line access networks in 2020–2021 was several times higher than in 2019. The wave program for upgrading the fixed-line network, approved in 2020 and designed to provide subscribers with high-speed broadband Internet access data plans, continued.

TV services for subscribers also underwent active development: the IP TV technology distribution providing high image quality, ease of connection and the opportunity for flexible changes in the rate policy commenced. By the end of 2021, it became possible to connect to the IPTV service for subscribers of more than 2/3 of the fixed-line MTS network.

Regional network construction and upgrade projects using GPON technology are being actively implemented. New construction projects were launched in the regions of no presence of a fixed-line MTS network, such as Yakutia and Bashkiria.

In 2021, due to the difficult economic situation in the metal and plastic market, calculations of the rise in the cost of certain items of rate and price indicators (RPI) were made and the RPI indexation mechanism was introduced. This made it possible to retain the majority of contractors on MTS FB projects and not to slow down the high work pace.

In 2021, the FB projects were implemented to construct a new network (538,000 households) and upgrade the existing network (1.7 million households).

Convergent

The company continues to develop offers for the Family segment —We Are MTS and We Are MTS+ data plans, which include mobile communications, home Internet and TV, as well as the ability to share traffic with family members (up to five SIM cards).

In 2021, MTS launched a partnership scheme for providing convergent subscriptions, within which it became possible to launch convergent services in settlements where MTS does not have its own fixed-line network. Within this product, the subscriber gets the opportunity to take advantage of all the benefits of a convergent paying for all mobile and fixed-line services using a single personal account, while remaining a subscriber of his/her home communications service provider. At year-end 2021, this scheme was implemented in five regions of the Russian Federation.

B2B/B2G

В2В

In 2021, MTS demonstrated a revenue growth rate exceeding 16%. The main contribution to revenue growth was made by the sale of equipment, socially significant facilities (SSF), A2Р, Digital advertising, Cloud, Collocation and SCN services.

The growth of mobile business and international roaming revenues shall be noted as well.

2021 Key Projects

• Socially significant facilities — more than 5 thousand facilities connected.
• In 2021, the MTS B2B team filled 100% of the Avantage Data Center.

A new modern design of the MTS Business Personal Account to manage corporate numbers was also implemented. The MAU of the MTS Business Personal Account increased to 65% (+36 p.p.) by the end of 2021.

At the St. Petersburg International Economic Forum (SPIEF), MTS signed agreements on strategic partnership and cooperation with the Roscosmos Corporation, the operator Morsvyazsputnik, as well as a memorandum of cooperation with NOVATEK.

В2G

Revenue in the B2G segment increased by 36%. In 2021, revenue growth was ensured by implementation of federal and regional infrastructure projects, as well as digital projects for federal and regional government customers. For the coming years, MTS sets a goal to keep the rate of revenue growth in the B2G segment by strengthening participation in national programs and federal government projects, as well as developing a line of digital products.

In 2021, government contracts for connecting socially significant facilities of the Russian Federation to the Internet within the Digital Economy of the Russian Federation national program were successfully implemented to the fullest extent, 5,354 facilities were connected.

Successful implementation of government contracts led to connecting additional customers.

Infrastructure projects were implemented jointly with regional authorities, including the projects for constructing communication facilities in small towns. As an example, a project was implemented with the Pskov Region administration, just as similar projects were implemented in the Novosibirsk and Voronezh Regions, as well as in the Krasnoyarsk Territory. These projects are also socially significant for the regions in terms of the regional work to eliminate the digital divide in small towns.

In 2021, the implementation of digital projects, such as the provision of geoanalytics and BD services to customers, continued.

B2B Products

Mobile Business

In the corporate market, the most highly demanded and sold offer since the time of launch to the present is the range of Smart Business data plans. For a subscription fee, the rate includes bundles of minutes, Internet traffic, SMS and useful tools for work. One may choose a rate from the range for any type of business, employee tasks and communication budget. Within the selected rate, the customer can set the ratio of minutes and gigabytes required at the moment through his/her personal account or mobile app.

In 2021, following market trends and customer convenience, MTS expanded the possibilities of unlimited communication within the data plans: now, in addition to calls to MTS Russia and messengers, all users can use social media and navigation services unlimitedly. Separate data plans provide for unlimited video services and the Second Memory service for cloud data storage.

During the year, MTS offered its customers the opportunity to double the bundles of minutes and gigabytes without increasing the monthly fee within the Double Benefit campaign, as well as receive the Mobile Employees Promo service for 12 months when activating the Smart Business data plans.

Fixed-Line Business

In 2021, MTS completed the second stage of the transaction to acquire the assets of Green Point Group of Companies, which provides broadband Internet access and digital television services in 12 cities of Russia: MTS bought the remaining 49% in the authorized capital of six regional fixed-line communication operators of Green Point Group of Companies in Stavropol, Mikhailovsk, Nevinnomyssk, Elista and Tambov. Consolidation of the assets of the acquired company allowed MTS to accelerate the development of convergent offers combining fixed-line and mobile communications, as well as to provide modern digital solutions for business.

In March 2021, MTS completed the commissioning of a BBA node — LESS was launched in the Chechen Republic. The implementation of this project will allow MTS to develop fixed-line communication in six regions of the North Caucasus. The first project implemented in 2021 thanks to launching LESS was the project for the provision of fixed-line communication services in the Grozny Mall shopping center. Moreover, each of the six republics already has both implemented and elaborated projects for a range of fixed-line communications services.

A project to provide socially significant facilities with fixed Internet access in eight regions being Moscow, Amur, Kemerovo, Kaliningrad, Leningrad, Tambov, Tver and Yaroslavl Regions was completed.

MTS is able to offer a turnkey solution as early as within one business day. Equipment is part of the service, including, among other things, a system for its operation monitoring, to enable the client to identify the root cause in case of a failure. The service allows you to generate basic network settings in your personal account and then apply them on the customer’s terminal equipment.

Convergent Rate (mobile services + fixed internet)

MTS offers the customers bundle solutions that help develop their business through

• receiving a full range of services to solve business problems from one operator;
• saving when buying a bundle.

Within the Business where You Are campaign, the customers could receive free mobile communications and up to 40% discounts on value-added services when purchasing wired Internet. The participants of the Save Once, Save Twice campaign received a 35% discount on mobile communication when purchasing multi-channel telephony (automatic attendant, VPBX or 8-800).

DDoS

During the pandemic, the number of DDoS attacks in Russia and globally has increased many times over. This also affected MTS customers. The DDoS protection service helped repel attacks against a number of large Russian companies. This service was also connected by customers from the government, including regional administrations.

The service allows you to protect customers’ web resources (website, store, personal account, etc.) and infrastructure from malicious attacks. When the service is connected, the Internet traffic entering the protected resources undergoes constant behavioral analysis for the occurrence of volumes that are not characteristic of the given resource (both bigger and smaller) or requests. When an attack is detected, the traffic is redirected to the clearing center, after which the customer receives legitimate requests only.

SCN

In October 2021, MTS launched the High Season — High Sales campaign: 8-800 number and 100 minutes for RUB 299 per month. This offer helped small businesses increase sales during a period of high business activity and seasonal demand for goods and services around Black Friday, New Year’s Eve and gender-related holidays.

Auto Attendant

Virtual multichannel telephony services based on “Auto Attendant” (federal and city numbers) and “Free 8800 call” (8-800 format numbers) proved to be essential for remote work. The services allow deploy telephony at the company without wires and special equipment, since PBX functionality is organized on the side of MTS virtual platform.

Successful project of 2021 under the “Auto Attendant / Free 8-800 call” service: when developing joint projects, two companies from the IT and advertisement placement sector purchased from MTS 250 thousand new numbers with the Auto Attendant service;

Contribution of MTT JSC

In June 2021, MTS closed the transaction for acquiring a 100% stake in Interregional TransitTelecom OJSC (MTT).

Virtual PBX (VPBX) from MTT combines complementary communication services for business: convergent fixed-line and mobile communication (FMC SIM cards), Calltracking service, Callback service, business process automation (СRM), call recording, messaging, mobile apps, etc. It is possible to connect subscribers to the system, regardless of where they are and what devices they use (computer, laptop, tablet, smartphone).

With the help of an open API, it is possible to implement new functionality required for a particular business in VPBX and make the product use even more convenient. The open API provides additional options for corporate telephony users. Thanks to it, one can integrate any third-party apps and information systems into the VPBX.

According to the study conducted by TMT Consulting Agency “The Russian Virtual PBX Market — 2021 Results” and “The Russian Market of the Toll-Free Call Service (8800) — 2021 Results”, MTS (together with MGTS and MTT) topped the ratings of digital VPBX and 8-800 services for the first time displacing in these segments the traditional leaders of previous years.

Business in the Markets of Operation

Armenia

MTS Armenia CJSC (MTS Armenia) is a 100% subsidiary of MTS PJSC and the largest of the three mobile operators working in the Armenian market.

Under the Viva-MTS trademark, the company provides mobile and fixed telephony services, as well as offers cloud and financial services (payments and transfers are carried out by the Mobidram CJSC subsidiary) for its subscribers.

MTS Armenia is the leader in the mobile communications market of Armenia by the number of subscribers and revenue.

MTS Armenia’s own retail chain is the main channel for attracting subscribers with 73 sales and service offices, covering all regions and key cities of Armenia.

MTS 2G communication covers 69.4% of the territory of Armenia, where 99.3% of the country’s population lives. MTS 3G communication covers 71.3% of the territory of Armenia, where 99.8% of the country’s population lives. The MTS 4G-LTE network is available on 69.4% of the territory of Armenia to 99.3% of the country’s residents.

MTS Armenia closed 2021 with a 59.67% (+0.79 p.p. year-on-year) market share by subscribers in Q4 2021, the market share by revenue in 2021 was 57.8% (–1.5 p.p. year-on-year due to the ongoing pandemic restrictions, which led to the revision of the inter-operator roaming and interconnect agreement). The market share of subscribers of bundled data plans reached 82% (+6 p.p. year-on-year) and the share of subscribers using data transfer in Q4 2021 amounts to 78.9%. The average volume of calls per one MTS Armenia subscriber in Q4 2021 amounted to 724 minutes per month and the use of data transfer amounted to 6.3 gigabytes per month (+36% year-on-year).

MTS Armenia is a confident leader in the Net Promoter Score (NPS) on the market, significantly ahead of competitors.

In 2021, MTS Armenia expanded its LTE network by building more than 399 stations in the 800 MHz LTE band.

2021 was a year of recovery for MTS in Armenia after a tough 2020 due to COVID-19 and the conflict in Nagorno-Karabakh. In 2020, the coronavirus pandemic had a negative impact on the Armenian economy. The most significant consequences of the pandemic for MTS Armenia were a decrease in roaming revenue, temporary closure of retail outlets, and a decrease in the subscriber base. In 2021, MTS managed to restore the subscriber base in Armenia and ensure normal operation of retail outlets, however, the fall in roaming revenues continued throughout 2021.

Belarus

Mobile TeleSystems JLLC (MTS Belarus) was established in 2002 by the Russian MTS PJSC (49%) and the Belarusian Beltelecom RUE. The company operates under the MTS brand and is the largest mobile communications operator in the Republic of Belarus. Its main competitors are BeST CJSC (‘life’ trademark) and A1 UE (Unitary Enterprise).

In Belarus, MTS provides mobile communication services of GSM 900/1800, UMTS 900/2100 and 4G standards (including 2600/800), home Internet and TV services, offers cloud services and products for business and financial services in partnership (MTS Money).

MTS Belarus is the leader in the mobile communications market of Belarus with the largest market share in terms of the number of subscribers and revenue.

MTS Belarus’ own retail chain together with single-brand stores of the partners is the main channel to attract subscribers. The chain of sales and service offices consists of 93 own offices and 257 single-brand partner retail outlets, allowing to connect subscribers and provide service operations in all regions and key cities of Belarus.

MTS 2G communication covers 98.0% of the territory of Belarus, where 99.9% of the country’s population lives. MTS 3G communication covers 96.5% of the territory of Belarus, where 99.9% of the country’s population lives. MTS 4G-LTE communication covers 47.1% of the territory of Belarus, where 85.6% of the country’s population lives. In 2021, MTS Belarus continued to expand access and provide new 4G network opportunities to the residents of Belarus through developing coverage in the 800 MHz LTE band. The new band made it possible to provide high-speed communication to wider areas, including the suburbs, remote villages, highways in the Gomel, Mogilev, Vitebsk and Minsk Regions of the country.

MTS Belarus retained its leading position and a significant market lead over its competitors and terminated 2021 with a market share by subscribers in Q4 2021 of 47.1% (–0.1 p.p. year-on-year), in terms of mobile business revenue — 51.0% (0 p.p. year-on-year), revenue — 51.9% (–0.2 p.p. year-on-year). The share of subscribers of V&D data plans reached 63% (+1 p.p. year-on-year) and the share of subscribers using data transmission reached 69% (+1 p.p. year-on-year). The average volume of calls per one MTS Belarus subscriber in Q4 2021 stayed at the last year level of 603 minutes per month (–0,5% year-on-year) and the use of data transfer amounted to 17 Gb per month (+14% year-on-year).

The company is leading in terms of the net promoter score (NPS) in the telecommunications market of Belarus. According to internal marketing research of MTS, Belarus is the leader in satisfaction with the quality of mobile Internet and perception of reputation/image.

In 2021, MTS Belarus expanded its LTE network by using the assistance of an infrastructure operator to launch 578 LTE base stations in the 800 MHz band in order to cover rural areas and more than 336 base stations in the 1,800 and 2,600 MHz bands in order to increase capacity and maintain consistent coverage of the LTE network.

In 2021, MTS Belarus actively developed the cloud area in working with business customers, the revenue from which grew by 2.3 times last year. MTS Belarus provides the services for creating private and hybrid clouds, IaaS-based disaster recovery and backup services are provided. Moreover, SD-WAN, BaaS, DRaaS services are available to the customers.

Also, MTS Belarus continued to expand its network coverage for the Internet of Things in Belarus last year. Minsk, regional centers and cities with a population exceeding 50,000 people are provided with NB-IoT communication. In the future, the systematic expansion of the NB-IoT network coverage area by MTS Belarus in rural areas will go on.

FinTech

MTS Bank-based FinTech became a significant driver of revenue growth for the entire MTS group. At year-end 2021, the FinTech contribution to the growth in the MTS group revenue amounted 34%, and to the growth of OIBDA — 29%.

In 2021, MTS Bank demonstrated impressive growth rates. The net income of the Bank, according to the MTS Group data¹, at year-end 2021 amounted to RUB 5 billion as per IFRS, which is almost five times more than the indicator of last year.

¹ Including intra-group adjustments.

The net interest revenue of MTS Bank for the reporting period reached RUB 19.8 billion, an increase of 28% compared to 2020. The net fee revenue reached RUB 13.2 billion increasing by 88% year-on-year. The operating revenue before deducting the provisions increased by 44% year-on-year to RUB 33 billion.

MTS Bank is actively increasing the contribution of transaction services, settlements and payments to operating revenue paying great attention to the fee revenue growth. Thus, in 2021, the ratio of net interest and fee revenue in the operating revenue structure amounted 60% to 40%, respectively, against 70% to 30% a year ago. The profitability of average capital increased to 11.6% in 2021 due to the net income growth in 2021 against 3.5% in 2020.

The retail portfolio of MTS Bank grew by 62% year-on-year and amounted to RUB 244 billion.

According to Frank RG, MTS Bank became the fastest growing bank in terms of loan portfolio growth in the unsecured lending segment — 83%. The Bank became the market leader in POS lending occupying the leading position in terms of lending and third place in terms of POS lending portfolio in 2021. The share of the Bank in terms of the volume of POS loans issued was 18.2%. General consumer loans still make up the major part of the portfolio; as of the end of Q4, the share of the GCL reached 55% of the total retail loan portfolio. The Bank doubled the sales of loan products during the reporting period.

Due to the loan portfolio growth (77% of assets), the growth of MTS Bank’s assets in 2021 reached 33%; as of December 31, 2021, the assets of MTS Bank amounted to RUB 289.1 billion.

The loan portfolio active growth is supported by the growth of deposits and customer accounts. As at December 31, 2021, the term deposits of the customers amounted to RUB 158.2 billion, 55% of the liabilities of the Bank. The customer accounts amounted to RUB 42.7 billion.

In order to diversify the passive base in 2021, the Bank issued debut bonds for RUB 5 billion, while the demand for bookbuilding exceeded supply by more than four times.

Herewith, the loan portfolio quality is one of the best on the market. Following the pandemic-driven NPL increase in 2020, we are observing a steady improvement in the retail loan portfolio quality; as of December 31, 2021, the NPL share decreased by 4.3 p.p. to 5.7%, while the coverage of retail non-performing loans by provisions increased to 162%.

As of December 31, 2021, the capital of the Bank reached RUB 51.1 billion, which is 42% higher than at year-end 2020. As of January 1, 2022, the capital adequacy ratio H1.0 reached 12.5%, which provides for a moderate capital stock compared to the minimum regulatory requirement, taking into account the surcharges of 10.5%.

Product Development and Launch

MTS Bank offers its customers a wide range of retail and corporate lending products. The development of retail lending and transactional services became a driver for the growth of the loan portfolio and revenues of MTS Bank in 2021.

In terms of general consumer loans, MTS Bank actively developed its partner base and product solutions. In 2021, the Bank showed an outstanding growth in selling general loans, compared to 2020, the figure increased by 2.9 times. The main sales growth drivers in 2021 were as follows:

• reducing and improving customer journeys on the Bank’s digital platforms;
• improving the processes for generation and sale of fully approved offers for the “Cash Loan” and “Refinancing” products;
• development of “visit-free” technologies for issuing a loan, including the loan delivery.

Already in Q4 2021, 67% of general loans were issued through remote channels without visiting the physical channels. The share of sales of fully approved offers reached 72%.

In terms of POS lending, over the previous two years, the Bank became the market leader and was ranked first in terms of the volume and number of POS loans issued in 2021.

In 2021, the Bank grew 2.5 times faster than the market, with a 65% year-on-year increase in loan volumes. The POS lending market has gradually recovered after the pandemic. In 2021, MTS Bank launched a number of new partnerships and projects that contributed to achieving high results:

• beginning of cooperation with Inventive Retail Group — a chain of ReStore, Xiaomi and Samsung retail stores;
• start of cooperation with Maria Kitchens within a pilot project without photographing the customer in retail stores;
• launch of lending in Ascona and Asus online stores;
• integration with the personal broker of DNS, one of the leaders in the electronics and household appliances market in Russia;
• implementation of our own solution for lending to customers in partner online stores.

The bank is actively developing the daily banking, area represented by a wide range of FinTech products for day-to-day operations for retail customers. It includes five key areas:

• cards and deposits;
• transactional business;
• investment and personal finance;
• money transfer system;
• development of payment technologies and processing.

The Bank continued expanding its product range, improving the quality of services rendered and increasing brand awareness.

2021 Highlights in terms of Credit Cards:

• MTS Bank entered the top 7 in terms of the gross portfolio of credit cards, leaving behind Home Credit, Russian Standard, OTP Bank, Raiffeisenbank and Citibank banks;
• the Bank held the third place in credit card portfolio growth with a result of 68.1% (December 2021 to December 2020);
• the MTS Cashback card became the leader of the Frank RG rating of the best bank cards in the “Best Credit Card with a Grace Period” nomination;
• the bank continued to increase sales in digital channels. The share of credit card sales there amounted to 47% as compared to 30% in 2020;
• despite high competition, the number of credit cards sold by MTS Bank in 2021 amounted to 637 thousand units, which is 24% more than a year earlier.

Separately, it is worth highlighting the development of virtual cards, of which 457,000 were issued in 2021. MTS Bank is developing new digital channels for issuing virtual cards: through the website with instant issuance, in popular messengers Telegram and WhatsApp, together with a Fintech Platform TalkBank is the first robot bank of MTS Bank Now; through the MTS Cashback mobile app. Within the virtual card development, the MTS Bank team developed the virtual card issuance within the MTS Premium subscription, the launch of a new co-branded MTS Bank-Magnit card with loyalty program in the Magnit retail chain, the launch of a new prepaid virtual card MTS Cashback Lite Mir (the first easy card combining two loyalty programs), the launch of a virtual card to the personal account of an MTS subscriber — MTS Cashback Mobile, the launch of the process of issuing virtual debit cards for the incoming stream of POS loans, for which more than 1 million cards have been issued.

In 2021, the launch of the best loyalty offer on the bank card market being 5% in supermarkets with an MTS Premium subscription became another significant event.

MTS Bank is actively developing payment and transfer services for MTS subscribers and MTS Bank customers, both in online channels and through retail chains featuring its own chain of MTS retail outlets, Bank offices and partner chains. The 2021 key product areas were as follows:

• acceptance of payments in favor of MTS Group of Companies;
• payments in favor of individuals and legal entities.

The main focus in developing the services is aimed at increasing the penetration of using services in online channels on in-house marts — My MTS and MTS Bank apps, the MTS Money mart (payment.mts.ru). In 2021, we managed to achieve significant results in this area: the volume of transfers and payments in the online channel grew by 1.9 times to RUB 208 billion and the number of 3MAU customers, users of payment and transfer services, grew by 1.6 times and reached 7.2 million people.

By the end of 2021, the turnover on in-house marts in favor of MTS Group of Companies reached RUB 28 billion, which is 56% more than the corresponding indicator for the previous year, and amounted to about 10% of the total volume of payments in favor of MTS Group of Companies.

By the end of the year, the number of connected auto payments amounted to 1.9 million, which is 27% more than the corresponding indicator for the previous year.

The penetration of in-house marts into the MTS Bank customer base paying for the services of MTS Group of Companies increased from 22% at the beginning of the year to 47% at the end of 2021.

One of the main local transfer service tasks is to provide functionality to top up debit and credit cards, repay loans.

The 2021 key achievements within the product development of customer services were as follows:

• expanding the set of payment tools for loan repayment services of MTS Bank;
• launching transfers to Sberbank using a phone number;
• implementing the me2me pull functionality for transfers via Faster Payments System;
• topping up MTS Bank brokerage accounts.

As a result of active service development and quality improvement, it was possible to achieve growth by more than 155% over the year in terms of turnover and an increase in the service penetration into the Bank’s active customer base to 45% in December compared to 12% in January 2021.

One of the priority areas for developing products for foreign citizens, as well as residents who have relatives and friends abroad, is the creation of cross-border transfer services.

In 2021, the Bank launched the following customer services and brought them to its own online channels — the MTS Bank app, namely:

• transfers using international money transfer systems Western Union, Unistream and Contact;
• transfers by card number to national cards of the CIS countries under direct agreements: Uzcard/Humo, Korti Milli, Elcart;
• transfers by phone number to Tajikistan and Kyrgyzstan;
• payment for mobile communication of the CIS countries.

In 2021, MTS Bank cardholders got access to more than 30 services in Kazakhstan, Armenia, Tajikistan, Uzbekistan and Kyrgyzstan: mobile operators, providers, loan repayment, e-wallet top-up, transfers to cards of foreign banks through Visa and Mastercard payment systems and national systems, payment for patents.

In December 2021, the Bank announced the start of issuing MTS Cashback debit cards to individuals not being residents of the Russian Federation from the CIS countries in the chain of MTS Bank branches, as well as launched cooperation with the Unified Migration Center in St. Petersburg. A plastic card for ruble currency with free annual service can be issued on the same day at any MTS Bank branch throughout Russia. The card allows executing money transfers to the cards of national payment systems in CIS countries with cashback accrual.

The card for non-residents of the Russian Federation is the Bank’s flagship product for foreign citizens in the MTS ecosystem. The implementation of this service has a high potential to engage a huge number of new customers: 12.9 million people are non-residents of the Russian Federation, which is 9% of the population of the country. MTS Bank pays special attention to customer support and communication in national languages. The IVR service, SMS communication and push notifications in national languages are already functioning. In March 2022, the Bank announced the launch of a chat bot in the Telegram channel.

Acquiring Services

In 2021, the total acquiring turnover of the Bank increased by 28% and reached RUB 117 billion, while the number of retail and service outlets increased by more than 80%, largely due to developing partner sales channels. 2021 total net fee revenue from merchant and Internet acquiring amounted to about RUB 170 million.

Within the development of payment services, the Bank implemented the following projects:

• Internet acquiring in Ozon;
• Faster Payments System payment functionality both through the Bank’s payment terminals and through the partner’s cash equipment (chain of MTS communication retail outlets);
• finalization within the Visa Micro-Merchant program, which made it possible to receive additional income (~RUB 2 million per month) for the companies in the micro and small business segment.

MTS Payment

MTS Payment is a payment service for the MTS ecosystem and subsidiaries. Today, the principal module value lies in a single payment CJM (Customer Journey Map), centralized card storage and an easy onboarding process (business and technology), which allows starting payment in a matter of a few days.

In 2021, the Bank made a complete technical solution refactoring: it abandoned vendor development, generated the basic microservice architecture of the solution, formed an integrated approach to solving the issues of monetization and payment with the corporate architecture of the company. In the middle of the year, jointly with KION, the Bank launched a pilot project.

The MTS Payment product aims to reach satisfaction with the payment service on the part of the customers of the products.

For 2021, MTS Payment was integrated in the following products of MTS Group of Companies:

• MTS Cashback
• e-Sim
• MTS Premium
• MTS Finstory

In 2021, MTS Payment switched to payment within a single CJM (Customer Journey Map):

• MTS At home
• MTS Insurance

By 2023, MTS Payment plans to transfer 16 previously connected partners to payment within a single CJM. More than 12 new ecosystem products expressed their wish to integrate MTS Payment.

Mobile Commerce

In 2021, the turnover of payments on partner marts amounted to RUB 18 billion. The customer involvement in payments from personal accounts amounted to 8.6 million unique users. A number of qualitative achievements contributed to the growth in demand for payment services using a personal account:

• connection of 500+ new trade and service enterprises to MTS Bank through aggregators and directly;
• the product was fully transferred to a single processing solution of PCEC, all partners are connected to the single platform solution;
• restoration of contractual binding with telecom operators Tele2 and Beeline through Single Cash Desk NSCA settlement organization;
• integration of mobile commerce with the payment solution of MTS Bank (RBS) for the possibility of payments using the MTS personal account;
• work to audit the activities of counterparties in terms of compliance with the requirements of No. 115-FZ “On Countering the Legalization (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism” and regulatory legal acts of the Central Bank of the Russian Federation was intensified.

Today, 4 million MTS subscribers regularly, at least once in three months, use the opportunity to make payments and transfers from their subscriber account.

MTS Retail Chain

The retail chain is the MTS ecosystem mart promoting the ecosystem products.

Through its 100% subsidiary RTC JSC (RTC), MTS PJSC has one of the largest non-food retail chains in Russia, which includes about 3,413 retail outlets selling telecom equipment and communication services, customer service, financial and banking services.

Developing on an omnichannel basis, implementing a single approach to the customer at all points of contact and the interconnectedness of communication channels, RTC interacts with 120 million customers a year. Live communication, personal contact, expert knowledge of RTC employees help familiarize the buyers with the best MTS ecosystem products.

About 80% of new customers of the MTS ecosystem who visited RTC retail outlets and learned about the MTS Premium subscription signed up for the program.

More than 200,000 new customers who learned about MTS convergent products at RTC selected a product combining Satellite TV and fixed-line communication.

The number of participants engaged in the MTS Cashback program through RTC almost doubled, as compared to 2020. 70% thereof are new participants registered in the program for the first time. In addition, more than 20% of the service members converted the points received into a repeated purchase.

The MTS online store (shop.mts.ru) is implementing an “endless shelf” project, the essence of which is that the goods not fitting in a physical retail outlet are available for purchase digitally. The buyers have the opportunity to place an order with delivery to a specific address or to any MTS retail outlet / point of issue of the order.

RTC is constantly working on reducing the time of customer service without losing the quality, improving the software operation and optimizing organizational processes; much attention is paid to the professional training of first-line employees.

During the pandemic, the RTC retail chain was not only able to quickly transform the processes within the company while maintaining its main strategic priorities, but also strengthened those its parts that allowed minimizing losses in such unprecedented circumstances.

KION/Media

On April 20, 2021, a new online cinema KION was created and launched on the basis of the MTS TV OTT platform and became a part of the MTS product ecosystem.

The MTS Media LLC (MTS Media) subscriber base dynamics is positive Y-t-Y +27%, the main increase was due to online cinema subscribers (+58%):

• KION video service rebranding;
• launch of KION Originals;
• implementation of MTS Media marketing campaigns: 100/100, KION for 199, as well as MTS Premium ecosystem products and convergent.

The flagship area of the KION platform is the KION Originals content line: exclusive series, feature films and documentaries. In the originals pool of the KION online cinema, there are such well-known film and series projects as “Crystal”, “Kidney”, “My Mom’s Penguins”, “Secrets of Family Life”, “Durov”, “Clinic of Happiness” and many others.

In total, KION released 21 original projects in 2021.

In 2021, the release of original content became possible thanks to strategic partnerships with key federal TV channels (Channel One, NTV) and cooperation with the leading production companies: Look-Film, Sreda, Bazelevs, Mediaslovo, VISH Media, etc.

Projects and works released by KION online cinema were awarded Russian and foreign awards (to date, KION series and films have received more than 18 film awards), including:

• the “Clinic of Happiness” series received the Bolshaya Tsifra national award in the “OTT Originals: Content Created Specifically for Online Cinema” nomination;
• KION online cinema received the 2021 Bolshaya Tsifra national award in the “Discovery of the Year” nomination;
• KION original series “The Spit” won the New York International Film Festival (INYFF) in the “Best TV / Web Series” category;
• the “Secrets of Family Life” project won The Digital Reporter Special Prize at the Realist Web Fest;
• KION original series “Father Sergius” was awarded at the third annual Pilot festival of TV shows for “masterful genre mix-up”;
• promo videos of the series “The Spit”, the movie “Sakharov. Two Lives” and branding of KinoJam TV channels were awarded at the ninth MediaBrand competition;
• victory of the KION online cinema commercial “Frenchman” at MIXX Russia, ADCE, Eurobest, Red Apple and ADCR Rewards (bronze in the “TV/Cinema Commercials” category; silver in the “Online Videos” category; gold in the “Craft — direction, cinematography and editing” category);
• KION original series “Secrets of Family Life” was acknowledged as the “Best Comedy Series” at WEBFEST BERLIN.

Regular citation in top business and specialized media, PR and GR events, co-producing of feature films with a high social response, release of our own high-rated series content, as well as a focus on content promotion, made it possible to increase KION brand awareness to 30% by the end of the year.

Thanks to the service restart and rhythmic original content releases, the share of VOD library viewing on the service increased significantly (three times), just as the time spent watching content on the service.

In 2021, MTS Media continued to work on its own TV channels with Russian and foreign content: KinoJam1 and KinoJam2 streaming HD movies and series. The KinoJam1 TV channel is dedicated exclusively to domestic cinema, while the KinoJam2 channel focuses on popular foreign TV series and films.

Quality and Customer Experience and Service Improvement

In 2021, we continued our work to increase customer satisfaction with the company services and provide the best customer experience in the MTS ecosystem. To this end, we are working on building a unified omnichannel customer experience, where our customer receives a high-quality product and seamless service, regardless of the product or point of contact.

The customer has been and remains our company value. In 2021, we actively developed the customer ecosystem. We arranged the work with each customer in such a way that he/she would receive maximum support using any of our services.

Particular attention was paid to the development of convenient customer service tools. Based on AI, we created speech and text analytics, and now we understand much better the way the customer communicates with Help Desk personnel. We see what is already working well and what is subject to improvement. Moreover, we made sure that contact center employees feel comfortable in the new pandemic reality. For security reasons, more than 50% of employees worked remotely from a comfortable home office being equipped with everything required for work.

In 2021, we went on developing the automatic voice assistant (IVR). We connected an internal intellectual platform thereto and now we offer the customer such scenarios that are best for him/her. IVR efficiency increased to 65%.

In 2021, customer service was launched in the popular WhatsApp, Telegram and Apple Messages messengers; we also actively developed the chat bot. The bot solves more than 50% of incoming questions on its own, without transferring to operators. New services have also appeared: we inform the customer about the terms for executing his/her application, as well as about the terms and status of reviewing his/her claim. The bonuses for those customers who got affected by network outages are provided automatically.

Attention was paid to the retail chain as well. Employees act according to the new MTS ecosystem customer service scenarios, they have a chat with a built-in smart chat bot for additional support.

All our activities are targeted at improving the customer service quality, this is an important part of the MTS CLV 2.0. strategy. Also, we get feedback on the changes introduced through a predictive scoring model. This tool shows the exact customer needs, as well as the approach capable of quickly and efficiently solve his/her problem. Thanks to this data, we become even better, and the customer appreciates it staying with us for years.

In 2021, an important area for improving customer experience became increasing communication transparency regarding the company data plans and services. This is a key component for strengthening the trust of customers using the products and services of the MTS ecosystem. CJM (Customer Journey Map) audits for popular data plans and services were conducted. The result of the work carried out for the customer was an increase in the transparency of information on charges, including the implementation of SMS/Push-notifications containing the recommended amount for payment, the construction of unified CJMs and the provision of up-to-date and unified financial information at the main points of contact.

High competition in the telecom services market requires a reduction in time-to-market and an increase in the quality of new data plans for services and subscriptions that meet the needs of different user categories. In order to accelerate the launch of new high-quality products on the market, the company developed an updated automated testing system. Using the new system, we will be able to more than triplicate the amount of processes tested at peak performance, thus increasing the number of products tested simultaneously. Increased system performance will have a positive effect on the maximum throughput capacity, while improving the quality of the products launched.

We successfully use and go on developing the portal for alpha and beta testing of MTS products. In 2021, we introduced a system to motivate our customers with various offers for the company products. The motivation system not only helps us engage new users, but also expands the number of the MTS ecosystem customers. Thanks to the portal, we provide high quality products, taking into account the needs and opinions of our end users.

In 2021, we expanded the coverage of digital products by customer and technological quality metrics by 88%, which made it possible to comprehensively assess customer satisfaction with MTS ecosystem products and understand the customer needs better. An approach to assess the quality of individual components of digital products being the modules providing convenient and seamless customer experience at every point of contact between the customer and digital products was introduced. Comprehensive improvement and optimization of mts.ru website performance was carried out, due to which it was possible to reduce the time for the complete website upload by 41%. In general, due to the ongoing activities, it was possible to increase the customer satisfaction indicator with our website by 3.5 times in H2 2021.

The Closed Loop project continues to develop, within which the customers are additionally contacted based on the results of satisfaction surveys to help resolve their issues. During the year, we expanded the Closed Loop areas by adding MTS and MTS Bank chat customers, as well as the users of banking products, to the project. The ecosystem services, such as MTS Premium, MTS Library and MTS Music, began to be used as loyalty tools when communicating with the customers. Upon the Closed Loop execution, the customer satisfaction doubles. This project helps adjust the existing business processes to ensure customer satisfaction with interacting with the company.

In 2021, we actively worked with the number and frequency of customer opinion surveys. As a result, it was possible to reduce the survey load on the ecosystem customers by elaborating a harmonious contact strategy within the entire ecosystem.

Big Data

Big Data develops and supports the majority of MTS products and solutions using technology platforms (recommendations, scoring, lead generation, dynamic pricing) and big data analytics competencies.

Big Data developments make it possible to provide the customers with more customized offers, which increases competitiveness, frequency and duration of customer contact with the product.

Big data processing technologies also allow to optimize processes within the company and increase the efficiency of investment in the initiation of business.

In addition, big data underlie individual services: a solution for individual organization of advertising campaigns by business customers of MTS Marketer, geoanalytics for Smart City (MTS Region), anti-spam services and others.

In 2021, a tool for automatic subscriber segmentation was developed for the MTS Marketer product, due to which the number of sold ad-hoc segments was increased by 2.5 times without increasing the staff or losing quality and meeting the set deadlines. Also, MTS Research, a marketing research product, was launched, within which a line of reports was developed to analyze the customer base, the campaign launch results (post-campaign) and to conduct other marketing research.

Big Data continues to develop FinTech areas in partnership with colleagues from MTS Bank and the MTS ecosystem. At the end of 2021, it was possible to increase the accuracy of segments and reduce the time of delivering offers to the customer by three times, introduce additional scoring models for “risks”, launch Full Approve loans, as well as integrate a recommending system for payments and transfers into RB.

MTS goes on utilizing big data analytics to efficiently plan the development of telecommunications infrastructure (Smart Rollout project). In 2021, the focus of developing the use of Big Data technologies was shifted to finding more efficient locations for new coverage. Within this activity, it was possible to increase the coverage of the analyzed facilities by seven times and to double the accuracy of models for predicting the revenue of locations due to machine learning algorithms and the ability to analyze a large number of factors. In addition, it was possible to clarify the methodology for assessing locations with low quality indicators on the basis of big data.

In 2021, the spam protection service was scaled to more than a third of the telecom business customers, which required a significant increase in the coverage and speed rate for detecting spam numbers. Together with our colleagues from the MTS ecosystem and the AI team, a service for short communication with spammers was launched, which allows the customer to receive the text of the advertising call and listen to it, if necessary.

In 2021, the Big Data team continued to cooperate with government agencies (the Situation Center of the Ministry of Digital Development, Communications and Mass Media of the Russian Federation) on the subject of fighting COVID-19 and its consequences in terms of supplying data on compliance with self-isolation regimes.

Artificial Intelligence

MTS Artificial Intelligence Center

The MTS Artificial Intelligence Center has been operating since 2017. The AI Center specialists create and introduce AI solutions within the MTS ecosystem. Developments of the Center complement the existing services with new features, improve customer experience: solutions in the field of computer vision (cloud video surveillance and video analytics), natural language understanding (chat bots, voice bots, virtual assistants, speech analytics), speech synthesis, industrial analytics.

MTS is a member of the Artificial Intelligence Alliance that develops the said technologies in Russia. Other members of the Alliance are Sberbank, Yandex, Mail.ru Group, Gazprom Neft and the Russian Direct Investment Fund (RDIF).

In March 2021, MTS announced investment of around USD 10 million in a startup of Kneron, a group of companies that develops and sells microchips used for accelerated and power-efficient processing of AI algorithms and related software.

In June 2021, the AI Center launched startup accelerator and venture fund. The authors of AI projects demonstrating a strong idea, solution prototype and development may apply to the accelerator. Currently, 13 startups from 10 countries have been selected with funding of up to USD 100 thousand approved for each project.

MTS has entered into agreements on strategic partnership in the field of AI with 30 international companies.

The MTS AI Center combines its own expert opinion with the world’s leading developments in the AI field so that our solutions are in demand not only in the Russian market, but also in the global one.

Developing New Services, Apps, Partnerships

МТС Live

In 2021, MTS Live was actively developing due to the theatrical direction and support of the Russian cultural sector: we entered into partnerships with major theaters (for example, the Mossovet Theater), invested in our own productions and musicals.

The share of MTS ticket services in the dropped market was increased by strengthening its leadership in Moscow and initiating business in the regions (agreements were concluded with 130 new counterparties), as well as active participation in the Pushkin Card program. In 2021, sales on MTS ticket marts grew by 84.5% year-on-year. In 2021, the total number of tickets sold amounted to 3.5 million.

Despite the restrictions imposed on mass and cultural events, the MTS promotion department managed to hold 341 events and concerts with more than 250,000 tickets sold in total in 2021.

A partnership was signed with the MTS Live Hall in Yekaterinburg, the opening of the MTS Live Arena in Moscow and the launch of a chain of own concert venues in the key regions were planned. The hall and bar in the Moscow Palace of Youth (Moscow) were rebranded.

MTS Live customers get access to all the MTS ecosystem benefits: from convenient seamless authorization using MTS Login or easy MTS Pay payment in the mobile app to special MTS Premium subscription offers and the ability to accumulate or write off MTS Cashback program points.

Partnerships

The number of active joint projects with major partners reached 50:

Apple, Microsoft, Samsung, Google, HP, Xiaomi, GazpromMedia, VK Group and others.

The partner infrastructure is improving, partner connection time has been reduced, which leads to an improvement in NSAT being an indicator of satisfaction with MTS as a business partner: 18 p.p. to 27 p.p.

10 partners were added as part of MTS ecosystem products: MTS Cashback or MTS Premium, X5 retail group (Perekrestok Vprok), Ozon, Airo, Urent, Medsi, VK Group (Uchi.ru), Lukoil, Aeroflot, Wargraming, PUBG mobile, IGG.

Contracts with five  key strategic partners were extended in terms of services (Apple Music, Yandex.Plus, MTS Music, Tinder).

Eco-modules

In 2021, we covered 90% of the top (TOP-30) ecosystem products with the major ecosystem modules (Login (MTS ID)), Profile, Design System, Help, Markup.

Seamless authorization for ecosystem products was developed and is being introduced.

A unified help system and a unified design system in code, which reduce the time for making product changes, were developed and introduced.

We developed and commenced the introduction of a system of cascade (Push, SMS, e-mail) user communication.

My MTS

My MTS becomes the versatile Ecosystem mart, which provides the customer with easy access to the entire range of ecosystem products and services (Premium subscription, MTS Cashback, telecom, bank, online store, etc.).

The customer now sees a set of widgets for digital products activated on the main page of the My MTS app and can easily manage his/her subscriptions.

Now, on average, more than 5 million customers visit the app daily (a million customers more than at the beginning of 2021)