Sistema reduces stake in MTS Bank

Sistema reduces stake in MTS Bank

Moscow, Russia - 05 July 2018 - Sistema PJSFC ("Sistema" or the "Company", together with its subsidiaries, "the Group") (LSE: SSA, MOEX: AFKS), a publicly-traded diversified holding company, today announces the divestiture of a 28.63% stake in PJSC MTS Bank, one of the 50 largest banks in Russia, to Mobile TeleSystems B.V., a wholly owned subsidiary of PJSC MTS (NYSE: MBT, MOEX: MTSS), the leading telecommunications operator and digital service provider in Russia, for RUB 8.27 bn.

As a result of the transaction, Sistema's direct ownership in MTS Bank decreased to 43.24% and MTS's stake increased from 26.61% to 55.24%[1].

The transaction builds on the success of the partnership launched in 2011 between MTS and MTS Bank to promote digital payment solutions and the issuance of credit cards and PoS loans. Since then, MTS Bank has increased its customer base, optimized its IT systems and business processes, and has been sufficiently capitalized, returning to sustained profitability in 2017. Consolidation of a controlling stake in MTS Bank will further advance the build-out of MTS's platform of digital products and customized offerings in the fast-growing fintech business.

Mr. Vsevolod Rozanov, Sistema's Managing Partner and Chairman of the Board of Directors of MTS Bank, said, "MTS's acquisition of a controlling stake in MTS Bank will accelerate development of the Bank, while allowing Sistema to monetize its investments in the banking sector. The transaction enhances MTS's role as a digital service provider while its core telecom business will also benefit from higher penetration of data services and increased customer loyalty driven by adoption of fintech products. Likewise, leveraging MTS's retail presence and online capabilities, the Bank will continue its digital transformation to offer a truly omni-channel experience to its clients."

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Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children's goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality. The company was founded in 1993. Its revenue in 2017 was RUB 704.6 bn; its total assets equalled RUB 1.1 trn as of 31 December 2017. Sistema's global depositary receipts are listed under the "SSA" ticker on the London Stock Exchange. Sistema's ordinary shares are listed under the "AFKS" ticker on Moscow Exchange. Website: www.sistema.com.

The Company is not an investment company, and is not and will not be registered as such, under the U.S. Investment Company Act of 1940.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Sistema. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might" the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. In addition, there is no assurance that the new contracts entered into by our subsidiaries referenced above will be completed on the terms contained therein or at all. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.