Q4 2019 Earnings Call
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dear ladies and gentlemen, welcome to the conference call of mobile telesystems of our customers request. This conference will be recorded as a reminder. All participants will be in a listen-only mode and after the patient there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press the star key followed the zero on your telephone for operator assistance may now hand you over to fully mature director of investor relations who will lead you to this conference, please go ahead.
Welcome everybody to today's event to discuss MTS fourth-quarter and full-year 2019 financial and operating results as usual. I must remind everyone that except for store information any comments made during this call May constitute forward-looking statements important factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements this took place certain risks and more thorough discussion, which are available in our annual report or form 20-f or the materials. We have distributed today MTS disavows any obligation to update page you previously made forward-looking statements spoken on this conference call or make any adjustments to previously made statements to reflect changes in the risks. You can find copies of the presentations and materials used and reference this conference call on our investor relations website. Finally. I also wanted to highlight that following the sale of our operations in Ukraine in December. We have reached respectively restated. All eight Gorge.
In 2019 and 2018 in our summary financials the input from our activities in Ukraine has now been requested fide under discontinued operations in our group profit-and-loss statement came back to our results. Today's presenters are Alexi Corner president and CEO slavonic alive, first vice president for customer experience and marketing in a signal to all of our first vice president for telecommunications and Andre Kaminski vice president for finance. Now, I will hand over to Alex to kick us off.
Welcome everyone and thank you for joining us. Before we We Begin I wanted to say just a few words on the recent developments. As you know, the has been sung, can use over the past several days. Naturally. This has led to Market uncertainty while the situation continues to remain focused on what we can control and confident now a business looking ahead on macroeconomic site our prudent Financial approach largely protects us from currency volatility. We have limited phone no exposure in terms of that. And we also actively use derivative instruments to minimize risk related to Forex volatility on the current situation. We are monitoring the global developments and taking appropriate steps to protect our employees. We believe our sector is resilient and even more importantly cuz much-needed role to play in helping travel pass.
Businesses in families keep in touch remotely. Now turning to today's agenda. I will begin with our performance in 2019 in some of the Strategic highlights four-year slow will then take you through our recent system use in an essay will give you silicone business update finally and they will go financials before I wrap up with Outlook 2020 as you may recall in saltwater were upgraded where we want it to be at the end of the year and will largely hit all those targets bearing in mind that the guidance we gave included the now the Consolidated operations in Ukraine extra policing for a full year impact from Ukraine. We estimate group am new in 2019 would have grown more than 7% versus 2018 only similar basis growth in group adjusted. We would have fallen with them.
Neither will follow guidance range or photo 5% based on our projections for the year Catholics came in ninety. One point five billion rubles off. This was principal in Target as we continue to heavily invested Network development all together in 2019. We added nearly 23,000 by stations in Russia age. Finally. We also fall through our commitment to reduce our retail footprint by at least two hundred stores in second-half twenty twenty turning to our 2019 financials. Yes, Pauline the mentioned we have reached respectively the Consolidated Ukraine this aimed at providing more transparent view on the before I am continuing operations on the like-for-like basis Revenue in for water was up more than 4% year-over-year to reach $127 a month.
billion rubles
Invite cool mobile connectivity mcs-bank overall. We successfully carried out momentum forward is delivered is sold close to 2019 for the year and you'll group Revenue was up 5.5% year-over-year to $476 billion rubles Thursday. We saw year-over-year growth in Mobile having you in all four quarters as well as a strong top-line contribution from MCS Bank this illustrates how we are successfully ma'am. Meaning is solid core business while also moving beyond connectivity in fourth-quarter droop just too busy was roughly flat year-over-year with a few one of em, get your impact. Did Andre will talk about in more detail for the year. We saw solid adjusted to see growth of 2.8% year-over-year to to hug.
10.3 billion rubles despite facing regulated ahead wins. The primary driver was KO connectivity with an additional contribution from his bank. Finally when we multiple big strategic moves in 2019 geographically with the risks how International exposure in Sharjah our focus on our core Market organizationally organizationally, we revamped our structure around for business verticals supported by horizontal in English functions strategically will lead our division to build the digital system on top of our strong silicone Foundation operationally, when we progress on right-sizing detail footprint to drive long-term value-creation and financially we feel the optimize our debt portfolio and kept the laser focus on cash generation and shareholder dead.
Overall, I am encouraged by the place and progress of our execution on the Strategic initiatives and I'm confident this steps are positioning the company for long-term success with that. I will hand it over to flower for marketing and the caste system update.
Thank you Alex. He's in the middle of last year. We took a bold step to begin refreshing our company branding launch a cleaner more contemporary Visual and we took an extensible to better accommodate our expanding product line up. We adopted an umbrella brand that easily adapts to wide-ranging formats such of as vertical content for smart devices Thursday. We begin rolling out last year and we immediately so good results in our advertising surveys. We've continued to make progress and I'm happy to report. We're also seeing positive Dynamics in our overall health tracking at the beginning of this year. We saw further increase of our MPS and according to our analysis. We have retained and even improved a solid lead among the big three operators in Russia looking ahead. Our brand favorability is a critical enabler as we move into new product segments. We're very happy with the new style and we are confident we're headed.
In the right direction as we're seeing good reception in the market recently. We took another ambitious step by setting up.
Can you use it for our life content MTS entertainment? This will be distinct from MTS media which covers video music. We have several entertainment projects in the works in partnership with agencies and performance later. This year will be launching our Flagship Flagship branded facility in Moscow until MTS Life Arena. This will be one of the Premier concerts in Moscow. We're also partnering with a couple of other sites in Russia strategically entertainment has a lot of synergies with our ticketing business too and it helps us engage younger audiences and energized our brand perception haunted wise. I think I can safely say that we have a strong line-up in the pipeline. We are excited about these opportunities and I have high expectations and we are off to a strong start.
I also wanted to briefly go over the steps. We're taking to revamp the way we approach product development. One of our competitive advantages is our capabilities in fouls app development everything from the back end to the front end. We started down this path a few years ago. And we've really delivered today. We have dozens of polished popular apps and in here for our anchor app, my MTS surpassed twenty million monthly active users, but we are not stopping there at the organizational level. We are improving our approach to product development wage historically, we've had multiple teams working independently. However, this can sometimes put those challenges in terms of ensuring compatibility and consistent look-and-feel to help address this we have now rolled out a unified quality control system across the company and on the back end we've we're combining our efforts to build out module or capabilities in yep.
I guess like client ID Logan payment and others these steps have multiple benefits first, they help ensure consistence and seamless user experience second. Give us plug-and-play building blocks. They that can speed up product development. Third. They give our partners a standardized technical interface and forth. They provide us with deeper insight into subscriber economics long-term. Ultimately that inside will allow us to take a personalized approach to marketing. So overall we are enhancing the way or ways we engage with customers. We're expanding our channels for interaction both on and offline, and we're putting the customer at the Centre of everything we do to provide a more compelling and engaging experience.
No, let me hand it over to you Nessa for it till the Communications business update. Thank you Slava. I will begin with Russia results and then walk you through our performance and connectivity by segun. Thank you for Russia. Revenue was up 3.9 year over a year to $126 billion rubles driven by MTS bank and mobile services wage adjusted ebitda increase 0.5% year-over-year 253.3 billion rubles supported by top-line performance for the year Russian Revenue grew 5.5% to 472.6 billion rubles and adjusted or if that was up 2.5% to 214.6 billion rubles adjusted margin and Russia student 45.4%
join into connectivity
Thank you for mobile services Revenue growth accelerated by 30 basis points versus Q3 up 3.3% year-over-year this partly reflected as in dog in particular and she for the cancellation of the majority of unnatural mean in Fall 2018 became fully priced into the base importantly also contracted to see positively subscriber Dynamics. We had one point 1 million total net ads in 2019 reaching seventy nine point 1 million subscribers at the end of the year for Thursday. We're also continue to see promising Trends in Customer Loyalty in particular. We had robust long-term retention Dynamics for subscribers who remained with us for more than 12 months. This is a promising indicator as we walk to cement our customer relationship along those lines. We continue to make strides in growing connectivity on Virgin birth.
In 2019. We're more than double the size of convergent customer base reaching 1.2 million subscribers across Mobile X line and satellite dish we have ambition plans to significantly increase the attrition going forward after several years of rapid growth. We experienced flattish performance 2019, the Dynamics and Russia a largely in line with global Trends Market Research indicates worldwide smartphone shipments decline in 2019, or the first time in more than eight for the year. We saw sales of Hansard and accessories down 1.6% to 58.9 billion rubles at the same time. We saw strong performance in on Life Volume which way up around 15% year-over-year in 2019 to eight billion rubles taken together these signals reaffirm our strategic logic to rep.
Size our footprint for today's market as Alex he mentioned in the second half of 2019. We reduce our network box over two thousand stores and we're continuing to take for the steps is here so far. We're on track to reach our targets up to a hundred additional net Closer by the end of 2020 having said that on the competitive side. We're seeing some mixed signals. We're closed when you told the evolving Market situation and will decide on further action in defaults. Looking ahead. Our stock runs will remain primary channel for high-quality face-to-face customer touchpoints. So that end last year were not plans to develop. I will tell Network. This is aimed at providing a more convenient and more engage in short an experience. We are now execution on that plan.
In terms of operation were approving our it and CRM systems in terms of design were moving forwards launching new stores formats. And in the terms of products, we're expanding our Chef offering Beyond connectivity a good example is the financial services today over than 1,000 of our stores are equipped with a team or payment terminals from MTSU and we have plans to significantly increase number this year. In addition. We have verified the identity of four million customers through our detail network box users can apply online for an empty bank card product and if approved immediately began making contact with purchases with their phone all the doubt even stepping foot in a bank branch.
well, well making great progress in retail and we see
That reflected in the figures in 2019. We saw an overall strengthening of our TPMS through the year starting from around 60% in January to reach a very wage is 65% by December turning to be to be this is already a significant segment for us with annual revenue of more than $65 billion rubles across connectivity with integration cloud and our services at the same time was starting from a low base and we see significant room to grow up for market share a good example is in BG last year. We won our first major b2g Tundra bring connectivity over 5,000 government facilities over three years projects like this enable us to expand our fix line. In fact you and they demonstrate our commitment to help every Russian citizens benefit from the digital economy.
Finally a few comments on our foreign markets in Armenia. We continue to face Regulatory and competitive had wings while Revenue full of full year was down 2.2% would increase by 3.5% supported by double-digit growth in the first quarter Belarus also continued to see solid performance with revenue and a bit of a double-digit for both the water and the fully with that. Let me hand it to probably
thank you. And listen, I will start with a few highlights from the bank. Then I will turn back to group results 2019 was the first full year of Consolidated operations for impaired Bank wage and our efforts are beginning to bear fruit since consolidation. The bank has been a significant acceleration in growth Testament to the progress. We're making an hour fintech strategy for the full year 2019 our loan portfolio expanded by 44% that drove 21% growth in net interest income despite declining interest rate environment off the bank also shows solid net project opponents reaching 1.3 billion rubles for the year.
In line with our strategy retail loans were our primary driver in total for the year. And there's Bank issued more than one hundred billion rubles in retail loan with the overall the retail part for increasing by 73% moreover. We made Solid progress in expanding our customer base, which reached 22.1 months Bank Lines by the end of the year in the long-term. We continue to Target ten million Financial Service users. Including been clients. Our progress to to date gives us confidence in the Target coming back to the group a few comments on the just retrieve the Dynamics in the fourth quarter adjusted to the grew 1% year over here, which was somewhat slower compared to plain group.
This was largely due to hear and Provisions related to him that bank as well as bad debt allowances recorded by us in the fourth quarter. In addition. There was a high basic fact that given very strong believe the performance in the year-ago quarter for the here. It has to tell you there was up 2.8% versus 2018 group that profit reached 54.2 billion rubles including discontinued operations in Ukraine for the full year net profit nominally increased eight times year-over-year, which largely reflects the provision in 2018 related to the SEC doj investigation.
when the lights
Like basis we saw strong positive contribution to group net profit from our continued robust cooperation performance at the same time net profit was negatively impacted by two other factors Thursday. The 1st was an increase in interest expenses while some of this reflects the hire run rate in underlying financing costs roughly half came from non-cash impacts related to IFRS nine reporting requirements second. We also saw an impact from operations with the hedging instruments and needed the strengthening Ruble environment in 2019. In addition. We recorded not fix losses from depreciation of the ruble. For example, the cash received in the US dollars from the sale of Ukraine declined the ruble terms. So where the end of the year, we regularly carry on a derivative transactions with the aim to manage our financial position and we believe recent external developments confirmed the logic of our approach.
We're confident that our underlying profitability remains strong reaffirming the health of our Core Business turning to Cadillac's total spending for the year amounted to page 1.5 billion rubles marginally above our guidance of ninety billion 2019. We continue to actively invest in developing our Network which is the Strategic Foundation of our brand favorability customer satisfaction and long-term business success, excluding the s a c d o j payment and cash received from the sale of the Ukraine operation underlying free cash flow in 2019 increased by 34% to 73.6 billion rubles versus the prior-year it was this was supported by strong generation in our Core Business. In addition. There was a lower base effect due to relatively higher acquisition activity in 2018.
2019 the total impact of Interest Bank on group free cash flow was largely neutral overall our free cash flow performance confirms our continued ability to generate cash and return it to investors at the end of the year that that the last 12 months just leave the stood at one point five, excluding the effects of 15 and 16 2019. We also actively moved on optimizing our debt platform. Russia has a very active local bond market providing a powerful lever in refinancing in the previous year. We issued 7 series of local bonds to 20 more than seventy billion rubles. This were long-term issuances of up seven years increasing the 10 of our overall portfolio.
And over the course of the Year coupons for new issuance has declined by more than two hundred basis points, lowering our cost of financing overall. We have food find out position and have already today nearly covered. Our entire funding needs to refinance debt maturing in 2020 now I will hand back to Alexei for his closing remarks.
Think you're on the day as I said earlier. I am encouraged by the place of our execution and performance in 2019-2020 from a position of strength and we feel there is a stable growth potential going forward looking ahead.
Well really seeing positive pricing Dynamics an additional room for retail optimization giving this context. We are focusing group Revenue to grow around 3 a.m. Send in 2020 at this stage. We expect to be busy to remain roughly flat. Although we are aiming for some upside for the year. We expect capex to, Thursday around 90 billion rubles including data storage Investments with the reduction of spending from Ukraine upset by an expected revamp in your growth areas. This is a guidance is based on our best view of the world today. We see number of positive Trends such as growing data consumption in rational competitive environment at the same time when we be impacted by macroeconomic forces and other factors outside of our control.
That said we believe we are in a secure position and I'm confident in our ability to adjust and adapt is necessary last but certainly not least. We remain focused on generating attractive returns for our investors in particular. I'm pleased to note that in 2019. We slightly exceeded our first year commitment on the on you dividends bulb in total. We returned around $67 billion rubles to shareholders last year when including buybacks on top of our regular dividend payments.
In in first quarter this year we paid the special dividend that was roughly equal to half of the proceeds from the sale value crane operations following the Ukraine divestment who freakish lose a likely to be somewhat lower in the near-term at the same time our solid track record and Outlook in Russia, give us full confidence in my ability to fulfill our dividend policy going forward moreover. We believe our stated before man stands in contrast to recent Dynamics and I'll share price, which now looks undervalued is it is as a result in giving our Stone cash generation. We are considering launching an additional $15 billion rubles buyback program. We plan to ask the board to consider his matter in the near future last year. We live out our new vision and strategy for the company.
It has two pillars connectivity and digital website. We have all the ingredients for Success the right resources the right Partnerships, and the right people. This is a multi-year journey. We're still at the starting line, but I am excited and confident about our future. Thank you, and let's open up the line for questions when you're ready to take questions. All right. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question for a speaker's, please, press zero and one on your telephone keypad now to enter the queue once your name has been announced. You can ask a question. If you find your questions answered before if you're trying to speak you can dial zero and two to come to your question Choice using CK equipment today. Please lift the handset before making your selection. One moment, please for the first question.
The first question we received it from mr. Time enough Bank of America Securities. Your line is not open.
Yes, I it's he's our phone Bank of America. Thanks for the call and the opportunity to ask questions. I have three. Sorry about that. The first one is on your guys versus 3% Revenue gross. Can you please explain if you already assumed some optimization into the guide and and how much of assumed the second one thousand? I wanted to ask what effects have used for your capex budget. And do you see any reason in spending more than men to be them if they will depreciate to $92 for exam or would you in that in that case just reduce the amount of of the lower capex respond. And then the third question really is on your your comments on the on the buyback. I can you please explain what drove the decision what can be the size and and also if you can link it to the to the shirts that you have in treasury are you not concerned that if you buy back moisture and on?
Cancel them that would create some some concerns in the in the market. Thank you so much.
This Sunday. I will take the first two questions. The first question was about the guidance. I just want to confirm that this guidance included the retail optimization that in that setad boat that we had in mind. Your second question was about a fixed effect in capex budget currently. I just want to say that as I already mentioned that we are effectively using our hedging instruments to not to have a fix exposure. We don't have a fixed version our debt. And actually I think the major part of our capex am a fix is already hatched and at the moment it's pretty early to actual to speculate on what can happen depending on the thick. So we're pretty comfortable the clubs that we will deliver and not only the amount of the Catholics but also the what exactly want to build and this year
And let me take the last one on the buyback. We think that we have very strong financial position right now, We delivering very good reputation all results. We are positively looking at twenty twenty in terms of our top-line growth and off potential upside taking all those factors together. We feel possible to to provide additional money returned to our investors and with the macroeconomic. Let's see, let's see is the price of Life. Yeah. The stock is going down. We feel more efficient to to do it in the form of buyback. So they buy back is is the preferred option for us right now is I said the total amount wage
considering his about 15 billion rubles
In the yeah, and that is it.
Thank you so much. Would that buy back the do you have a time frame for it? I mean would be would it be realized in in H1 or H2 this year will bring it to the board the consideration to the board in the near future and then we'll act depending on the stock price Performance Off the to add the to your question on treasuries strategically as with many time mentioned. We we are looking and cancellations, However, tactically we for food or for the reasons. So for keeping here Thursday evenings cushion, tactically, we don't we don't want to do that. So we'll look for opportunities our finance.
So before months will will give a give us such an opportunity.
Thank you so much for that. Thank you.
And the next question is from
I thank you very much for the opportunity. Had a couple of questions first follow up on in the system, and that what you were talking about the retail that signal from the competition competition. I've missed them if maybe you could elaborate a bit on what you imply by that from both from positive and negative sides, and the second question is on investments that are being done by competition. It seems like Pierce for example teacher who has been had the backend that Catholics into off your bill. Any other capacity line is also enhanced plans for Investments. Would do you reflecting that on potential competitive wage? What do you think do you think there is a risk of overcapacity looking at 2021? Thank you.
Okay, let me comment undertale optimization last year. We mentioned that we we see opportunity on the on the Russian Market job opportunity to to decrease the number for retail footprint and last year. We announced that we are prepared to reduce up to six hundred shops last month. We need an exercise and we we close to other shops and this year. We are making the exercise to continue further closing the the retail. Of course, we can Benchmark what what our partners on the market are doing. Yes, because being a leader on the market will definitely also have a very healthy situation on the sales rep don't want to to to ruin the situation. So before closing every and each shop definitely monitoring situation and make the decision.
yeah, so
We confirm that we still have the plans for four hundred shops. But as mentioned will keep you informed every quarter on the status on the on the progress. Thank you. And I I'll I'll elaborate on competitive market landscape. We feel that overall. The competition is reasonable in particular. We don't see a lot of competitive.
What ladies and gentlemen due to a technical issue? We will have to pause this conference for a few moments. Please stay on the line. Thank you.
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Thursday Thursday, ladies and gentlemen, thank you for your patience. The conference is now being resumed. I hunt back to the speakers.
Yes.
We stopped on the computer and discuss discussing competitive environment. So as we said in as I said, we see overall reasonable competitive environment and investigate the pricing Shield. We don't see the the key players the following in the in the pricing War which is encouraging us and we think that the trend will continue also we don't see any threat in terms of uh, cat extreme competitive for Investments because we are basing our Graphics program or on the customer needs and capacity requirements rather than Competitive Edge in a situation. That's very helpful. Thank you very much.
Is the next question is from Scotland South Carolina is not open.
Yes, thanks for the call first question. How do you see mobile service rep me progression in Russia in 2020. Do you think that the recent tariff increases will lead to acceleration of growth in 2020 come back to the levels. We have seen in Q4 and secondly, how do you see developments around the affordable internet projects? Do you see any free data traffic level which is comfortable for you to predict to the customers. So would you see any risks of additional costs on the back of that? Thank you.
Okay, I will take the first question regarding a mobile Revenue. So we do for a cost very healthy growth in mobile service Revenue due to several reasons. First of all, the fact that we have right now healthy competition and there is no price Wars on on the market secondly as I mentioned in in my speech we finished last year with the glue off of sub-bass. So finish the Subways of 79.1 million subscribers, which gives us an hour. So very healthy. So we see all the elements in place. So to forecast healthy Revenue grows, and if S4, socially significant information resources wage, it's a little bit to do pretty much give any indication on estimation of a potential impact because there is no Clarity on what time
Will be included in such resources. What would be the the treatment of such resources and and so on so forth. So I think right now. We we are in discussion with the regulator and with authorities on that project and we cannot give you much of visibility.
Okay. Thank you very much.
On to the next question is from Yvonne Kim exhaust Capital. Your mind is not open, please.
Yeah, good afternoon, and firstly congratulations on the great execution throughout 2019 on the fourth quarter $19.00. I would have expected Lee mobile service Revenue growth to accelerate a little more since the internal roaming effect was completely phased out and it was more or less at home with a quarter growth. So any collar on the factories your would be much appreciated. And secondly, I'm going back to Catholics. So I understand about the hedging instruments, of course, but is there a rule level where you think the topics will go up in the real world terms. Thank you.
I will take the first question. I can tell you that while you see that really there was slightly lower growth of mobile swop service. Thank you for that wasn't one single reason for that. There were if you would most of which were one-off I can give you an example. We've been moving a big tariff plan off from Pure per month payment to per month and per day which technically in the month of change would would lead to decreasing revenues but later on in all the coming month, it will increase revenues because people would would be online more so they were life like when we've checked were like seven or eight different reasons for that month again were uh, one off so we expect this to look even better further.
Yes with regard to the topics just went first. I want to repeat that part for a fix exposure within the topics is the hedged off. The rest amount is is not that big and in in the current situation, I think as I as I said, we are pretty comfortable with the levels that we mentioned and I think it's pretty early age this stage to to talk about the what can what when the amount can be higher. I think that we can accommodate and we have some certain flexibility internally with our vendors, but still I think depending on the situation on the market we will monitor this and then we will provide more information later on things.
Thank you. Just a quick follow-up on the mobile service. Do you have an estimate of what it would have been without those one-offs? Thank you.
Well, you know again, it's you you understand that it wouldn't be pure estimate. So I see that that it's going to be below up again at 7 a.m. Or eight different reasons from 100 million to 200 million each. So roughly below 1 billion, but something like that.
Okay, great. Thank you.
I'm just the next question is from your line is not open. Hi, thank you. Two questions for me, please on the new business complex am sort of referring to your DMV Slide the 2020 total capex guidance. I believe implies that you will be at the very high-end of what the new business complex should be at the percentage of total. Can I just understand? What is that is as if its initial rollout phase that that that should subside or wait time or whether we could expect for example in the next few years over the entire medium-term Guidance. The the new business complex to be up to 20% of total. That's the first question second question. If if you could maybe at this stage elaborate a bit more on why exactly the sixty billion in potential of retained earnings after a potential treasury cancellation would be to
whether there is the
Simply due to some residual covenants of whether that it's uh, just just cautious in your part. Any Cloud would be helpful. Thank you.
Okay.
Hey.
I'll look to the questions on the traffic side. I think the estimate of 20% is a little bit puzzling. I don't know where it's coming from. It's from the overall topics in new areas is concerned we see these are usually less capital-intensive various. So we should not expect that growth in those businesses going forward will trigger a significant, uh Capital requirements. However, of course in order to support the growth example in financial services or in other areas will require certain Capital Investments. So based on that, we don't offer the think that the one should expect the share of carpets in new areas grow.
But I don't think also that will see significant reduction and that is just the initial stage know I think we'll pretty much key for the level of investments in order to support the growth efficient in order to support the growth. If I if if I was clear in my ins and only take walk-ins. That's very long term based Vision. What is what is the sufficient level of retained earnings in order to support a long-term dividend commitments and long-term vision of the growing in return to our shareholders. Uh, so they you know, you know solid figure or there is no strict limit that small kind of, you know, estimate softest. Yep.
Where we feel confident in what we believe should be uh the right size of this cushion.
Okay, thank you. Maybe just explaining on the topic since I'm referring to your Capital markets. They slide where you're saying basically the estimate for 2019 of the new products and businesses about ten billion rubles. And then you're saying that the total or did these the new complex could be up to 15 or say up to 20% of the total and over 20 20 20 22 back up from 13% So just you know backing out with that might be it sounds like going into 2020 with your 90 billion total cupcakes guidance, assuming a billion Flats number for roughly. It seems like you're ramping Investments instead of new businesses up quite significantly versus 2019. So, uh, you're saying basically I see if you can confirm that the the the levels that we're going to see in 2020 should be assumed for the foreseeable future at all.
in the coming
Okay, thank you. Thank you. We got it. I think it was the upper end of in for this year. And that also is very much defined on how long you sleep the convicts between your infrastructure where you are located. So I think it's an upper end and for this year for the 2028. Um, I would say that we have a lower figure on topics into new areas.
Says the core driving the the higher number then just to confirm.
Yes. Yes. That's I didn't get it was a question. Yes. The core is also is you know driving basically or contributing to the capital guidance, which we yep. All right, that is clear. Thank you very much.
And the next question is from the second shuttle from Banks, and then it's not open to go ahead.
Yes, thank you very much. My question basically was also related to carpets and was largely answered the community go, but just to follow up briefly off if you say in the core capex is the driver of the topics I could increase because clearly you are increasing topics in comparison to X Ukraine level of last year. So is this the driver of this? Could you elaborate repeat what drives the increase in the core capex? I understand from your previous answers that affects wage is not the driver of that. But what what is the driver of the countries of the core capex increase next year this year 2020. Thank you.
Well, once again the the share of non-core topics topics in other business lines wage is growing. It is not 20% It's below that figure for this year, but it is clearly growing and it's one of the key contributors to the overall growth of Catholics still the core capex overall capex remains flat. And also we include Arava investment in to this guidance, which is in 2020 will be high then in 2019. So these are the key factors. So growing non-core growing irava and stable core business. But of course Core Business is is a significant part of our topics.
Okay, that's very clear. Thank you very much.
And the next question is from Savannah.
Good afternoon. I have to question. My first question would be on carpets again. I'm sorry, but under different Souls. Can you remind us what share of Europe is a 16 because you also have construction. You also have to pay Constructors. You also have to buy some kind of metal et cetera et cetera. So what kind of what percentage of your cock is a fixing? That would be my first question and my second question would be on Top Line guidance in this uncertain slowness question said that you do expect Healthy Growth it serviced Avenues in twenty-twenty and you have subscriber base growth and you have the priced yourself mind standing by around 4% why am guiding top-line to grow only 3% in what kind of lines do you expect slow down? Thank you very much.
This is one of the things that emerged is Sandra answering your first question speaking about the capex. What we're saying is that there is no direct link. There's indirect link of our ethics exposure within the complex and it's up to 50% of our contacts less than 50%
Well, you know given the current situation about the second question about top-line guidance Frankly Speaking. I don't see it as too conservative. I mean if you would look at last year beginning of the year we gave approximately the same level of guys and I think it's it's pretty accurate given the data that we have now at hand.
Politically, I thank you very much.
That are currently no further questions. So as a reminder, if you would like to ask a question, please press zero and one on your telephone keypad.
And the next question is from Alex. I'm having matter. Which relations Capital your time. Is that open?
Yes, good evening, just to follow up to the previous question on Revenue guidance. So when we look at your forecast month, can you please help us to kind of a I don't understand what sort of underlying Groove you forecast for the new business segment wage or if you can provide more understanding on how you look at development of empty as being this year which might be the largest part of the month additional Revenue segments and just the revenue segments which will be contributing to your Revenue as I think that will be the largest driver of that because as far as understand, we are more or less on the same page on the Core Business growth and the biggest question will be how the other adjustments revenue streams will be growing which will create more volatility around your top-line wage.
We thank you. We stick the other areas non non Telco to grow a good piece and I assume it's about double-digit by in particularly in financial services. Um might be not that high growth in media. But in B2B digital and cloud services also is is aggressive growth estimates. However long we have also flattish Dynamics now a detailed which is about $99 billion of our overall $500 billion Revenue Office. Oh, sorry, so that's we we focused the taking our reduction in retail footprint and overall macroeconomic. Yep.
Education and so on and so forth will be flat and some other segments logo segments will will will potentially like wage roaming for example will suffer probably from the current development macroeconomic development and so on so forth. So overall we are coming to the feeder which you see, you know guidance and we believe it's it's solid estimate for 2020 taking our constitution.
Thank you very clear.
And the next question is from Union Bank.
Yeah, good evening. Thanks for taking the question. It is on the bank actually with the expected with fast growth. As you said do you think that the bank would need the capital increase this year?
So do you think you very much with this country speaking about the bank? You're absolutely right that to support this level of growth. We are ready to support the bank and found within this year or billion rubles War would be provided into the capital of the bank in school.
Sorry 5 p.m. Okay. Thank you very much. Very helpful.
To add to this question. I would like just to stress the stress the success of growth now financial services are all Bank was within two banks in Russia in growth of retail portfolio.
last year
right a good to know. Thanks. Thanks for that.
He knows how the questions.
Okay, ladies and gentlemen, thank you very much for listening. If you have any further questions, we welcome you to contact MPS investor relations at any time a webcast of this discussion will be available soon our website. If you need to replace the call in the meantime, I appreciate your interest and wish everybody a pleasant day.
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Dead dead dead dead.
Yes.