MEGAFON Annual Report 2016

Chairman’s Statement


Today we are witnessing the process of MegaFon’s transformation from a traditional mobile operator to an integrated digital communications company, whose mission is to make the way we do business and live our daily lives more comfortable and efficient by creating a connected digital environment around every user. I am proud to say that MegaFon is responding to all key market trends around us by maintaining a relentless focus on developing, adapting and efficiently implementing advanced technological solutions that take us closer to the digital future.


Throughout 2016, the Company was actively developing a new strategy, which was unveiled in May 2017. This will account for the new economic realities and the most recent trends in the telecoms and information industries, along with the growing significance of digital technologies in our daily life. The Company also updated its dividend policy.

In December 2016, the Board of Directors proposed for the approval of the General Meeting of Shareholders the acquisition of shares representing a 63.8% voting stake in Mail.Ru Group, a leading company in the Russian-speaking Internet market. The decision to acquire the stake was in line with MegaFon’s new strategy to embrace digital growth opportunities and best meet the needs of digital customers, through the implementation of digital solutions for business and society. The transaction was approved by the extraordinary General Meeting of Shareholders in January 2017 and closed in February 2017. The acquisition of the stake in Mail.Ru is aimed at providing both companies with a number of strategic benefits, including the enhancement of MegaFon’s digital services and channels for their promotion, the launch of a special VKmobile offering for users of the VKontakte social network, and other potential initiatives. The partnership with Mail.Ru Group will help MegaFon provide premium and differentiated bundled services to digital customers, creating value for the shareholders of both companies.


2016 was a challenging year for the Company given the difficult macroeconomic environment and intense competition in the market. I am delighted to say that MegaFon came through these difficulties successfully and succeeded in turning challenges into opportunities.

In 2016, the Company focused on improving its internal processes. We paid particular attention to strengthening our commitment to responsible business practices and initiated a number of measures to improve our compliance framework and foster a compliance culture, including setting-up a new Compliance Committee, and the development and adoption of the Company’s Compliance Policy. We also continued to enhance our corporate governance systems, focusing mainly on reviewing existing regulations and procedures, to ensure full compliance with the requirements of the Moscow Exchange and the new Corporate Governance Code adopted by the Central Bank of Russia.


One of MegaFon’s most important principles is to ensure stable and attractive dividend payments to its shareholders. Starting from FY2012, the Company’s has been paying out dividends on a regular basis. Dividends declared in 2016 totalled RUB 50bn, or RUB 80.63 per ordinary share or GDR, in line with the 2015 level. The General Meeting of Shareholders approved payment of dividends twice: at the annual General Meeting of Shareholders on 30 June 2016, in the total amount of RUB 35bn, and at the extraordinary General Meeting of Shareholders on 9 December 2016, in the total amount of RUB 15bn.


In 2017, MegaFon will launch the implementation of the new digital strategy the Company has been developing throughout 2016. It will involve a major effort to update our offerings, identify unconventional solutions, and take a wider, visionary perspective on the current circumstances. At the same time, we will build on MegaFon’s strong position as a leading mobile operator and leverage Mail.Ru’s vast expertise in digital and online technologies. Today we are well-positioned to become the operator of choice for our customers.

I would like to sincerely thank all MegaFon employees and emphasise once again that our common success ultimately relies on the personal commitment of every member of our team. Thank you for your efforts, and I wish us all further success in the future.

Chairman of the Board