Tender Offer Memorandum

TENDER OFFER MEMORANDUM

MEGAFON INVESTMENTS (CYPRUS) LIMITED
(A WHOLLY-OWNED SUBSIDIARY
OF PUBLIC JOINT STOCK COMPANY MEGAFON)
with respect to a proposed tender offer to purchase for cash up to 128,950,036 of the issued and outstanding ordinary shares, of RUB 0.1 nominal value per share (“Ordinary Shares”), including Regulation S and Rule 144A Global Depositary Receipts (“GDRs”), each representing one Ordinary Share, representing all of the issued and outstanding Ordinary Shares and GDRs other than Ordinary Shares or GDRs held by MegaFon Investments (Cyprus) Limited and certain major shareholders

of
PUBLIC JOINT STOCK COMPANY MEGAFON,
at a purchase price of US$9.75 for each Ordinary Share and for each GDR (the “Purchase Price”)

THIS TENDER OFFERWILL EXPIRE AT 5:00 P.M., LUXEMBOURG/BRUSSELS TIME (6:00 P.M., MOSCOWTIME, 4:00 P.M., LONDON TIME, 11:00 A.M., NEW YORK TIME) ON AUGUST 22, 2018, UNLESS THIS TENDER OFFER IS EXTENDED (THE “EXPIRATION TIME”).

Please note that The Depository Trust Company (“DTC”), Euroclear Bank N.V./S.A. (“Euroclear”) and Clearstream Banking, Société Anonyme (“Clearstream” and, together with DTC and Euroclear, the “Clearing Systems”), their respective participants and the brokers or other securities intermediaries through which GDRs are held will establish their own cut-off dates and times for the tender of the GDRs, which will be earlier than the Expiration Time.

THE TENDER OFFER AS SET OUT IN THIS TENDER OFFER MEMORANDUM IS SUBJECT TO IMPORTANT TERMS AND CONDITIONS, INCLUDING THE CONDITIONS LISTED UNDER “CERTAIN CONDITIONS OF THE TENDER OFFER”.

MegaFon Investments (Cyprus) Limited (“MICL”, “we”, “our” or “us”), a wholly-owned subsidiary of Public Joint Stock Company MegaFon (“MegaFon” or the “Company”), is inviting holders, other than AF Telecom Holding LLC and its affiliates (“USM Holdings”) and ZAO Gazprombank-Asset Management and its affiliates (“Gazprombank Group”, and together with USM Holdings, the “Major Shareholders”) and MICL, of the issued and outstanding Ordinary Shares and GDRs (the Ordinary Shares and GDRs, together, the “Securities” and each a “Security”, and the holders, individually or together, the “Securityholders” and each a “Securityholder”) to tender for cash all of the issued and outstanding Ordinary Shares and GDRs held by such Securityholders at a purchase price of US$9.75 for each Ordinary Share (to be paid in Russian rubles based on the exchange rate of the Central Bank of Russia (the “CBR”) effective on the date of the announcement of the results of the Tender Offer) and for each GDR (to be paid in U.S. dollars), upon the terms and subject to the conditions set forth in this Tender Offer Memorandum (the “Tender Offer”) and, in the case of Ordinary Shares, in the related Ordinary Shares Letter of Transmittal (the “Ordinary Shares Letter of Transmittal”) and, in the case of GDRs, the GDR Corporate Action Notice (the “GDR Corporate Action Notice”).

Securities Description

State Registration No./
Common Codes/ISIN Nos.

Number of Securities
Issued and Outstanding

Ordinary Shares

1-03-00822-J

620,000,0001

Rule 144A GDRs

CUSIP: 58517T100
ISIN: US58517T1007
CommonCode: 084894150
CFI Code:ESVTFA
SEDOL: B832YZ1

82,6182

Regulation S GDRs

CUSIP: 58517T209
ISIN: US58517T2096
CommonCode: 084894044
CFI Code: ESVTFA
SEDOL: B8PQQ77

92,604,0882

(1) Includes Ordinary Shares represented by GDRs.
(2) As of July 13, 2018.

NO GUARANTEED DELIVERY AND NO WITHDRAWAL RIGHTS

The principal trading market for the Ordinary Shares is the trading platform and exchange of Public Joint Stock Company Moscow Exchange MICEX-RTS (the “Moscow Exchange” or “MOEX”). The Ordinary Shares trade on the Moscow Exchange under the symbol “MFON”. On July 13, 2018, the closing price per Ordinary Share on the Moscow Exchange was RUB 504.00 (or US$8.11, using the MOEX closing ruble/dollar exchange rate in effect as of the same date). The GDRs are listed and trade on the main market of the London Stock Exchange (“LSE”) under the ticker “MFON”. One GDR represents one Ordinary Share. The GDRs are delivered by The Bank of New York Mellon, as depositary for the GDRs (the “GDR Depositary”) pursuant to the deposit agreement entered into between the Company and the GDR Depositary on August 24, 2012, as amended on June 2, 2014 and May 28, 2015 (the “Deposit Agreement”). On July 13, 2018, the closing price per GDR on the LSE was US$9.00.

On July 13, 2018, the Purchase Price represented a cash premium of US$2.03 and 26.3% per Ordinary Share to the 3- month volume weighted average price of US$7.72 for the period ending on July 13, 2018 (using MOEX daily closing ruble/dollar exchange rates in effect as of the respective period ending on July 13, 2018) and a cash premium of US$1.64 and 20.3% with respect to the closing price per Ordinary Share on the Moscow Exchange on July 13, 2018. On July 13, 2018, the Purchase Price represented a cash premium of US$0.98 and 11.1% per GDR to the 3-month volume weighted average price of US$8.77 for the period ending on July 13, 2018 and a cash premium of US$0.75 and 8.3% with respect to the closing price per GDR on the LSE on July 13, 2018. However, holders of Ordinary Shares should note that the Purchase Price for the Ordinary Shares will be paid in Russian rubles at the CBR exchange rate in effect on the date of the announcement of the results of the Tender Offer and that the exchange rate of the U.S. dollar against the Russian ruble is volatile. No assurance can be given as to the CBR U.S. dollar / Russian ruble exchange rate that will be in effect on such date.

Securityholders should note that the Purchase Price does not take account of applicable fees, expenses, taxes or other charges and the net proceeds actually received may be lower, perhaps significantly. Securityholders are urged to obtain current market quotations for the Securities.

To the extent permissible under applicable securities laws, each of the Dealer Managers (as defined below) and their affiliates may from time to time purchase, or enter into arrangements to purchase, Securities either as principal or agent before and during the period when the Tender Offer remains open for acceptance. Neither MegaFon, MICL nor any member of the MegaFon consolidated group expects to purchase Securities, other than pursuant to the Tender Offer, during the period in which the Tender Offer is open for submission of tenders, except that MegaFon and such other companies may use Securities in connection with financing and refinancing transactions, purchase such Securities in connection with such transactions and sell and purchase Securities to and from other members of the MegaFon consolidated group. In addition, in accordance with Russian law and pursuant to Rule 14e-5 under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”), affiliates of MegaFon that are not members of the MegaFon consolidated group and over which MegaFon does not exercise control and their respective nominees or brokers (acting as agents), and any advisor to MegaFon or any of its affiliates and any Dealer Manager in the Tender Offer or any of its affiliates, and any person acting, directly or indirectly, in concert with any such persons, may from time to time make purchases of, or arrangements to purchase, Securities other than pursuant to the Tender Offer, before or during the period in which the Tender Offer is open for submission of tenders, so long as those acquisitions or arrangements comply with applicable Russian law and the provisions of the exemption provided under Rule 14e-5 under the Exchange Act (“Rule 14e-5”). Any of the purchases referred to in this paragraph may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Information about such purchases will be disclosed as and if required by applicable securities laws.

The Dealer Managers and their respective affiliates may contact and communicate with institutional Securityholders regarding the Tender Offer and will not take any action in relation to, nor have any liability or responsibility for, communications with retail Securityholders regarding the Tender Offer. Communications with retail Securityholders with respect to tender procedures for the Ordinary Shares will be via JSC Independent Registrar Company (“IRC”) and with respect to tender procedures for the GDRs via the GDR Tender Agent (as defined below).

Emerging markets such as the Russian Federation are subject to greater risks than more developed markets. As a result, tendering Securityholders should familiarize themselves with such risks as well as make their own assessment of the merits and risks involved in participating in the Tender Offer, including investment, tax, legal and accounting matters.

Securityholders should be aware that the sale of Securities and receipt of the Purchase Price pursuant to the Tender Offer may have certain tax consequences, and are urged to consult at their own expense with their tax advisors with respect to those consequences in considering the Tender Offer. Securityholders are liable for their own taxes and have no recourse to MICL, any Dealer Managers, GDR Tender Agent, with respect to taxes arising in connection with the Tender Offer. For certain U.S. federal income tax consequences, please see Section 9 “Certain U.S. Federal Income Tax Consequences”.

NONE OF MICL, MEGAFON, THEIR RESPECTIVE BOARDS OF DIRECTORS OR MANAGEMENT, THE DEALER MANAGERS (AS DEFINED BELOW), IRC, NRC STOCK MARKET (AS DEFINED BELOW), THE GDR TENDER AGENT (AS DEFINED BELOW) OR THE GDR DEPOSITARY MAKES ANY RECOMMENDATION AS TO WHETHER A SECURITYHOLDER SHOULD OR SHOULD NOT TENDER SECURITIES PURSUANT TO THE TENDER OFFER. YOU MUST MAKE YOUR OWN DECISION AS TO WHETHER TO TENDER YOUR SECURITIES AND, IF SO, HOW MANY SECURITIES TO TENDER. IN DOING SO, YOU SHOULD CONSULT YOUR OWN FINANCIAL, LEGAL AND TAX ADVISORS, AND READ CAREFULLY AND EVALUATE THE INFORMATION IN THIS TENDER OFFER MEMORANDUM, INCLUDING OUR REASONS FOR MAKING THE OFFER.

The Dealer Managers for the Tender Offer are:
Credit Suisse and UBS
The date of this Tender Offer Memorandum is July 16, 2018

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