Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the third quarter 2019, Investor Analyst Cool.
This time, Oh participants are written Alison I'm limited after the speakers presentation. There won't be a question unanswered question to ask a question. During the session you will need to press tolerant one on your telephone keypad.
<unk>. This conference is being recorded today Monday, the 14th November 2019, Oh, it's not like 10 macabre print. So what's your first speaker today Nick show. Thank you. So please go ahead.
What are you ladies.
Welcome to give young said quarter 2019 results <unk> joined on the line by <unk> came in and T.I. you're right.
Deputy Chief Financial Officer extra Stevie <unk>.
<unk> operating office as well as calling Siggy all incoming Joyce Yeah. I was also with US today. The presentation starts with an I.V. of odd treatments for the silence of the year from.
Followed by greet somebody is off an x. performance during the quarter I'm from there aren't any so they provided operational reviews. The state courts, the country level after which basically look close the formal part of the cool with it not look for the better the yen. Some followed remarks as boys. These schools with these cool if you will ensure that there's ample comp you'll crazy the ins and go also.
Upright moderate that.
Either before getting started I would just not remind you that we may make forward looking statements during today's presentation, which involves kitten Christian uncertainties.
These statements relate to call to the company said dissipated performance and concentrating on P.
<unk> future market development treats operational and nitrous development and if we can basements and the company's ability to realize it's targets and <unk> initiatives, including current and future transactions.
Certain factors may cost extra results to different maturity from those in the for the in statements, including the risk details in the company's annual report <unk> 20, if and other recent public Follies made by the company with the if you see.
And it's finished presentation each of which include reconciliations of non operates on exclamations presented today can be tolerated done that it's my website.
<unk>.
So thank you Nick good morning to every one in thank you for taking your time to dial into our third quarter results announcements. This morning.
Let me start our presentation by summarizing where our business stands as we move into the final quarter.
It has been another event full year for us.
This will be a familiar slides to those of you who joined us for our capital market stay presentation.
Back in September .
It sets out the core elements of the investment case, alongside our achievements and milestones.
Nine month point.
Taking each of these intern first we continue to capitalize on the growth opportunities offered by operating markets, which rank amongst the industry's most dynamic.
Growing useful populations and low levels of smart phone penetration present us with a unique demographic dividend not present in developed markets.
<unk>, our customers appetite for data through the introduction of a growing eco system of digital products and services.
Strategy.
Checking strong operational execution is fundamental to our success has a business and here I'm pleased to report continued progress in growing out <unk> through both solid revenue generation and back further reductions in our costs spaced throughout the group.
Third managing an appropriate capital structure is vital to ensuring that we can we invest in our court business and pursue growth opportunities and new services and adjacent industries. The upgrading our long term deck long term credit rating by Fitch two investment grade during the quarter was a welcome validate.
<unk> of the good progress that we've made in recent months, it's forth active management of our portfolio is a vital component component and maximizing value for shareholders here. The successful conclusion of the G.T.H. tend to offer wasn't important milestone.
US to simplify our corporate structure and this will allow us to enjoy the cash flows and economic benefits of these operating companies in full.
Harnessing. These elements together is our new strategy framework, which stretches hour long term growth ambitions be on our core connectivity businesses into new services.
Through the latest digital technologies and overtime to future assets that will define the products and services up tomorrow.
Look into the next slide.
Ours is a diversified portfolio of businesses, which as we set out at our capital market stay naturally separates into three pillars are cornerstone, Russia the growth engines of Pakistan.
Ukraine, Uzbekistan, <unk> and our frontier markets, the largest of which are Algeria and Bangladesh.
The diversification benefits of these each with their own unique operating characteristics and differing levels of market development.
Clear in quarter, three during which underperformance in Russia was offset by operating strengthen our growth engines, keeping our group revenue and eat but on track with full year targets.
Much of our longer term growth will come from revenue opportunities outside of our core connectivity business. This is evident in the initial attraction that we are seeing in new services K.P. ice for which we have set out here.
Fundamental to these are the self care eco system that we are deploying in a number of our key markets, which transformed the relationship between us and our customers.
These are enhancing our understanding of the individual needs about customers in helping us to tailor local services to match.
These include content services like pay T.V., which in Russia, now attracts 1.8 million monthly active users.
He's also include transformative digital financial services in markets like Pakistan.
The world's most unbanked.
<unk>, our market, leading jazz cash platform now accounts for just under 7% about total revenue in that market.
I turn into numbers are business is in good shape as we enter queue for.
Organic basis, we have delivered revenue growth Oh, 4.6% at the 9.9 months stage and roughly twice. This <unk> this growth rate in organic either which stands at 8.8% for the first three quarters.
Data continues to drive our growth and dominate our medium term revenue opportunities as we develop new products and services to monetize the demand that we see across I'm markets.
Costs remains a core focus for us and here, we continue to deliver on the one percentage point reduction in cost intensity that we committed to as an annual ambition for three years, when we announced full year results in 2018.
This is on top of our commitment to progressively reduce our corporate cost and we remain on target to half. These from their full year 2000 is 17 levels as we exit this financial year.
I business is a castillo temp one and after nine months stage delivered just over 900 million U.S. dollars in equity free cash flow against our full year goal of around 1 billion U.S. dollars.
Finally, we have continue to maintain levels of investment in our networks necessary to maximize the value of our core connectivity franchise as well as developing new services more of how these are being phased in at the country level when Alex takes us through our individual markets later in the call.
I announced one very important milestone for our group just a few days ago.
End of the external compliance Monitorship, which concludes our differed prosecution what the U.S. department of Justice.
Decision.
Demonstrates that V. on has successfully establish a robust and sustainable compliance and controls program.
The ons commitment to ethics compliance and controls is unwavering and is reflected in our structures procedures and daily ways of working throughout the organization.
On that note I would like to hand over to Morocco, who will take you through the group's financial performance during the third quarter.
Thank you <unk> good morning, everyone.
Tuning target financial <unk> eight.
Operational B. Q3 was excluded quoting for the group.
The changes in Texas in administration theme Park, Houston had the material impact on our reported growth rates per.
<unk>, which we have reconcile you too you know running through these.
These are site acquainted with performances sound and trucking in mind with our expectations.
Yeah.
The group or minus 4% and 16.5% respectively.
The group level organic revenues <unk>, 0.9% Euro 40 years old.
Although excluding the impact of the <unk> featuring just the growth rate was 2.4% euro per year.
Once again data, maybe you, let or service revenue growth.
Raising by 18.4% organically year over year.
With particularly strong performances from Ukraine, Pakistan and banana dish.
Well security weakness was far less than perfect to include three compared with probably your quarters, the negative ethics and pick the north applying was limited to $72 million compare $279 million in the last quarter.
Result to pitch, the relatively stable ruble and stronger Ukrainian.
It'd be a degree organically by 5% year over year.
I was thinking a healthy.
<unk> it'd be deer marginal 38.6.
Huson, excluding the impact of package from section few changes the usual organic it'd be the group was 11% solid results supported by lower cost.
We continue to make good progress on cost control during Q3.
With all costs intends to reach with declining 2.2 percentage points as compared to the probably a year.
Particular by local placing corpse, Russia, Ukraine and H.P. calls.
Which are 25% lower it to nine months speech versus last year.
Okay. Two three report <unk>, excluding licenses was 370 million U.S. smell. This.
Excluding finish 16 adjustments equity fecal school was.
$269 million and reached $902 million for the first nine months.
These they could be free cash will numbers include the negative that 202 $6 million paid by viewing in respect of the G.T.H. section of the month, which was not included in our full your equal to freakish, we'll get into $1 billion.
We are on track to deliver on or you could freakish will target for food you 19, excluding <unk>.
All in all all results for the most reclusive portfolio took the strong results from our growth and <unk> shutting the weakness you know largest markets, Russia effective <unk>.
Moving too slight nine.
Looking at all to three performance on the comfort level revenue weakness in Russia is a key feature functional.
Distribution challenges, we face, though and unlimited data bundles that continues dominate the market place.
Electrical discussed in greater detail when he picks up through the all country performance.
<unk> affect the site the weakness in Russia was or sit by the performance or group markets, which dealing with both reaching organic revenues and A.B.D. well above the group average.
It's a single cluster or front your markets deliver a broadly flat organic revenue performance.
And it was particularly encouraging to see the <unk> execute well, India challenging Mcquigg mums.
Finally, it is gratifying to report an increase in reports the fourth quarter.
Up but of course control in Russia, and continued progress in reducing or corporate costs.
Moving to slate 10.
Looking at all you three performers byproduct.
Once again later, if we use that group at the group level, providing set to beat and she voiced revenues as well as we go over equipment and explicitly seems in Russia.
As noted on the previous night lower cost hooked on it'd be good performers more than setting the small declining organic so distributed.
The impact of both I think something for the 60 also depicted here indicates a fixed pleasing the global numbers in recent court is as I discussed earlier.
The results was reported total rubbing your $2.223 billion and report <unk> $987 billion wants to post to the impact of way for the 16 amounting to $129 million is.
<unk>.
Moving to income statement.
Reconciling D., we don't you three incomplete a few other item so brutal to note when comparing our financial performance with you three 2080.
Depreciation almost position other line includes eight to 9 million in in payments later, <unk> compared to $782 million in payments in previous year same quarter.
Reported financially expenses increase impacted by I finished 16 and by $41 million related to put optional maybe we'll see with respect to 15 per cent Noncontrolling <unk> just Pakistan.
Excluding d. SNET financial income and expenses decrease year over year, mostly due to lower levels of that.
Holding old net income from continue to operations sport you three we just talked me into others compared to $780 million most of the Mafia.
Gainful compared to <unk> note that you 318 was off into the gain of $1.279 billion presented as profit from discontinued operations is the result of the completion of the <unk>, 50% stake in Italy joint venture to see Kay Hutchison.
You have no such adjustments in Q3 2090.
I'm, a sled 12 looking at all <unk> cost a quarter.
It is gratifying to see the the net and cheering trends are both stable over the quarter with or leverage ratio spending at 1.7 times at end of <unk> quota.
The same level at which we entered the costs.
This adjusted 2.1 time, so the need for the 16 basis, which is again the same as and the second quarter.
This was achieved despite its number of significant payments during the quarter asides from <unk>.
<unk> 300, and <unk> $372 million, you also paid $296 million in respect or entering pulled you 2900 and.
$225 million in Pakistan is a security deposit in respect to.
Spectrum license renewal.
Touches 121 million dollar, which includes the second the final payment of the text <unk> Egyptian authorities.
$82.3 million.
The first payment or <unk> medium was into too.
We also recorded to $90 million financial gain.
Into the right to deposit held on balance sheets with respect to the projected costs and you're poor G.T.H.
Would that let me <unk> take you through the perform muscle for individual markets during the quarter.
Thank you for that and good morning, everybody.
First of all the largest market Russia.
Slide 13.
In Russia operation continues to face challenges related to firstly, the coverage and performers gap, which will have with our competitors despite making improvements.
Secondly market pricing structures favoring unlimited funds and thirdly effectiveness of our distribution.
These all together have negatively affected.
B lines, so a year on year decline in his mobile custom base you to these factors as well as you to the declining sales so alternative distribution channels.
Porto Port that we think we in customer base.
Mobile service revenue followed this instead of a trench and while they to go to continue to grow strongly up 53%, yeah, Yeah data revenue goes with slower 3% into sport.
Oh reduced focus a low margin equipment sales during the quarter resulted in the 10% drop in respect that sales yeah.
On the poster size number broadband customers continue to grow resulting in 8% growth and respected ready.
Managing costs against this challenging revenue environment remains of focus.
In this area cause control measures <unk> a lot for <unk>.
The revenue trends.
Okay I'm complex the sales continue to increase in this courtroom following a focus on that quality improvements and we expect this racially to reach 22%.
Yeah.
<unk>.
Musical.
<unk> <unk>.
As an example number though for G. base stations increase 43% or to use the third quarter of 19.
As we mentioned will actively addressing challenges that we face in Russia follow the three priorities set out at our kept the markers day in September namely.
First continuing net for quality in performance improvements.
<unk> optimization about distribution footprint.
And thirdly, restoring price discipline to the marketplace simplifies the office.
The sequencing of his priorities at turn it off the no. That's an operations is likely to take several courses.
Tony too slight 14, Ukraine.
It was another quarter of solid outperformer spooky and stuff.
Which service revenue growth of 18.3% in what remains one of our strongest growing markets.
Successful marketing activities alongside improving the quality and availability drove strong growth in data usage up on 70, 70%.
On a per subscriber base.
And the 37% rise in data right.
Kids first mobile custom base, so a slight fall down 0.8% year on year is multi stream uses continues to decline, but this was more than upset by a solid rise in our.
Plus 19, 99% you on the led by data services.
You'd be done prayer for 16 increased by 27.7% you on the driving in the be the margin of 62.1%.
Up from the 57.5% recorded history last year.
<unk>, let it be the performance.
Good cost control in that period further supported margin expansion report it it'd be the post I for 16 increase by 33.1% young yet as a consequence.
We continue to roll outs.
And one that will support the yields groups cash flows during Q3 keeps the upstream 4.5 billion heading in dividends from key of stuff.
Turning to the next page Slide 15, Pakistan just continues to perform well operationally and also there is a number of moving parts the package and supported numbers this quarter, our underlying business there is fundamentally strong.
First of all to note here that the financial impact of this effect will carry on until second quarter 2020.
We have explained that lengths in our earnings release, how the so more to order and the administration see reversal.
Effects that our reported numbers, but adjusting for the organic revenues and EBITDA increased by 14.3%.
And 14% respectively during the fourth.
Just subscribers, which grew 5.6% year on year significantly increase their data volume consumption, which grew more than 70% year on year driven by growing smartphone penetration.
And subscription to more services.
Just TV is an example here it has over three and a half times more monthly active users in September that at the end of 2018.
Namely 558000 versus 154000 in December 2018.
And illustrating how major event, how rich can impact the its use we saw average time on app rise by two thirds during the cricket World Cup in June and July of this year.
Turning to 26 minutes per day, compared to 15 and help minutes per day during the five months prior.
Fast growing data consumption translated into mobile data revenue.
Revenue growing by about 25% year on year to comprised just under a third of just total revenues.
DFS revenue continues to contribute positively to our data revenues was just cash revenues, increasing 43% year on year in the quarter.
We continue to make significant investments in our network to accelerate coverage rollouts.
Finally, I would note that in September 2019, just deposited 50% those disputed license renewal fee approximately 225 million us dollars as security under protest in order to maintain its appeal in the some of US high court regarding the PDH underlying.
Vision on the license renewal.
Moving to the next slide Slide 16 was based on.
This is another market where tax has an impact on our reported numbers the business delivered a 4.6% sequential improvement in revenue year on year end, while total reported revenue decreased by 8.8% on the year on year basis, adjusting for the impact of the reduction in mobile termination rates.
And the introduction of the 15% excise tax revenues would have grown by at around 7% year on year.
Data revenues as in all growth engine cross the country's drove our operational performance rising by 20.3% year on year on the back of.
A doubling of mobile data traffic.
Courted by our continued rollout of high speed data networks increase smartphone penetration.
And the increased uptake of bundled offerings by our subscribers.
Despite the tax headwinds, we were able to bring our EBITDA margins of 53% and eight percentage point margin expansion in 12 months on a pre fr 16 basis.
Our LTM Q3, 2019, Capex to revenue ratio was higher than last year, reflecting high levels of investment in the first half of 2019.
On the regulatory side, we have an expectation that goes back, especially international gateway will be liberalize.
At or around the end of 2019.
This in our view would be a positive for the company.
Moving to the next slide 16, Algeria.
Our general remains a challenging market.
Both in terms of micro environment and political uncertainty.
As well as the high levels of price competition that persist in the sector.
Against this backdrop, Jason maintained its focus on both prepaid and postpaid customers with a segmented approach to the market, which is continued to outperform NPS leadership, and an increasing relative share or what remains the contracting market for mobile services.
Nevertheless, our customer base reflected this top down trend contracting by 4.3% as competition remains intense in a declining subscriber marketplace.
It's also impacted ARPU, which declined by 1.2% year on year during the quarter, although it's significant to note that on a sequential basis, ARPU rose, 9.2%, reflecting judges introduction of and modernized and updated tariffs portfolio.
At the same time JV. So a further increase in data customers, which contribute to a 27.8% year on the increase in data revenues, followed continued rollout of our Threeg and Fourg networks.
The decline in revenue remains a challenge for EBITDA performance, which ranked 24% year on year being also impacted by increase HR costs and bad debt recognition this quarter.
The increase in Capex year on year reflects changes in India.
Phasing of investments LTM Capex sales rose as a consequence to 15.2% that's fair for 16 up from 11.3% in Q3 2018.
Moving to the next slide slide 17 Hundredish.
Finally, this operational turnaround continued in Q3 with bundling delivering its fourth consecutive quarter of service revenue growth, despite the competitive marketplace and continuously challenging regulatory environment.
I'm going to once again remained focus on improved network availability and test them acquisition, which has which was rewarded by a year on year acceleration in revenue growth, which was 3.8% in the quarter.
Service revenue increased by 5.2% year on year, driven by the further expansion of been going its distribution footprint and the introduction of new higher priced bundled offers.
Data revenue increased by 26.4% year on year, driven by increased smartphone penetration and data volume growth.
Up 83% on a per subscriber base.
EBITDA for Fysixteen decrease year on year by 4% as higher revenues was largely offset by the increase in the minimum tax rate.
However, excluding the impact on the tax change Korea Fysixteen.
EBITDA growth would have been 7.1% higher.
Capex, excluding licenses preference 16 increased considerably year on year, reflecting the continued rollout of our Fourg LTE network. Following the introduction of the service in February 2018.
Now I'd like to handle back to sort of for the closing comment and guidance for the reminder of the 2019.
Thank you Alex let me close the formal part of this call with some observations on where we stand at a nine month stage of our financial year.
Overall, I'm encouraged that the diversified portfolio of businesses that we operate have collectively delivered another solid quarter.
Quarter three has been a complicated one in terms of regulatory changes in a number of our markets, particularly Pakistan, but the operating performance of the group remains solid and growth opportunities remain on track.
That said the continued underperformance of Russia is something that we're working hard to address we are in the process of making of course correction in strategy here, which will take a number of quarter. If you take full effect.
We remain committed to improving the operating performance of Russia, our largest market.
In the meantime, we shall continue to drive our revenue opportunities across our markets guided by our new strategy framework and supported by the new partnership between surgery Herrera and.
Can turn signal.
Joint Chief operating officers come together bring a terrific blend of skills through which to manage the three operating pillars of our business.
On depending in underpinning. This strategy is a greater flexibility that is embodied by our new dividend policy that we announced in September .
I'll provide a flexibility that we required to execute on VR investment opportunities in a way that maximize returns for our shareholders.
Finally, our financial guidance.
Performance that we've delivered during the first nine months of the year puts us on track to deliver against our target, namely low single digit organic revenue growth.
At least mid single digit organic growth of EBITDA.
And equity free cash flow, excluding licensure of approximately us dollars a 1 billion.
These are targeted I'm happy to reconfirm today.
Before I hand over to the operate I'd like to thank shell Martin Johnson for his commitment to the group over the past number of years and most recently as COO for the group, we wish him all the banks in his future endeavors.
Thank you show for myself and from the company with that I'll hand, the call back to the operator for questions. Operator, Thank you Madam.
Ladies and gentlemen, we wanted to ask a question answer session. If you wish to ask a question. Please press star and one on your telephone keypad.
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Thank you. Your first question comes from the line of C. Tehran of Bank of America.
Please ask your question.
Yes, hi, everyone. Thanks for the call in terms for the opportunity to Rob's question. So I have two questions. If that's okay.
The first I mean, they're both on wash out the first one.
In which areas where are you able to conserve cost in inertia to allow for margins expand.
Do you think that's sustainable and by this I mean, if you have another couple of quarters of Mega TV service revenue growth are we going to see margins decreasing again and the second question.
You can talk a bit more on the details on the increase Capex plan in in Russia is his many going to increasing base stations. How do you think can you to bridge the gap with competitors because I think you're trying to this for a couple of years now and are we going to see a Russian capex are trending towards 22%.
Only for this you're also going forward. Thank you so much.
Well, it's once you start.
Okay. Thank you.
Let me start now on so if you look at our EBITDA performance for this quarter I mean, there were also number of the.
Certain provisions one the wrong reversals and certain provisions previously so that affected. It. However, we also reduced our commercial costs, because we have closed down 120 shops and thats clearly affected the performance of the EBITDA positive.
Going forward as we said that we we are committed to improve the margin and the cost intensity by one percentage point, so clearly that target has not changed.
Now on the second question about the Capex the as we guided for the long term LTM Capex too.
Revenue for the full year will be about 22% that does include Yarwun. However, we will do in Russia, whatever is necessary for us to fix the gaps, which we feel they still exists in the market now we have addressed this issue as I said the LTE base stations justly this quarter rate grew about 43.
So clearly we are very much on track to addressing all kind of performance gaps we might still having the markets and we will look at the targeted investments in order to bring up the speed the coverage and the capacity in the areas, where we feel it is most needed.
Thank you if you just along your follow up sort of sort of housekeeping question, but we would you be disclosing what was the EBITDA margin in Russia or the order could be low margin in Russia, excluding the.
Yes, this provision reversal.
It does the impact in Russia is close to.
The Photofix billion rubles in the quarter three the reversal of bad debts and all the.
Related.
Provisions that will be worse.
Thank you so much thank you.
Thank you.
Your next question comes from the line of Slava Java of Goldman Sachs. Please ask your question.
Hi, Thanks organization.
Also question on Russia, and what's the strategy for the distribution improvements in the country do you aim to continue reducing the number of stores, but all the similar pace, meaning 120 vessels per quarter. Thank you.
Units.
Slower on Russia, I mean, that's a two pronged question I would say one is that as you know the distribution.
System or network, if you wish for all the classes is very inefficient. So we're very much welcoming the moves by all the other players in the markets also reduce their footprint.
Think recently, they MTS again repeated that there will be rich reducing their footprint in the market. We also showed that we are optimizing our network on the 20 stores down just in this quarter. So clearly that process. We'll continue our general aim is to convert so to say the stores the inefficiencies.
As to much more efficient bunch close those with the wells, which are less efficient and move generally to more digital more online sales that it would be our long term goal.
I was going to add something but I think Alex covered at all.
It's optimizing distribution as much as it is optimizing the cost.
Okay. Thank you.
Thank you once again, ladies and gentlemen, if you wish to ask a question. Please press star and one on your telephone keypad and wait for your name Japan.
If you wish to cancel the request please press <unk> okay.
Next question comes from the line of Alexander Vengranovich.
My name. So please ask your question.
Yes.
Good afternoon.
Two questions. So first one again a follow up on the distribution in Russia.
Based on what you've seen over the fourth quarter.
Have you already started to see that your competitors for low.
Youre movement with regards to an optimization on the distribution always just words at this stage and Youre, probably the first one on the markets to start to really optimizing on the number of the stores. That's the first question and the second question is on was back as Stan.
Surprisingly.
I've noticed that.
It is a sequential quite substantial decrease of number of the subscribers Pakistan over the last two quarters just wanted to understand what is there any specific reasons for that one or anyone else. There. Thank you.
On the distribution.
I mean, it's difficult to comment what the competition does.
Clearly we need to wait when there was announced on the actual numbers. However, just referring again to MTS, they announced or they declare that there would be looking gets reduction of the distribution footprint by up to I think 300 stores already last quarter and also before so I think we will see runs the numbers will reported what is.
The actual so to say reduction there.
But in general I would say that trend clearly towards more sales. So the model Brent shops, and optimization of the model brands and here for us as one other thing, which I was mentioned is that it's also changing indicate the eyes and looking at the long term value of subscriber as the main CPI for signing new site.
New subscribers is the key for the overall market to cut down the overall footprint on the distribution side. So I don't think that I can say more on that one at the moment.
Interest, Pakistan, we basically have been focusing very much on undervalued.
So in that says we have deliberately in some way, let's go to some of the low end subscribers and the value focus actually worked out very well for US you saw that the organic growth of the revenues have been very robust and however, going forward given again the competition is quite the rational in Uzbekistan, we will.
Be reviewing and revising our tariffs mentioned our pricing model in order to be a bit more competitive in the market. However, there was nothing else, but our focus on the value customers in the sport.
Okay.
Thank you welcome.
Thank you once again, ladies and gentlemen.
From one to ask a question well the hash key to cancel.
Your last question comes from the line of Andre kept the SEC coffee ABS. Please ask your question.
Hello. Thank you I've got two questions. Please the first one on Russia, I could just explain them, but how you're thinking in terms of balancing the cuts and commercial cost like you're saying with apparently losing market share and I guess, what aiming at it wouldn't it be better to wait.
With cutting commercial cost only up to you.
Fixed them up the network issues that I think are partly explained for the market share losses.
And then the second question on if you could just please break down the impacts of right at the one impact of the.
Riversleigh the.
Charge is when you criticisms of customers what impact of the overall decline there was attributed to keep this one off.
Thank you.
Flux.
Let me take the personal so in general I agree the network should proceed to any other so to say changes. However, the strategy in Russia is not just the distribution network of course, it's also pricing.
So you know we have of course, the backing out of pricing being very much you told us. They are limited prices. However, we have been also changing our pricing model as well I didn't know if you saw our new bundles in the market them into much more get again towards the value if you issue.
Now specifically on the commercial side I think that.
Cutting commercial costs is not a gold. It is just falls through the fact that we want to optimize our distribution footprint and distribution network and we're disclosing though the inefficient shops or repositioning them. So that is driving the reduction of commercial commercial cost, it's not a deliberate cost cutting.
Exercise from our side, we're very committed to.
So the should boost our presence in the markets. So indeed, that's way the network investments come first and then of course, all our commercial activities falls follow some of that.
Rob Let me address the second part of the question the impart because of the reversal.
$40 million impact Q3 results.
Well the tax and thieves other changes in the fee structure will have the continues impact in the remaining.
Two three quarters more.
On a year over year comparative basis for Q3, the impact was $40 million.
That's for zero, yes.
Wonderful wonderful wonderful one four and this this effect will not be carried over into the fourth quarter. Because there's it's 45 days of of the validity of theme a person that that you mentioned.
We as this although it's been.
We totally have 26 million those of reversals of which $40 million is being recorded into Q3 on about $12 million would be affected partially into Q4. However, we anticipate the big chunk of this Q4 impact to be offset with the use of these services within the Q4, so to be not heavy.
And your full impact on something like in Q4.
Alright, Thats clear thank you very much.
Thanks, Ken there are no further questions at this time please continue.
Okay.
I will it did Nemo Christian thank you very much everyone for dialing in if you have any more questions. Please just just reach out to us. Thank you very much to that.
Thank you, ladies and gentlemen that does conclude our conference for today.
Kim all for participating you may now disconnect. The speakers please standby.