1 annual report 2017 - blberza.com · switch exchange axe 10, manufactured b y ericsson, assembled...

Annual Report 20171

Annual Report 20172

FIRST DIRECT INTERNATIONALINTERCONNECTION

TELEKOM SRPSKE ESTABLISHED

since 1 January 1997, JODP Telekom Srpske has been operating independently, as a government-owned public enterprise

first international telephone switch exchange AXE 10, manufactured by Ericsson, assembled and put into operation

first digital transit and local telephone switch exchanges, manufactured by Ericsson, put into operation

You’ve Got Friends for 20 Years!

Significant anniversaries for the m:tel Company are marked in 2017: 20 years of the Company’s operation, 18 years since we provide mobile telephony services to our customers, as well as 10 years since we operate under the m:tel brand within the Telekom Serbia Group. We could say that in these jubilees the entire history of the company is summarized, that is all important events within its existence. Therefore, these important years that have marked our existence, speak volumes about who we are and where we are today. Moreover, we are a company that has more than 1.600.000 users of its services, with a significant market share in all business segments, which plays an important role in the world of telecommunications in the region. If history teaches us about the future, then our previous 20 years are the best roadmap to set new, even higher, goals and visions, break new records and move beyond the boundaries in every sense.

Marko Lopičić, CEO

Annual Report 20173

DIAL-UP INTERNET ACCESS, E-MAIL, WEBHOSTING AND DPI INTRODUCED

FIRST POINT OF SALE IN BANJA LUKA– CONTACT CENTER

MOBILE TELEPHONY COMMENCED OPERATIONS

first digital transit and local telephone switch exchanges, manufactured by Siemens, put into operation

Numbering Plan adopted

mobile telephony commenced operations

License for work obtained in March 1998, equipment purchased in the same year and in March 1999 the installation of the equipment commenced. Test phase with 6 BS, mostly in the Banja Luka area, commenced in the period of May - June 1999.

first international interconnection (outside of the ex-SFRY borders) realized with the Deutsche Telekom

first call was made in May with the mobile phone Siemens s10

initial capacity of the Siemens mobile switch exchange was 20.000 subscribers, since the study, developed by a consultant company from Greece, foresaw less than 20.000 subscribers for the first few years of the operation in RS

first IT sector of mobile telephony established, first Billing System, ERP (Enterprise Resource Planning) system, provisioning in the mobile

SMS AND VOICE MAIL SERVICES ACTIVATED

MOBILECUSTOMERS’ NUMBER REACHES

100.000replacement of the prepaid system with the new, enhanced capacity system, manufactured by Siemens

Annual Report 20174

PACKET DATA (GPRS) AND MULTIMEDIA CONTENTS MESSAGES - MMS SERVICES INTRODUCED

in the promotional period from April to December 2003, the number of mobile customers who used GPRS service was 17.000

It should be mentioned that GPRS was the equivalent to ISDN service in terms of the data speed, which was typically up to 144 kb/s

Business intelligence system implemented in the Company (set of methodologies and concepts for collecting, analysis and distribution of information, by means of various software tools)

implementation of the first module of integrated ERP, independently developed within the IT, will become the basis for the most important system in the Company

FIRST TELEPHONE BILLS PRINTED

SDH- optical backbone system, capacity of 2,5 Gb/s, on the Banja Luka-Zvornik route, optical ring in Banja Luka and optical backbone system, capacity of 622 Mb/s on the Zvornik-Trebinje route, constructed with the EBRD Program funds.

first integrated billing of the fixed telephony was put into operation

in terms of the mobile telephony services, CRA issued Telekom Srpske the License for Provision of GSM Services in 2004, which enabled us to provide the mobile telephony services on the 2G technologies

On 11 May 2004, the Quotation Committee of the Banja Luka Stock Exchange issued the Decision on including the Telekom Srpske shares into the SE quotation.

VAS SMS SERVICE INTRODUCED

(Value Added Service SMS) enables integration of SMS service with third parties, SMS services providers (parking payment, media services, prize games, etc.)

Single Ledger and HR Records implemented

MOBILE USERS’ NUMBER AT THE END OF 2006WAS OVER

600.000

VPN SERVICE INTRODUCED

GPRS users’ traffic was around 40 GB on monthly level. For the sake of comparison, nowadays, the daily level in the mobile network is around 18000 GB

IP/MPLS network of Telekom Srpske constructed with the EBRD Program funds

implementation of centralized ERP system, which supported all most important business processes – own development

Annual Report 20175

2007. 2008. 2009. 2010.

broadband Internet access introduced over ADSL technology

mobile telephony users’ number around 650.000

On 19 January 2007, the Agreement on Purchase of the “Telekomunikacije Republike Srpske“ a.d. Banja Luka Shares was concluded between the Republic of Srpska and telecommunication company

“Telekom Srbija“ a.d. Beograd

On 28 June 2007, pursuant to the Decision of the Basic Court in Banja Luka, it was registered the status change – ownership transformation, by sale of the entire government capital share to the Company of Telekom Srbija a.d. Beograd, which became major owner of Mtel a.d. Banja Luka, with 65% ownership share.

new image of the Company presented:m:tel – You’ve Got Friends! (m:tel – “imate prijatelje!“)

TELEKOM SRBIJA AD BEOGRAD BECAME MAJOR OWNER OF MTEL ADBANJA LUKA 3G NETWORK

INTRODUCTION

Introduction of UMTS (3G) network – License, first UMTS base station put into operation

NGN core systems (SoftX3000 class 5 and UMG8900) and STP systems put into operation thus the process of closing TDM Local Exchanges began with the migration of subscribers to the access nodes (MSAN) of NGN network

In 2009, the CRA granted Mtel the License for Provision of Mobile Telephony Services on the Universal Mobi le Telecommunications Systems (UMTS), which enables for provision of the mobile telephony services over mobile telephony 3rd generation network – 3G

Blackberry service put into operation

children’s playground donated in Zenica

Beginning of a long-term friendship with UNICEF in BiH (Invest in Yourself, Help Others and Wall of Children's Wishes)

FIRST IPTVSERVICE

first IPTV service, product of the Greek company of Intracom Telecom, provided the services of linear TV and VoD (Video on Demand)

IMS (IP Multimedia Subsystem) put into operation, intended for fixed network core convergence

Implementation of SAS (Statistical Analysis System) Data Mining – software package for statistical analysis of large quantity of data

Implementation of server and working stations virtualization concept, later private Cloud IT

Expansion of NGN core system (SoftX3000 class 4), which enables this system to become, besides the local level, both transitional and international node

In 2010, CRA issued Mtel the License for RTV Program Distribution, on the basis of which Mtel commenced to provide the services of program contents distribution. Presently, Mtel provides these services in accordance with the License for Distribution of Audio-Visual Media Services and Media Radio Services

In 2010, standardized project management implementation and development, based on the globally recognized standards, commenced

First generation of scholarship grants (“m:stipendije“) recipients

DWDM (Dense Wavelength Division Multiplexing) transport network constructed on the Banja Luka – Trebinje route

set up of the unique infrastructure at the company level, unique domain, e-mail, corporate networks, Internet gateway

TIS (Telekom Information System) as central system for fixed services sales implemented

purchase and construction of IMS system for the purpose of fixed and mobile network services convergence

Data Center established in Banja Luka

completed

first studies for introduction of UMTS network in the Telekom Srpske network

STP (Signalling Transfer Point) installation – consolidation of signaling network with geo-redundant nodes completed and preconditions for Number Portability achieved

first point of sale opened in FBiH -Sarajevo, followed by Mostar and Tuzla

You are not alone, you have friends! (the campaign for help to the children with special needs in BiH)

IN THE EARLY 2008MOBILE USERS’ NUMBERINCREASED TO

900.000

Annual Report 20176

NUMBER PORTABILITYREALIZED IN THEFIXED NETWORK

Since 2011 Telekomunikacije RS a.d. Banja Luka operates in accordance with the new Law on Companies, new Company’s Statute has been adopted and the existing statutory bodies of the Company constituted. The Statute stipulates that, along with the name of „Telekom Srpske“ a.d. Banja Luka, the shorten name of the Company is also „Mtel“ a.d. Banja Luka

m:tel Android League

Art of Connecting! (connecting by art, in cooperation with all academies of art in BiH)

modernization and expansion of mobile radio access network – SWAP I (singleRAN)

migration of all inter-operator connections from MnC AXE to NGN completed. The interconnection topology transformation was done for the remaining local exchanges, and they were connected exclusively over NGN

platform for number portability service realization introduced and implemented on STP systems

NUMBER PORTABILITYREALIZED IN THEMOBILE NETWORK

modernization and expansion of mobile radio access network – SWAP II (singleRAN)

completed concentration of AXE systems thus the AXE type switching systems in

Trebinje were turned off

modernization and expansion of mobile radio access network – SWAP III (singleRAN)

fixed cable access network in Bijeljina modernized by using VDSL2+ vectoring

In 2014 Logosoft became a part of the Mtel Group with enlisted 65% shares owned by Mtel a.d. Banja Luka and, since 26 December 2016, Mtel owns 100% of the registered capital of Logosoft.

Mtel Austria is a subsidiary founded by Mtel a.d. Banja Luka. On 1 July 2014, in the register of the competent authorities of the Republic of Austria, it was entered and registered the newly established company Mtel Austria, based in Vienna. In order to provide telecommunications services, Mtel Austria operates as a MVNO (Mobile Virtual Network Operator). With the establishment of Mtel Austria, Mtel a.d. Banja Luka became a telecom operator on the Republic of Austria territory thus having also entered the European Union markets.

Ad Museum as a Friend! (support to the RS Museum and Museum of Contemporary Art of RS)

Good Deed – a campaign for promotion of positive stories crowned with construction of one more children’s playground in Prnjavor

Schools 2.0 (school websites developed for all elementary schools in BiH)

m:tel constructed house for a little boy Gojko

humanity in floods

BATTLE FOR BABIES(donating incubatorsto the maternitywards in BiH)

Annual Report 20177

MULTISCREEN CONCEPT FOR IPTV CONTENTS DISTRIBUTION APPLIED

integral system for IPTV contents distribution, Multiscreen concept (TV, mobile telephone, tablet, PC /Laptop) applied, provided access to YouTube, Facebook, Twitter, Weather forecast via TV, capacity 65.000 IPTV STB devices, 15 tablet/smartphone devices and 30000 webTV (PC/laptop)

OTN (Optical Transport Network) /DWDM network constructed on the Banja Luka – Bijeljina route

completed modernization of CS core mobile network (geo-redundant solution, LTE ready)

fixed cable access network in Prijedor (FTTH) modernized by using VDSL2+ vectoring

multimedia contents introduced in the Open Platform offer (HBO, Pickbox video libraries, Open to Go!, smart functions for non-using mobile phone while driving)

Blue Phone (m:tel provided free calls to counselling line for children – violence victims in the whole BiH)

TELCO CLOUDLAUNCHED

Multiscreen and hotel IPTV solutions placed, capacity increased to 90.000 IPTV STB devices and 65.000 OTT/multiscreen devices, statistical model for data collection and acquisition of TV ratings implemented

total reconstruction of the TKC Banja Luka building completed

geo-redundant Telco Cloud intended for virtualization of network function and Cloud service offer to third parties installed and put into operation

modernization of PS core mobile network (geo-redundant solution, LTE ready) completed

modernization of core Internet Service Provider – ISP network completed with installation of the cutting edge AntiDDoS (Anti Distributed Denial-of-Service Attack) protection on three geo-redundant locations

Internet Gateway Routers put into operation on the locations of TKC Banja Luka, Pale and Bijeljina instead of Juniper T1600 routers of over 100 Gb/s bandwidth. As a historical comparison, in 2002, TEOL, as an independent operational unit for Internet services provision, had 30 Mb/s leased.

Modernization and expansion of mobile radio access network with preparation for introduction of LTE or 4G network

Recycle and make profit

Tesla’s Time Machine in Banja Luka

LTE ready

fixed cable access network modernized by introducing FTTH technology and using VDSL2+ vectoring

in the last 12 years alone, 25 912 participants attended various trainings, and the total number of training days is 47 794

we have our own internal academy by which we transfer knowledge to one another

we won the prestigious “Hall of Fame” award for excellent results in applying business strategy according to the Balanced Scorecard (BSC) methodology, in the global competition, organization by “Palladium Group”

Oracle, one of the biggest multinational companies recognized our approach to the project management on the corporate level and placed us as the Reference Story in their global program

we operate in accordance with International Certificate ISO 9001:2015 for Quality Management System

we operate in accordance with International Certificate ISO 27001:2013 for Information Security Management System

we have our media – internal portal, “M:blog”, “m:agazin” periodical and TV show

we operate faster and more efficiently because all our divisions are under one roof

WE HAVE OVER

1,6 MILLIONUSERS

Our values:

Commitment to Customers. Well-coordinated Team. Corporate Responsibility. Orientation towards Changes. Constant Growth and Company Development. Company Ambassadors.

At this point, we can say that Mtel is one of the best operators in the Region, with modern services, cutting edge technology and expert staff, trained for new challenges that lie ahead in building a digital society.

Letter to Shareholders

Main Characteristics of the 2017 Business Operations

Corporate Profile

Enviroment and Regulatory Framework

Corporate Social Responsibility

Awards and Recognitions

Customers

2017 Financial Review

Capital Investments

Human Resources

Information to Investors

Statement on Application of the Corporate Management Standards

Mtel Group

Contacts

Contents:

9 - 10.

12.

13 - 23.

24 - 33.

34 - 40.

41 - 43.

44 - 50.

51 - 57.

58 - 61.

62 - 64.

65 - 67.

68 - 69.

70 - 75.

76.

Letter to Shareholders

Dear Shareholders,

The year 2017 is marked by our very important jubilees. These have been a good opportunity to remind ourselves to our beginnings, while looking towards the future and bringing services and products of contemporary times to these territories, and measure a long way we have passed so far.

In the course of our business history, we have been oriented to quality and significant investments of our resources, both financial and human ones, into every project in which we have seen the future, seriously adhering to the vision of going in pace with the world, and this has remained unchanged in the year behind us as well.

Telecommunications are globally being faced with new trends and new customer habits, which lead to necessary change of the revenues direction from those services that are “out of time” to the new ones, which requires large investments and adaptation of both the operators and customers.

In this very inter-space lies the reason for temporary stagnation of the financial result growth in telecommunications operators’ businesses, both in the region and in Europe. In terms of mobile telephony,

the reasons for decrease in the revenues lay in the fact that the prepaid customers communicate less by means of traditional services thus the increase in the postpaid customer number is one of the instruments for stopping the decreasing income trend in this field, which, in turn, requires additional investments.

Also, BiH telecommunications market is specific in one more point – the fact that the decrease in the population number is recorded every year, which also means smaller telecommunications market. In spite of that, according to the analysis of the market share in the total mobile telephony revenue in BiH, it is obvious that Mtel’s business operations are still the best, relative to the competition. To that regard, we should emphasize that Mtel, in spite of the unfavorable circumstances throughout the year 2017, has invested significant funds in the projects and services that are the basis for future development and represent a “springboard” for the future, the effects of which will yet to be seen in the years to come.

One of those strategic projects is related to the optic network construction and modernization, not only in the major cities but, also, in smaller towns and rural areas, which requires significant resources. With this investment, we will provide our customers with the cutting-edge technology, unmeasurably better Internet quality and speed, as well as new and improved functionalities of the other contemporary services that “rely” on the Internet.

We closely follow European standards, which is proved by the fact that our infrastructure is completely ready for all processes related to digitalization. Also, we must mention that the indicators of the aims, stipulated by the European digital agenda, show that Mtel fully satisfies the standards, in terms of the broadband Internet as well as in terms of the specified access speeds and optics coverage.

Annual Report 20179

Annual Report 201710

Following the global trends, we target the sphere of integrated services, which are a good example that our vision is in line with the contemporary market demands. Our unique integrated services solutions, which we have offered among the first in BiH, record a constant growth of the customer number, and represent the very services for new age. Expansion and positive effects on the total revenues of the integrated services is still expected, although the 2017 results show the 14.9% growth in the customer base.

In 2017, we have made official our partnership with Microsoft, as another important step in Mtel’s transformation into a modern ICT company. In that regard, I would like to mention our orientation to one equally important segment – our business customers, who we provide with complete business solutions.I believe that, in this sense, the telecommunication industry is going towards offering them provision of optimum IT services, so that they could concentrate on their primary business processes.

Along with the general trends we have followed, we continued to reduce the business expenditures in 2017 thus, relative to the previous year, we recorded 2.6% lower costs.

In terms of the jubilees, I would like to emphasize that, for 10 years now, we have been the shareholding company that pays its shareholders 100% of its profit in dividends, which is a unique framework for the picture of our relationship that will not change in the future.

We look towards the future with optimism, based on realistic and solid foundations we have built for years, thanks to our customers, employees, as well as the trust you, our shareholders, have given us. Thank you for that.

Sincerely,

Marko Lopičić, CEO



Corporate Profile

Environment and Regulatory Framework


Awards and Recognitions

Customers

2017 Financial Review

Capital Investment

Human Resources

Information to Investors

Statement on Application of Corporate Management Standards

01.

02.

03.

04.

05.

06.

07.

08.

09.

10.

Mtel, a.d. Banjaluka


MainCharacteristicsof the 2017BusinessOperations

2014

2014

2014

2014

2014

369,8

39,1

49,7M

illio

n B

AM

Mill

ion

BA

MT

ho

usa

nd

use

rsM

illio

n B

AM

Th

ou

san

d u

sers

2015

2015

2015

2015

2015

373,4

44,0

56,9

2016

2016

2016

2016

2016

369,9

48,8

62,9

2017

2017

2017

2017

2017

360,4

52,2

68,3

-2,6%

+7,1%

+14,9%

360,4 M BAM

52,2 M BAM

97.135

68,3 M BAM

355.136

CAGR -0,9%

CAGR +10,1%

CAGR +13,0%

CAGR +11,2%

CAGR +8,3%

Total expenditures

Integratedservicesrevenue

Integratedservices users

Revenue from mobile telephony

subscription

Number ofpostpaid users

Total expenditures

Integratedservicesrevenue

2017vs2016

2017vs2016

2017vs2016

+8,6%

+4,8%

2017vs2016

2017vs2016

Revenue from mobile telephony subscription

Integratedservices users

Number ofpostpaid users

67,378,0 84,5 97,1

279,4317,2 338,9 355,1

CORPORATE PROFILE

0101.1 Background and Origin

01.2 Management Bodies

01.3 Activities

01.4 Mission, Vision and Strategy

01.5 Corporate Values


01.1 Backgroundand Origin

The Public State Enterprise for Telecommunications of the Republic of Srpska, Banja Luka, was registered on 20 December 1996 and, until 12 December 2002, pursued the activities as a fully government-owned company. Then the ownership transformation into a joint stock company was performed, and the name was changed into “Telekomunikacije Republike Srpske a.d. Banja Luka”.

Since 1 January 1997, pursuant to the provisions of the Republic of Srpska Law on Communication Systems, Radio-Traffic and Postal, Telegraph and Telephone Traffic, the Company has been divided into two new enterprises – Public State Enterprise of “Telekom Srpske” and Public State Enterprise of “Srpske pošte”.

In the course of 2002, pursuant to the Law on Privatization in the Republic of Srpska and the Republic of Srpska Government’s Decision, 20% of the government share in the Company was privatized through vouchers, out of which 10,5% related to the privatization-investment funds, and 9,5% to physical persons. The rest of 80% (government capital – 65%, Pension and Disability Insurance Fund – 10% and Restitution Fund – 5%) were privatized

under the Special Privatization Program of the Republic of Srpska Government, pursuant to the Law on Privatization of the Government Capital in the Companies.

Pursuant to the Basic Court Decision, dated 12 December 2002, it was registered the change of name into “Telekomunikacije RS”, a.d. Banja Luka, as well as the status change. Pursuant to the Decision of the Basic Court in Banja Luka, dated 28 June 2007, it was registered the status change – ownership transformation through sale of the total government share to the Telekom Srbija, a.d. Beograd.Having purchased 65% of the government capital, Telekom Srbija became the major owner of Mtel.

As at 31 December 2017, the ownership structure of Mtel is as follows:

• Telekom Srbija, a.d. Beograd, Srbija – 65,01%;• Penzijski rezervni fond, a.d., Banja Luka

(Pension Reserves Fund)– 8,92%; • Fond za restituciju Republike Srpske, a.d.

Banja Luka (Restitution Fund) – 5,03%;• DUIF Kristal invest a.d. – OMIF Future Fund

– 3,30%;• Other shareholders – 17,74%.

As at 31/12/2017, Mtel has a capital share in three companies, as follows:

• Mtel Austria GmbH, having its registered office in Vienna, with 100% share,

• Logosoft d.o.o. Sarajevo, with 100% share,• Društvo za telekomunikacije MTEL d.o.o.

Podgorica with 49% share.

Mtel Austria GmbH Logosoft d.o.o. Sarajevo MTEL d.o.o. Podgorica

100% 100%

49%

Share Percentage (31/12/2017)


01.2 ManagementBodies

Business operations of Mtel, being a shareholding company, i.e. joint stock company, are defined by the provisions of the Law on Commercial Companies. Pursuant to these provisions and the Mtel Statute, the joint stock Company bodies are the following:

• Shareholders Assembly,• Management Board,• CEO,• Auditing Board,• Internal Auditing,• Board of Directors.

Shareholders Assembly

Shareholders Assembly involves all the shareholders. By rule, CEO or the Management Board members and the Independent Auditor attend the Shareholders Assembly sessions and participate in its work.

Management Board

The Management Board performs its function with the following membership: Predrag Ćulibrk, Dejan Carević, Dragan Đurđević, Draško Marković, Branko Malović, Nenad Tomović and Slavko Mitrović.

CEO

The Company CEO is Marko Lopičić.

Auditing Board

The Auditing Board performs its function with the following membership: Vladislava Argyrakis, Milan Simić and Darko Lakić.

Internal Auditing

Internal Auditing, headed by Mirjana Matanović-Bundalo is organized as a support function to Mtel.

Board of Directors

The Mtel’s Board of Directors includes the CEO, Marko Lopičić, and the Executive Directors:

• Executive Director for Technics - Miodrag Vojinović,

• Executive Director for Finances – Jasmina Lopičić,

• Executive Director for Marketing and Sales – Radmila Bojanić,

• Executive Director for Corporate Affairs – Vladimir Četrović,

• Executive Director for Operations – Nikola Rudović.


Marko Lopičić,CEO

Marko Lopičić was born in 1975 in Kraljevo. He graduated from the Faculty of Law of the Belgrade University in 2000.

He commenced his career with the Telekom Srbija, a.d. in 2000. He was employed in the legal representation within the Legal and General Affairs Secretariat and, afterwards, he performed the duties of the Normative Department Head, within the Budget and Control Division, and the duties of the Legal Support Department Head, within the Services Division.

He was appointed the Mtel a.d. Banja Luka Executive Director for Corporate Affairs on 19 June 2007. As the management team member, he was in charge for Human Resources, relations with the regulator and legal affairs, as well as for the activities of the Company Secretariat and relations with the shareholders.

The Company Management Board elected Marko Lopičić the Mtel a.d. Banja Luka CEO on 8 June 2016.


Jasmina Lopičić was born in Belgrade in 1972. She graduated from the Faculty of Economics of the Belgrade University in 1996.

She started her career in JP PTT Srbija in 1997, in the Division for Economic Affairs. Since 1998 she has been employed with Telekom Srbija a.d. Beograd. She was appointed the Director of the Economic Estimates Sector in 1999 and, in 2005, she was the Director of the Budget and Control Sector of the Division for Economic Affairs in the Telekom Srbija a.d.

From 2001 to 2004 she was a member of the Telekom Srbija a.d. Supervisory Board and, in the period of 2004-2008, a member of the Telekom Srbija Management Board. Since 2010, she has been a member of the Mtel Podgorica Board of Directors. She speaks English. She is married and a mother of two.

She was appointed the Mtel a.d. Banja Luka Executive Director for Finances on 19 June 2007.

Vladimir Četrović was born in 1968. He graduated from the Faculty of Law of the Belgrade University.He started his career as an apprentice lawyer in 1996 and from 1998 he was employed with Telekom Srbija a.d. Beograd in the Legal Affairs Secretariat as the Company legal representative. He was appointed the Director of the Legal Affairs Division in JP PTT Srbija in 2004 and in 2007 the General Manager of Mobtel PTT d.o.o. From 2009 to 2010 he was an advisor to the General Manager of JP PTT Srbija.

In January 2010 he joined the Mtel team as a Head of Legal Affairs Sector in the Division for Corporate Affairs.

He was appointed the Mtel a.d. Banja Luka Executive Director for Corporate Affairs on 14 June 2016.

Radmila Bojanić was born in 1972 in Gradiška. She graduated in 1997 from the Faculty of Electrical Engineering of the Banja Luka University. She continued her academic education in 2004 at the Faculty of Economics of the Banja Luka University, where she obtained the title of Master of Science in Economics and then at the Singidunum University in Belgrade - Doctor of Science in Economics in 2010.

She started her career in the Mtel Company in 1998 (then Telekom Srpske) where she moved from the position of engineer, participant in numerous strategic projects to various managerial positions in the Division for Marketing and Sales.

From 2010 until 2013 she was the Head of Business Customers Sales Sector, and from 2013 until April 2017 she was a Head of Sector for Business Customers Sales and Wholesale. During last year, until this appointment, she was responsible for sales to residential customers as well.

She participated in numerous expert conferences and was an author of several scientific papers in the field of management in telecommunications and quality management. She speaks English language.

She was appointed the Mtel a.d. Banja Luka Executive Director for Marketing and Sales on 5 April 2017.

Jasmina Lopičić, Executive Director for Finances

Radmila Bojanić,Executive Director for Marketing and Sales

Vladimir Četrović,Executive Director for Corporate Affairs


Nikola Rudović was born in 1978 in Bar. He graduated from the School of Law of the Belgrade University in 2003, and, in 2004 completed the “PERIKLES“ - School for Social and Political Leadership by the “Centar za demokratiju“ Fund, financed by the European Commission.

He passed the judicial examination in 2007. Since 2007, he has been the member of the Belgrade Lawyers’ Chamber as a lawyer specialized in corporate law.

In January 2013 he joined the Mtel team as the CEO’s Advisor and, since December 2013, he has been performing the duties of the Strategy Function Director. He speaks English language.

He was appointed the Mtel a.d. Banja Luka Executive Director for Operations on 25 April 2014.

Miodrag Vojinović,Executive Director for Technics

Nikola Rudović,Executive Director for Operations

Miodrag Vojinović was born in 1972 in Banja Luka. He graduated from the School of Electrical Engineering of the Banja Luka University in 1999. He additionally advanced in the field of telecommunications in the USA, China, Germany and Austria.

After having been the Telekom Srpske scholarship grant recipient, he commenced working for this Company in 2000, and he moved from the position of junior engineer, senior engineer, department head and sector head respectively to the function director. He has participated in the projects such as: prepaid system, IPTV, wireless access network modernization, introduction of FTTH, ngHLR, number portability, IMS, mobile broadband, SBC, and many other. He speaks English and German.

He was appointed the Mtel a.d. Banja Luka Executive Director for Technics on 24 March 2015.


01.3 Activities

Pursuing the activities as one of the three national telecom operators in Bosnia and Herzegovina, Mtel a.d. Banja Luka offers unique communication solutions.

Following the requirements of more and more dynamic market, Mtel provides the most contemporary telecommunication services in the field of mobile telephony, fixed telephony, digital television, Internet and Data transmission.

Mtel’s main business activities are telecommunications, provision of the telecommunication and related services i.e. voice, data, text, sound and picture transmission respectively, encompassing:

• activities in the wire telecommunications,

• activities in the wireless telecommunications,

• activities in the satellite telecommunications and

• other telecommunication activities.

Along with the main activity, with the aim of more efficient and rational business operations, Mtel provides a wide spectrum of other telecommunication services, including other fixed and mobile telephony services, data transmission, leased lines, private lines, services in the entire network area, additional services in the mobile telephony, Internet and multimedia services.

Mtel also provides the services in the sphere of telecommunication infrastructure leasing, construction, management and protection. Mtel also pursues other activities, ancillary to the registered activity, which are generally performed along with the registered activities, to the lesser extent or from time to time.

With continuous following the world trends and cutting-edge technologies in the field of telecommunications, Mtel listens carefully to the customers’ wishes and needs. Knowing they want more than just making phone calls, Mtel introduces new technologies and offers a wide range of additional services in BiH.

Business users are provided with integrated business solutions, with calls and data in the mobile and fixed network, thus the preconditions are created for successful business operations.

Along with provision of the high-quality services and application of contemporary information technologies, Mtel invests much in sports, culture, education, and humanitarian projects and, by pursuing activities with corporate social responsibility, contributes to development of the recognized values in its environment.


01.4 Mission, Visionand Strategy

Business Guidelines

According to the current market trends, as well as the general situation in the telecommunications sector which, above all, is characterized by stagnation of revenue from generic services, and in the context of BiH especially revenues from prepaid services and mobile telephony traffic, in future Mtel will focus its activities on improving stability of customer base, and further development of the service portfolio.

This refers to further increase in the number of integrated and postpaid services’ users as well as users of mobile Internet, with the development of ICT services portfolio in cooperation with the parent company Telekom Serbia and its subsidiaries Logosoft Sarajevo, exploiting the existing know-how on the Telekom Serbia Group level.

Implementation and Importance of ISO Standard Introduction (ISO 9001:2015 Quality Management System)

The Company operates in a complex environment from the market, environment and trends standpoint, striving to the optimal management on its way to achieving a sustainable development through long-term satisfaction of all interested parties’ expectations.

Quality Management System – QMS requires the Company to implement the management of key business processes, which Mtel implements using Business Process Management (BPM), continuous modeling, informatization and monitoring of business processes. Management of key business processes in the Company enables accommodating to these tumultuous changes brought by modern business, bringing digital transformation in all areas, with new rules, new methods and new people. These changes lay the foundation for a new business culture and new business success criteria. With the improvement of business processes it achieves improvement of competitiveness and better market position through increased efficiency and effectiveness.

In late 2017, the Company established an Integrated Management System (IMS), which fulfils the

requirements of two internationally recognized standard ISO 9001:2015 and ISO/IEC 27001:2013 for all business processes in the Company.

The Company’s strategy outlines the following fundamental principles of the Quality Management System:

• Continuous achieving of the results,

• Improving the quality of services and processes,

• Process Management,

• Achieving success based on employees’ competencies and engagement,

• Developing stable and fair relations with partners and suppliers,

• Taking responsibility for a sustainable future.


The Company’s Quality Policy, which represents the framework for establishing and reconsidering the quality aims, according to which the Management undertakes to periodically reconsider IMS, for securing the business processes efficiency and continued improvement.

The IMS Policy encompasses:

• Fulfillment of customers’ requirements for high quality product and service in order to maintain the long-term customer satisfaction,

• Developing competencies that motivate employees to actively participate in the improvement of all aspects of the business,

• Ensuring enjoyment of rights and equal treatment of all shareholders,

• Compliance with laws, regulatory and other regulations, in order to maintain fair and effective market competition,

• Developing long-term and correct relations with partners and suppliers,

• Providing continuous technical and technological development in line with the global trends in the telecommunications sector,

• Corporate social responsibility in a way that systematically and permanently builds tradition of quality attitude towards the society and environment in which the Company operates,

• Protection of trade secrets of the Company, business partners and clients as well as protection of their privacy,

• Permanent concern about information integrity, availability and confidentiality,

• Security of information, as well as of other assets, in a manner proportionate to the risk, through the effective application of protective measures and procedures in accordance with the financial justification and technological strategy of the Company.

Basic Principles of the Quality Management System


01.5 CorporateValues

Our values are the path and mean that lead us towards the same goal, they are our philosophy, principles and beliefs we hold on this path. These values set the signs to ensure successful operations and results we strive for. A strong brand, which we are ambassadors of always and everywhere, is growing and developing on the solid foundation of our Company.

Commitment to Customers – A Customer Is Our Inspiration

Our customers are our partners in achieving business goals, so we are constantly focused on monitoring our customers’ needs, but also their development. Adapting to the market demands, trends and customer needs, we create more value for them, as well as for the Company.

For as much as our business communication with customers would be simple, more effective and better, we strive to simplify internal processes and procedures, and provide modern options of interaction in order to efficiently meet the needs of our customers.

Well-Coordinated Team – We Are Friends

Realizing the importance of fostering team spirit, we improve the system of internal communication, and rely on each other, making our relationship stronger and more stable.

We are constantly focused on strengthening confidence and improving communication between hierarchical levels, as well as to simplify working with colleagues, customers and associates.

Nourishing our own human potential, we build the image of the Company, which takes care of its employees with responsibility and diligence, so they would be motivated and qualified to provide users the most high-quality services.

Corporate Responsibility – Business Based on Ethics

Good business practices, compliance with rules, procedures and laws is an absolute must of our business in relationship with customers and business partners, as well as shareholders.

Guided with positive values, we do business in a way that systematically and continuously build a tradition of quality relations with the society and environment in which we operate, seeking to be recognized as a company whose business philosophy is clearly directed towards ethics in business, as well as the basis on which it builds the business identity.


Orientation towards Changes – Changes Are a Road to the Future

Our vision is the future. We change in order to endure. We are creative in order to be innovative. We are flexible in order to be ready for the organizational and market transformations. In our Company, new ideas and innovation are recognized and rewarded, and creativity of our employees is desirable and appreciated.

Constant Growth and Company Development – Every Day We Build New Levels, Achieve New Heights and Successes

Guided with clear idea and goal to build a recognizable brand, we contribute to the Company’s growth with our daily efforts and influence the steady growth in the market share.

On a path of the respect and fulfillment of the mission and vision of our Company, in times of rapid and major changes, we do our best to keep pace with global trends in the field of telecommunications, to maintain its leading position in the territory of Bosnia and Herzegovina, as well as to conquer new markets. We stay recognized in the region as a team that has a significant impact on the growth of our Company market share.

Company Ambassadors – My Title Is Ambassador

We are unique ambassadors of the Company during and outside working hours. Our dedication to the Company and the work we do results in the quality of the business that bears the signature of all of us.

A sense of belonging to the Company we work for and professionalism in business we consider to be important elements in promotion of the Company services and its overall business.

Mtel’s Corporate Values

02.1 Macroeconomic Environment

02.2 Pestel Analysis

02.3 Telecommunications Marketin Bosnia And Herzegovina

02.4 Regulatory Framework

ENVIRONMENT ANDREGULATORY FRAMEWORK

02


02.1 MacroeconomicEnvironment

According to the analysis of the World Bank published in January 2018, the world economy is on the upswing, since 2017 ended with 3,0% growth of global GDP. It is significantly more than anticipated, while the GDP growth on the global level is projected to edge up to 3,1% in 20181. Generally speaking, the world economy is recovering, as a result of investment, production and trade growth. Projections are that this positive trend will, however, slightly moderate and therefore for the period 2019-2020 it is expected the growth of 3,0%2.

GDP growth in the European Union amounted to 2,4% in 2017, being thus for 0,7 percentage points higher than expected3. The cyclical upturn is expected to continue in 2018, though due to anticipation that domestic demand will lose its intensity, GDP growth is expected to be 2,1% in 2018. It is lower from the achieved in 2017, but notably stronger than previously projected. For the period 2019-2020, it is then foreseen the growth rate of 1,6%. Over the longer term, the EU growth rates are constrained by shrinking of the working-age population in the majority of Euro Area economies4.

According to the World Bank estimations, it can be expected that the year 2018 will be a turning point for the global economy because, for the first time

in the last ten years, that is since 2008 and global recession, it is expected that the negative output gaps in the previous period will be overcome and that the world economy will continue to develop in positive direction. Practically it means that after a long decade, the global demand for products and services that is outputs will be higher than the offer5.

In 2017 Bosnia and Herzegovina achieved the growth of 2,3%6. From the standpoint of macroeconomic trends, analysts predict that the unfreezing pending disbursements from international credit institutions should have a positive impact on the movement of the BiH economy in 2018.

According to the World Bank analyzes the BiH’s key economic challenge is the imbalance of its economic model: public policies and incentives are skewed toward the public rather than the private sector, consumption rather than investment, and imports rather than exports7. The unemployment rate in Bosnia and Herzegovina is high, it is still about 41%. Due to the steady growth in the EU, it is thus expected that these positive trends should contribute to improving of the BiH economy. Therefore, the GDP growth of 3,1% is anticipated for 20188.

1 World Bank: „Global Economic Prospect“, January 2018 – pg. 23.

2 - 4 Ibidem

3 Ibidem – pg. 33.

5 World Bank: „Global Economic Prospects“, January 2018 - pg. 28.

6 - 8 www.focus-economics.com/countries/bosnia-and-herzegovina

7 www.worldbank.org/en/country/bosniaandherzegovina/overview


02.2 PESTELAnalysis

PESTEL analysis of the Bosnia and Herzegovina market shows that the Company still has no direct control over majority of the factors, which aggravates the sector’s very development. However, it re-emphasizes the significance of the results the Company has realized so far.

Main characteristics of the individual factors (PESTEL) are:

Political factors:• Complex inner structure of Bosnia and

Herzegovina with two entities, one district and numerous cantons;

• Low political support level for the ICT development and lack of adequate development programs, which would result in a higher level of primary demand for this type of service;

• Inadequate institutional approach to monitoring the ICT market;

• Negative impact of the political relations to the economic development.

Economic factors:• Relatively weak economy structure, with

regard to a small number of companies which create new value;

• Low economic development level, hence a slow economic recovery;

• Stable currency, due to the Currency Board existence;

• High unemployment rate;

• Low consumer power level i.e. GDP.

Social-cultural factors:

• High participation of the rural population and relatively old population;

• Continuous emigration of the working population;

• Low birth rate;

• Relatively low general education level of the population, but quite fast acceptance of new technologies and services by the younger population.

Technological factors:• Relatively fast transfer of technology in the

Bosnia and Herzegovina market, thanks to the SMP operators;

• Low technological literacy level;

• Relatively well developed network, particularly in the mobile telephony segment.

Legislation:• Three new service providers in the mobile

telephony market, and 13 alternative operators operating in the fixed telephony market, as well as a significant number of ISPs with a tendency to growth, along with other indicators that can be monitored in regular reports of the Agency, confirm the high level of liberalization in the BiH telecommunications market;

• Relatively rigid attitude of the Regulatory Agency toward SMP operators, according to the concept by which the market liberalization in certain segments is based predominantly on reducing the impact of SMP operators.


02.3 Telecommunications Marketin Bosnia and Herzegovina

The telecommunications market in BiH is reflected in: increase in the Internet user and mobile telephony customer number, as well as the increase in number and types of services offered by the telecom operators. Processes of market liberalization and raising the level of competition in the telecommunications market in Bosnia and Herzegovina are continued.

In 2017, the Council of Ministers has adopted the Electronic Communications Sector Policy for the period of 2017-2021, which includes an Action Plan for the Policy Implementation. The adoption of the Telecommunications Sector Policy creates preconditions for further strategic development and improvement of the telecommunications sector, development of the next generation networks, new investments, increase of competitiveness level as well as lower prices and wider portfolio of services for customers.

Although Bosnia and Herzegovina undertook an international obligation to complete the transition from analogue to digital terrestrial broadcasting until 17 June 2015, this deadline was not met. In the middle of October 2016, the test digital signal was released in Sarajevo, Mostar and Banja Luka, thus completing

the first phase of the digitization of transmission and broadcasting equipment in BiH.

The estimated total revenue in the telecommunications market of Bosnia and Herzegovina in 2017 is BAM 1.4 billion9, which is higher than the realization in 2015 (BAM 1.451 billion10).

The estimated revenue from the mobile telephony services in 2017 is about BAM 627 million11, i.e. 45,40% of the total estimated telecommunications market revenues.

The estimated revenue from the fixed telephony services in 2017 is about BAM 331 million12, or 23,96% of the total estimated telecommunications market revenues.

The estimated revenue from the Internet services in 2017 is about BAM 167 million13 or 12,09% of the total estimated telecommunications market revenues.

The estimated participation of other revenues (cable television, data transfer, etc.) is 18,55%14.

9 Internal estimates using SAS Visual Analytics forecast tools based on the

last published CRA data for 2016

10 BiH Telecommunications Indicators for 2016; www.rak.ba

11 - 12 - 13 - 14 Internal estimates using SAS Visual Analytics forecast tools

based on the last published CRA data for Q2 2017


Fixed Telephony

At the end of 2017, the public telephone service through fixed telecommunication networks in BiH were provided by 15 operators, out of which three with the License for Public Fixed Telephony Operator (BH Telecom d.d. Sarajevo, Telekom Srpske a.d. Banja Luka and Hrvatske Telekomunikacije d.d. Mostar), and 12 operators with the License for Provision of the Public Fixed Telephone Services.

Three operators with the License for Public Fixed Telephony Operator have significant market share, sales volumes and realized revenues, as well as the employees’ number15.

Majority of activities in the public fixed telephone services domain during 2017 refer to enhancement of the product range of various telecommunication services offers. The voice services market in the fixed telephony was marked with activities aimed at offer improvement and creation of demand for integrated services, possibility of a single account creation, customers’ protection from overspending and more precisely defined conditions for provision of the services.

In June 2016, the CRA Council adopted the Rule on Alterations and Amendments of the Rule 67/2012 on Tariff Rebalance Model of Voice Telephone Services in BiH. The alteration is related to abolition of different zones within the national traffic. The application of this Rule commenced on 1 January 2017.

The decreasing trend in the fixed telephony lines number continued in 2017, relative to 2016, hence it is expected also in the oncoming period, due to enhanced use of the mobile telephony services and broadband networks.

Out of the other services, it is worth mentioning that the operators are launching Cloud services for both legal entities and physical persons.

The number of SMP operators’ subscribers in the fixed telephony in Bosnia and Herzegovina at the end of Q2 2017 was 677.73716, and it is estimated that, at the end of 2017 (31/12/2017), this number is 654.70717, with the negative change rate, relative to 2015 which amounts 5,47%18. The decreasing trend in the fixed telephony customers’ number is most visible at the SMP operators, because these operators have the largest database of such customers and replacement of fixed services usage with the mobile ones has been going on for years.

On the other hand, the decline in the number of fixed telephony customers is attenuated with their migration to integrated services, which are delivered via fixed network.

The total number of the alternative operators’ subscribers in the fixed telephony at the end of Q2 2017 was 111.364 users19, and it is estimated that, at the end of 2017 (31/12/2017), this number is 120.524.

The BiH telecommunications market liberalization, particularly in terms of the number portability service offered to the customers of the fixed public telephony, strengthened the competition in the fixed telephony market. Growth trend of the total ported numbers in the BiH fixed telephony network continued in 2017, thus it has grown from 48.91120 in 2016 to 58.60321 at the end of the Q2 2017. It is estimated that, at the end of 2017 (31/12/2017), the number is 68.07922.

It is estimated that, at the end of 2017 (31/12/2017), the penetration rate in the fixed telephony in Bosnia and Herzegovina is approximately 20,63%23.

15 - 20 BiH Telecommunications Indicators for 2016; www.rak.ba

16 - 19 - 21 Quarterly comparative data of the electronic communications

market (Q2 2017); www.rak.ba

17 - 18 - 22 - 23 Internal estimates using SAS Visual Analytics forecast tools



Mobile Telephony

Three operators hold the License for GSM and UMTS Services in Bosnia and Herzegovina: JP BH Telecom d.d. Sarajevo, Telekomunikacije Republike Srpske a.d. Banja Luka and JP Hrvatske Telekomunikacije d.d. Mostar.

The operators, registered as providers of mobile public telephony services, which provide mobile telephony services based on commercial agreements with holders of Licenses for GSM and UMTS services are: Blic.Net d.o.o. Banja Luka, Logosoft d.o.o. Sarajevo, ELTA-KABEL d.o.o. Doboj and TELRAD NET d.o.o. Bijeljina.

The total number of mobile subscribers in BiH at the end of Q2 2017 was 3.319.08424, and it is estimated that, at the end of 2017 (31/12/2017), this number is 3.425.76325.

In terms of the mobile telephony customers’ number, Bosnia and Herzegovina is on the third place in the Region, after Serbia and Croatia.

The number of prepaid users is still several times higher than postpaid. The participation of the postpaid users at the end of Q2 2017 was 27%26, and it is estimated that, at the end of 2017 (31/12/2017), this percentage is 26,04%, being still lower than in the countries of the Region and EU. According to the data of the regulatory agencies of the countries in the Region, in 2017 participation of postpaid users in Croatia was around 50%, Serbia 54%, and Montenegro 46%27. The European average of postpaid users’ participation in the total mobile telephony customer base is around 50%.

The mobile telephony penetration rate in Bosnia and Herzegovina at the end of Q2 2017 was 99%28, and it is estimated that, at the end of 2017 (31/12/2017), the penetration is 102%29. This mobile telephony penetration rate is still below the current values in the surrounding countries (Montenegro 180%, Serbia 128%, Croatia 105%30). The mobile telephony penetration rate in Europe is around 125%.

The increased use of the applications, being a substitute for voice calls, SMS and MMS (such as Viber, Skype, Gtalk, Whatsapp, Facebook Messenger) led to decrease in the outgoing international traffic and number of SMS and MMS messages.

Implementation of the number portability service in the mobile telephony started in 2013. The total number of ported numbers in the mobile network at the end of Q2 2017 was 46.12631 numbers, and it is estimated that, at the end of 2017 (31/12/2017), this number is 52.02432 ported numbers, which is an increase of approx. 27,9% compared to the same period of the previous year (40.682 users33).

24 - 26 - 28 - 31 Quarterly comparative data of the electronic

communications market (Q2 2017); www.rak.ba

25 - 29 - 32 Internal estimates using SAS Visual Analytics forecast tools


27 - 30 Ekip, Ratel, Hakom

33 BiH Telecommunications Indicators for 2016, the Communications

Regulatory Agency; www.rak.ba


Internet Services

Internet access services market was marked with the following activities: introduction of new access technologies, introduction of flat traffic package, services that protect Internet users by controlling access to Internet contents, increased access speeds for all users.

Internet services penetration rate in the BiH market is characterized with continuous growth, whereby the fixed broadband access is the generator of such growth. The use rate of the Internet via fixed network, at the end of Q2 2017 was 83,48%, and it is estimated that, at the end of 2017 (31/12/2017), it is 86,6%35.

The number of fixed broadband access users in BiH at the end of Q7 2017 was 671.06836, and it is estimated that, at the end of 2017 (31/12/2017), this number is 694.36137. The broadband Internet access rate in the fixed networks is estimated to be approx. 19,81%38 at the end of 2017. This penetration rate in BiH and several neighboring countries shows that, in spite of higher number of users in the fixed broadband Internet access market, Bosnia and Herzegovina still belongs to the group of less developed countries in the region and is significantly below the EU average.

Use of broadband services continues to increase from year to year, so its number of users reached 99% of the total number of the Internet subscribers. The dominant type of Internet access is xDSL, whose number of users, at the end of Q2 2017, was 389.31039, and it is estimated that, at the end of 2017 (31/12/2017), this number is 402.14040.

The number of cable Internet access users at the end of Q2 2017 was 221.55941 and it is estimated that, at the end of 2017 (31/12/2017), this number is 229.13142.

The development of broadband Internet, together with the telecommunications market liberalization, influenced the service packages offer that includes several telecommunication services: Internet, fixed telephony, mobile telephony and television. In 2017, the trend of increase in the number of these service packages was continued.

There has been a further improvement of data services offer during 2017, primarily in ADSL services provision, increased access speeds by introducing VDSL2+ vectoring technology and introduction of new packages for various user categories.

Multimedia

The multimedia services market in Bosnia and Herzegovina, from the perspective of the SMP operators, is characterized with constant growth in the number of package services users, acquisition of new customers or retention of the existing ones in the way that xDSL users and voice services users become the 2P, 3P or 4P package services users.

All three dominant operators have improved their offer in the sphere of multimedia content delivery, offering new services in this segment, as well as improved access to the service (multiscreen)

34 - 36 - 39 - 41 Quarterly comparative data of the electronic

communications market (Q2 2017); www.rak.ba

35 - 37 - 38 - 40 - 42 Internal estimates using SAS Visual Analytics forecast

tools based on the last published CRA data for Q2 2017


Regulation of the Bosnia and Herzegovina telecommunications market falls within the competence of the Communications Regulatory Agency (herein referred to as the “Agency”) and is based on the Law on Communications (Official Gazette of BiH, No. 31/03, 75/06, 32/10 and 98/12), Electronic Communications Sector Policy, Action Plan for the Policy Implementation and the by-laws.

The existing BiH regulatory framework is based on the EU regulatory framework, characterized by a constant telecommunications market monitoring and analysis, as well as by passing the required regulatory acts, with the aim of its permanent development, in terms of the services number increase as well as marketing and technical innovations.

The telecommunications market in BiH was liberalized in the early 2006 and, at the end of 2017, in this market there were operating:

• 3 significant market power (SMP) operators; according to the Significant Market Power Operators List (Official Gazette of BiH, no. 73/12), Mtel a.d. Banja Luka, BH Telecom d.d. Sarajevo and HT d.o.o. Mostar have been declared the significant market power operators in the fixed and mobile telephony and leased lines market respectively;

• 11 holders of the License for Provision of the Public Fixed Telephone Services;

• 79 holders of the License for Performing the Activities of the Public Electronic Communication Networks Operator;

• 71 holders of the License for Provision of the Internet Access;

• 4 registered providers of the mobile telephony services.

Mtel pursues the activities in accordance with the valid licenses granted by the Agency, as follows:

• License for the Public Fixed Telephony Operator, since 30 May 2017,

• License for Pursuing the Activities of the Internet Access Provider, since 15 March 2013,

• License for Provision of the GSM Services, since 12 October 2004,

• License for Provision of Mobile Telephony Services on the Universal Mobile Telecommunications Systems (UMTS), since 26 March 2009,

• License for Distribution of Audiovisual Media Services and Media Radio Services, since 9 February 2017.

02.4 RegulatoryFramework


According to the Annex I of the License for Provision of Mobile Telephony Services on the Universal Mobile Telecommunications Systems, dated December 2010, Mtel may provide the UMTS services on the GSM frequency band. According to the Annex I of the License for Provision of GSM Services, Mtel uses an additional frequency band - E-GSM, since June 2012.

Within the l iberalization process of the telecommunication market and in accordance with the regulatory framework, the following Mtel’s referent offers are in place:

1. Referent Interconnection Offer for the Mtel’s fixed network,

2. Referent Offer for the MVNO’s interconnection and access to the Mtel’s mobile network,

3. Referent Interconnection Offer for the Mtel’s mobile network,

4. Referent Interconnection Offer for unbundled local loop access,

5. Referent Interconnection Offer for leased lines wholesale.

The most important regulatory activities in the course of 2017:

• In April 2017, the Council of the Agency adopted the Market Analysis of the Calls Ending in the Individual Mobile Networks – Market Analysis 7 (second round of analysis).

• In May 2017, the BiH Council of Ministers passed the Decision on Electronic Communications Sector Policy for the period 2017-2021 and Action Plan for the Policy Implementation.

• In June 2017, the Council of the Agency passed the Rule on Changes to the Rule 68/2013 on the conduct of the provider activity for public fixed telephone services. The adopted change is related to the definition of nomad telephony services given in the Article 29 which is undertaken in order to comply with the needs for electronic communications development and the emergence of new services in the market.

• In October 2017, the Council of the Agency adopted the Decision on the Annual Fee Amount for the License for Provision of Telecommunications Services and Point Value for Fee Calculation for the License in Telecommunications for 2018.

• In December 2017, the Council of the Agency adopted the following rules in the radio-communication field:

- Rule on the use of the radio frequency ranges 900/1800/2100 MHz for LTE – This Rule prescribes technical scope for use of 4 Generation (4G) networks, known as LTE

(Long Term Evolution) in 1800 MHz range. In this way, the unique document defines the technical requirements for LTE system use in three ranges in which LTE evolved as upgrade of the existing GSM and UMTS systems,

- Rule on radio equipment that can be used without individual licenses in radio-communications – This Rule defines the type, conditions and manner of use of radio equipment for which it is not necessary to obtain individual licenses for device issued by the Agency. The Rule 72/2014 on radio equipment that can be used without individual licenses for devices issued by the Agency ceased to be valid with the entry into force of this Rule,

- Rule on Amendments to the Rule 64/2012 on applying for a licence in radio communications – This Rule stipulates that radio networks used for the purpose of performing the primary activities of providing service (including taxi transportation), must submit a permit / approval of the competent authority to perform these services.


• In December 2017, the Agency submitted for public consultations the following draft Rules:

- Rule on the utilization of the radio frequency band 3400-3600 MHz and 3600-3800 MHz for MFCN (mobile/fixed communication network) – second round of the public consultations. This Rule defines the manner of utilizing the radio frequency band 3400-3600 MHz and 3600-3800 MHz for mobile/fixed communication networks (MFCN) in Bosnia and Herzegovina on technologically neutral basis,

- Rule on the utilization of the radio frequency band 800 MHz for MFCN. This Rule defines the manner of utilizing the radio frequency band 800 MHz (790-862 MHz) for mobile/fixed communication networks (MFCN) in Bosnia and Herzegovina on technologically neutral basis,

- Rule on the utilization of the radio frequency band 2600 MHz. This Rule defines the manner of utilizing the radio frequency band 2600 MHz (2500-2690 MHz) MHz for mobile/fixed communication networks (MFCN) in Bosnia and Herzegovina on technologically neutral basis,

- Rule on the Plan for Allocation and Utilization of radio frequency spectrum in Bosnia and Herzegovina. The proposed draft consolidates the revised document of the previous Frequency Allocation Plan (CRA Rule 49/2009) adjusted with the conclusions of the International Telecommunication Union (ITU) World

Radio Conference WRC-15. The draft rule represents a set of norms, which generally define the use of frequencies for all radio frequency bands in Bosnia and Herzegovina.

• During 2017, the Agency has intensified activities on the implementation of accounting separation and cost accounting. In December 2017, the Agency has submitted a document Methodologies for accounting separation and cost accounting and announced the Methodology implementation through the Rule on accounting separation and cost accounting.

• In June 2017, the Agency has initiated activities related to logging data on networks, exchanges, interconnection and inter-operator agreements by the users of licenses for conducting activities of an operator for public electronic telecommunications network.

03.1 Humanity

03.2 Culture and Education

03.3 Sport

03.4 Ecology

03.5 Employees

CORPORATE SOCIAL RESPONSIBILITY

03


03.1 Humanity

Traditionally at the end of 2017, a fundraising dinner titled “With Love to Brave Hearts” was held in Banja Luka. Mtel took part in this noble action giving a humanitarian fundraising number, and also donating the Solidarity Fund for the diagnosis and medical treatment of diseases, conditions and injuries of children abroad. The income raised from all activities in this humane action is designated to this Fund.

On the occasion of International Day of Persons with Down Syndrome, in Banski Dvor in Banja Luka was held an inclusive manifestation with symbolic name: “Thank You, Mother”, which was attended by 40 children with Down syndrome as well as their friends. Aware of the importance of taking care of the youngest and most vulnerable members of society, the Mtel Company supported once again the organization of this event.

Humanitarian fundraising action for BiH Bone Marrow Bank was held in 2017 under the slogan “For Health, for Tomorrow, for Us, for Bone Marrow Bank”. The aim of this event was that Bosnia and Herzegovina gets as soon its Bone Marrow Bank, becomes a member of a worldwide network of bone marrow donors, and forms its own registry. For the second consecutive year, the Mtel Company joined the realization of this humanitarian project, thus contributing to the efforts of the Bosnia and Herzegovina citizens to facilitate treatment process.

The Parents of Preemies Association in RS “Tinies” during 2017 launched a campaign called “Breathe Life”. Its aim was to raise funds for the costly equipment, which neonatology wards need for treating premature babies. Mtel supported this humanitarian action, and the funds raised through the Mtel humanitarian number are intended for the procurement of necessary medical equipment such as monitoring, warm cots and rehabilitation equipment in the neonatology wards throughout the Republic of Srpska.

Presentation of the Blue Phone work, which operates with partner support of Mtel in Bosnia and Herzegovina for years, was held at the Krajina Square in Banja Luka. Thanks to the partnership with Mtel, calls to number 080 05 03 05 are free from all over Bosnia and Herzegovina, regardless of the network from which this helpline is being called. The aim of the existence of this line is to provide advice and support to children in difficult and crisis situations, especially in cases of violence and exploitation.

In cooperation with the City of Banjaluka, the Mtel Company donated funds for building a children’s playground and recreational zone in Banja Luka. The

project of playground construction was carried out in line with the highest standards, and citizens of Banja Luka got another playground with modern play equipment, which are in accordance with the children safety regulations as well as a gym and outdoor running track, which makes this area a unique sport and recreational zone in the heart of the city.

On the occasion of the Saint Nicholas Day, Mtel continued to traditionally present gifts to the young ones. Hence the gifts received residents of the “Rada Vranješević “ Home for Children and Youth without Parental Care, children in the “Dr Miroslav Zotović“ Institute for Physical Medicine in Banja Luka, as well as in previous years the youngest ones in the Preschool “Sveta Evgenija, carica Milica“ in Trebinje.

Humanitarian Telephone is a service Mtel has been providing free to everyone who needs it. Since 2004, the year when this service commenced, by means of the short telephone numbers there were realized numerous fundraising actions. In the course of 2017 Mtel supported 136 humanitarian actions and raised over 1.120.000 BAM.


03.2 Culture andEducation

In 2017 the Mtel Company promoted its new scholars. The ceremony of scholarship grant program called “m:stipendije” for 25 students of electrical engineering and information technology faculties from all over Bosnia and Herzegovina was held in Banja Luka. The Mtel scholars, as well as their colleagues in previous generations, got a right to the monthly amount of BAM 300 until the end of the first cycle study and opportunity to spend a month on professional training in our Company. This is the seventh generation of m:stipendist and the title was awarded to the best students of the Schools of Electrical Engineering in Banja Luka, Sarajevo and Istočno Sarajevo as well as in Tuzla and the School of Mechanical Engineering and Computing and the School of Information Technologies in Mostar. In 2017 Mtel announced competition for another, the eighth, generation of scholars.

Last summer Mtel hosted again foreign students for professional training in our Company. The International Association for the Exchange of Students – IAESTE and the Mtel Company traditionally cooperate within the exchange students system, which means that accepting foreign students on professional training, Mtel provides for our students the possibility to perform their professional training abroad, according

to the system of reciprocity. Since 2002, as long this cooperation is, Mtel has hosted a large number of electrical engineering students from around the world, giving them the possibility to learn about the practical application of knowledge in the field of information technology and telecommunications. In 2017 the School of Electrical Engineering in Banja Luka and Mtel signed a document on cooperation, which implies a long-term business and technical cooperation in research and application of new knowledge in the field of telecommunications, information technology, and other areas of interest for both sides.

In order to support knowledge and influence the development of the domestic IT market, the Mtel Company launched another social responsibility project – m:tel app competition of high school pupils in mobile applications development for Android™ OS and iOS in 21 secondary schools from across the country. Under the motto “Launch Your Idea!“ pupils who love programming, have good ideas and the desire to compete with their peers, had the opportunity to create a mobile applications and win mobile smartphones.

The m:tel Austria Company, youngest member of Telekom Serbia Group, in 2017 presented to the citizens and visitors of Vienna an unusual multimedia 4D projection about the great scientist and genius inventor Nikola Tesla, without whose inventions one could not imagine the modern way of life. The façade of the Technical University at Karlsplatz served as a canvas for “painting“ and depicting the life and work of Nikola Tesla through the audio-visual spectacle. At the “PR Excellence Awards” the innovative project “Tesla’s Time Machine“ has been named one of the top five in Europe, in the category of “Science and Education”.

The traditional friendship and good cooperation between the RS National Theater, RS Children’s Theater and Mtel Company continued in 2017, supporting the organization of the 20th Teather Fest “Petar Kočić” and event for children and adults “Snješkovo”. Once again, a friendly hand to support culture the Mtel Company lent through cooperation with the RS Museum of Contemporary Art on the occasion of the European Night of Museums.


On 6 November 2017, the birth date of Vuk Stefanović Karadžić, a reformer of the Serbian language, a bust of this great man was unveiled in front of the Faculty of Philology in Banja Luka. Appreciating the importance of Vuk’s work, the General Consulate of the Republic of Serbia in Banja Luka and the Mtel Company supported the initiative of the Faculty of Philology for making the bust and bow this faculty a valuable work of art that will adorn the space in front of the faculty building, the place where Vuk’s heritage is studied and kept.

The second regional innovation forum, held in Sarajevo, represented the first regional platform for gathering visionaries, innovators, young entrepreneurs, organizations, institutions and local and foreign investors in one place. The Mtel Company was an official partner of the forum “Sarajevo Unlimited 2017”. Within the forum, which attended the Company’s representatives, was also organized m:tel Hackathon.

The Mtel Company gave support to another important cultural event – the International Festival of Student Theater “Kestenburg” as well as to the spectacular premiere of the ballet on ice “Nutcracker” performed by the Ensemble of the Russian State Ballet of St Petersburg.

The Mtel Company through socially responsible business provided support to a number of musicians and musical events throughout Bosnia and Herzegovina over the past years, and such a good practice was continued in 2017.

Among traditional friendships that the Mtel Company has been nurtured for years are events “Đurđevdanski festival – festival of children’s songs”, musical spectacle Rock Fest “Kozara in Heart”, Demofest, Banja Luka Guitar Fest, OK Fest, which takes place on Tjentište and Fresh Wave festival in Banja Luka.


03.3 Sport

Promoting the idea of true values, healthy lifestyle and sportsmanship, in 2017 Mtel has continued to support sports clubs and events, strengthening the existing and creating new friendships.

Mtel supported the Regional Water Polo League for Veterans, organized by the Water Polo Club of Veterans “Incel” Banja Luka as well as race of European Cup in Kayak and Canoe on Wild Waters “Vrbas - m:tel 2017”.

Promoting true values, healthy lifestyle and sportsmanship, Mtel gave its support once again to the organization of the international cycling race “Belgrade – Banjaluka” 2017 as well as the Tenth International Swimming Rally “Banja Luka Open 2017” in which participated over 300 swimmers.

The Street Basketball Tournament “FIBA 3x3” organized by the sports organization “Basket bam” was held at the Krajina Square in Banja Luka. Mtel supported once again this competition, which is in the official calendar of FIBA Europe tour. A show matches of the children from the Center “Zaštiti me” and the “Rada Vranješević“ Home for Children were played with the aim of socialization of children through sport.

The Street Football Tournament in six cities, the event “Jelen kup 2017”, organized by the Civic Association Center for Education, Youth and Sports (CES) in Banja Luka with the support of the RS Football Association was held in six cities in the Republic of Srpska with the earnest help of sponsor, the Mtel Company. Together with event sponsors, the Association plans to rebuild, repair or make as many sports grounds in the cities where the event is taking place, which would remain as a lasting tribute to its residents. This year, the playground of elementary school “Ivan Goran Kovačić” in Banja Luka was renewed.

With the friendly assistance of Mtel, this year were held the twelfth tournament “m:tel OPEN 2017”, ITF tournament “Banjaluka Ladies Open 2017”, and the third Banja Luka m:tel half marathon, as well as “ATP Challenger Banjaluka 2017”.

The Mtel Company supported realization of the qualifying tournament for the European Water Polo Champions League, in which five renowned water polo clubs from Europe fought for the final competition for the Old Continent champion.

The volleyball player Ana Gajić is the best athlete of the Republic of Srpska for the year 2017, by the jury of the 63rd Selection of the Best Athletes in the Republic of Srpska in the organization of “Glas Srpske”. Mtel supported this important event, thus contributing to the affirmation of all sports disciplines in Srpska.


03.4 Ecology

In 2017, Mtel has initiated and implemented a number of activities in the field of environmental protection. In accordance with the practice of a responsible attitude towards the environment, the Mtel Company, by all means, puts a special emphasis on adherence to the law, as well as specific activities in the field of environment and people protection.

One of the activities, implemented in 2017, is the development of the information booklet – brochure “We Build a High-Quality Mobile Network”, which contains all the information about the conscientious business of our Company, high awareness of social responsibility and environment protection. Compliance with the standards of environment protection and legislation is our business imperative.

As a socially responsible Company, which invests in environment protection, Mtel has supported and participated in organization of VI Conference of the Institute of Regions of Europe (IRE) on mobility. It was organized by the RS National Assembly and the Institute of the Regions of Europe (IRE) under the title Banja Luka: “How to reach the status of environmentally sustainable city – sustainable and connected cities of Europe”.

In regard with the environment and people protection, as in previous years, thus in 2017, the greatest attention was paid to the base stations operations

and electromagnetic radiation that are emitted from antenna system. To this aim, in 2017 Mtel has cooperated with all Republic and state bodies in charge for monitoring and enforcement of obligations in the field of environment and people protection, mostly with the RS Ministry of Health and Social Welfare, the RS Republic Administration for Inspection Affairs RS (Health and Sanitary Inspection), the RS Institute of Public Health, as well as with the Communications Regulatory Agency of BiH.

During 2017, there were 150 reports made on systematic testing of electric field non-ionizing radiation level on the mobile telephony base stations, while 320 measurements of electromagnetic radiation level were conducted at base stations throughout Bosnia and Herzegovina.

In order to obtain permits for construction and operation of base stations, under the applicable legislation, 406 requests were sent to the Ministry of Health and Social Welfare.

In order to obtain a security certificate for operation of base stations in territory of Bosnia and Herzegovina, 254 Security Declarations were sent to the Communications Regulatory Agency.

The Republic Administration for Inspection Affairs, Health and Communal Inspection, continually oversaw the operations of the Mtel’s mobile telephony base stations, and carried out inspections at 24 locations of base stations in the Republic of Srpska.

During 2017, a contract was signed with a company that is the operator for packaging waste in the Republic of Srpska, for the transfer of obligations related to the management of packaging and packaging waste. Better results in the collection and recycling of packaging waste in the RS, and therefore nature preservation are expected from this contractual relationship.

In order to protect the environment, in 2017 Mtel has been continuously conducting internal and external campaign for rational use of paper that is for using electronic bills instead of the printed ones. Activities regarding the proper disposal of obsolete and defective electronic equipment, and damaged phone were also continued.

The amount of soot ejected through the chimney into the air was measured on all Company’s facilities, where boiler rooms are located. The noise produced by the cooling systems was also measured on need basis.


03.5 Employees

Endeavour in continuous care for the employees marked the year 2017 in Mtel with gathering around common corporate values: commitment to customers, well-coordinated team, constant growth and company development, orientation towards changes, all with the aim that our employees would be the first ambassadors of the Company. These values are created as part of activities to define the corporate culture. Thus, the employees declared which values they consider to be important for the Company and working environment, so they would be able to make their greatest contribution.

In an effort to strengthen more internal communication and collaboration, the internal “m:akademija” became a formal gathering place for employees in the integration process, where the exchange of knowledge and experience makes a significant contribution to strengthening the cooperation. “m:akademija” spread knowledge even outside the Company, through cooperation with the School of Electrical Engineering in Banja Luka, giving presentations for students in the m:teme (m:topics) project, conveying the experience from the working environment to future generations of engineers of various profiles in the ICT industry.

Supporting development of employees as well as improving satisfaction and motivation has been continued in 2017 through numerous education and professional trainings of employees in the Company.

Significant anniversaries are marked in 2017 – 20 years of the company’s operations , 18 years since we provide mobile telephony services to our customers, as well as 10 years since we operate under the Mtel brand within the Telekom Serbia Group. Internally, the anniversaries are marked with an exhibition of technological development and brand development, as well as exhibition of portraits, personal stories of 23 colleagues who participated in the Company’s building up and witnessed its development.

Employees promote humanity as a role model through a Voluntary Blood Donors’ Active, which has been supported and helped by the Mtel Company for years.

AWARDS AND RECOGNITIONS

04


04.1 Awards andRecognitions

In the past ten years our Company has been a donor of various socio-beneficial projects, which is a testament that true values and ideas may always rely on the friendship of our Company. Year after year numerous prizes and awards show that our Company is on the right track to affirmation of right values and promotion of events that enrich our lives.

Recognition for Significant Support to the Chamber and Contribution to Economic and Social Development

At the ceremony on the occasion of its 115 anniversary the Representatives of the Chamber of Commerce and Industry of Banja Luka Region presented awards and plaques to meritorious companies and individuals from this region. Mtel has received an award for special contribution to the work of the Chamber of Commerce and Industry of Banja Luka Region, as well as the development of the local economy and society.

Plaque for the Responsible Taxpayer in Telecommunications and Information Technologies Sector

At the event held in the organization of the Government of the Republic of Srpska and the RS Union of Employers’ Associations in Banja Luka, titled “Together for Stronger Srpska“, the RS Prime Minister Željka Cvijanović presented the plaque for responsible taxpayer in telecommunications and IT sector to the Mtel’s CEO Marko Lopičić. This plaque represents the support and gratitude to the business sector, especially to those taxpayers who, like Mtel, respect the laws and pay taxes and contributions, which certainly affect the macroeconomic trends, market development and society in general.

Appreciation for Successful Cooperation and Contribution in Building the System of Protection and Rescuing People and Property in Bosnia and Herzegovina

On the occasion of 1 March, the International Day of Civil Protection, in Sarajevo was held a ceremony at which the Federal Civil Protection Headquarters presented awards for achievements in the field of protection and rescue operations during 2016 to individuals and collectives, legal entities, social and other organizations and associations. On this occasion, the Mtel Company was awarded for successful cooperation and contribution to the building the system of protection and rescuing the people and property in Bosnia and Herzegovina.

Awards and Recognitions in 2017

Appreciation for the Support and Assistance

in Implementation of Activities and Projects

of the Parents of Preemies Association in

RS “Tinies”

Plague for the Responsible Taxpayer in

Telecommunications and Information

Technologies Sector

Plaque of the Kayak Canoe Club “Vrbas m:tel” for Friendly

Support

Appreciation for Successful Cooperation

and Contribution in Building the System of

Protection and Rescuing People and Property in Bosnia and Herzegovina

Recognition for Contribution to the

Trafficc Safety Improvement and the

Work of the RS Agency for Traffic Safety

Recognition for Significant Support to

the Chamber and Contribution to

Economic and Social Development


Recognition for Contribution to the Traffic Safety Improvement and the Work of the RS Agency for Traffic Safety

“Be smarter than your smartphone! Don’t use the phone while driving!” is an educational campaign designed with the aim of improving the traffic safety and care about people’s lives. It was realized by the Ministry of Transportation and Communications of the Republic of Srpska, the RS Agency for Traffic Safety, RS Automobile Association and Mtel. This year Mtel was again awarded the recognition for supporting the work and implementation of various activities of the RS Agency for Traffic Safety.

Appreciation for the Support and Assistance in Implementation of Activities and Projects of the Parents of Preemies Association in RS “Tinies”

On the occasion of the Day consecrated to Preemies, Mtel was awarded the Appreciation for the Support and Assistance in Implementation of Activities and Projects of the Parents of Preemies Association in RS “Tinies” for participation and generous support and raising awareness about the problem of premature birth.

Plaque of the Kayak Canoe Club “Vrbas m:tel“ for Friendly Support

On the occasion of 70th anniversary of the Kayak Canoe Club “Vrbas - m:tel”, a ceremony was held in Banski Dvor in Banja Luka. The Mtel Company herewith received a plaque, appreciation for friendly support to this club, proudly carrying its name.

05.1 Customers in 2017

05.2 Fixed Telephony

05.3 Mobile Telephony

05.4 Integrated Services Users

05.5 ADSL Users

05.6 IPTV Users

CUSTOMERS

05


05.1 Customersin 2017

MOBILE TELEPHONY USERS (in million)

Total no. of mobile telephony users

FIXED TELEPHONY AND INTERNET USERS (in thousand)

Total no. of fixed telephony users

Total no. of ADSL users

INTEGRATED SERVICES USERS (in thousand)

Total no. of integrated services users

TRAFFIC (mill. minutes)

Traffic in the fixed telephony

Traffic in the mobile telephony

MARKET SHARE

Market share of fixed telephony in BiH

Market share of mobile telephony in BiH

Market share of broadband in BiH

Customers, Traffic and Market Share

2016

1,30

251

129

85

609

1,044

33,06%

38,30%

19,55%

2017

1,31

235

134

97

523

1.084

32,24%

38,50%

19,65%

% change

0,1%

-6,5%

3,8%

14,9%

-14,1%

3,8%

2016 2017

134.051

129.149

ADSL users (in thousand)

2016 2017

97.135

84.545

Integrated services users (in thousand)

In 2017 services of our Company have been improved and enhanced in order to attract new customers, and retain and increase the satisfaction of the existing ones.

The result of improved services with the constant development of multimedia services and advanced TV functionalities, improved IPTV content and fixed and mobile telephony services is the customer base of 1,6 million customers.

The continuous growth of customer base in the business year 2017 is realized in the segment of integrated services, ADSL and IPTV services.


05.2 FixedTelephony

The characteristics of the fixed telephony market in 2017 are the same as in the previous years, with the trend of decrease in average income and traffic per user i.e. ARPU and ATPU.

The migration of fixed telephony customers to integrated services packages is one of the strategic guidelines of our Company, which affects the preservation of the fixed telephony market and creates additional value for the operator, but also for customers.

Mtel offers its customers fixed telephony services as a standalone service or as a service within the integrated services package.

In the market of Bosnia and Herzegovina, Mtel is the only one with the prepaid services offers in fixed telephony, which use more than 16 thousand users.

As at 31 December 2017, the number of the fixed telephony customers is 235.270, out of which 85,2% relates to the residential users, including POTS, ISDN BRI, integrated services users with the fixed telephone, CLL connections and prepaid fixed telephony users.

Other 14,8% of the total number of the fixed telephony customers relates to the business users, in whose structure the highest growth is recorded in the IP Centrex services user number, with 12.774 or 36,8%.

The number of business users increased by 6,32% compared to the previous year.

The realized traffic in the fixed telephony is 523.005.356 minutes, out of which 79,9% is related to the residential users’ traffic and 20,1% to the traffic generated by the business users.

Structure of Fixed Telephony Customers 2017

0,1%

14,7%

49,6%

35,6%

Business usersintegrated

Business usersnon-integrated

Residential usersnon-integrated

Residential usersintegrated


05.3 MobileTelephony

Mtel has been recognized in the market as a provider of high-quality mobile telephony services, which with its offer follows the world trends and provides the customers with the highest quality prepaid, postpaid, VPN, M2M and Quadro services.

During 2017, a promotional tariff models were introduced within which the customers were granted with significantly greater amount of free traffic, subscription discounts, and most attractive models of mobile phones with the installment sale possibility.

In the business users segment, in the second half of 2017 bonus of mobile Internet in the “m:biz” tariff model is increased and created additional “m:biz” tariff model m:biz Start Net 50+. In addition, it is possible to introduce virtual user tariff model ”Moj Mix”, based on which the “m:biz” tariff model singled out as a dominant in the Total Group offer.

As at 31/12/2017, the total number of mobile telephony the customers is 1,31 million, out of which, there are 364.578 postpaid and 940.514 prepaid users.

In the total number of mobile telephony customers, the most significant growth was registered within the postpaid subscriber base by 19 thousand users, given that one of the Mtel’s objectives in the mobile segment is migration of prepaid users to postpaid tariff models.

During 2017, numerous promotional campaigns were made for prepaid users, in which they were offered tariff plans with different combinations of minutes, messages, and mobile Internet.

In addition to selling services packages without contractual obligations, Mtel offers its customers the opportunity to purchase handsets in service package in 12 or 24 monthly installments.

The traffic realized within the mobile telephony is 1.083.732.144 minutes, which is for 3,8% higher, relative to the previous year. Significant is the growth in the postpaid traffic of tariff model users with significant number of free minutes included in the subscription.

Structure of Mobile Telephony Customers in 2017

27,9%

72,1%Prepaid

Postpaid

2016 2017

1,3 1,3

Total Number of Mobile Telephony Customers in 2017 (in million)


97.1352017

84.5452016

78.0492015

67.3352014

05.4 Integrated ServicesUsers

Mtel offers its customers various services in the context of multiple packages, tailored to the needs of users who incorporate various combinations of fixed and mobile telephony, Internet access services via ADSL and IPTV services. Integrated services retain a good market position and extend the lifespan of fixed telephony.

Integrated services are subject to constant improvement, in terms of service packages content, marketing activities and providing the best possible offer of phones and other smart devices.

Within a package, users are provided with flat traffic in fixed telephony towards the Mtel network, the choice of a friend number, mobile telephony number with more favorable conversation prices, the ability to choose the desired ADSL services speed, and other benefits.

As at 31 December 2017, the total integrated services user number is 97.135, which is 14,9% more, relative to the previous year.

Within the framework of integrated services the highest growth in 2017 is recorded with Trio and Quadro packages user number for 22,3% and 41,2% respectively compared to the previous year, thanks to significant marketing campaigns, TV content offer, especially sports channels.

When it comes to TV users, it is offered for both residential and business customers in the integrated services segment, provided that this service is available only to residential customers in the form of an integrated package. At the same time, in the TV customer base, a much higher proportion have residential customers – 99% compared to business users.

Total Number of Integrated Services Users per Year


05.5 ADSL users

During 2017 the trend of improving the data transfer services offer was continued, primarily in the provision of ADSL services, increasing access speeds by introducing VDSL+2 vectoring technologies, building FTTH, and the introduction of new packages designed for different categories of users.

Number of ADSL users as at 31/12/2017 amounted to 134.051, which increased by 3,8% relative to the year 2016. Significant participation in the customer database have ADSL service users within integrated services package, forming the base of 63,6%.

The user number growth in 2017, relative to the previous year, is the result of increase in the flow rate of the ADSL service, faster connection realization, good and free technical support, content non-filtering, ADSL flat migration on integrated ADSL users, and flat-rate tariffing.

Total number of ADSL Users per Year

134.0512017

129.1492016

127.0852015

124.1032014


05.6 IPTV Users

IPTV service is a platform for offering television programs and additional contents, such as video library, and an electronic program guide.

The basic IPTV package, in addition to previous offers of Arenasport channels, supplemented with six new Sportklub channels that are provided to users at no additional charge.

The total number of IPTV users as at 31/12/2017 is 74.692. The IPTV users number records growth trend from year to year, which is in line with the popularity of IPTV service, which Mtel began to provide in 2010.

Mtel continues with upsell crossings trend, which confirms the positive trend in retaining users with appropriate combinations of promotional campaigns that will include subsidies on monthly subscription and hardware, as well as the positive effect of the distribution of new TV channels.

Mtel has consistently offered to its customers LCD TV models from renowned manufacturers with excellent characteristics, following global trends, as well as competition offer, ensuring the availability and accessibility of different models.

For the segment of business customers, we offer Hotel IPTV solution service, which, in addition to IPTV service usage, provides an administrative portal that allows check-in, check-out.

06.1 Financial Results in 2017

06.2 Operational Segments

06.3 Financial Instruments

06.4 Financial Risks Management

2017 FINANCIAL REVIEW

06


06.1 FinancialResultsin 2017

Total income

Total expenditures

EBITDA margin

EBIT margin

Gross profit

Net profit

Total assets/equity and liabilities

Equity

CAPEX

Share of CAPEX in business income

Number of employees

Key Business Operations Indicators in 2017

2016

447,77

369,90

39,26%

16,98%

77,86

70,17

856,03

677,27

105,68

23,76%

2.143

M BAM

M BAM

M BAM

M BAM

M BAM

M BAM

M BAM

2017

427,22

360,40

38,91%

15,15%

66,82

60,05

843,63

672,95

75,87

17,89%

2.137

% change

-4,6%

-2,6%

-14,2%

-14,4%

-1,4%

-0,6%

-28,2%

-0,3%

The business year of 2017 is marked with the net profit of BAM 60,05 million, primarily due to the 2,6% lower realization of expenditures, relative to the year 2016.

The EBITDA margin in 2017 is on the level of 38,91%, while the EBIT margin is on the level of 15,15%.

In the total realized revenues of BAM 427,22 million in 2017, the revenue from the mobile telephony participates with 58,1%, while the fixed telephony and Internet revenue participates with 41,9%.

In 2017, within the target actions, the prepaid users have been migrated to some of the offered postpaid tariff models. The “Moj Mix” tariff model was enriched with attractive models of telephones, as well as the traffic bonuses, which influenced the customer base growth thus also the growth of revenues on such basis.

Assets

Balance Sheet Structure (in million BAM)

17,0% 16,8%

31/12/2016 31/12/201631/12/2017 31/12/2017

Current assets Non-current assets

Equity and liabilities

Short-term liabilities Long-term liabilities Equity

5,2% 4,4%

83,0% 83,2% 79,1% 79,8%

15,7% 15,8%


The most important growth within the mobile telephony revenues is recorded in the revenues from subscription of 8,6%, and revenues from sale of the mobile telephony products of 20,6%, relative to the year 2016.

Continuation of growing trend in the integrated services user number in 2017, is the result of an attractive offer of packages with higher ADSL service speed, enriched TV channels offer and significant bonuses in the form of the subscription discount, resulted in the integrated services revenue growth of 7,1%, relative to the year 2016.

The total expenditures have continued to decrease in 2017, and are BAM 360,4 million, which is 2,6% lower relative to the previous year.

In the 2017 total expenditures structure, the mobile telephony costs participate with 58,7% while the participation of the fixed telephony and Internet costs is 41,3%.

Given the past five years, the lowest expenditures were realized in 2017, this having been the result of a more efficient management and permanent cost control.

A significant category that records a 5,2% decrease in the year 2017, relative to the year 2016, is related to the maintenance costs.

Revenues from sale of the mobile telephony products

2016 2017

Maintenance Costs

2016 2017


06.2 Business OperationsSegments

According to the segment, the fixed telephony revenues are BAM 179,08 million, and the mobile telephony revenues are BAM 248,14 million.

At the end of 2017, Mtel has over 235 thousand of customers in the fixed telephony and 134 thousand of ADSL users. Number of the integrated services users is over 97 thousand, which is 14,9% higher, relative to the previous year.

In the year 2017, the fixed telephony expenditures are BAM 148,94 million, while the expenditures in the mobile telephony are BAM 211,46 million.

The postpaid customer base growth of 5,1% has resulted in the number of almost 205.000 postpaid service users. The VPN user number is 96.000, which represents an increase of 1,1%. The M2M service is used by over 50.000 customers, while the number of the M:net service users is over 6.000.

The most important capital investments in the fixed telephony in the course of 2017, are realized in the cable transport network and access network and equipment, while the most important capital investments in the Internet are realized in the sphere of terminal equipment.

The most important investments in the mobile telephony have been made into the wireless access network, construction of mobile telephony objects and services and service systems in the mobile network.

Income

179.1

148.9

30.1

M B

AM

Expenditures

248.1

211.5

36.7

Gross profit

Fixed telephony segment

Mobile telephony segment

Fixed and Mobile Telephony Segment in 2017


06.3 FinancialInstruments

Capital Management

There is no formal framework for the Company capital risk management. Mtel’s Management Board considers the capital risk on the basis of risk minimization and in belief that the Company will be able to maintain the business continuity principle, at the same time maximizing the shareholders’ profit, through the debt and capital optimization.

Mtel’s capital structure includes credits, cash and cash equivalents, and the capital consisting of share capital, reserves and accumulated profit. The Company’s Management Board reviews the capital structure on need basis. Following such review, the Company balances the capital structure through new long-term investments, as well as by taking new credits or by purchasing the existing ones. The overall capital management strategy remains unchanged.

Significant accounting policies, related to the financial instruments, are thoroughly described in the Mtel’s financial reports.


06.4 Financial RisksManagement

In its regular business operations, Mtel is exposed to certain financial risks in various forms, as follows: market risk, liquidity risk and credit risk. Risk management is directed towards minimizing potential adverse effects on the Mtel’s financial status and business operations in the quite unpredictable financial markets.

Risk management is defined by the Company’s accounting policies. Mtel does not enter into transactions with derived financial instruments (derivatives) such are interest rate swaps or forwards. Also, in the business year 2017, Mtel has not performed any transactions with the financial instruments.

Market Risk

Market risk includes the risk of the foreign currency exchange rate fluctuation, risk of the interest rate change and risk of the capital prices changes respectively.

• Risk of the foreign currency exchange rate fluctuation - although Mtel performs a part of its transactions in the foreign currency, the Management’s opinion is that it is not exposed to any significant risk of the foreign currency exchange rate fluctuation in the course of its pursuing the activities in the country and abroad, since the business transactions are performed mostly in the local currency (convertible mark -BAM), as well as in EUR, to which the convertible mark is related by the fixed exchange rate (1 EUR = 1,95583 BAM).

• Risk of the interest rates change – Mtel is exposed to various risks which, through the changes of the interest rates level, affect its financial position and cash flows. Given that Mtel does not have any significant interest-bearing assets, the income is quite independent in terms of the market interest

rates changes. Mtel’s risk of the interest rates change arises primarily from the long-term loans received from the suppliers. The changeable interest rate loans expose Mtel to the cash flow interest risk, while the fixed interest rate loans expose Mtel to the risk of changes in the interest rate fair value. In the year having ended on the day of 31 December 2017, most of the liabilities under the loans had variable interest rates, related to the EURIBOR. The liabilities under the changeable interest rate loans were mostly in foreign currency (EUR).

• Risk of the capital value change – in 2017 reporting period, Mtel was exposed to certain risk of changes in the registered securities prices. The mentioned investments are held for strategic purposes, rather than for daily trading, and they are not subject to active transactions. Also, Mtel is exposed to the risk of its products price change, due to its facing an intensive competition in the field of telecommunications.


Liquidity Risk

Liquidity management is centralized on the level of the Mtel Company. The responsibility for the liquidity rests with the management, which has established specific procedures related to the short-term and long-term liquidity risk. Mtel manages its assets and liabilities in the way that ensures the fulfillment of its obligations at all times.

Mtel has a sufficient amount of high-liquidity assets (cash and cash equivalents) at its disposal, as well as a continuous inflow of funds from realization of the services, which enables it to service the obligations in due time. Mtel does not use any financial derivatives.

For the risk management purposes, Mtel has adopted the financial policies that define dispersion within the decision-making levels in the process of certain goods/services procurement. This dispersion has been made by establishing the limits to which the individual persons, or the bodies of Mtel, may decide on the particular procurement.

Credit Risk

Credit risk is related to the risk where the other party does not perform its contractual obligations towards Mtel, which will result in Mtel’s financial loss. Mtel has adopted the policies for monitoring of the partner’s credit standing, as well as for requesting certain warranties (collaterals) where possible, all with the aim of reducing the potential financial losses risk, caused by non-performance of specific contractual obligations.

The credit risk arises in relation with the receivables from legal entities and physical persons, cash and cash equivalents, deposits with banks and financial institutions, as well as the commitments. Mtel is exposed to the credit risk to certain level. The credit risk security was established by undertaking certain measures and activities on the Mtel’s level.

Mtel does not have a significant receivables-related credit risk concentration, since it has numerous mutually non-related customers with small amount of respective debts. Along with suspension of the services, the following collection mechanisms are also used: debt re-programming, settlement with legal entities, legal actions, out of court settlements, etc.

Repayment of the credits extended to the Mtel’s employees is secured by application of the administrative measure, i.e. reduction of the salary for the particular amount. If leaving the Company, the employees regulate the manner of the outstanding debt repayment at the moment of their actual leaving from Mtel.

07CAPITAL INVESTMENTS


07.1 CapitalInvestments

In the course of 2017, several strategic investments have been realized, having ensured a reliable provision of the services, introduction of new services and the basis for further enhancement of the portfolio of Mtel’s services it provides to the customers in all segments of the telecommunication services.

Along with the realized investments, continuous activities on the fixed and mobile network modernization are underway, with the aim of ensuring a better quality and versatility of the services in the market.

The total realized investments in 2017 amount to BAM 75,87 million.

Capital Investments in the Fixed Telephony

The greatest capital investments in 2017 have been realized in the fixed telephony segment, in the amount of BAM 29,68 million. The most important investments are related to cable transport and access network as well as the procurement of the relevant MSAN and GPON access equipment.

Planning, engineering and construction of the Mtel’s cable access network in 2017 have followed the customers’ requests for high quality broadband

services by shortening of the customers’ local loop on the existing cable infrastructure, by which the customers are provided with 30 Mbps speed, as well as constructing of the FTTx optical access network. Several projects of construction of the backbone and regional optic fibre links have been also realized.

In 2017, projects in construction of the optical access network in the Executive Units (EUs) in Prijedor, Brčko, Istočno Sarajevo for the city of Pale, and Trebinje respectively, with the largest project for access network modernization, realized in Nevesinje. The modernization of the FTTx optic access network is in progress on the territory of the municipalities covered by the EU Doboj. The construction of the optic access network has continued in the City of Banja Luka, and the ground-works have commenced for the cable ducts on the locations where Mtel did

not have them, which provides for a great progress in realization of the Banja Luka optic access network and establishing of the relevant infrastructure for provision of the quality broadband service.

In 2017, the preparations and works for enhancement of the OTN/DWDM network have continued. Optimization of the fixed backhauling has been done in the form of optimization for traffic aggregation, formation of new aggregation points, breaking of subtending, formation of optic rings through the aggregation points and a proposal for construction of new optic directions.

In the sphere of the core network, the project of the application servers capacity enhancement has been completed, as well as the application servers supervision system installation.

75,872017

95,282014

90,40

Capital Investments per Year (in million BAM)

105,682016

107,052015


Capital Investments in the Mobile Telephony

The capital investments in the mobile telephony in 2017 have been realized in the amount of BAM 23,70 million. The most important investments are realized in the wireless access network and construction of mobile telephony objects, services, service systems, and core mobile network.

For the purpose of further enhancement and modernization of the existing mobile network, the delivery of the RAN equipment is very important, as well as construction of the mobile telephony wireless access network facilities. In the course of 2017, a total of 163 mobile telephony base stations have commenced operations, and the coverage, capacity and service quality have been enhanced through introduction of 3G on 900 MHz, introduction of F2 and F3 on 2100 MHz, while the LTE1800 stations equipment installation has been preformed on the total of 120 locations. The mentioned equipment will be put into operation when the Communication Regulatory Agency (CRA) issues the required licenses. At the end of 2017, the total number of base stations was 1.327 and the number of pico repeaters was 82.

Following the customers’ requests, continuous improvement of the wireless transport network modularity and flexibility level have been performed in the form of improvement of the possibilities for capacity and/or functionality enhancement (QoS, bandwidth on demand, Multiband i.e. Carrier-Aggregation, and alike).

In the core mobile network, it has been performed the PS Core system modernization, by which it was enabled the geo-redundancy of the system for the packet traffic in the mobile network.

Along with the above, one of the most important projects is a complete replacement of the messaging subsystem with entirely new, virtualized VAS platform, with performed geo-redundancy, mGo application has been enhanced with new functionalities, while mPay services have provided for the money transfer among the users, Bill Payment and Presentment, as well as the payment by use of the QR Code. The project of the CS Core upgrade and enhancement has commenced with the aim of getting ready for the commercial launching of LTE/4G.

Capital Investments in the Internet

Capital investments in the Internet are realized in the amount of BAM 10,71 million in 2017.

The majority of the investments into Internet, in 2017, relates to procurement of the terminal equipment

for business and residential customers (IAD, STB, ONT, VoIP gateway equipment, routers and other user equipment) as well as to testing of new types of terminal equipment for the purpose of its installation at the end users’.

In 2017, the 100G links have been realized between the MPLS and ISP network, as the precondition for providing the Internet users with higher capacities. In line with the access network development, and with the aim of providing the redundancy, it has been performed the installation of new MPLS edge routers on new locations.

It has been performed a strategic improvement and enhancement of the systems for signaling supervision and quality control. Also, an extremely comprehensive integration of large number of systems into the Central Fault Management has been performed.


Following the trends of the growing customer number, through a series of projects, purposed for improvement of the Integral System for IPTV Contents Distribution, the capacities of the IPTV STB system have been enhanced and new functionalities implemented, in order to enable diversification of the Mtel’s offer.

Capital Investments in the Information Technologies

Capital investments in the information technologies are realized in the amount of BAM 8,85 million in 2017.

In the course of 2017, the activities have been aimed at constant following of the internal and external users’ needs, provision of a quality, timely and reliable IT service as well as a more thorough orientation towards sales and sales support.

The presentation part of the Portal has been improved in line with the trends, and the online shopping service implemented, by which Mtel introduced the web as a sales channel. The product catalogue management has been optimized at mtel.ba, as well as the management of the purchase orders coming from the web shop, Contact Center and Telesale.

With the aim of faster, simpler and more efficient services realization, new solutions have been introduced for provision of the Open Biz Hotel TV service, new convertor for IP Centrex has been realized, having provided for free of charge calls within the group, regardless of dialing extension or a full number, which has contributed to the customer satisfaction.

Also, integration of retail application and eVoucher Platform of Mtel Austria have been realized, which enabled for top-up of the Mtel Austria numbers from Mtel BiH points of sale.

In the course of 2017, creation and implementation of ICT solution has been performed for the purpose of satisfying the growing ICT market and Virtual Data Center service has been realized, as well as the network-security services: Firewall and Load Balancer. In June 2017, Mtel entered the Microsoft CSP (Cloud Solution Provider) program, which enabled a direct sale of the Microsoft Cloud services to the Mtel customers, primarily in the sphere of business collaboration, infrastructure and security.

Along with above, the activities have been performed in the sphere of IT security, in line with the ISO Standard and positive practice. With adoption of the internal acts and rulebooks, there have been established the general principles and basic conditions for use of the Company’s IT resources and the employees’ awareness level has been raised, which increased the security coverage in the Company.

08HUMAN RESOURCES


2.1552014

2.1492015

2.1432016

2.137 2017

08.1 HumanResources

The total number of Mtel’s employees, as at 31 December 2017, is 2.137 that is six staff less, relative to the end of the previous year.

Out of the total headcount, there are 1.311 or 61,3% males, whereas there are 826 or 38,7% females.

In terms of the staff qualification structure on the Company level, the secondary school certificate holders have the greatest participation (54,8% or 1.172 staff). The second most numerous category are the university degree holders (38,6% or 825 staff), which also includes the master’s and doctor’s degree holders.

In terms of age, the major share in the total headcount has the 41 – 50 age group with 40,1% or 857 staff, as well as the group of over 50, with 31,4% or 670 staff.

Education

In the course of last year, various types of training have been organized with the aim of business processes improvement through: improvement of communication, initiative for change of prospective, improvement of the managers’ excellence, and improvement of the employees’ competences.

Total Number of Staff per Year

Having in mind a long-lasting experience in the staff education and knowing the internal potential of the Company to develop the educational activities in line with its own business needs, the priority was set to organization of internal trainings and launching of the Internal academy – “m:akademija” activities.

Following the annual education plan, we have organized a large number of in-house and internal trainings for the management and the sales staff. Two team buildings have also been organized for the Executive Board members and newly recruited staff.

Internal Trainings

The first year of the Internal Academy activities is organized in two semesters. It has been realized a total of 69 trainings, for over 1.200 participants,

and 42 internal trainers have been engaged in the realization. We have equipped 14 training rooms thus the activities have also been performed in the Executive Units’ premises, which has improved the organization of internal trainings outside of Banja Luka as well.

Electronic Training (LMS)

Quality Management System, ISO 9001:2015 and Implementation of the Information Security System to all processes in the Mtel a.d. Banja Luka, in line with the requirements of the International Standard ISO/IEC 27001:2013, have been organized for all employees of the Company.


Activities for Improvement of the Company’s Organizational Culture

In 2017, we have continued the Company corporate values promotion and realization of the activities under the Program for Change of the Company’s Organizational Culture.

In line with the adopted Program for Change of the Company’s Organizational Culture, in 2017, we have introduced corporate values in the selection, remuneration and onboarding process respectively. The Pilot Project has also been launched for profiling the competences of a group of the Company managers, in line with the required change of the organizational culture. Within the Project, the employees in the Human Resources Sector have attended the education in coaching techniques, as a support to the managerial competences development.

Onboarding and Selection

In 2017, an agreement was signed with the School of Electrical Engineering Banja Luka, under which the internal m:akademija employees and trainers enhanced knowledge outside the Company, through presentations for the students under the roof project entitled m:teme (m:topics), thus having transferred the experience from the working environment to the future generations of various profiles of the ICT industry engineers.

Selection of candidates has been continuously improved by introduction and use of the psychological personality tests in the work environment, and by interviews based on the corporate values. New Rulebook on the Student Scholarship Grants, as well as the announced scholarship grants competition for the eighth generation of students, are aimed at providing a more viable channel for recruitment of the electrical engineers in the future.

Other Activities

In 2017, a series of research activities has been realized with the aim of a better planning of the Company staff development. Thus the research has been performed in regard with the employees’ satisfaction, as well as the research related to motivation and evaluation of the corporate culture of the Company.

6,8%under 30 years

Staff Age Structure in 2017

38,6%

0,1%

2,2%

4,3%

54,8%Highly skilled

40,1%41 to 50 years

PH. D, M.SC, University

degree31,4%

over 50 years

21,8%31 to 40 years

Skilled

Secondary school

Two-year college degree

INFORMATION TO INVESTORS

09


09.1 Information toInvestors

The Banja Luka Stock Exchange turnover in 2017 is characterized by lower volume of share trade, which is in line with the decreasing trend of profitability in majority of the companies whose shares are traded at the BLSE. The largest participation in the total SE turnover is of the transactions involving RS bonds and treasury notes.

Pursuant to the Law on Securities and Rulebook on the Securities Registration and Transactions with the Central Securities Register, as at 15 April 2003, the Mtel’s share capital was divided into 260.230.389 regular shares with the face value of BAM 1.

The Mtel a.d. Banja Luka shares were first quoted at the Banja Luka Stock Exchange on 11 May 2004. As at 31 December 2016, the share capital value was BAM 491,38 million.

In the shareholders structure, the majority relates to Telekom Srbija, with 65,01% share in the total capital of Mtel. The Mtel shareholders structure on 31/12/2017 is presented in the chart below: Mtel Shareholder Structure 31/12/2017

17,7%

5,0%3,3%

65,0%Telekom Srbija

a.d. Beograd, Srbija

Othershareholders

Restitution fund Republic of Srpska

a.d. Banja LukaDUIF Kristal invest a.d.OMIF Future Fund

8,9%Pension Reserves Fund,a.d. Banja Luka


According to the Banja Luka Stock Exchange annual statistical report, 9,0% of the total realized turnover relates to Mtel, while 7,5% out of the total transaction number, realized within the regular BLSE turnover in 2017, relates to Mtel, which places it on the second position in terms of the regular turnover.

The average price of the Mtel’s share in 2017 is BAM 1,11 the minimum share price is BAM 1,03, and the maximum price is BAM 1,25.

On the last day of the Mtel’s shares trading in 2017, the share price is BAM 1,05.

The total number of the Mtel transactions in 2017 is 1.000, with the total value of BAM 5,33 million.

As at 31 December 2017, the market capitalization is BAM 515,95 million.

At the Shareholders Assembly session, held on 6 December 2017, it was passed the Decision on Payment of the Interim Dividend from the H1 2017 Profit, in the amount of BAM 25,42 million.

The interim dividend was distributed equally over all Company’s shares upon the principle – the same face value of BAM 0,052 per share.

Dividends Paid per Year (in million BAM)

Market Capitalization per Year (in million BAM)

2016

2016

2017

2017

63,5

515,9

71,0

501,2

10STATEMENT ON APPLICATION OF THE

CORPORATE MANAGEMENT STANDARDS


10.1 Statement on Application of theCorporate Management Standards

Mtel has its own Code of Conduct and Corporate Management, which stipulates the mechanisms for functioning of the the Company bodies’ and protection of interests in mutual relations of various stakeholders in the Company.

With established corporate principles in the Company, mechanisms for determining the aims have been provided, as well as the resources for their realization and monitoring of the effects, and a permanent and consistent controlling system created for the Company bodies’ work and protection of interests in mutual relations of the interested parties.

The Company’s aim is to improve its competitive capacities and provide a more favorable environment for the investment activities, with consistent application of the stipulated standards, as well as by proper and responsible management and supervision over business and managerial functions in the Company.

In the course of 2017, the Company has been applying the Corporate Management Standards and its own Code of Conduct thus having ensured an efficient application of the Company’s corporate management principles, related to transparent business operations, clearly defined operating procedures for important decision-making bodies’ work, avoidance of the conflict of interests, efficient internal control and efficient system of accountability.

With the aim of establishing high standards and realization of good corporate management, as well as transparent business operations, being the basis for protection of the shareholders, investors and other interested parties, the Company will continue to pursue the activities with social responsibility, recognizing the interests and positions of other stakeholders, and actively cooperate with all interested parties.

As a responsible and market-oriented company, in 2018, Mtel will apply fundamental principles of conduct, which will ensure the efficient application of the corporate management principles, related to the shareholders’ rights, equal treatment of the shareholders, role of the interested parties, disclosure and public availability of information, role and responsibility of the Boards, and make efforts in ensuring a long-term prosperity for the Company and its shareholders.

Mtel’s statement on harmonization of the organization and activities with the Code of Conduct, i.e. the corporate management standards, forms an integral part of this Report, and is published on the Company’s Internet site, under the Section „Investors“: http://www.mtel.ba and the Stock Exchange Internet site: http://www.blberza.com .

1111.1 Mtel Group Structure

11.2 Consolidated Financial Reports

11.3 Logosoft, d.o.o. Sarajevo

11.4 Mtel Austria GmbH

MTEL GROUP

Annual Report 201771 Annual report 201771

11.1 Mtel GroupStructure

As at 31 December 2017, within the Mtel Group there are the mother company - Mtel a.d. Banja Luka and two subsidiaries with 100% of the mother company share: Mtel Austria GmbH, with corporate seat in Vienna, and Logosoft d.o.o. Sarajevo.

MTELGROUP

MTEL, AD BANJA LUKA

Republic of Srpska, BiH

• Fixed telephony

• Mobile telephony

• Integrated services

• Internet

Austria

• Mobile telephony

BH Federation, BiH

• Fixed Telephony

• Mobile Telephony

• Integrated Services

• Internet

MTEL AUSTRIA GmbH

LOGOSOFT, DOO SARAJEVO


11.2 ConsolidatedFinancial Reports

The business year 2017 is characterized with the EBITDA margin of 37,35% and net profit in the amount of BAM 56,30 million.

The total expenditures on the Mtel Group level, in the amount of BAM 382,52 million, record a decrease of 2,1%, relative to the year 2016.

As at 31/12/2017, the business assets of the Mtel Group are BAM 841,45 million, which is 2,6% lower, relative to the day of 31/12/2016.

Total income

Total expenditures

EBITDA margin

EBIT margin

Gross profit

Net profit

Total assets/equity and liabilities

Equity

CAPEX

Number of employees

Key Business Operations Indicators in 2017

2016

463,80

390,85

37,74%

15,32%

72,95

65,50

864,33

668,90

107,32

2.250

M BAM

M BAM

M BAM

M BAM

M BAM

M BAM

M BAM

2017

445,58

382,52

37,35%

13,67%

63,06

56,30

841,45

660,83

76,41

2.252

% change

-3,9%

-2,1%

-13,6%

-14,0%

-2,6%

-1,2%

-28,8%

-0,1%

2016 2017

101,9

89,8

Integrated services users (in thousand)

2016 2017

1,3

1,3

Mobile telephony users (in million)

2016 2017

1,61,6

Total no. of users (in million)


11.3 Logosoft, d.o.o.Sarajevo

Company Background and Origin

The Company of “Logosoft d.o.o. Sarajevo” was founded in 1995 as a computer engineering company. The past 23 years of successful business have been characterized by innovations of various concepts and technologies, by which the Company is recognized as the leader at the contemporary, business information-communication solutions market. Since establishing, the Company has been expanding its services portfolio, from the Internet access services, over its own fiber infrastructure, to the fixed and mobile telephony services, IP television, network integration activities, software and business solutions, colocation and cloud services in its own Data Center, as well as the IT education.

Mission

Offer the latest, cutting-edge telecommunication and IT services, create extraordinary business and information-communication services, and provide our subscribers with the best value for their money, with continuous investments made into the services development and our employees’ education, as well as into the relationship with the end users.

Vision

Following the global trends, we create the contemporary business information-communication solutions, facilitate everyday communication and create a better living and business environment for the modern people.

Activities

Logosoft business platform unifies the services of permanent Internet links, connection of distant locations – VPN, fixed and mobile telephony, mobile Internet lease service, Office365 solution of server and office applications, local, global and hybrid cloud solutions and, as such, represents an excellent business, information-communication solution.

Development of various business solutions from the system integration domain, software development and establishment of the new generation Data Center, as well as the implementation of various solutions on the Microsoft platforms, have promoted Logosoft into a reputable business partner of many companies in BiH market. Several years of experience in the Microsoft Dynamics NAV and Microsoft Dynamics CRM solution implementation projects, distinguish

Logosoft both on the Bosnia and Herzegovina territory and in the region. The Logosoft Company is the only BiH Microsoft partner with Microsoft Silver ERP partner competence, which has a localization CfMD module for NAV 2016, as well as CfMD module for calculation of salaries for the BiH market.

”Logosoft Edukacija” is the first Microsoft-certified training center and certified VUE and Certiport test center, with greatest number of training courses in technical knowledge, required for IT professionals and programmers.

The Company employs 101 mostly highly educated young persons from BiH thus, thanks to the employees’ high knowledge and professional expertize level, each client is provided with the latest technical solution and technical support, which fully satisfies the business operations requirements.



Continuous support to development and promotion of culture, sport, art and education in Bosnia and Herzegovina, are the fundamental characteristics of corporate social responsibility in the Logosoft Company business operations and business policy. In 2017, they have supported and contributed to successful operations of the Sarajevo Philharmonic, Student’s Center Sarajevo and “Kamerni Teatar 55”. Having supported knowledge and education, Logosoft was the partner of the greatest IT Conference in BiH - Microsoft NetWork for 7th time, and 6th MSCommunity BiH conference, the most important gatherings of IT professionals from BiH and region. In 2017, the cooperation was agreed with the Faculty of Natural Sciences and Mathematics Sarajevo, by which Logosoft directly supported education process of young programmers and mathematicians. Development of economy and innovations is the global social success generator and, in order to support it, the Company has put its trust into the 8th “Sarajevo biznis forum” business and investment conference and 2nd “Sarajevo Unlimited” regional innovation forum. Logosoft has also supported “The Safer Internet Day“, with the aim of promoting the efforts and activities in prevention of the children and youngsters abuse on the Internet.

In continuous support to the “Pomozi.ba” Association, the Children’s Psychiatry Ward and Gastroenterohepatology Ward of the University Clinical Center Sarajevo, Association of the Persons with Children’s Palsy of the Sarajevo Canton, Association of Persons with PTSP - “Life“, and Special Sports Club “Drina” from Goražde in 2017, they have confirmed a true wish to improve the quality of life in the country by pursuing the activities with corporate social responsibility.


The year 2017 is characterized by investments made into a reliable, safe and available Data Center, which opened its doors in March 2017. Partnership with global cloud vendors – Microsoft and Cisco, and direct connections with the largest global Tier 1 parent providers, has enabled the Company to plan and work on joint implementation of the cloud-based services and high level of availability, reliability and stability of the services on the local and regional level.

With development of the Logosoft Data Center, the most contemporary facility of this type in BiH, and establishing of the service Backup as a Service, as well as with a prompt reaction to the customer needs, they have positioned themselves as an excellent partner in the field of contemporary security cloud-based technologies and collocation services. Logosoft information-communication platform, enhanced with cloud and colocation services, has been recognized as a perfect business solution, even for the most demanding companies.

In May 2017, the Logosoft Company acquired the Cisco Cloud and Managed Service Provider Master (CMSP Master) Certificate thus having confirmed the position of the regional leader in the field of cloud-based technologies and services. This Certificate is an official confirmation that the Logosoft Data Center has fulfilled all rigorous technical, security and organizational requirements for the Cisco partners that offer the cloud services based on the Cisco infrastructure solutions.

With establishing the MTS-SI Company in Belgrade in 2017, Logosoft has successfully enhanced its operation to the regional ICT market thus having made a significant step towards realization of the strategy for positioning of the company both within the MTS Group and in the global ICT market. The MTS-SI (full name: “mts sistemi i integracije”), deals with the system integration, implementation of software and business solutions, network integration and education. Thanks to its competences and certificates, and internationally recognized certificates held by its employees, Logosoft will guarantee a high level of professionalism and skills in all projects of the MTS-SI Company, regardless of their being local, regional or global ones.


11.4 Mtel AustriaGmbH

Company Background and Origin

The subsidiary - Mtel Austria GmbH, with the seat in Vienna, founded by Mtel a.d. Banja Luka, commenced its commercial operations on 1 October 2015, while this newly established company was registered with the relevant authorities of the Republic of Austria on 1 July 2014.

Mission

Creation of the most favorable and top-quality communication from any kind of mobile or fixed device under the optimum conditions in the market.

Vision

We link spaces and connect people, providing the improved regional and global connectivity.

Strategic Goals and Values

Under the corporate slogan Näher daheim!, we offer mobile telephony services, primarily purposed and tailored for customers in Austria, originally from Bosnia and Herzegovina, Serbia or Montenegro, those who often travel there or need a frequent communication with the people from these countries.

Regulatory Framework

Regulation of the telecommunication market in Austria falls within the competence of the Regulatory Agency – Rundfunk & Telekom Regulirungs (RTR), and is based on the Communications Law of the Republic of Austria. The Company of Mtel Austria, has been approved of the General and Special Conditions for Provision of the Prepaid, Postpaid and VPN Services in the mobile telephony, including also the prepaid, postpaid and VPN tariff plans.


The 2017 business operations of Mtel Austria are characterized by enhancement of the distribution network for sales of the postpaid services in Austria,

commencement of the postpaid services package sales through the distributors, start of sales of the duo service packages – mobile telephony plus TV, in cooperation with the GO4YU Company, and the preparations have also been completed for launching of the VPN services for the business users in the mobile network.

The customer number shows a rising trend in 2017, this being the result of more extensive use of services by the existing customer base, as well as by new users, generated particularly in the postpaid segment.


Mtel Austria GmbHFleischmarkt 1/6/12

1010 WienAustria

Tel: +4312051073194www.mtel.at

LOGOSOFT, d.o.o. SarajevoIgmanska 9, Bosna i Hercegovina

71120 Sarajevo – Novo SarajevoTel: +387 (33) 931 900Fax: +387 (33) 931 901

www.logosoft.ba

CONTACTS

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