Q3 2020 VEON Ltd Earnings Call
Good day, ladies and gentlemen, and welcome to feeling sick Fortetropin to trench results webcast and conference call. At this time all participants are in listen only mode. It's actually speak a presentation that will be a question and not see session.
Ask a question during the session you when each press star one on your telephone.
As a reminder, today's conference is being recorded.
I'd now like to hand, the conference over to Mr., Nick Cashell head of Investor Relations. Please go ahead Sir.
Hi, good afternoon, and good morning, everyone. Welcome to you on second quarter results presentation.
<unk> grew 10 Investor relations I'm pleased to join them a lot today.
<unk>.
She said you're right not creep up because she is long without <unk> chips, I say cannot do that.
Today's presentation will begin with an overview of our third quarter results from say Ken for the <unk> operational you from corn and Suji to discuss the trends we saw across all business during the quarter as that and then it looked after that well.
Well, then hand it back to sit can you discuss the OSM can our financial guidance for the full yet.
You know, we will ensure that the Apple top your questions that Youd all cities safety for the end of the presentation.
Before getting started I'd like somebody that we may make forward looking statements during today's presentation, which involve certain risks and uncertainties. These.
These statements that I can talk to the company anticipates the full in Chicago, So 20, twinkie, particularly in lots of the Capex pandemic.
Future market developments and change.
Operational and it will develop into next investments.
And the company's ability to target, some commercial and strategic initiatives, including current and future transactions.
Certain factors may cause actual results to differ materially from those in the forward looking statements, including the risks detailed in the company's annual report on form 20-F, and other recent public filings made by the company with the agency.
The increase any any presentation each of which includes reconciliations of non <unk> financial measures presented today can be downloaded from our website with that let me hand of a chicken.
Thanks, Nick and good morning, or good afternoon to all participants.
Thank you for joining us for this presentation or third quarter results. After several different difficult months for our business during district glow phones, that's COVID-19 record I'm pleased to say that this quarter's foolish steady recovery you know you know printing trends back towards more normal levels.
We look at told US they were not as the quarter progressed does it to later, but this is supposed to go straight to our reported numbers, which are summarized here on slide five.
Loop revenue for third quarter declined by 1.3% in local currency terms year over year to 2 billion U.S. dollar an encouraging grace from the $1.9 billion recorded in Q2.
On a reported basis do you have or you change your revenue was minus 10.4% once the negative impact to currency movements amounting to $202 million or accounted for.
Once again due to revenue net of our growth rising by 13.1% year over year in local currency terms or 3.1% on a reported basis.
This result reflects the continued expression or for your networks subscriber numbers.
What is the rapid uptake in digital services that well reach has encouraged.
Local currency EBITDA was flat year over year, a good result, despite being boosted by a 52 million dollar positive contribution or the reversal of a pre provision in Pakistan.
Adjusted for this EBITDA fell by 4.5% year over year in local currency more on this later.
One is currency effects accounted for reported EBITDA fell by 9% year over year.
Well, maybe there was margin was 45.1%, which was up 0.7 percentage points year over year on a reported basis.
This was helped by continued cost reduction, particularly in HQ overheads and it was boosted by the reversal of a provision of not just from the $52 million.
Net profit for the quarter before one of items was home to the $4 million to $5 million. However, this is before non cash impairment was founded a $90 million.
Principally relates to the carrying value of goodwill.
Poor be learned in Russia, which we have improved by 723 million U.S. folks.
The impairments reflect a number of headwinds for our Russia business, which has in recent years, Jim It's Rick.
Revenues and profitability challenge quite competitive pressures in the market.
More recently the impact of a weaker Russian ruble.
Along with ongoing Corbett looked almost kinda sushi to troubled restrictions have had a negative impact on consumer spending which weakened during the third quarter.
To give you the slower than expected recovery and be learns ARPU, which does impact the projected revenues as good as the low market kept additional the group a revision to our previous estimates has been deemed necessary men.
Measures to turn it on the line are better at lunch and the recent on speed to business returned to positive year over year revenue growth and deliver further improvement in operational keep you asked him to source household 2020 one.
Our mobile and financial services offering there.
In terms of funding to three so much lunch hour second won't be sure on there or medium term north program, which helps reduce our coastal depth by hundred and 19 basis points compared with Q3 last year.
From a shareholder value perspective, and number of milestones were also reached doing both during two three and early because of this current quarters.
Neutral, which underscore our commitment to creating frameworks, that's reflective financial and governors needs of shareholders.
We reached an agreement with our he pushed her bank, which means that in the master's holding of our stock via or NASDAQ listing will no longer be subject to an annual depository fee.
In Pakistan, the exercise of the put option by our business partner and just means that the group will capture the full value of this fast growing business. Once this transaction closest.
Just today Vienna, two successful sale of Armenian business and I'll come there to reflect ongoing optimization all of our operating portfolio.
This transaction has no claws, you have shares transferred and cashed received.
And Tuesday, so I'll put in place in new governess model for the group based on a leaner ht function and greed to empowerment all of our local boards, which now also draw one the expertise and experience or independent directors.
Taken together, we believe these steps strengthen the foundation foundations of our business and the value proposition, we can offer our shareholders.
Looking at our financial resolved in greater detail slide seven sets out our third quarter performance alongside our corresponding performance at the nine months stage.
To have comparisons this last year 49 months figures. We also shut out adjusted values for both very near an editor wants to non-recurring items, excluding from last year's figures, which are detailed in the footnotes.
They are also set out here the impact all the impermanent on financial performance in Q3 and for the first nine months.
The key Trump I'd like to highlight here is the the quarter over quarter improvement they have seen in revenue EBITDA and EBITDA margin each have rebounded from Q2 levels.
This is consistent with the recovery in business activity dissolving two three is that we're operating companies returned to normal trading conditions Comcast at the restrictions that that lockdowns imposed on them issue too.
We have provided more detail on this sequential chance here on slide eight.
As you can see from the right and chart the decline in local currency revenues bottomed in early cuter and has shallow steadily since.
As a result, the groups are both reported revenue a bit that it just it for provision reversal in Pakistan Grove, 5% quota look over a quarter into three.
Sorta aspects all of our product revenues will take longer to return to normal.
Which means both benefits and challenges for us in the meantime.
Growth in our fixed line remedies for example remains high as home working out lies the full lockdown phase of the pandemic.
Illustrated by strong double digit crawfish, the recorded in Kazakhstan, and you're cleaning two three and a 9% revenue growth we solve in Russia.
[noise] roaming revenue. Meanwhile, remain understandably week as travel takes far longer to recover to anywhere in your career Covid levels.
They currently stand at roughly one third or the group revenue contribution they're making this time last year.
However, the overall pattern or recoveries consistent this the revised guidance. We sure is your last quarter.
And assuming current lockdown restrictions do not version they expect these trends to continuing to for more on this when I take us through guidance at the end of the presentation.
Moving to slide line and more detailed breakdown all of our revenue during the quarter.
The kiss him across all markets was an improvement in euro you're ready insurance compared with Q2, three of our larger markets, namely, Pakistan, Ukraine, and Kazakhstan, each delivering double digit underlying growth.
Russia continue to report a decline in revenues largely as a result of significant to Laura roaming revenue due to travel restrictions as well as a further falling customer numbers.
However, the peso revenue decline in Russia was shallower them in queue too and we remain confident that the measures. We are taking their will support an operational turn around during this far south of 2021.
You'll also see here the impact of four actually the actors on a report numbers, which at 12 of them 2 million U S. Dollar for the quarter meant that reported driven useful by 10.4% year over year compares with a smaller only 1.3% decline in local currency Jones.
Turning now to slide 10.
Everything in local currency terms of work up slightly by 0.1% versus crispy last year helped by the double digit growth be enjoyed in Ukraine and Kazakhstan.
Once again Cos controller was a key focus for us throughout the quarters.
Particularly at the Ht level there'll be reduced our corporate overhead by 46% year over year to 43 million yourself.
Finally turned to head windows $90 million impacted reportedly booster, which declined by 9% you over a year.
Turning now to our captors structure on flight 11.
As has been the case throughout the pandemic strength in both capital and liquidity remain priorities as we navigate the group through this challenging period.
In two three this man active management all of our depth through a second drove down under the MTM program, which enabled us to refinance some of our existing maturities through a five year 10 billion rubles billion rubel not issue.
We also refinanced our existing 30 billion rubles Galata alone facility in Russia, and fully repaid of our borrowing under a revolving credit facility.
Together this has enabled us to lower our average cost of borrowing by hundred and 19 basis points compared to two three last year.
I'd also point out there so far this year, we have been able to access credit markets at lower coupon rate than both.
Our average coastal rubel depth and some of the more expensive you have solid borrowing they acquired through the consultation G T H.
In the previous quarters.
We have also managed to match, Utah borrowings practically refinancing near term maturities I'm pushing out the average tenure or depth to 2.8 years compared with 2.5 years at the end of two three last year.
He can't you too much of our borrowings dollar functional currencies as far as it is practical using rubel hedges, they're appropriate and managing liability against a Russian revenues.
The impact all these hedges illustrated on the two right and pie charts, which show the currency makes all of our borrowings prayer and port hedging. The result of which are rubel exposure arises from 31% to 42%.
It just going for our cash holdings as well, which are shown in the left hand side, a pie chart, although net rubel exposure rises further to 48% covered up the matching of a rubles revenues as a result.
Final on the slides the group continues to access.
Two considerable cash and Undrawn credit facilities, which together a monster 2.8 billion yourself up from two and a half billion dollar at the end of last quarter.
Moving to slide 12th which shows have grouped up changed over the quarter.
Slightly lower cash capex as well as a stronger habitat them queue too.
Enable us to reduce our net deposition this quarter to $5.9 billion down from 6.4 billion link you too.
This resulted in a small quarter on quarter fall in our leverage ratio to 1.9 times.
Clothing leaves liabilities from two times and cute too.
Which is the largest internal guideline will they around two times, we have set up tall ourselves.
To summarize the group remains in a strong position financially. Despite the challenges of recent quarters and we will continue to look for market opportunities to enhance our balance sheet, while safeguarding our liquidity position the quarter that.
With that let me handle over to come to take us through our operational performance during the quarter in more detail.
Thank you second and a warm welcome to all participants online today I'm pleased to talk about not all year recovery from the impact of COVID-19, and third quarters, but offer a strong operational foundation that make us optimistic about long term growth of the on group.
Going through Q3, we have witnessed the recovery and revenues and acceleration in our forward your subscriber base and the lower churn in all key markets.
We continue to invest in our networks in order to respond to ever growing demand of our customers and took measures to improve customer experience.
The built teams and other operational capabilities, most notably in I T that will carry us further.
In the course of the quarters.
We have reached year on year growth levels across all operations. Despite the loss of migrant workforce revenues and roaming revenues.
There will be Bob challenges and opportunities for our business as we go forward. We are both committed and better prepared today to serve our customers with connectivity and digital products as the world Eh, just new ways of interacting socially professionally and commercially.
If you got a slight 14th forgy penetration is the cornerstone of beyond gloves growth opportunity as bolt our existing base shifts the forgy from two and three third generation technologies.
And we acquire new customers through deploying new networks and population coverages.
This shift has the potential to transform the financial characteristics of our businesses, giving the higher data consumption higher artwork and lower churn that it generates.
Here I'm pleased to report that we have made good progress in Gucci as beyond group. The now sharp 73 million customers with our forgy services.
That signifies a year on year growth rate of nearly 40% and additional 20 million users year over year 8 million just added in Q3.
Today, 35% of our total customers consume forgy services.
45% is up from 25 per cent a year ago.
On the slight you can already see the additional value that our customers who are users of voice versus forgy data delivers.
In comparison to the average users day consume about two to four times more data depending on the market.
And they are our pool is up to two times higher and the churn rate is half on average.
And your profit customers, who uses one of our D still services like the line television or mobile financial services on top of Forgy data.
Is at least three times of that voice only customers in about 25% to 40% higher than that of it to play for G customers.
Including forgy cost three G customers to charge of our total customers are now mobile data users, which gives us an immediate opportunity to continue the migration towards forgy in the coming quarters.
In addition to this business to business and six slides services are additional too gross engines for us.
On our beat to be mobile services revenues, we have seen a growth of 5.6%. This quarter's driven by an expansion of our be to be customer base by 4.4%.
Russia, Pakistan and Ukraine, each made strong contributions.
We will look at those when we review these markets later in the presentation.
A similar pattern is evident in our fixed line service revenues, which grew by 4.4% year over year led by an expansion of our customer base of almost 10 per cent.
The combination of these factors provided is strunk platform of our long term growth and a great Foundation from which we grow a range of new digital services, let me handle where to saggy to update you on the latest developments regarding digital services saggy.
Thanks, and good morning, good afternoon, everyone, you'll be hearing about our digital initiatives for a while now and we're selling of that but.
Ah more gunnera in detail update on the brother, who are making me some of them.
We found beyond ventures, where I joined from Facebook into them at around 19 don't be misled by the name Bantered. Another typical corporate Bantu capital platform for passive imbalance. It's ultimate goal is to find built and scaled the hit our services in high growth vertical that can be further enhanced through close partnership with V on Scott connectivity business.
And therefore result in an increase of the overall valuation of it beyond group.
This will enrich experience of our 200 plus million customers help extend our reach of the two of a 600 million people that live in our operating Marcus I don't know if I said that have been that have the potential to become the multimarket leaders of the decade ahead.
In order to maximize our in but we decided to initially focused on three main vertical.
Hit a financial services content an attic.
We have the fortune that some of these opportunities are already being develop within the groups operation operating this.
Guest cash our leading into financial services franchising, Pakistan is a bad example of that.
The roller venters here has been to expand desk Cassius reach out and liabilities to technology product and channel development.
Thank you I've got technology to replace station albino sub terminals, creating a full digital onboarding for Americans and tailoring just cashiers service to Bucky. Some freelance community are great. Examples of how we can help develop their business from within.
Last week's announcement of our strategic investment Shabaab alongside segue, a capital employee debentures, it and actually ministration of how be inventors can help us brother, our growth opportunities in one of beyond multi NAMIC and growing market.
Sharp up provides Ah my wife first commerce platform that brings by us and tell US together of course, black violaceous highly fragmented retail supply chain, which is dominated by micro and small businesses.
It also offers access to hit a credit which provides the on ventures with an excellent opportunity to leverage our skills in my wife financial services and develop these collaborated together.
The second Vertigo content already has some great. Examples of how we are leveraging they're very late that distribution technologies to deliver video streaming to millions of our customers.
Blankley in Russia, and Duffy in Bangladesh at by your eating this garden drive.
And enjoying rapid rates of adoption.
Belatedly expanded each user days by over 40% yellow a year during the quota.
So I'll feeling well regarded over 1.5 million monthly active users into three and hashing fast the two mediamark a great achievement for a service lunch less than a year ago.
The third of vertical ethic illustrates how we can leverage and a deeper understanding of our customers behavior to enhance their digital experience of our services and those provided by our platform balance on that day, we've already doubled down on our operating in Russia, while we possessed robots capabilities and technology.
By leveraging the synergies between that we are strengthening our market proposition and showing embassy put already in the process.
This experience will enable us to explore this adtec model to our other orcus, starting with our adjacent C. I S market.
Let me pause here and handmade to gone to discuss Russia in Kazakhstan.
Thank you sorry.
Turning now onto the individual performances of our major markets, starting with Russia. This a slight 60.
COVID-19 did not distract us from the focus on execution of turnaround in Russia.
We should anticipate will happen in multiple stages.
Stage, one improvement in our network metrics.
Two improvement in customer experience Kpis, three resumption of subscriber base growth.
Four following a return on year on year growth in revenue. The New line then you be like team under Alexander Tub of course leadership remains focused on improving garden network performance and we are pleased to see the first results of this effort.
Good progress was made in Q3 with.
An 18% increase in Moscow data speech network quality and the completion of the first phase of our Moscow Metro rollout today 70 per cent of Moscow subway stations are covered and we anticipate to completion of the coverage by the end of the year.
We are also seeing encouraging signs of improvement in our subscriber base with 10% growth of our forgy userbase year on year.
Another positive sign is the two percentage points fault insurance via recorded this quarter's here I'm pleased to say that the shower reduction driven by better network quality is also edit by stricter policy. We are applying to third party content services improving customer satisfaction.
We are also seeing encouraging trends in the take up of our digital services.
And half functionalities off might be lying application or self service platform has contributed to a 33 increase per cent increase in its monthly active users Sim.
Similarly, broadening the content offer of Beeline television has helped us drive large rises and its user base because reach 2.5 million.
As I mentioned earlier B, two b is a major opportunity for us in Russia.
Be free type services, which we are positioning for <unk>.
Growing range of business activities for remote working is now replicated in many of our markets.
All mobile be to be service revenues groove, 4.2% year on year in queue treat during which we expanded our be to be customer base around 10%.
Also impressive growth in big data and artificial intelligence enabled services their revenues more than doubled during the quarter.
In September the clothes, the acquisition of the telecoms operator, VESCO one of the leading independent operators in the Moscow region, serving around 10000 business the business customers, which will provide us with a strong synergies as we extend our fixed line IP and clouds services further.
Now turning onto the number on slide 17.
Russia total revenue declined by 6.8% year on year, partially recovering from last quarter's decline of close to 10% and closing the quarters with 5.9% year on year decline in September remedies.
This improvement was achieved despite smaller revenue contribution from migrants migrant workers virtual customers.
Visible in subs base decline and the 68% year on year declining enrollment revenues, which alone is equivalent to a topline impact of 2% on beeline Rush us total revenues.
Eliminating unrequested services from third party content providers contribute to a 21% falling contents every news this quarters with a top line impact of about 0.5%.
As I mentioned on the previous slide this has a significant impact in better customer experience and churn reduction and.
And we are confident that this is the right way to go for long term growth and customer satisfaction.
And other area of growth has been our fixed light business.
Our revenues grow 9% year on year as customers continue to benefit from our fixed line data at home and pay more of their services following revisions to our product offerings and pricing.
And other positive contribution to revenues came from handset sales as handsets revenues increased over 50% quarter over quarter.
Once most of the lines start work real.
In Q3, Beeline recorded and 18% year on year declining EBITDA, primarily due to lower revenues and higher structural costs associated with higher interconnection costs increase network investments and continued in sourcing of technology operations.
While these efforts on the technical side have a negative impact on call. We are confident of their long term positive impact on customer experience and service quality.
In summary, the steep rise beauty quoted in our both our Fort V customer base and a 4.5% growth that we are seeing in data revenue gives us confidence that we are on the right path.
By keeping up on our focus on improving customer experience. We will continue to target a return to a year on year growth for revenues in the first half of 2021.
Turning next to Kazakhstan on Slide 80, Beeline, Kazakhstan is our fastest growing market recording more than 14% year on year revenue growth in Q3.
This growth is driven by the fact that we have already reached 50% penetration of four G customer base in our customer portfolio. This is the highest among our operating companies.
In Q3, our network expanded to cover 75% of the nation's population.
We also sign an important network sharing partnership with casualties stunts other through mobile operators to extend high speed network to rural communities with populations about 250.
We are pleased to be able to contribute to the elimination of the digital divide in Kazakhstan.
I'm also pleased to note that the growth in forgery adoption underpins the expansion of digital services Beeline television has seen its monthly active user base double year over year in Q3, two 1.6 million.
My D lines Self-care application recorded also and 94% increase in unique users.
Our mobile financial services enjoyed a quick rise with active varlet users growing by 59% year on year.
Finally, our digital operators easy so further growth and its customer base and remains on track to reach 50000 users by the end of this current quarter.
All the fixed site the increased demand for home connectivity has allowed us to grow our revenues, 40% year on year in cutesy.
As a result of the growth and fix mobile convergence roughly one in FIFO far fixed line customers now you are converging products.
This gives them more flexibility in using our services, while strengthening the foundations of our customer engaged.
Looking more closely to the numbers on slide 19.
As you can see revenue grew by 14.4% year on year underpinned by data revenue growth of 35 per cent, which reflects the very encouraging structural growth sense I just outlined.
Right in our top line led to a 17.3% drive in our EBITDA.
Carrying our EBITDA margin to 53%.
As previously noted or forgery subscriber base grew about 20% year over a year and half of our subscriber base base now consist of forgery users, reflecting in 11 percentage point growth in forgery penetration.
The decline in the total customer base reflect the reduction in grass at due to limited mobility, along with ongoing effects of the introduction of sick I M. E. I registration rules in Q4 of last year. The second impact is visible in the year on year comparisons for the entire industry and is a distortion.
<unk> that will pass away as we move to 2021.
Let me know and over to serve you to take you through Pakistan and a brain before we close the formal part of this presentation.
Sorry.
Let me turn next to a market that is very close to my heart, Pakistan and the three themes that dominate the quarter growth forgy and hit our services.
So a return to revenue growth during two three Ah slowdowns, what is and so each subscriber market share expand again.
We continue to expand our forgy network, increasing our number of beta stations by 19% to reach 56% of nations publisher and increase of seven percentage points year on year.
Once again data services, what are the focus of our engagement with customers. We just cash modern doubling each monthly active users 297 million during the quarter.
And I'm pleased to report that this week, we just passed that 10 million monthly active users mark with over 2 million of these wallets being added each day during the month of September alone a fantastic milestone for the business and for the overall financial inclusion efforts in Pakistan.
This volatile a DVD has helped push the number of transactions conducted on digest cashed platform to over 1 billion over the past 12 months.
As well as financial services, we also make good progress and expanding our digital engagement with customers through our sales Kara guesswork, which so unimpressive.
158% increase in monthly active users compared with Q3 last year.
And on our continent service just television also enjoyed a strong quota with each subscriber base bashing, the 1 million Mark and growing 85% from a year earlier.
Turning now to the numbers they lemon balm, 5% revenue growth you see here captive the recovery in the month following the logged out but also the administration fee reversal recording 232019 relating to the supermodel order tax regime change.
If we adjust for that tax in but the revenue growth rate is 7%.
These incredible of underpinned by another strong quota for mobile at the revenue withdrawals like 25% yet over here and we successfully grill, our forgery subscribers with an addition of 3 million users.
This leaves our soldiers subscriber base, 70% larger and it was this time last year and we will have a controller Grove runaway ahead of us given that almost two thirds of our subscribers are yet to add up for G.
Reported growth of 41.2% is distorted by the reversal of Ah one of tax provision of figured 2 million U S. Dollars you produced for this everyday grew by 2.4% year on year robot.
Roberta debit was also negatively impacted by the change in accounting or the security deposit we made on the protests in respect of our ex worried the spectrum license, which from last quarter is now amortize a side of our services cost.
Finally, let me turn onto Ukraine and keep that.
Gives us a double digit growth in both revenue Amida EQ three following the relaxation of locked out driving this was a growth.
A strong a rebound lean towards your subscriber growth, which jumped by over 20% quarter on quarter and enable a double digit expansion in up.
This growth followed up period of sustained network deployment that Hasheem. Our total number of forgy basis station increased by 65%. Since this time of year and include installations in the gift Metro.
Keeps our growth in digital services have been impressive with our Microsoft US health care up userbase rising my ticket, 2% year over year and growth and Keester television content users by about 37%.
Keister has continued to drive demand for it to be to be services by bringing to Ukraine, they're very later in digital technologies and services.
This strategic partnership Gifter announced with most of the Microsoft in later 19 has been an important at least here and has enabled keister to offer club services alongside the development of its own AI and big abilities.
Keeps selwyn one step farther recently by becoming the first operator provide open a bag of abilities to developers.
In order to encourage collaborative ecosystem of services between the company and Ukraine larger and done the community of developers.
Ukraine telecom industry benefit from a supportive regulator and a number of recent policies that encourage the development of Delta services.
And although we are monitoring the impact of new quarantine measures.
The performance of our business will remain positive on the long term outlook of these dynamic market for our shirts.
Turning now to number on flight 93.
You can see the two left hand bottle charge the acceleration in both revenue on Evita, we're experiencing Q3 restarting the double digit growth that was dominant Trent for us in this market pre-college.
Mobile data revenue once again drove the growth rising by 23% year on year and on the back of an in breath, ingression, Arco and furnished our service adoption lean.
Linking this trend is a success we have secured in expanding our <unk> user base through greater legwork availability keister.
Keeps are forging network now cause 85% of the nation's population in our user base is growing rapidly up 50% year on getting to see.
These photos a big jump in our full penetration rate during the quarter up by one third year on year to 36%, which is still leave us a considerable growth runaway ahead of us.
For an adoption et cetera.
Let me finish by highlighting some of the key trends in our other markets, which we have shed out on slight done before this.
This market at each a better stage of a smartphone adoption, but the common theme is that the expansion of for the coverage is boosting way the revenues and increase in our.
You can see in the second row of numbers, how these translating into forging customer growth, particularly Bangladesh, what our foggy userbase more than double in the shower.
Year on year.
Who had executing unfold you that bloemer alongside the introduction of similar range of digital service, but Taylor in each instance to the new place.
Example, here is stuffing in Bangladesh, which following it's lunch and last November went on to reach the number one spot locally on Google Blake and Hasheem more than 50 million downloads so far.
Although some of these are smaller market are taking longer to recover from Lockdowns, we're particularly pleased to see Bangladesh return two year on year growth this quarter and we remain positive on the considerable wrong run potential of this early stage months.
Let me know Hanover to show come to conclude the hour presentation with something much.
On outlook and guidance circa.
Thank you surgery, let me now turn to the Arctic of queue for an hour or so your expectations for the full year 2020th ownership out for him.
Which is set on slide 26.
We ought to their confirming of our financial guidance for 2020, which is set out on this flight anticipate a loaf to meet single digit low local currency Euro are you declining both group Redman editor.
And copies in touch at all 22% to 24%.
This is consistent with our pet from us at the nine month stage.
Of our guidance as seems disturbed the recovery we have seen in our operations will continue in queue for an Atkins current locked arms restrictions do not gerson.
And deterioration here would have a negative impact on this outlook.
I would also like to reiterate what I said last quarter regarding our dividend cash.
Cash flow generated in the first nine months of 2020, there a vicar compared to last year.
Which reflects acceleration and 14 missing programs across the group.
Coupled with the costs associated with to put option exercise borrower partners, Pakistan management anticipate no dividend for for the year 2020.
Let me to conclude with some key messages, we'd love to leave it with you on page 26.
First a key theme of two three was a sequential recovery in the group's financial performance as of our market exited lockdowns set.
Second of our for the opportunity is the backbone of our growth story and we are a ticketing on it at page.
Third there is no change in our expectation or an operational turnaround in Russia. During the first half of 2021, when we expect positive revenue or subscriber growth to rescue.
Fourth there.
Expansion over digital capabilities is helping us forge stronger more enduring relationships with our customers thrilled grooving range on these services.
Fifth shareholder value remains uppermost in our priorities and we continue to it all of our business to Sir it's neat.
And finally.
Swimming current lockdown restrictions across over market do not version in queue for our financial guidance for the financial year of 2020 is unchanged with that I'd like to thank you for your attention and pass through the call over two questions operator.
Thank you so ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad and light show named Kippy announced and if you wish to cancel that request. Please pass the hash K.
Once again that style one to ask a question.
And once again.
And gentlemen that sounds like fun to ask a question and your first question comes from the line of hungry headset Morganstanley.
Please go ahead you line as a pattern.
Yeah. Thanks, Thanks, very much add add a few questions. Let me just wondering in Russia in areas, where you've I guess, it's predominantly instead of Moscow and Saint Petersburg at this point, but and I asked way of upgraded in network. What are you seeing in terms of enthusiasts.
Navy office and sort of China effect.
And then secondly, I was wondering I mean, you gave some pretty good stats in terms of fall G versus the average pace, but what I actually seeing link so much upgrades because I got the early adopters are already generating higher office.
A lot of Sean than the average customer so subtle that three G customer going to <unk>. What are you seeing in terms of octuplets, China reduction, particularly in Russia.
And then they start last question is you've solved Emmenia can you talk a little bit about how you see or how you think about your portfolio of assets I guess geographically, but also in terms solved sort of vertical integration G. I know there's been I guess this morning, even some.
Speculation about you potentially selling looking to sell your towers in Russia. So just <unk>, you're thinking around dining infrastructure, that's in Washington, and other markets. Thanks very much.
Thank you very much for your question that just calling I will take the especially the part about the the Russia. It's been about 12 months that we have pushed the button with regard to our turnaround program and we have prioritized Moscow multiple centers Moscow of loss and also some Peters, who can cross knows R. As our prior.
Dorothy areas, where we have concentrated our investments efforts I'm glad to see that actually year on year. Thanks to these efforts are quality of service today in Moscow centers has been none too second to none of the other operators also certified by third parties and we have seen.
And about two full percentage points of churn reduction thanks to the achievements on this network quality.
We are just 70% done with Motzko metro and with the completion of that this customer satisfaction levels are expected to go even higher same results with regard to Saint Petersburg.
And the city and also we'd Saint Petersburg subway system. So really strong results in terms of customer satisfaction levels and key network Api's.
The fact that we have been faster and basically more concentrated on Demasco centers also gives us differentiation with regard to the different M. P. S scores compared to the Moscow of lust, delivering solid proof points that actually this is working and as we rolled out of our network and a more than she fight way in Moscow.
[noise] warblers and complete the metro deployment, we will get even better results looking.
Looking into migration from two G. Three G 240, and ultimately what I call a multiplayer customers, meaning that it for G customer.
Also enjoying some.
Some digital services and this could be like T V or our financial services.
The at two levels from a single play voice customers to it doubled play data and voice customers twin LTE customers is almost one X two X three X and when a customer also enjoys a digital service on our network the accuracy further.
Reductions in churn in about 20% to 30% additional artwork for that type of customers and we see all these actually evolutions also happening.
As we have converted almost 20 million additional customers into L. T and 8 million of those in the last quarter. So I hope or this gives you a little bit more color on how we impact the.
Growth rates moving forward.
It's very important for us that as our customers are more adapting for G. They will be consuming more data and they will be actually having an opportunity also to consume additional digital services, which will lead into more artwork and also let's jump.
With regard to our portfolio, we would like to make sure that we focus on key markets that could help us to move the needle in terms of our top line growth and profitability. Therefore, we're continuously reviewing our portfolio.
As as we have announced we have sold R. Armenia operation, we believe that every country needs to be the top priority of the investor in those countries and we would like to make sure that we apply this principle to the markets that we operate we've.
We believe.
Armenia with the investments done by the team investors entrepreneurs there'll be position in much better way for a digital infrastructure with their focus and commitment for deploying these technologies.
We will continuously review our portfolio and make sure that we focus on the markets that we believe we can make a huge contribution.
Okay.
Okay.
Next question comes from the line as Oranges EPS. Please go ahead you said.
Then.
Hi, Thank you for the presentation for taking my question.
A follow up on Russia place. So you know you know some confidence to be able to turn around Russia, and and one 821 I was just curious what assumptions here using their because if we sort of look at the.
Breakdown that the growth rate in the third quarter, then even if we sort of exclude the the roaming and Pat and the and then the third party revenue impact. Then then clearly there is sort of track.
<unk> not just from.
See the eroding customer basis of what are the assumptions there and then for example, how far you with phasing out the third party revenues, which you mentioned had a bit of a tried this quarter what are the other sort of customer initiative that you are taking in order to.
I tried to turn around and then one one question for 30. Please how far are we from the defense like business being big enough to be reported as a separate.
Entity in Pakistan, and and one more question on Pakistan. There is a there were some headlines around essentially new spectrum.
Target, saying something like $1 billion to be auctioned off towards the end of this year, if we could get any updates on that please thank you.
Let me start with the questions around Russia as we have reported you know all through revenue dropped in Q3 six 8%. This is a significant improvement if you compare to two two which was around double digit declines.
I would like to mention that this 5% almost quarter on quarter increase and we have today also disclosed.
Additional data point specific default, Russia, and that's the September momentum, which is at 5.9%. Despite the fact that we have lost two full percentage points Deuteronomy, we have lost a significant almost similar amount due to migrant workers and we have lost about 0.5%.
Each points about the content strict rules about high quality content and improving the customer's satisfaction with regard to the additional.
Potential toxic revenue. So this is really critical that we see this momentum.
And this is happening vehicle week, Munto, Vermont, and we believe that our adoption or <unk>, our customer churn rates declining almost two full percentage points are all contributions and the good signs of recovery here.
I will leave a.
Secondly, Allison Johnson.
Thank you again.
When it comes to desk geyser in preparation you know that we are in the middle of a.
Put option with our panel there shall we will not be proven.
To go too too long on this topic.
We have no no ongoing plants, but we'll be able to talk more about this when we close the transaction hopefully before the end of the year when it comes to new spectrum auctions as you know the government issue a paper are seeking for expert on some cultural vision on how to craft when it comes to five G. A new spectrum.
The Lisa as much as they go where money is sharing with US now I was there last week and I was able to meet with some people are the government there's not a clear.
Timeline when it comes to to issuing new spectrum. So I think that for the at least the next six months no news will come in that regard.
Thank you one sharp follow up if I make on at the the assumptions that you have in the turnaround that that it's again.
Price increases in in one key 21 as.
As we saw this here.
Well in terms of the assumptions behind to turn around and the steps that we are going to go through you know when you start actually focusing on customer satisfaction. The first thing you focus on is your network quality and from the law.
Last year at 12 months. They go to today, that's where we started to focus on critical areas, especially more schools in Petersburg crosses are in terms of our active investment areas. When you start. This it takes about two to three quarters for investments to be deployed fully and to become life. After this customer X.
<unk> starts to be visible.
And this is exactly the time that we are currently experiencing next stage will be direct impact on churn deduction, an M. P. S and finally the improvement on year on year Rabbit. So these are all assumptions of course, one of the most important actions that we have taken in Russia was re re holding off the entire leadership.
Team with a real energy and commitment to success and this of course requires that we will be <unk>.
Moving more and more are captive subscribers into forgy and it will only be possible to also adopt with price increases of new packages as the complete our deployment of a metro at by the end of this year. So you will see us getting more active with much more Richard packages and.
Probably improved pricing and as we do that we will of course, you know move the value chain.
Higher level.
That makes a lot of sense. Thank you.
He also in the previous question I missed one part about the Russian towers I know that that has been some questions about potential sale of the towers. We don't have a specific sale plan as we speak but we always look into our infrastructure assets as a unique part of our portfolio that could be creating more shareholder.
<unk>, we will of course update you as we clarify our plans in this area, but at this particular moment I would like to make sure that we don't have a sales plan on this area.
Yeah.
Next question comes from them.
I cannot stylus capital. Please go ahead your line of sight then.
Yes, Hi, Uhm, maybe three questions for me, please or if I may firstly on.
The given the outlook.
So if everything goes as you expect with a turnaround mangroves and market such as color style, Ukraine, Pakistan Uhm. So you is everything sort of Saint <unk> four dividends to be paid again I'm trying to trying to to.
The first question.
The second question is on the kept on task and Russia. So for how long do you expect a I kept blood test in Russia to stay at current levels.
And then finally I guess a regular question on there wasting structure. So you said before your date of markets and she'll be around.
Not a lot of time left so it anything you can communicate.
Okay, great. Thanks.
Second why don't you take the dividends to okay.
Yeah. This is sir can actually your question is about a dividend potential dividend payment in 22 regarding 21 results.
To Beth I don't want to speculate about 21, the results and the potential dividend payout, but what I can say is that our dividend policies in place. There's no change in the dividend policy and of course, depending on the results on the subject to the approval of the board, there's a potential to return back to deal with them payouts that time, but I think it is.
Quiet early to speculate whether we can restart or we can distribute dividends that time.
You're good.
Yeah, I think kept interest in Russia, Yes of course, the capital intensity in Russia, you know we are planning to.
Focus on actually is smart.
No legit deployment plan, which involves about looking into Russia in more than 400 revenue generating units and based on this you have to be clear plan to deploy.
Blow to Capex of course in balance with our revenue growth and cost management practices as well. So you will be seeing actually slightly above capex to sales ratios in Russia for this year.
And next year and later on normalizing.
Yeah.
Question comes from the line.
So can I have a P. C. S. Please go ahead. Your line is that then.
Yeah.
Just.
The question.
They were also.
About.
Alright.
Could you please.
Tell us what.
I also.
Question.
You were also supposed to have.
About that spectrum.
Right.
Right.
Thank you for that I could barely hear you. So please if I don't understand the question properly just just tell me.
So both questions are related to the type disputes when it comes to the tower cell.
Basically the court order is happening as as we speak so I cannot comment on that because I don't have in real time information what I know from the team is that.
Your position is very strong and we are back by our advisor there that take has been perhaps a misunderstanding Mr. Some of the authority there and at the office will be on sale actually today by itself. So that does a delay does that I have from from Pakistan.
And that's what I can tell ya.
<unk> just the second question was around the that the spectrum, where we've made the payments and so far the payment laski in a payment this year and the the next court date for that was scheduled for for today. So they would just the question was just have we got any updates on the prices around the that the engagement that we are having ourselves and kid at all.
With the with the the regulation around it unfortunately.
Unfortunately, I cannot tell you more than that we made some payment under protest as you know in the past hour.
Ah brush has always been to collaborate with the government and fine amicable solutions they.
They call hearing today, it's ongoing so we don't have a redone resolution. So it will be not for them from my side to comment on that will have the documents outside and that's just much as I can say unfortunately.
Understood.
Hello next.
<unk> comes from the S T a pregnant.
Please go ahead your line is Nathan.
Hi, Thank you very much for that the changing quick question Uhm Mustang.
Just on the anti smoking I tried to have launched at aniak asking around September time, a cat.
Which has not expiring and I just wanted to get your ass thought somebody it vacations or.
Testing the market and my fifth Avenue non expiry.
And all I D D H and do you feel like at recess and gap onto my check on that you expect package of customer take up on the back of that can maybe if you could add sure how to take up off the staff has been so far.
Well you are referring to generations that carrots that we have recently launched in Russia. We have noticed that there is an incredible excitement and interest in terms of environment and wasting no resources in the Russian youth and younger generations, and we have actually off.
<unk> offers directly at this in this particular market segment. We had that's very good feedback from the customer base and I think you know this is honestly there this as as they all they should and that's with the customers as we get ready for our much more enriched offers later in this year.
Thank you very much.
Your next question is from from the lineup.
So can I ask that sandbank. Please go ahead your line is a N.
Yeah first of all on Pakistan. Thank you very much for answering some ideas question, but when do you think you'll be able to update us on what's happening to your <unk>, what Daddy, what's happening to your license shouldn't expect any press ready to help you with today Oh, you think there is a notion of they'll take longer that's about.
<unk> and I got two quick questions on the rash at just one would be or your telephone. Please if you haven't creased face just yeah already or if you plan to increase sent by they get and.
<unk>. Another question would be what's the status of your details natural how much more stores do you plan to close by then yeah. Thank you.
So I am happy to address the Pakistan, one we should have some something else will deleo regarding our offices today for sure.
I don't think that we're going to have a lot of clarity when it comes to the license is because as you can imagine is a complex process. So it will probably take I'd be more than that.
I would also like to remind that the office says it's not all the officers that we have in Islamabad, we have a truly quite big operation. There. It has been only two of our office is one that I ever had some more visible to the public which is but also of these ongoing these questions. So.
But we should be able to provide an update today on this.
Yes and.
And with regard to our commercial product portfolio in Russia, you will see us getting.
More and more for more type of an approach with much more granularity for different market segments as we move into the later part of this year.
With regard to a retail network you have closed close to 700 stores in Russia, and our intention is over the next three years to have a minimum of one third of our sales through digital channels.
And we are actually restructuring dollar organization to allow us to execute on these plants as you know a b.
C leaders are tissue SIFCO there'll be coming back to the market with our new offer portfolio as well that strategy on the distribution sites and two four.
Very clear. Thank you very much and will be looking forward to the update for back you can of course. Thank you.
Your next bill is from the line.
And you're not sure.
The nation's capital. Please go ahead sure Linus now I've been.
Yes, good afternoon, gentlemen, a couple of questions from my side first one again in Russia, you want like a main competitor in Kiev has recently launched its own ecosystem services and the single subscription for several products around the core connectivity and the financial service.
So I just wanted to get your view on that do you feel that you are a few short endeavors in driving additional digital solutions and Russia will be also built around the system with a single subscription like all the big competitors.
And doing it from the different angles like from banking from then Internet Uhm services providers like a different different companies or you Wanna you Wanna keep tie it's kind of a separate just like a trying to.
Pitch each additional product as a kind of a core leader and it's service category. So I just wanted to get you.
Are you on that first second wander about cleaning up toxic content revenue I think I heard about that cleaning out for many many years from all the companies and it looks like it's a never ending process. So can you believe may be.
Elaborate on that whether you feel there is any sort of a light at the end of the tunnel and whether it in this process might and at some point of time and then you you at some point of time you will not expect these two with a drag on your top line. That's my second question and the first question is and try.
And to get an update on your plants regarding additional lifting. So for example, if a previously discussing potential moscone exchange anything or along his pocket change. If there is any sort of update on that front will golf helpful. Thank you.
So I got like I'll take the first and second one then.
Guns help us with a third one.
Look I'm a firm believer of open ecosystems I don't think that we can at this point force people to be with us.
Looking them I think that we will be producing an hour potential when it comes to value creation I think that is apt.
Up to the brother to speak more than us when it comes to bundling. So to answer your question I feel that we have the potential to have separate business I can stand alone. When he comes with financial services, often Antarctic of course, when they're synergies between them and the gorgonian TVP acid leverage that but it's not the.
And to lead fully to improve the Arab will review that that will be I would say leading money on the table and not growing the pie, we want to grow the bio and want to be sure that our customers and users benefit from services and even if they are not customers of the line that they feel that we are building things that resolve their problems.
And they improve the day to day lives and hopefully buy them attract to use all their service just one of them can be connectivity, but I believe that opening is is better than clock when.
When he got to cleaning up toxic revenue.
There is something that is.
To our Hearts and I'm very personal I do believe that if we don't really need immediately all the airforce that we are doing on improving the quality and being rushed.
Russia specific will be protyle. So.
One of our priorities to be sure that when come here and talk to you next quarter, either a zero or close to zero. So you can see on and I. Appreciate the problems that we will make.
I don't know if you want to comment on the third one.
So yes. Thank you very much. So the we are out of the tunnel no light of the tunnel, but we are out of the tunnel in that in that regard and you will see you will see the results as we move on in terms of fire customer satisfaction is for sure.
So the looking into the listening very actually I would refer nieca to you. We are considering alternatives in this specific area, but we will let you know when we have come to the conclusion and that's not that time has not come yet Nick anything you would like that no doubt I think that's as as conscious now this is something we we've been given feedback from.
From a lot of investors on and obviously, we are looking into this to make sure. We do the best course of action is the long term for all stakeholders. So as soon as we in a position to update you on this vehicle.
Thank you that's Claire.
Yeah.
Sullivan.
Line, if Andre and justify it if I may add we just heard from our team in Pakistan.
It seems that the commissioner.
Cause issue in order to do feel the offices.
Immediately so this is coming from our teams in Pakistan, so that should be taking effect as I said immediately.
<unk>.
Thanks.
N D. Next question comes from the line of Oranges Caddyshack EPS. Please go ahead you line is Nathan.
Thank you just one one conceptual question Clifford maybe so you you you you've been asking for our Jovian for a couple of quarters. Now you you came to a company that was very different from the one that you left last year and as we go through this turnaround phase by phase you're no confidence.
We can sort of go back to growth and decor market pretty soon so I was just curious on a high level, what sort of Ah learnings from the checks held playbook do you think you can employ once we get back to the growth rates or is there anything specific that you're planning for.
When when he gets back to that that the key target that you have which is returning Russia to growth.
<unk>.
Thank you very much for the question now it's really critical that an operator reaches in the early days of four G deployments reaches minimum of 20 per cent customer penetration and the first 24 months and moves faster 30, 40, and ultimately to 70 per cent on this end.
I think you know when I look to the potential we have you know all of our markets I exactly see this potential we need to be pushing first high quality for G penetration in our markets, but more importantly, once this is achieved this is just the table Stakes, it's very important for us to increase the relevance of our Sir.
Services and this can only happen through deploy right digital services, that's why I see in view on.
Mike Coyle C O N myself, our job is to work really and then head to make sure that we bring the right of course of the market. So that the relationship that we built the customers are not based on pure connectivity, but adding value to their real interests of using this connectivity and that's is.
Priority that we have now we are in early stages of declaring success with regard to the forgery penetration, but progressing very solidly and as we do these our priorities off digital services just like you know in my past experience demonstrated will bring hierarchy higher.
Assumption of data and less true and V. C D already signs of that and I'm very happy monitoring that.
Thank you thank.
Thank you.
And gentlemen, Leah Hi, Matt.
Well I'm not 100, barkai, if a genetic piece gotcha.
I just like to say thanks, so much everyone for Darling into our presentation Uhm. We have we covered most of your questions. If you do have any incremental questions feel free to each asked me and you have my contact details and we'll be speaking to you again soon thank you very much have a good day.
Thank you.
Thank you.
That does Kincaid conference for today, Thank you for participating E mail it disconnect.
[music].