Annual Report for 2015-2016
Corporate report Social initiatives Consolidated Financial Statements
Corporate report 2015-2016 About this report
4
.....................................................................................................................................................................
Development of mobile applications and innovational services
24
.........
About Kyivstar...................................................................................................................................................................................5
Chat bot in Viber ........................................................................................................................................................................25
Shareholders ......................................................................................................................................................................................6
Mobile security ..............................................................................................................................................................................26
Financial results ...........................................................................................................................................................................7
Access to cloud services
Service incomes .......................................................................................................................................................................... 8
Social initiatives in 2015-2016 ................................................................................................................28
Mobile internet .............................................................................................................................................................................. 9-10
Transparency index ..............................................................................................................................................................29
3G coverage ........................................................................................................................................................................................11
Educational strategy ...........................................................................................................................................................30
Radio network updating .............................................................................................................................................12
“Make Your Mark” Project ........................................................................................................................................31
New IT infrastructure ....................................................................................................................................................... 13
Geography of academic competitions .........................................................................................32-34
Payment of taxes .......................................................................................................................................................................14
Scribing festival ............................................................................................................................................................................35-36
Customer care. Improvement of tariffs and services ...........................15
Programs for students ....................................................................................................................................................37
Subscribers and services............................................................................................................................................. 16
Kyivstar Bussines Hub ......................................................................................................................................................38-39
Innovational tariffs................................................................................................................................................................... 17
Projects for start-ups ........................................................................................................................................................40-43
Internet SIM pair .........................................................................................................................................................................18
Support of young specialists .............................................................................................................................44
Calls abroad ........................................................................................................................................................................................19
Sports sponsorship ...............................................................................................................................................................45
Communication in roaming ...............................................................................................................................20
Telecom charity ..................................................................................... 46
Kyivstar All Together ..........................................................................................................................................................21
Consolidated Financial Statements 2015 .................................... 47
“Business Office” Tariffs ..............................................................................................................................................22
Consolidated Financial Statements 2016 .................................... 69
Governmental hotline .....................................................................................................................................................23
27
..........................................................................................................................................
Kyivstar in 2015-2016 3G development and preparation for new standards of telecommunication
Kyivstar. Corporate report
About this report In 2015-2016 the national telecommunication operator Kyivstar strengthened its financial results and made even stronger its leadership by market share and Net Promoter Score (NPS). Kyivstar has chosen a course for transformation into a digital service provider in order to provide new and innovative services to its clients.лієнтів. Kyivstar mobile network is modernized and 100% ready for providing services of 4G* Standard * *as of 2017
ar 3G Kyivst ion is ct conne almost 10 ral ble in availa ban and ru r re 000 u ents, whe m e ’s l in e sett f Ukra 80% o tion live. la p op u
About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
• Kyivstar’s priority is the development of worldwide level mobile technologies in Ukraine. The company invests actively into expansion of its 3G network area and creation of technical base for quick update of mobile connection standards. • By making sure that every Ukrainian is able to use all the privileges of high-speed data transmission, the company has invested over 9,4 billion UAH into modernization and development of network in 2015-2016 (including the payment for 3G license). Thanks to this, Kyivstar has made a step towards the next generation mobile technology 4G/LTE. • In 2015-2016 Kyivstar has upgraded most of the radio network by installing multistandard equipment. The aim of modernization is to prepare the network for “explosive” growth of data transmission traffic and introduction of new telecommunication standards. • 2016 has become a year of company’s transformation into a digital service provider. The first large-scale project within the strategy of Kyivstar’s transformation has become the application of Digital Stack — new digital IT-infrastructure. The new services are working for the development of digital direction, and are elaborated and introduced for the convenience of online services use via the cell phone in any sphere of life. In order to expand the clients’ access to the high-speed internet and services, Kyivstar has established convenient online tariffs: even more calls, internet megabytes, unlimited access to social networks and messengers. Moreover, from now on music and video are available without limitation for traffic used. • During 2015-2016 the company carried out its duties for the country and society, and introduced a number of educational and social projects. In particular, Kyivstar has supported the development of Ukrainian start-ups, developers and entrepreneurs, that work in online-technologies area. 3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Information about Kyivstar Kyivstar is a national telecommunications operator, that provides connection and data transmission services based on the wide range of mobile and fixed technologies, including 3G. For 20 years Kyivstar works in Ukraine and is one of the biggest taxpayers among telecommunications operators and one of the best employers, as well as a socially responsible company.
â„–1
telecommunications operator of Ukraine
26,4 m clients
35
â„–1
b UAH of investments*
taxpayer on the telecom-market
*for 20 years of work in Ukraine About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
13
Kyivstar’s Shareholders On February 27, 2017 Kyivstar’s shareholder announced its rebranding and renaming to VEON. Rebranding reflects company’s plans concerning transformation from telecom holding to global technological leader. In so doing, on the territory of Ukraine the services will continue to be provided under “Kyivstar” brand name. VEON is an international telecom group with headquarters in Amsterdam, that is introduced in 13 countries of the world. The company is in NASDAQ (New York) and Euronext (Amsterdam) listing.
VEON works in 13 countries of the world
Provides services to more than
240 m clients
41 994 employees
Markets: Ukraine, Algeria, Armenia, Bangladesh, Georgia, Italy, Kazakhstan, Kyrgyzstan, Laos, Pakistan, Russia, Tajikistan, Uzbekistan
About this report
About Kyivstar
Shareholders
10%
VEON telecom network provides services to 10% of the world population
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Operational and financial results of 2015-2016 National telecommunications operator Kyivstar has strengthened its financial results in 2016, in spite of complicated macroeconomic situation. Furthermore, the company has strengthened its leadership in Net Promoter Score (NPS). Incomes
EBITDA Growth
+11%
+23.4%
13,475 m UAH
14,960 m UAH 6,332 m UAH
2015
2016
2015
Incomes from fixed communication services realization
Incomes from mobile connection services realization +11.2%
7,811 m UAH
12,508 m UAH
2016
2015
Growth of incomes from fixed communication, m UAH 967 m UAH
1,052
13,908 m UAH
2016
Growth of incomes from “Home Internet” service
1,052 m UAH
610 524
m UAH
m UAH
b UAH
– 967 m UAH of incomes from “Home Internet” service
2015
2015
2016
2016
– 85 m fixed communication About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Use of fixed communication services, mobile and fixed internet During 2015-2016 there is a growth of incomes from mobile and fixed connection services provision — 11,2% and 9% accordingly. Average monthly voice communication service use per client (MoU, min) 504 min
524 min
2013
2014
562 min
Dynamics ARPU*, UAH *Average monthly client’s account
565 min 36 UAN
2015
2016
2014
Average monthly use of mobile internet per client, MB +177%
45 UAN
41 UAN
2015
2016
Number of mobile subscribers, m
553 Mb
25,3 m
26,1 m
2016
2015
2016
200 Mb 2015 About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Kyivstar mobile internet use in 2016 Number of mobile internet users
2,6 m 2G mobile internet users
Mobile internet growth (TB)
8,6 m 3G internet users
19 808
2G
Among mobile internet users the owners of smartphones are using 8 times more data traffic
3G
13 931 8 385
9 361
1Q
2Q
3Q
4Q
37 852 TB Kyivstar subscribers have used 51 486 of TB data traffic. It means 2600 years of non-stop viewing of high-quality videos
13 633 TB
2G network traffic
About this report
3G network traffic
About Kyivstar
9,7 m smartphones in Kyivstar network Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Use of 2G and 3G mobile internet services by subscribers
42%
30%
29%
24% 17%
2G
3%
3G
3%
6%
11%
32%
3%
search and browsing
use of social
audio and video
file downloading
VoIP (calls via
of web pages
networks
streaming services
from the internet
internet channels)
About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
Other
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
3G coverage national leadership 3G Kyivstar network has doubled compared to December 2015* and covers the territory, where 80% of Ukraine’s population live
11 m mobile internet users 10 000 urban and rural settlements already have access to 3G
80 %
ar Kyivst t firs is the cations i to m m un teleco that began s in tor, opera t 3G service gion. u e o ansk R f carry h u L d sk an 70% o Donet e moment, es on At th that liv O, ation, l u p of AT o p rritory to 3G e t e h t ccess have a vstar Kyi
of the population are on the territory of 3G network
100% of radio equipment are renewed and technically prepared for 4G connection
*as of 2017 About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Mobile network updating Kyivstar adopts new technologies and invests into the network development, so more subscribers are able to use high-speed mobile internet.
• D uring 2015-2016 Kyivstar has modernized radio network by installing new equipment, that supports different standards of connection, including 3G and 4G. • During 2015-2016 the amount of investments into infrastructure development (without taking into account payment for 3G license) has reached 6,2 b UAH. • Renewed Kyivstar network is one of the best in terms of quality among operators of international telecom group VEON and has new possibilities: • network channel capacity has increased by 250% • Power consumption for each base station has decreased by 12% • Needs less time for elimination of emergency situations, larger reliability of the network
After ng nchi f u a l o 3G ount ion m a the umpt s n o c in traffic ustomer as per c etwork h tar n by 177% s v i y K o ased incre ntinues t o and c row g About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Digital Stack — innovational transformation of Kyivstar • Within the strategy of Kyivstar’s transformation, besides the replacement of radio network technologies, there was an introduction of DIGITAL STACK — the new digital IT infrastructure. • WHAT DOES DIGITAL STACK PROJECT MEAN? • renewal of numerous business processes — most of service operations will become online, allowing the clients to use the services more easily • acceleration of Kyivstar’s product and service development • deeper personification of services for clients thanks to analytics in real time • improvement of customer service quality at all levels by simplifying the user interface • The supplier of renovated IT infrastructure — Ericsson, worldwide provider of technological solutions and equipment.
About this report
About Kyivstar
Shareholders
Financial results
Service incomes
Mobile internet
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Kyivstar. Corporate report
Kyivstar — №1 taxpayer in telecom area
4 267 721 000 UAH That’s how much taxes and charges in 2016 the company has paid to the national budget. This amount would be enough to fulfil any of the following projects:
construction of 792 km of the roads
About this report
About Kyivstar
Shareholders
65 285 646646 153153 285 151 151 65 646 153Purchase 65 646 of 153 65 school textbooks
Financial results
Service incomes
Mobile internet
Payment of 285 151
285 151 minimal pensions during the year
3G coverage
Radio network updating
New IT infrastructure
Payment of taxes
Customer care
Improvement of tariffs and services
Kyivstar. Corporate report
Mobile subscribers are actively taking advantage of calls, mobile internet and SMS In 2016 the subscribers used:
179 b minutes
45,9 terabytes of mobile internet
2,7 b sms and mms
In 2016 the Kyivstar customer base increased by 3% – to 26.1 m – due to favorable tariffs and expansion of 3G network coverage
9 3G400 000 internet users
80% of the whole internet traffic are used by 3G subscribers
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Innovative tariffs Revolutionary tariffs from Kyivstar: more calls, internet megabytes, unlimited access to social networks and messengers, music and video without limitation for traffic used — with new tariffs Kyivstar subscribers receive maximum from life!
Tariff plans
Calls
Online
• u nlimited calls within network • 30 minutes every month for calls to other mobile networks • unlimited 2G internet • 100 3G megabytes for free
Online+
• f ree of charge: social • audio streaming without networks, popular limitation for traffic used messengers, Wikipedia • 4000 mb every month online for other mobile internet • unlimited calls within services Kyivstar, 60 minutes for • 100 minutes for calls to calls to other networks other mobile networks • 2000 Mb for other mobile and unlimited calls to internet services Kyivstar subscribers
Online Extra • v ideo and music online, social networks without limitation for megabytes used • 6000 mb for other internet services • unlimited communication within Kyivstar network and 300 minutes for calls to other mobile networks • 500 SMS to all other mobile networks of Ukraine
All the tariffs have regional variations that take into account the needs of residents of different regions of Ukraine in communicating with subscribers of other networks and are available to subscribers of prepaid connection. Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
More convenient services for clients Internet Sim pair Kyivstar provides subscribers with the ability to connect two SIM cards to one phone number: for voice communications and mobile internet use. Thanks to the activation of service “Internet Sim pair” subscribers can do this independently. Innovative service allows to activate Internet Sim pair in an easy and convenient way: it is enough to purchase a new starter package, send a special command from the new SIM card number and confirm from your main phone number the activation of the service. Wherever a subscriber is, from now on he can always activate an additional SIM-card to access the internet from another device without addressing the Kyivstar store.
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Calls abroad have become even more convenient Kyivstar makes the world closer with “Favourite Countries” tariff
• Free activation • No subscriber fee • Ability to choose 3 countries and call by more favorable tariffs • Calls to Poland, Italy, Russia at 0,5 UAH/m with “100 minutes for a favourite country” package • Low tariffs for calls to USA and countries of European Union — from 0,5 UAH/m • Ability to choose a tariff independently and manage the service via the system «My Kyivstar»
e urit o v “Fa tries” ers n b u i r o c C s e sub y thre : e ic an ll by serv oose a c ch nd can tries a duced e n cou ecial r a sp tariff.
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Roaming, available for everyone In 2016 Kyivstar subscribers received unique conditions for communication in 67 countries of the world at favorable tariffs*
• C alls from 2 UAH for a minute • Internet from 0,35 UAH for a megabyte • SMS from 1 UAH for a message • Installation is not required — the service activates automatically
*The cost within packages: 15 minutes — 30 UAH; 100 mb — 35 UAH; 25 SMS — 25 UAH. Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
“Kyivstar All Together” — three services in one offer Unique solution for Ukraine — mobile connection, home internet and TV services in one tariff plan.
Advantages of “Kyivstar All Together”: • easy to activate • one personal account to manage all services at once • payment from mobile account • discount for an account up to 50%
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar is the only telecommunications operator of the Ukrainian market, that offers its subscribers a complex solution for several high quality services.
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Business office for corporate clients Kyivstar offers its business subscribers “Business Office” tariff plans with favorable terms of use Microsoft Officе 365: mobile connection, internet and programs for the office — everything necessary for work — in one package.
Within the chosen tariff, Kyivstar corporate clients get the opportunity to use the licensed Microsoft applications for free. Officе 365 during 365 days from the moment of tariff plan activation Opportunities for subscribers: Skype for Business, Exchange/ Оutlook, Word, Excel, PowerPoint, OneDrive/ SharePoint, Sway/Teams/ Yammer and Publisher/Access.
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Free calls to governmental hotline Since July 3, 2016 Kyivstar subscribers can call to the number of national system for handling appeals to reach government bodies.
In order to carry out this task, Kyivstar has opened a short number in its network — 1545 — and provided the routing of calls from this number to IVR hotline of Government Communications Headquarters. Calls to this number are not subject to tariffication. The clients can call to the 1545 number on the following questions: • • • • • • •
housing and communal services construction and public welfare law obedience activity of officials consumer protection health care and social protection entrepreneurship and other issues related to the life of the country and society
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Development of mobile applications and innovational services
Kyivstar. Corporate report
Zoriana — the first intellectual chat bot in Ukraine For the quick help to its clients, Kyivstar has introduced a virtual assistant called Zoriana, which answers the questions about connection services, helps to choose and activate the tariff or service, can talk to you on abstract topics and even recite poetry.
You can communicate with Zoriana on the company’s website, in social networks, messengers.
13 000
Zoriana knows 13 000 answers to the questions about tariffs and services
1 500 000
m dialogues with the clients
85%
of the clients, that have communicated with Zoriana, now address only to her
70%
of the questions Zoriana solves right away
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Київстар. Корпоративний звіт
Mobile security for Kyivstar subscribers At the beginning of 2015 Kyivstar has introduced an innovational service called “Mobile Security”.
Mobile security Cases of returns
Places with the largest number of returns Lviv and the region
Kharkiv
Kyiv and the region
The most widespread places of phones loss
Dnipro
Odessa and the region
Age of the service users
Service users
Restaurant
Beach
Club
Taxi
This service: • allows to return the mobile phone in case of loss; • allows to get an insurance payment if the terminal was not returned; • there is a possibility of a remote blocking of your mobile device and examination of geoposition; • Blocks access to the personal information.
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Over the course of its operation, the servise has been used by 70 thousand clients. Thanks to this service 50% of lost phones and smartphones have been returned to the happy owners.
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Kyivstar. Corporate report
Kyivstar received the Cloud Solution Provider status Thanks to the Microsoft Cloud Solution Provider (CSP) program — access to cloud services — Kyivstar enables contract subscribers to use Office 365 on favorable terms. By keeping up with global trends, when the communications operators transform into ITservices operators, Kyivstar makes Ukrainian market more progressive by simplifying the access to cloud services for the clients. In order to develop this direction Kyivstar has chosen Microsoft — the leader of global market in cloud solutions.
Kyivstar is the partner of IoT LAb. This is the initiative of in “Microsoft Ukraine”, with the framework of which the Ukrainian start-ups have t ability to study for free, tes ce their products and introdu new products to the Ukrainian market.
Which opportunities are opened by CSP program? • allows to carry out direct sales of cloud solutions; • allows to offer special terms and services; • allows to provide the support to subscribers in the use of cloud services.
Subscribers and services
Innovational tariffs
Internet SIM pair
Calls abroad
Communication in roaming
Kyivstar All Together
“Business Office” Tariffs
Governmental hotline
Chat bot in Viber
Mobile security
Access to cloud services
Social initiatives in 2015-2016
Educational programs Support for the young scientists and developers Investments into society
Kyivstar. Corporate report
Kyivstar is the most transparent telecommunications operator of Ukraine in 2015* *according to the results of the transparency index and companies’ accountability research, initiated by the “Corporate Social Responsibility Development” Centre
• The research assessed the biggest companies of Ukraine from 18 economy sectors, whose annual income exceeds one billion dollars • Transparency index, based on Beyond Business methodology, checks whether the websites of public companies have full and easily understandable information on corporate social responsibility
Transparency index
Educational strategy
Level of companies’ openness
50%
level of openness, which is considered to be sufficient according to the Index methodology
According to the results of 2016, one of the sectors with the highest level of disclosing information about corporate social responsibility was “IT/ Telecom”. Kyivstar entered the TOP-20 rating.
56%
Kyivstar has the highest transparency index among the companies of telecommunications area
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Support of education in Ukraine Investments into talented youth are investments in the future of Ukraine. Kyivstar supports educational programs and projects to create informational culture, develop logical and algorithmic thinking of the future IT specialists and true professionals of exact sciences, engineering, programming and other fields.
BUSINESS HUB
We support pupils
We support students
We support young specialists
• sponsorship of academic school competitions, team training sessions and contests • modernization of material and technical base of educational institutions • organization of creative contests and programs in order to adopt innovative technologies and methods into the learning process
• support of the academic student competitions and creative contests on country and international level • engagement of youth in socially useful Kyivstar initiatives • assistance in developing engineering ideas and in creating new inventions, exchanging experience and innovative views between students and professionals of the field
• development of Kyivstar Business Hub — platform for meetings with leaders of public opinion in economy and social sciences • organization of training and provision of first employment for graduates of higher educational institutions • engagement of young entrepreneurs in the development of modern solutions in mobile technologies
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Development of socialeducational program “Make Your Mark” “Make Your Mark” is a nationwide social-educational initiative of “Kyivstar” under the global programme Make Your Mark, implemented by the international VimpelCom group. Aim of the project: supporting talented pupils, programming students, start-uppers, and young entrepreneurs. In Ukraine, the initiative supports pupils with the best results in exact sciences — natural sciences, technologies (including informational, engineering, robotics, and mathematics).
Make Your Mark: achievement of 2015-2016
3 25
summer schools
22
academic lessons
22 academic school competitions
5 of them international Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Geography of academic competitions and victories Kyiv
Hakaton INT20H A forum for students of technical universities, organized in cooperation with the international student organization BEST (Board of European Students of Technology) under NTUU «KPI» KSE Brainchamp An academic student competition in business and finance economy, conducted alongside Kyiv School of Economics
Lviv
IT-Eureca A contest of innovative start-up projects for students of IT specialities Graduation at Minor Academy of Sciences in Ukraine Rewards for graduates during the graduation ceremony
Kyiv
Vinnytsia
All-Ukrainian academic competition in radio engineering (VSORT-2016) Competition among the students of higher educational institutions of Ukraine with a set of theoretical tasks and contest of practical developments in radio engineering
Lviv Vinnytsia
Odessa
Cherkasy
Intellectual marathon A natural and mathematical sciences festival for pupils of 5-6 forms
Dnipro
Odessa
Richelieu regatta An academic contest in natural and mathematical subjects between the pupils of 9-11 forms from Odesa, Kyiv, Kharkiv, Lviv and Kherson
Zaporizhzhia
All-Ukrainian competition of scientific works A competition between the student teams of technical specialities “Telecommunication systems and networks” and “Information networks”
Dnipro
Summer IT school An educational program under the project “IT education of teachers and gifted children of Dnipro”
Zaporizhzhia
All-Ukrainian academic competition in mathematics A mathematical contest between the pupils of 8-11 forms from different parts of Ukraine
Cherkasy
All-Ukrainian academic competition in informational technologies A competition between the pupils of 8-11 forms. Real-life events and situations were used to create the tasks for it.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Support of educational projects and contests in Ukraine Development of education and science in Ukraine is one of the strategic directions of Kyivstar’s activities. It does not revolve around the support of talented youth and modernizing the material and technical base of schools only, but includes participation in events for teachers and educationalists. “ Graduates to lyceum pupils” A project for the development of long-distance education at Richelieu Lyceum that was organized in the form of online video lecture of successful graduates of this educational institution. Kyivstar has provided a modern interactive board for presentations to the teachers and lyceum pupils. Odessa
European student engineering contest EBEC-2016 A competition for searching and implementing unordinary engineering ideas and developing new inventions. By joining likeminded people, EBEC helps the participants to exchange experience and innovative views. Zaporizhzhia
Transparency index
Educational strategy
All-Ukrainian academic student competition in programming This stage of competition is part of the International Academic Student Competition in programming according to ACMICPC (Association for Computing Machinery/International Collegiate Programming Contest). Odessa
Mini-EdCamp conference An event for educationalists in the form of a training camp, organized in order to exchange experience between pedagogical communities of the region. Odessa
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Participation in international contests International conference in exact sciences XX republican competition between pupils, where research works in astronomy, biology, informatics, mathematics, physics, and chemistry were presented. Our achievements — 7 participants have won 6 prize awards. Minsk, Belarus
Transparency index
Educational strategy
I nternational academic competition “Romanian Master of Mathematics” A mathematical competition between the pupils from all over the world. Our achievements — 2 silver and 3 bronze awards. Bucharest, Romania
“Make Your Mark” Geography of acaProject demic competitions
European academic competition in mathematics for girls Girls from 8-11 forms of European educational institutions take part in the competition. Our achievements — gold, silver and bronze medals. Ukraine has occupied the sixth place in the team placing. Bușteni, Romania
Scribing festival
Programs for students
Kyivstar Business Hub
56th International academic competition in mathematics A mathematical competition between pupils from different countries of the world. Our achievements — 2 gold, 3 silver and one bronze medal; 11th place in the general team placing and first — between the teams of European countries. Chiang Mai, Thailand
Projects for start-ups
7th International 5 mathematical Olympiad The competition is organized between the middle and senior students. Our achievements — six Ukrainian representatives have won 2 silver and 4 bronze medals
Support of young specialists
Hong Kong, China
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Adoption of modern technologies in the educational process In 2015, Kyivstar alongside educational experts initiated the first All-Ukrainian festival of scribing shorts “Mobile Internet Generation”. The second scribing festival took place next year. 139 people from all of Ukraine took part in it.
SCRIBING is a new trendy technique of presentation that allows visualizing the main content of the text with the help of quick drawing in an unusual and creative way.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Scribing festival 2015
2016
107
139
participants
participants
9
22
regions
regions
350
minutes of video about possibilities that 3G technology opens for people
Transparency index
Educational strategy
“Make Your Mark� Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Investments into Ukraine’s IT future: programs for students Big Data School educational program from Kyivstar The project helps to teach talented programmers and analysts to work with innovative technologies. In 2016, 27 students out of 850 were chosen for the Big Data School. They familiarized themselves with the tools for processing big databases and showed their skills in working with real-life cases. After graduation, 3 students were offered to work at Kyivstar. Kyivstar sponsors the INT20H hackathon for students of technical educational institutions The company’s experts were mentors during the event, organized by the international student organization BEST (Board of European Students of Technology) under NTUU «KPI». Thanks to Kyivstar, the participants of the hackathon learned how to build algorithms for determining the age of users and filtering spam-messages in SMS.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Kyivstar Business Hub is platform for development of entrepreneurship and technological skills of youth
Based on this project for young entrepreneurs, Kyivstar organizes meetings with the leaders of public opinion in the economy and social sciences.
2015-2016 рр. Kyivstar Business Hub
10 meetings with experts of 4
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
international level 714 young entrepreneurs have attended business seminars Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
A business seminar of Bronwyn Hall, Honorary Professor of Economy at the University of California in Berkeley, Professor of Economy of Technologies and Innovations at Maastricht University (the Netherlands). The guest has shared her knowledge on how to make innovations profitable.
A lecture from Anousheh Ansari, Co-founder and Executive Director of Prodea Systems, as well as the first woman among space tourists. The guest shared her own experience on how to gain education in another country, achieve big success in business and make one’s dream come true.
A seminar of Mikael E. Björling, Expert in Consumer Behaviour at Ericsson. During the event, he shared his knowledge on how innovative communications determine the successful strategy of development and behaviour tactics in the market.
A meeting with Newton M. Campos and Joseph Kurt, Doctors of Philosophy, Professors of Entrepreneurship and Business Analytics at IE. The lecturers spoke on how to increase the productivity of business by using the available resources and social networks, and on the possibilities of researching big data.
June
October
November
2015 April
The most interesting meetings at Kyivstar Business Hub February A meeting with experts, who have experience in implementing business decisions based on Big Data. Among the participants were Serhii Maryn, Data Science department of VimpelCom, and Pau Agulló, Co-founder and Managing Director of Kernel Analytics. The guests have given practical advices concerning the adoption of leading analytical tools in working with databases.
Transparency index
Educational strategy
April
June
A speech from the IE Business School Professor Jose Estevez, who specializes in informational systems. He spoke on how to manage digital transformation and which skills of effective management should be developed by business leaders.
A lecture from Joao Perre Viana on the new ways of running a business. The meeting continued in the form of a business discussion of the guest with Andrew Chakhoyan (VimpelCom), Doctor Soeren Grabowski (AT Kearney), Vitalii Sultan (Kyivstar), and Denys Dovhopolyi (GrowthUp group).
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
October Start-ups VS Corporate business was one of the most topical meetings at Kyivstar Business Hub. More than 480 listeners participated in it. Speakers: Ruben Nieuwenhuis, entrepreneur, Director of Startup Amsterdam, and Paris de l’Etraz, Managing Director of Venture Lab, Professor of the IE Business School
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
2016
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Programs for young entrepreneurs and start-ups Telecom accelerator VDNH-TECh — a competition program supported by Kyivstar and oriented towards the search and development of innovative technologies and developments in telecommunications and connection fields.
For participants, the telecom accelerator included: • a training program for the development of technological business • mentor support from Kyivstar experts • consultations of domestic and international experts in telecommunications and business • possibility to launch the project commercial under Kyivstar’s support
39
119
teams from Kyiv, Lviv, Odesa, Dnipro, and other cities
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
teams reached semi-finals
Kyivstar Business Hub
Projects for start-ups
4
Support of young specialists
finalists cooperate with the telecommunications operator
Sports sponsorship
Telecom charity
Київстар.Corporate Kyivstar. Корпоративний report звіт
Finalist projects of the 2016 telecom accelerator GRAVITEC, a cloud multichannel intellectual service of push notifications for effective user returns to the website. In cooperation with Kyivstar, the service developers have launched the WebPush business service that allows to gather a client base, segment users, send dispatches, do analytics etc. INCUST, a cardless loyalty program for turnkey business in 15 minutes. InCust unites several functions: phone number usage instead of a plastic card, access to unified communicative space for the client, instant start even on the smartphone. VIRBOX, a platform for travels in the form of virtual reality. Besides VR360 content, the developers also release the Teleport station — unique carton sets to plunge into the virtual reality comfortably. Virbox and Kyivstar have created 22 panoramas of the cities and other picturesque places of Ukraine, where you can travel through Kyivstar Reality application.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
NRAVOKIDS Ukrainian social project got to the finals hors concours — developing mobile, active games for children of pre-school age, aimed at helping them to perceive the world. The project is designed by domestic programmers. One more advantage of NRAVOKIDS is that the games are fit for Ukrainian children both thematically and mentally.
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
We create innovative solutions of the future today! Kyivstar supports new ideas through Eurasia Mobile Challenge
1000 participation applications from the representatives of Armenia, Georgia, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.
88
EURASIA MOBILE CHALLENGE is an international initiative of VimpelCom group. The aim of the project is to unite young entrepreneurs of Europe and Asia to develop modern solutions in mobile technologies. The main prize is $20 000 for the development of own project and for the opportunity to present the project at the Mobile World Congress 2017. In 2016, the competition of innovative projects, supported by Kyivstar, took place in Ukraine for the first time.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
of them are from Ukrainian entrepreneurs
24
teams have gotten to the finals of the competition
The history of VimpelCom (Kyivstar is part of it) began from a start-up. Today this company is one of the leading providers of telecommunication services for more than 200 million users. Supporting fresh ideas is part of Kyivstar’s DNA.
3
of them are domestic projects
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Ukrainian projectsfinalists of Eurasia Mobile Challenge • P HOTOFACT, a service that converts photos into a reporting document, protected from forgery. • ONLINE LOST & FOUND LUCKFIND.ME, a lost property search service. • INCUST, a system that allows to link customers to a discount club with personal settings for the loyalty system. The client is identified by mobile phone number. The information on the accrued bonuses and promotions is sent via SMS. Earlier inCust became the graduate of the first corporative telecom accelerator VDNH-TECh, supported by Kyivstar, and obtained an opportunity to launch its solution commercially on the basis of the national telecommunications operator.
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar is a company that is open to young specialists In March 2016, Kyivstar has signed the “Pact for Youth”, thus supporting the European initiative in preventing unemployment among young specialists. Until 2020, all the signers of the pact (major Ukrainian and international companies from different market spheres) pledge to give:
For several years now, Kyivstar keeps the status of one of the best employers of Ukraine
Transparency index
Educational strategy
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
100
partnerships between the business and educational sectors
Projects for start-ups
Support of young specialists
10 000
places for apprenticeship and first employment of young people
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
Mobile connection and sport, a charitable project supported by Kyivstar In 2016, 172 Ukrainian Paralympic sportsmen came to Rio de Janeiro. This was the biggest national team over the years. The team won a record of 117 medals for the country and occupied the third place in the overall medal score. Kyivstar helped to share the joy of victories with friends and relatives.
2016
172
sportsmen
117
medals
The Ukrainian team that took part in the Paralympic Games of 2016 was given the opportunity of free communication with their Brazilian colleagues as well as with relatives and close friends from Ukraine and abroad. In addition, Kyivstar has reduced the prices for roaming services for all its subscribers in Brazil during the period of the Olympic and Paralympic competitions. Transparency index
Educational strategy
“Make Your Mark� Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Kyivstar. Corporate report
The platform “Charitable telecommunication message” will ensure full transparency of collecting the funds, thus raising trust to charity in Ukraine
Social charitable projects Kyivstar is one of the founders of telecom charity in Ukraine
• K yivstar in cooperation with other telecommunication operators has signed the Memorandum on Assisting in the Development and Introduction of the All-Ukrainian Platform “Charitable telecommunication message”.
Transparency index
Educational strategy
• T he platform will become a public place for collecting charitable donations — via SMS and voice messages. It will also include a cooperation mechanism for all the stakeholders: telecommunication operators, charitable and public organizations, and people that make donations.
“Make Your Mark” Geography of acaProject demic competitions
Scribing festival
Programs for students
Kyivstar Business Hub
• A s the signer of the Memorandum, Kyivstar takes part in the development of regulation, necessary to implement telecom charity in Ukraine and free this service from all the taxes
Projects for start-ups
Support of young specialists
Sports sponsorship
Telecom charity
Joint Stock Company Kyivstar Consolidated Financial Statements as of December 31, 2015 (short version)
Full version of 2015 consolidated financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2015 (in thousands of Ukrainian Hryvnia, except for earnings per share) Notes
2015
2014
Notes
2015
2014
Revenues
8
14 925 358
12 986 795
Other comprehensive income not to be reclassified to profit and loss in subsequent periods:
Cost of materials, traffic charges and other direct costs
8
(3 347 186)
(3 706 888)
Re-measurement gains on defined benefit plans, net of tax
-
-
Salaries and personnel costs
8
(1 048 332)
(1 014 979)
Other operating expenses
8
(4 301 381)
(3 518 914)
Other comprehensive income for the period, net of tax
-
-
12 864
21 477
2 572 679
2 168 375
196,46
165,58
Other income Other expenses
8
(103 519)
(130 316)
Depreciation and amortisation
8
(1 736 461)
(1 765 668)
Impairment losses
8
(454 470)
(178 819)
3 946 873
2 692 688
Finance income
8
206 591
148 244
Finance costs
8
(162 896)
(22 743)
(536 112)
(134 211)
3 454 456
2 683 978
(881 777)
(515 603)
2 572 679
2 168 375
Foreign exchange gain/loss, net Profit before tax Income tax expense
Profit for the year
9
Total comprehensive income for the year, net of tax Earnings per share, UAH
29
Signed and authorised for release on behalf of management of Joint Stock Company Kyivstar on 15 April 2016: President Chief Financial Officer
Peter Chernyshov Gabor Kocsis
Chief Accountant
Olena Ksenich
CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2015 (in thousands of Ukrainian Hryvnia) Notes
2015
2014
Notes
ASSETS
Cash and cash equivalents
Non-current assets
Other current financial assets
Property, plant and equipment
10
7 900 146
6 885 017
Intangible assets
11
4 369 077
1 236 919
Other non-current assets
12
372 850
11 173
Prepaid income tax
9
404 795
1 314 086
Deferred expenses non-current
15
53 113
36 484
Deferred tax asset
9
-
254 782
13 099 981
9 738 461
48 952
37 257
Current assets Inventories Trade and other receivables
13
1 119 708
995 943
Prepaid income tax
9
799 974
314 832
1 695
69 685
64 590
54 339
70 047
78 644
Prepaid taxes, other than income tax Prepayments Deferred expenses
15
Assets of disposal group classified as held for sale
TOTAL ASSETS
16
2015
2014
1 672 125
1 827 399
1 201
75 273
3 778 292
3 453 372
997
487
3 779 289
3 453 859
16 879 270
13 192 320
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) As at 31 December 2015 (in thousands of Ukrainian Hryvnia) Notes
2015
2014
Notes
EQUITY AND LIABILITIES
Current liabilities
Equity
Employee benefit liability
Share capital
17
1 009 249
1 009 249
Share premium
17
102 338
Additional capital
17
2015
2014
1 566
3 596
Deferred revenue
19
690 793
666 908
102 338
Provisions
20
83 760
29 823
155 956
155 956
21
244 354
285 151
Retained earnings
9 732 663
7 160 446
Taxes payable, other than income tax
Treasury shares
(370 398)
(370 398)
Trade and other payables
22
1 702 290
2 213 285
10 629 808
8 057 591
Dividends payable
17
549 966
549 966
Loans payables
18
2 277 663
288 722
Interest accrued
18
36 675
106 993
Advances received
23
229 358
201 126
Other current liabilities
24
245 060
229 918
6 061 485
4 575 488
16 879 270
13 192 320
Non-current liabilities Employee benefit liability
7 373
20 173
Provisions
20
18 366
24 872
Loans payables
18
-
394 269
Deferred revenue non-current
19
140 688
119 927
Deferred tax liabilities
9
21 550 187 977
TOTAL EQUITY AND LIABILITIES 559 241
CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2015 (in thousands of Ukrainian Hryvnia)
Notes
Operating activities Profit before tax Non-cash adjustments to reconcile profit before tax to net cash flows: Depreciation of property, plant and equipment Impairment of property, plant and equipment and intangible assets Amortisation of intangible assets Loss on disposal of property, plant and equipment, intangible assets and assets of disposal group classified as held for sale Interest income Interest expense Other finance costs Impairment loss from other financial assets Movements in provisions and employee benefit liability Unrealised foreign exchange loss Share-based payment transaction expense Working capital adjustments: Decrease/(increase) in inventories
2015
2014
3 454 456
2 683 978
8
1 342 587
1 530 327
8
454 470
178 819
8
393 875
235 342
8
24 920
115 891
8 8 8
(206 591) 130 219 32 676
(148 244) 11 882 10 861
18 730 20 205
(5 061)
536 112
135 691
(50) (11 695)
(1 839)
Notes
Decrease /(increase) in trade and other receivables, prepayments and other assets Decrease/(increase) in deferred expenses Increase/(decrease) in trade and other payables, other current assets and taxes payable, other than income tax Increase in deferred revenue Increase in advances received Increase/(decrease) in other current liabilities Interest received Interest paid Income tax paid Net cash flows from operating activities
2015
2014
286 019
(343 992)
(8 032)
9 025
(1 418 850)
900 155
44 646 28 225
6 677 26 341
14 681
(37 076)
5 136 603 205 560 (243 500) (164 065)
5 308 777 144 137 (4 257) (933 547)
4 934 598
4 515 110
CONSOLIDATED STATEMENT OF CASH FLOWS (continued) For the year ended 31 December 2015 (in thousands of Ukrainian Hryvnia) Notes
2015
2014
Notes
Investing activities Purchase of property, plant and equipment
(2 585 396)
(1 241 546)
Purchase of intangible assets
(3 776 141)
(210 856)
Proceeds from sale of property, plant and equipment and assets of disposal group classified as held for sale
26 687
Cash received as a result of LLC “Golden Telecom” acquisition Other outflows Net cash flows used in investing activities
19 135
-
84 252
55 472
(46 077)
(6 279 378)
(1 395 092)
Financing activities Dividends paid to equity holders of the parent
-
(1 939 947)
Other outflows
-
(20)
Proceeds from loans and borrowings
2 139 368
-
2015
2014
Repayment of loans and borrowings
(984 523)
-
Net cash inflow/(outflow) from financing activities
1 154 845
(1 939 967)
Net (decrease)/increase in cash and cash equivalents
(189 935)
1 180 051
34 661
6 388
Net foreign exchange difference Cash and cash equivalents as at 1 January
16
1 827 399
640 960
Cash and cash equivalents as at 31 December
16
1 672 125
1 827 399
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 (in thousands of Ukrainian Hryvnia) Attributable to the equity holders of the parent Share capital (Note 17)
Balance as at 01 January 2014 Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Dividends declared Contribution from shareholders Other changes Balance as at 31 December 2014 Profit for the year Other comprehensive income Total comprehensive income for the year, net of tax Dividends declared (Note 17) Contribution from shareholders Other changes
Balance as at 31 December 2015
1 009 249 1 009 249 1 009 249
Share premium (Note 17)
Additional capital
Retained earnings
Treasury shares
Total equity
102 338
132 682
7 824 466
(370 398)
8 698 337
-
23 274 -
2 168 376 2 168 376 (2 489 933) (342 463)
-
2 168 376 2 168 376 (2 489 933) 23 274 (342 463)
102 338
155 956
7 160 446
(370 398)
8 057 591
-
-
2 572 679 2 572 679 (461)
-
2 572 679 2 572 679 (461)
102 338
155 956
9 732 664
(370 398)
10 629 809
1. Corporate information Joint Stock Company Kyivstar (hereinafter referred to as “Kyivstar” or the “Company”) was established and registered on 3 September 1997 under the laws of Ukraine. The Company is involved in the design, construction and operating of a dedicated cellular telecommunication network and provides a wide range of mobile communication and home internet services in Ukraine. The Company’s registered legal address is at 51, Chervonozoryanyy Av., Kyiv, 03110, Ukraine. The Company’s head office and principal place of business is at 53, Degtyarivska St., Kyiv, 03113, Ukraine. The Company has Main office in Kiev and Processing Center in Lviv. As at 31 December 2015 and 2014 the Company’s direct shareholders and their respective declared interests were as follows: Interest
VimpelCom Holdings B.V. (Netherlands) VimpelCom Ltd. (Bermuda) Treasury shares
Number of shares
73,804%
13 094 562
0,004%
700
26,192%
4 647 127
100,000%
17 742 389
As at 31 December 2015 the Company had two wholly owned subsidiaries – Limited Liability Company Staravto and Limited Liability Company StarMoney. The Company and its subsidiaries are hereinafter together referred to as the “Group”. On 21 August 2014 the Company bought Limited Liability Company “Golden Telecom”. From November 2014 the legal accession of LLC “Golden Telecom” was started and finished in 2015. As at the end of 2015 the Limited Liability Company “Golden Telecom” does not exist. On 19 August 2015 Kyivstar established the wholly owned subsidiary Starmoney Limited Liability Company. The Company’s ultimate parent is VimpelCom Ltd., a company headquartered in Amsterdam, the Netherlands.
2. Operating environment, risks, political and economic conditions in Ukraine The recent political and economic instability in Ukraine has continued in 2015 and has led to a deterioration of State finances, volatility of financial markets, illiquidity on capital markets, higher inflation and a depreciation of the national currency against major foreign currencies. In March 2014 various events in Crimea led to the accession of the Republic of Crimea to the Russian Federation. Further, in 2014 armed separatist forces obtained control over parts of the Donetsk and Lugansk regions in eastern Ukraine. The relationships between Ukraine and the Russian Federation worsened and remained strained. In 2014 the Group lost control over its property, plant and equipment located in Crimea and these assets were fully impaired in 2014. The amount of impairment was UAH 156,965 thousand. In 2015 the Group ceased providing services in the parts of the Donetsk and Lugansk regions which are not controlled by Ukrainian government and as at reporting date recognised UAH 199,143 thousand of impairment of its property, plant and equipment located in these areas. As at reporting date impaired assets in Donetsk and Lugansk regions represented approximately 3% of the Group’s property, plant and equipment. On 1 January 2016, the agreement on the free trade area between Ukraine and the EU came into force. The Russian government
reacted to this event by implementing a trading embargo on many key Ukrainian export products. In response, the Ukrainian government implemented similar measures against Russian products. As at the date of this report the official exchange rate of Hryvnia against US dollar was UAH 25,44 per USD 1, compared to UAH 24.00 per USD 1 as at 31 December 2015 (31 December 2014: UAH 15.77 per USD 1). To constrain further devaluation of Hryvnia the National Bank of Ukraine has imposed a number of restrictions on operations with foreign currency including: a temporary ban on payment of dividends in foreign currency; a temporary ban on early repayment of debts to non-residents; mandatory sale of 75% of revenue in foreign currency and other restrictions on cash and non-cash operations. The central bank of Ukraine prolonged these restrictions several times during 2015 and the current restrictions are effective until 8 June 2016. Devaluation of the national currency created pressure on consumer price index. The official inflation rate in Ukraine for 2015 reached 43.3%. On 11 March 2015 the IMF Executive Board approved a four-year Extended Fund Facility (“EFF�) programme for Ukraine exceeding
USD 17 billion. During 2015 Ukraine obtained first and second tranches in accordance with the programme in the amount of USD 5 billion and USD 1.7 billion, respectively. In October 2015, Ukraine reached an agreement with the majority of its creditors for restructuring of part of the national external debt in the amount of USD 15 billion. The restructuring pushes out maturities of restructured debt to 2019-2027, fixing annual interest rate at the level of 7.75% and includes exchange of 20% of the debt into GDP warrants at par value of USD 2.9 billion. There remains a significant portion of debt for which a restructuring has not been agreed to. After reaching the above restructuring agreement on external debt with the majority of its creditors, the credit rating of Ukraine has improved. Further disbursements of IMF tranches depend on the implementation of Ukrainian government reforms, and other economic, legal and political factors. The banking system is fragile due to its: weak level of capital; its weakening asset quality caused by the economic situation; currency depreciation; and other factors. As at 31 December 2015, the Company had significant prepayment made to the State, represented by prepaid income taxes. The timing of settlement of the balance is uncertain and is dependent upon amounts of future taxable profits of the Company.
The final resolution and the ongoing effects of the political and economic situation are difficult to predict but they may have further severe effects on the Ukrainian economy and the Company’s business.
3. Revenues and expenses Revenues
Cost of materials, traffic charges and other direct costs 2015
2014
2015
Interconnection
4 630 946
3 506 680
Interconnection
Periodic fees
4 073 483
3 383 392
Air time charges
3 073 121
Value added services
2014
2 862 218
3 084 600
Cost of materials and services
263 047
324 571
3 313 541
Roaming
147 197
88 786
1 477 099
1 363 931
Leased line costs
38 051
64 850
FTTB internet
524 031
442 961
Access to network
36 673
144 081
Fixed lines
400 861
227 607
Roaming (subscribers)
331 179
295 177
3 347 186
3 706 888
Roaming and access to network
199 410
252 947
64 586
89 890
5 096
7 334
145 546
103 335
14 925 358
12 986 795
Connection and one-time subscription fees Customer equipment sales Other revenue
Salaries and personnel costs 2015
2014
Salaries, holiday pay and other employee benefits
823 031
765 714
Social security taxes
208 300
214 576
16 500
34 244
501
445
1 048 332
1 014 979
Medical insurance Training
The average number of employees of the Group (incl. contactors) in 2015 was 3,400 (2014: 3,968).
3. Revenues and expenses (continued) Other operating expenses
Other expenses 2015
2014
Repair and maintenance
1 134 676
931 958
Local taxes and VAT
1 024 061
778 327
534 986
467 911
Marketing and sales commission
2015
Foreign transaction loss
55 864
-
Loss on disposal of property, plant and equipment, intangible assets and assets of disposal group classified as held for sale
24 919
115 891
Impairment loss from other financial assets
18 730
-
Contributions and donations
1 945
3 100
1 234
11 325
827
-
103 519
130 316
Operating leases of building, land and equipment
487 725
422 717
Electricity
373 698
303 642
Litigation accrual
Advertising
262 235
283 388
Other expenses
Consultancy fees and external personnel
245 853
145 993
Bad debts
70 743
44 002
License and research fees
29 910
24 958
Materials and supplies
27 980
29 281
Insurance
27 611
20 896
Business trip expenses
22 511
21 457
Postage, freight, distribution and telecommunication
7 544
7 178
Bank charges
5 135
2 010
46 713
35 196
4 301 381
3 518 914
Other operating expenses
2014
3. Revenues and expenses (continued) Amortisation, depreciation and impairment losses Details of amortisation, depreciation and impairment losses are as follows: Finance income Property, plant and equipment
Property, plant and equipment
Intangible assets
Intangible assets
2015
2014
2015
2014
Depreciation and amortisation
1 342 587
1 530 326
393 874
235 342
Impairment losses
454 470
178 819
-
-
1 797 057
1 709 145
393 874
235 342
2015 рік
Interest income
In addition, in 2015 the Group recognized reversal of impairment losses in respect of network equipment in the amount of UAH 21,428 thousand (2014: UAH 6,551 thousand) as a result of changes in plans for future usage of previously impaired network equipment in accordance with adjusted capital expenditure budgets.
206 591
148 244
206 591
148 244
Finance costs 2015 рік
Interest expense
In 2015 the Group recognized impairment losses on property, plant and equipment in the amount of UAH 475,898 thousand (2014: UAH 185,370 thousand), based on internal indications of impairment for various individual components of network equipment, as the Group did not plan to use this equipment in future. Assets identified as no longer in use were written down to their recoverable amounts, which were based on value in use determined for individual assets, usually zero.
2014 рік
Other finance costs
2014 рік
130 220
11 882
32 676
10 861
162 896
22 743
4. Income tax The Group’s income is subject to taxation in Ukraine only. The major components of income tax expense for the years ended 31 December are: 2015
2014
Current income tax: Current income tax charge
605 445
568 873
Increase in deferred tax liability due to decision to write-off fixed assets, which are not fully amortised in tax accounts, in the course of the network modernisation
276 332
(63 863)
Recognition of deferred tax asset due to indexation of fixed assets value in tax accounts
-
10 593
881 777
515 603
Deferred tax: Relating to origination and reversal of temporary differences Deferred tax related to differences with origination in GT
Reconciliations between tax expense and the product of accounting profit multiplied by the tax rate for the years ended 31 December are as follows: 2015
2014
3 454 456
2 683 978
621 802
483 116
Deferred tax related to differences with origination in GT
-
10 593
Non - taxable income for tax purposes
-
(1 555)
118 579
75 631
Accounting profit before tax Income tax at actual rate (18%)
Non - deductible expenses for tax purposes
2015
2014
259 740
-
(156 060)
-
Change in estimates of deferred tax asset on losses carried forward
56 063
(58 916)
Other changes (reassessment of temporary differences, effect of changes in tax rules and tax rates)
(18 347)
6 734
881 777
515 603
Deferred tax assets and liabilities relate to the following items in 2015: 31 December 2015
Recognized in profit and loss
31 December 2015
31 December 2014
136 338
Deferred tax liabilities: 100 351
100 351
-
-
(14 193)
14 193
1 474
1 474
-
-
(17)
17
101 825
87 615
14 210
-
(3 058)
3 058
Intangible assets (i)
25 025
24 600
425
Other current liabilities (ii)
33 977
6 261
27 716
3 657
3 657
-
Property plant and equipment (i) Deferred expenses (ii) Trade and other payables (ii) Prepayments (ii)
Deferred tax assets: Property plant and equipment (i)
Deferred expenses (ii) Employee benefit liability (ii)
1 604
1 604
-
Advances received and deferred revenue (ii)
11 626
(36 938)
48 564
Inventories (ii)
-
(216)
216
Trade and other payables (ii)
-
(76 028)
76 028
Provisions (ii)
3 306
(1 171)
4 477
Taxes payable other than income tax (ii)
1 080
519
561
Interest-bearing loans and borrowings – NC (ii)
-
(528)
528
Accumulated tax losses (iii)
56 063
(51 356)
107 419
Provision for deferred tax asset Net deferred tax asset/(liability)
(56 063) (21 550)
Recognized in profit and loss
31 December 2014
(132 654) (56 063) (276 332)
268 992 254 782
4. Income tax (continued) Deferred tax assets and liabilities relate to the following items in 2014: 31 December 2014
Recognized in profit and loss
Recognized in profit and loss with origination in GT (vi)
31 December 2013
31 December 2014
Deferred tax liabilities: -
(8 300)
-
8 300
Intangible assets (i)
-
(689)
-
689
14 193
(2 315)
4 381
12 127
Prepayments (ii)
17
17
-
-
Trade and other receivables (ii)
-
(1 462)
-
1 462
14 210
(12 749)
4 381
22 578
Deferred expenses (ii)
-
3 246
76 028
37 168
(440)
39 300
4 477
(3 529)
-
8 006
Taxes payable other than income tax (ii)
561
561
-
-
Interest-bearing loans and borrowings – NC (ii)
528
528
-
-
Accumulated tax losses (iii)
107 419
7 561
-
99 858
268 992
51 114
(6 212)
224 090
254 782
63 863
(10 593)
201 512
Trade and other payables (ii) Provisions (ii)
Net deferred tax asset 3 058
6 426
(3 368)
-
Intangible assets (i)
425
8 735
(8 310)
-
27 716
(5 370)
-
33 086
Employee benefit liability (ii)
-
(3 792)
-
3 792
Prepayments (ii)
-
(191)
-
191
48 564
6 047
5 906
36 611
Other current liabilities (ii)
Advances received and deferred revenue (ii)
31 December 2013
(3 030)
Deferred tax assets: Property plant and equipment (i)
Recognized in profit and loss with origination in GT (vi)
216
Inventories (ii)
Property plant and equipment (i)
Recognized in profit and loss
The nature of the temporary differences is as follows: (i) Property, plant and equipment and intangible assets – differences in depreciation and amortisation patterns and estimates of the remaining useful lives, differences in capitalisation principles; (ii) Advances received and deferred revenue, deferred expenses, employee benefit liability, inventories, trade and other payables, provisions, taxes payable, other than income tax – differences in period of recognition, differences in measurement and recognition principles; (iii) (iii) In 2013 the Company recognized deferred tax assets of UAH 175,338 thousand on accumulated tax losses inherited from JSC «Ukrainian RadioSystems» (“URS”), UAH 75,480 thousand of which were utilised within 2013, and UAH 102,712 thousand of which were utilised within 2014-2015. In 2014 the Company recognized deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from LLC «Golden Telecom» (“GT”). In 2015 the Company recognized provision for deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from LLC «Golden Telecom» (“GT”). Prepaid income tax in the amount of UAH 404,795 thousand is not expected to be utilised within the next twelve months and was classified as a non-current asset as at 31 December 2015 (2014: UAH 1,314,086 thousand).
All taxable and deductible differences will be realised in the next accounting period, except for those arising on property plant and equipment, intangible assets and non-current portion of deferred revenue and expense.
5. Equity Share capital and share premium As at 31 December 2015 the authorised and fully paid share capital comprised 17,742,389 ordinary shares (2014: 17,742,389 ordinary shares) at a par value of UAH 50 each. The carrying value of share capital differs from par by UAH 122,130 thousand being the currency translation difference, accumulated till 1 May 2004 when the Company changed its functional currency from US dollar to Ukrainian Hryvnia. Dividends declared In 2015, the Company has not declared any dividends. In 2014, the Company has declared dividends in the amount of UAH 2,489,933 thousand (UAH 190.14 per share). As at 31 December 2014, according to the decision №758 from 1 December 2014, the National Bank of Ukraine (the “NBU”) extended restrictions on payment of dividends in foreign currency; as at 31 December 2014 the total sum of unpaid dividends is UAH 549,966 thousand. As at 31 December 2015, according to the decision № 863 from 4 December 2015, the NBU extended restrictions on payment of dividends in foreign currency; as at 31 December 2015 the total sum of unpaid dividends is UAH 549,966 thousand.
6. Taxes payable, other than income tax Taxes payable, other than income tax consist of the following as at 31 December: 2015
VAT payable Pension fund duty for mobile services Unified social security contribution payable Miscellaneous other taxes Frequency fee
2014
211 244
209 586
25 702
29 019
6 899
-
509
146
-
46 400
244 354
285 151
7. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share for the years ended 31 December are as follows: 2015
Net profit attributable to ordinary equity holders of the parent for basic earnings, UAH thousand Weighted average number of ordinary shares for basic earnings per share Basic earnings per share, UAH
2014
2 572 679
2 168 375
13 095 262
13 095 262
196,46
165,58
Joint Stock Company Kyivstar Consolidated Financial Statements 2016 As at 31 December 2016 (short version)
Full version of 2016 consolidated financial statements
Independent Auditor’s Report To the Shareholders and Management Board of Private Joint Stock Company Kyivstar
Report on the audit of the financial statements (i) Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of PrJSC Kyivstar (the “Company”) as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (the “IFRS”). (1) What we have audited The Company’s financial statements comprise: • • • • •
the statement of financial position as at 31 December 2016; the statement of comprehensive income for the year then ended; the statement of cash flows for the year then ended; the statement of shareholders’ equity for the year then ended; the notes to the financial statements, which include a summary of significant accounting policies.
(ii) Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. (2) Independence We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
(iii) a.i.3. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. (iv) a.i.4. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. April 2017 Yulia Victorivna Paranich Chief Executive Officer LLC Audit Firm “PricewaterhouseCoopers (Audit)� Certificate of Registration as an Auditing Entity No 0152 Issued on 26 January 2001 Extended to 30 July 2020 Certificate of Registration as an Auditing Entity or Auditor Eligible to Conduct Audits of Financial Institutions No 0132 issued on 27 March 2014 and extended to 30 July 2020
Yulia Victorivna Paranich Audit certificate â„– 004720 Issued on 22 June 2001
Appendix 1 to National Regulation (Standard) of Accounting 1, General Requirements for Financial Reporting
Codes Date (year, month, date)
2017
Company Private Joint Stock Company "Kyivstar"
EDRPOU
21673832
Territory Kyiv, Shevchenkivskyi district
KOATUU
8038900000
Organisational and legal form of economic activity Joint Stock Company
KOPFG
230
Type of economic activity Activities in the field of wireless telecommunications
KVED
61.20
01
01
Average number of employees 1 2,623 Address, telephone 03113, Kyiv, Degtyarivska street, 53, tel.: 247-39-49 Measurement unit: thousands of Hryvnia, no decimal point (except for Section IV of the Consolidate Statement of Financial Results (The Consolidated Statement of Comprehensive Income) (Form 2) where amounts are stated in Ukrainian hryvnias with kopecks) Prepared (tick the necessary box): according to National Regulations (Standards) of Accounting in Ukraine according to International Financial Reporting Standards
Х
Consolidated Balance Sheet (Consolidated Statement of Financial Position) as at 31 December 2016 DKUD code
Form 1
Notes
At the beginning of the reporting period
At the end of the reporting period
3
4
5
1100
48 986
50 858
production stock
1102
29 931
41 682
goods for resale
ASSETS
Line code
1
2
1801001
II. Current assets Inventories ASSETS
1
I. Non-current assets
Line code
Notes
2
3
At the end of the reporting period
4
5
4 346 899
4 043 012
1001
7 446 270
8 080 902
1002
(3 099 371)
(4 037 890)
Intangible assets
1000
historical cost amortisation
9
At the beginning of the reporting period
1104
19 055
9 176
Current biological assets
1110
-
-
Accounts receivable for goods, works and services
1125
12
1 111 292
1 357 747
Accounts receivable on settlements: on advances issued
1130
12
40 493
90 479
with the budget
1135
12
801 190
363 819
including corporate profit tax prepaid
1136
12, 28
799 997
361 466
1140
12
8 353
26 163
12
206
71
Construction-in-progress
1005
10
931 322
1 015 330
Accounts receivable for settlements on accrued income
Property, plant and equipment
1010
8
6 993 237
6 135 705
Other current accounts receivable
1155
18 585 869
19 501 069
Current financial investments
1160
-
-
Cash and cash equivalents
1165
13
1 672 125
3 419 008
14
historical cost depreciation Investment property
1011 1012
(11 592 632)
(13 365 364)
1015
-
-
Deferred expenses
1170
100 007
93 676
1190
1 376
14 037
Long-term biological assets
1020
-
-
Other current assets
Long-term financial investments: accounted for according to the equity method
1030
-
-
Total Section II
1195
3 784 028
5 415 858
III. Non-current assets held for sale and disposal groups
1200
230
10 825
BALANCE
1300
16 880 519
17 607 970
other financial investments
1035
Long-term accounts receivable
1040
12
-
-
404 795
-
Deferred tax assets
1045
28
-
302 310
Other non-current assets
1090
11
420 008
684 930
Total Section I
1095
13 096 261
12 181 287
LIABILITIES
Line code
1
2
I. Equity
Notes
At the beginning of the reporting period
At the end of the reporting period
3
4
5
15
1 009 249
1 009 249
LIABILITIES
Line code
1
2
IІІ. Current liabilities and provisions
-
1615
17
1 701 847
1 628 380
with the budget
1620
18
237 261
161 447
including liability on corporate profit tax
1621
52
1 507
-
-
Short-term bank borrowings
Additional capital
1410
258 294
258 294
1610
Share premium
1411
102 338
102 338
Current accounts payable on settlements: for long-term liabilities for goods, works, services
132 933
132 933
9 599 730
11 427 145
Unpaid capital
1425
-
-
Withdrawn capital
1430
(370 398)
(370 398)
Total Section I
1495
10 629 808
12 457 223
II. Long-term liabilities and provisions
21 524
-
1500
28
Deferred tax liabilities Retirement benefit liabilities
1505
Long-term bank borrowings
1510
-
-
Other long-term liabilities
1515
22
140 688
152 159
Long-term provisions
1520
20
18 366
57 089
-
23 190
including employee benefits
1521
8 846
6 231
Special-purpose financing
1525
-
-
Total Section II
1595
189 424
215 479
5
991 228
1405
1415
4
16
Revaluation reserve
1420
3
-
1400
Retained earnings (accumulated deficit)
At the end of the reporting period
-
Registered (share) capital
Reserve capital
Notes
At the beginning of the reporting period
1600
for insurance
1625
-
-
on payroll
1630
321
372
on advances received
1635
19
522 915
544 440
with shareholders
1640
15
549 966
1 531 735
Current provisions
1660
20
86 108
352 777
Deferred income
1665
22
354 744
417 648
Other current liabilities
1690
16, 21
1 616 897
298 469
Total Section IІІ
1695
6 061 287
4 935 268
IV. Liabilities associated with non-current assets held for sale and disposal groups
1700
-
-
BALANCE
1900
16 880 519
17 607 970
President Peter Chernyshov Chief Accountant
Olena Ksenich
Codes Company Private Joint Stock Company "Kyivstar" (name)
Date (year, month, date)
2017
EDRPOU
21673832
01
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
01 Financial results from operating activities:
2190
4 229 348
4 433 991
2195
-
-
Profit
Consolidated Statement of Financial Results (Consolidated Statement of Comprehensive Income) for the year ended 31 December 2016 DKUD code
Form 2
Loss
1801003
І. Financial results
Income from participation in equity
2200
Other financial income
2220
Other income
2240
Financial expenses
2250
Losses from participation in equity
2255
Other expenses
2270
Financial results before taxation:
2290
1
Line code
Notes
For the reporting period
2
3
4
For the similar period of the prior year 5
206 591
26 302
6 390
26
(18 454)
(162 896)
-
-
27
(337 454)
(1 029 620)
4 225 102
3 454 456
-
-
(815 589)
(881 777)
-
-
3 409 513
2 572 679
2000
23
15 753 027
14 925 358
-
-
Cost of sales of goods, works and services
2050
24
(8 658 447)
(7 927 329)
7 094 580
6 998 029
Profit
2090
Loss
2095
-
-
Other operating income
2120
97 730
3 312
Administrative expenses
2130
24
(1 271 998)
(1 077 082)
Selling expenses
2150
24
(1 316 755)
(1 327 902)
Other operating expenses
2180
24
(374 209)
(162 366)
2295
Income tax expense
2300
Profit (loss) from discontinued operations after tax
2305
Net financial result:
Net revenue from sales of goods, works and services
Gross:
-
325 360
Profit Loss
Item
25
Profit
2350
Loss
2355
28
II. Comprehensive income
IIІ. Elements of operating expenses
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
1
2
3
4
5 3 347 186
Upward (downward) revaluation of non-current assets
2400
-
-
Upward (downward) revaluation of financial instruments
2405
-
-
Accumulated exchange differences
2410
-
-
Share of other comprehensive income of associates and joint ventures
2415
-
-
Other comprehensive income
2445
-
-
Other comprehensive income before tax
2450
-
-
Income tax arising on other comprehensive income
2455
-
-
Other comprehensive income after tax
2460
-
-
Comprehensive income (total of lines 2350, 2355 and 2460)
2465
3 409 513
2 572 679
Material expenses
2500
24
2 275 894
Payroll
2505
24
844 462
837 710
Social payments
2510
24
127 569
208 299
Depreciation/amortisation
2515
24
3 675 708
1 737 246
Other operating expenses
2520
24
4 697 776
4 364 238
Total
2550
11 621 409
10 494 679
IV. Calculation of shares profitability Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
Note: Section IV. Calculation of shares profitability is not completed, as shares of the Group are not sold or purchased on stock exchanges. Detailed information is presented in notes 16 and 33. Signed and authorised for release on behalf of management of Private Joint Stock Company Kyivstar on 10 April 2017:
Average annual number of ordinary shares
2600
-
-
Average annual number of ordinary shares, adjusted
2605
-
-
Net profit (loss) per share
2610
-
-
President
Net profit (loss) per share, adjusted
2615
-
-
Dividends per share
2650
-
-
Peter Chernyshov
Chief Accountant Olena Ksenich
Codes Company Private Joint Stock Company "Kyivstar" (name)
Date (year, month, date) EDRPOU
2017
01
01
21673832
Consolidated Statement of Cash Flows (indirect method) for the year ended 31 December 2016 DKUD code
Form 3
1801004
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
І. Cash flows from operating activities
3000
4 225 102
3 454 456
1 737 246
Profit (loss) from ordinary activities before taxation Adjustments for: depreciation of non-current assets
3505
24
3 675 708
increase (decrease) in provisions
3510
20
305 392
49 779
non-realised foreign exchange differences
3515
(26 947)
536 112
loss (income) from other nonoperating and non-cash transactions
3520
246 803
37 293
Profit (loss) from participation in equity
3521
-
-
Changes in assets measured at fair value and gain (loss) on initial recognition
3522
-
-
Gain (loss) from disposal of noncurrent assets
3523
-
-
held for sale and disposal groups
3524
Gain (loss) from disposal of financial investments
3526
27
-
-
42 237
454 470
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
Impairment (reversal of impairment) of non-current assets
3540
26
18 454
162 896
Financial expenses
3550
(43 752)
57 721
Decrease (increase) in current assets
3551
(1 872)
(12 467)
Decrease (increase) in inventories
3553
(128 920)
225 813
Decrease (increase) in accounts receivable for goods, works and services
3554
126
-
Decrease (increase) in other current accounts receivable
3556
(23 629)
(8 032)
Decrease (increase) in deferred expenses
3557
(13 835)
-
Decrease (increase) in other current assets
3560
357 582
(171 856)
Increase (decrease) in current liabilities
3561
(194 368)
(1 170 792)
Increase (decrease) in current accounts payable for goods, works and services
3562
(98 672)
(48 471)
Increase (decrease) in current accounts payable for settlements with the budget
3563
-
-
Increase (decrease) in current accounts payable for settlements on insurance
3564
57
-
Increase (decrease) in current accounts payable for settlements on payroll
3566
(273 115)
44 642
Increase (decrease) in deferred income
3567
25 300
(5 024)
Increase (decrease) in other current liabilities
3570
8 091 651
5 343 786
Cash flows from operating activities
3580
(303 696)
(164 045)
Income tax paid
3585
-
(243 499)
Interest paid
3195
7 787 955
4 936 242
Cash flows from operating activities, netÂ
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
3200
-
-
non-current assets
3205
23 674
26 687
Receipts from: interest received
3215
-
-
dividends received
3220
-
-
Receipts from derivatives
3225
-
-
Other receipts
3250
-
55 472
Purchases of: financial investments
3255
-
-
non-current assets
3260
(2 779 928)
(6 361 537)
Payments on derivatives
3270
-
-
Expenditure for loan issue
3275
(317 500)
-
Other payments
3290
-
-
Cash flows from investing activities, net
3295
(3 073 754)
(6 279 378)
III. Cash flows from financing activities
3300
-
-
II. Cash flows from investing activities Receipts from sale of: financial investments
Receipts from: Equity Loans received
3305
-
2 139 368
Other receipts
3340
-
-
Expenditure for: Repurchase of own shares
3345
-
-
Loans repayment
3350
(2 449 156)
(984 523)
Payment of dividends
3355
(518 162)
-
-
-
-
-
Interest paid Other payments
3390
Item
Line code
Notes
For the reporting period
For the similar period of the prior year
1
2
3
4
5
Cash flows from financing activities, net
3395
(2 967 318)
1 154 845
Cash flows for the reporting period, net
3400
1 746 883
(188 291)
Cash at the beginning of the year
3405
1 672 125
1 827 399
Effect of exchange rates on cash balances
3410
-
33 017
Cash at the end of the year
3415
3 419 008
1 672 125
President
Peter Chernyshov
Chief Accountant
Olena Ksenich
Codes
Company Private Joint Stock Company «Kyivstar» (name)
Date (year, month, date)
2017
01
EDRPOU
21673832
01
Consolidated Statement of Shareholders’ Equity for the year ended 31 December 2016 Form 4
DKUD code
1801005
Item
Line code
Registered (share) capital
Revaluation reserve
Additional capital
Reserve capital
Retained earnings (accumulated deficit)
Unpaid capital
Withdrawn capital
Total
1
2
3
4
5
6
7
8
9
10
Balance at the beginning of the year
4000
1 009 249
-
258 294
132 933
9 599 730
-
(370 398)
10 629 808
Adjustments: Change in accounting policies
4005
-
-
-
-
-
-
-
-
Correction of errors
4010
-
-
-
-
-
-
-
-
Other changes
4090
-
-
-
-
-
-
-
-
Balance at the beginning of the year, adjusted
4095
1 009 249
-
258 294
132 933
9 599 730
-
(370 398)
10 629 808
Net profit (loss) for the reporting period
4100
-
-
-
-
3 409 513
-
-
3 409 513
Other comprehensive income for the reporting period
4110
-
-
-
-
-
-
-
-
Item
Line code
Registered (share) capital
Revaluation reserve
Additional capital
Reserve capital
Retained earnings (accumulated deficit)
Unpaid capital
Withdrawn capital
Total
1
2
3
4
5
6
7
8
9
10
Profit distribution:
4200
-
-
-
-
(1 499 931)
-
-
(1 499 931)
Payments to the owners (dividends) Allocation to the registered capital
4205
-
-
-
-
-
-
-
-
Allocation to the reserve capital
4210
-
-
-
-
-
-
-
-
Contributions by owners:
4240
-
-
-
-
-
-
-
-
Repayment of unpaid capital
4245
-
-
-
-
-
-
-
-
Withdrawal of capital:
4260
-
-
-
-
-
-
-
-
Sale of treasury shares
4265
-
-
-
-
-
-
-
-
Cancellation of treasury shares
4270
-
-
-
-
-
-
-
-
Withdrawal of the share in equity
4275
-
-
-
-
-
-
-
-
Other changes in equity
4290
-
-
-
-
(82 167)
-
-
(82 167)
Changes in equity, total
4295
-
-
-
-
1 827 415
-
-
1 827 415
Balance at the end of the year
4300
1 009 249
-
258 294
132 933
11 427 145
-
(370 398)
12 457 223
Capital contributions
Repurchase of shares
President
Peter Chernyshov
Chief Accountant
Olena Ksenich
1. Corporate information Private Joint Stock Company Kyivstar (hereinafter referred to as “Kyivstar” or the “Company”) was established and registered on 3 September 1997 under the laws of Ukraine. The Company is involved in the design, construction and operating of a dedicated cellular telecommunication network and provides a wide range of mobile communication and home internet services in Ukraine. The Company’s registered legal address is at 53, Degtyarivska St., Kyiv, 03113, Ukraine. The Company’s head office is located at the registered legal address and the principal place of the Company’s business is its registered legal address. The Company has Main office in Kiev and Processing Centre in Lviv. As at 31 December 2016 and 2015 the Company’s direct shareholders and their respective declared interests were as follows: Number of shares
Interest
VimpelCom Holdings B.V. (Netherlands) VimpelCom Ltd. (Bermuda) Treasury shares
73.804%
13 094 562
0.004%
700
26.192%
4 647 127
100.000%
17 742 389
As at 31 December 2016 and 31 December 2015, the Company had two wholly owned subsidiaries – Subsidiary Company “Staravto” and Limited Liability Company “StarMoney”. The Company and its subsidiaries are hereinafter together referred to as the “Group”. The Company’s ultimate parent is VimpelCom Ltd., a company headquartered in Amsterdam, the Netherlands.
2. Operating environment, risks, political and economic conditions in Ukraine The ongoing political and economic instability in Ukraine which commenced at the end of 2013 and led to a deterioration of State finances, volatility of financial markets, illiquidity on capital markets, higher inflation and depreciation of the national currency against major foreign currencies has continued in 2016, though to a lesser extent as compared to 2014–2015. The inflation rate in Ukraine during 2016 reduced to 12% (as compared to 43% in 2015), while GDP returned to growth of 1% (after 10% decline in 2015). Devaluation during 2016 has been moderate. As at the date of this report the official exchange rate of Hryvnia against US dollar was UAH 26.97 per USD 1, compared to UAH 27.19 per USD 1 as at 31 December 2016 (31 December 2015: UAH 24.00 per USD 1). In 2016 the National Bank of Ukraine (“NBU”) has made certain steps to ease the currency control restrictions introduced in 2014–2015. In particular, the required share of foreign currency for mandatory sale was decreased from 75% to 65% starting from 9 June 2016 and the settlement period for export-import transactions in foreign currency was increased from 90 to 120 days starting from 28 June 2016. Also starting from 13 June 2016, the NBU allowed Ukrainian companies to pay dividends to non-residents with a limit of USD 5 million per month. The National Bank of Ukraine prolonged these restrictions several times during 2015 – 2016 years and the current restrictions are effective until rescinded by the NBU (with minor exceptions, including mandatory conversion of foreign currency proceeds, which are set to expire on 16 June 2017). The IMF continued to support the Ukrainian government under the four-year Extended Fund Facility (“EFF”) Programme approved in March 2015, providing the third tranche of approximately USD 1 billion in September 2016. Further disbursements of IMF tranches depend on the continued implementation of Ukrainian government reforms, and other economic, legal and political factors. The banking system remains fragile due to its weak level of capital, low asset quality caused by the economic situation, currency depreciation, changing regulations and other factors. During 2014–2016 the Deposit Guarantee Fund repaid about UAH 74 billion to depositors of insolvent banks and over UAH 150 billion were allocated to capitalisation of state-owned and nationalised banks. The conflict in the parts of Eastern Ukraine which started in spring 2014 has not been resolved to date. The relationships between Ukraine and the Russian Federation remain strained. On 1 January 2016, the agreement on the free trade area between Ukraine and the EU came into force. Just after that the Russian government implemented a trading embargo on many key Ukrainian export products. In response, the Ukrainian government implemented similar measures against Russian products. Despite certain improvements in 2016, the final resolution and the ongoing effects of the political and economic situation are difficult to predict but they may have further severe effects on the Ukrainian economy and the Company’s business.
3. Statutory capital Registered (share) capital As at 31 December 2016 the authorised and fully paid share capital comprised 17 742 389 ordinary shares (2015: 17 742 389 ordinary shares) at a par value of UAH 50 each. The carrying value of share capital differs from par by UAH 122 130 thousand being the currency translation difference, accumulated till 1 May 2004 when the Company changed its functional currency from US dollar to Ukrainian Hryvnia. Dividends declared In 2016, the Company declared dividends in the amount of UAH 1 499 931 thousand (UAH 114.54 per share). In 2015, the Company did not declare any dividends. As at 31 December 2016, the total amount of unpaid dividends is UAH 1 531 735 thousand (2015: UAH 549 966 thousand). As at 31 December 2015 and 2016, according to the decision No 758 of 1 December 2014, the NBU extended some restrictions on payment of dividends in foreign currency.
4. Taxes payable, other than income tax Taxes payable, other than income tax consist of the following as at 31 December: 2016
2015
Frequency fee
70 056
-
VAT payable
51 592
210 777
Pension fund duty for mobile services
36 738
25 702
1 554
730
159 940
237 209
Miscellaneous other taxes Total
5. Revenue 2016
2015
Periodic fees
5 504 926
4 073 483
Interconnect fees
3 879 681
4 630 946
Air time charges
2 701 628
3 073 121
Value added services
1 817 288
1 477 099
FTTB internet
603 845
524 031
Fixed lines
415 813
400 861
Roaming (subscribers)
357 504
331 179
Roaming and access to network
206 317
199 410
82 440
64 586
1 779
5 096
181 806
145 546
15 753 027
14 925 358
Connection and one-time subscription fees Customer equipment sales Other revenue Total
6. Operating expenses 2016
2015
2016
2015
270 387
262 299
Postage, freight, distribution and telecommunication
63 071
7 540
License and research fees
59 821
29 909
Bad debts
58 334
70 743
Business trip expenses
33 263
21 455
Materials and supplies
24 594
27 980
Advertising 1 627 691
2 862 218
Roaming
300 736
147 197
Cost of materials and services
235 370
263 047
Leased line costs
87 096
38 051
Access to network
25 001
36 673
Material expenses
2 275 894
3 347 186
Bank charges
4 604
5 112
Salaries and wages
533 228
477 570
Insurance
2 793
24 095
Bonuses to employees
255 783
303 776
Other operating expenses
34 060
105 456
55 451
56 364
Other operating expenses
4 697 776
4 364 238
Payroll
844 462
837 710
Total
11 621 409
10 494 679
Social payments
127 569
208 299
Cost of sales of goods, works and services
8 658 447
7 927 329
Depreciation/amortisation
3 675 708
1 737 246
Administrative expenses
1 271 998
1 077 082
Local taxes and nonreimbursable VAT
1 009 986
1 023 738
Selling expenses
1 316 755
1 327 902
Repair and maintenance
1 007 457
1 142 571
Other operating expenses
374 209
162 366
Marketing and sales commission
600 167
534 986
11 621 409
10 494 679
Operating leases of building, land and equipment
521 658
487 725
Electricity
410 583
373 698
Consultancy fees and external personnel
313 145
245 697
Provision for litigations and other claims
283 853
1 234
Interconnection
Other staff costs
Total
The average number of employees of the Group (including contactors) in 2016 was 2,623 (2015: 3,192).
7. Income tax The Group’s profits are subject to corporate profit tax in Ukraine only. The major components of income tax expense for the years ended 31 December are: 2016
2015
Current income tax: Current income tax charge
1 139 449
605 445
(323 860)
276 332
815 589
881 777
Deferred tax: Relating to origination and reversal of temporary differences
Total
Income tax (continued) Reconciliations between tax expense and the product of accounting profit multiplied by the tax rate for the years ended 31 December are as follows: 2016
2015
4 225 102
3 454 456
760 518
621 802
20 788
118 579
Increase in deferred tax liability due to decision to write-off fixed assets, which are not fully amortised in tax accounts, in the course of the network modernisation
-
259 740
Change in estimates of deferred tax asset related to decision to write-off fixed assets, which are not fully amortised in tax accounts, in the course of the network modernisation
(31 962)
-
-
(156 060)
28 184
-
-
56 063
38 061
(18 347)
815 589
881 777
Accounting profit before tax Income tax at actual rate (18%) Non - deductible expenses for tax purposes
Recognition of deferred tax asset due to indexation of fixed assets value in tax accounts Decrease in deferred tax asset due to decision to write-off fixed assets, which are not fully amortised in tax accounts, in the course of the network modernisation Change in estimates of deferred tax asset on losses carried forward Other changes (reassessment of temporary differences, effect of changes in tax rules)
Total
Deferred tax assets and liabilities relate to the following items in 2016: 31 December 2016
Recognised in profit and loss
Income tax (continued) Deferred tax assets and liabilities relate to the following items in 2015: 31 December 2015
31 December 2015
(100 351)
(100 351)
-
Deferred expenses (ii)
-
14 193
(14 193)
Prepayments (ii)
-
17
(17)
(1 474)
(1 474)
-
(101 825)
(87 615)
(14 210)
-
(3 058)
3 058
Intangible assets (i)
25 025
24 600
425
Other current liabilities (ii)
33 977
6 261
27 716
1 604
1 604
-
15 283
(33 281)
48 564
Inventories (ii)
-
(216)
216
Trade and other payables (ii)
-
(76 028)
76 028
Provisions (ii)
3 306
(1 171)
4 477
Taxes payable other than income tax (ii)
1 080
519
561
Interest-bearing loans and borrowings – NC (ii)
-
(528)
528
Accumulated tax losses (iii)
56 063
(51 356)
107 419
Property, plant and equipment (i)
Property, plant and equipment (i)
-
100 351
(100 351)
Trade and other payables (ii)
-
1 474
(1 474)
Total
-
101 825
(101 825)
184 514
184 514
-
45 643
20 618
25 025
Other current liabilities (ii)
-
(34 003)
34 003
Deferred expenses (ii)
-
(3 657)
3 657
5 658
4 054
1 604
-
(11 626)
11 626
Provisions (ii)
55 851
52 545
3 306
Taxes payable other than income tax (ii)
Advances received and deferred revenue (ii)
10 644
9 564
1 080
Accumulated tax losses (iii)
56 063
-
56 063
358 373
222 009
136 364
Deferred tax assets:
Intangible assets (i)
Employee benefit liability (ii) Advances received and deferred revenue (ii)
Total
31 December 2014
Deferred tax liabilities:
Deferred tax liabilities:
Property, plant and equipment (i)
Recognised in profit and loss
Provision for deferred tax asset
(56 063)
-
(56 063)
Net deferred tax asset / (liability)
302 310
323 834
(21 524)
Trade and other receivables (ii) Total
Deferred tax assets: Property, plant and equipment (i)
Employee benefit liability (ii)
31 December 2015
Recognised in profit and loss
31 December 2014
Total
136 338
(132 654)
268 992
Provision for deferred tax asset
(56 063)
(56 063)
-
Net deferred tax asset
(21 550)
(276 332)
254 782
The nature of the temporary differences is as follows: (i) Property, plant and equipment and intangible assets – differences in depreciation and amortisation patterns and estimates of the remaining useful lives, differences in capitalisation principles; (ii) Advances received and deferred revenue, deferred expenses, employee benefit liability, inventories, trade and other payables, provisions, taxes payable, other than income tax – differences in period of recognition, differences in measurement and recognition principles; (iii) In 2013 the Company recognised deferred tax assets of UAH 175,338 thousand on accumulated tax losses inherited from JSC «Ukrainian RadioSystems» (“URS”), UAH 75,480 thousand of which were utilised within 2013, and UAH 99,858 thousand of which were utilised within 2014-2015. In 2014 the Company recognised deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from LLC «Golden Telecom» (“GT”). In 2015 the Company recognised provision for deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from LLC «Golden Telecom» (“GT”) Prepaid income tax in the amount of UAH 361,466 thousand is expected to be utilised within the next twelve months and was classified as a current asset (accounts receivable on settlements with the budget) as at 31 December 2016. In 2015, UAH 799 997 thousand was classified as a current asset (accounts receivable on settlements with the budget) and
UAH 404,795 thousand was classified as a non-current asset (long term receivable). All taxable and deductible differences will be realised in the next accounting period, except for those arising on property plant and equipment, intangible assets and non-current portion of deferred revenue and expense.
8. Earnings per share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share for the years ended 31 December are as follows: 2016
2015
Net profit attributable to ordinary equity holders of the parent for basic earnings, UAH thousand
3 409 513
2 572 679
Weighted average number of ordinary shares for basic earnings per share
13 095 262
13 095 262
260.36
196.46
Basic earnings per share, UAH