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2018 Outlook

MTS’s outlook for 2018 will be impacted by new IFRS standards:

  • In January 2014, IFRS 9 and 15 were issued to respectively address accounting for financial instruments and establish principles in recognizing revenue from contracts with customers. These standards come into effect from January 2018.
  • In January 2016, IFRS 16 was issued to provide investors with greater clarity regarding the accounting for leases. Although this new standard is effective from January 2019, MTS has elected to adopt this practice early.
  • Subsequently in 2018, MTS applied these new standards to its FY 2018 results beginning with Q1 2018 and provide the market with 2018 results excluding the impact of IFRS standards for the sake of the sake of transparency.

Group Revenue:

For FY 2018, MTS forecasts 4-6% revenue growth, based on the following factors:

  • Rising data consumption and weaker voice usage, due to voice-data substitution and data adoption;
  • Competitive dynamics in distribution and reduced SIM-card sales in Russia;
  • Expected impact of internal roaming cancellation in Russia;
  • Increased sales of handsets in Russia;
  • Continued growth in UAH-denominated revenues in Ukraine; and
  • Service revenues in other foreign subsidiaries and currency volatility in relation to the Russian ruble.

Group Adjusted OIBDA:

MTS anticipates that the adoption of new IFRS standards will increase Adjusted OIBDA by an estimated at least RUB 25 bln in 2018. Excluding the impact of new IFRS standards, MTS anticipates ~ 2% increase for FY 2018 Group Adjusted OIBDA due to the following factors:

  • Competitive factors and on-going uncertainty over potential optimization of retail distribution;
  • Increases in labor costs;
  • Increase in spectrum costs in Russia;
  • Market sentiment and the prospective growth in usage of high-value products like roaming;
  • Developments in foreign subsidiaries; and
  • Macroeconomic developments and currency volatility throughout our markets of operation.

Group CAPEX:

FY2018 – FY 2019 CAPEX spending estimated to be RUB 160 bln, due to a number of factors:

  • Partial investments to comply with anti-terror law in Russia;
  • Further incremental improvements and enhancements to LTE networks;
  • Implementation of infrastructure and spectrum sharing projects within Russia;
  • Roll-out of LTE services in Ukraine;
  • Evolution of commercial 5G solutions and introduction into Russian market; and
  • Continued investments in digital products and services.

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